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Government Regulations School Vending

An interview with Seden Harrison of SmartSource Vending about Government Regulations School Vending.balance-judgement

You’ve been keeping up with the Federal legislation as it relates to Government Regulations School Vending, what are you learning?

A couple months ago the USDA came out with a stringent ruling with a 60-day open opinion on it. The ruling is basically highly controlling of the content on the snacks and drinks served in schools. They are proposing tohave Government Regulations School Vending and regulate school stores, ala-carte lines, vending; they say they aren’t touching the fundraising, but the wording says:

“If there are too many fundraisers selling the traditional items, that will be regulated as well.”

It should be about choice, not regulation.

The USDA is focused on the childhood obesity issue in schools and vending seems to be an easy bulls eye. But there are so many other ways students get these items that it seems the wrong approach and too much regulation. The schools don’t want it either and are in favor of choice; they make money on the commissions; they are struggling with many cut backs. They don’t want the regulations to deal with and they don’t want to lose the funds.

Are there places that are benefiting from healthy vending?

I know from personal experience and from the corporate side, people want the choice. It’s good to have the option vs. “I’m told this is all you can have.” When the Government Regulations School Vending, I tend to find what I want elsewhere.

The government regulations school vending has also made a big push to get the calorie disclosure for all products and this might be a good compromise. Most people already know what’s what in terms of nutrition, but if you still don’t know what to pick, here’s all the calorie and nutrition info for each product. All vending machines are moving toward calorie and nutrition disclosure in 2014.

Do we want to be completely 100% healthy vending in a location? Absolutely not. Do we want to provide the choice? Yes.

There are many places where 100% healthy vending has gone into a government location and a year later you read the report that shows sales have plummeted and things aren’t doing that well. What happens to us vendors? It requires us to raise the prices and they don’t sell as fast so we’re dealing with expired product and a loss.

It seems like the government is saying “if you really don’t have other options as a child, you learn to chose what is more healthy.” What do you say about that?

In theory yes, your starving and trapped on an island that has nothing but bananas and coconuts, yeah you’re going to choose the healthy items. But these kids, and I have kids of my own who are teenagers. We are preparing them to go out into the world, especially high school kids, get jobs, join the military, become self sufficient, do you really believe that if you tell them “you can’t have this” that they’re not going to find a way around it?

We’ve already seen this with the American Beverage Association agreement that Coca Cola and Pepsi made. They agreed they would only stock certain types of drinks with less sugar. Sales plummeted, but what happened… kids stopped by QuikTrip before and during school. They find ways to circumvent it.

On top of that you aren’t teaching them anything, the forbidden is always more enticing. When you ban it, they want it even more.

What is the ABA?

The American Beverage Association (a trade organization representing the nonalcoholic beverage industry in the US) worked with Coca Cola and Pepsi to come up with a plan to meet these so-called healthy requirements and in the schools they agreed on the drinks that they will stock.

When this happened, sales went down, the kids found ways around it. And when some kids can’t find a coke classic, they do buy a diet coke – but it’s not solving the problem of obesity. It should be about doing things in moderation.

It’s my job as a parent to deal with obesity, not the government’s and not the school’s job either.

On a federal level, what can a vending operator do to let their voice be heard?

1. Look at the USDA website, especially when they are open for comments on policy from the public.

2. Contact your local representative, their job is to listen to you.

3. NAMA has been very helpful. Eric Dell, senior VP of government affairs, has been right there on the front lines. They can help with communicating with the government. The more operators we have contacting them, the more ammunition that they have at the ground level.

It’s almost understandable to regulate the elementary level students, but high school students? Really?

I have accurate records of sales in the schools we operate in showing what students are purchasing per capita between healthy vs. traditional items and it is not what you think.

When you aren’t in the vending industry it’s not obvious that there’s a business behind a vending machine. Healthy items are more expensive and when a customer asks to stock only healthy items, they often act like they are being price gouged when in reality the costs are higher for those items.

 

 

Episode Transcript:
Tom Shivers: This is Tom Shivers with the Vending Business Show, here with Seden Harrison of Smart Source Vending. Today we’re talking about Government Regulations School Vending. How are you today, Seden?

Seden Harrison: I’m good, Tom, how are you.

Tom Shivers: I’m doing good. And I know you’ve been involved in keeping up with some of federal legislation and what’s going on there, especially as it relates Government Regulations School Vending. You’re doing vending here in the state of Georgia, what are you learning in that area?

Seden Harrison: I do know that, there’s different things going on different states as far as regulation that’s pending and out there, but the big thing that happened a couple of months ago is the USDA came out with a ruling of very, very stringent, and they came out with this ruling, and it had a 60 day open time for people to come in and to make their opinions known, whether they were for it or against it, and the ruling is, and I don’t have the details of what it is. But basically it’s pretty much very highly controlled as far as what the fat, the sugar, the salt and all these contents on all these snacks and on the drinks and everything.

Seden Harrison: What they’re proposing is not only to the vending, but in these schools, they want to regulate the school stores, they want to regulate any of the a la carte lines, they want to regulate vending, they say they are not touching any of the fundraisers, but when you read the ruling like the following paragraph says that if there are too many fundraisers that are selling the traditional items, that that will also be controlled. It’s, for me as an operator, and we are in a lot of schools, it’s very scary because the reality is the students, adults, everybody, it’s about choice, and when you tell someone, not to pick on granola bars, but, here’s a vending machine and it’s all granola bars and carrots and whatever that somebody has deemed as healthy, it doesn’t work that way. If somebody wants to get their Snickers bar, they’re going to find a way to get their Snickers bar.

Seden Harrison: Right not the USDA is focusing on this obesity issue and they’re focusing on the schools. Vending seems to be an easy bullseye because you’ve got this box with all these items that are deemed as unhealthy, and it’s just a very, very easy target. There’re so many other ways that these students can get these items, and they do get these items, that I think the approach is incorrect, and it’s just too much government control.

Seden Harrison: The schools don’t want it either. The schools aren’t looking for this either. The schools want to provide the choice. The schools make money on commissions from all these services, and that they utilize for things they need. All these schools are struggling with so many cutbacks and so many hurdles. They don’t need the regulation to have to deal with, and they don’t need to lose the funds.

Tom Shivers: It sounds like there’s a lot of fear about this issue. Are there some places that are really benefiting from healthy vending?

Seden Harrison: I think again, I don’t claim to know everything, but I know from our experience from the corporate side and from the school side, and things that I read, people just want a choice. I don’t know that there’s any operators out there … well, I shouldn’t say that. I think there are definitely some companies that are franchise sort of situation, and they market only the healthy aspect of things. That may be working great for them. I don’t even pretend to speak for them. I just know from personal experience, even on the corporate side of things, you go into a company and they want to have the choice. Me as an individual, myself as an adult, anybody walking up to a machine, if you go to that machine and you want to purchase a snack, it’s good to have the options versus I’m being told this is all I’m allowed to buy. And I’m not going to do it. If I don’t want it, I’m going to find another way to get the product.

Seden Harrison: This is the way in everything out there. Whether you drive to a restaurant that has healthier options or you choose to drive to a restaurant that has less healthy options, again it’s about personal choice, making that choice. I know the government too has made a big push about the calorie disclosure and trying to get all that. As much as that is a difficult thing for all of us as vendors to do, and I know they haven’t even figured out quite how that’s going to happen, that may be the compromise. That might be the middle ground that says, “Here’s a way to present the nutritional information on the products in a machine, and if you really have no clue still what to pick, guess what you can read the calorie information and the nutrition information.

Seden Harrison: The pointless side of that is I think most people still know whether they read what’s on the packaging, what’s good for them and what’s not good for them. I don’t know if I’ve answered your question. Do we want to be completely, 100% healthy vending in a location? Absolutely not. Do we want to provide the choice for whether it’s to students or to adults? Yes. The government is trying so hard, even … and I don’t know exactly which states, but I’ve read articles about different control in government buildings where they’re removing, it’s a county building or whatever, and they’re removing all their traditional items. And they’re only going to stock healthy items. And a year later you read the report that sales have plummeted and that things are not doing that well.

Seden Harrison: Unfortunately what happens to us in the industry is we go and we try to put all these healthier items in a machine. One, you have to raise the price on everything, and two, they just don’t sell as fast. Us as an operator, we’re dealing with expired product and a loss on everything. Nobody thinks past that point. They just say, “Oh, yes, stock it with all this stuff that’s supposed to be healthier for you.” It’s just not …

Tom Shivers: It seems like one of the government points is, “Hey, if you really don’t have other options, then you start, if you’re a child, you start learning to choose what’s more healthy?” What do you say about that?

Seden Harrison: All right, you want to hear my opinion about that? In theory, yes. You’re starving, you’re trapped on an island. It’s the only vending machine on the island has bananas and coconuts, nothing else. Yeah, that’s the only way you’re going to be forced to buy that situation. But these kids, without a doubt, and I have kids of my own that are teenagers, that I am constantly trying to get them to eat the right things and be healthy in their choices and everything. These kids, especially high school kids, that we are supposedly preparing to go out into the world, whether it’s go off to college, join the military, get jobs, become self-sufficient. Do you really believe that if they want to have a Coke, and I’m not trying to pick up one product, a sugar drink. Or if they’re trying to have a chocolate bar or candy or whatever.

Tom Shivers: Or sports drink.

Seden Harrison: Or Doritos or sports drink. Do you really, really think that if you tell them, “You can’t have this,” they’re not going to find a way around it? It’s already happening in schools. Schools where a few years back the American beverage association made an agreement with Coke and Pepsi that they were only going to stock these certain types of drinks, whether it’s Coke Zeros and Diet Cokes and waters, and not put the sugar drinks it. Sales plummeted.

Seden Harrison: But what’s happening? I have kids that are high school kids in these schools. These kids stop at Quick Trip in the morning before school, or they run across, if there happens to be a Quick Trip close to the school, they leave between breaks, even though they’re not supposed to leave campus. They leave campus, they go get their drinks. Kids bring it from home. They find ways to circumvent it. And that’s exactly what’s going to happen.

Seden Harrison: And on top of that, the forbidden is always more enticing. You’re not teaching anything. You’re not teaching anybody anything other than when you tell them, “ban it, ban it, ban it, ban it,” they want it even more. All of this … see you got me mad and started now.

Tom Shivers: You mentioned the ABA. What is that exactly?

Seden Harrison: The ABA is the American Beverage Association. Coke and Pepsi, and I don’t remember how many years ago, Coke and Pepsi made, on a push to move forward on this initiative to show basically the world, the industry, that they are all about concern for the health and well being of children. They said, “Look, we’re going to come into this agreement with the American Beverage Association and come up with a plan of which drinks meet these so called healthier requirements. When we go into any of the schools, these are the only types of drinks we’re going to stock.”

Seden Harrison: That’s what’s going on. What I’m not sure about is, I’m don’t know if that’s in all the states. I know that’s here in Georgia, and I’m guessing it’s across the country. Anyway, that’s kind of what’s going on with the schools, but like I said, we’ve seen in action what’s happened. The sales went down, kids find a way around it. Yes, the occasional kids, when they can’t find anything else they go and they buy their Diet Coke instead of a regular Coke. They do all that, but it again is not solving the problem. The problem, truly, there is an obesity problem. There’s a health problem from adults to kids to everything. But it’s about being educated, it’s about knowing the right choices. It’s about doing things in moderation. There’s nothing wrong with having a couple of snacks a week. If you have a Coke or you have a candy bar. There is nothing wrong with that as long as it is balanced with healthy activity too.

Seden Harrison: Are there people that abuse it? There’s absolutely. I have to stop my kids from coming home and popping open a Cokes a day. I have question how many they had, and I try to limit them to one a day. Do they get around it? Of course they do, and I have to watch what they’re doing? Of course I have to. It’s my job as a parent. It’s not the government’s job. And it’s not the school’s job either. They have plenty on their plate.

Tom Shivers: On a federal level what kind of things can a vending operator do let their voice be heard?

Seden Harrison: I know when the ruling came out there was an open period where you could comment on the ruling. If you go to the USDA website, you can actually look up the ruling, you can read all the comments. They’re open for public view. What I have done, personally, there’s a couple of things. Contact your local representative for one. Their job is to listen to what you have to say, and if they can do anything to assist, they are your representative, they need to hear how businesses are affected in the area.

Seden Harrison: Above and beyond that, the biggest support and the biggest help I’ve received is through our association NAMA. They have been so great, and Erik Dell who is the senior VP, I believe, of Government Affairs. He is right there on the front lines. He has been so responsive, so amazing, so informative, guiding me through this. Not only him, but his staff too. I’ve written letters to different people, and I can send it to them. They read it, they proof it, they make sure I don’t sound like I’m just angry and spewing a bunch of stuff. They point me in the right direction, and they help me draft these letters so that they sound very good and I make very valid points.

Seden Harrison: The more operators that we have contacting them, the more ammunition that they have from the ground level to go, “look, you’re picking on an industry that is not going to solve this problem that exists out there. It has nothing to do with this industry. The schools too, the same thing.” The problem isn’t in the schools, it all starts at home, it starts at habits with home and what’s going, and what these kids are learning. The most ironic thing I go back to is trying to regulate high school kids who have mobility. They have jobs. They have money in their pockets. They have cars. To ban them, it’s almost understandable to say to the little ones that are very … even at home I’m sure not allowed to eat as much of the traditional items and have free access to the pantry. You control all that a lot more. I can even understand even on that level. But high school students? It’s so counterproductive to make the government to come in and control what they’re eating.

Seden Harrison: And another point I have to make is, without divulging all the details on sales, if you … I have accurate records on what the sales are in each of the schools that we are a part of. The quantity purchased from these kids is not as high as you would think. The reason it seems so high is when you deal with student populations of these big schools of 2,000-3,000 students, you’ve got a lot of students versus an office of 100 employees. 2,000 kids in a week, of course they’re going to purchase items and the numbers seem high. But when you break it down as to what they’re spending per week, per student, and you take an average, the number is very, very low. It’s not near what they seem to be thinking is going on.

Tom Shivers: In terms of the traditional versus healthy?

Seden Harrison: In terms of traditional versus healthy. For example, the way … some of the things I’ve read, they make it sound like each student is spending $10 a day on snacks and drinks. Their whole meal consumption is unhealthy, unhealthy, unhealthy, unhealthy. Are there some students that do that? There is no doubt there are some students that do that. And are there some students that don’t even go near any of this stuff? There’s some students that don’t even touch any of that stuff. It’s all about averages. It’s all about the balance. If you look at the balance. The usage is not the way people think. That’s my two cents.

Tom Shivers: That’s what I mean. If somebody wanted to get a breakdown on the numbers from the government without crossing the-

Seden Harrison: I’ve already volunteered all my sales information to these parties. To the USDA. To NAMA and everybody. I’ve said I have absolutely no problem showing this to you to prove to you that it’s not what you think. Unfortunately, I also get it. In theory I get what this is. I get it. But, as always when you’re on the other side of it and you’re a part of it and you’re in the industry, and you learn, I mean, I had a different view of the vending industry too. One of the things with vending, you almost don’t even think about it being a whole business behind it when you’re not in the industry. Everyone thinks that a vending machine, “Why aren’t things super cheap in here? Why is this much? Why is that much?”

Seden Harrison: No one thinks past the fact that there’s a whole business running behind it with all the operations and overhead and everything else. I’m going off on a different tangent, but it goes to the healthy when companies say, “I want you to stock only healthy products in here,” and then you tell them, “I’m sorry I can’t sell this product for less than $2 or $1.50. And they’re upset over that. They think you’re price gouging them, but you’re not. Your cost is high and the items are more expensive for those items.

Tom Shivers: Right. They can work in some environments. I’ve read where they do in certain areas. But across the board-

Seden Harrison: Well they do work. But again it’s choice. We have Avanti Markets in place too that have a wide variety of stuff. But both items sell. The healthier stuff sells and the maybe not-so-healthy sells. Inconsistent. I can see purchases on different people and one day somebody’s deciding they want to buy something healthier, and the next day they want that candy bar. It’s again choice. Provide choice for everybody.

Tom Shivers: Thanks Seden for sharing with us. Tell us a little more about your business.

Seden Harrison: We’ve been in the business not super long. Over four years. It’s growing. We love it and we’re learning a lot. This whole new USDA regulation or potential regulation is definitely caused a huge concern because we’re growing as I said, and we’re growing by word of mouth, which is wonderful, but you just don’t know if the government’s going to shut things done and pull the rug out from under us, and what exactly is going to happen. But we’re hoping for the best and just plowing for the best and moving forward. We love it. It’s been a great learning experience. Growing and learning every day basically.

Tom Shivers: You’ve been listening to the Vending Business Show, a publication of A&M Equipment Sales.

Look at some of our fine vending machines  https://www.amequipmentsales.com/prodcat/new-vending-machines/

Best Vending Machine Products Of The Year

This year’s Best Vending Machine Products  is

The winners of the Automatic Merchandiser’s Readers Choice Awardsawards_product for “Products of the Year” were recently announced in a number of categories. Winners for new products of the year include:

  • Cookie category – LLC’s RUGER® Strawberry Wafers
  • Candy category – DOVE® Silky Smooth Cookies and Creme bar
  • Food category – Pierre Drive Thru Deluxe sandwich
  • Snack category – Kellogg’s Special K® Cracker Chips
  • Cold beverage category – Nestlé Sweet Leaf Tea
  • Hot beverage category – Barista Prima Coffeehouse® Vanilla Latte Café Beverage
  • Pastry category – Mrs. Freshley’s Cinnabon® Honey Bun

Learn the winners of micro markets, all-natural healthy, and OCS categories at VendingMarketWatch

 

Best Vending Machine Products are the cookie category winner, RUGER®, LLC’s RUGER® Strawberry Wafers, is served in multi-functional pouches perfect for traditional vending or micro markets, as is the Best Vending Machine Products diverse packaging sizes of the candy category winner Mars Chocolate North America DOVE® Brand Silky Smooth Cookies and Crème bar. The Best Vending Machine Products  in food category winner, AdvancePierre Foods Pierre Drive Thru Deluxe sandwich, fits the growing micro market trend by offering restaurant-style food.

Wellness focused, the Best Vending Machine Products snack category winner, Kellogg’s® Special K® Cracker Chips is regarded as a healthy choice snack low in sodium and calories. In addition, the cold beverage category winner, Nestlé Sweet Leaf Tea, is viewed as a healthy beverage alternative, made with pure cane sugar and no high-fructose corn syrup.

Consistent with the demand for café-quality office coffee, the Best Vending Machine Products is Barista Prima Coffeehouse® Vanilla Latte Café Beverage for the Keurig® Vue® system, has won the hot beverage category.

The last category is representative of a consumer favorite Best Vending Machine Products — Mrs. Freshley’s® Cinnabon® Honey Bunwhich won in this year’s pastry category.

Future Vending Technology ROI

Future Vending Technology ROI  An interview with Mike Bunt, General Manager of Corporate Marketing Equipment of the Buffalo Rock Company

Future Vending Technology ROI  The future of vending as it relates to sales and service is a topic that lots of vending operators are interested in but may not be able to evaluate from an operations point of view. Some of the hot topics today are healthy vending, interactive displays, campus id cards, mobile commerce, and micro markets. Have you evaluated any of these or similar opportunities in vending for Buffalo Rock?

“You must be careful on the new technology, we are, there’s a lot of it out there we call ‘foo foo’ technology that really is a marketing ploy today to those who like all the gadgets… but if it increases service calls, we have to be careful not to get overly involved with it.”

“We look at up front costs, then increased sales or decreased service calls and a lot of times it’s easier to come up with a decrease in cost of lifecycle than pin pointing an increase in service calls.”

Mike gives several examples of what he calls a win on technology, listen to the podcast:

EPISODE TRANSCRIPT:

 

Future Vending Technology ROI  Tom Shivers: This is Tom Shivers with the Vending Business Show, here with Mike Bunt of Buffalo Rock, general manager of corporate marketing equipment of the Buffalo Rock Company. Thanks for being here, Mike.

Mike Bunt: You’re quite welcome.

Tom Shivers: Today we’re going to talk about the Future Vending Technology ROI   and especially as it relates to sales and service because it’s kind of a popular topic today among vending operators, and sometimes it’s hard to evaluate from an operations point of view. Some of the hot topics today are healthy vending, interactive displays, campus ID cards, mobile commerce, and micromarkets. Have you evaluated any of those or similar opportunities in vending for Buffalo Rock?

Mike Bunt: Yes. Buffalo Rock is always looking at new technology. As a matter of fact, I attended the NACS trade show in Vegas and brought back six new pieces of equipment for testing. When we analyze equipment, we look at it from two points of views. One is the sales side and the other obviously is the service side of it. There’s all kind of new technology in the trade that is exciting. However, does it bring a value to the customer or to the company, and that’s what we have to look through.

Mike Bunt: For instance, LED lights. They claim to increase sales, which is a hard claim to back, but it does present the product in a much better light. However, we know LED lights last longer than the standard lighting and we know it’s going to reduce service calls, so the upfront cost of the LED is a no-brainer to us because we know we’re going to save service calls down the road.

Mike Bunt: And everybody must be careful on the new technology. We are, and there’s a lot of it out there what we call foo-foo technology that really is a marketing ploy to the youth today that likes all the gadgets and the gizmos, but if it increases service calls, we have to be careful not to get overly involved with it.

Tom Shivers: Yeah, for new vending technology, how do you go about weighing the cost versus benefits or say return on investment?

Mike Bunt: Well, we look at it from the standard ROI procedure. We look at the upfront cost and then we’ll look at increased sales or decreased service calls, and a lot of times like I say, it’s easier to come up with a decrease in cost of life cycle than pinpointing an increased service call. For instance, a few years ago everybody migrated to the electronic boards on equipment, and one of the things we noticed is that we were going to a lot of vending machines just to reboot the boards in the machines. Well, talking with the manufacturers, we convinced one, Vendo, to build a reboot chip if you will that basically just checks itself on all its boards, and if it senses a loss of connectivity, it reboots itself automatically. The boards that we were in test with, it drove service calls practically out of it for won’t take money calls, so that would be what we’d consider a win on technology. Now the consumer never sees it, but they enjoy the benefit of it because every time they go to the machine, they can buy a drink.

Mike Bunt: The interactive display boards, to me that’s more of a marketing ploy to the youth. It does draw excitement to your machines, but then you look at the cost of the doors versus the increased sales, and the placement potentials on those are very limited because you can’t just take an interactive vending machine and place it anywhere you have a vendor, so down the road, if we invest capital in equipment like that, we have to be very smart because you’re only going to be able to put in specific locations.

Tom Shivers: Are there any other examples that you have for evaluating vending technology?

Mike Bunt: We tested the [dex 00:04:52] project, where [dexing 00:04:56] was a huge technological win for Buffalo Rock is that you’re able to minimize routes on the streets, you increase sales, you reduce spoilage or outages of the machines, and that’s a huge cost to the company to get into [dexing 00:05:15] on 20,000 machines, but we know the payoff’s gonna be there through the efficiencies that the program’s gonna bring.

Mike Bunt: The MEI recycler, for instance. The big question is credit cards versus recyclers, and every machine that goes out into trade gets a changer and validator on it, so the upcost of the recycler, we have done tests on equipment where we put recyclers, and we’ve seen 30, 40, 50%. On a military base, we’ve seen 200% increases on machines for adding a component onto a machine that was already there operating, so that was a huge impact for us on sales, the return on investment was minimal, and it’s not like every machine doesn’t get a validator anyway.

Tom Shivers: Mm-hmm (affirmative). Well, it sounds like you’ve tested a number of products, perhaps several of the MEI products, and it sounds like the LED lights tend to pass the ROI test as well. Are there other features or ideas that are being touted today that make you wonder what the ROI might be for some of these?

Mike Bunt: Yeah. Right now, telemetry is a hot spot along with the interactive equipment, and the one challenge you have with telemetry is sales signal, and I don’t believe there’s anybody in this country that’s ever been on a cell phone that didn’t drop a call or it lock up. Well, that’s the same type of opportunities that you have when you put telemetry on your vendors. However, there’s a value to telemetry because it does allow you to preload your trucks, it can alert you for service calls, and I think once the technology is perfected and the calls droppage reduced, I think that you’ll see a lot more telemetry in the trade. You just have to weigh out the cost, the monthly fees versus the value of what you’re getting out of the system.

Tom Shivers: Mm-hmm (affirmative). Well, do the telemetry manufacturers allow for a testing period before making a decision?

Mike Bunt: Yeah, I would imagine they would. Again, that would be up to each company that’s selling the system, but like with most equipment, they’ll let you evaluate it and analyze it.

Tom Shivers: Well, thanks, Mike. Tell us about Buffalo Rock.

Mike Bunt: Well, we’re one of the largest privately owned Pepsi bottlers in the country. We have over 2000 employees and around 90,000 assets in the trade in Florida, Georgia, and Alabama.

Tom Shivers: You’ve been listening toFuture Vending Technology ROI  at the Vending Business Show, a production of A&M Equipment Sales.  More Vending Business Blogs USA Technology G10-S EPORT Telemeter & Credit Card Reader

Vending Machine Marketing At The Machine Level


An interview with Larry Towner, a vending consultant.


Larry is a veteran vending operator who has had success in all areas of the vending business. Listen in on how to max out end-user sales,

The efficient system Which products sell best?, Product placement, Presentation, Setting the machine up, Loading the truck handling requests, optional items, New products tend to sell rapidly Part science, part art, Make the machine look fresh as well as vending machine marketing


EPISODE TRANSCRIPT:


Tom Shivers: I’m Tom Shivers with the Vending Business Show here again with Larry Towner, who is a vending business consultant. He has been in the vending business for many years and sold the majority share of his vending business a few years ago. Thanks for being here, Larry.

Larry Towner: Thanks, Tom.

Tom Shivers: In the last show, we talked a little bit about what to do when you get a new account or your first account. And I’ve heard you mention going forward from there what you call marketing at the machine level and vending machine marketing. What does that mean?

Larry Towner: Well, vending machine marketing and marketing at the machine level, Tom, is basically if you consider a vending machine to be a mini store, more or less it’s a small convenience store that’s located in someone else’s business. So when we talk about marketing at the machine level, when you’re in the vending business, there’s two people that you market to. You market to the accounts, which is how you actually get the vending accounts, and then you also market to the end users in the account. And when we talk about an end user, we’re talking about the people that actually put the money in the machines and purchase product.

Larry Towner: When we talk about marketing at the machine level, that’s what we’re referring to, how you maximize your sales out to the people in the account. How do you get most sales and how to … And then we tie that in also with an efficient system to actually operationally run your company in a smooth and efficient way. And a lot of what we talk about when we talk about marketing at the machine level is first off, you need to get to know which products actually sell the best. And each product there’s … If you look at the industry standards, there’s a series of products that consistently outsell everything else.

Larry Towner: This information is available from the National Automatic Merchandising Association, and from the magazines like Automatic Merchandising and Vending Times. But in general, every year it seems like … Well, it actually seems like Coca Cola is the number one selling drink. Snickers is generally the number one selling candy bar. And in general things like honey bun is actually the number one selling pastries. These are consistent to statistics that occur year after year.

Larry Towner: So you need to read through some of those trade magazines and find out what actually sells nationwide or worldwide at a high level. That’s right where you start. The second thing is how you market at the machine levels. Now, when we were running our business, what we would do is we had a specific set of things that we would run in every machine because if you’ve got a 30 or 40 select machines, just depending on the size machines that you put in, there’s always lots of space for optional products, what we call the optional products. But we would always run a certain selection of products at the machine level, and some of those would include … Snickers, of course, has been the number one selling candy bar, so we would always run Snickers.

Larry Towner: We would run a M&M yellows also and honey buns and usually Cheetos, Frito’s, Doritos, barbecue chips, and plain chips. Those were generally the largest selling potato chips. Usually, we would run like a peanut butter cheese cracker, some kind of a multi-cracker, some kind of a cheese cracker, some kind of a sweet cookie, and usually peanuts as well if we had that kind of information available. And then usually we would run Cheez-Its as well. The rest of the machine became kind of optional.

Larry Towner: Now, when I talk about vending machine marketing & marketing at the machine level, one thing you need to do is you need to kind of understand that in a machine, much like in a store … Tom, when you go into the grocery store, what do you notice? Isn’t things kind of set up in a certain way?

Tom Shivers: Well, you got produce is on one side, and you got dairy up towards the back, and meat is in the back almost in every store. And then off to the other side there may be other items, and then in the middle there’s always something like frozen foods or something.

Larry Towner: Yeah. Does it always seem funny that all the stores basically lay themselves out all the same?

Tom Shivers: Yeah, it’s Kinda like a maze.

Larry Towner: It’s Kinda like a maze, yeah. Well, the idea there is that the grocery stores and the convenience stores and also the vending industry has spent millions of dollars in research to find out where you put things because you’ll find out that they sell the best in certain locations. And in the vending industry or basically it’s in all industries. Actually, people are drawn to the center of the aisles are the center of the machine in our case. And you tend to put your best sellers at eye level.

Larry Towner: So in vending machines, you want to take your best sellers and you basically want to put them in the center of the machine. And you want to try to get them at eye level, although that’s not possible because we work in a vertical arrangement, but best sellers in the center of the machine and work your way out from that way. This is a marketing technique. Another thing when you study marketing and actual selling, what you would call selling when you’re not there, which is what marketing actually is, is you have to be aware of presentation. And presentation includes things such as composition of the color or the package, how the package looks, and things like that.

Larry Towner: Generally, it’s not a good idea to put the same color packages right next to each other. So if you have two packages that happened to be red in color, you generally don’t want them sitting right next to each other because what happens is people look at it, they tend to get confused, and if they purchased the wrong product, then they tend to do things. In vending anyway, they’ll tend to hit the machine or get mad, and they might not buy from you.

Larry Towner: So you want to keep those kinds of things aware of what’s going on. When you’re looking at it, you want products that are in similar color packages to be separated from each other. Again, this is done at the machine level, and this is done usually the first time that you set … We call it setting the machine up. When we did our businesses, we set all of our machines up exactly the same way. We did that for a reason. We did that so that we actually set our machines up the same way. We set all our truck inventories just like they are in the machine, so when you’re working in your truck, as you do your pick list, when you go in and you actually pick out what you need and what items you need to restock, you just move just like you’re in front of the vending machine to pull all your product. If you do this at work very, very well.

Larry Towner: If you just go out and throw all the product in the truck, and you can’t find it, and you can’t this … The vending business is a business of minutes, so you want everything set up smoothly, well-organized so that you can find things. And that goes for in front of the machine. When I go to my machines now, and I still have a few out there, I don’t even have to think usually what’s in a slot. I know what’s in those slots because have been doing it for years. I know that in certain places there are certain products in all my machines, and so it just makes it that much faster. I also can track my sales a little better in my head. We don’t use a computerized system and never did to track our actual sales on at the column level, meaning how many times … How many Snickers are you selling in every machine, how many this, how many that? We use general statistics.

Larry Towner: We just found it to be a little more efficient. Although if you can mine that information can be very helpful, but it’s not necessary. So anyway, that’s marketing at a machine level. One of the other things, when you market at the machine level … Now, Tom, you, you’ve purchased vending products, is that correct?

Tom Shivers: Sure.

Larry Towner: If you had vending in your company, and let’s just say you wanted something special, would you want your vendor to supply that?

Tom Shivers: Oh, absolutely.

Larry Towner: Yeah, and that’s one of the things that we try to stress. Obviously, we’re in the business of trying to give people what they want. If you give them what they want, they generally will spend more money with you, and theoretically you should make more profit. So this is talking about requests. When we marketed a machine level, while we might put in many of the same products in each of the machines, we do allow for a certain number of optional type items. And optional means that it’s not part of your standard planning grant. It’s not so part of your standard arrangement. And optional items, for me, always came from customer requests. We would do a number of things.

Larry Towner: We had suggested in the last show when you put your first set of machines out that you actually hand the customer a request list with some of the items that you have and some of the items that might have or that they might want. And when you take those kinds of lists, we would post those, those lists up on the machines regularly throughout the year, usually once a quarter, maybe once every six months, just to see if anything’s changed or if anybody wants anything new. Oftentimes, people will tell you or make a request to you actually in person as you’re servicing the machine, but sometimes it’s just a nice memory jog or if they have a little note that they can write it down, hey I want Hershey’s with almonds or something like that.

Larry Towner: Whatever it is that they happen to have a hankering for at that particular time. And those particular items go into the optional columns or the slots that you don’t necessarily have your main line things because some things, they just sell well. They sell well all the time, and you want to keep those things. At the machine level, what we find is that when you put in something new, it tends to sell very rapidly quickly. So if you put a new product in that they haven’t seen for a while, you’ll get a tremendous spurt of sales initially. They’ll come out, and they’ll purchase that initial product, and they usually buy it out very rapidly because they liked something. It’s something different, but that doesn’t necessarily mean it’s going to have longterm sales. So you have to be kind of aware of what’s happening when you put things out there, particularly if the manufacturers introduce a new product, say a new potato chip or new … whatever, a new flavor.

Larry Towner: You put it in, and you’re probably going to get a rush of sales on it initially. But then, it will slow down. So you have to be careful because you can get stuck with a lot out of date inventory. But with that said, that’s what marketing at the machine level is. I’m going to say it’s part science, it’s part art, some of it is we would change things at the machine level fairly often because it gives the appearance of it being new, and that spurs your sales. Sometimes we would also take things, and we just changed the arrangement in the machine every so often just to make it look new.

Larry Towner: And that’s another little tip to do what we call machine level marketing, where if you’re used to running Cheetos on the right side of the machine, move them over to the left side of the machine, that kind of thing. It makes the machine look fresh. It also gives you the ability to let the people know that the product actually is fresh because freshness in the vending business is critical. Don’t run out of date product. If you do, you’re going to end up not being in the vending business for very long.

Larry Towner: What comes to mind for you, Tom? Do you have any questions as far as the marketing at the machine level? I can go on for a really long time on this. There’s all kinds of little tricks, but these are some of the highlights that we’ve used through the years.

Tom Shivers: Yeah, I liked the … It sounds like you found that there are certain things that bring high efficiency to the vending business, and these are the kind of things that attack … What’d you call marketing at the machine level, getting the end user … maximizing end user sales basically.

Larry Towner: Correct.

Tom Shivers: So that’s fascinating actually, and it’s interesting that you can utilize basic statistics overall rather than collecting statistics from each machine.

Larry Towner: Yeah. Well, the industry publishes some beautiful statistical stuff. Now, that doesn’t necessarily mean that your particular company is gonna abide by those statistics. And I use one great example that the people at the bottling companies love to hear me use, at least one bottling company they love to hear me use it. In my company we had the number one selling drink in the wintertime was Coca Cola, and we track it per season just because. But we would see Coca Cola would outsell all the other soft drinks in the winter. But in the summertime, in my accounts, we had kind of a specific demographic that we hit. Mountain Dew would overtake and surpass Coke in the summertime. And overall we sold more Mountain Dew than we did Coca Cola in a year by the time we added it all up.

Larry Towner: Now, that highly counter to what the national statistics are. National statistics will say that Coca Cola should outsell everything else about two to one. And in many of our accounts that would be the case, but we had a lot of accounts with a lot of young guys. And we’re here in the South, so it’s very hot for most of the year, and they would drink Mountain Dew instead of coffee. For my company, that’s what we found out. But that doesn’t mean that we still … It means we wouldn’t not run coke. It just means that we were aware that Mountain Dew might outsell coke in the summertimes, in the hot months. And that’s local information, but you take those national things, they’re a place to start. And particularly if you’re new in the business, look at what everybody else is doing.

Larry Towner: I forget how many vendors are in the country, something like 10 or 12,000 full time professional vendors, and those are bigger companies. Everything they do can’t be wrong because they’re in business, and they’re sustaining their businesses. And so you have to learn from what they do so that you can be successful yourself.

Tom Shivers: Yes.

Larry Towner: Learn from somebody that’s been doing it for a while, and then make your changes or your particular changes later on after you get used to what you’re doing.

Tom Shivers: Yeah. It sounds like some great … just good entrepreneurial tips. Learn from the successful person to be able to do the same thing, right?

Larry Towner: Basically. There’s very little innovation in business overall. There are always the Steve Jobs and things like that, but they comprise a tiny percentage of the market when you look at all of the business that’s out there in the world. And your best ability is to identify when the market is soft and take advantage of the market versus trying to create a market, as it were. That’s basic entrepreneurial advice I learned a long time ago.

Tom Shivers: All right, Larry. Well thanks for sharing. Tell us a little about your consulting business.

Larry Towner: Well, what we do with our consulting business is much of what we’ve just described things here. What we do is we help people become super efficient in their businesses so that they can be successful. We can teach all aspects of the vending business and other businesses as well. Actually, we were talking a bit about sales here last night, and some people have since contacted me and wanted to know more about just how to sell, and do we do any sales training? So we can teach you how to sell business to business, mostly.

Larry Towner: Now, personal sales or a different issue, but in a business-to-business sales, we can teach you how to do that, can teach you how to run your operation efficiently, can come in and do … After you’ve already been in business for a while, come in and do a market analysis a take a look at how you’re running your operation. Are there things you can do to improve? Our goal basically is to help you become more profitable, and we can make you become more profitable. We don’t really want you as a customer, not in a negative way, but our goal is to make you more profitable. That’s how we get paid. We can be reached at servicegroupinternationalatearthlink.net. And that’s the best way to get ahold of us, and we’ll go from there.

Tom Shivers: All right, great. And you’ve been listening to the Vending Business Show, a publication of A&M Equipment Sales.