The Vending Business State Of Health
The vending business is a twenty billion dollar a year business. It, as many businesses, will rise and dip with our economy as the vending machine business supports our factories and offices.
Vending machine locations are as follows starting with the number one location: Manufacturing 33.2 %, Offices 22.4%, Hospitals 9%, Restaurants, Bars, and Clubs 8.3%, Retail 7.3%, Universities 5.8%, Schools 5%, Corrections Facilities 2.2%, Other 1.1% and Military Bases coming in at .7%.
The vending machines placed in America are enjoying healthier profits in recent years. Vendors have been able to raise prices at their locations keeping up with wholesale price increases.
For many years convenience stores have enjoyed being able to charge more for items that vendors sell, but in truth their wholesale prices are higher. Management at vending accounts has been more understanding of the need for price increases while there has been some resistance by the customer to pay the higher price.
Cost Cutting Measures In Difficult Times
Vendors are a resourceful group, during the down turns of our economy they will make cost cutting measures to deal with the times. Some of the things that can be done are cutting the frequency of visits to their accounts.
Layoffs are not as common as in some businesses but are an option in difficult times.
Extra large vendors ($10,000,000.00 and more in annual sales) are the vendors that usually get hit the most in our economic downturns. The reason being they are normally the ones that have the commissaries and this sector of the vending business gets hurt first.
Large vendors ($5,000,000.00 to $10,000,000.00 in annual sales) in a downturn will do all right, as they don’t normally have many commissaries. They also have enough buying power that they are able to leverage better prices with their suppliers.
The medium size vendor ($1,000,000.00 to $5,000,000.00 in annual sales) is the vendor that gets hurt the most in the economic downturns because they don’t have the buying power and are vulnerable from both small and large vendors.
The Small Vendor
The small vendor ($1,000,000.00 and lower in annual sales) is the vendor that has the advantage during the downturns. They normally have lower overhead and lower labor cost. This is an excellent time to start a vending company.
The larger companies are cutting back on their frequency of deliveries and they are raising prices to help maintain their own business. This will help their bottom line as long as they don’t lose accounts and this is the small vendors chance to demonize the large companies.
The customer is already upset with the large vendor for cutting back on their service or raising prices. To put it bluntly it’s the small companies turn to land the larger accounts.
State Of Soda Sales
Cold drink prices have been increasing in recent years due to manufacturers increases. The final consumer has been resistant to price increases even though in most cases the vendor is on average .35 cents cheaper than most convenience stores. Keep in mind as we discussed earlier the convenience store normally will be paying more.
During the 1990’s and up until 2007 there was a switch from can soda to bottles. In 2007 the trend is beginning to reverse itself. The bottlers have been using the bottle to increase their profits.
They have sold the vendor on the idea that even if bottles are more costly per ounce they are still taking more dollars to the bank. This is true if the bottle and can are selling an equal number of units. There are some vendors that are not buying into this anymore.
Glass front soda vendors are slowing a bit in placement. The cola companies have furnished the glass front vending machines to be used in the vending business larger locations. As of recent times the cola companies have started putting more restrictions on them. This is the way the cola companies are cutting back on their equipment expenditures and if they do supply them they want more of their high profit items placed in them.
Some drinks they are requiring to be in these machines are drinks like Fuse, SoBe, energy drinks, and bottled water, which they are making better money on.
Bottled water has enjoyed a decade of rapid growth but in 2009 we have seen a reversal.
Recapturing Candy And Snack Profits
Vending operators have been able to recapture some of the profit margin they lost from 2006 to 2008. The manufacturers during this period of time were raising prices faster than most vending companies felt like they could raise their prices.
The candy segment lost market share to snacks during 2006 to 2008 but were able to gain some of it back in 2009. During the time when the candy companies were raising prices the vendors were cutting the candy selections back from two rows to one row in their machines.
Healthy Loses To Value
Healthy items always lose to value items when the economy slows. Employers have been pushing hard for the vending business to maintain healthier items in vending machines in hopes of lowering their health insurance premiums.
Although the vending business industry was down slightly in 2009, the real news is, now is the time to start a new vending company. The established vendors are vulnerable.
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