A Look Ahead

December 9, 2015

The vending, OCS and micro market future looks bright as operators say ‘hello’ to a new year.

As the year comes to an end, industry professionals have begun looking ahead and preparing their companies to meet the demands and challenges of today’s business climate. In 2016, many operator challenges will be ongoing from the year before, like changing government regulations, increased competition for the consumer dollar and the rising cost of product. Despite these challenges, the future looks bright for the vending, office coffee service (OCS) and micro market industry as operators add more healthy alternatives, OCS diversification and technology that give them the opportunity to increase services and revenues.

Look to healthy

In 2016, healthy food options are going to be key for operators in both micro markets and vending. Many of TN-based Five Star Food Service customers are requesting a more robust offering of healthy items. In order to respond to those requests the company built out a full healthy section of its micro market planogram to meet those demands. “To further drive sales in this area, we have created an attractive point-of-sale that calls out our healthy set of products,” said Mark Stephanos, vice president of micro markets at Five Star Food Service and 2015 Pro to Know awardee. “Also, some customers have agreed to subsidize or use offset pricing to encourage the purchase of healthy items by employees. The challenge is finding healthy items that aren't too cost prohibitive.”

To that end, Stephanos believes manufacturers and suppliers have been responding and consistently introducing products that will fit those needs. Manufacturers have launched or are working to bring to market items that fit customer demand for gluten-free, whole grain, fiber and protein.

Offering healthy items isn’t limited to the micro market segment, however. In 2015, MD-based Black Tie Services partnered with the city of Baltimore, MD, and announced a strategic plan to implement healthy vending standards throughout city buildings. This type of partnership will continue into 2016 as more U.S. cities will look to vending as a way to promote health initiatives. Educating consumers to the quality of food available is an important aspect to growing sales in the vending and micro market channel. The challenge will continue for operators to meet consumer demand for variety while finding products at the right price point that have an adequate shelf life.

OCS diversification

The OCS industry reached record-breaking sales last year due in part to diversification. Although the OCS industry is facing challenges from competitors who sell items at-cost, industry experts expect OCS to be an opportunity for growth due to the operator’s ability to provide a multitude of options.

KS-based Prairie Fire Coffee Roasters General Manager Jeff Deitchler told Automatic Merchandiser magazine that the number of SKUs his company offers will continue to increase as new products and coffee brewing equipment emerges.

The addition of non-coffee products and services is also a predicted growing part of OCS. Revenues associated with pantry service—providing snacks and other products to a location paid for by the employer—are expected to increase in 2016, as pantry service is a way for businesses to incentivize their employees, many operators believe.

Invest in your tech

Technology will play an increasingly important role in 2016, from payment options to EMV compliance. “In the year ahead, the industry will need to fully understand EMV, its liability implications for a low ticket retail environment like vending, and how one’s business intends to take action with this knowledge,” said Patrick Richards, cashless product manager at CPI and a 2015 Automatic Merchandiser Pro to Know. “Vending operators will need to determine what the risk and reward outcomes will be for their decision to or not to replace their cashless technology with EMV compatible ones.”

Richards notes that while this may come as an initial burden to an operator, the alternative— not complying—may have much greater risk for an operator. “They may risk losing future sales because the U.S. consumer may want to protect themselves in all cashless transactions and choose to avoid using POS terminals that don’t have the most secure technology available.” There is also the risk of losing brand reputation when the market deems that a business has less secure technology and standards than other companies in the industry. “New and existing contracts may be nullified with customers if an operator is without this level of EMV compliance particularly for operators who are involved with large corporate type accounts,” Richards continued. “And of course, the operator risks being responsible for the cost of the good sold in their machine to a fraudulent card.” Technology investments will be key to providing a 21st century break room experience for the customer and streamlining backend business for operators, too. “By embracing all of the new technology (which now includes Apple Pay in some areas) vending companies are given the opportunity to run leaner, more efficient, and minimize loss of sales which then increases profits,” said Steve Williams, manager of professional services as Crane Merchandising Systems and a 2015 Automatic Merchandiser Pro to Know.

An ongoing challenge that operators face is if the cost of adapting technology is going to give them the long term benefits.

It goes back to the customer

Although technology, micro markets and healthy option offerings are important drivers in the industry in the coming year, successful vending operations will continue to be rooted in customer service. “To me, it’s all about customer support,” said Jack Brown, CEO of EAGLE USA and a 2015 Automatic Merchandiser Pro to Know. “No matter what we are selling, the items with the most perceived value are the items that will sell.” At one of Brown’s locations he and another operator compete for the same business; he services a bank of machines in one location of the building and his competitor services another. “We have a beautiful bank of new, clean, well-presented vending machines all with cashless and a $20 bill recycler attached,” he said. The company offers a bean-to-cup coffee machine and visits the site twice per week. “This is one of our best accounts,” said Brown. “How? We do the right thing, keep pricing at industry average, present our products well, communicate with the customer and keep the machines clean.”

There are ongoing challenges in the year ahead, but the future looks bright for the vending, OCS and micro market industry.