Canadian Vending

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Innovative Insights: Making Decisions

Making decisions


March 11, 2008
By David Murphy

Topics

Vending, office coffee, water: all of these categories are in the midst of changing times.

Vending, office coffee, water: all of these categories are in the midst of changing times.

We are not alone and the downturn affects all of us.

Take note of the news lately that Starbucks is not doing as well as expected, Second Cup is looking into selling food and the word on the street is our famous American-owned corporation brown cup is having a flat season.

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Same old problems: external cost rising, thinner margins, and slow sales.

I believe this is a universal problem. Even the famous billionaire, Warren Buffet, stated that China is now contracting out products to other countries like Vietnam because of lower labour costs. Now who would have thought that?

There is still strength in office coffee. Recently, I brokered a large company in Toronto, and have had many inquiries for more. As always in changing times, it seems there are always a small number that will always adapt and do well in all the above professions. How is this possible? 

I wrote an article a few years back on “noissecer” – recession spelled backwards. It seems the politicians don’t want to mention that word or don’t believe it exists. My own company did over a million in sales 15 years ago and now does a quarter of that due to factory closings. I have not lost anything to competition, just over a dozen factories closing in my area alone. Included with that are thousands of “person hours” reduced in other locations. Sound familiar? But, no recession?

There are several ways to move forward, or at least some alternative directions to take in today’s marketplace.

If you are a small vending operator and getting discouraged let’s look at solutions. Vending is still viable, but things must change. You have to charge top rate because you are a professional providing a professional service. For example: cans $1.25, chips $1.25, bars $1.50.

If you are going to be successful in vending over the long term, the rebates (with the exceptions of volume) must stop. Let your competitor suffer with rebates and soon you will have that account on your route.

Secondly, many accounts now have to subsidize the equipment and costs. An example is a food machine which now cannot be placed in any account under 250 (for males) and 400, with a split of 300 for both genders.

Other ways are to explore adding office coffee service. Good margins exist here, along with lower equipment costs, and they are easy to service. The market is still strong for OCS, especially with the increasing cost of coffee at the drive-thrus and growing environmental backlash over automobile idling times.

With minimal deliveries and fewer wholesales, look at some wholesale accounts such as special groups in arenas, soccer parks, ball parks, etc. Margins are thin but these accounts give you buying power and help cash flow in the slower times.

Don’t discount selling. Contrary to what is said, there is a market for all food service. Office coffee and water are very strong, but vending is still salable. The first two bring a premium, but if you need to move on there are buyers for vending.

The price for vending has a lot of variables, so you may be pleasantly surprised just what it is worth on the market. Experience has shown me that this is a reality today, despite the perception out there.

Go to the vending show and see what is new in OCS, water, and vending. Make sure you subscribe to the magazine and read all the articles that are only there to help you. Entertain your suppliers for a few minutes: they know what is happening out there.

As I have said every time I write: Educate yourself. That way, when it comes time to consider any of the above decisions, it can be done with confidence and knowing what is right for you and your business.


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