Vending Machine Operators
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Increase Appointments
Engage Prospects
Build Your Confidence
Industry Overview
The US vending machine operator industry includes about 5,000 companies with combined annual revenue of about $6 billion. Major companies include divisions of Coca-Cola, Compass Group, ARAMARK, and Sodexo. The industry is fragmented: the top 50 companies generate about 40 percent of industry sales.
Competitive Landscape
Consumer spending and business growth drive demand, since many vending machines are located in workplaces. The profitability of individual companies depends on effective merchandising, reliable service and maintenance, and securing prime locations. Large companies can offer a wide product selection, service large accounts, and enjoy scale advantages in purchasing, finance, and distribution. Small companies can compete effectively by serving a local market, providing superior customer service, or offering unique products. The industry is labor-intensive: average annual sales per employee are about $100,000.
Vending machine operators compete with companies providing food and beverages, including restaurants, grocery stores, convenience stores, and coffee shops.
Products, Operations & Technology
Major products sold include cold beverages (40 percent of industry sales) and candy and snacks (30 percent). Other products include hot beverages, hot and cold meal products, ice cream, and cigarettes. The majority of cold beverages sold are soft drinks in cans, bottles, or cups. Candy includes chocolate, gum, and mints. Snacks include salty snacks (potato chips and pretzels); baked goods (cookies and cakes); crackers, nuts, and seeds; and nutritious bars. Companies may also offer office coffee services (OCS) and provide brewing machines, sweeteners, and cream. With bulk vending, machines randomly dispense candies, nuts, gumballs, or capsules containing novelty items.
Most operators manage groups of vending machines in multiple locations known as a route. Drivers travel to each location and record sales, rotate and restock products, collect money, and service machines. The average route covers between 18 and 25 machines per day and generates $6,500 weekly, according to Automatic Merchandiser. Three-fourths of vending machine operators make less than $1 million annually.
Vending machines vary by merchandise type. Cold vending machines dispense items requiring refrigeration, including soft drinks, ice cream, and sandwiches. Some machines can store frozen items or reheat/cook foods. Cup drink machines with mixing capabilities can produce multiple beverages, such as coffee and hot chocolate. Glassfront machines can hold different types of products and allow customers to see products prior to purchase. Machines typically accept payment by coin or bill, with a small percentage accepting credit/debit cards. Some soft drink manufacturers offer free vending machines if an operator agrees to sell the manufacturer's brands exclusively. A new beverage/snack machine costs from $2,900 to $4,300; cold food machines from $7,000 to $8,500. Companies may also buy used or refurbished machines at discounted prices.
Companies rent space for vending machines in workplaces or high-traffic areas. While manufacturing facilities and office buildings are the most common locations, vending machines can also be found in retail centers, hotels, hospitals, and schools. To secure key sites, companies typically pay customer locations commissions based on sales. Contracts may contain exclusivity clauses, which prevent machines with competitive brands.
Companies buy inventory from a variety of sources depending on the size of operations. Large companies typically purchase directly from manufacturers, while small companies rely on distributors and retailers. The vending industry relies on well-recognized brand name products to drive sales. Because the markup on vend products is high, small operators can often buy merchandise at retail and still make a profit. Establishing the right product mix is critical to maximizing sales: many large vending companies have location-specific plan-o-grams, or product layouts.
Open technology and data standardization can help vending companies operate more efficiently. The Data EXchange (DEX) protocol provides an electronic standard for recording vending product movement, inventory, and sales information. The multi-drop bus (MDB) standard ensures payment devices can interface with any vending machine, regardless of manufacturer. DEX- and MDB-compatible devices, such as handheld scanners, improve the speed and accuracy of data collection. Through the Internet, remote monitoring systems help operators identify product shortages and machine malfunctions and schedule routes more effectively.
While cashless vending technology using credit/debit cards exists, many vending operators have resisted due to the incremental cost of installing card systems and transaction fees. Some operators are testing cashless payment using cards containing radio frequency identification (RFID) tags, similar to the "EZ passes" used at toll booths.
