Enliven Beverage Deal Podcast Episode #14
Vending is old, dirty and unhealthy, right? Wrong!
Many times, when negotiating and creating beverage partnerships, beverage vending is treated as an afterthought. Martin Strobel, Enliven’s Aviation Practice Leader, joins us to explain why that’s a mistake.
In this episode, Martin explains the benefits of a well-thought out vending program, ways to make vending a healthier platform, and how to structure vending to be one of the most profitable ventures in your organization.
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Related Resources:
3 Reasons Beverage Companies Want to Partner with Airports
3 Pitfalls to Avoid Converting Your Property to Your First Beverage Deal
How to Get Every Cent Owed in a Beverage Deal
Transcript:
Tim Harms:
Welcome to the Enliven Beverage Deal podcast, where we’re all about saving and making you money by taking both the guesswork and the legwork out of your beverage partnership. And by leveling the playing field, when it comes to negotiating your beverage contracts. I’m your host, Tim Harms. We’ve got a great show for you today. Stay tuned.
Tim Harms:
Well, today we are welcoming back to the podcast the Mr. Martin Strobel, airport practice area leader here at Enliven. Hi Martin.
Martin Strobel:
Hey Tim. Thanks for having me on.
Tim Harms:
It’s always a pleasure. You doing all right today?
Martin Strobel:
I am. What about yourself?
Tim Harms:
Doing well, doing well. Today, we are talking about vending. We do beverage deals day in and day out. People thinking about the fountain machines. People think about the bottles and cans and the coolers and the promotions and the menus. They think about all sorts of different things, but oftentimes vending can be an afterthought to the beverage deal. And you’re here to tell us that’s a mistake. It shouldn’t be an afterthought. And I guess the first thing I would just ask you, when I think about vending, it can be old. It can be dirty. It can be filled with unhealthy products. Not an appetizing, great picture comes to mind. So can you just even start by saying why in the world would you think that we should be thinking about vending and we would want actually more vending?
Martin Strobel:
Yeah, it’s a great question. And the easy answer is your customers want it, whether you’re a hospital, an airport or another premier property. When you look at vending, most people have the thought that it is the older machines that are never full, that always take people’s money and never give the right change, has the technology and the look and feel hasn’t been enhanced so much over the past, really, five to 10 years. It’s just, it’s a different product offering.
Martin Strobel:
But if you, as a premier property, don’t have vending, you are not providing your customers really what they’re looking for, because there is a segment of customers who prefer vending rather than some of the other ways in which they get their products.
Tim Harms:
Can you expand on that a little bit? Yeah, how does vending actually meet the consumer demand?
Martin Strobel:
There are a couple of different ways when we look at vending that customers really lean in towards that. The first is, is that it’s open 24/7. So for instance, at an airport for flights that are late arriving, when most or all merchants are closed for business travelers or families on leisure vacations, who are trying to get a drink or a snack before they head to the hotel. Vending oftentimes is the only place that they can get that. So for those types of customers, late at night with maybe a young child who’s hungry, that needs a snack. That is an Oasis for them. When they see a vending machine or a set of vending units from which they can get something to meet that need.
Martin Strobel:
The second is, and I always think about this with airports, but when you have inclement weather, a couple of things happen. One, you’ve got stranded passengers, but the second is, is you also have employees who can’t get to the airport. You have manufacturers who can’t get their products to the airport. So oftentimes, especially with long-term or inclement weather that lasts a day or more, you’re running short of employees. And then, you also begin to run short of snacks and beverages and things like that. And so your vending can give a really, can augment all of the merchant sales that happened during that. So during inclement weather vending can also be, I use the word Oasis, but it can also be an Oasis for folks who are looking for a drink or some sustenance during that time.
Martin Strobel:
And then the second or the third thing is when I mentioned that there’s a customer segment that likes vending, and they often like it more than either a cafeteria setting in a college or university, or going into a news and gift outlet in an airport. And I kind of organize those into three groups.
Martin Strobel:
There’s one group especially, and these are especially international travelers, who there is either a language barrier that they’re apprehensive about, or they don’t have the right currency at that point. And so they’re nervous about going in to purchase a drink at a news and gift. And so, oftentimes they’ll see vending as a place where they can go, take their time. They’re not rushed, they’re not holding up other people. And they will go to that vending machine.
Martin Strobel:
The second is, is there’s a group that are just in a hurry and they may walk by a news and gift outlet or a restaurant that has a long line because they just don’t have time, or kind of like me, just don’t want to wait in the line. But if you go to a vending area, then it’s, they see there’s no line. They know intuitively how much time that transaction will take and they will go to that vending piece.
Martin Strobel:
And then more recently, what we’ve seen is that with COVID, that more and more people are trying to socially distance. And so that group will go to a vending machine, wipe it down, but they would rather order from that vending machine or get their product from that vending machine rather than standing in line at a news and gift or sitting down at a restaurant.
Martin Strobel:
So those are some ways that that’s really, that customers choose or want a vending when they visit a premier property.
Tim Harms:
Yeah, no, it’s interesting that you mentioned that. I mean, I think when my wife delivered our first child at the hospital, it was late at night by the time kind of the commotion settled and people left, and we kind of just caught our breath a bit. And then, realized it was late and we needed some food and the cafeteria was closed. And so our only option at that point, after my wife just delivered a baby, she wants some food. We just had to go and get it from the vending machine because nothing else was open. Had that vending machine not been there, we wouldn’t have any other options.
Martin Strobel:
Yeah. And I mean, first of all, that’s a great example. I had a similar one when we were in Disneyland. So, kids are hungry. We don’t have snacks. The lines are long. And we were looking for just a snack and a beverage just to kind of get us through the last hour or two that day. And, the vending was there and it was open and it was quick and easy.
Martin Strobel:
And I think what people forget is when they think of great hospitality companies, they think of service or full service, but oftentimes great hospitality companies provide great service by allowing patrons to do self-service. Because, while people might complain about a waiter or waitress or somebody working in the cafeteria, rarely do people ever complain about their own service that they give themselves. So that’s why you see people like vending and it’s typically a quick and easy way for them to get exactly what they’re looking for.
Tim Harms:
Well, that’s great. I mean, so reason number one, why you focus on vending is to meet the needs of the customer.
Martin Strobel:
I mean, your customers want it. I mean, the management teams that I speak with that are either poo poo or say, “Ah, vending’s not right for our property.” For the most part, what they’re talking about is not the customer, but it’s themselves. It’s, “I don’t want to see that, as you said, ‘dirty vending,’ that’s always empty, that’s never working, next to all these nice restaurants or cafeterias that I have.”
Martin Strobel:
And it’s just, they’re missing kind of what, I don’t say what the purpose is, but the purpose is, is to meet the needs of the customer and that’s what the customer wants.
Tim Harms:
Yeah. So can you dive in a little bit on that dirty piece or the aesthetic piece? Because I think I’ve seen you do some interesting stuff for some of our clients and certainly, we’ve all seen that dirty vending machine, but I don’t think that has to be the standard. Can you talk a little bit about how you address that concern?
Martin Strobel:
Yeah. So what we’ve started to do is encourage beverage companies and premier properties, whether hospital, college, university, airport, whomever that is, is to look at the vending as a help to the aesthetic look and feel of… And I’ll use the airport since that’s what I’m most familiar with. So the aesthetic look and feel of the airport.
Martin Strobel:
And typically, the way that we’ll do that is by enclosing the vending in what we call an enclosure. So we can close it in an enclosure, but these enclosures are, they’re vibrant, they’re colorful. And they match the look and feel of the airport so that it helps as the traveler’s going through the airport, it just feels like it’s part of the airport. And the airports really look for a sense of place. We’re here in Nashville, Nashville is Music City. You see that throughout the airport. They do a great job of giving that sense of place. And that’s what we tend to do with the vending too.
Martin Strobel:
You want the vending to show a sense of place as they walk through an airport. And I mean, what we’ve seen, because enclosures are expensive, they do look better. Everybody feels good about them. But what we’ve also seen is that when we added these enclosures, we got a 22% increase in gross sales from the vending machines. It was really interesting. It was… We ran a study.
Martin Strobel:
It was the first-ever study that looked just at the impact of enclosures on vending. We did it at the Philadelphia International Airport and we took about half of their vending units and we put enclosures around them. And then we use the other half as a control group.
Martin Strobel:
And so we did sales 90-day pre enclosures, and the 90 days after enclosures, and the sales, actually vending sales, increased in both groups, but they increased 22%. The group that we enclosed, their sales increased to 22% over what the control group did.
Martin Strobel:
So I mean, and when you see them it’s almost one of those, well, of course, it would, you know? Because they’re clean, they look nice, they’re inviting. They go from vending to self attended retail. It’s really, it’s a much better experience for the customer and at the same time, it’s generating a ton of money for the property.
Tim Harms:
Yeah. And if you’re listening and you’re not familiar with the beverage industry and growing incidents rate, growing attachment rate, growing sales in the beverage channel, a 22% lift is unheard of. I mean, it is huge to think about increasing beverage incidents at a fast-food restaurant or concessions 22%. It’s just unreal. So that is a huge financial lift.
Martin Strobel:
Well, and it goes to the second reason that people should have vending. So, the first is your customers want it. The second is it’ll generate a lot of money for your organization. So whether you’re an airport, whether you are a hotel, whether you’re college and university, even some restaurants, theme parks, movie theaters, premier properties typically have and need to have vending to appease their customers, to fulfill that need. But also they’re leaving money on the table if they don’t.
Martin Strobel:
So, we have seen the largest airports who have embraced vending have generated literally millions of dollars a year in vending commissions from their partner beverage company. Airports with whom we’ve worked, large airports are generating several hundred thousand dollars a year in vending. And even smaller airports can generate tens of thousands of dollars in vending commissions. And this is the best part, is they don’t have to do anything. Both Coke and Pepsi take care of the entire program. So Coke and Pepsi will come in, they’ll pay for the vending machines. They place the vending machines. They will service the vending machines. They’ll put the product in the vending machines. And then at the end of the month, you get a commission check.
Martin Strobel:
And so I hate to say it’s almost a no brainer, but if you can appease the customer, if you can make them look good on your property and it’s generating incremental revenue, it almost becomes a no brainer for you.
Tim Harms:
Yeah. What do you say, I mean, you talk about increasing sales and revenue. That all sounds great. For the person listening, who they’re thinking about their property and they outsource their concessions. So, they outsource their cafeteria to a strategic partner, and they’re really worried about vending cannibalizing sales, and they don’t want to do this on the backs of their strategic partners. What would you say to that person?
Martin Strobel:
I’d say it doesn’t. They wouldn’t believe me, but I would say it doesn’t. And what I would use is try to give them a little data to back it up. And I use, for instance, one of our largest airport clients does not have any vending post-security, which is typically where most of the concessionaires are, concessionaires and merchants are. So what we’ve done is we’ve placed about 50 machines pre-security and so that’s garages, employee lots, cell phone lots, some ticketing areas and things like that. Sounds like a lot, but it’s really usually you have two machines in a location or three machines in a location. So you’re really talking about 15 locations or so.
Martin Strobel:
But what we’ve seen is the sales for the merchants kept increasing once this vending was put in pre-security because people just, it just didn’t impact them, but the vending machines still generated several hundred thousand. I can’t tell you how much, but several hundred thousand dollars for this airport. And that’s just, it’s just incremental sales and it’s sitting there for virtually any airport, or hospital, or any other property that would want to take advantage of it.
Martin Strobel:
I mean, and all of these programs are flexible. So for a hospital per se, that doesn’t want vending near the cafeteria, okay. Don’t put it near the cafeteria. Put it away from the cafeteria where your customers can still get to it and your customers want it, but it doesn’t impact that cafeteria set up. I mean, it just is, it’s a very, I don’t say easy because there are some hurdles to it in terms of making sure electricity’s available and really the big hurdle is just getting the management team to say, “Yeah, vending’s okay.” And once you’re there, I won’t say it’s just collecting money, but it is. It’s very good steady money for a property.
Tim Harms:
That’s right. Well, we’ve seen some clients do studies on their cafeterias and various properties that they own and figure out they’re actually operating those cafeterias at a loss during certain hours of the day. And so if they could meet that need for the customer with a vending machine for the small amount of people that need food during that hour, actually that’s a plus to their strategic partner because they’re not operating. They’re not having to pay people when the revenue’s not coming in.
Martin Strobel:
Yeah, and just to piggyback on that with two things. First of all, we’re doing a study at the Raleigh Durham International Airport right now that will look at impact of vending on area concessions. And everything we do is very data-driven, just like I talked about the Philadelphia piece. We’re looking at the data 90 days before, and 90 days after. We’re running a control group. We’re trying to take as much noise out of it as we can. And so we’ll be able to at least have some data that we can look at that says this is the program we did, or this is the timeframe in which we did it. And this is the impact that we see.
Martin Strobel:
But the other thing that you said that I wanted to touch on is just about every property has limitations in terms of space and traffic. So when we talk about limitations in space, you can’t put a news and gift outlet anywhere you want to in an airport. You can’t add a cafeteria anywhere you want to in a hospital. There’s space limitations to that, and being able to do that. But with vending, because it takes up such a small footprint, you can put it anywhere. So you can work with it in a lot of space limitations.
Martin Strobel:
And then the second, and you hit it perfectly, is that traffic. There may be some places in a college or university that people just don’t go to that much, but man, when they’re there, they want a beverage or a snack. And if you can put vending there to meet that need it makes your customer happier. And that’s the same thing you’re talking about with hospitals, and we see it in airports. It’s not, the end of terminal F is not a good place for a news and gift unit. You just can’t run it profitably, but you know what? There are what we call gate huggers. The people who go to their gate and will sit there for an hour because they don’t want to miss their plane, even though their plane doesn’t leave for a while, but they’re going to sit there. And if you had a vending machine there, you’re going to make money off of their stay there.
Tim Harms:
Yeah. Do you have any, kind of go into the last objection that I’ve heard and I kind of threw at the beginning of this, the unhealthy product angle? Plastering a property with big red or big blue or big sugar soda companies. Do you have any, either anecdotally or real data, about the mix of volume that goes through and how could you use the vending program to promote wellness?
Martin Strobel:
Yeah, it’s a great question. I would say the first misconception is when people look at the beverage companies as soda companies, because right now, bottled water, bottled coffees, teas, all of those products are selling more and more than the traditional carbonated soft drinks. So for instance, at an airport, 50 to 60% of what is sold is going to be water, typically bottled water. And then, only about 15% is that carbonated soft drinks.
Martin Strobel:
So when it comes to vending, what’s in the vending machines reflects that. So when you go through an airport in particular and you look at a vending machine, you might see a whole vending machine, and every product in it is a bottle of water. Now it might be a base water like Aquafina or Dasani and then, a premium water, like a Dasani or a Smartwater or a Life water, or even premium waters, but it will be full of that water because that’s what the customers want.
Martin Strobel:
So the vending is going to reflect what customers want, but then there’s also an opportunity for organizations to nudge travelers, nudge customers, travelers, and the business that I work mostly in. But to nudge people towards healthier options and both beverage companies have platforms through which they do that.
Martin Strobel:
And I’ll just use, for instance, Pepsi has a vending platform called Hello Goodness. And there are certain dietary restrictions in terms of calories and sugar content for products that can go in those specific Hello Goodness vending machines. And so, one of our airport clients wants to nudge travelers and employees towards healthier choices. And they’ve chosen to put this Hello Goodness platform in a couple of places in the airport. And candidly what that has done is instead of people may be going to a vending machine and grabbing a Pepsi, Mountain Dew, a Coca-Cola. They are now looking towards a no-calorie tea or a zero-calorie Gatorade, or a Pepsi zero sugar, or a Coke Zero sugar, things like those.
Tim Harms:
That’s exactly right. When people think about vending, their perception maybe a decade or more old to what is actually being offered and what’s actually possible now. And I guess that leads me to the last question that I have. You spoke a lot about what a vending program means today and what a modern vending program can look like. When you take that out a bit and look into the future, where do you see vending going in the future? Where do the trends point from here?
Martin Strobel:
First of all, it’s a great question. When I look at vending going forward, I look at the different equipment that’s being used and then also how connected society is becoming. So in terms of the equipment, first of all, the equipment that is used today is so much further advanced than it was even five years ago. And that’s in terms of sustainability, in terms of emissions and power usage, it’s in terms of telemetry. So with every vending machine that we are part of installing, they all have telemetry, which means that vending machine talks to a central headquarters and says, “Hey, I’m out of this product, have somebody come and deliver a product to us.”
Martin Strobel:
So those things are happening right now in the marketplace, and video boards that help to sell, that run advertisements, that help to sell products through these vending machines. So that great equipment’s here.
Martin Strobel:
The next step is really it’s here, but it’s in a prototype. It’s even a little bit further along than a prototype, but it’s the unattended retail that you see at an Amazon store, which had been placed in a couple of airports. And so, what you have is a news and gift outlet where people are walking in and they are picking up a beverage or a snack and they’re walking out and it’s automatically being charged to their credit card. And that’s through a lot of different technologies that Amazon is putting in place. I mean, we call it unattended retail. Well, that’s vending. It’s just a bigger vending machine. It’s an 800 square foot store, but that is where you’re going to start to see vending going.
Martin Strobel:
And we’ve seen that in some-
Tim Harms:
Fascinating.
Martin Strobel:
Yeah. We’ve seen it with some of the products that you have in vending machines. I’ve always thought of vending as being stale donuts and month old candy and sugar sodas. But in a lot of vending machines, what you’re seeing now, are fresh-made salads, fresh-made sandwiches, all of this as the customers desire it. Healthier choices that they can get on the go.
Martin Strobel:
So when I talked a little bit earlier about you’ve got some people that are just in a hurry or just don’t want to wait in a line, they go by a vending machine that has fresh salad or a sandwich made that day. They’ll grab that versus going into a restaurant. And if you don’t have the vending machine, you’re not going to get that sale. So, I mean, there’s a lot of evolution in the equipment that’s going on now.
Martin Strobel:
And then the other, just how connected we are through beacons, through crowdsourcing, through their use of apps. What you’re starting to see is these vending machines are, rather than waiting for the customer to walk to them, they’re going to start calling out to the customer. And whether that is through a promotion that Coca Cola may do that says, “Buy this product from this vending machine and we give you so many Coke points.” Or some other type of incentive that’s used, we’re going to see more and more of that, where the vending machines really are used as a communication tool by the company to reach their customers.
Tim Harms:
Great. I look forward to it. We’ll see if that comes true.
Martin Strobel:
Yeah.
Tim Harms:
Well, before we wrap up and thank you, this has been such a wealth of information. I mean, is there anything else that you’d like to leave with our listeners?
Martin Strobel:
The one thing I would say is vending is an art and it is also a science. And when you start to look at vending, get somebody who does it to help you. And we’d love to obviously, that’s our business and we think we’re pretty good at it. But get someone to help you because the results that I’m talking about are based on years of analysis and data that we’ve compiled in order to get to where we are and what we think is a best practice, because it does matter where you place the machine. And it does matter what the enclosure looks like and the look and feel of that. And the product mix matters, whether the machine stays full matters, whether or not you have the right payment methods is critical. The pricing, the retail pricing of the products. Is it competitive with your merchants? But is it too high or too low?
Martin Strobel:
We’ve got vending pricing from across the country. So we know, depending upon what channel you’re in or industry you’re in, what the average vending pricing is. And so, if you don’t focus on those key pieces, then you might have a vending program and it’ll be good, but unless you’re really checking each of those boxes it may not be best in class. And you just won’t see the results that you’re looking for.
Tim Harms:
Right. Right. Well, Martin, thank you. This has been a lot of information to take in. Super knowledgeable about vending. Appreciate you helping dispel some myths today.
Martin Strobel:
Who would have thought, right? I spend this much time talking about vending machines.
Tim Harms:
That’s right. There’s always some interesting angles to explore.
Martin Strobel:
I just get curious about things. And so this, for me, has been something that you just get curious about and you dig in and well, what if we change the product mix this way, how does that affect it? And because you get real-time results from a vending machine because of the telemetry that’s going on, you can really do some neat testing with it. So anyway, I probably had a little bit more fun with it than I should but…
Tim Harms:
You can, but it’s surprising how much revenue it can generate. You have no idea. So it’s worth it too. It’s a worthwhile exercise.
Martin Strobel:
And just to toot our own horn, what we’ve seen is with a smaller airport, with whom we’ve worked, we were able to triple the revenue that they earned. And for one of our bigger airport clients, we’ve almost quadrupled it. And that is just dollars to the bottom line. And it’s a lot of money and people who are maybe skeptical of vending at those airports, they just love it now because they’re getting that cash, which helps them keep people employed. Their customers are happier and they look nice.
Tim Harms:
Well, that seems like a great place to end and wrap this up. Thank you, Martin. And if you need any help with the vending program, of course, give us a call.
Martin Strobel:
Love to help. Thank you.
Tim Harms:
Thanks, everyone for listening and hope you found that informative. If you have a burning question about your beverage negotiation or partnership, we’d love to hear from you and answer it on this podcast. Reach out to us by emailing podcast@enlivenpartnership.com. And hey, before we sign off, I want to remind you that you can take both the guesswork and the legwork out of your beverage partnership. You can level the playing field in your beverage negotiations and you can save or make your company millions through a new or an improved beverage agreement. The first step is a free beverage opportunity analysis, which will tell you just how much you can save, or you can make. Sign up for your free beverage opportunity analysis at enlivenpartnership.com and by clicking free savings estimate. On behalf of everyone here at Enliven, thanks for listening in.
