From junk food and soda pop to organic snacks and digital payments, the vending machine industry is reinventing itself one treat at a time.
Canadians are returning to the automated dispensers they eschewed during the financial crisis, as vendors adapt their offerings – and businesses – to healthier choices consumers are looking for.
In the five years to 2018, the Canadian vending machine industry’s revenue is expected to grow at an annualized rate of 1.9 per cent to about $715.8-million, driven by products such as coffee, tea, juice and healthy snacks, market researcher IBISWorld’s study from late 2013 shows.
“People expect more from the vending machines today,” said Mike Masse, president of food services at Compass Group Canada, which operates 5,000 automated merchandisers in Ontario, and is one of the largest players in Canada.
“You’re not going to have the standard wedge sandwich, lack of salads, a lack of yogurts and variety. I would say consumers today are looking for vending to have as good variety or choice as a café or a food mall,” Mr. Masse said.
Vending machine sales struggled through the recession as consumers became tightfisted with their disposable income. That contributed to an industry revenue decline by an annualized rate of 1.5 per cent from 2008 to 2013, the IBISWorld study indicates. It looked at vending business operators that own, stock and service automated machines with snacks, drinks and other items, such as newspapers and cigarettes, but excluded the big soft drink producers, such as Coca-Cola Ltd. and Pepsi-Cola Canada Ltd., which stock their own machines.
The decline in sales pushed many small operators – those managing a few local machines – out of business, the report said, and the consolidation is expected to continue. There are now about 1,118 operators in Canada, down more than 5 per cent from the precrisis level.
Revenue bottomed out in 2010 and now that the worst of the economic squeeze appears to have passed, the vending machine business has an opportunity to make up ground. One trend is toward appealing to consumers who wouldn’t consider pumping quarters in a traditional machine.
Vancouver-based Canadian Healthy Vending believes the health-conscious consumer is a niche market of the vending machine industry that will grow. The company launched three years ago after parent company National Vending Corp., a traditional snack and drink vendor, was inundated with calls for healthier snacks from businesses that house the dispensers.
“We all realized even the big players like McDonald’s are offering salads, and there are healthier options in convenience stores,” said Shaun Casey, co-founder of Canadian Healthy Vending, which now has 2,000 machines across the country and wants to more than double that in the next year or two. The company’s products come from organic grocers and include items such as Clif and Luna energy bars, spiced nuts and seeds, and coconut water at price points that should compare with traditional machine-dispensed candy and drinks, Mr. Casey said.
Canadian Healthy Vending partners with operators across Canada to provide brightly-coloured machines that display nutritional information on a screen and take credit cards and cellphone payments. IBISWorld notes the industry has been slow to adopt cashless payments, but both Compass Group and Canadian Healthy Vending say tap-and-go debit and credit card payment systems are in the works.
To boost profits, machine operators are moving away from the soft drinks that had been a core industry product. Health concerns tying high sugar content of the fizzy drinks to obesity has driven down consumption over the past decade – even before the recession hurt sales.
“The whole move away from the carbonated beverage has meant an explosion of varieties of waters, and coconut waters and [energy drinks],” Mr. Masse of Compass Group said.
It also bumped up price points on drinks, he observed. “If I was sitting here five or six years ago would anyone have thought they would go to a vending machine and pay almost $3 for one of these higher-end beverages?”
Consumers are also being presented with more inventive vending machine offerings beyond the food and drink markets. Vancouver’s B.C. Pain Society launched a vending machine that dispenses medical marijuana earlier this year. The Portland Hotel Society’s Drug Users Resource Centre set up two crack-pipe vending machines that sold clean pipes for a quarter in an effort to promote safety and reduce violence.
And other countries are also seeing unusual vending machines pop up. The Minnesota Twins baseball team just launched self-serve beer vending machines where fans can dispense their own drinks and pay with a preloaded card – no bartender required.