Coffee Vending Machine Trends

COFFEE VENDING MACHINE TRENDS

Higher coffee prices are allowing coffee vending machine operators to raise their prices, allowing them the opportunity to drive sales. According to the Automatic Merchandiser 2005 State of the Coffee Service Industry Report, most operators raised their coffee prices in the last twelve-month period more than any time since 1997-1998, which was the last time coffee prices increased. As a result, coffee revenues rose by five percentage points to $3.56 billion in the last twelve-month period. This revenue gain in the past year was driven more by higher coffee prices than per-location unit sales, unlike other growth years.

Coffee vending operators have discovered that in order to compete directly with cafes and convenience stores, they must offer good quality coffee. In the late 1970s and 1980s operators raised coffee prices, in response to higher coffee costs. However, rather than serving good quality coffee, operators sold their customers less expensive and lower quality coffee. This tactic proved to be a losing strategy for coffee vendors. Today, coffee vending operators are responding to higher coffee costs by raising their coffee prices and offering their customers high quality private label coffee, as well as an increase in specialty coffees. Surprisingly, coffee vendors have found that their customers are willing to pay higher coffee prices since they are offering quality beverages. Although the price increase may not have allowed operators to offset all of their operating costs, it has allowed them to maintain product quality, which is most important with the customer.

Growth & Demand of Special Coffee

In addition to product and equipment cost increase, coffee vending operators who are invested in higher quality systems and product usually need to hire more experienced employees to market them successfully by effectively explaining the benefits to potential clients. In fact, studies have shown that the general public’s awareness of specialty coffee has reached an all-time high.

A recent study confirmed that consumers are drinking more specialty coffee. In fact, the percentage of Americans who drink coffee daily increased to 52 percent from 49 percent in 2004. The survey also confirmed an 11 percent increase in out-of-home coffee consumption. The largest increase in out-of-home consumption was among those who consumed their coffee at work. Although more consumers are drinking coffee in their workplace, they are getting their coffee from outside the office from cafes or convenience stores. This opens a huge market for coffee vending operators to capitalize on business within the workplace and to compete directly with retail competitors.

Coffee vending operators have been slower than cafes and convenience stores to capitalize on the demand for specialty coffee. One reason is that it has taken vending operators a long time to become confident in both the equipment and economic operating model needed to provide specialty coffee. However, more and more coffee vending operators are investing in the product and technology to serve specialty coffee. In fact, in the last four years, thermal/airpot and single-cup brewers have consistently increased at the expense of batch brew systems. With coffee vending operators responding to the demand for better quality coffee, there has been an increase in higher-cost coffee systems being sold. There are currently four coffee systems available to coffee vending operators.

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