Cold Beverage Industry

In 2004, cold beverage industry sales reported a 1.3 percent sales gain. This recovery was driven largely by an industry-wide move to bottled beverages over canned beverages. Soft drink and other cold beverages in bottles as a percent of sales rose in double digits in 2004. While many vending machine operators reported a preference working with cans, finding them more profitable, they observed that customers were strongly requesting bottled beverages. To the consumer, beverages in bottles are more convenient, resealable, and reusable. In fact, in 2004, only 24.4 percent of soft drink sales were from cans, the other 74.9 percent from bottles.

The cold beverage industry's sales gain was also contributed by the increase in the number of cold drink vending machines. In fact, the cold beverage industry was the only major product category in which machine placement grew instead of declined in 2004. Many of these new cold drink machines were provided by popular bottlers, such as Coca-Cola and Pepsi-Cola. Both Coca-Cola and Pepsi-Cola have made exclusive bottle-only soft drink vendors that have proven to increase sales.

Although soft drink sales increased last year, vending operators were still unable to compete with soft drinks sold at retail outlets. One reason is that bottled soft drinks have been more established at these retail outlets. Vending operators are hoping that a shift to bottles will allow the vending industry to keep up with the sales of its retail competitors. This increase in soft drink sales was largely driven by the demand of diet sodas. Despite the growth of soft drink selection in vending machines, operators cited that bottled water remains the industry's fastest growing product in 2004.

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Candy & Snack Industry

The candy and snack industry also reported a slight recovery in 2004. Much of this improvement was driven by price increases in candy bars, which remains the industry's largest single revenue generator. Major candy companies attempted to support their comeback in 2004 by offering large size versions of their top selling candy bars. These large-size candy bars allow vending operators to charge a dollar per vend. The operators who reported success with the large-size candy bars noted that the higher sales were enough to compensate for the rather slow turnaround.

In 2004, 35% of all sales in the candy/snack industry were from candy bars, followed by other snacks (18%), and baked goods (16%). As a result of the demand for low-carbohydrate snacks and healthier vending options, vending operators reported an increase in sales of nut, cheese, and meat snacks. Vending operators cited that meeting the requests for healthier vending options was not difficult due to the increased options available. Many snack manufacturers announced healthier product initiatives, including the introduction of healthier product alternatives and emphasized nutrition labels.

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Hot Beverage Industry

The hot beverage industry reported a slight decline in 2004. However, vending operators were able to raise coffee prices resulting in a slight sales gain. Vending operators are starting to capitalize on the growing demand for specialty coffee, which has started to revive the coffee vending industry, as well as its retail competitors. Vending operators are also investing in coffee vending machines specifically designed to meet the demand for higher quality specialty coffee with more selection. However, some vending operators were able to reduce investment while also increasing product selection by replacing hot beverage vending machines with single-cup brewers. Although single-cup brewers provided less capacity than hot beverage machines, these operators reported success with machine replacement by meeting the demands of the consumer.

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Fresh & Frozen Food Industry

Frozen food vending machines reported a continued increase in sales and placement. This sales gain was largely due to frozen food vending machines that sold a large quantity of ice cream in 2004. Frozen food vending machines have witnessed consistent gains since they reduce food spoilage. In fact, frozen food vending machine sales reported a 12% gain, unlike fresh food vending machine sales that reported a decline.

Although fresh food vending machine sales declined, the sales of milk posted a 10% gain in 2004. This increase in milk sales was the direct result of aggressive marketing by the dairy industry and the growing demand of milk vending machines in schools. Of all hot and cold beverages, milk was the only beverage to out-perform retail sales.

For more information, please contact Peter LeVine or any one of his talented colleagues at (800) 223-4101, (650) 493-2258, or contact us through our Info Request form

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