Vending innovations pose threat to restaurant market share

Aug. 8, 2012 | by Alicia Kelso

Can vending machines take away market share from the quick-service segment? Not only do some experts think it's possible, others wonder if it's already happening.

The vending sector was deeply affected by the recession, but it seems to be making a comeback thanks to a confluence of trends. For example, vending manufacturers have added unique technology to machines that has driven intrigue and improved food quality, and consumers like the idea of bypassing restaurant lines for the sake of speed and convenience.

According to Elliot Maras, editor of Automatic Merchandiser Magazine, some technology innovations in vending include remote machine monitoring, cashless payment, mobile phone payment, mobile media marketing and micro markets. The item level tracking capabilities which allow remote machine monitoring also allow category management in vending.

He adds that the demand for vending has grown because people want to consume food at their convenience. QSRs and convenience stores specifically have conditioned consumers for this on-demand trend. The biggest obstacle vending faces is the economics of the expensive and complex machines, particularly during the down economy.

Fresh Healthy Vending didn't get its start until after the recession, and has benefitted from the increased demand in this sector. Dan Negroni, CEO, said the company has grown to more than 1,600 locations in the two years it's been in existence, with continued significant franchising interest.

"Demand for healthy snacks, drinks and coffee is growing. People want great choices in vending where they work, live and lay, and we provide them with that opportunity," he said. "It is a very exciting time in healthy vending."

Negroni adds that the Fresh Healthy Vending platform brings whole bean espresso-based coffee drinks, healthy foods and snacks to the workplace. Coincidentally, beverages and snacks are two of the fastest-growing opportunities for the QSR segment.

Negroni doesn't consider the QSR segment to be a direct competitor, but Suzy Badaracco, president of Culinary Tides Inc., sees the vending threat to restaurants as "50/50."

"A consumer sees a Starbucks and a high-quality coffee vending machine, and what will have more pull for them depends on many factors. There will definitely be reasons people will always choose vending. The keys are food quality, which is getting better because of technology, food options and location," she said. "Also, there is definitely a competition here for certain parts of the day. Vending has two advantages over a walk-in or drive-thru: It can be unmanned for 24 hours and open for 24 hours."

Potential for brand extension

Badaracco believes some brands have enough leverage to take any competitive threat from vending and instead turn it into an extra revenue stream.

"It'd be the same thing as the frozen food segments that a lot of brands have now. It doesn't hurt their brand, it helps it. Vending's success, I think, is just a matter of having a big name – like a McDonald's or a Domino's – that is willing to experiment with it until the quality and consistency is just right. And with the new technologies, that is very possible," she said.

Maras points to Seattle's Best Coffee's vending machine as an example of this, and Sprinkles Cupcakes is another. The California-based cupcakery expanded on its brick and mortar with a vending machine that dispenses fresh cupcakes like an ATM. (See how it works here.) If a McDonald's or a Domino's were to jump into vending, Badaracco said the brand extension opportunities could be very exciting.

"You could offer vending specific items, or test items there first and then roll them out to your traditional restaurants or vice versa. Vending's potential is extremely high in the U.S. right now because of the technology advances – which appeal to the Gen X and Gen Z generations. It just needs a brand champion," she said.

Examples of vending innovations

The vending machines trickling onto the market now have well evolved past the familiar chips/crackers/candy bar providers located in the office break room. Most of these innovations have happened overseas, but Badaracco believes they could translate successfully here because of the novelty factor. Some of the more cutting-edge machines in the industry include:

  • Asahi Vending Machines (out of Japan) offer alcoholic beverages and a free wireless Internet signal within a 50-meter radius. "If you're sitting there using the free WiFi, you're more likely to buy something from the machine," Badaracco said.
  • H.U.M.A.N.'s Healthy Vending machines include both hot and cold compartments, so they can feature a range of food and not require a nearby microwave.
  • Pizzametry and Let's Pizza both create hot pizzas in minutes. 
  • Sprinkles Cupcakes created the first 24-hour cupcake vending machine that acts similarly to an ATM.
  • TaxiTreats is the brainchild of two college students who entered and won a business competition. The concept brings small, snack-filled vending machines to NYC's taxi cabs; a great idea, Badaracco says, for people who are in a rush.
  • PepsiCo's Lay's vending machine debuted in Argentina in 2011 and creates Lay's potato chips on demand from real potatoes. The machine even bags them up for customers.

"These are radically different technologies from each other. Every single one of them is totally different. So, think about what these could spin off. This is a huge technology birth we're watching and it's really exciting," Badaracco said.

Read more about restaurant industry trends.

Topics: Business Strategy and Profitability , Customer Service / Experience , Food & Beverage , Franchising & Growth , Online / Mobile / Social , Operations Management , Restaurant Design / Layout , Systems / Technology , Trends / Statistics

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with, and has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

Sponsored Links:

Related Content

Latest Content

comments powered by Disqus