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Price point balancing act Cost of goods continues to be a sig- nifcant challenge for many opera- tors. Increasing prices continues to be the strategy used most often to handle increased costs. However, in some areas, competition is reported to undercut price increases. Also, in some product categories, costs rose faster than vendors could change machine prices. Both of these led more than half of operators to absorb the extra costs in 2013 (chart 6). From operator comments, a com- bination strategy of reducing service frequency, rearranging routes and eliminating unproftable accounts was the most effective strategy. Many added that they were using sales data to extend the time between service trips, increasing best sellers and eliminating slow moving products. More data used to increase profts Vending operators reported using technology to an unprecedented degree in 2013. While much of it was adding back-end systems to increase effciencies in merchandising, there were also additions in warehouse equipment such as picking systems and prekitting. Also systems that address delivery schedules, such as remote machine monitoring showed some increase, see chart 10A. A number of operators said that because economy and competitive pressures remained the same in 2013, technology innovations in logistics and merchandising is what kept them proftable. Technology was cited above all else as a way opera- tors can make educated decisions based on multiple factors that led to rethinking everything from route scheduling to accountability. It has caused many to feel positive about 2014 and beyond. In addition, operators also recog- nized the need for cashless payment systems to a greater degree in 2013. According to our survey, there are CHART 12: PROJECTED SALES BY CATEGORY, 4-YEAR REVIEW IN BILLIONS 2010 2011 2012 2013 % CHANGE Cold beverages $5.97B $8.23B $7.34B $6.72B -8.52% Candy/snacks/ confections 4.04 5.57 5.22 5.60 7.22 OCS 1.21 1.7 2.14 2.89 34.86 Vend food 0.87 1.14 1.38 1.44 4.88 Hot beverages 0.75 0.99 0.89 0.86 -3.50 Milk 0.29 0.34 0.49 0.49 -1.18 Ice cream/frozen 0.35 0.42 0.59 0.55 -6.73 Cigarettes 0.12 0.11 0.33 0.24 -28.82 Other 0.42 0.47 0.94 0.91 -2.82 Manual foodservice 5.39 28.4 17.22 11.8 -31.48 Micro Markets N/A N/A 1.8 5.11 183.89 * Numbers adjusted for previous years as manual foodservice and micro markets removed from product category totals. CHART 13A: COLD BEVERAGE MACHINE ESTIMATES BY TYPE, BOTTLERS AND VENDORS, 4-YEAR REVIEW BOTTLER OWNED TYPE 2010 2011 2012 2013 Bottle and can closed front 2,300,000 2,280,000 2,291,400 1,919,700 Glassfront 200,000 210,000 211,050 200,000 Cup 0 0 0 0 TOTAL 2,500,000 2,490,000 2,502,450 2,119,700 VENDOR OWNED TYPE 2010 2011 2012 2013 Bottle and can closed front 972,000 972,000 976,860 902,500 Glassfront 30,000 35,000 35,175 35,000 Cup 6,000 4,000 4,000 4,500 TOTAL 1,008,000 1,011,000 1,016,035 942,000 CHART 13B: COLD BEVERAGE SALES, 4-YEAR REVIEW % OF SALES TYPE 2010 2011 2012 2013 Can 29% 29% 42.15% 42.04% Bottle 70.8 70.7 55.13 55.48 Cup 0.2 0.3 3.35 2.41 PROJECTED TOTALS IN BILLIONS TYPE 2010 2011 2012 2013 Can $1.7B $1.704B $2.352B $2.63B Bottle 4.11 4.155 3.076 3.83 Cup 0.017 0.017 0.187 0.26 Editor's Note: These totals only apply to the volume sold by vending operators, not bottlers. CHART 13C: AVERAGE COLD BEVERAGE PRICES, 4-YEAR REVIEW TYPE 2010 2011 2012 2013 Can 73¢ 76¢ 76¢ 81¢ Bottle $1.30 $1.32 $1.33 $1.33 Cup 70¢ 70¢ 71¢ 85¢ 32 Automatic Merchandiser VendingMarketWatch.com June 2014 STATE OF THE INDUSTRY autm_26-39_0614SOVI.indd 32 6/11/14 10:06 AM