Reinventing the vending machine

 
May 5, 2014 | by Robin Arnfield

The last few years have seen a variety of creative brands entering the vending machine market, selling products such as freshly-baked cupcakes, gourmet coffee, organic food, pizzas, burritos and bananas. Kiosk Marketplace spoke to three of these companies about how they are reinventing the vending machine.

Sprinkles Cupcakes

Los Angeles-based Sprinkles Cupcakes, Cookies and Ice Cream has installed 24-hour cupcake vending machines known as Cupcake ATMs in Beverly Hills, New York, Las Vegas, Dallas, Chicago and Atlanta.

"Cupcake ATMs are currently only attached to Sprinkles bakeries," said Nicole Schwartz, Sprinkles' vice president of marketing. "We plan to install a Cupcake ATM at all of our shops. We also plan to launch standalone Cupcake ATMs that won't be attached to a Sprinkles bakery. However, these machines will be in the same city as one of our bakeries so they can be restocked throughout the day."

The Cupcake ATM concept began as a sales method, Schwartz said. "We're paying rent 24 hours a day, so why not make sales 24 hours a day?" she said. "It's been very effective in getting our product to our customers during off hours. But we never anticipated the marketing benefit we've received. When Sprinkles launched the world's first Cupcake ATM in 2012 in Beverly Hills, we received worldwide media attention. Everyone from Jay Leno to Wolf Blitzer was abuzz about 24-hour cupcake access, and we had a continuous line down the block. The media attention has continued with every new Cupcake ATM we launch, and we've received thousands of emails from customers asking us to bring Cupcake ATMs to their cities."

Schwartz believes there is a huge demand for fresh food products at vending machines. "In the hustle and bustle world we live in, we're always on the go and want to make our purchases as efficiently as possible," she said. "If a self-service kiosk is managed properly by being restocked several times a day to keep its product fresh, and conveniently located, it can be successful not just with novelty food, but with everyday food items."

Farmer's Fridge

Farmer's Fridge said in April that it is adding 18 new healthy food kiosks to its existing three kiosks in the Chicago area. The vending kiosks are stocked daily with fresh salads and snacks made from local produce.

Other U.S. healthy food kiosk operators include PaleoExpress, whose machines supply products such as grass-fed meat and organic grain-free nut-based granolas; Fresh Healthy Vending, which just signed a Super-Bowl winner to its team; and Healthier 4U Vending.

Farmer's Fridge vending machines have an enclosure made of reclaimed barn wood, and are equipped with touchscreens and card readers.

"I started Farmer's Fridge because of my desire to make healthy food more accessible," company founder Luke Saunders said. "I was traveling a lot for work, and I realized a distributed network of automated kiosks might give healthy food an edge in the marketplace. In vending, there's a mentality of picking from the lowest hanging fruit, and I'm trying to make sure that those 'fruit' options are organic salads and snacks that leave consumers fully satisfied. We don't call our machine a vending machine because that would be insulting to our food. Instead, we prefer to call it a 'veggie machine.'"

While vending machines have had a negative connotation in the past, Farmer's Fridge is designed to break the mold on "fast food," Saunders said. "We compete with restaurants in food courts, and offer healthy, fast casual dining, which just happens to be in a vending machine," he said.

Saunders said his company is open to franchising its business model and technology. "We will consider any option such as franchising that would make healthy eating options cheaper and more accessible," he said.

Currently, Farmer's Fridge only operates in Chicago. "We started with one kiosk in 2013, and our goal is to open many more within the next few years," Saunders said. "But we need to build a solid foundation here in Chicago first. To our surprise, Canada has been one of the markets outside Chicago with the biggest demand for our machines, so we are currently in talks with a few potential Canadian partners."

BananaBar

Since August 2013, Australia's Mackays Bananas has installed six BananaBar fresh banana vending kiosks in Brisbane, the capital of the Australian state of Queensland. The BananaBars are installed in train stations and hospitals, and the company is planning to roll out its kiosks to schools, universities, sporting venues and large workplaces.

"BananaBar was conceived as a way to offer ripe fresh bananas to consumers in locations and public spaces where current access to fresh fruit is limited," said Mike Evans, marketing manager at Mackays Bananas. "In these places, thousands of processed food snack options are readily available in a large number of different retail formats, but few of them carry fruit that is fresh, convenient and enticing. Bananas are Australia's No. 1 consumed produce item, but research pointed to the fact that access to bananas isn't convenient from most workplaces."

Evans said that, although there has been strong interest across Australia in BananaBars, the company is concentrating on Brisbane to ensure its expansion is successful.

Two markets

"There are two distinct markets for self-service food kiosks," said Nikki Baird, managing partner at U.S. consultancy Retail Systems Research. "One serves the need for convenience through traditional vending machines, and the other serves the 'need' for opportunity, which is almost a trial-based marketing approach, but where consumers are paying for the trial."

Baird said that it is hard to generalize about the future of vending. "It depends on the audience the kiosk serves," she said. "For example, there are almost no schools left in the U.S. that will let you put unhealthy snack machines in them. If you're focused on a strategy of trial and opportunity, then it probably is going to be more higher-end and niche, whether that is "healthy" or "foodie" or gourmet vending machines. What the Best Buy kiosks in airports have done is demonstrate that it's okay to sell more expensive products via self-service, and that realization is coming to food."

Baird noted that the fact that Hot Dog on a Stick, Quizno's and Sbarro's have filed for bankruptcy reflects a growing consumer awareness that diet is important and that people need to pay attention to what they eat. "That's just carrying through to every kind of food venue, including self-service," she said. "Will the unhealthy vending machines go away? No. There's still an audience that will be receptive to the counter-culture argument of 'It's bad for you, and you know you want it.'"

Challenges

"My view of 'portable' demand for products such as yogurt, coffee and organic foods is the fact that consumers of such items tend to be extremely selective and brand-conscious," said Lee Holman, lead retail analyst at U.S. consultancy IHL Group. "Their preference will run to the Chilla Cappuccino Mocha in the fancy take-out cup rather than the General Ground in the office bulk styrofoam cup dispensed by a vending machine. It's part of the mystique, part of the experience. The challenge will be to somehow replicate this mystique in a vending machine environment."

Holman said another challenge is the fact that fresh or organic foods have a very short shelf-life. "The products in a Coke or candy bar vending machine rarely spoil due to their 'non-natural' nature, whereas organic products tend to be 'all-natural,' and have no preservatives. The Coke machine is serviced only when replenishment is required, not because the product spoils. The machine vending natural products will have to be monitored more closely to avoid vending spoiled product."

"Fresh food is hard," Baird said. "Anything that is not shelf-stable is going to be difficult to scale, as the supply chain is going to be challenged to support it. So a Cupcake ATM does very well when put in front of a bakery to serve after-hours traffic. But can that bakery take it nationwide? Probably not."

Holman said that demand for healthy food vending machines will likely be based in metropolitan areas such as Seattle, Los Angeles, San Francisco, New York, Washington D.C., Boston and Miami, but not cities such as Detroit, Pittsburgh and Green Bay.

Micro-markets

"The micro-market food service concept has grown with amazing rapidity over the past four years in North America," said Tom MacDermott, president of food consultancy Clarion Group. A micro-market is an unattended convenience store located in a workplace where there's not enough population to support a food service operation and vending machines by themselves aren't adequate.

"The increasing consumer expectation of fresh, healthy and local foods dictates that kiosks feature these foods in the same way all other food service outlets are doing," MacDermott said. "This is especially true in offices and other sites with college-educated populations."

MacDermott said that selling fresh and/or organic foods and specialty items such as pizza will work in a micro-market kiosk setting. "The food can be heated in a microwave oven either adjoining the kiosk or in a pantry close to where the employee sits," he said. "Kiosks are a viable alternative to the employee café for any food product that has a strong appeal to a limited number of customers and for pre-packaged take-home meals that people can buy on their way home after the staffed café has closed."

Operators have to be careful about how they market and display packaged fresh foods in micro-markets and be willing to rotate products before they're past their peak, MacDermott said. "The concern I've heard about fresh food in micro-markets is that it's 'vending food,'" he warned.

New technologies

And finally, new technologies such as mobile couponing and payments, social media, gesture or touchscreen interactivity and gamification, are reinventing the user-interface possibilities for vending machines themselves, taking the next-generation ofmachines to new heights of branding, advertising, and brand and consumer engagement.

Between the "back-to-the-basics" of healthier, fresher food, and the "back-to-the-future" of right-here, right-now service and new technologies, the future of the vending machine is looking plenty healthy.

Cover image via YouTube.


Topics: Kiosks , Self-Checkout , Trends / Statistics , Vending Kiosks


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