Vending firms learn to weather slump

Widespread job losses throughout northern Nevada have hit owners of vending machine companies as reduced workforces mean fewer snack, drink and sandwich purchases.

But they're finding ways to protect their profits even while revenues decline.

John Baldock, a retired engineer, purchased United Coffee & Vending LLC in 2002, and he's been profitable since the day he acquired despite recent declines in sales volume.

Baldock, who operates United Coffee & Vending from his home in the Saddlehorn area of southwest Reno, started with about 60 machines and 25 customers. Since 2002, he's grown the company about 600 percent.

Rather than hire more employees to service routes, he sold off a third of his business at a price that was more than his original investment.

"I didn't want to really get super big," Baldock says. "Our total volume is down but we are still profitable. I am probably making at least twice what I originally bought this company for."

John Olarte, co-owner of Fernley-based Jokker Vending with his father, Ken Eden, got started in the vending business three years ago.

Despite the recession's effect on sales, Jokker experienced its best year last year. Since founding the company its roots are in bulk candy sales Jokker has grown into a full-service vending company. The company started with 40 accounts and now has more than 70. Jokker services Reno and Fernley and maintains shop and storage space in both areas.

One key to retaining customers, Olarte says, is keeping prices low enough to maintain a steady revenue flow from vending locations.

"You are not trying to make a huge profit; you are looking for more quantity," Olarte says. "If you keep customers happy they are glad to stay with you it keeps companies from having to send employees out, they have more time on the job, and it works for both parties."

Michael Turner, owner of Pony Expresso Vending, says his company has seen modest sales declines at public areas at ski resorts that it serves, but improved sales from machines in employee break rooms more than made up the difference.

Turner says more employees seem to be brown-bagging lunches grabbing chips or a soda from a machine rather than buying lunch away from the resort.

Pony Expresso Vending serves customers at Northstar-at-Tahoe, Squaw Valley USA, the Hyatt Regency Lake Tahoe Resort, as well as Reno and Carson City.

Friendly pricing also has helped keep break room vending sales brisk, Turner says.

"When we do have a break room, I price it lower. It is someone who is working, and we try to cut a break for the working man as opposed to people who are coming to a resort and spending $500 a night for a room."

To counter sales declines, Pony Expresso Vending added coffee service for employee break rooms. "I don't have the overhead of major coffee players, so the price is very fitting for the times," Turner says.

When starting a vending business from the ground up, the first year is nothing but expenses, Turner says, noting that the average cost for snack machine is $3,500, soda machines cost about $2,500, and cold-storage sandwich machines run about $8,000.

"We don't have many of those," he says.

One of Reno's big beverage distributors also has seen a decline in sales from vending locations.

Molly Vestal, executive vice president of Dr. Pepper 7-Up Bottling Company of the West, says the company's full-service vending business has dropped 20 to 25 percent. Dr. Pepper 7-Up Bottling also has picked up about 60 pieces of returned equipment in the past 24 months as businesses leave the area or go bust a loss of about 40 customers, Vestal says.

"There has been a very visible contraction in the market," she says.

Vestal's vending crew has contracted as well, from five employees in 2007 to three today. The company's vending line provides soft drinks to regional vending machines. To boost sales the company has taken on new beverage brands and expanded existing product lines.

The millions of jobs lost to the recession nationwide have taken a significant bite out of the vending business, says Dan Matthews, executive vice president and chief operating officer of the National Automatic Merchandising Association. Nationwide sales declines are about 18 to 20 percent, he says.

"Since the industry feeds people at work, and there are fewer people working, revenues have dropped in most areas," Matthews says. "It really depends on the mix of business the company services."

To spur business, NAMA encourages vending machine machine service companies to maintain high customer service levels and to renegotiate contracts in some cases. Newer technologies, such as wireless remote machine monitoring can help cut back on the need for route drivers, and cashless card systems also can help boost sales, Matthews says.

Staying one step ahead of the next vendor is a key to success in the business, Jokker's Olarte says. "You just try to keep up with new things and be as innovate as you can," he says.