 Unlike
most industries, vending machine operators tend to benefit
from an economic downturn.
In recessionary times, consumers
who cut down or eliminate larger expenses such as
new appliances, cars or meals outside the home often
remain willing to part with their change for a soda
or handful of candy, peanuts or bubble gum.
Their coins quickly add up.
In 1999year alone, America's machine
vendors nickel-and-dimed their way to $25.6 billion
in revenues, according to a report prepared for the
trade publication Automatic Merchandiser. That total
represented a nearly 5 percent increase from 1999,
and this year promises to be even bigger. (Revenues
since then have increased several billion dollars
in the successive 10 years.
Despite the presence of more than
60 competitors in Southern Nevada, Russ K. knows firsthand
the value of operating a local vending machine concession.
A partner in Sky Top Vending since 1977, Russ said
his family-owned operation has prospered through both
good and bad economic climates.
"(Vending) is recession-proof
because everyone's got change in their pockets,"
said Russ, whose company currently maintains 800
to 1,000 snack and entertainment machines at sites
across the Las Vegas Valley. "We're constantly
taking our equipment from business to business and
we're as busy as we've always been. As the town grows,
so do we."
While Sky Top's revenue typically
remains stable, its actual sources of income are anything
but staid, Russ said. With offices, bars, shopping
centers and other vending sites opening and closing
on a weekly basis, one of the biggest challenges faced
by the company's 45 employees is the constant reshuffling
of equipment from lessee to lessee.
"We have companies that close
up, so we pick up their equipment," Russ said.
"The next week, someone else comes into town,
hires 50 people and decides they want to put coffee
and soda machines in the snack and break room. ...
We're always picking up and dropping locations."
Russ said it's still too soon to
tell if the current economic downturn will impact
his business. If a slowdown does come, however, Russ
said the presence of seldom-used coins will mark its
arrival.
"I can tell when things are
getting hard because I start seeing silver coins in
the drops," Russ said. "I'll see Mercury
dimes or silver quarters, wartime silver nickels.
... When that happens, I know people are scraping
the bottom of their barrel."
Randy Francis, general manager of
Idaho-based vending manufacture (manufactures the
U-Spin Spacesaver), has spent the past decade promoting
his company's bulk candy vending business across the
United States and in more than a dozen foreign countries.
Thanks to the recent economic slowdown, he expects
his vending business will increase substantially in
the future.
"People won't spend the money
to buy their kid a $2 or $3 toy they normally would,
but they'll give them some quarters out of their pocket
to buy a toy capsule or candy from a vending machine,"
Francis said. "It seems like every time there's
a downturn in the economy, our business picks up."
The Idaho based vending company generates
its revenues by selling candy vending machines to
private entrepreneurs who subsequently place and support
their machines as part of a home-based business. Despite
start up costs of $300 to $500 per machine (depending
upon how many customer orders), Francis said he's
never seen a business that allows investors to recoup
their investments so quickly.
"Gumballs that sell for 25 cents
only cost vendors 2 cents. That's one of the reasons
vending works as well as it does," Francis said.
"Even if you open up a dispenser to its widest
setting for a product like M&Ms, it cost you about
11 cents per pull."
"Compared to what they get buying
candy in a grocery store, the (vending) customer still
gets a good handful of product for a quarter, but
the vendor is still making a significant profit."
Despite giving a percentage of their
earnings to the owners of the stores or offices the
average U-Spin Spacesaver takes in a monthly gross
profit of $50 to $100 for each machine in operation,
although actual earnings vary from location to location.
He said the Las Vegas Valley's rapid growth makes
it a prime site for those looking to enter the industry.
"It's almost impossible for
a Mom & Pop operator to get machines placed in
the casinos or big (grocery or retail store) chains
because they contract out with vending corporations,
but there are still plenty of places to place machines
there," Francis said.
Not everyone is convinced of the
vending industry's infallibility, however.
John C., who has owned Ice Cold Vendors
of Nevada since 1973, said rising product costs have
cut into profit margins at his small business.
John said on a per-machine basis,
revenue has stayed steady regardless of the economy,
although the costs of purchasing and maintaining his
machines have risen in recent years. Automation of
the workplace has also cut into his profits, John
said.
"Because of computers, a lot
of offices have less people in them and that translates
to smaller accounts," he said. "I've been
in big monstrous warehouses where there are only five
people working there."
Automatic Merchandiser's report also
cited increased expenses for gasoline, electricity
and employee benefits as factors that negatively influenced
vendors' profitability in 2000 and early 2001.
-INBUSINESS Las Vegas - October 2001
- Article written by Chris Jones/IBLV Staff
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