The Unpopular Move - The Vend Price Increase

    [fa icon="clock-o"] Apr 30, 2015 8:00:00 PM [fa icon="user"] Vending Group

    Remember when you could by a can of Coke for $.50 or a bottle of Pepsi for $1.00?  Those days are {mostly} long gone.  For several years, suppliers big and small have been sending out a similar message: cost of goods increases on the supply side is forcing them to increase retail pricing in vending machines. 

    Increases in cost of goods drives higher vend prices

    In recent years, increases in raw materials costs have been driving unpopular vend price increases. This includes but is not limited to increases in the wholesale price of sweeteners, concentrate, PET, HFCS, fuel, and labor. These higher costs affect the general market and are reflected by the retail prices that you see in Grocery stores, C-Stores, Restaurants, etc.  

    Bottlers and vending operators understand that no one likes to see the price on the vending machine go up.  While sales do rebound, there is a noticeable drop in the short term following an increase. Interestingly, due to the nature of vending, i.e. largely a cash/coin operation (something that is changing), the percentage increase is often substantial ÛÒ to the tune of 20-25%.  ÛÏStrangeÛ price points impact the mechanical operation of the machine. Price points of 1.05, 1.10, and 1.20 often create nickel and dime shortagesÛ_which in turn contributes to an increase in ÛÏout of changeÛ service calls. Pricing in increments of 25 cents is much preferred, and because suppliers know that a 25 cent hike is a big deal, they will often hold pricing steady for as long as possible.

    To avoid increases, suppliers focus heavily on cutting costs and improving operations efficiencies so they can continue providing the low cost ÛÏmilkmanÛ service ÛÒ because when you think about it, thatÛªs what vending machines are ÛÒ modern day door-to-door beverage and snack delivery services. They bring product directly to their customers, and they even stock and service the machine on site. Most businesses these days have an up-charge for that luxury, but in the world of vending, we all love that elusive $1.00 bottle. To the suppliersÛª credit, many vending machines are still lower than what you might find at a C-Store, theater, or restaurant.

    Subsidized Pricing - $1.00 bottle does exist, sort of

    In most regions of the country, the standard vend price for a 20oz carbonated soft drink (CSD) is $1.50. If you live in an area with deposit fees and such, that price might be higher. Yet still, there are pockets in the Southeast where $1.00 bottle is still common ÛÒ but those pockets are growing smaller. One way to ensure a low vend price, if for example you did not want to charge your employees an exorbitant price, is through subsidy. Some vendors will allow you to choose a price lower than their cost of goods provided that you are willing to pay for the difference ÛÒ and in the case where you are filling your own machine ÛÒ you could simply purchase product and sell it for a loss in order to offer the discounted price as a perk.

    Consumer demand for alternative products increases price

    Vend prices in machines are also changing because the product selection is changing. A machine that once held all carbonated soft drinks now sells water, VitaminWater, PowerAde or Gatorade, and energy drinks, all which come at a higher price point.  Moreover, our preference for promoting healthy eating ÛÒ which foods we are willing to consume and which we will avoid at all costs ÛÒ is increasing. People are concerned about obesity, diabetes, and other health issues that are impacted by diet. There is a growing demand for beverages and food items that meet certain nutritional standards, and many companies following USDA trends like Smart Snacks in School by promoting wellness programs and ensuring customers and employees have access to healthy choices in their machines. And those healthier items can come at a slightly higher price.



    Vending Group

    Written by Vending Group