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Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Pilot Project On Vending-Machine Produce Shows Promise In
New Channel Of Sales

Jim Prevor’s Perishable Pundit, January 31, 2008

Sometimes the path to increased produce consumption can come through nurturing new products, as we discussed in Merchandising Neglect Leads To Less Consumption, and sometimes the issue is new venues. To a great extent, the trade’s interest in Tesco has been heightened, and we have discussed the concept extensively, because it came into the market with a new type of venue.

One area where produce is very weak is vending machines. The vending market in the United States is estimated at in excess of $30 billion dollars a year. If the produce industry could figure out a way to get the same share of market of food sales in vending machines as it has in supermarkets, it would constitute a very substantial market. Since almost all vending purchases in the U.S. are for immediate consumption, almost all these purchases would represent incremental sales.

This is big stuff and has interested big players, especially because with all the public pressure on schools to stop vending soda and candy, a market opportunity is surely developing — if the industry can figure out how to grasp it. Back in February of 2007, we ran a piece entitled, Dole Introduces Unique Vending Machine Concept, to highlight a pilot program in the U.S. designed to replace candy and salty snacks with fresh produce and more nutritious items in school vending machines.

Now it turns out that Holland Produce Promotion is involved in a similar project in the Netherlands. We asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:

Auke Heins
Senior Project Manager
Holland Produce Promotion
Netherlands

Q: What was the impetus for the Fresh Day Vending pilot?

A: We wanted to create a new way to approach people with fruits and vegetables — that’s the main reason, while addressing gaps in the foodservice market.

Q: What companies participated in the pilot? How did you go about getting partners?

A: We are a promotion agency for fruits and vegetables, so that was our exclusive focus. We wanted to explore different edible and drinkable fruits and vegetables that would be easy to sell. We weren’t only looking in the Netherlands. For example, Chiquita Fresh International could provide a range of product options and expressed interest in participating early on.

Our partners during the pilot were: Automaten Centrale Neede, Albron, Chiquita, DeliXL, Fruity King, Inova Fruit, Rainbow Growers, Syntens, Tuinderij Vers, Unilever (Knorr Vie), Hero, Van Marrewijk & Van Mil (Tommies), and Vezet (Znek).

Q: Did you look to get the government involved in any way? For example, in the healthy vending machine pilot here in the U.S., all of the snacks and meals chosen for the vending machines were USDA-approved and reimbursable under its guidelines for the National School Lunch and Breakfast Programs. [Editors Note: You can read about all aspects of the U.S. program in the Pundit here.

A: We tried to get the government involved but didn’t succeed. We didn’t get a budget from them, but the reasoning behind it is complex. They were wary and didn’t know what would happen with the machines. It has everything to do with the way we provide Fresh Day vending. If the government provides money to schools, for example, it would mean we’d need to buy these machines for these schools, and as a non-profit organization it is complicated and wouldn’t meet our program objectives.

Q: What did you learn from the Fresh Day Vending pilot?

A: We tested the concept in a large company, a high school, university and factory. The results varied. However, all-in-all, it was successful. We started vending at a large bank in the Netherlands, with 1,100 people working there. They had their own restaurant facilities operating for specific hours, obviously not open continuously throughout day.

They found it would be interesting to have vending machines situated right near the restaurant to fill the void, and the location would be logical since it would be easier for the food service staff to fill the machines. The board of the company said they would subsidize the project and allay some of the costs of the fruits and vegetables on display and being sold, so employees wouldn’t need to pay as much.

We learned it was very successful. Not only did people eat more fruits and vegetables than they did before, they also found out it was easier for them. Employees were very content with the availability of the machine, and ate more produce with the convenient access. Normally they had to bring snacks themselves or buy snacks outside work at stores in the neighborhood, and not always healthy ones. Leaving the office also took more time. Vending machines kept them at the office continuing work. Obviously the employers were very pleased with that.

Also the vending machines stood as a sign for the employees that the company cared for them.

Q: Were these results anecdotal or did you do an official analysis, where the company or your organization conducted employee surveys, observations, etc.?

A: We did several surveys, involving questionnaires that were filled in by employees, asking what worked, what didn’t, what they felt, etc. The Holland Promotion Board receives funding from the fruit and vegetable sector for these studies. You can see some results here.

Q: What kinds of products worked best? How effective was the machine in protecting product quality and freshness?

A: We tested a variety of fruits and vegetables and healthy drinks like smoothies. Success of individual items varied. People in the Netherlands are interested in the snack tomato, a size of 1.5 centimeters or 1 inch. They are very tasteful and fit into a small plastic bag. Ten in one bag eat like a snack.

There are two areas in the machine that are temperature-controlled to accommodate different fruits and vegetables; one area is maintained at 70 degrees, and the other at 40 degrees. Tomatoes are OK in 70 degrees. If an apple or banana is positioned in a cold area, it won’t work.

We did research and believe the Wurlitzer machine works best for perishable products. There are other machines that divide into five to eight areas with six or seven platforms that spin and turn. This Wurlitzer concept performs better for our purpose and you can put a lot more product in.

Q: You’re not alone in your thinking. The same Wurlitzer with the spiral mechanism was selected for the Dole-sponsored healthy vending pilot here in the U.S. In this instance, Dole created a unique packaging to accommodate the challenges with vending bananas.

A: We faced similar issues. Bananas presented a very big difficulty. The machine had trouble transporting bananas. Working with spirals, the device in the machine turns and pushes product into a basket for the consumer to fetch it. With a banana the skin is too rough, and it needs to be specially packed. With an apple, it won’t need to be packaged.

We experienced success with oranges and kiwis, of course. We also had a fruit and vegetable drink. Several suppliers delivered juices. Chiquita Fresh supplied refrigerated diced fruit cups.

Q: What differences did you find when piloting at schools? Did kids gravitate to the produce in vending machines like the adults in a corporate bank setting?

A: We also tested at a high school venue. In the Netherlands, the ordinary school (ages 12 to 18) is structured where kids go in the morning and leave in the evening. What we discovered is that it wasn’t always very successful, depending on situations. For example, when there was a big test coming up, there wouldn’t be many students around, and as a consequence there wouldn’t be enough people interested in buying. If vending machines weren’t closely monitored during these times, products would go bad, another difficulty to overcome.

When a test was taking place, students brought small snacks and were very interested in buying fruits and vegetables, and that’s the time when it might be interesting to increase availability.

The major problem is that fruits and vegetables in the vending machines are highly perishable and need to be closely monitored. Those managing the machines need to be aware that the products can only be left there for one or two weeks. Everything needs to be sold or needs to be replaced.

In regular snack machines, you can leave Mars, Snickers and Coca Cola cans for a year. With perishables, you need to be alert and replenish the vending machine several times a week. One day product can be sold out in a few minutes, and some days not at all. It depends on the time of year and what students are doing.

Q: Did the school vending machines incorporate food items from the cafeteria? Were all products brought in from manufacturers or were some prepared by food service staff at the school? What is the most effective, cost efficient, etc.?

A: All food was brought in by manufacturers. One of our goals with this program was to create new channels for these growers. We thought it was a good idea but it doesn’t work in practice. When you provide food for a school, you have to deliver what is asked for. Logistics are very important. By limiting the vending program to specific partners or brands, the school won’t be able to get all the different products from different companies. You need to work through the school caterer and obviously they don’t want to pay that much for produce.

You won’t be able to provide a particular specialized packaged product designed for the machine all the time. What we concluded in the end was the suppliers we initially started with won’t be enough to get the program started everywhere. We need to be more flexible with who provides product. The product selection has to be decided by the company or organization that has the machine.

Q: In the U.S., at least, kids may not always choose the healthy produce option when candy, chips and soda remain a tantalizing alternative. Did you find that availability of less healthy snacks competed for the students’ attentions?

A: This is a culturally based phenomenon. In the Netherlands, most women and young girls are very keen on their diets and very interested when fruits and vegetables are being provided. Also, what’s being provided at the venues is the responsibility of those running the schools. When you provide a lot of unhealthy snacks as well, it’s a choice the school needs to make.

When administrators say, ‘We think we have a problem with obesity,’ and then they don’t do anything, that’s an issue. Everything has to do with what’s available. We find that when you provide fruits and vegetables, people eat them. It doesn’t make the choice easier for students when you tempt them with a sweet alternative.

Of course, you’ll have difficulties in the beginning, if a person is in the habit of fetching a Mars bar every day; they may not automatically fetch fruits and vegetables unless they are regularly exposed to them. You need to put effort in, to get something out of it.

Unhealthy snacks will always be there. People want something sweet to eat. There are many sweet-tasting produce options. Choosing the right products for the machines is part of the solution. Again, many people are careful with their daily diet, or at least want to be.

In the Netherlands, we have a very strong fruit and vegetable sector where a lot of new products are grown. We have these snack mini tomatoes, mini cucumbers and mini peppers, the very sweet variety, a lot of tasteful, small products that do fit into the machine and are very well eaten here. We have the greenhouses, which also helps us.

Q: Have you tested different salads and more substantial, meal-type items?

A: We tried salads in the machine with mixed results. When we tested in a factory where a lot of men were working, they said, ‘we need something to fill our stomach.’ In the end salads didn’t work in that venue. Big men are looking for something else to eat.

We also tested salads at machines in the bank, and there the products were very successful. It has everything to do with the people around the machines. You need to know your target groups. You won’t be able to just provide salad and expect they will buy it. What you need to find out is what is interesting for that particular customer.

Q: You mentioned that the bank subsidized the pilot. Is the program costly? How financially viable is it to implement?

A: We learned it can be cost effective as well, but it has to do with one, what you offer and two, the logistics. If you have a restaurant at the high school already buying fruit and vegetables, the staff can easily fill the machine as well. For them the vending is an extra income. If you don’t have this logistics, it will be hard to earn money on it.

Q: How does branding come into play?

A: At first we started out with the idea to launch a new brand, called Fresh Day. The problem we stumbled on is that fruit and vegetable companies said, ‘now you’re competing with our brands. Everything in the machine is Fresh Day. Chiquita said it was a very nice idea but we’d like our brand on our products.

Dole got more involved with the vending machine pilot in the U.S. that you wrote about.

One of the bottlenecks is the logistics; if don’t have good logistics, ways to transport the fruits and vegetables and put them in the machine and arranged well, you won’t do well.

This is harder to do when the venue doesn’t have an established food operation already.

It also has to do with what you put in the machines and how you offer the product. We had whole apples and versions of sliced apples in small plastic see-through bags. The sliced apple sachets sold for 1 Euro per unit versus 80 cents for the whole apple. People favored the sliced apples. It was harder to sell whole apples.

You have to be creative. It’s easier to snack on sliced fruit. For fruit and vegetable sectors to succeed, they have to be able to provide products in ways to get people to buy them. You’d expect when product is more expensive people wouldn’t buy it, but that’s not the trigger.

Q: Where do you go from here with the information you garnered from initial testing in various venues?

A: We ended the pilot program. We now want to do the vending on a larger scale. We’ll start with our higher education system here in the Netherlands, where students range in age from 16 to 25. To broaden the program and explore that channel further, we will work with the caterers that supply to the schools. Caterers are important to connect with because they already visit and deliver fruits and vegetables to these companies. They can fulfill this need.

Q: If companies want to get involved, how should they proceed?

A: We are a non-profit organization. We tested vending to find new ways to provide people with fruits and vegetables and get more produce out into the market. Obviously we want companies to buy the concept. We want to be Number 1 in Fresh Day Vending in the Netherlands, but that’s commercial and we can’t do that as a non-profit organization.

We won’t be able to sell products ourselves as a non-profit. A commercial company has to say this is a format we’re willing to take on. Currently Fresh Day Vending is available by obtaining a license at Holland Produce Promotion. It doesn’t have to be positioned as Fresh Day Vending; a company can use the vending strategy for its own brands.

As senior project manager at the Holland Promotion Board, vending is just one of the projects we do. We are working on a new campaign to provide fruits and vegetables to employees. We work through different kinds of venues to increase produce consumption.

Q: What is your realistic assessment of healthy vending machines as a viable channel for selling produce?

A: In my opinion, vending is one of the biggest opportunities for large fruit and vegetable companies to contribute to society with healthy products. It also is a very good way of building a firm’s own corporate brand. School vending is a very interesting place to start since the technology, facilities, and fruits and vegetables are available to implement a program, and there’s no better target audience when it comes to increasing produce consumption.

Q: Are the pilot companies sticking with the program? Are any new companies coming on board?

A: At this point in time, the four participants where the machines are standing are all interested in buying them. There are 26 other companies that have indicated interest in implementing Fresh Day Vending, but they haven’t officially committed to the program yet. It has everything to do with the price of the machine.

This was a more diverse test than the U.S. pilot, as this went beyond schools to include an office, a university and a factory. This was also produce and juice specifically, whereas the U.S. test included the National Dairy Board as a partner, and so included a more diverse range of products.

The U.S. trial, though, offered some interesting solutions to some of the problems experienced in the Dutch trial:

First, to increase demand in the U.S. trial, the machines were equipped with technology to allow students to use money from the national school lunch and breakfast programs to buy items.

Second, special software in the U.S. program was used to send a message to a school cafeteria manager to let them know that the machine is running low on an item and needs to be replenished.

Both programs, though, struggled with the key logistics issue. Who will provide the produce and how?

In the Netherlands project, it was envisioned as a route for particular producers to sell more product — but they couldn’t resolve the distribution issues. Much as in the U.S., it was determined that it was expensive and difficult to buy products just for the vending machines — say packets of sliced apples if they aren’t already used in the school. They wanted to use the school cafeteria staff to prepare salads, cut apples, etc., and then stock the machines.

Our sense is that this may all be true — but it is problematic on three counts:

First, an awful lot of vending takes place in venues where they do not have catering staffs and kitchens. In addition to candy and non-refrigerated food, they manage to sell cold drinks, sandwiches and, perhaps, an apple or orange. If the trade’s vending concept depends on the existence of a caterer on sight, it will leave a large part of the vending market out of reach.

Second, we suspect that the product these cafeterias will produce will not win in the marketplace. Who goes around praising the food produced by school cafeteria staffs? Plus, consumers, of all ages but especially children, get used to product and want what they want. In other words, children don’t want a cup filled with apple slices cut up by the cafeteria staff — they want the same packets they eat at home which their parents bought at the supermarket.

The Pundit kids would want ones with Mickey Mouse on them or maybe McDonald’s Apple Dippers. We suspect that a Ready Pac Bistro Bowl type of salad would do better than something made in most school cafeterias — not to mention that it could be made available in places where there are no cafeterias.

Third, a lot of vending machine food — especially at venues such as factories that run 24 hours a day — winds up being cooked in a microwave. All these programs have focused on snacks, but our experience is that a lot of vending machines sell meals — a sandwich, a microwaveable soup, etc. So we want to see both snack products, say, Mann’s Snacks On the Go! line, but also innovative products such as Mann’s Steam in Bag! line.

Both projects see who will buy the machines as a big problem, yet we suspect that if we develop great products that will generate sales in vending machines, there will be zero problems in getting those machines sold.

In fact the distribution and machine purchase problem may have the same solution. What if an industry consortium develops and tests the machines and the products and then we partner with thousands of small businesspeople. They buy or lease the machines, then provide them free to schools, offices, hospitals, factories, etc. They then operate routes in which they buy produce packaged to fit the machines from wholesalers around the country and then operate a route system to keep the machines restocked.

It is very doable — we can easily adapt product into sizes to fit vending machines, we can easily sell it through wholesalers, we can easily find plenty of entrepreneurs looking to buy or lease machines and run vending routes — many already do that exact business with sandwiches.

The challenge is generating high enough sales to make it worth while. The pilot program we really need is to test all different types of product assortments to find the optimal mix to generate maximum sales.

If the sales are there, there will be plenty of incentive for great minds to figure out the logistics.

Many thanks to Auke Heins and Holland Produce Promotion for sharing their innovative work to increase produce consumption. It is through such efforts that a brighter future for this industry shall be realized.

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