Technology and changing consumer needs are creating an opportunity for fresh-food vending machines, which may prove to be a fierce competitor for fast casuals.
Getting fresh food from vending machines in the past hasn't been easy, but new technology and changing consumer needs are creating an opportunity. And that means fast casuals can add another competitor to the growing list of businesses vying for their market share as attested by a panel at last week's Self-Service Innovations Virtual Summit, titled, "Why Fresh Food Vending is the Industry's New Darling."
Several dedicated fresh food vending companies have emerged in the last few years for a variety of reasons. Panelist Drew Munro, co-founder and CEO of Upmeals, Vancouver, Canada, said the need to get healthy meals at the workplace has become more difficult in recent years, for example, with catering and meal delivery companies not always offering flexible, accessible and customizable meals.
"A solution like vending that is flexible, customizable and accessible 247 is actually a perfect solution to solve those problems and meet those needs now and into the future," said the veteran caterer, who recently expanded into fresh-food vending.
Panelist Arne Saupe, director of engineering at Farmer's Fridge, which provides wood-paneled kiosks with a glass front displaying freshly prepared food packaged in recycled plastic jars, agreed that accessibility was a major benefit of vending machines. He said it was often difficult for people at work to get healthy food quickly.
"Being able to have a vending machine that gives you something different than just snacks is something that's appealing in general," Saupe said. He further said technology has improved that can more easily guarantee food safety.
"Now, with the increase of automation and automated kiosks is an opportunity to reach a new market that is more convenient for the end user," said panelist Sam Hale, founder of Nutrimeals, Calgary, Canada, a meal delivery provider who expanded into vending.
In high rise buildings, many people don't have time to go out and get a meal, said panelist Todd Madlener, president and COO of Coolgreens, Oklahoma City, Oklahoma, a fast casual restaurant chain that has expanded into vending.
"By placing our machines in these lobbies, in these lunch areas, in these break rooms, we're able to bring fresh, high quality meals to the consumer, and open up Coolgreens to a whole new demographic that may or may not know about us as we're expanding," Madlener said.
Overcoming negative perceptions
Finding a solution is one thing, but getting customers to accept it is another. Moderator Cherryh Cansler, vice president of editorial at Networld Media Group, asked the panelists how they were able to overcome the traditional customer perception of vended food as low quality food and convince them to try it.
Saupe, whose company debuted its dedicated fresh food vending in 2013, acknowledged that changing perception takes time, which is why his company actively markets its food.
"It takes a while for people to accept that what comes out of a vending machine is as good as when you go to a counter or some place," Saupe said. "It takes some time for people to accept the concept." He said it requires "world of mouth" marketing.
"It's been a challenge for us to get those early adopters… to get people to believe that the product you're serving is the same high quality that you can get in our brick-and-mortar stores," agreed Madlener of Coolgreens. "Once we can connect the guest to that...the acceptance is much faster."
Munro said vending has the benefit of the perception of being safe compared to other foodservice formats.
"Everything you get from a vending machine is safe," he said. "You're not purchasing that from a retail environment where perhaps 15 or 20 people have picked up that salad bowl before you're purchasing it."
Saupe agreed on this point, adding that in New York City, his company needed to get a separate license for every vending machine.
"It's also a real approachable way for consumers to try specific diets or specific dishes that maybe are a little intimidating for them to try cooking at home or going to the store or going to a restaurant, something like a keto or paleo meal," Munro said.
Supply chain and other challenges
One obvious challenge with fresh food compared to products with longer shelf life, of course, is the supply chain.
Saupe said his company receives fresh food daily to be prepared at its 50,000-square-foot kitchen. The company then delivers its meals in temperature controlled vans to machines that allow temperature monitoring on a continuous basis. Farmer's Fridge even puts sensors in some of the products to monitor temperature.
Given all these considerations, the panelists agreed that fresh food vending involves a lengthy learning curve.
Munro said it is important to first identify what problems you are addressing and who the users will be. This will help you select your equipment, your technology and the product you will offer. "The decisions from there became a lot easier," he said.
"With vending, we had to find, first and foremost, a partner that could supply an actual smart fridge…that can keep our guests safe, keep the product safe, and that will monitor that product throughout its life cycle," said Madlener.
Coolgreens then hired a person experienced operating micro markets who taught them how to set up delivery routes. The next step was to create packaging to provide restaurant-quality meals in an appealing manner.
"There's been a lot of learning, a lot of give and take," Madlener said.
The 'elephant in the room'
Cansler then focused on what she called "the elephant in the room" — food waste, which has always been one of the biggest obstacles to offering fresh food in a vending machine. She asked the panelists how they control it.
"Essentially, data is the key," said Saupe. "Once you have your data, you can start optimizing your processes to make sure the right amount of food goes into each vending machine so that it can be a reasonable chance of being sold. That is something that you can control."
Munro agreed that data is an important tool in minimizing waste. He said software allows operators to manage inventory and even offer limited time offers when products approach the end of the shelf life.
Munro said there is far less waste in his vending operation than his catering, while Madlener said there is more waste in the company's restaurants than its food machines.
"There is going to be waste," Madlener said. "We do have to balance the cost of the waste to the product that we're selling," To do this, it is important to monitor sales on an individual machine basis, he added.
Monitoring sales on an individual machine basis does more than allow the company to control waste, Madlener said. It has also allowed the company to tailor individual machine menus to individual location preferences. The company has been "very surprised" by the variance in product preferences for the different location.
Prices and ROI
The panelists offered price and ROI information.
Munro said retail prices in vending are 20%-30% more cost-effective than similar items available from a delivery service or a caterer. "That's sort of the sweet spot in the market where we're trying to add value for our partners," he said.
Hale of Nutrimeals agreed that the margins in vending are 20% better than in food delivery.
Saupe pointed out a vending machine is much cheaper to deploy than a restaurant. While he did not give numbers, he said the ROI for vending is reasonable.
"In a vending machine, it's actually a much shorter time window than it is for opening a restaurant," he said.
Madlener said his products retail from $7-$10 for entrees and beverages and snacks that are less expensive, while Hale said the prices in his machine are $9-$10.
Asked about information resources for newbies, Madlener said his company learned by trial and error since information resources were not ample.
Munro said it is important to know where you plan to fit into the current foodservice market before you start investing in equipment.
Saupe suggested starting small and make sure you have a marketable product before you invest a lot of money.
While information resources are limited and a lot of dedication is needed in this relatively new foodservice sector, the panelists nonetheless confirmed it is possible for an entrepreneur to succeed in a product segment that the vending industry has long avoided
December 17, 2020 at 06:00PM
https://www.fastcasual.com/articles/why-fresh-food-vending-is-gaining-fast-casual-market-share/
Why fresh-food vending is gaining fast casual market share - Fast Casual
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