STATE OF VENDING MACHINE OPERATORS INDUSTRY IN THE UNITED STATES

A long trend of declining revenue has made for a slow decade for the Vending Machine Operator industry in the United States. Within the past five (5) years revenue has declined each year except for 2012. According to IBISWorld Inc. revenue has decreased at an annualized rate of 0.8% to about $7.3 billion within the past five years, and a 1.1% decrease so far in 2016. The status of the vending machine industry has been a result of changes in the eating index, new nutritional restrictions, and the rise of micro markets and convenience and grocery stores among other things.

Although the outlook may be somewhat discouraging, with downward revenue trends being expected to continue, there is a silver lining as these decreases are expected to occur at a slower rate. Over the next five year period, vending machine industry revenue is expected to decrease at a rate of 0.6% to an estimated $7.1 billion, according to IBISWorld. In the coming years, key external drivers will both positively and negatively affect the industry’s profit margin; these include an increase in per capita disposable income, a rising healthy eating index, and rising prices for corn and sugar.

Changing laws pose a big threat to industry operators. Since its implementation in 2014, the USDA’s Smart Snacks in School has introduced new challenges for operators who have machines in primary and secondary schools. The nutritional restrictions have created a limited selection that operators can supply, and unfortunately the approved items are not popular among the students. These restrictions have caused many operators with school locations to experience a 30-40% decrease in revenue. If more laws similar to these continue to be passed some vending operators will be forced to find healthy selections that will be profitable, or exit this industry segment.

In response to the decreasing sales from snack, food, and beverage machines the vending machine industry has turned some of its attention to using technology to generate sales, as well as continuing to pursue non-traditional machine markets. As it stands in 2016, of the $7.9bn in the industry, movies and games has 29.8%, food has 29.6%, beverage has 29.9%, and other products have 10.7% according to IBISWorld.

Technology such as touch screens, cashless / mobile payment, and remote monitoring systems will help companies are the future and will create a more enticing customer experience which will hopefully drive sales. Recent advances in technology will help to improve operators’ profit margins, as they will be able to monitor machines more closely and make decisions to eliminate underperforming machines.

Competition / Major Players
IBISWorld determined the market share concentration in the industry to be medium with the top four industry operators being estimated to represent 47.1% of total industry revenue, the remaining 52.9% being held by small to medium sized companies. Major players with the largest market share are Outerwall Inc. (21.2%), Compass Group PLC (12.5%), and Aramark Corporation (9.0%).

Over the five years leading up to 2016, market share concentration has been on the rise as costs continue to increase while revenue declines. IBISWorld determined the most important key success factors for businesses in the industry are:
• Having an exclusive sales contract
• Ability to pass on cost increases
• Economies of scale and scope
• Proximity to key markets
• Easy access for clients
Internal competition in the industry is high and the trend is steady, according to IBISWorld. More and more companies are beginning to diversify the products they offer, as well as changing the machines to cater to the rising healthy eating index. IBISWorld says that sleek, well-branded machines with easy customer interfaces and technology will help spur revenue growth for operators.
Overall, the industry outlook has been looking up as the continual decline in industry revenue is expected to slow. Improvements in technology will give operators tools to remain profitable. Industry companies need to continue to focus on meeting the demand of healthy vending and embracing technology to drive efficiencies and increased sales.