It's really important that as a broader society and as an industry, we find it within ourselves to focus on the positives and uncover opportunity where some people can only see despair. This will be my third major recession, since I started out in 1981 and I can tell you that recessions are not unilaterally bad. There can be a sunny side up for vending - I have seen some green shoots of a new more dynamic industry evolving in the last 12 months and I think that will bear fruit over the coming years, at least for those who are ready to embrace change.

Recessions tend to speed up change, because they focus businesses to do better, work harder, change their products, skill up their staff, invest in new IT solutions and take better care of their customers. 2009 will be a very good year for vending and here's why I say that:

The search for premium value

In case you hadn't noticed, some of the discount retailers are doing very well. What can vending learn from this? Well, lazy commentators say that's because people want cheap food. That's wrong and far too simplistic. What they have done, which is a lesson for vending, is they have created the quality, added the satisfaction guarantees, won the taste awards, ensured the healthy options are there, in short matched the quality of the big established retailers then offer it at a competitive price.

 Now if we think about vending, the operating companies I can see that have done really well in the last year are in their own way copying (perhaps inadvertently) the ‘Aldi formula'. In hot drinks, they are embracing value-added vending concepts that use quality ingredients, producing coffee shop standard drinks, in a quality paper cup, with a lid and wrapped up with great service and operating disciplines. They are then offering a premium quality product at a lower cost than the high street coffee shop operator. Thus they are doing to Starbucks what Aldi is doing to Tesco. Over a period, word gets around and the operator offering this kind of ‘credit crunch' busting solution will find plenty of takers.

Finding new mechanisms, business models, concepts and products that develop added value (i.e. enhanced revenue streams) in what is a difficult market is vital and the ‘switched-on' operators out there will look for suppliers to feed in plenty of ideas and tools to assist them.

One of the smartest things an operator might do right now is win business by lowering employers' costs - by switching fully or heavily subsidised drinks over to pay vends for a value added concept. In that scenario everybody wins, the specifier wins because they save money, the consumer wins because they appreciate the better quality drinks, operators win with higher cash margins.

We sell staples

Food and drink are the primary staple items in people's lives. That means vending is historically more recession tolerant than other sectors. Indeed, vending can outperform the economy as it can offer quality products at value prices versus canteens, convenience stores or foodservice outlets. As people rein in spend (as we know they are doing) the opportunity is that they substitute e.g. £2.30 cup of coffee for a 80p vended drink, or they don't pay £1 for a Coke at the store - they get one from the vending machine for 80p. The key thing here then is know each site, understand what the competition is versus the vending machine, get the right range and selection of goods in at competitive prices and sales can rise not fall.

Re-adjusting markets

I'm afraid the recession is necessary to re-adjust input costs. All businesses have trouble passing on rising costs. The last two years have seen unprecedented rises in raw material prices - everything has gone up way ahead of the official inflation rate. In fact in some periods we have seen commodities increase by 300per cent per annum. That sort of rise is damaging, it destroys margins and profitability overnight and it disrupts business as too much time is spent trying to pass on costs. Already as economic activity has slowed we are starting to see raw materials stabilise and hopefully they will come down. The recent downward movement in oil is good news and that will hopefully feed through into other raw materials. At least then recession restores stability and that's good for all parts of the industry.

The industry's focus should now be firmly on cash flow and credit management. Higher unemployment, factory and workplace closures can reduce the number of available customers. Two things to be mindful of here is to re-double your credit check procedures both for existing and new business - ask your supplier to help, (Aimia provides an online credit checking facility for our customers to use for credit checking their clients). Secondly, cashflow is what keeps business profitable in recession - but remember that more businesses tend to go ‘bump' when the economy comes out of recession on (as they begin to respond to upturn in demand)!

Creativity and innovation

The most difficult times bring out the most miraculous creative solutions and inventions. Amazon was born in recession, so was Google, so was Dyson etc. I am starting to hear from many people that they want to do things differently, effect change in their businesses, and go for new differentiated products and concepts. I think that 2009 will be the year when ideas and views start to come to fruition and that will make for a better, stronger industry. Weaker business (and those that only talk about change but don't) will disappear. New vending companies will start up with different ideas and as an industry that has to be good.

In short, then, I think its wise to approach recession as a period of change and there might some good things that come out of this period. Of course, it will be tough and challenging, but out of adversity comes creativity, imagination, stronger business and I hope a more dynamic, energetic, more successful vending industry.

Have a prosperous and successful New Year.

Printer friendly version

Email this article to a friend

Bookmark this

---