Healthy vending choices creating headaches for operators
The nationwide push to consume healthier foods is putting the squeeze on vending machines operators who say they are being forced to eat more of their costs.
Here’s how it works: Vending machine operators make all their money on the mark-up they charge for the goods sold in their machines. They own and stock the machines and get permission to place one in a business — in the employee break room of a manufacturing company, for example. The manufacturer doesn’t pay the operator to locate the machine there, nor does the operator compensate the manufacturer for using the space, but in exchange the vending machine owner gives the company some say in what types of food and drink are made available.
Many businesses, feeling the need to promote employee health to reduce insurance costs, are now requesting on-site machines be filled with more wholesome choices such as protein bars and mineral water.
But employees aren’t in on the trend, and the items go largely unsold, say vending machine operators, leaving the operators holding the bag.
“As a vendor, I cringed whenever anyone said they wanted healthy food in their machines because I knew I was going to lose money,” says Clint Moxey, owner of Moxey’s Machines, which services and repairs vending machines.
Moxey, who used to run a route with 140 machines, says unsold items eventually expire and are thrown away, representing nothing but a loss for the operators.
“We want to be accommodating,” says Betty Albright, owner of Ladd Vending LLC, a vending machine business serving Reno and Sparks. “But it hasn’t been successful. Even individual (employees) asking for certain things don’t buy what they asked you to get.”
To fill those requests, and experiment with new items, the operator has to buy the product in small bulk — a box of 24 protein bars from Costco or Sam’s Club, for example, says Albright.
Part of the problem, say vendors, is price. Moxey says a protein bar, for example, costs two to three times the price of a candy bar. People just don’t want to pay that much more for healthy items, he says.
“People who want to eat healthy bring it. They bring carrots to work,” says Annette Bland, owner, Arrow Vending, which serves locations in Reno, Sparks and Carson City. “People want a treat.”
Bland says people turn to vending machines mostly for a pick-me-up in the afternoon, for the sugar in a Snickers bar or the caffeine in can of Coke. Or for a bag of Lay’s potato chips or Doritos tortilla chips to go with the sandwich they brought for lunch.
Vending machine operators say businesses tell them they want more nutritious choices because it affects their health insurance costs. Under the Affordable Care Act, businesses can reduce insurance costs through employee wellness programs with specific goals — such as quitting smoking or losing weight. So the food in a vending machine or cafeteria isn’t directly covered under the new healthcare law, but indirectly if an employee is part of a wellness program to lose weight. Also, fitter employees can reduce overall insurance costs.
“We’re just hoping for the trickle-down effect of healthier eating,” says Lorie Miller, human resources manager for Veka West, a maker of vinyl for windows in Stead.
Veka West is a customer of Avanti Markets, a concept developed in Washington State and introduced in northern Nevada by High Sierra Vending & Coffee, a vending machine operator serving Reno/Sparks and Fernley.
Avanti Markets replaces the break room vending machine with a small market, including coolers for drinks and food, racks for food and a kiosk and Avanti card to pay for items.
It solves some of the problems faced by vending machines by allowing for 300 or more items including salads and fruit while enabling buyers to examine food before purchasing it.
“They’ll pay more because they can touch and feel what they’re buying,” says Jeff Johnson, owner of High Sierra Vending and Avanti Markets. “In the vending accounts we’ve converted to markets, sales have doubled.”
Avanti Markets now has 15 customers. The markets are best suited for companies with 130 or more employees, says Johnson, although Veka West says it’s a success with 113 workers. Johnson plans to continue running the vending machines business for smaller customers, but says Avanti is quickly taking over.
“Sixty percent of our business is Avanti,” says Johnson. “That’s how fast it’s shifting.”
The rate effective Jan. 1, 2020, is 1.65 percent of wages paid to employees. That is two-tenths of a percent lower than the current rate, giving a significant break to businesses that pay the tax.