Unlike most industries, vending machine operators tend to benefit
from an economic downturn.
In recessionary times, consumers who cut
down or eliminate larger expenses such as new appliances, cars
or meals outside the home often remain willing to part with their
change for a soda or handful of candy, peanuts or bubble gum.
Their coins quickly add up.
Last year alone, America's machine vendors
nickel-and-dimed their way to $25.6 billion in revenues, according
to a report prepared for the trade publication Automatic Merchandiser.
That total represented a nearly 5 percent increase from 1999,
and this year promises to be even bigger.
Despite the presence of more than 60 competitors
in Southern Nevada, Russ Kashka knows firsthand the value of operating
a local vending machine concession. A partner in Sky Top
Vending since 1977, Kashka said his family-owned operation has
prospered through both good and bad economic climates.
"(Vending) is recession-proof because everyone's
got change in their pockets," said Kashka, whose company currently
maintains 800 to 1,000 snack and entertainment machines at sites
across the Las Vegas Valley. "We're constantly taking our
equipment from business to business and we're as busy as we've
always been. As the town grows, so do we."
While Sky Top's revenue typically remains
stable, its actual sources of income are anything but staid, Kashka
said. With offices, bars, shopping centers and other vending
sites opening and closing on a weekly basis, one of the biggest
challenges faced by the company's 45 employees is the constant
reshuffling of equipment from lessee to lessee.
"We have companies that close up, so we
pick up their equipment," Kashka said. "The next week, someone
else comes into town, hires 50 people and decides they want to
put coffee and soda machines in the snack and break room. ...
We're always picking up and dropping locations."
Kashka said it's still too soon to tell
if the current economic downturn will impact his business.
If a slowdown does come, however, Kashka said the presence of
seldom-used coins will mark its arrival.
"I can tell when things are getting hard
because I start seeing silver coins in the drops," Kashka said.
"I'll see Mercury dimes or silver quarters, wartime silver nickels.
... When that happens, I know people are scraping the bottom of
Randy Francis, general manager of Idaho-based
vending manufacture (manufactures the U-Spin Spacesaver), has
spent the past decade promoting his company's bulk candy vending
business across the United States and in more than a dozen foreign
countries. Thanks to the recent economic slowdown, he expects
his vending business will increase substantially in the future.
"People won't spend the money to buy their
kid a $2 or $3 toy they normally would, but they'll give them
some quarters out of their pocket to buy a toy capsule or candy
from a vending machine," Francis said. "It seems like every
time there's a downturn in the economy, our business picks up."
The Idaho based vending company generates
its revenues by selling candy vending machines to private entrepreneurs
who subsequently place and support their machines as part of a
home-based business. Despite start up costs of $300 to $500
per machine (depending upon how many customer orders), Francis
said he's never seen a business that allows investors to recoup
their investments so quickly.
"Gumballs that sell for 25 cents only cost
vendors 2 cents. That's one of the reasons vending works
as well as it does," Francis said. "Even if you open up
a dispenser to its widest setting for a product like M&Ms,
it cost you about 11 cents per pull."
"Compared to what they get buying candy
in a grocery store, the (vending) customer still gets a good handful
of product for a quarter, but the vendor is still making a significant
Despite giving a percentage of their earnings
to the owners of the stores or offices the average U-Spin Spacesaver
takes in a monthly gross profit of $50 to $100 for each machine
in operation, although actual earnings vary from location to location.
He said the Las Vegas Valley's rapid growth makes it a prime site
for those looking to enter the industry.
"It's almost impossible for a Mom &
Pop operator to get machines placed in the casinos or big (grocery
or retail store) chains because they contract out with vending
corporations, but there are still plenty of places to place machines
there," Francis said.
Not everyone is convinced of the vending
industry's infallibility, however.
John Corcoran, who has owned Ice Cold Vendors
of Nevada since 1973, said rising product costs have cut into
profit margins at his small business.
Corcoran said on a per-machine basis, revenue
has stayed steady regardless of the economy, although the costs
of purchasing and maintaining his machines have risen in recent
years. Automation of the workplace has also cut into his
profits, Corcoran said.
"Because of computers, a lot of offices
have less people in them and that translates to smaller accounts,"
he said. "I've been in big monstrous warehouses where there
are only five people working there."
Automatic Merchandiser's report also cited
increased expenses for gasoline, electricity and employee benefits
as factors that negatively influenced vendors' profitability in
2000 and early 2001.
-INBUSINESS Las Vegas - October 2001 - Article written by Chris