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For Vending Machine Operators, It’s Not the Candy That’s Dandy

That vending machine you hit up for that late afternoon pick-me-up may be changing its stripes. Out with sugary sodas and candy; in with organic juices and Cliff bars.

“There’s a trend nationwide about increased awareness of healthy eating…and people are also asking for more convenience,” says Sean Kelly, chief executive of Human Healthy Vending, which operates some 1,100 franchised vending machines in 30 states.

The big drivers behind replacing vending machines that carried junk food with ones that offered more healthful snacks were federal and state regulations covering the types of products sold in schools and state buildings, he said.

Kelly said most of his company’s machines are in schools, but they’re also proliferating at YMCAs, hospitals and state office buildings.

Brad Quick, director of Bellus Academy, a Poway-based cosmetology school, said the school hosts six vending machines dispensing more natural food snacks at its three campuses.

“We cycle through the food (in the machines) almost daily, and they’ve been a big hit with our students,” Quick said of the machines provided by San Diego-based Fresh Healthy Vending International Inc.

Alan Rigo, a franchisee in Houston for Fresh Healthy Vending, said he began operating 15 machines in 2012, and now has 33 machines. “I was doing everything to run the business in the first six months, but since then I’ve hired two people to take care of all the day-to-day stocking and maintenance,” said Rigo who has another full-time job.

The machines carrying the more natural snacks are refrigerated and accept credit cards and other electronic payments.

A Fan and a Franchisee

Peggy Lewis, who purchased an initial five vending machines from Human Healthy Vending in February 2012, said she was attracted to the business because she herself preferred eating more healthful food than was usually found in the vending machines where she worked.

Today, Lewis, a resident of La Mesa, says some machines are doing better sales than others, but the business is generally holding its own. At two high school locations, her machines replaced those that formerly sold junk food, Lewis said.

“We expect the business to grow and will begin to give us a more substantial income as we grow it,” she said about the business she co-owns with her husband, who has a full-time job.

Kelly said his October sales report shows Human Healthy Vending machines generating average sales of about $800, or more than double the industry average.

“We’ve only been franchising since 2012,” Kelly said. Before then, Human Healthy Vending was a licensor of the machines and allowed buyers to pick their products, which led to some consistency issues, he said.

The franchising model has been working well for Human Healthy Vending, which was named to the Inc. 500 list last year based on its explosive, three-year sales growth from 2009 to 2012. The Culver City-based firm’s revenue for 2012 was $9.2 million, but Kelly said he was no longer providing updated sales figures.

Of the franchisees, Kelly said a typical owner has about 10 machines, but the company is trying to attract people who will operate the business on a full-time basis.

Micro Markets Trend

Human Healthy Vending is putting increased emphasis on selling micro markets, a newer type of snack delivery system that Kelly called “an unattended miniature convenience store in a corporate setting.”

The micro markets could offer both cold and hot foods, and a greater product selection, as well as fatter margins, Kelly said.

The prices of vending machines range from $3,000 to $8000 with the most common variety costing $5,999, while the micro markets range from $6,000 to $12,000. The firm also charges a franchise fee of $35,000, Kelly said.

Micro markets are being adapted in many corporate environments, replacing the older vending machines that usually contained standard sodas and candy bars, said Roni Moore, vice president of marketing for the National Automatic Merchandising Association, the national trade group for the vending industry.

“The vending and refreshment services market is about $42 billion in this country,” Moore said. While the rules covering products sold in schools is certainly having an effect on the make-up of many vending machines, the entire industry continues to evolve and there’s a focus on putting more healthful products in the machines because that is what the public desires, Moore said.

“They’re not alone (in their emphasis on healthful snacks),” Moore said of Human Healthy Vending. “Everyone who is interested in growth in this industry is doing the same thing — providing a healthier type of snacks in their machines.”

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