Inside the healthy vending business

In recent years, the request for healthy products and location wellness programs has dramatically increased from the business and industry sectors as well as schools and government facilities. NAMA launched FitPick in 2005 to help member operators find products designated better-for-you and before that it had a program called Balanced for Life. 

In today’s environment, operators are searching for good-tasting products that meet nutrition requirements either for schools or community-based wellness programs. The concept of healthy vending has continued to grow, and that includes healthy vending companies.

Within the legacy industry of vending, those suppliers, franchisers and vendors that label themselves “healthy” have a negative reputation. Ever since they were first introduced 10 years ago, healthy vending franchises have been called fads or scams by many people in the traditional vending business. Oftentimes they are cited as displacing traditional vending operators and offering products that are debatably healthy.

Despite skepticism from traditional vending operators, healthy vending franchises continue to grow and gain locations. The combined factors of additional better-for-you products in retail and more locations looking for wellness-focused solutions have no doubt helped operators who run healthy vending companies. In fact, some traditional operators have even begun branching into healthy vending in order to cater to changing location requests. How does the healthy vending industry survive and what can the traditional operator take away from it? Here is a look inside the complicated niche segment of healthy vending.

Niche that creates partnerships

Traditional operators and healthy operators face similar challenges and successes when it comes to business growth. 

Dan Trainor who operates a Grow healthy vending business in Southern California sees the advantage of offering both healthy and traditional vending. “I’m predominantly a healthy route operator,” he said. “But I’ve slowly added some traditional locations.”

Trainor started in October of 2010 with six machines. He now has 60 machines, a full-time driver, a part-time employee who prekits and himself to run the business.

For Trainor, a big part of a successful healthy vending business is finding new products to place in his machines. Besides the products he can get from Grow’s distributor network, he also looks at grocery stores, online retailers and discount stores. Some products, like organic, squeezable apple sauces, are available from multiple retailers allowing Trainor to shop around for the best price.

He finds that healthy vending machines can be a profitable business. “It’s all about the locations, in addition to the products you put into the machine,” said Trainor. Locations where there are no other snack options other than the healthy vending machine products seem to work best and consumers certainly develop favorites. “They find a product they like and stick to it,” observed Trainor who has seen his sales increase to the point where he has outgrown his warehouse space and is struggling to maintain inventory levels of his top selling items. His average vending price is $1.50. His annual revenue for 2014 was over $300,000.

Products identified as better-for-you and a recognizable healthy brand name on the machine are what will drive partnerships between healthy and traditional vending, according to Chris Wyland, president and CEO of Grow Healthy. “I don’t think this should be an ‘us versus them’,” said Wyland. “I think over a period of time there could be synergy.”

Grow is not a franchise, but an equipment distributor with a healthy brand name and location finding service. Already the company has at least one operator who has run a traditional route for years, but recently bought into the brand for the equipment and product sourcing. “It’s the same equipment, but different product,” said Wyland, “the best quality products.”

John LaRoy, co-founder of CoachVend, LLC, experienced first-hand how consumers feel about switching traditional products for healthy ones. He placed some H.U.M.A.N. vending machines in a local high school and got pushback from the students, including some vandalism of the machines. “I then did some tasting events, so the kids could see that healthy doesn’t mean it has to taste bad,” said LaRoy. It worked.

Price is another issue. “The price of a typical vending item will jump from 55 cents to $1.25,” he said. The products LaRoy sells are just more expensive and sometimes difficult to get reliably. The distributor can be out of a hot product for 3 or 4 months at a time, says LaRoy.

In an attempt to offer the student athletes he coaches healthier snack options, LaRoy opened his H.U.M.A.N. franchise in 2014. He has surpassed 30 machines already this year and plans to install two micro markets. His machines average $1,000 a month, so he forecasts his annual revenue to be around $360,000 without the micro markets.

How does LaRoy see the healthy vending segment in relation to the larger vending industry? Currently a unique, separate and small segment, but not for long. “In the next 4 or 5 years, it won’t be a niche anymore,” he said.

It all hinges on receptive locations

Selecting a location with the right clientele is also of paramount importance to Craig Walters, owner of a Fresh Healthy Vending franchise in Pennsylvania. “Not everyone is receptive to healthy food,” he said. “And sales volume is critical in this business.” Walters aims for high traffic locations with physically active individuals like those at martial arts studios, gymnastics and dance studios as well as local schools. “Customers at these locations are more health conscious — aware of fats and preservatives — things like that,” said Walters. Distribution centers, factories and other traditional locations did not perform well for Walters, despite being staffed 24-7.

Fairly new to healthy vending, Walters opened his first round of machines in 2014. Previously he worked in the financial sector and currently consults in that area as he grows his healthy vending business. The franchise concept was a plus for Walters, although he knows he could have bought the equipment for a less expensive price and sold healthy products on his own.

“As I thought about it, brand was important and brand extensions would be important,” he said.

The franchise gave him access to an established healthy brand name. Currently, Walters services 23 machines. His average item sells for $2.50. “A lot of these food items are significantly more expensive [than traditional vending items],” he admitted. His biggest hurdle is that consumers are not as aware of the products or brands he offers in his machines, especially when they previously had traditional vending. Many of the products are produced by smaller companies that aren’t national name brands.

To give consumers a chance to taste the products, Walters offers a box of product free to a location for events, usually a lesser known brand. “Once people become familiar with the brands and products, they find something that fits their taste palate,” explained Walters, “which drives organic growth at a single location.”

Walters feels very positive about his business and is expecting to make $350,000 in annual revenue with his current projections.

Schools are another location where healthy vending machines are very popular, especially with the new Smart Snacks in School Standards in place. Mandated by the federal government, these standards establish minimum nutritional guidelines for snacks in school vending machines.

Todd Weishaus, a Fresh Healthy Vending franchisee in Southeast Michigan, has been placing machines for 3 years and finds middle and high schools ideal locations. “Schools are a home run,” he said, “even though it takes a long time to get into a school due to existing contracts and the many levels of decision makers there are.”

Weishaus employs a full-time driver to fill his 50 machines. He performs the accounting for his company, Fresh Healthy Vending of Michigan, maintains inventory in the warehouse and reviews location leads provided from Fresh Healthy Vending. This last duty has been imperative to his success. “We need to find locations that maximize sales. I won’t take a location that isn’t a good fit,” he said. He believes this is why other franchisees may fail and opt to sell their routes and equipment.

“Everyone [the franchisee and franchiser] has incentive to place the machines as quickly as they can,” he said. “When you do that, you get locations that aren’t so great.”

Weishaus is picky about his locations, aiming for high traffic places that produce a high volume of sales. “These machines perform very well in the right location,” he said. Each vender brings in over $60 in sales per day with an average item price of $1.50. If the location turns out to bring in less revenue than expected, Weishaus has an optimistic view. “That’s the beauty of this business. It’s a machine, not a brick and mortar business that you’re buying. You simply pick it up and move it,” he said.

Take-aways

Traditional operators should be able to relate with what healthy vending operators know to be true — that the preference of a location can mean big sales of better-for-you products, or few. Schools are a prime place to sell healthy offerings in a vending machine as there are few snack alternatives. Fitness related locations or businesses that are health-focused are also good potential locations for this type of selection.

Finding new products that meet guidelines and have a popular taste profile is difficult and the products can be more expensive. The industry will have to look at multiple distribution channels to meet this need, some of which have been cultivated by the healthy vending franchises. This represents an opportunity for the traditional industry to partner with healthy vending providers, as does a growing brand awareness among consumers. Can traditional vendors overcome their convictions about healthy vending and form partnerships? Can healthy vending operations grow into multi-generation companies? Time will tell.