By David Llewellyn, CEO, The AVA
It’s amazing how many people eagerly look forward to the AVA’s Annual Census to inform their business plans. It’s a valued resource not just for vending operators, but also for the wider industry, such as machine and component manufacturers, commodities vendors and IT providers.
I was pleasantly surprised by the latest findings. The impact of COVID seemed to linger for longer in the UK than it did elsewhere in Europe, where pre-COVID turnover was regained a year, 18 months ago.
It’s taken us a little longer to get there but now, we’ve seen that the industry has advanced. We saw a 3%-4% revenue increase over 2019, and then a 13% increase in 2024 over 2023.. It’s good to see that. In fairness, sales volume is not that much above where it was back then. There’s been a great deal of pressure on supplier pricing and on costs, but at least we’re seeing that at the other end, operators are being able to increase their retail pricing, so those increased costs are finally being covered.
There does seem to be greater acceptance on the part of clients that prices have had to increase. They recognise that operators and their suppliers are seeing their costs going up significantly. The clients themselves are under similar pressures.
The price of a basic cup of vending coffee from a free-standing machine is now 49p. Not so long ago, we were talking about average prices of around 20p. However, the average price of a table-top coffee is 54p and a coffee to go comes in at £2.81
We’ve seen a huge increase in the importance of coffee on the go to the industry
We’ve seen a huge increase in the importance of coffee on the go to the industry. Consumers are embracing the offer of a larger cup of high-quality coffee, and the greater margins possible in this area have been a boon to the industry.
A consequence of this is seen in equipment sales. The industry is buying fewer large floor-standing, ‘traditional’, hot beverage vending machines. Having said that when you look at some of the large machinedevelopments from the manufacturers, whether it be Evoca or Coffetek, their equipment is becoming more and more sophisticated and – for want of a better word, ‘sexier’ in appearence. But the shift towards tabletops is undeniable. They’re easier to install when your objective is to provide the coffee and hot drinks people want, where they wish to enjoy them. Where, in the past, clients had four or five traditional machines on site, these days you may find that they have been superceded by a dozen tabletop coffee machines.
I think this is as much about the post-COVID move to flexible working, with people in the office at different times. Table-tops have made managing that change so much easier. Bean-to-Cup machines are perceived to provide ‘proper coffee’, which also accounts for the increasing sales of machines that use fresh milk.
Operators have taken note of successful High Steet outfits such as Costa Express, adopting attractive machine housings that professionally present the machines and also accommodate peripherals such as cups lids and increasingly, snacks and baked goods.
Many operators continue to use freeze-dried milk. The technology in the equipment has improved so much that often, it’s hard to tell one product from the other…
Fresh milk machines like those in a Costa Express have to be checked every couple of hours, but with the advent of self-cleaning, fully-automatic machines, fresh milk has become a viable option for many.
Some operators have always been agile, moving very quickly to address changing requirements. Others were, once upon a time, more pedantic. They would say, ‘this is the way we’ve always done it.’ But COVID brought real change, resulting in people embracing management software, leading in turn to a huge increase in cashless sales. Operators have accepted that this kind of change really is good for business.
As 3G was shut down, many assumed that machines would just fall back onto 2G, but the truth is that the more nimble operators saw this as an opportunity and said, ‘tell you what, let’s just replace everything.’ They introduced new payment systems and new management systems, and subsequently they’ve seen their businesses become that much more profitable.
It’s a characteristic of our modern industry that those involved in it have the attitude that change is an opportunity, rather than a problem. The imposition of a sugar tax is a case in point. Pessimists thought the consequences would be disastrous for us, but suppliers smartly changed the way that they constructed their products to make them compliant.
The AVA will of course be fighting the industry’s corner
DEFRA and the Treasury have recently announced a proposed consultation on the change to the soft drinks sugar levy, as they call it. The limit has been five grams of sugar per 100g. Now, they’re talking about bringing that down to 4%, but they’re also considering adding the levy to milk drinks. The British Hot Drinks Association are really concerned about the implications of this proposal. Milk drinks contain a lot of natural sugars and as soon as you start adding fruit, then obviously that quickly takes them over the over 5% threshold. The AVA will of course be fighting the industry’s corner.
Another interesting revelation in the report signals what appears to be the demise of plastic cups in vending machines in favour of paper products. Paper cups in themselves are easier to recycle but that doesn’t necessarily mean that they are recycled.
A point that we will emphasise is that vended coffee cups seldom end up as litter on the steets. 82% of the industry’s machines are in work places and used cups invariably end up in recycling bins. Getting that fact across to the powers-that-be presents a challenge, but it’s a challenge we’ll be taking up on behalf of our members.
Interestingly, a lot of the levies they’re talking about imposing are based on what the refuse weighs, which is crazy! A plastic vending cup is lighter than a paper vending cup, so taxes based on this criterion may well achieve the exact opposite of what they want.
The imposition of Extended Producer Responsibility levies will be a critical focus for us in the next 12 months. Our members are having to work out whether they should register and report. We’ve been going round the country presenting the details of the situation and a series of webinars addressing the subject are coming in June. We’ll be distilling the requirements to make them more straightforward, but it’s still flipping complicated! As an operator, do you have any idea what the packaging that goes through your business weighs? Thought not.
Then there’s the introduction of the deposit return scheme to factor in. It was introduced in Scotland and then withdrawn, nevertheless by October 2027 it will be up and running.
When it lands there’ll be an immediate effect in terms of pricing and clients are going to be asking, ‘what do we do about this?’ It’s our job to make sure our members have the information they need to answer clients’ questions and that’s what we’ll be doing – alongside the 37 other different pieces of legislation that the industry will probably have to deal with!
Did you know that the Office for Health Improvement and Disparity wants to introduce legislation to restrict the sale of energy drinks to under 16s? Their ‘solution’ was to ban the sale of these products through vending machines. We’ve had to engage with them, because 80% of machines are in work places, where 15 year olds are thin on the ground… This is typical of what we’re dealing with on behalf of our members.
In terms of operator personnel, in 2018 / 19 there were 24,500 of them. Five years on, that number is down to around 19,000. This is largely because operators are working more professionally, they are better organised and yes, more of them are seeing the benefits of using vending machine management software, which impacts the business all the way through; from stock and ordering, what stock they hold in the warehouse, how it is then picked and how it goes out. They know which machines need to be refilled and when. All of this additional information has allowed them to streamline.
More and more people are moving into fresh food
On top of that, the use of software makes operators more eco-friendly, simply because wasted journeys have been eradicated and consequently less fuel is used.
Micro-market installations are growing and I’m sure that will continue. Smart fridges and smart markets use more enclosed equipment where the sites are semi-public, and we’ll see a significant growth as operators adopt that technology.
More and more people are moving into fresh food, partly due to changing work patterns and partly due to the emergence of the appropriate equipment.
All things considered, looking at the next five or so years, I think we can be very, very positive abour our industry. Yes, it can be tremendously challenging at times, but when you get to it, the vending industry in 2025 is a fantastic place to be.
David Llewellyn was talking to Ian Reynolds-Young
*For more information or to purchase a copy of The AVA 2024 Census & Market Report, visit: www.the-ava.com or contact info@the-ava.com.
Stay in touch! Visit Planet Vending
Add Comment