Kurk Johnson of Three Square Markets is one of the best-known characters in US Vending and in this exclusive article, he offers an insight into the growth of breakroom markets and predicts that they’re about to take off in this country.
Over the years, a number of advances in technology have given vending a boost. In the 70s, bill acceptors came out and that was a big thing, leading to an increase in sales because customers were no longer reliant on the coins in their pockets.
Then came the introduction of glass fronted, larger machines with more spaces. It meant that operators were no longer restricted to offering just Pepsi and Coke, they could expand the offer to include, for instance, chilled coffee, and that helped revenue to grow. Then credit cards came out and gave us another boost.
Then, maybe ten years ago when I was a distributor, I stopped at a store on the way to a customer and I noticed that employees that worked at a site served by vending machines were stopping to buy a Mountain Dew, because it was 2 for 1, and buying the larger candy bars that were on sale. I could see that was hurting the industry. We couldn’t give people what they wanted, because all we had was a 12 selection pop machine and a 40 selection snack machine – and there weren’t enough employees on site to justify the introduction of a food machine – you need 200 plus people on site for a food machine to be viable .
So I started to look at breakroom markets. A good friend of mine, in the days before 32M came along, went with the first manufacturer of micro markets. This was maybe 8 years ago. He told me that his vending business had been so bad for so many years that he couldn’t afford to upgrade his vending machines. That’s when he heard about breakroom markets. He took a chance on breakroom markets because he had to make a change, or he was going to lose accounts. Immediately, he saw a huge increase in the number of very happy customers and an increase in sales of between 200-400%.
At the time I was selling him vending machines and I called him and invited him to breakfast because I thought his business must be in trouble. In the preceding year, I’d bought more equipment from him, to sell on as used, than he had bought from me. I found out that it wasn’t because he was struggling; it was because he was taking out vending machines and replacing them with breakroom markets. In fact he’d been able to buy a new building and hire more employees, he had a better cash flow and he was all excited about breakroom markets.
I asked him a lot of questions and he said, ‘Kurk, sell coolers to me, I’ll buy them from you, that way I can repay you for all the work you’ve done for me’ So that’s what I did.
Soon after that 32M came out with breakroom markets and I saw our vending machines sales drop by 30% in a year. The same thing was happening to other distributors, we were all laying off salesmen. There were two reasons for this: first, breakroom markets were selling well and second, the arrival of breakroom markets meant that the market was flooded with good quality used equipment. It was a double whammy.
When I heard 32M were doing breakroom markets I was interested because they were coming with a lot of experience from a market that used kiosks, the jail industry. I was very excited when they asked me to be part of their team as a distributor, so I worked with them.
At that time, 32M only sold the kiosk, not the full package. My friend told me ‘you have to put the whole package together and then I’ll buy it from you: coolers, microwaves and custom fixtures.’ So, that’s what I did.
When you’ve been in the business as long as I have, you get very close to others in the business, and I saw a lot of my old colleagues selling their vending businesses or just closing them down because there just wasn’t any money in it any more.
A lot of them trusted me when I urged them to take on breakroom markets. They’d install one, see what it did for revenue and then go for another. Now many of them have 30 or 40 micro markets and to be honest, they’ve never had it so good.
Not all my friends took my advice. One fellow thought breakroom markets were a different business, not for him. Sadly, he went out of business because he lost his best accounts to companies who did breakroom markets. In fact, many companies were bought out very cheaply by the new generation of breakroom market operators.
Soon, there was a trend of larger companies buying smaller vending companies, converting them to them to micro markets and increasing their sales 400%.
Here’s an example. We had a customer on South Dakota, he was doing $2m in sales. All he did was food and snack machines. Many of his customers were call centres with 300-500 people. There was always somebody trying to buy him out because he was doing $2m without offering beverages. By adding beverages and converting to breakroom markets, that company was potentially a $6-8m company, but he couldn’t get his arms wrapped round that. So he sold out, and as part of the deal, he went back to work with the company for a year and he called me and he said he wished he’d known then what he knew now: ‘I could have sold out for a lot more money, or I could have continued to grow it.’
So you see, breakroom markets have revolutionised the vending industry. They’ve turned many family concerns that were struggling into thriving, profitable businesses.
As our customers are growing, so 32M is growing immensely. There’s a lot of consolidation, if you look at Compass Group and Canteen, they figured out early on that a lot of the vending companies were ripe for takeover and conversion to breakroom markets.
It’s a new playing field now: better quality food is being sold, bigger bags, non-food items such as gloves and mittens. One guy from Northern Minnesota called me up all excited. It gets very cold up there and the workers in one particular factory didn’t want to stop off on their way home from work to buy food for the evening meal. There’s not much up there, it’s mostly farmland. So the breakroom market’s operator starting selling larger items like frozen ready meals, 12 inch frozen pizzas, milk, beverages in 2l bottles, that sort of thing. So now, he doesn’t just capture the sales during the day, because people in the factory, especially the younger ones, will maybe buy a pizza a bottle of pop and cookies and take them home for their evening meal.
I must say that a lot of people were nervous and afraid when they opened their first markets, so it became my job to make sure that they opened that market successfully. I’d put the plan together for conversion, get them all the training they needed; help with inventory, organise a supply of fresh food from a local deli and so on and then oversee opening. After that, they’d open more breakroom markets, quickly.
That’s what my colleague Tony Danna will be doing in the UK: working closely with people to make sure that their first breakroom market opens successfully. After that, it won’t be long before there’s a critical mass of breakroom markets in the UK and that’s when you’ll really see the business take off. Believe me, it’s going to happen!
To learn more about Three Square Market or breakroom market technology contact Tony Danna at firstname.lastname@example.org or visit http://www.32market.co.uk
*Tony Danna’s article, ‘People Love Breakroom Markets’, is HERE