Competition will limit revenue, but demand for convenience will sustain growth
Los Angeles, CA (PRWEB) March 03, 2012
According to IBISWorld industry analyst Dale Schmidt “rising food costs and less-populated public places have translated into lost earnings for vending machines. Vending Machine Operators have found it difficult to absorb the additional food costs, and instead have raised prices. Vending machine operators can pass price increases through to consumers. Higher product prices and a slight improvement in consumer sentiment are expected to result in a marginal increase in revenue in 2012, though revenue will have declined overall in the five years to 2012, at an annual rate of 3.0% to $7.3 billion. The revenue decrease primarily occurred because of a dip in disposable income due to high unemployment during and after the Great Recession.”
The primary advantage of buying products through vending machines is convenience, but it generally comes at a price. With American consumers feeling the pain of the recession in recent years, their priorities have increasingly shifted toward value over convenience. Schmidt says that “this shifted snack purchases from vending machines toward bulk purchases at lower-priced outlets, such as supermarkets and coffee shops. The industry acutely felt the overall decline in consumer impulse purchases after vending machine operators raised prices. However, increasing the amount charged to consumers did increase industry profit margins.” Also, as less-profitable operators shut their doors at an annual pace of 1.5% since 2007, average industry profit rose. In 2012, the industry is estimated to have 29,375 operators.
In the five years to 2017, vending machine operators are anticipated to benefit from a 1.8% increase in disposable income. In addition, Schmidt says, “operators will work to better meet demand by offering a wider selection of food, including a further push into healthy snacks. However, the operators will still rely heavily on soda and candy even with the increasing focus on healthy eating, hindering industry growth.”
In 2012 the top four operators are estimated to earn around a quarter of industry revenue. Major players are Compass Group and Aramark Corporation. The Vending Machine Operators industry is highly competitive. The industry is made up of several medium-sized companies, thousands of small businesses, and tens-of-thousands of partnerships and sole operators. With costs continuing to rise and location population counts not following suit, this operating environment appears to favor the largest and smallest vending operators. Medium sized operators, those ranging between $5 million and $10 million in sales continued to lose market share. This is because, the larger operators have the resources to compete in more challenging retail conditions, and have the ability to enjoy economies of scale and scope through vertical integration. Alternatively, the smallest companies benefit from fewer overheads and personal relationships with their clientele.
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IBISWorld industry Report Key Topics
Vending machine operators provide and service automated machines that sell merchandise.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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