Should vending operators upgrade to large-size candy bars?
Vencoa's prices are lower than machines from Selectivend, Fawn, Federal, or USI.
Vending machine operators considering upgrading to large-size products must commit to selling only large-size products. Studies show that if a smaller product is offered next to a large product, the success of conversion is limited. Customers would often times stay with the traditional size product rather than upgrading to the large-size product. In fact, in order for the trade-up tactic to work with candy bars, the product must sell for at least $1.00. In certain cases, price points above one dollar are required if the large-size product line is to be financially beneficial.
Let's consider the turn requirements for a vendor considering upgrading to large-size candy bars:
A traditional candy bar sells for $0.75, while a large-size candy bar sells for $1.00. The product cost of a traditional candy bar is $0.37, while the product cost for a large-size candy bar is $0.60. The gross profit for a traditional candy bar is $0.38, while the gross profit for a large-size candy bar is $0.40. If 100 candy bars are sold, traditional candy bars would yield a gross profit of $38.00, while large-size candy bars would yield $40.00. Therefore, the maximum percentage drop-off that can occur before gross profits are negatively affected is 5%.
Being a leader in the candy bar size upgrade process may come at a risk. By offering only large-size options, a competitor may be able to come in behind you and offer customers the traditional products at the old price. Additionally, although most of the large-size candy bars will fit into existing spirals and shelving arrangements, some products will require adjustments. Occassionally, these adjustments may require purchasing additional spirals, which can sometimes get costly as products don't fit into higher count spirals. If the large-size conversion is being done to minimize expenses, vendors are probably unwilling to purchase equipment or use incremental labor hours to make all of the necessary adjustments.
Another cost to consider is whether drivers are being paid on commission, rather than on an hourly pay rate. Vendors who pay drivers on commission will need to pay drivers more money to fill the same spiral, if upgrading to large-size candy bars. For example, assume that large-size candy bars have a $1.00 vending price and a $0.57 blended cost and traditional candy bars have a $0.75 vending price and a $0.38 blended cost. The blended cost is the combined candy product cost from various manufacturers. Also assume that there is a 6% commission to all drivers. The driver commission as a percentage of gross profit is 15% on the large-size candy bars and 12% on the traditional size.
Generally speaking, the conversion to larger products has been favorable for candy and snack vending machine operators who have made the full conversion. However, the conversion has not come easy for everyone. Some vending operators who choose to be market leaders in the candy bar conversion process will expose themselves to the possibility of lost business as competition solicits their accounts with the "old", traditional size program. However, candy vending machine operators who can successfully implement the large-size candy bar conversion will be able to earn more money without having to invest in new accounts or vending machines.
Looking to purchase a candy vending machine or snack vending machine? Vencoa offers a great selection of diverse vending machines for sale. Continue to browse our site to find out more information on Vencoa's candy or snack vending machines.
For more information, please contact Peter LeVine or any one of his talented colleagues at (800) 223-4101, (650) 493-2258, or contact us through our Info Request form
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*Vencoa is an authorized distributor of USI vending machines and is not an authorized distributor of Selectivend products.