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The Business of Vending Machines

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Urban lifestyle, changing consumer behavior and economic growth have bolstered the market for vending machines

Vending machine dispenses a product or a service, and it is a fairly new concept in India. Economic growth, development of cities, lifestyle and eating & drinking habits have opened a huge market for these machines which can cater to consumers directly. There exists a high potential for growth, both in sales of these machines and goods & services sold through these machines.

Both goods and services can be sold through vending machines. Goods include pre-packed beverages, snacks, newspapers etc. Services include bill payments, recharge cards like mobile talk-time recharges, tickets and so on. There are different kinds of vending machines for different purposes. Some type of vending machines include machines for snacks and beverages (packed foods), hot beverages (tea and coffee), magazines and newspapers, tickets and machines for services like recharges etc.

The market
Sales of goods and services through vending machines are pegged to be worth $1 billion by 2012. According to Pulin Dani of Plus Beverages, a vending machine manufacturer, approximately 12-15% of the potential market for vending machines has been tapped in India till now. So, a huge market is still untapped. Estimates suggest that globally, the industry mix of products sold through vending is 40% for canned beverages, 19% for snacks, 8% for hot beverages and 33% for other products. However, vending of services is a fairly new concept and is expected that the share of services would increase considerably in the coming years.

As of now, hot beverages’ vending machines for tea and coffee has the substantial share in sales of machines in India. These machines are mostly found in offices, shopping-malls and restaurants. However, sales of snacks and beverages machine are picking up and have a huge potential. Potential locations where these machines are installed are train-stations, airports, universities, shopping-malls, offices, hospitals, hotels, fuel-pumps etc.

Quick Facts
Fairly new industry in India
Projected to be a $1 billion industry by 2012
Changing lifestyle, technology, consumer behavior expected to influence business significantly
Only 15% of the market captured till date
Machines available on rent too
Business point could be supported by just operating 4-5 machines.

The Business
Manufacturing of vending machines is just like any other manufacturing activity. Most of the components required to manufacture or assemble a machine are available in India.

Growth Drivers of the Industry
Changing lifestyles, eating and drinking habits
Consumerism due to increasing incomes (economic growth)
Upcoming urban centers and corporate culture
Technology (making vending easy and convenient)
Fairly new industry. Large part of market still untapped.

However, some sophisticated components and systems like currency recognition system are imported. In India, there are no regulations as such regarding manufacturing vending machines. However electrical equipment norms regarding machines needs to be followed.

New vending machines available in the market have the option to accept currency (both notes and coins), give the change back in terms of notes and coins, accept payments through cash cards etc

- S Choudhary
Vice President (Sales),
E Cube India Solutions

The cost of a vending machine depends upon its size, sophistication, payment system and other special features. A typical, small, basic snack & beverage vending machine costs around Rs 40,000 in India on the lower side. A hot beverage machine costs around Rs 10,000 on the lower side.

These machines are also available on rent. In this business model, monthly operation charges are paid to the owner of the machines whereby the owners provide the machine and services such as maintenance or as agreed in the contract. The vending operators (those who install and run vending machines) decide and arrange for the location and pay electricity bills and space rentals. Generally it’s the vending operator that decides on the products to be sold through vending machines. Monthly operational charges for a typical snack and beverage machine is around Rs 7,500. According to Pulin, most of the machines are on rent in the market and are very often owned by the operators.

According to a study by the National Automatic Merchandising Association (NAMA), scale of operation does affect the profitability of the operators. However, according to Pulin, businesses can be operated with just 4-5 machines and still be profitable in India.

Main revenues of the vending operator come from the sales of products through these machines. However, other options like advertising seem to have a substantial scope. Advertisements could be done both by displaying products in the front-glass machines or by putting ads on the machine itself.

Challenges

Approximately 12-15% of the potential market for vending machines has only been tapped till now in India. So, a huge market is still untapped

- Pulin Dani
Plus Beverages

In India, conventional vending business models and machines have not done well. Major reasons are consumer habits, non-availability of machines suitable for Indian conditions and the availability of cheap labor. People are yet not very comfortable using these machines because of complications, trust and other factors. Also, currency recognition and especially of notes has been an issue as prices of products is generally such that payments through coins is not convenient. Instances of vandalism and rough use have also been an issue and has deterred installers/operators from making investments in these machines. Machines often break down because of dust, heat etc. Furthermore, availability of cheap labor has come in the way of popularity of vending through machines. One of the major reasons for vending is to bring down the labor cost and especially when labor cost is the major chunk of cost. But in India this advantage has not accrued to vending businesses till date.

Other areas that need to be taken care of is keeping machines well stocked, goods should be quality products, quick repairing in case of breakdown, keeping machines clean etc.

Overcoming challenges
There is a huge scope for machines that are designed and that can be designed addressing the issues faced by old vending machines in India. Currency recognition is a major step to solve the payment problem. Other payment modes such as through mobiles, credit cards also seem feasible. According to S Choudhary, Vice President (Sales), E Cube India Solutions, new vending machines available in the market have the option to accept currency (both notes and coins), give the change back in terms of notes and coins, accept payments through cash cards etc. Also, these machines are being tried to be put on networks whereby information is easily available and thereby increasing efficiency. However, according to Gary Partridge, International Sales Director, Seaga, a vending machine manufacturer, real time networking (telemetry) is an interesting concept but in India it is costly. The information provided would unlikely help to reduce cost and only minimally increase efficiency at this stage of the industry development.

The exciting aspect in India about vending is that India does not have a long history of vending. There are no pre-conceptions in India about what is vended. So a lot more different products could be vended through vending machines

- Gary Partridge
International Sales Director, Seaga

Other measures like installing machines in safe places like metro stations, hotels etc., where no explicit security is required for these machines, could be a good way out. Changing habits and lifestyle are likely to give a big boost to this industry.

Vending is a fairly new concept in India. According to Gary, the exciting aspect in India about vending is that India does not have a long history of vending. There are no pre-conceptions in India about what is vended. So, a lot more different products could be vended through vending machines. Also, the impact of slowdown on vending business has not been significant. Industry estimates suggest that the industry will experience substantial growth and will lay down opportunity open both for vending machine manufacturers and operators. According to Choudhary, still major part of the market is untapped. Demand for these machines is growing day by day due to advantages like making products available 24*7, not being dependent on anyone or manpower and various other advantages.

Comments (19)Add Comment
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written by Ravi negi, September 13, 2010
What is the Goverment regulation for retail thru Vending machine for a foreign compnay?
Is any foreing company can do sales thru Vending m/c.
can be a own vending machine operater?
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written by hariprasad, August 19, 2010
can somebody tell me of who are manufacturing these machines at hariprasad1972@live.com
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Really interesting and new concept
written by Abul Hasem, August 10, 2010
Vending machines concept in India is really a new concept and is going to make living of many unemployed people.

As you already specified that it is going to be worth $1 billion by 2012 then it would be a very successful step in supply of healthy food and drinks.

Thanks for the post
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what vending is?
written by Abhishek Verma, July 27, 2010
A vending machine sells any pre-packed item without any human assistance (except stocking the machine). These tea and coffee machines should not be categorised under vending machines,these are liquid "dispensors" and are at the bottom of the value chain where automation is considered.
Today vending is missing a sustainable model due to:
i. high equipment cost
ii. regulation of maximum retail price(MRP)
iii. Market not ready for open location (remember retailing is all about location with high footfall)
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Remote monitoring & management is availabe now
written by James Oladujoye, July 15, 2010
We have created system that provides a comprehensive way to monitor stock, cash and faults remotely– directly from the machine? This means that without going to the machine you can get:
Instant fault and stock status, reduce cash theft, Improve stock levels (stock control), Build business rules that look for and notify you of anomalies as they happen. This reduces costs and increases profits. If you require further info take a look at www.veovend.com . A diagram of how it works can be found at http://veovend.com/veovend_system.html
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Looking for Vending machines Distributorship
written by Mohammed Khader Ali Khan, May 17, 2010
Hi, I would be interested in taking Distributorship for Vending Machine in Hyderabad AP. I appreciate any company interested to allot.
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Vending Machines - Operated By Vendors
written by Cheeran, April 19, 2010
the very purpose of the Vending Machines are to avoid/reduce manpower, but all Vending machine seems to be operated by venders. SO, the Machine is down graded to a "mixer" of coffie bean or a heater to boil the water/milk.

as it is mentioned in The article, in India, such vending machines are not popular because, it still require manpower and the maintanence of the equipement is higher due to heavy usage. But if you see the Vending machines operated other parts of the world, its used for minimum usage and Kept for public with out any operator, as manpower is very expensive.
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In India, when we say 'Vending Machine', we mean - hot beverage vending machine
written by Manu Yadav, April 19, 2010
Being associated with this industry(beverage vending),I feel that this industry is still in a very a nascent stage,sturdy and reliable machines are still not available.
As far as beverages are concerned no manufacturer has been able to provide a good tasting Indian tea premix, all that is available is, like a user put it-"Something hot, with lots of cardamom but definitely NOT Tea",and this is true for all brands.
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Currency problem
written by Gopal Amlekar, April 18, 2010
I think the major issue for these kind of machines will be the poor condition of our currency notes..
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Modern Vending Machines
written by Prasanth, April 18, 2010
Thanks to the author for this interesting article on vending machines. I have been an avid follower of vending machine and their developments world over.
To be frank, these days, the technology in vending machines have taken a big change and no longer are these machines confined to just vending a bottle of soft drink or some small packet of chips. These days there are machines capable of freezing food, heating the same and giving you a well cooked hot meal (all while you are listening to your favourite music or watching a movie trailor on the video screen attached)... These machines may be costly, but worth every penny, for the operator and the consumer...

Contact me incase you want to know further... magicpashu @ gmail.com
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VENDING MACHINES
written by Shyam Malhotra, April 17, 2010
you can count on SAM Smokeless Fuel Pvt.Ltd. to provide branded Lipton Tea & Coffee Vending Machines from Rs.5000 to 35000.We market Hot as well as Cold Vending Machines.Brooke Bond,Lipton,Taj Mahal Tea Bags,Knorr Tomato Soup,Knorr Lemon Seasoning/Orange Mix all can be vended through our machines.Come join us in the fun.
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link exchange request
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nestle vending machines
written by jain, February 17, 2010
hey ppl nestle is also in the business of vending machines.and they are business leaders in this category .they either sell small vending machines which costs around 12000Rs....and they also give machines on rent ..these machines have larger capacity.BEYOND BEANS are the authorized dealers of nestle vending machines in bangalore. i own one vending machine of nestle and i tell tell u guys it will surely saves a big amount and its very good.
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I know one......
written by Ravindra Chandran, December 30, 2009
Dear all, we have Vending Machines at our office and it works really well. We are never left hungry....So any one of you interested in similar machines at your locations I would preferably recommend Instant Retail India Ltd. Its services are really good.
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written by Rakesh Gupta, December 15, 2009
hi, i am interested.
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vending machines to be cheaper
written by S.Aunandakumar, December 05, 2009
if vending machines are available at a cheaper price for selling
beverages like coffee and tea then it can be made available to
unemployed youth to make their living.
Machine for Rs.5000/- should be made available.
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Hmm..
written by Mahadevan Sundarraj, November 01, 2009
Unfortunately, most of the vending work in India works on copying an imported model. The only guys perhaps who've tried to do something original are the Canola guys. We did considerable work on the coffee vending machine, that Cafe Coffee Day uses these days and found plenty of interesting partners willing to discover original work. Frankly, if there are enough interested people, there are plenty of ways of finding the right solution.
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written by Jay, October 03, 2009
Where can i get one ?
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