You Get What You Pay For In The Vending Business

We often receive inquiries from organizations looking to switch vending machine companies because their current supplier had raised the pricing on their Pepsi or Coke machine. The organization feels that the pricing is not fair and wants to switch vending companies. In almost every case we are not able to help the organization out because the vend rates they are requesting are too low for any vendor to make a financial return on the machine placement.

Many people who are not familiar with the industry assume that the vending business is very profitable. The most common example calculation mistake for people is that the vending company purchases a case of Coke for $.25 and sells it for $.75, thus receiving $.50 of profit. While it’s true that the vendor will make $.50 with these numbers, the net income is much lower once the costs are taken out.

A decent quality standalone soda or pop machine runs about $3,000. Assuming the previous example of a vendor purchasing soda for $.25 each and selling it for $.75 in the Coke machine, the vendor would have to sell over 16 sodas every day for a year to just break even on the vending machine itself. This doesn’t include costs such as insurance, delivery vehicles, gas, paying the person to stock the machine etc.

That being said, there are vendors out there who have very low vend rates compared to the competition. Extremely low vend rates are usually obtained the following ways:

· The vending company isn’t reporting all of their income to the IRS.
· The vendor doesn’t carry insurance protecting his or her clients should the machine injure someone or cause damage such as an electrical fire.
· There is not a customer service center to call if there’s a problem.
· The vending provider uses old, outdated equipment.
· The vendor uses low quality generic products instead of Coke or Pepsi.
· There are illegal immigrants servicing the equipment, which that can be a legal issue for the organization that hired the vending company.
· The vendor will place the machine with the low price for a few months to get the machines in the door and then raise the price later.

In most cases organizations are better off looking for a company that has good service rather than simply going with the lowest bidder. Most people prefer a Coke vending machine that is always stocked with products and actually works rather than having an old vending machine with a low vend rate that steals money and is always out of product.

Like the old adage says, “You get what you pay for.”