National Dairy Council

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Milk Processor Education Program
(MilkPEP) Plant/Factory Milk Vending Test
October 15, 2001

RESEARCH CONSULTING FOR THE GLOBAL BEVERAGE
INDUSTRY
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Plant/Factory Milk Vending Test Executive
Summary

• Contents
• Test Objectives
• Test Methodology
• Key Messages
• Overview of Test Results

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Plant/Factory Milk Vending Test Executive
Summary

• Contents
• Test Objectives
• Test Methodology
• Key Messages
• Overview of Test Results

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Test Objectives

• Primary Objective
• To evaluate the opportunity for milk vending in
  plant/factory locations in terms of sales volume,
  velocity and revenue
• Supporting Objectives
• To understand the impact of dedicated milk
  venders compared to milk/snack combo venders
• To understand milk venders effect on adjacent
  competitive venders
• To quantify potential milk vending sales
• To evaluate vending performance of various
  flavors
• To gain key insights/learnings for milk vending
  program optimization

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Plant/Factory Milk Vending Test Executive
Summary

• Contents
• Test Objectives
• Test Methodology
• Key Messages
• Overview of Test Results

6
Test Methodology
The test included two types of milk venders
Glassfront Combo Vender (GC)
Dedicated Milk Vender (DM)

• Vends sweet snacks milk
• Top three rows are snacks, the bottom two are
  milk
• Milk capacity is 96 units (8 columns per row, six
  slots deep)
• Milk is in 16oz bottles with an avg. price of
  0.99

• Vends milk only
• Closed front with various graphics (milk mustache
  ads)
• Milk capacity is 270 units (5 rows, 9 columns per
  row, six slots deep each)
• 12 available buttons (typically only 9-10 were
  used range was 6-12)
• Milk is in 16oz bottles with an avg. price of
  1.00

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Test Methodology

• The plant/factory test included 28 machines half
  milk-dedicated and half glass-front combo venders
• The machines were placed in 3 markets, 6 cities

Milk Vending Machine Placements
Number of Machines Placed
Dedicated Milk
Glass-front Combo
Market
City
Total
South Dallas, TX 4 1 3 Mid-Atlantic Chattanooga,
TN 9 5 4 Nashville, TN 3 0 3
Total 12 5 7 Northeast Marlton,
NJ 4 3 1 Canastota, NY 5 4 1 Canton,
MA/Providence, RI 3 1 2 Total 12 8 4 Total
All Markets 28 14 14
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Test Methodology
Flavors offered varied by market, depending on
processor product line
Milk Vending Test Product Variety By Market
Machine Type
Mid-Atlantic
Milk Dedicated
Glass-Front Combo
South
Northeast
SKUs
Whole White ? ? ? ? ? 2 White ? ? ? ?
? 1 White ? ? Chocolate Whole ? ? ? ?
? Strawberry ? ? ? ? Coffee Low Fat ?
? Cappuccino ? ? Total SKUs 3 4 7 6 5
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Test Methodology
Test data was collected by Streamware
Corporations sales tracking service, InfoVend
InfoVend

• Carbonated Soft Drinks
• RTD Teas
• Fruit Juices
• Bottle Water/Sports Beverages
• Milk

Data from 5 Beverage Categories
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Plant/Factory Milk Vending Test Executive
Summary

• Contents
• Test Objectives
• Test Methodology
• Key Messages
• Overview of Test Results

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Key Messages
What Was Learned from the Plant/Factory Vending
Test

• Within the plant/factory setting, vended milk can
  be a profitable business
• Consumers will purchase an array of milk flavors,
  but white milk is also important in this
  all-adult environment
• Milk sells out of both milk-dedicated and
  milk/snack combination venders with a slight
  advantage for milk-dedicated machines
• Among a bank of competitive venders, milk may
  cannibalize some non-milk sales, but clearly adds
  incremental volume, as well
• Size of the account is a critical determinant of
  vended milk velocity and must be considered
  before placing a vender
• In large plant/factory accounts, more than one
  vender may be necessary
• In smaller accounts, combo milk/snack machines
  may be a better business decision

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Plant/Factory Milk Vending Test Executive
Summary

• Contents
• Test Objectives
• Test Methodology
• Key Messages
• Overview of Test Results

13
Overview of Test Results

• Across the markets, milk sold very well through
  both milk-dedicated and mixed milk/ snack
  machines
• Incredibly, these numbers exceeded school milk
  vending test results by nearly 100 units per week
• Dedicated milk venders outsold combo venders, on
  a total milk sales per week basis

Average Vended Milk Sales Units Per Machine Per
Week
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Overview of Test Results
Even though the milk/snack machines had fewer
facings/spirals for milk, vended milk velocity
was somewhat higher for milk-dedicated venders in
terms of vends per spiral (or select), as well
Average Vended Milk Sales Units Per Spiral Per
Week
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Overview of Test Results

• There was a large variation in vended milk sales
  by location depending on the size of the account
• InfoVend divided the test sites into large and
  small, based on total vended units sold (all
  products) during the test period
• This finding indicates that third-party operated
  dedicated-milk vender may not be profitable at
  smaller plant/factory locations in addition,
  large accounts may easily support two or more
  milk venders

Average Weekly Milk Vending Sales By Account Size
Large gt 50,000 total units vended during test
period all products Small lt 50,000 total
units vended during test period all products
Average Units Per Week
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Overview of Test Results

• Results were overwhelmingly positive in all three
  markets, though sales levels varied widely
• In all cases, vended milk sales were more than
  sufficient to profitably support a dedicated milk
  vender, based on prior business model analyses
  (no similar analysis is available for combo
  milk/snack vender)

Average Weekly Milk Vending Sales by Market Units
Per Machine Per Week
Units Sales Required to Support Third-Party
Operated Milk-Dedicated Vender with 1.00 Vend
Price 200 Units/Week
Source Beverage Marketing Corporation
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Overview of Test Results

• Consistent with prior milk vending test results,
  flavors outsold white milk
• However, with an all-adult audience, the margin
  was very narrow compared to schools where
  flavors outsold white 9 to 1

Vended Milk Sales by Flavor
By Machine Type
Total All Markets
Other includes lowfat, coffee, cappuccino, 1
white these were available in only one market
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Overview of Test Results

• Vended milk sales in the test were incremental to
  other vending sales
• Among the milk test machines competitive banks
  for which year-ago data is available, overall
  vending unit sales increased 17 from prior year
• 40 of the additional sales were from milk

Vending Bank Units Sales Total Unit Sales vs.
Prior Year Select Locations
40
17
Millions of Units
Thousands of Units
60
Where prior year data is available includes
some locations where old milk venders were
replaced with new test venders
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Overview of Test Results

• Though still a very small category compared to
  some other vended beverages, on a sales growth
  basis, milk far outpaced the competing categories
  in the test vending banks
• In terms of incremental units, milk had the
  second highest growth after canned soda both
  increasing sales by more than 100,000 units

Competitive Beverage Vending Units Sales Select
Locations
11
7
21
572
1
13
Where prior year data is available includes
some locations where old milk venders were
replaced with new test venders
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Overview of Test Results
Milk Spoilage during the test was practically a
non-issue at less than 0.4
Vended Milk Spoilage By Flavor
Share of Milk Spoiled
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Comments from the Field
Overview of Test Results

• Milk has been such a popular addition to the
  break room. I have to service the machine a
  couple times a day to keep it stocked
• The milk is flying out of the machine,
  especially the chocolate
• The combo machine is a great looking machine and
  is a great addition to our locations
• We are definitely buying all the test machines
  and keeping them in the field after the project
  is finished.