Automatic Vending Machines

SIC 3581

Industry report:

This industry consists of establishments primarily engaged in manufacturing automatic vending machines and coin-operated mechanisms for such machines.

Industry Snapshot

According to the U.S Census Bureau's 2008 County Business Patterns, there were 83 vending machine manufacturers in 2008 employing 155,622 workers who earned annual wages totaling nearly $156 million. The automatic vending machines sector accounted for 94.5 percent of the market in 2009. Additionally, there were about 22 manufacturers of mechanisms and parts for automatic vending machines; 15 manufacturers of mechanisms for coin-operated machines; and 8 manufacturers of coin-operated locks. The industry generated nearly $396 million in 2010 with industry-wide employment of 6,224 workers. The majority of vending machine operators were small, generating about $1 million annually.

According to the "State of the Vending Industry Report," published in 2010 by Automatic Merchandiser, 33 percent of vending machines are distributed around manufacturing facilities; offices (22 percent); schools and colleges (11 percent); hospitals and nursing homes (9 percent); retail settings (7 percent); and other (18 percent).

With significant advances in technology and innovation, the vending machine industry served numerous markets and in the mid-2000s was pushing into new venues and offering new vendible products. In 2006 shipments of coin-operated vending machines by manufacturers totaled $1 billion, down from $1.6 billion in 2003.

Traditionally, the industry has segmented itself by the kind of service provided by the vending operator, including the four C's: coffee, cola, candy, and cigarettes. Merchandisers also provide full-line vending, which includes hot food, canned soda, and dairy and frozen food; specialty vending, which encompasses such special products as pizza or french fries; office coffee service; bulk vending, focusing on such unpackaged items as gum or nuts; and street vending, which includes music machines, video games, and other vending machines used in public places. Although cigarette vending has come under strict regulatory code in an effort to curb underage smoking, in the mid-2000s the vending industry was successfully pushing into new areas, such as DVD rentals, cellular ring tones, and coin-to-cash operations.

Organization and Structure

Vending essentially is a three-step process involving three separate industries: manufacturing companies, distributors, and vending machine operators. This industry group (SIC 358l) primarily covers the manufacturing step in this multi-stage industrial sequence.

About 90 U.S. companies produced automatic vending machines or parts for them in the 1990s. Although a vast majority of vending machines were manufactured by large companies, the industry did sustain quite a few smaller firms. The merchandise vending industry essentially is part of the small business community.

According to the U.S. Department of Commerce, 97 U.S. companies were engaged in the manufacture of automatic vending machines or vending machine parts in 2006. The industry employed more than 6,000 workers, of which over 60 percent were production workers.

The National Automatic Merchandising Association (NAMA) has been the most important trade organization in the vending industry in the 1990s. NAMA represents companies involved in every facet of vending, from machine manufacturers to suppliers of vended products. Founded in 1936, NAMA compiles a broad range of statistics and produces several periodicals, including a regular industry newsletter, a review of pertinent state legislation, and a labor issues bulletin.

The National Bulk Vendors Association (NBVA) concentrates specifically on the manufacture and operation of bulk vending equipment. The NBVA was founded in 1949 and is based in Chicago.

Background and Development

The earliest recorded "vending machine" was in 215 B.C. when the mathematician Hero described and illustrated a number of inventions conceived by himself and his teacher, Tesibius, in a book called Pneumatika. Included in the book was the plan for a completely automatic, coin-operated machine that dispensed a small amount of sacrificial water when a five-drachma coin was deposited. It is unlikely that the machine was used on a large scale, and there is no evidence to suggest that anything was sold automatically again for centuries.

Coin-operated machines that sold snuff and tobacco appeared in English taverns around 1615. These machines were actually cruder than Hero's device and required the proprietor to shut the lid after each use. Usually made of brass, the machines were portable and were carried from customer to customer.

In the nineteenth century, vending machines began to appear in much greater variety and quantity. An early incarnation of the newspaper machine appeared in England in 1822. The device was the brainchild of Richard Carlile, a bookseller trying to avoid arrest for peddling copies of banned works such as Thomas Paine's The Age of Reason. While his machine worked, his plan to avoid arrest did not.

The first known patent for a vending machine was issued in 1857 to Simeon Denham for a penny postage stamp device. Over the next couple of decades, inventors began showing up at patent offices all over the world with coin-operated machines that sold candy, cigarettes, handkerchiefs, and other small items. In 1884 the first U.S. vending machine patent was issued to W.H. Fruen for a contraption remarkably similar to Hero's holy water machine.

The American vending machine industry was truly born in 1888, when Thomas Adams of the Adams Gum Company began selling his Tutti-Frutti gum out of machines on the platforms of New York's elevated rail system. These machines were an immediate success, and toward the end of the century postage stamp machines also became more common. The Automatic Machine Company of Buffalo, New York, was the first company to sell stamps automatically on a large scale, beginning in 1891. Bulk vending machines began to appear around the turn of the century. The Mills Novelty Company introduced the first of these, which sold a pre-set amount of peanuts for a penny, at the Pan American Exposition in 1901. The following year, the Horn & Hardart Baking Company revolutionized vending in the United States by opening is first Automat restaurant in Philadelphia.

Prior to 1908, beverage vending machines dispensed only the beverages themselves, which the customer then drank out of a common cup. That year, with public awareness of sanitation growing, the Public Cup Vendor Company of New York (later to become the Dixie Cup Company) unveiled a machine that dispensed water in individual paper cups.

By the 1920s, the vending industry had been divided into manufacturers and operators. The Doehler Die Casting Company, for example, developed machines for vending a diverse range of products that included Life Savers, lighter fluid, and sanitary napkins. Another industry revolution took place in 1925, when three new machines were developed, all of which sold cigarettes. Candy machines offering customers a choice of products began to spread in the 1930s. Nathaniel Leverone, the founder of the Canteen Company, was a pioneer in the development of this type of machine.

The manufacture of vending machines was suspended during World War II, but at the war's conclusion the industry regained its momentum. Among the machines that appeared during this time were the first hot coffee vendors and a hot dog machine. In the first decade after World War II, hundreds of small manufacturing companies entered the vending machine arena, and vast improvements were made in design--especially in the area of coin mechanisms. In 1960, paper money changers came into widespread use. When machines for vending canned soft drinks were introduced in 1961, vending sales soared.

Since that time the vending machine industry has been consolidating to a great degree. Manufacturing has become increasingly dominated by large companies. At the same time, advances in electronic components, which first appeared in vending machines in 1980, have made machines "smarter," enabling them to keep records and diagnose glitches. The variety of products vended automatically has continued to grow explosively, as items specifically created for machine vending, such as microwave popcorn, have made their appearances.

In the early l990s, vending machine manufacturing appeared to be entering a new era. The emergence of "smart" machines was certain to affect every part of the industry. The availability of full-service machines that could handle a variety of products and perform their own record keeping was enabling bottling companies to take over many of the chores that were previously handed over to third-party operators. This represented the reversal of a trend that began in the l950s, when bottlers began to remove themselves from the day-to-day servicing of machines. In addition, the replacement of moving parts by electronic components was expected to contribute to a further concentration of manufacturing companies, since the demand for spare parts was sure to decline sharply.

At the beginning of the 1990s, the slumping U.S. economy led operators to seek ways to hold their costs in check. Frequently, this meant refurbishing old machines rather than purchasing new ones. Dixie-Narco Inc., for example, saw its sales drop by about 18 percent in 1990, while its parts business was actually more active than usual. The improved security and record keeping capabilities offered by newer machines, and their potential to save operators money in the long run, might provide operators an incentive to invest in the latest equipment.

During the 1990s inflation also had an adverse effect on the vending industry. The convenience of dropping coins into a machine in exchange for merchandise disappeared when the price of an item exceeded the amount of change reasonably accommodated in a pocket. Manufacturers reacted to this problem in two ways. One involved the introduction of debit cards, first introduced in 1985. Debit cards eliminated the need to carry change, enabling regular users of a vending area to pre-pay for several dollars worth of merchandise at a time. Mechanized dollar bill acceptors, notoriously fussy and uncooperative, had also improved somewhat by the mid to late 1990s, but the industry continued to seek ways to improve performance.

Several significant changes were taking place in the vending industry in the late 1990s. Some resulted from new technology, while others stemmed more directly from general societal changes. New machines developed during this time were capable of vending food of much higher quality than was previously possible. This ability was having a particularly noticeable effect in the work place, as corporate downsizing necessitated the replacement of many company cafeterias with vending areas. With a new emphasis on hot, nutritious foods, the major manufacturers began producing machines that sold items such as french fries, fresh pizza, and a much broader line of microwaveable frozen foods.

The U.S. Department of Commerce reported that 45 companies were engaged in manufacturing coin-operated vending machines in the mid-1990s. Thirty-five of the companies produced beverage machines, 27 were involved in manufacturing machines that sold food and confections, and 31 manufactured other types of vending machines, including those selling cigarettes, water, and postage stamps. As the numbers indicate, many of the companies manufacture machines for several segments. Canned and bottled soft drink machines made up by far the largest share of beverage machines manufactured at that time. Among confection and food vending machines, those that sold bulk confections and charms predominated, while bagged snacks and confections made up another significant share.

According to the "State of the Vending Industry Report," published by Automatic Merchandiser, the automatic merchandising industry grew 5.6 percent in 1998, to $23.3 billion. The jump represented the largest one-year increase in the 1990s. All product categories enjoyed increases with the exception of cigarettes, a segment that accounted for less than 1 percent of the total in 1998. The beverage category was especially enthusiastic about vending machines, and about 1.2 billion cases of soft drinks were traded via vending machines in the United States in 1998. One reason that soft drink companies invested in vending machines was because vending machine drink prices were less subject to the discounting and extreme competition affecting beverage brands in supermarkets. Growth began to slow in 1999, as the value of industry shipments declined slightly from $1.444 billion to $1.443 billion. The value of shipments fell to $1.244 billion in 2000. Between 1998 and 2000 the cost of materials dropped from $786 million to $625 million.

Other trends in the late 1990s included the increase of plastic beverage bottles in vending machines. As soft drink manufacturers turned to larger, plastic bottles, vending machine manufacturers developed machines that accommodated not only the larger sized bottles but different sizes of bottles as well. Other innovative machines accepted credit cards, debit cards, and coupons. Glass-front cold beverage machines that showcased the enclosed drinks gained in popularity, and insulated machines that allowed candy machines to be placed outdoors were developed.

The sharp decline in cigarette smoking the United States throughout the 1990s has had a dramatic impact on the vending industry. Once a huge seller as one the four Cs of vending, cigarettes only generated a small portion of the vending operator's revenue compared to the considerable percentage of revenue cigarettes generated in the 1960s (at 45.5 percent).

One of the most significant issues affecting the vending machine industry in the late 1990s was the introduction of new currency. When new $20 bills were released in the United States in 1998, many vending machine manufacturers were unprepared. As a result, about 250,000 vending machines that normally accepted $20 bills, including bill changers and fare card machines, were unable to take the newly designed bills. New $5 and $10 bills were released in 2000, and the Bureau of Engraving and Printing, the printers of U.S. currency, worked closely with the vending machine industry to make sure machines were prepared. The adaptation of the new machines was estimated to be a $100 million project.

The economic recession during 2001 impacted the vending industry as it did the entire economy. Disposal income was tightened, as were profit margins on the industry's mainstay of cold beverages. However, the industry rebounded once the economy shifted, and by the early 2000s at least some segments within the industry were showing new life.

According to the U.S. Department of Commerce, total shipment values were just over $1 billion in 2006, a 60 percent decrease from 2003. The decrease can be attributed to an unstable economy, political conflict, and an overall decrease in consumer spending in the middle of the decade. Yet despite the bulk of the industry remaining focused on the largest segments during the mid-2000s--namely beverage dispensers and manual food service--new technology, combined with new consumer interests, was leading to growth in specialized vending.

The production of automatic vending machines and equipment fuel the vending industry, which was estimated by Automatic Merchandiser to be valued at more than $21 billion in 2003, down from more than $24 billion in 2000. According to Automatic Merchandiser, the cold beverage and manual foodservice segment led the industry. Receipts from cigarette vending machines--which have been regulated to establishments that require identification (such as bars)--continue to decline, making up a mere .5 percent of the industry's revenues. Candy and snack sales also were down significantly, reflecting a massive pullout of unhealthy choices from school-based vending machines. Consumer demand for and increased varieties of beverages, however, were expected to drive demand for vending machines through the 2000s, with the largest markets being industrial facilities and offices.

While the industry attended to its mainstay beverage and food service sectors, in the mid-2000s it also was expanding into new areas, motivated by consumers' desire for convenience. For example, in 2004 nReach announced plans to introduce vender-based, self-serve mobile products, including cellular ring tones, graphics, and games. Coinstar Inc., which provides self-service vending services that convert loose change into cash, began in 1992 but expanded rapidly in the early 2000s, with machines in many national grocery and other retail chain stores. Some drug and discount stores also were experimenting with vending machines designed to rent DVDs.

Vendors also were consistently moving toward more technologically advanced machines. More and more machines were entering the market that will accept debit and credit cards for payment. The industry has pushed for the widespread use of a one-dollar coin. However, the trend has not materialized and vendors will likely move toward the debit/credit card option so that higher priced items can be offered, thus increasing the possibilities for product offerings. Accounting and support services surrounding the auditing and maintenance of cashless machines must be overcome before their use will become widespread.

Not only does the use of credit/debit cards overcome the limitations (and sometimes frustration) of paper bill acceptance, debit/credit acceptance has two distinct advantages. First, it eliminates vandalism and theft. Second, preliminary studies have shown that consumers on average spend more per purchase when using a debit/credit card than when paying in coins or cash.

Current Conditions

According to the "State of the Vending Industry Report," published by Automatic Merchandiser, the automatic merchandising industry fell from $22 billion in 2008 or 10 percent before plummeting to $19.8 billion in 2009, the direct result of the stagnant economy. In order to offset staggering sales operators began to increase prices across the board. From 2007 through 2009 vending machine sales of food and drinks fell 14 percent, which led to further industry consolidation. Los Angeles-based FirstClass acquired several troubled smaller vending machine companies struggling due to the recession, while others were just going out of business all together.

Meanwhile, at a time when vendor operators sales were plunging, vending machine thefts were on the rise, especially in Georgia, South Carolina, Mississippi, and New York, most likely the result of the economic downturn. YouTube step-by-step videos began to surface making it even easier to crack vending machines. To combat the situation, some vending operators were becoming a little tech savvy such as Marcus Whitener who equipped 4,000 of his vending machines with wireless devices that would send him both a text message and e-mail alert if the vending machine door was opened during a time that wasn't permitted or if the power was turned off.

While vendors were focused on the economic situation some industry experts warned that "every vending operator should be more concerned about the industry's failure to modernize in an environment where competing retail channels have created new customer expectations," Maras Elliot wrote in the August 2009 issue of the Automatic Merchandiser. For example, the average age of vending machines was about 12-years-old. While the cost of "swipe-card readers" can cost anywhere from $400 to $1,000 per machine, 1.8 percent of machines were outfitted with "cashless readers" nationally in 2008 and that climbed to 2.3 percent in 2009, indicative of the industry's shortfall when it comes to updating their equipment. Operators admitted competition was heating up as convenience stores, coffee shops, and grocery stores had more of a selection and most of all it wasn's a "cash-only" sale.

As consumers began to be more and more health conscious and industry sales were slumping, traditional vending machine food and drink items were being replaced with some healthy choices. One San Diego, California newcomer, Fresh Healthy Vending situated in school settings offered items such as baby carrots, smoothies, and organic yogurt and with remote camera monitoring devices in every machine operators are able to monitor for expiration dates.

Industry Leaders

Dixie-Narco Inc. is the leading manufacturer of automatic vending machines in the United States. The company primarily services major beverage producers such as Coca-Cola and Pepsi-Cola with beverage-dispensing machines. Other major companies in the industry included Multiplex Co. Inc. and Automatic Products International Inc. About 40 percent of Multiplex's sales are international.

During the mid- to late 2000s industry consolidation was underway with vending machine manufacturers that were once owned by several companies were now owned by a few of the larger companies. Automatic Products International, located in St. Paul, Minnesota was acquired by Crane in 2006, followed by the acquisition of Dixie-Narco in 2007. Additionally, vending machine manufacturers entering into the industry began to focus in one individual niche market such as vending machine specifically for DVD rentals.

America and the World

The United States was not alone in its obsession with the convenience offered by vending machines. Industry leader Dixie-Narco, for example, was selling a complete line of models in more than 30 countries by 1990. The company began to emphasize exports, tailoring machines for the specific needs of its foreign markets rather than merely making small adjustments in existing models.

The popularity of the vending machine proved even stronger in Japan. Although the cold beverage sector dominates the market, vending machines lined the sidewalks, playing music and offering a wide variety of merchandise, including beer, sushi, and panty hose. One advantage that vending operators in Japan had over their American counterparts was that vandalism not nearly as prevalent as in the United States. These and other factors contributed to this being one of the few manufacturing segments that showed a trade surplus instead of a deficit. In 2006 the automated vending machine segment exported approximately $203 billion in products while importing $183 billion.

Research and Technology

Flexibility and security were two areas in which engineers in the vending industry made great strides in the first have of the 2000s. Many of the high-tech machines available in the mid-2000s are able to process credit or debit cards; almost all accept paper currency. Many machines have undergone refurbishment to fit them for these services; in machines built for products in the $2-plus range, vending equipment also has to be retrofitted to provide change in a $1 coin currency. Cutting-edge wireless technology also is allowing machines to provide advanced services, including monitoring of product sales, in a wide variety of locations. DEX is an emerging uniform data-collection system that uses a handheld scanner to collect vending audit data. Advancements in temperature control also have improved the quality and consistency of the vended product.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

News and information about Automatic Vending Machines

Licence for Installation and Operation of Automatic Vending Machines for Soft Beverages - Visakhapatnam Airport
Mena Report; February 1, 2018; 321 words
...for Licence for installation and operation of automatic vending machines for soft beverages - visakhapatnam airport Licence for installation and operation of automatic vending machines for soft beverages - visakhapatnam airport Tender...
Licence for Installation and Operation of Automatic Vending Machines for Soft Beverages
Mena Report; January 8, 2018; 335 words
...for Licence for installation and operation of automatic vending machines for soft beverages Product Category : Miscellaneous...Open/advertised Product Sub-Category : Automatic vending machines for soft beverages Location : Visakhapatnam...
Rental and Maintenance of Connected Automatic Vending Machines (Dac) and Related Management Information Systems
Mena Report; October 21, 2017; 338 words
...notice: Rental and maintenance of connected automatic vending machines (dac) and related management information systems. Rental of connected automatic vending machines (dac), Including associated management information...
Automatic Vending Machines for Beverages and Foodstuffs and Water Fountains
Mena Report; March 4, 2017; 421 words
Contract notice: Automatic vending machines for beverages and foodstuffs and water fountains...to the Act of Engagement. The quantities of automatic vending machines for beverages and foodstuffs to be installed...
Supply and Installation of 59 Automatic Vending Machines for Valencia Metro Lines
Mena Report; May 27, 2017; 330 words
...Contract notice: Supply and installation of 59 automatic vending machines for valencia metro lines. : Supply and installation of 59 automatic vending machines for metro lines in Valencia. This contract...
Installation and Operation of Automatic Vending Machines for Soft Beverages at Lucknow, Varanasi and Amritsar Airports
Mena Report; July 1, 2017; 316 words
Tenders are invited for Installation And Operation Of Automatic Vending Machines For Soft Beverages At Lucknow, Varanasi And Amritsar Airports EMD Amount (INR): Rs.188400 Tender Fee(INR): Rs.5000...
Comprehensive Maintenance Service for 588 Madrid Automatic Vending Machines
Mena Report; June 24, 2017; 366 words
Contract notice: Comprehensive maintenance service for 588 madrid automatic vending machines. : Service of integral maintenance of 588 automatic machines of sale of Metro of Madrid. This contract is divided into lots...
Wipo Publishes Patent of Minebea for "Selection Switch and Selection Unit for Automatic Vending Machines" (Japanese Inventors)
US Fed News Service, Including US State News; March 27, 2017; 366 words
...2017/047457 was published on March 23.Title of the invention: "SELECTION SWITCH AND SELECTION UNIT FOR AUTOMATIC VENDING MACHINES."Applicants: MINEBEA CO. LTD. (JP).Inventors: Yasutoshi Obata (JP), Kiyoshi Omori (JP), Shuichi...

Search all articles about Automatic Vending Machines