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By: Howard Telford

In October, I explored the possibility of next-generation hot drinks vending in the United States through the Briggo automated espresso bar and other new concepts. Premium innovation within the vending segment could be an important means of driving hot drinks value sales in non-traditional locations where full-sized cafes are not a practical option. Gourmet automated retailing – coffee vending 2.0 – could help to save a flagging corner of the coffee industry.

The notion of higher quality bean-to-cup coffee vending is a relatively new one to global hot drinks vending. Where and why is the hot drink vending approach succeeding? What are the obstacles to adoption and what elements might make it successful?

Japan Leads Next-Generation Vending

In Japan, a mature market for the vending of hot drinks, soft drinks, packaged foods, beauty products and other products already exists. Japanese vending of hot drinks reached 3% of the hot drinks category in 2013, or US$258 million in total sales. The negative quality perception that influences consumer decision making in North America is less relevant, with manufacturers already focused on both improved product quality and advanced level interface improvement. The Japanese market is routinely home to the most advanced innovations across the vending platform.

Apex Co Ltd is one of the historic leaders in premium, bean-to-cup vending in Japan. Coffee mills are installed within the company’s newest machines, producing freshly brewed coffee (predominantly in traveler/commuter locations with heavier amounts of foot traffic). Some models have video cameras and built-in screens, allowing the user to view the coffee being brewed in real time. Latte art – a process of sprinkling powder on the surface of the beverage – has also been popularized by Yoijya Café Selection, a vending machine currently available to consumers at Tokyo’s Haneda Airport. This effort – although niche – serves to sustain interest in the category.

Improving Product & Interface

Are these isolated, market specific examples, or can new technologies spur a comeback in the automated retailing of hot drinks? Consistent product delivery and high quality user interface will both be important elements to consider.

Coffee, tea and other hot drinks are products that benefit from precision and process automation to achieve quality control, producing a replicable cup of coffee or hot chocolate from each machine on each user occasion. Even when operated by a barista, espresso is invariably an automated process in most chained coffee specialist retailers. Furthermore, consumer adoption of closed pod based systems in the home and workplace stand as evidence of the consumer’s preference for easily replicable single-serve options. While gourmet espresso vending is not a simple or inexpensive process to achieve, the trend aligns with preferences in the home and – crucially, for vending operators – in the workplace. The question remains as to whether a reliable, cost-efficient machine can produce a cup of coffee that will be held to the standard of popular national café or at-home brands?

Quite aside from the question of coffee or other hot drinks quality is the style and capability of the interface presented to the consumer. Touchscreens, advanced user options and attractive product design should not be discounted in the brand, source and craft conscious world of coffee retailing. Advanced vending options such as Briggo or Costa Express in the United Kingdom (the fastest growing global coffee vending brand) utilize advanced user interfaces, featuring touchscreens, digital advertising and cashless payment options. This presentation and user experience helps to set consumer expectation in a category where beating low expectations is a big part of the vendor’s challenge.

The presentation aspect of vended hot drinks retailing is improving markedly. Interface and design as a focus point in automated beverage retailing bears some comparison to Coca-Cola’s Freestyle machine – a fountain concept that encourages consumer choice, promotes the brand, and provides food service vendors with a way to excite and retain the consumer on-premise. While the Freestyle machine doesn’t claim to deliver a better or higher quality soft drink, it does succeed in exciting the consumer and engendering loyalty to the Coke brand. It serves as a marketing opportunity as well as an aesthetically attractive option in busy fountain food service environments. Successful hot drinks vending operations – particularly from Costa Coffee in the UK – have followed this model in their vending operations.

Cashless payment options can also be extended to drive revenue. According to Starbucks, mobile payments already account for 10% of Starbucks US store sales. Incorporation of mobile payment technology – already a key facet of Starbucks brick & mortar locations – seems a perfect fit with the world of automated coffee retail, with the consumer presented with the option to order via smartphone app.

Location, Location, Location

Opportunities may exist for a reinvigorated, higher quality hot drinks vending experience. But what retail occasions are best suited to capitalize from new coffee vending concepts? Too often, automated retailing has centered on so-called “captive” locations: industrial or office locations, where price and speed are valued more highly than quality and experience. Space and budget constraints have also forced office managers to explore smaller, counter-top hot drinks options rendering next-gen vending machines unfeasible.

Costa Coffee – a global leader in the segment through growth of the Costa Express platform – have benefited from a focus on expansion in travel spaces: service stations, petrol stations and commuter spaces. Modern forecourt retailers, stop & go convenience channels and major travel hubs may present the best opportunities to reach a consumer demographic amendable to gourmet vending. Mixed, public venues allow for broader demographic reach than closed, captive commercial spaces.

Potential downsides to a hot drinks renaissance include the potentially high mechanical servicing costs associated with next generation vending technology. On December 10, Outerwall Inc – the parent company of DVD rental vendor Redbox and vending machine partner of Starbucks in the US – announced plans to discontinue its highly touted ‘Rubi’ coffee vending machines, the majority of which had been located in US supermarket locations. The company ended the program as part of a broader operational review, including jobs cuts, although Outerbox executives had previously expressed concerns about the quality control and maintenance of the machines.

Next generation hot drinks vending machines stand to beat low consumer expectations, increasing drink selection options through new automated interfaces. Control of purchase – the ability to customize drinks unique to the consumer – will be a major selling point, as will the quality of consistent bean-to-cup coffee. Vending operators and coffee licensors must be careful to select the best locations for these new machines, entering busy, cosmopolitan public venues with less concentration on the closed office environment.

Finally, brands that have built a strong reputation in the world of specialist coffee – whether through café on-trade, retail sale or commercial presence – will be the best positioned to grab the consumers’ attentions with new hot drinks vending concepts.

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