Vend it like Red Bull
Annual sales of a billion cans; worldwide brand leader; an 80% brand share of the UK energy drinks market; 1,200 employees globally. The dynamic growth story of Red Bull has been well documented in these pages and elsewhere. So why has the company now chosen vending as a route to market? Soft Drinks International explores the rationale behind Red Bull's latest initiative and uncovers the brave new world of vending.
AVEX , the UK's largest vending exhibition, was held recently in London and it was quite a revelation for those of us who thought of vending as downmarket and, frankly, a little 'difficult'. But it seems that vending machines are no longer rusty boxes that gobble your cash, steadfastly refusing to yield their contents. Today, it's big business, worth over £2 billion. Machines are more like works of art and important advertising vehicles for the major players.
The trend started with the cola brands and Coke and Pepsi machines are still amongst the biggest names to use vending as a distribution vehicle, but there are an increasing number of retail brands finding that vending is a lucrative route to market. For example, GlaxoSmithKline has six-foot high bottles of Ribena and Lucozade on its vendors; Evian machines with back-lit door panels make us salivate for a bottle of cold water; and Outspan even has a machine which will freshly squeeze oranges for you.
There are two clear reasons why the big branded houses would wish to vend their products. First of all, in high footfall areas such as shopping centres, airports and rail terminals, there is the potential for volume sales, but possibly more important is the exposure that modern merchandisers allow resulting in reinforced brand positioning - virtually free of charge. Red Bull formally launched its new vending proposition earlier in the year and revealed it to the industry for the first time at AVEX, where the machine caught our eye on the stand of German manufacturer, Sielaff.
The Red Bull machine really is quite eye-catching, with a 3-D door panel. The fascia features a permanently rotating larger-than-life can, which alternately shows Red Bull and the company's recently launched low calorie variant, Red Bull Sugarfree. The machine itself is made by Sielaff, which is one of the largest manufacturers of vending machines in the world. The initial concept for the door design was thought up in-house by Red Bull and refined and implemented by product design agency, Hodges & Drake, before the concept underwent an extensive 30-machine field trial in the autumn of 2002.
David Donald, vending manager for Red Bull, explains the rationale behind the trial: "Red Bull is the perfect impulse purchase, ideal for those times of the day when you need a lift and we see vending as the perfect vehicle to reach our target audience. So, we carefully hand-picked a mixture of key private and public sites, where we expected to maximise volume uptake and brand exposure, such as prestigious office complexes, shopping centres, car parks and leisure centres, working with premium partners in each sector. We decided that we would operate the machines ourselves and overall, we have been delighted with the results of the trial. Without hesitation we quickly moved to a roll-out of the concept in strictly limited numbers in January 2003."
Vending has moved on apace in recent years. Research company Mintel recently issued figures which show that vending is now very much more acceptable to youngsters. Popularity declines with age, it seems; 79% of over 65s never buy products from a vending machine, whilst only 16% of youngsters aged 15-24 fail to do so. This age group purchases mainly snacks and soft drinks from machines sited predominantly in leisure centres and sports facilities. Vending used to be associated only with the workplace and, whilst offices and factories are still important locations, sales levels are now matched at sports and leisure locations.
Another factor in the rising popularity of vending amongst young people is the decrease in formal dining. These days it is the exception rather than the rule for families to gather around the dinner table. More and more we take sustenance on board as an adjunct to another activity - 'grazing' as the marketers would have it.
Vending as a whole is growing steadily with further growth anticipated, particularly on public sites. This calls for a special type of vendor. It needs to be robust, vandal-proof, reliable, simple to use and - if located outdoors - weatherproof. These are the features that led Red Bull to select Sielaff as its equipment partner.
David explains: "When we decided on this route to market, we did the rounds of the vending machine manufacturers. We were looking for machines that would stand up to harsh treatment and prolonged use over many years and Sielaff fitted the bill best of all. We were impressed by the high standard of machine security on the company's equipment and the co-operation we received from both UK and German offices in pulling the initiative together was very supportive."
But what is it that attracts youngsters to accept vending when the wrinklies won't - the concept has been around for 50 years after all, so the older generation should be used to it by now. The answers are manifold, but overall, these days, machines are more reliable than ever and it's far less hassle to actually vend a drink. For a start, the capacity of the machines is bigger - up to 900 lines in some cases. That means there's less chance of your selection being out of stock (always a turn-off). However, perhaps the most important fact is that, unlike the old days, you don't need to fumble for the correct change. Modern vending machines are fitted with changegiving mechanisms and many have bill readers, so the frustration of needing the correct money is avoided.
Today, many closed environments operate a cashless payment system and, in some offices, the security card can even be used instead of cash to make the vend. And watch out for the future; pretty soon you will be able to pay for your purchase using a mobile phone. Just dial up and make your selection, with the cost automatically charged to your mobile phone bill. If there is anything that's guaranteed to 'future-proof' the industry, it surely has to be harnessing cellular technology.
Technical advancement isn't confined to the end-user, either. Modern telemetry means that details of vending machine activity can be captured remotely, without the vending operator putting in a personal appearance. It's a simple matter of dialling up to find out what sales have been made and how much stock remains, thus enabling just-in-time deliveries to be made. Working with Vianet, who are specialists in this area, telemetry has been recognised by Red Bull as a key element in its vending proposition.
Within a growth industry, the hot and cold drinks sector is accelerating fastest of all - by 30% in machine terms between 1997 and 2002 (Mintel). In that sector, pre-packaged cold drinks in cans, bottles and cartons have been outstripping all else, driven by the major brands such as Coca-Cola and Britvic. But, as is often the case, if the UK follows the North American model, the surface has barely been scratched. Maybe carbonates are a maturing market, but watch out for healthy, sports-related and energy drinks such as juice, flavoured water, hypotonic drinks and, of course, Red Bull.
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