Consolidation beckons for Europes vending market

Consolidation beckons for Europe's vending market

CVC Capital's move into the drinks vending market with the acquisition of Autobar could herald an era of rapid consolidation for Europe's long tail of vending companies.

CVC Capital said at the weekend that it would acquire the majority of Autobar, one of Europe's largest vending machine companies, from Charterhouse Capital. The reported fee is EUR1.2bn (US$1.6bn), although CVC has not confirmed this.

The deal further underlines that private equity firms are rich enough to pursue deals in the economic downturn, as just-drinks noted last week. However, CVC's move is also a signal to other investors that Europe's fragmented vending market is ripe for the picking.

Consumer demand for convenience and on-the-go drinks and snacks has turned vending into a EUR26bn-per-year industry, according to the European Vending Association. Yet, the sector's fragmented nature is revealed by the EVA's assessment that there are 3.7m vending machines run by around 10,000 companies in 21 countries of Europe. Most of these are "small-to-medium enterprises and family businesses," said the trade body. 

That makes an average of only 370 machines per operator. Autobar is one of the largest operators, yet it still accounts for a mere 255,000 machines. Autobar has provided its own evidence of an emerging consolidation trend in the industry, having acquired seven businesses over the last two years.

The economic downturn, then, has turned the fragmented vending sector into a credible buying opportunity. Exact sales figures for Europe's drinks vending market are hard to come by, but recession has clearly bitten the industry hard. 

"The European Vending market has suffered significant declines and is back at 2003 values with most of the decline resulting from a reduction in throughput," said the summary of a report published jointly by the European Vending Association and Datamonitor last month. It refused to disclose full figures to just-drinks when requested today (9 August).

Many vending machine operators blame the sector's downturn on sharp rises in unemployment in the sector's key markets across Western Europe, the EVA said.

Of the major vending markets of France, Germany, Spain, UK and Italy, only Germany has seen unemployment fall in the in the last two-and-a-half years, according to figures from the Organisation for Economic Co-operation and Development. Nearly one in five adults of working age in Spain are unemployed, compared to a rate of around 8.5% in December 2007. 

With employment prospects across Europe threatened further by Government austerity measures, the lean times look set to continue for a majority of vending machine operators in the near future. And, the longer this continues, the more likely it is that one will see businesses willing to sell up. In what looks like a buyers' market, deals may also prove good value.

CVC hinted that it was already planning its next deal in the sector. The investment firm said that it saw Autobar as  "an exciting platform for growth within the European vending industry over the next five years". This growth, it said, would come both from new machines and from acquisitions.

There has already been speculation that CVC would next seek to acquire Selecta, owned by Germany-based Allianz.

Assuming that companies keep the faith with vending's medium-term prospects, based on continuing consumer convenience trends, we can expect more deals in the pipeline.