A common relationship between vending and coolers is that of the ‘package deal’, where vending suppliers, in order to add value to a contract, will throw one in with the other, either completely free or on a set period of free rental.
When water coolers are given away, it raises the question as to whether for the small distributor it’s undercutting business. After all, who can compete with gratuity?
“If you take bigger companies engaging in this practice, like Bunzl and Selecta, they’re often contracting with the larger corporations and institutions on a level that the everyday water distributor wouldn’t get to,” says Fred Cairns Palmer of Water Coolers Direct, “and the practice of giving away coolers is very often a makeweight in the overall deal. For example, take Barclays corporate offices in Bristol. On the third floor, we found a vending machine supplied by Bunzl and a Waterlogic 3000, which was the makeweight in that contract. On every other floor of that building were coolers supplied by water cooler distributors. In fact, there were three different suppliers, so they’re separate parts of the procurement process. It doesn’t impact on companies as a whole, looking to supply their whole business.”
“In the offer you allude to, the cooler and the coffee machine are equally important really in the deal,” says Rupert Cox from Crown Water & Coffee, which offers coffee and cooler deals. “Quite often, it may not be a Flavia coffee machine that the customer ends up having, but it has sown a seed. As a water cooler company that also sells coffee and vending machines, it’s important to make this pay, and a good customer would have both or we up-sell later; we make a conscious effort to go back later or talk to the customer to entice them to have the other option.”
For distributors looking for the higher volume contracts to bigger businesses as opposed to the single unit sale, it seems the vending cooler giveaway doesn’t impact on water cooler contract rental and sales. What’s more, the deal can help the industry as a whole, especially for the manufacturer of the apparently sacrificial makeweight cooler. Not only does it help brand awareness and increase visibility, the unit purchase of the makeweight coolers by the vending company is a valuable contract in itself.
“Our vending clients are important to us,” says Chris Garner, marketing manager for Waterlogic, “as they have an excellent market reach by virtue of being larger, more established organisations. In fact, we have found that our vending clients around the world place our water machines on rental contracts at market rates. This makes sound business sense for them, as the regular and dependable rental income balances out the more variable income from a vending machine. Furthermore, vending operators gain economies of scale as they therefore service more machines on each call (ie water + coffee + snack vending etc).”
The symbiotic nature of the coffee and water business means that, far from one threatening the business of the other, they can promote each other. And if not promote, then feature as a component of a company’s extended services and offerings.
“Ultimately, the coffee boys are not going to damage the water business,” says Ron Hounsell, MD of Cameron Water. “They tend to have smaller vehicles, and when customers start taking significant volumes of water, they have to look at bigger vehicles, which is a real pain for less profitable business. I think the vending companies should be more concerned about water companies looking at coffee, with bigger margins per kilo – it being easier to deliver and easier to add to the product list.”
There’s lots of money to be made in coffee, said Ron Hounsell, and Cameron Water has been offering coffee for over 10 years. When looking at the great coffee and water vending strategy, it works whichever way you look at it.
“There’s lots of money to be made in coffee – generally a 100% mark-up,” says Hounsell, “so a case of coffee at £40 means a £20 profit. Coffee weighs hee-haw as opposed to a 19 litre/kg bottle giving about £1.50 profit, so it’s easier to give away a water cooler when you’re getting the coffee business, and interestingly I see more water companies now offering coffee, like we do.”
Rachel Delahaye is former editor of Cooler Innovation magazine. Subscribe here.
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