Vending Manufacturers in Europe

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2 opinion Vending Manufacturers in Europe 2 Past and present In the past vending has been developing in very different ways. Today the map of Europe has changed with new EU countries and the emerging economies that offer new markets and opportunities. It is a fact, nonetheless, that there is no longer a market, which is not price sensitive and does not compare characteristics, prices, payment terms and range of products. Vending, however, to some of these new markets is not really a totally new activity or industry: for example, in the former Soviet Union in the 50-70ss there were vending machines for newspapers, underground tokens as well as and sparkling water with and without syrup. Mature and emerging markets As far as Europe is concerned, vending industry saw most of its development in Western Europe. Until today such mature markets as Italy, UK, Germany, France and Spain are the largest and the most important in volume for vending machine. These are also the home markets for the most important vending manufacturers Italy itself accounts for over 20 vending machine manufacturers. While the Western European markets became saturated with a very vast offer of equipment, services and products, Eastern European markets were largely left unattended and mainly considered for second-hand cheaper equipment. However, the non-european manufacturers saw there an opportunity to expand, Korean vending machines manufacturers like Samsung SM Coin serve as a good example. Eastern European markets became strategic for most of European manufacturers. Russia today is the most prominent market with growth that reaches nearly 20% per year. Poland is another very

3 *picture taken from promising Eastern European market with the advantage of being in the EU. In general, we can say that Eastern European markets are still divided between those with the higher purchase power that offer opportunities for higher and lower cost manufacturers such as Russia, and those who still trade more in used and reconditioned machines such as Bulgaria. European vs. non-european manufacturers Different approaches The market saturation and fierce competition in the Western European led to a clear geographical division in the equipment supply. For instance, due to coffee preference and perception UK, German, Swedish and Dutch manufacturers mostly focussed their sales and marketing activity in the Central and Northern Europe. It is also argued that the quality perception of the equipment in these markets is favourable towards the Northern European manufacturers. On the other hand, the Southern European markets are dominated by cheaper manufacturers from Italy and Spain that mainly focus on two market segments such as hot drinks and snacks. At the same time we see that some of the non-european manufacturers establish themselves as references in Europe. Among them are Sanden Vendo from Japan and Dixie Narco from USA, where the latter is mainly present via large bottlers such as Coca Cola and Pepsi. diversification. The main Southern European manufacturers have today a build quality that is adequate to market expectations. 1. The Northern European manufacturers apart from SIELAFF that offers a very diversified range, are still specific to certain market segments such as: a. Wurlitzer: snack machines b. Spengler: hot drinks machines 2. Furthermore, the Northern European manufacturers do not offer such a comprehensive range of machines as compared to the Southern European ones, but in certain cases attempt to complement their product range with machines made in Southern Europe but with their brand names. As a result we can see how the Southern European manufacturers, even if not having 100% the quality expectations in certain markets, offer a highly diversified range of products, aggressive pricing and frequent 3

4 4 updates of their range. It allows them to gain market share in the Central and Northern European markets. Another factor to consider is that coffee in Southern Europe, in particular, is seen as a way of life, a new style of socializing and gains public preferences in other markets including the Eastern European ones. This offers an important advantage to Southern European manufacturers that are traditionally very strong and diversified in their hot drink range. New markets Different strategies Another characteristic of the Southern European manufacturers is their market entry strategy: the larger ones usually enter the market directly with their own offices and sales force rather than seeking distributors and/or agents. This market entry strategy, despite being much more expensive, in the long-term, allows these manufacturers to capitalize on market potential, be more price aggressive and build a much stronger awareness of their products and brand name in the market. So in my opinion, in the long run, it pays back! Another obvious question is what is currently happening in the Eastern European markets? 1. Southern European manufacturers, in particular Italian ones, are moving in directly gaining important market share and recognition, even if they still appoint local dealers: a. N&W: b. SAECO: c. FAS: d. BIANCHI: 2. Korean manufacturers follow the same strategy as the Italian manufacturers: a Other important manufacturers active in the Eastern European markets, in particular Russia, via distributors are: a. Azkoyen b. Jofemar c. Dixie Narco The important conclusion is, that whatever the present strategy in this market is, Russia is a key strategic market and is much aware of the vending offerings across the world. It is the market that recognises quality but also value for money and above all recognises credibility. It is definitely a market worth to invest in, and even in payment systems is a key market. 4. There are Eastern European manufacturers that offer their machines in the home markets, for example CPS vending in Ukraine and UNICUM in Russia. These machines, given the knowledge acquired by these companies, have all the basic attributes to be competitive in the Eastern European markets and even beyond. Their development was based upon product knowledge of other European manufacturers, they are price competitive, offer acceptable quality and are made to fit market needs.

5 USA vending manufacturers in Europe To round up, it is important to address the issue why USA companies have not so far succeeded in Europe (Western and Eastern) and why they keep loosing ground in the European arena. The fundamental reasons are as follows: 1. All the USA companies miss the most important market segment in Europe - hot drinks. Their models are not adequate for the main markets in Europe: drink quality (except instant and possibly fresh brew) is not up to the taste of European customers; lead times are too lengthy and somehow prices are not as competitive in Europe as they are in USA (transport is not the reason). 2. USA companies offer usually focuses on snack vendors segment, which is the second largest market segment in Europe, and where the Southern European and German competitors established themselves as references. However, the Japanese manufacturers such as Vendo hold their production in Europe and as a result offer more competitive prices. Generally speaking, the USA-made snack machines have acceptance, but not strong enough market penetration in Europe since they often do not meet European needs, for example such as smaller footprint. 3. USA companies were pioneers in cold drink front glass vending machines. From 1990s until 2006 they had this volume market segment controlled mostly due to the innovative product they offered and the acceptance by worldwide bottlers such as Coke and Pepsi. However, the past two years proved that even in this segment USA companies loose ground. Despite them still being the dominant manufacturers in the segment, European quality manufacturers now offer front glass cold drinks machines, which are more flexible, have different foot prints, are more robust and extremely well engineered, i.e. Sielaff from Germany. Moreover, the Japanese manufacturers such as Vendo offer a more diversified range (larger and smaller foot prints models). 4. USA companies do not offer such visually attractive products as European or Korean competitors. Their models mostly look outdated; do not have enough light, have too big footprints and no new features. For example, only recently the American-made machines use energy-saving options and led lights. So far no news on multimedia screens as compared to Korean, German or Italian manufacturers. 5

6 opinion Summary 6 As a conclusion, I would like to note that the European market is extremely competitive and diversified and, due to so many diversities like languages, taste preferences, etc., only the companies that evolve fast and are quick to adapt or to create trends will be successful and expand or keep their market shares. Competition in price vs. benefits (value for money) will grow, Southern European manufacturers will keep improving quality and Korean manufacturers will grow, particularly in Eastern Europe. As for Chinese manufacturers there are plenty already they will also keep improving the quality and be still competitive in pricing. Nonetheless, they will have a demanding task in implementing their products in Europe when Southern European manufactures can sometimes be as competitive in price as Chinese with the advantage of being local. From my point of view, the European market place will still be dominated by European manufacturers in Western and Eastern Europe, as well as Korean manufacturers, particularly in Eastern Europe, leaving to American companies niche segments such as frozen food and ice cream where USA manufacturers have capable products and cheaper ones than some available from Germany. As for front glass cold drink machine American manufacturers are no longer dominant and European already have products that offer more advantages and many more are being developed. As for Japanese companies present in Europe, in order to be more competitive they should address their range limitation and start offering hot drinks range: HoReCa, table top and free standing in at least two versions: bean to cup (B2C) and Instant. Worth mentioning that frappe coffee which has very few solutions in the vending industry as such, is important for markets such as Greece, Turkey and Middle East. Concerning European manufacturers, the actual economic constraints are affecting them as many other industries, however, overall, given the number of manufacturers acting in the European market place, with or without international economic turmoil, it is easy to assume that the market place is smaller for all and that mergers, acquisitions or simply failures to continue in business can be expected.