Originally created 10/25/98

Vending company upgrades



NEW YORK -- Had a sandwich from a vending machine lately? Didn't think so. But with food and beverage vending sales estimated at more than $22 billion last year, someone must be stopping by for a bite.

Canteen Vending Services, the vending industry leader, is trying to create a tastier experience and improve the industry's image by stocking nationally known restaurant brands in its fresh food machines.

It has struck deals to stock Nathan's hot dogs, Blimpie's sandwiches, Hardee's biscuits and burgers and Red Baron pizza along with its own private-label brands of sandwiches.

Some items are designed to be eaten as is from the refrigerated machines, while others will have to be heated in a nearby microwave oven.

Anthony Gagliardi, president of Canteen, called it the most ambitious effort to date by any vending machine operator to offer restaurant brands in food kiosks.

"There is a clear consumer desire for brands in vending, but there has never been a focus on brands by the vending operators," he said in a recent interview.

Mr. Gagliardi figures the restaurant brands will boost business for Canteen and improve consumer perceptions of food sold through vending machines in the process.

In tests over the past year in North Carolina and California, he said, vending machine sales rose 20 percent when restaurant brands were offered.

Officials for the brands say vending machines give them a new way to distribute products, reach new customers and boost brand awareness. Some plan to include coupons with their vending food to get people into their stores.

But marketing experts say there are huge risks in entrusting a revered fresh food brand to a vending machine operator.

"The consumer perception of vending machine products is poor at best," said Jon Kramer, president of the marketing consultancy J. Brown/LMC Group. "I'd be looking twice at this if I were a brand marketer."

Indeed, spokesmen for the three big fast-food chains -- McDonald's, Burger King and Wendy's -- said they have no plans to sell via vending machines.

Denny Lynch, a spokesman for the Dublin, Ohio-based Wendy's chain, said selling its hamburgers, chicken sandwiches or pitas via a vending machine "doesn't seem to be a compatible idea since we like to serve freshly made products."

Charles Nicholas, a spokesman for Burger King Corp. in Miami, echoed those concerns: "From a quality standpoint, our product wouldn't be best served through a vending machine."

But Canteen's Mr. Gagliardi said his company has been working on introducing restaurant brands to its food kiosks for about two years, and is sure it can deliver quality food.

Its brand partners say they're confident of Canteen's ability.

"They are the masters of this segment of the business," said Jerry Sbarro, a vice president and member of the founding family of the Italian restaurant chain Sbarro Inc. It is still deciding whether it will supply its pasta, salads, pizza or something else for the Canteen machines.

Canteen, a North Carolina-based unit of Britain's Compass Group, certainly has some strengths.

It has been in the business for 70 years and has 150,000 food and beverage vending machines in the United States. It operates eight kitchens nationwide where it makes its own food for vending, and stands ready to make food to specifications of its new partners. It employs more than 3,100 people to service the machines and has state-of-the-art refrigeration systems to keep the food fresh.

Most of Canteen's food kiosks are in work places, campuses or medical facilities where people may not have the time or the inclination to go elsewhere for a quick meal. Among its clients are IBM, Microsoft, Johnson & Johnson, Chrysler, the University of Michigan and Kaiser Permanente hospitals.