Junking sweets in vending machines could give vendors, schools profit chills

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By Petra Breyerova ST. LOUIS POST-DISPATCH Saturday, May. 20 2006

As schools and hospitals look to kick the junk food habit, local vending machine operators are left to wonder what the impact will be on their businesses. Many expect that replacing sweets and sugary sodas with healthier alternatives could sour their profits.Finding low-sugar snacks that children will buy as much as they do Skittles or Starburst is now crucial for Jim Harris, owner of St. Louis-based Harris & Pipkin Vending Inc.Harris has 60 vending machines at 26 middle and high schools that generate about 20 to 25 percent of the company's sales. By July, he will have to replace sweets with low-calorie snacks like Nutri-Grain Bars or Corn Nuts to meet nutrition requirements."Healthy products do not sell," said Harris, who has been in the vending business for almost 30 years. He anticipates a 40 percent drop in revenue at schools after the provision goes into effect."It is unfair to blame a particular line of retail for obesity as the consumption of junk food through vending machines is minimal," said John Mitchell Jr., president of Mid-America Automatic Merchandising Association, a trade organization representing Missouri and Kansas. Surveys show that students consume less than one snack or candy item per student per week, he said.School districts say they don't blame only vending machines. Instead, they want to address the obesity issue from a variety of ways, including looking at cafeteria food and changing the curriculum to educate children about healthy eating. Following a federal regulation aimed at curbing obesity, each school district must establish a local school wellness policy by this summer that includes vending. Because elementary and middle schools largely have limited the sale of junk food and sugary drinks in vending machines, the biggest impact will be in high schools. "According to what we hear from school districts, they will adopt stringent health policies," said Karen Wooton, director of school food services section at the Missouri Department of Elementary and Secondary Education. The department has developed the Missouri Eat Smart Guidelines, which outline healthy eating standards at schools. Many school districts say they will follow Eat Smart's advanced guidelines, stating that at least 50 percent of vended food and drinks must be low in fat and sugar with not more than 200 calories. The Illinois State Board of Education is developing similar guidelines. Illinois officials also have approved a ban on high-sugar food and sodas in elementary and middle schools this fall. Some school districts already have started changing contents of vending machines. Over the last six months Hazelwood-based Dynamic Vending has replaced 20 percent of high-sugar products in its almost 200 vending machines in St. Louis high schools with healthier alternatives. Based on what he has seen so far, Joshua Koritz, Dynamic Vending's owner and president, said healthy items such as Fit Bars sell 30 percent less than traditional candies. But for Koritz, who has more than 5,500 vending machines in the St. Louis area, Southern Illinois and Columbia, Mo., school business makes up a small amount of his company's overall sales.He also is concerned about sales in hospitals."We are going to make a dramatic change (in hospitals' vending machines) this summer," he said.Over the last three years Dynamic Vending has been adding more healthy items in its approximately 500 hospital vending machines, but will have to do more to meet hospitals' growing demand for low-calorie food and beverages. One of Dynamic Vending's customers, BJC HealthCare, will change the ratio of traditional and healthy items in its hospitals' vending machines from 75 percent snacks and sodas and 25 percent healthy items, to at least a 50-50 mix. The hospital even might reverse the ratio to 75 percent healthy items, said Kathleen Killion, executive director for health literacy at BJC HealthCare. This transition, part of an overall wellness policy, aims to provide "balanced choices" for vending customers who ask for healthier products, Killion said. To mitigate against the impact, vending operators, with distributors and suppliers, are testing various products, hoping to find new top sellers."We are searching on daily basis for better products and getting samples in our warehouses to see what will sell," Koritz said. Although national manufacturers constantly are launching new items low in fat and sugar, they are not immediately available for sale in St. Louis vending machines, vending suppliers say.Filling up 45 slots in a vending machine with healthy products that consumers will buy is "too hard," said John Murray, an account executive in the St. Louis area for Denver-based distributor Vistar Corp.With many school districts still formulating their wellness programs, Murray said he did not know how much vending machine sales would fall. But he predicted that convenience stores and other retailers would benefit from the decline in vending machine sales. "Children will buy it (junk food and sodas) somewhere else and bring it in (schools)," Murray said. Lindbergh School District already has approved guidelines that surpass the toughest proposed by Missouri Eat Smart, said Patrick Lanane, assistant superintendent for finance. By July 1 the district will pull all sodas and leave only water, flavored water and 100 percent juices in schools' vending machines.Lanane said many junk snacks, including chocolate, will disappear completely from vending machines and be replaced by healthier items like peanuts and pretzels. This move will please parents and teachers but may upset students and districts' coffers. Revenue from vending machines is used for schools' extracurricular activities, including sports and music programs. The Lindbergh School District collects about $60,000 a year in revenue from its 21 vending machines, mainly in high schools. Lanane said this figure is likely to shrink by 30 percent in the first year after the new wellness policy is adopted. But in two to three years revenue may work its way back as manufacturers develop new products. Meanwhile, the district is seeking new ways to raise money to fund its non-profit group activities, Lanane said. Lanane, Wooton and other industry observers say that in the future vending machines at schools will have only healthy items, or some school districts may decide they will not have vending machines at all.Christopher Stegeman, co-owner of Jefferson City-based Central Missouri Vending Service, said small school districts in his area are considering the latter move. As with other vendors,Stege­man expects between a 40 percent to 50 percent drop in sales at high schools, which account for about 15 percent of the company's total revenue. Although concerned with sales now, the vending industry may profit from the trend toward healthier eating in the long term, said Mitchell, who doubles as president of Treat America Ltd., a food-service and vending company based in Overland Park, Kan. As people move toward healthier lifestyles they will use vending machines more frequently to buy small healthy meals five to seven times a day, and will be willing to pay more for healthy items, Mitchell said. pbreyerova@post-dispatch.com 314-340-8372Junking sweets in vending machines could give vendors, schools