CHURNING OUT BIG BIZ RETURNS

WIth a change in lifestyle and consumer behaviour, the markets have had to rise to the occasion, all decked up with several gadgets that are modern and time saving too. In such a market the compact yet sophisticated vending machines making tea, coffee, soups, drinks, sodas and ice creams have become the most sought after devices that are seen hitting the offices, malls, multiplexes and other market places.

Keeping in mind the fast-paced life one lives in the modern world and the ever-increasing popularity of the ready-to-eat concept, these dispensing devices are available in various avatars in the market. The automatic operational system of these devices save us not only from the traditional method of cooking and preparing food but also provide quicker servings. In the process of fulfilling consumer demands, these vending machines are proving to be fruitful investments as well.

The concept of vending machines in India got momentum in 2002 when Tata first established vending machines for tea in the country. Thereafter it was Taj Mahal and Lipton tea vending machines, along with that of Coca-Cola.

The coffee kiosk was popularised by Nestle in India, wherein the brand offered the hot beverage through its vending machines. The brand installed hundreds of its vending machines at shopping malls, cinema halls, food centres, hospitals and offices. Its vending machines came in different sizes and styles to match the needs of consumers at different locations. The high capacity multitasking vending machine of Nestle provided snacks, drinks and confectionery items enabling its consumers to have hot drinks instantly.

Another brand, Cadbury India, manufacturer of Cadbury chocolates, launched a chocolate vending machine operated by mobile handset at select corporate offices and eating joints in Mumbai.

Huge market potential

The changing eating habits of people and the adoption of urban lifestyle have opened great business opportunities for investors of vending machines, both for kiosks and standalone outlets. The increasing demand for vending machines in the F&B industry has created a huge market for these machines which are being sold through franchise, retail and dealer/ distributor models of business. But as the use of vending machines and the services they offer is fairly a new concept in India, only 12-15 % of the potential market for vending machines has been tapped till now.

Elaborating on the vast business potential for vending machines in the market, R Shivshankar, CEO, Lavazza, says: “We have more than one lakh corporate offices operating in India; this is only the metro and tier-I figures. All these offices need some kind of solution for their hot beverage requirements. When we look at hotels, we have more than 8,500 different category hotels in the country – the potential in India is huge and one who implements customised solution to cater the needs of consumers will have good business prospects.”

Airing similar views, Ghouse Mohiuddin, Managing Director, Café Desire, says: “The market potential is huge as tea and coffee are inevitable in a country like India and the market does not have any saturation point. This industry is growing at the rate of 25 per cent per annum.”

However, only the vending machines for tea, coffee, cold drinks and ice creams have so far shown substantial sales as compared to other types of vending machines.

Opportunities galore

Big F&B industry players like Nescafe, Bru, Lipton and Maggi have recently taken up the concept of their product services through vending machines. They offer dealer / distributorship business opportunities to investors who are looking for low cost business opportunities without having to wait for a long time for profitable results to show up. The low investment business of vending machines can be commenced with just 4-5 units and still one can earn profitable returns. These machines can also be taken on rent and/or availed through dealers and distributors or directly from the manufacturers. This business model allows the investor to pay monthly operation charges to the owner of the machine whereby, in return, the owner would provide for its services and maintenances, as per the contract agreement.

“Being the pioneer in freshly brewed coffee vending industry in India, our understanding about the requirements across the segments, (HoReCa, OCS & Public places) especially in the hot beverage category, is very deep. So, planning and focused customisation is the only key to growth in both top line and bottom line. Our team is very well equipped to optimise the resources and ensure high profitability to the distributors with prior experience in the field. We believe when we combine hands of an experienced distributor-partner with our guidance and technological superiority, their business model will be enhanced and high profits are ensured,” says Shivshankar.

However, these machines save not only the cost of keeping helpers but also dissuade the investors from hiring a place as they can be put anywhere and provide regular as well as immediate returns. The cost of a vending machine depends upon its size and its operational system. Any beverage vending machine in India will cost Rs 10,000 and above, while on the lower side, a snack or ice cream dispensing machine will cost about Rs 40,000.

About the reasons behind the growth of this industry, Mohiuddin says: “The vending industry has grown in the Indian market because the vending machine in any place, any office will have a lot of convenience in making tea and coffee, with benefits, including avoiding pilferage, consistency in quality, hygiene, untouched by hand, easy to operate, a large range and so on.”

He adds: “We offer our investors the distributor model of business only. And with our figure of distributors reaching to 150 till date. We are also planning to roll out in the near future.”

Training & support

The potential in India for hot beverage vending machines is good and the technological advancement that took place in the category is phenomenal. Moreover, ice cream vending machines offer attractive business opportunities to earn money as they hold about 2% market share of the total vending business.

Sometimes the vending operators, who install and run these dispensing machines, decide and arrange for the location and pay electricity bills and space rentals. Generally, the vending operator decides on the products to be sold through vending machines. Lavazza provides its investors training on how to use the machines and apprises them of the different types of coffee blends, and its centralised warehouse in Chennai caters to all its branches in other cities

“We focus on imparting a better training to our sales and marketing team wherein they are equipped with the best of the tools and skills to get a good quality business. We also provide a three-day extensive training programme to our investors and participate in a lot of events for product awareness and customer interactions, and we do run a lot of schemes and offers for the customers to make us stand out from the competition,” says Ghouse.

However, the sales department of Café Desire is fully responsible and accountable for the company's logistics and boasts of tie ups with premium logistic companies to ensure timely supply of products across the country.

Overcoming hurdles

As the concept of vending machine is quite nascent in India, the business of vending machines is facing a few hurdles on its way. On being asked if the Indian brand of vending machines faces stiff competition from their international counterparts, Shivshankar says: “The market is huge, there is room for everyone. The only ticket to success here is the quality you offer and then the turnaround time on service issues.”

On the other hand Ghouse feels that the vending machine industry in India would benefit from a lot of expertise, research and development, as not many players are involved in this industry yet. "With more hands, the industry will grow and expand," he believes.

Aiming to grow further

Lavazza, having close tie ups with a few companies which provide end-to-end vendor solutions to corporates, is looking for expansion in India. “We would double the machine population and the turnover in next three years in metros. Agencies having a good rapport with corporate offices can become the investors and distributors of Lavazza,” says Shivshankar.

Café Desire, which is also seeking a roll-out, has quoted its investment capacity of Rs 6-8 lakh over a period of one year, preferably for investors who have a business background and an existing office setup.

So pull your socks up and chase the dream of owning a small business with the vending machine of your choice, as it will offer you high rewards.

INTERNATIONALLY USED VENDING MACHINES YET TO FORAY INTO INDIA