FAQ - Cost/Benefit of Vending Products

This article will illustrate when expensive coffee vending products are appropriate and when you should look to budget products. We're going to look at a couple of scenarios and determine the most suitable product for each situation. Remember that you're in business to make money but sometimes you need to spend money to make money.

One of the assumptions we'll make is that better tasting coffees will sell more cups. Exactly how many more is debatable but my own experience has shown that improving the taste can increase sales by up to 100%. For this article we'll assume that the cost per cup of the cheapest coffee vending product is 25 cents and a cup of the best coffee vending product is 40 cents.

$2.00 per cup in an office. If you put a coffee vending machine in an office you're relying on regular customers. If you can get 10 staff members to buy a coffee once per day then you're guaranteed a minimum of $5000 per year turnover. If you can make a better tasting coffee and increase the number of staff using the machine daily to 15 then you'll turnover an extra $2500 per year. But what about your costs? Your costs over the year have doubled from $625 (2500 cups x 25 cents/cup) to $1500 (3750 cups x 40 cents/cup). But overall you're making an extra $1625 profit for the year.

$0.80 per cup on freevend. If you put in a coffee vending machine on freevend then staff will use your machine even if the taste isn't the best. Your bigger risk is that a competitor will do a taste test with a better product and kick you out of the site. On a pure cost benefit basis lets look at the following assumptions: We do 50 cups per day and if we put in better product then sales will increase by only 20% to 60 cups per day. If we use the cheaper products our sales per year will be $10,400 (13000 cups x 80 cents/cup) and our costs will be $3250 (13000 x 25 cents/cup) leaving $7150 in profit. If we use the premium product then our sales will increase by 20% to $12480 but our costs will increase to $6240 (15600 x 40 cents/cup) leaving $6240 in profit. So although we're making more coffees it's better to use cheaper products for this situation.

But what's the reality of coffee vending? I've put together a few rules of thumb to based on my years operating coffee vending machines.

The more you charge per cup, the better product you should use
In offices you're also competing with the coffee van and the cafe so make it taste as good as possible
Your profit will come from increasing sales, not cutting costs
There's a middle ground for good taste vs costs, especially if you're charging $1.00 to $1.50
Your best customers are repeat customers so keep the taste as good as possible.

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