MILK VENDING SESSION November 5 2003 Kathy Belcher

MILK VENDING SESSION November 5, 2003 Kathy Belcher, Program Coordinator, Southeast Dairy Association

AGENDA I. Welcome& Samples II. Why Vended Milk? III. Machine Options IV. National Vended Milk Test Results V. Milk, Cheese & Yogurt Test Results VI. Local Results VII. SUDIA Milk Vending Grants VIII. Questions & Answers

WHY MILK VENDING? n Milk vending offers students a healthy and “cool” alternative to soft drinks and juice drinks n In the appropriate setting, milk vending can deliver a profit to schools

Research Has Shown… l 90% of teen girls and 70% of teen boys do not get enough calcium l Children who followed a diet rich in dairy foods had lower body fat than children with lower calcium intakes l Each additional serving of sugar-sweetened beverages such as soft drinks increased the risk for obesity

Research Has Shown… l Students prefer plastic, re-sealable containers to traditional paper cartons of milk l Secondary students prefer larger servings of milk l When given flavored milk options, milk and calcium consumption increased l Adding a 3 rd flavor of milk increased in-school milk consumption

Setting the Record Straight on Flavored Milk n Children who drink flavored milk drink more milk and have higher calcium intakes than those who don’t. n Children who drink flavored milk consume fewer nutrient- void soft drinks and fruit drinks. n Children who drink flavored milk do not consume more fat and sugar than those who drink unflavored milk. Johnson , R. K. et al. The nutritional consequences of flavored milk consumption in U. S. school –aged children. JADA 2002; 102, 2: 853 -856.

Ideas for Funding Support? n Community Health Organizations n School Health Advisory Committees n PTA’s or other school organization n Community Ag-related Businesses n SUDIA Grants

SUDIA Grant Process n School Foodservice Director or Principal may apply for $1000 SUDIA grant (10 still available) n May be used for purchase or lease of a milk vending machine n Up to 2 grants per school district n Purchase or lease by December 15, 2003 n Submit copy of purchase order or lease agreement for funds to be released.

Milk Vending Machine Options Clyde Paschal, The Vending Center David Pisacane, Shaffer Distributing Co. Why special milk machines? l Constant temperature of 37° ensures freshness and great taste l Typical soft drink machines chill only the bottom 1/3 of the cabinet l Health guard renders machine inoperable if the temperature goes above 40° for 15+ minutes

Machine Features What to look for… l. Front of machine l. Capacity l. Stocking method l. First-in, first-out function l. Storage - vertical or horizontal? l. Currency mechanism l. Ease of adding different size products

Dixie Narco n 360 16 oz bottle capacity n New, smaller capacity now available n Glass front with celebrity graphics on sides n Health guard n Coin, bill or card system n Warranty n Anti-theft system n Price: $3900 / $4500

AMS Automated Merchandising Systems n Up to 288 16 oz bottle capacity n Drawer-like, pull-out trays make rotating product easy n Can accommodate yogurt & string cheese n Glass front with graphics n Health guard n Coin, bill changer system n Warranty n Price: $3900

School Milk Vending Test : Evaluating Opportunities for School Milk Vending September 5, 2001 Funded By: Milk Processor Education Program (Milk. PEP) Dairy Management Inc. (DMI) Managed By: Research and Consulting For the Global Beverage Industry

Test Objectives and Methodology Primary Test Objective • To evaluate the opportunity for milk vending in schools • To quantify the profit potential Supporting Objective • To understand the operating dynamics • To identify optimal products, placement and merchandising • To build vending economic models for schools, processors and vending operators

Test Objectives and Methodology The five test markets were selected based on processor capabilities/interest, third-party vend operator capabilities and geographic representation • Vending machines were placed in middle and high schools, with dual machine placements in 13 high schools Omaha, NE • Roberts Dairy • Dahl Vending • 2 Middle/6 High Schools • 4 Dual Placements • Avg. School Population: 1, 080 Boston, MA • HP Hood, Inc. • A&B Vending Co. • 5 Middle/12 High Schools • 1 Dual Placement • Avg. School Population: 1, 180 Southern California • Alta Dena Dairy • Venders Service - Orange Cty. • Roosevelt Milk Vending - LA • 6 Middle/9 High Schools • 4 Dual Placements • Avg. School Population: 1, 785 Austin, TX • Oak Farms Dairy • Accent Food Service • 11 Middle/10 High Schools • Avg. School Population: 1, 190 Miami, FL • Velda Farms Dairy • Great American Vending • 0 Middle/12 High Schools • 4 Dual Placements • Average School Pop: 3, 060

Test Objectives and Methodology The vended milk was priced at $1. 00 across all test markets, which was in line with competitive vended products in similar serving sizes Typical Beverage Vending Prices in Schools Item Omaha Boston Austin 20 -oz. Plastic Soda $1. 00 $1. 05 $1. 00 Bottled Water $1. 00 $0. 85 Bottled Juice $1. 00 $1. 25 Canned Juice $0. 85 $0. 80 $0. 75 Isotonics $1. 25 $1. 00 N/A $1. 25 $1. 00 Bottled Tea Milk Test Los Angeles Miami

Test Objectives and Methodology The flavors offered varied by market, depending on processor product line • Test parameters required at least three flavors, and each market also offered a variety of fat levels Vend Test Product Variety by Market SKUs Omaha Boston Austin Los Angeles Miami Whole White Low Fat White Skim White Chocolate Whole Chocolate Low Fat Strawberry Low Fat Orange Coffee Total SKUs 4 6 4 5 5

Key Learnings/Messages from the Vending Test What We Learned from the School Milk Vending Test * Kids will eagerly buy milk from vending machines in schools Vending will be the preferred venue for kids to buy flavored milk, especially products they can’t get on the lunch or a la carte lines The greatest vending sales opportunity comes from large middle and high schools Flavors out-sell white milk nearly 10 to 1 Milk vending can be a profitable business, given the right product mix, pricing and operational components Commissions to schools are usual if vending is not school-operated There is no single approach to school milk vending Not all schools are appropriate for milk vending There may be significant competitive response by the soft drink players There was no significant lunch line cannibalization Spoilage was not a significant issue/expense *See full report at www. idfa. org/mktg/gotmilk. htm

Test Results – The Data Average weekly sales per machine during the test were $280 for all schools • High schools achieved higher velocities, primarily due to the larger school populations compared to middle schools Average Milk Vender Sales Per Machine Per Week Installation Period – 1 st 3 weeks Base Line Period – After 1 st 3 weeks All Weeks

Test Results – Student Reaction Students were generally satisfied with the milk serving size of 16 -ounce – they definitely did not want smaller portions • A number of students would have liked more milk per vended serving Share of Total Respondents Students’ Reaction to 16 -ounce Serving Size Source: Beverage Marketing Corporation; Student Survey

Test Results – Student Reaction Overall, students had very good things to say about the got milk? ® vending machines • 84% of the comments from both middle school and high school students were positive Straight From the Students’ Mouths J J J J “I think that it’s a very creative idea to influence our students into buying milk” J J “I like it; it gives us a choice besides soda” “I like it, I wish it was closer to the cafeteria because I would buy it more” “It’s beautiful and I love it so much; Yea for got milk? ® vending machine” “It’s great and it’s very nutritious for those with calcium deficiencies” “Handy; Don’t have to stand in line” “I like it, especially the Dixie Chicks; it gives us something else to drink” “It’s a great way to call kid’s attention to drinking milk” “I like it; sometimes me and my dad get strawberry milk after school because it’s our favorite” “I like it because it gives us more variety and more milk”

Test Results – Student Reaction Negative comments focused on the cost and the machine itself Straight From the Students’ Mouths L L “It costs too much for too little; better deal through lunch line” L “I don’t think many kids are into buying milk from it; also, you can get free milk in the lunch line” L L “Milk in the machine for extended period of time scares me” “All the milk has too much fat in it” “I think it’s easy to flip over and get free milk” “Sometimes there is milk in the machine and after you press the button, it says sold out, even though there’s still milk in there” “It needs a new picture on the side” “It’s good, but I don’t use it very much because it’s too expensive” “It’s kinda cool, but dumb too because milk is in lunch line for 50 cents”

Dairy Vending Test in Iowa/Illinois: Final Report Prepared for: Swiss Valley, Midwest Dairy Association & Dairy Management Inc. Prepared by: Marketecture June 19, 2003

Dairy Vending Machine Plan-O-Gram Yoplait Go. Gurt Schreiber String Cheese Nestle Vanilla Nes. Quik Nestle Banana Nes. Quik Swiss Valley Whole Chocolate Milk SV/Whole Chocolate Milk or Yogurt Swiss Valley Strawberry Milk SV/Skim White Milk SV/LF Chocolate Milk SV/2% White Milk SV/Whole White Milk SV/LF Chocolate Milk

Units Sold Total Yogurt: 12, 738 School/Week 29. 7 Total Units Sold: 77, 951 Total Cheese: 18, 443 School/Week: 16% Go. Gurt Strawberry: 47% Go. Gurt Berry Blue: 39% Raspberry Cup*: 7% Strawberry Cup*: 7% 100% 24% 43. 1 4, 585 Units Sold/School 4. 2 Units Sold/Student 182 Units Sold/ School/Week. 17 Units/Student/Week * Products not available in all schools and during all weeks. Total Milk: 46, 770 School/Week 109. 2 Chocolate Whole: 42% Chocolate 1%: 19% Strawberry 2%: 23% 60% White FF: 3% White 2%: 4% White Whole: 3% Nes. Quik Vanilla*: 8% Nes. Quik Banana*: 3% 100%

Units Per Week • Sales volume differed significantly from low to high

Vending Machine • AMS machines were used because of their ability to dispense a variety of different products – milk, cheese & yogurt

School Milk Vending in Kentucky n At least 49 Machines in place l 3 in Elementary Schools l 14 in Middle Schools l 32 in High Schools n School Food Service – Administration Partnership in at least 3 districts (Barren, Hardin & Muhlenberg) n School Food Service – Athletic Dept. Partnership in Monroe Co.

Barren County Schools Sarah Vincent, SFS Director Barren County High School – 1200 students, 2 machines Barren County Middle School – 600 students, 2 machines (1 st machine paid for in less than 2 months) n n n Where: Commons area, just outside cafeteria What: Milk Price: $1. 00 Processor milk; $1. 50 Nesquik Stocking Time: 15 -60 minutes a day Milk Sales: 150 -430 units per day Milk Variety: Strawberry, chocolate, banana, vanilla, white

Warren County Schools Doris Pruitt, SFS Director 5 machines in middle and high schools, 1 in elementary (1 st machine paid for itself in 2 -1/2 months) n Where: Cafeteria – access before, during and after school (In elem. , is in hallway outside cafeteria) n What: Milk, water (w/ school logo) and 100% juice n Price: $1 for local product; $1. 50 for Nes. Quik products n Sales: From 100 to 350 units per week, per machine Elem. school includes daily “milk break” opportunity n Variety: 1% chocolate and 1% strawberry from local dairy FF choc, RF banana, Nes. Quik n Stocking Time: 10 -15 minutes per day *Note from Doris: Be sure to set up dual control for money collection

Ohio County High School Shirley Dockery n Student population: 1100 n Where: Lobby of HS. . available at all times n What: Milk products only n Cost: $1 n Sales: 350 -375 units per week n Variety: Chocolate, Strawberry, white n Stocking time: Zero. . milk vendor stocks

Hart County High School Martha Taylor, SFS Director n n n Student Population: 800 Where: Cafeteria, access anytime What: Milk only Price: $1. 00 for local product, $1. 50 for Nesquik p Sales: 175 per week Milk Variety: 1% Chocolate, local dairy; 4 flavors Nesquik n Stocking Time: Approx. 10 -15 minutes per day

Mercer County High School Sylvia Moore, SFS Director n n Student Population: 650 Where: Foyer, access anytime What: Milk, Water & Juice Price: $1. 00 for processor milk, $1. 50 for Nesquik; $1. 00 Juice; $. 75 water n Sales: 420 units per week (ave. of 16 weeks) n Milk Variety: White & Chocolate + 4 flavors Nesquik n Stocking Time: Approx. 10 -15 minutes per day

Butler County High School Jane Smith, SFS Director n n n Student Population: 600 Where: Access all day What: Milk, Water and Juice Price: $1. 00 and $1. 50 for Nesquik products Sales: 150 per week average, more sales the beginning of the year and when weather is warm. n Milk Variety: 1% choc. ; 1% strawberry; Whole Choc. ; Orange Juice; Water; 5 Nesquik flavors. n Stocking Time: Approx 1 hr per week.

Two Examples of School Milk Vending Operation School Self Operation Pros School retains all revenue Full control over contents and quality control Control over vend price Fund raising mechanism Availability of on-site labor Leasing allows for immediate operating profitability If purchasing the vender, the payback is short Cons Machine purchase price Added responsibilities for staff Maintenance infrastructure Costs for product spoilage Machine service costs Vending Operator Pros School can have vending program for little or no money Machine filling, maintenance and service provided by vend-op Benefit from expertise and experience of vend-op School receives percentage of profits Cons School shares profit with vend op School forfeits some control over what goes into the venders School depends on operator for quality control Not viable for smaller schools School forfeits control over vend price

Considerations n Location l High traffic area with all day access is key u. Consider location outside cafeteria to capitalize on before & after school and weekend events l Be flexible & willing to change location if needed n Training l “learning curve” to become proficient in operation

Considerations n Operation l Insure continuous source of power u. Not shut off at night or on weekends u. Use tag or lock to insure plug is never disconnected l Plan for stocking & rotation l Routine maintenance of machine l Try a variety of products u. Different flavors & fat levels u. String cheese & yogurt

Considerations n Partnerships l Food Service, Administration, Athletics, Student groups, PTA l Dairy Processor l Vend Operator n SUDIA grants still available

Increase Sales With Vending Promotion n Sampling n Introduce new flavors n Rotate products for variety l Flavor-of-the-Month n Vending-specific promotions l SUDIA materials uposter, floor decals, banner, mobile, tip sheets, public address announcements n Mark products for free merchandise (posters, hats, t-shirts, key chains) n Try new products l String cheese l Yogurt

Promotions Ideas n Press Your Luck l “Got Milk? ” stickers were placed on bottom of select milk bottles in machine. Student who got a sticker won a prize. n Lotto – Free Vend l Machine was set to dispense a free product every 25 th purchase. Student received the product plus his money back.

Vended Milk Delivers a Healthy Alternative! Questions? Thank you for coming!