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Time for vending to join the tech revolution believes Uvenco UK

“Machines talk to each other. We see it in everyday life but not in vending.”
picture of vending machine
No empty spirals with telemetry

Hard to believe that vending machines are the one area of retailing yet to embrace machine-speak or internet of things technology.

But that’s the case according to Sergei Kornienko, chief executive of Uvenco UK Plc (LON:UVEN) and something he plans to change.

“Machines talks to each other. We see it in everyday life but not in vending.”

 

Machine speak

Telemetry is the description he uses, or the ability to control what’s in a vending machine from an office and respond almost immediately when either a machine breaks down or stock runs out – ‘empty spirals’.

Kornienko is also chief executive of Russian firm Uvenco where ‘smart machines’ have been in operation for five years, so he has plenty of experience of their use and potential.

As you might have spotted there is a link between Russian Uvenco and the AIM-listed firm.

A consortium of Russian investors led by Uvenco owner Boris Belotserkovsky owns just over 53% of the shares, it supplies the UK business (and others) and will be the source of the new ‘smart venders’.

Their introduction here would have happened sooner but for the poor financial and operational state of SnackTime, Uvenco UK’s name until earlier this year.

Kornienko says it has taken two years to get the UK business to a position robust enough to start to roll-out the new state-of-the–art machines. 

But after a final six months of sorting out the business, the long-awaited introduction should start to happen from 2018.

 

Cost savings

Why Kornienko’s keen to get started is easy to spot. The classical vending machines model involves an operator turning up every two days to refill or repair a machine.

In some cases where a coffee machine and a snack machine are on the same premises, that involved two people being sent to the same place.

Not a problem for the new, smart vending machines. They minimise downtime and empty shelves by monitoring their own stock levels and performance.

Delivery route planning, forecasts and the analysis of what is selling well and what isn’t also becomes a lot easier.

All in all, Kornienko reckons a smart vending machine can shave up to 30% off costs with incremental revenue from better stock control, fewer outages and so on.

That would make a big difference to Uvenco’s UK numbers, although things here have already been moving in the right direction, at least on the profit front.

Benefits from the heavy restructuring meant a reduced operating loss of £743,000 (£3.35mln loss) in the nine months to March.

On an underlying basis [EBITDA], the company posted a profit of £324,000.

Sales have been harder to turn around, especially as one of the main planks of the restructuring was to assess the profitability of contracts and cull the loss makers.

Revenues dropped 9% on an annualised basis in the year to March and there will be some more slippage this year says Kornienko, but he expects underlying profits to continue to improve.

 

2018 upgrade

From 2018 onwards and the advent of the new technology, sales should start to pick up.

Railways stations and airports remain the best places for a vending machine, but Uvenco UK also has a sizeable chunk of public sector-based outlets such as hospitals.  

Financials have also steadied with the link with Uvenco proving a help. In June, for instance, it lent £1mln to Uvenco UK.

The market is also moving on. Micromarkets are the new big thing in vending in the US and Uvenco is trialling 30 in Russia.

Essentially mini-shops, they stock 300 products instead of the 40 in a traditional vending machine. Some of these are perishables and the key is razor-sharp stock control using telemetry.

Kornienko says two micromarkets are being trialled in the UK, but how the concept will work here is still under review.

Another ingredient in the mix is the strong likelihood of consolidation among the vending machine operators.

 

Consolidation afoot

This is already underway with two of the private equity –owned European giants Selecta and Pelican Rouge trying to get a €2bn merger past the European authorities.

Uvenco UK is much smaller with 3,500 machines currently, but once the business has the right foundations Kornienko sees a lot of potential for expansion.

“It’s a fragmented business with a lot of 100-200 machine operators.”

Early stage discussions have already been held with one £2mln turnover operator and this year there were reports Uvenco wanted to buy the UK business outright.

If the new smart machines have as dramatic impact as Kornienko believes, it is unlikely that will be the end of the story. Indeed, it may be just the beginning.

 

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