The Automatic Salesmen

Wall Street's newest romance is with the automatic vending-machine industry, which is changing the eating and buying habits of America. Shares in vending companies have suddenly been tagged with the magic phrase "growth stocks," have risen spectacularly in a declining market. In January, the stock of Universal Match, which rings up 40% of its sales in vending equipment, sold for 83, last week closed at 134 3/4. Vendo, the largest maker of automatic vending machines, has jumped from 23 3/4 to 66, while Automatic Canteen, biggest combined food-selling and machine-manufacturing company, rose from 21 to 31 1/2.

Vending-machine sales rose from $600 million in 1946 to $2.3 billion last year. The industry's 125 manufacturers and 6,100 operators are confident that they can maintain an average yearly sales increase of 10%, hit $4 billion by 1965.

Underlying the industry's optimism are such changes in the U.S. economy as automation, high labor costs and increased leisure time. All have spurred an increase in money-in-the-slot automatic retail selling. Machines now dispense 15% of the nation's cigarettes. Last year vending machines sold 2 billion cups of coffee, 20% of the nation's candy bars and soft drinks. More than 4,000,000 robot vendors offer everything from onion soup and insurance to a spray of French perfume or a 30-second sniff of oxygen to ease hangovers. And if the coffee isn't quite like home, it's at least hot and close at hand.

No Servants. To woo the demanding U.S. consumer, at least to the point where the accessible substitute is preferable to a long walk, machine manufacturers have improved the quality and reliability of vending machines by employing the latest advances in refrigeration and electronics. Kansas City's Vendo Co. has set up completely automatic snack bars at the University of Kansas and the University of Wichita, offering sandwiches, milk, coffee, pastry and juices. Vendo, which expects 1960 sales of at least $50 million and profits of $2.50 per share, is setting up an automatic drive-in with a complete menu on Kansas City's South Side. Says Vendo's Board Chairman Elmer F. Pierson: "In America today nobody wants to be a servant, and vending machines free people from being servants." The service may not be gracious, but it also saves tipping.

But a real boost for the vending boom has come from the improvement in coin-handling devices. Unlike the bad old days in the '30s, today's vending machine is virtually slugproof, returns money if it is empty. The biggest maker of coin-handling devices is National Rejectors, Inc., a wholly owned subsidiary of Universal Match Corp., which is controlled by Frank J. Prince. When Prince took over in 1951, sales were $10.3 million. By acquiring vending companies, Prince brought Universal Match to the forefront of the industry with sales of $72 million, earnings of $3.01 per share.

Universal expects its growth to continue, thanks to a paper-money-changing machine which it will be ready to field test in July. The machine, which will open new retail sales outlets for vending, changes bills up to $5, will be improved to change $10 and $20 bills by year's end. Universal is currently installing a machine for Manhattan's Macy's that will sell undershirts and shorts, change up to $9.90 in coins and bills.

Plant Restaurants. Most aggressive new entrant into vending-machine manufacturing is Chicago's Seeburg Corp., biggest U.S. jukebox manufacturer, which is run by 34-year-old Delbert W. Coleman (TIME, Oct. 27, 1958). Within the past 18 months, Seeburg has acquired four vending-machine makers (cigarettes, fresh brew and powdered coffee, soft drinks in bottles and in cups), added a fifth last week. Seeburg plans to bring out two new machines (milk and candy) in the near future to broaden its line. Coleman expects the company's sales to rise 15% to $26 million this year (35% from vending v. 7% last year) with profits "substantially increased" over 1959's $1.64 per share. Says Coleman: "Just open up a suitcase and try to sell in the lobby of a big office building. They'll throw you out on your ear. But with vending machines they welcome you because you're rendering a needed service."

The biggest area of growth within vending is something that goes by the repellent name of in-plant feeding installations. With them, such companies as Chrysler and American Motors have stopped losing money on company cafeterias. Machine makers are racing to perfect a complete in-plant feeding system for such operating companies as ABC Vending Corp. (1959 sales: $66 million) and Los Angeles' fast-growing Automatic Retailers Co. of America (est. 1960 sales: $35 million). ABC Vending, which began selling popcorn and candy in Manhattan movie houses, now has concessions in more than 2,750 theaters and 420 drive-in movies. It has taken advantage of the leisure-time boom, moved vending machines into sports arenas, bowling alleys and stock-car racetracks. At Squaw Valley's Olympic Games last winter ABC did $280,000 worth of business in ten days, decided to keep its snack bars in the area permanently.

Varied Menus. Presently out in front is Chicago's Automatic Canteen Co. (1959 gross income: $140.5 million), which both makes and operates vending machines. Automatic Canteen has developed a battery of vending machines that offer a complete snack line including infra-red toasted sandwiches, hot soup, chili, baked beans, pastry, coffee and cigarettes. Says Automatic Canteen Chairman Nathaniel Leverone: "The sales potential in in-plant feeding alone is at least as great as the entire automatic vending business is now." In an industry where profits for operating companies run about 3% of sales after taxes, Automatic Canteen expects to earn about $5,000,000 from 1960 sales of $147 million.

This week, Long Island's Continental Industries will begin operation of an automatic cafeteria for investment bankers Carl M. Loeb, Rhoades & Co., providing a menu of 55 dishes with three choices per day, e.g., roast turkey dinner (50-c-) and codfish cakes, peas and carrots (45-c-), to 600 employees.

To keep up to date and to remain competitive, vending-machine makers are now spending ten times what they used to on developing new gadgets. They are now experimenting with store-front units with a complete line of grocery staples, which could operate on a 24-hour-a-day, seven-day-a-week basis. They are also perfecting new dispensing devices for supermarkets and drugstores to prevent costly pilferage of small items of merchandise.

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