Vending market of Ukraine is in decline.

For the first time in recent years the Kiev Vending market has decreased on third. Observes say this is a result of an absence of the attractive places for accommodation of the new equipment, so as the increase in/of  the rent rates and toughening of a competition that have made purchase of automatic devices unattractive for businessmen. In order to increase their income Vending companies began rapidly taking over the regions.

Sales have fallen

Kiev Vending business becomes less attractive. In 2006 there were about 3,500 operating machines in the capital. In 2007 there were around 1,6000 sold, and the total number reached approximately 5,000. This year participants of the market anticipate 20- 30% decrease in sales (altogether there will turn to be up to about 6,000 automated dealers “on the streets”). The Director of the Vending Systems company, Sergey Driga says that the decreasing tendency of sales affected coffee automatic devices, which make up about 85% of sales. Sales of the equipment of the piece goods (water, juices, snacks, sandwiches, DVD and so forth), according to sales manager of Vending Company Natalia Vorotyntseva, have remained practically at the last year's level.

The absence of the increase of interest in the vending machines, experts connect with rather low profits from sales of those products. For example, at equipment cost for preparation of hot drinks of 3,5 thousand euro the profitability is 200-300%, whereas the unit for snack sales has profitability of 30-100% & costs 4,5 thousand euro. Besides, the maintenance of coffee automatic devices is much easier than the one of vending machines with wider variety of goods.

According to the interviewed “DS” companies, the tendency of decreasing volumes of sales is only observed in capital, while the continuing development is still observed in regions. However in regions Vending networks face the problem of a level of income of the population which remains the lowest of all among the western part of the CIS. Besides that, other serious factors take place. The last political events in Ukraine have deprived the large foreign investors confidence of stability a rate of the country in this connection, serious outflow the capital from the region leading, in turn, to falling of consumer demand.

The economic crisis has affected the capital of Ukraine to a lesser extent; the main reason of the decrease in sales is pronounced the saturation of the Kiev market. “Almost in all shopping centers, supermarkets, offices, etc. there have been already installed about 3, 4 units, and in some places, for example in Metro, there could be about 10 units”, - Mr. Driga says. “Concentration” leads to decline of the parameters. “For example, if the automat makes 80-100 cups of coffee a day, then after the installment of “the competitor” those parameters are very often divided on two”, - the chief of the department of sales of the “Vending- Ukraine” company Nikolay Chernyavsky insists. The company also adds that it is not rare when businessmen refused to get the equipment because of the absence of suitable locations, and the risk of vandalism if placed on the streets. Based on this information, Vending companies talk about the double increase in rent for owners of automatic devices up to $100/m2 per month. As a result if two years ago it was possible to return the means invested in the equipment within a year, this year the time of recovery of outlay has grown twice.

“Information”

50% of Kiev markets of automatic devices are kept by Italians - Necta, Reavenors, Saeco, etc. About 20% are held by local ŃPS Vending and a factory “Tomak”. Nearly 7% is taken by Chinese manufacturers, the largest of which is Palleo. The remained part of the market is shared among the Korean, American, French and German manufacturers. The interests of foreigners on the capital market are represented by about 30 distributors, the largest among which are “The Ukrainian Vending company “,“Vending- Ukraine”, “Vending Company”, “Vending Systems”, “Liberty”, etc.

We shall note that in Moscow where the potential of the market is estimated as 30 times above Kiev , there are only 10 large distributors as accounted for ,which is, according to the experts, positively influence the development of the Russian market as a whole. Experts believe that a large number of distributors does not allow the companies to get financially strong they operate on the verge of bankruptcy, being compelled to limit services rendered by clients, and buyers could just wish for the high quality of protected by warranty service.

10.09.2008