PepsiCo Revamps Vending Machines to Attract Healthier Eaters

Dual-Temperature Machines Offer Food and Beverage

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PepsiCo Hello Goodness Vending Machine
PepsiCo Hello Goodness Vending Machine Credit: PepsiCo
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PepsiCo Inc., facing an anti-soda backlash and health concerns about snack foods, is looking for a resurgence in an especially hard-hit part of the industry: vending machines.

The company is rolling out several thousand dual-temperature machines that offer both food and drinks under the new Hello Goodness brand, according to a statement. The units will include healthier products from PepsiCo's beverage and Frito-Lay divisions, including Naked Juice, Lays Oven Baked chips and Sabra hummus cups.

The idea is to put a fresh face on an invention long associated with junk food, cigarettes and other vices. Though vending machines are still widespread, they've been jettisoned from many U.S. schools and other locations over health concerns. U.S. vending sales declined by 1% to $4.5 billion in 2014, according to Euromonitor International.

PepsiCo's new machines will have a digital interface, letting customers make purchases with credit cards or Apple Pay, said Kirk Tanner, chief operating officer of beverages in North America.

"This is the vending machine of the future," he said in an interview. "There's an opportunity for us to be a leader in better-for-you vending, and we have a long-term commitment to making that happen."

Soda Slump
The move is part of a broader push by Chief Executive Officer Indra Nooyi to offer healthier snacks. Consumers are increasingly shunning sugary drinks and candy, plaguing soda sales for PepsiCo and competitor Coca-Cola Co.

Schools have been a key battleground for the industry. The federal government has imposed standards on foods sold in school vending machines, limiting the amount of sugar, sodium and calories. The change has hurt vending operators, reducing sales in some cases by 30% to 40%, according to Vending Market Watch, a trade publication. Though new technology and snacks are helping the industry rebound, total sales are still below where they were before the last U.S. recession.

PepsiCo is betting healthier choices will help change that, though Hello Goodness isn't aiming at grade schools. The machines will be located in places like hospitals, universities, offices and transportation hubs.

"We see it as accretive, not as cannibalistic," Mr. Tanner said. "We see it as a great way to grow our business -- to reach consumers in places that we can't reach them other than vending."

--Bloomberg News