---
title: "Why Are Wahaha and Nongfu Rushing into the Vending Machine Sector?"
description: "China's vending machine market is still operator-led, but as Wahaha and Nongfu Spring increase their involvement, how will the market landscape change? Behind the large-scale investment, what is the original intention of brand owners entering the market? The future vending machine market structure—will it be the operators' 'show' or the brand owners' 'game'?"
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-01-09"
language: "en"
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---

# Why Are Wahaha and Nongfu Rushing into the Vending Machine Sector?

> China's vending machine market is still operator-led, but as Wahaha and Nongfu Spring increase their involvement, how will the market landscape change? Behind the large-scale investment, what is the original intention of brand owners entering the market? The future vending machine market structure—will it be the operators' 'show' or the brand owners' 'game'?

**Introduction:**
China's vending machine market is still operator-led, but as Wahaha and Nongfu Spring continue to increase their involvement, how will the market landscape change? Behind the large-scale investment, what is the original intention of brand owners entering the market?
Will the future vending machine market structure be the operators' 'show' or the brand owners' 'game'?
The past two years have been the most 'turbulent' and 'hot' years for China's retail and FMCG industries. Vending machines, once inconspicuous, have entered the public eye in recent years, with one side hearing the voice of channel reform and the other the voice of retail convenience. At that time, brand owners could no longer sit still.
With Nongfu Spring as a typical representative, Wahaha and Huiyuan have also been deploying vending machines in recent years. What are the reasons and logic behind this?
**1**
**The Eve of the Vending Machine Explosion**
According to Kantar Retail forecasts, when per capita GDP reaches $10,000, consumer demand for vending machines will explode. With an aging population, labor will only become more expensive, and the cost of human labor will continue to rise, making the replacement of human labor by vending machines unstoppable.
On the other hand, according to a subsidiary of Fuji in China, since 2012, its vending machine orders have almost doubled year on year. Moreover, it is preparing to set up a new factory to expand production capacity and quickly meet the exponential growth demand for vending machines in China. At the same time, the popularity of mobile payment has accelerated the arrival of the eve of the vending machine explosion.
**2**
**A Lever for Brand Owners to Resist Channel Cost Pressure**
It is worth noting that the higher the frequency of a product, the higher the degree of brand concentration. At the same time, brand owners are gaining more and more voice in the channel. Considering the profit retention, efficiency, and same-category competition of channel distributors and retailers, shortening the hierarchy, increasing convenience, and building self-operated vending machine channels have become inevitable.
This is not only a trend choice under environmental circumstances but also a strategic plan that is reasonable for brand owners.
Of course, the original intention of brand owners in deploying vending machines is not solely to resist channel cost pressure; there are other market significances as well.
01 Channel Control
When brand owners deploy vending machines, although it is still a distribution channel, compared with small retail stores, the channel is completely under their control. The exclusivity of products, the visual appeal of products, and the promotion of new products are far superior to the 'can't see, can't touch' of small retail stores.
For example, during the peak season for beverages, the vivid display of products is often the core strategy for brand owners to land in small retail stores. The vivid display of products not only tests the execution effect of grassroots business, but also the competition for end caps between brand owners is often 'irrational'.
As a self-built channel, vending machines can be completely controlled by the brand owner, free from the constraints of competitors and retail stores.
02 Consumer Profiling
With the popularity of mobile payment and the digitization of consumption, brand owners can also obtain consumer consumption data from the side. For example, after consumers pay via Alipay, cloud data sharing can obtain accurate consumer habits, consumption levels, consumption time periods, and even the brands consumers pay attention to.
Massive consumer profiles form a consumer heat map with vending machines as the physical radius.
At this point, brand owners also have sufficient consumption data, changing the past reliance solely on third-party market research. They have also gained a handle on the 'consumption temperature' offline.
03 Filling Density Gaps
According to industry insiders, the current layout characteristics of vending machines can be divided into three categories: **The first category is traffic-oriented public places**, typical locations being subways, airports, shopping malls, and stations; **The second category is closed operating places**, typical locations being industrial parks, campuses, gyms, office buildings, and universities, where the consumer group is fixed and non-flowing within a certain period; **The third category is mobile operating places**, such as scenic spots, libraries, exhibition halls, and 4S stores.
Although there are still small stores or convenience stores around the above vending machine locations, consumers' consumption of beverages is highly immediate. The accelerated pace of work and life makes walking an extra 50 steps a 'difficulty' for consumers.
Brand owners deploy vending machines to get closer to consumers, behind the goal of filling channel coverage density.
04 Market Competition
Public data shows that the number of vending machines in 2016 was 180,000 units, and in 2017 it is expected to be around 300,000 units. According to Kantar Consulting forecasts, by 2020 there will be 1.38 million vending machines nationwide, basically catching up with the U.S. market's holdings; the monthly sales per vending machine are 6,000 yuan. (Currently, based on public data from a vending machine operator, the average monthly sales per machine are 1,600 yuan.)
An independent channel, a rising market, and high-quality locations are limited—each one taken reduces the available options. Even if brand owners don't grab them, operators will. Once in others' hands, brand owners have to pay 'toll fees' to the channel to place their products.
**The original intention of brand owners in deploying vending machines is not only a change in external trends but also a strategic positioning. Of course, there are also many risks.**
1 Investment Cost
Taking the procurement cost of 30,000 yuan per vending machine as the standard, the gross profit margin of product sales is about 40%, and the monthly sales are about 2,000 yuan (varies greatly by location).
**Rough calculation: 0.2 (monthly in ten-thousands) * 12 (months) * 40% * X (years) = 3 (cost) X = 3.125 years**
**Conclusion:** A single vending machine put into the market takes about 3 years to break even. The payback period is long, and the more machines deployed, the greater the upfront capital investment.
2 Location Resources
Different vending machine locations lead to significant differences in revenue. Revenue differences affect the cycle of capital accumulation, further affecting the progress of market layout. High-quality locations are non-renewable; a good sales point can even approach the sales of a convenience store.
For example, in credit card competition, acting early versus late is not just a matter of quantity but also the difficulty of development. The market expansion costs behind it are several times higher.
**Core locations are scarce resources.**
3 Single-Product Operation
A 'weakness' of brand owners is that operating a single brand, or even a single category, cannot meet the diverse needs of users. In the early stage of insufficient market competition, users have fewer choices and are 'forced' to consume. Once the market explodes, competitors may increase their 'chips' for high-quality locations.
**Four Predictions for the Vending Machine Market:**
> 1. Third-party vending machines dominated by operators are inevitably at risk of becoming 'meat on the chopping block' for brand owners on the eve of market explosion, ultimately becoming eunuchs accompanying the prince in his studies.
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> 2. In the future, the mainstream deployment of vending machines will be dominated by brand owners. For high-quality locations, multiple brands and multiple vending machines will appear, and the Chinese-style 'location buyout' policy will be staged, entering a white-hot stage of market competition.
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> 3. When vending machines reach the coverage density of Japan, the trend of distributors being reduced to mere pipelines will become increasingly evident.
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> 4. A game for big players. Taking the cost of 30,000 yuan per machine as an example, deploying 10,000 machines requires 300 million yuan in upfront capital, and it's 'invisible and intangible' in the market; 100,000 machines require 3 billion yuan—this is not a child's play.
What do you think about brand owners entering the vending machine market? Among Nongfu Spring, Coca-Cola, and Wahaha, which one do you favor? Welcome to leave a message for discussion!
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