The days of school children flocking to the Coke machine for their daily afternoon sugar and caffeine buzz may be coming to an end. Children may still turn to the vending machine, but future snacking options will be more nutritious than a conventional candy bar and soda. At least, that will be the case if the healthy vending companies that have popped up in California and other states are able to get their wares into more schools, health clubs, recreation centers and other locations that utilize conventional vending machines.
As childhood obesity continues to rise, Americans are becoming more educated on the implications that a sugar-, sodium- and fat-laden diet can have on a child's health — now and later in life. In fact, the Centers for Disease Control and Prevention (CDC) reports that 25% of obese adults were overweight as children and that if a child is overweight before the age of eight, obesity in adulthood is likely to be more severe.
Because kids spend 35 hours or more each week at school and consume many of their calories on campus, child nutrition advocates are focused on affecting positive change at the school level. Certainly, the work of people such as Ann Cooper — a.k.a. the Renegade Lunch Lady — who has been working to reshape school lunch programs across the United States is crucial to addressing childhood obesity and disease epidemics. But other efforts are needed to confront the fact that many schools still leave kids the option of turning to vending machines for snacks that are chock full of sodium, trans and saturated fats, and sugar and other empty carbohydrates.
California legislators took notice of the rising trends of unhealthy meals and snacking in schools and took action in 2005, passing two bills aimed at improving nutrition in schools. Senate bills 12 and 965 require that the sale of all foods on school grounds comply with nutritional standards. Some of the restrictions associated with the new laws include specific parameters on the types of foods and beverages that are allowed to be sold in schools.
Senate Bill 12 states that an individual snack sold on school grounds may not have more than 35% of its calorie content derived from fat, 10% of the calories derived from saturated fat, or contain more than 35% sugar by weight. The snacks must also be 175 calories or less in elementary schools, or 250 calories or less in middle and high schools.
These guidelines have been championed by the Alliance for a Healthier Generation, a partnership between the American Heart Association and the William J. Clinton Foundation that was created to address the issue of childhood obesity. In late March, Hank Izzo, vice president of research and development at Mars Inc. (which is a member of the Alliance for a Healthier Generation), testified before Congress and urged U.S. lawmakers to base national school nutrition reform on the 35-10-35 formula.
But not all child nutrition advocates are happy with this formula. “The 35-10-35 rule is a travesty,” Laryn Callaway, ND, a practicing naturopathic physician in Arizona and founder and CEO of Organic Bistro Whole Life Meals, told NBJ. “It's basically saying that, as long as a food doesn't have too much of these bad, crummy things, it's healthy. That is like saying, ‘If there's only a little bit of nuclear waste in the sandbox, it's probably OK.’” According to Cooper, who is also author of Lunch Lessons: Changing the Way We Feed Our Children, the 35-10-35 rule “just allows and supports more junk food in the schools.” She also noted that the rule opens the door for sweetened drinks such as Vitamin Water. “So now we will have a generation of children who think water is supposed to be sweetened,” Cooper said. “Water is a necessity of life.”
Given the popularity of soda and energy drinks, beverages are a hot topic in the school nutrition debate. Senate Bill 965 in California takes aim at improving the quality of beverages sold in the state's schools. The bill says that no less than 50% of all beverages sold on school grounds shall be: fruit-based drinks that are composed of no less than 50% fruit juice and have no added sweeteners; vegetable-based drinks that are composed of no less than 50% vegetable juice and have no added sweeteners; drinking water with no added sweeteners; milk; or an electrolyte replacement beverage that contains no more than 42 grams of added sweeteners per 20 oz. serving. Starting on July 1, 2009, all beverages sold in California schools must comply with the stipulations set out in Senate Bill 965.
Hello Healthy Vending
When the California legislation was first passed in 2005, it not only provided the opportunity for nutrition advocates to be heard on a larger stage, but it also created business opportunities for distributors and manufacturers looking to supply schools with healthier foods and beverages that would comply with the new state laws. “The alarm went off in March of 2006 when we went to [Natural Products] Expo West in Anaheim,” said Mark Trotter, CEO of California-based healthy vending company Yo-Naturals. “Based on our studies, we knew there was a lot of [business] potential with schools [because] the vending industry did not have any healthy products.” Building off of this analysis and the opportunity created by the new California legislation, Yo-Naturals was able to place 40 vending units in various locations around San Diego. About half of those locations were schools.
Initially the company selected products to feature in its machines on the basis that they comply with the California legislation, Trotter said. Today, Yo-Naturals — which now has a presence in approximately 800 locations in 105 cities across the United States — offers “Plan-o-Grams,” which take into account a school's or location's specific nutrition guidelines, as well as the particular needs of the age group that is being served. The three most popular products sold via Yo-Naturals' machines are Pirate's Booty snack chips, CLIF Bar's ZBaRs, and individually packaged servings of Horizon organic milk. Other products carried by Yo-Naturals include Barbara's Snackimals cookies, Annie's Organic Cheddar Bunnies, Vitamin Water drinks, and hundreds of other offerings that are primarily natural or organic. “We love offering new products — we grow with the brands,” Trotter said. “We'd also like to see our own private-label brand of Yo-Naturals products.” Trotter told NBJ that he'd like to roll out a Yo-Naturals private-label product line in 2010.
After launching in San Diego, Yo-Naturals received very positive press coverage that soon spread to the national level. As the national media picked up the company's story, the concept of healthy vending gained popularity and Yo-Naturals found itself fielding more requests from potential distributors. The company launched its national distributorship program in February 2007. Typically, potential distributors hear about Yo-Naturals from press coverage or via word of mouth, Trotter said, adding that the company gets as many as 200-300 calls or e-mails per week from people wanting to be distributors. Yo-Naturals sells its machines, which can feature about 35 different products, to distributors. At that point, the distributor places the vending machines in schools or other locations and stocks them by ordering food through Yo-Naturals' e-commerce platform. “We're like the Whole Foods and Amazon.com of the healthy vending business,” Trotter said.
Although Trotter would not share specific revenue figures with NBJ, he did note that the company has doubled in size each of the last two years. Currently about half of the Yo-Naturals' locations are schools, but Trotter said he expects that percentage to be closer to 75% in the next year. “That's because kids are always hungry, they've always got access to resources, and they've got the support of parents and teachers who support healthy eating,” he said.
High schools and middle schools make up about 95% of Yo-Naturals' school locations, but the company does operate a “kid-zone” program for elementary school children, which is still a new initiative and gaining popularity, Trotter said. Kid-zone machines typically have marketing graphics that are aimed at a younger crowd and meet stricter guidelines and restrictions that are required within elementary schools.
Breaking into Schools
According to the CDC's School Health Policies and Programs Study (SHPPS), which was conducted in 2000, 43% of elementary schools, 89% of middle/junior high and 98% of high schools have a vending machine, school store, canteen, or snack bar where students could purchase foods or beverages.
Although many schools have been receptive to the healthy vending concept, significant hurdles for companies hoping to partner with schools still remain. David Sciarretta, who is the principal at the Albert Einstein Academy Charter Middle School in San Diego, said his school operates a Yo-Naturals machine. In an interview with NBJ, he noted that some schools are more hesitant to participate because of the perception of pricing issues. “I think that healthy snacks may sometimes be associated with higher cost, which may make some schools reluctant to use these machines, especially with low-income student populations,” Sciarretta said. “I definitely see a shift happening in education, with the move toward healthier eating and lifestyles. I know there are companies that specialize in organic foods for schools, for example. But the issue of cost is still an obstacle.”
Still, Trotter said he doesn't feel that price is as big of an issue as some may think. Yo-Naturals' products range in price from $1.00 to $2.50, which is on par with, or slightly more expensive than, the prices offered in most conventional vending machines. “It doesn't matter if we are in a low-income area in Philadelphia or a wealthy private school in San Francisco, those kids have access to money — all of them do,” Trotter said. “We don't see a difference in earnings from wealthy zip codes to lower- or middle-class zip codes; the machines do just as well, sales are just as strong.”
Trotter went on to note that he believes healthy vending may be a better channel than large retail outlets for penetrating traditionally underserved communities with natural & organic products. “Whole Foods wouldn't go into a lower-income zip code; no one would shop there,” Trotter said.
Other healthy vending operators, however, do feel price can be an obstacle in some communities. “[The] challenge is the unavoidable fact that all-natural, organic products cost more to produce and are therefore more expensive,” said Joe McCullough, owner of Enlightened Vending, a Santa Cruz, California-based healthy vending company. “To encourage students to make healthy choices, we have made every attempt to keep our prices as low as possible. As a result, we cannot realize the kinds of profits that a vending company serving inexpensive junk food and beverages can make.” Products offered by Enlightened Vending range in price from $.75 to $2.00, McCullough said.
Taking on Coke and Pepsi
Another challenge that companies entering the healthy vending space must overcome is the multi-year contract that many schools have with The Coca Cola Co. and PepsiCo. “The biggest hurdle by far has been trying to overcome the stranglehold that Coke and Pepsi have had on the beverage and snacking industry,” McCullough said. “Both Coke and Pepsi pay tens of thousands of dollars to schools, hospitals and businesses to ensure that their products are sold, often exclusively.”
Currently, Enlightened Vending has machines in only one California school, but the company hopes to expand that number in the coming years, said McCullough (who himself is a school teacher, along with his wife and Enlightened Vending co-founder, Tara McCullough). Enlightened Vending has stringent requirements for the foods it will offer, and McCullough said he hopes that schools will embrace the company's efforts to rid vending machines of unhealthy ingredients. None of the snacks featured in the company's machines contain hydrogenated oil, artificial colors or sweeteners, high-fructose corn syrup, preservatives or MSG, McCullough said.
Perhaps most puzzling for McCullough and Trotter is the mixed message that institutions are sending by continuing to partner with companies whose offerings are not seen as being nutritious. “A major reason we did not get an account with a well-known hospital in Santa Cruz was because they were not willing to give up the large commission that they were receiving from Coke,” McCullough said. “It is a reflection on our priorities as a nation that a healthcare institution decided to choose money over the health of their patients and employees.”
Trotter echoed those sentiments. “Kids want to eat healthy,” he said. “They are taught to eat healthy, and they are aware of healthy foods. That's why it's always a surprise to us when educators take money from big soft-drink companies when they are teaching health.”
McCullough said his company is rapidly working to devise a strategy that will enable it to better compete against heavyweights such as Coke and Pepsi. “Our hope is that schools and healthcare institutions will choose the overall health of their students and employees over money,” he said. “However, budget shortfalls are making this a tremendous challenge. This is one of the reasons we plan to hold educational seminars that highlight the many benefits of a healthy lifestyle. We feel that the better educated people are, the more likely they will be to make healthy decisions.” Enlighted Vending also runs a program through which it donates 5% to 10% of its vending profits to a school or charity.
For its part, Yo-Naturals said it doesn't view Coke and Pepsi as competitors because of the minimal beverage product crossover that exists between Yo-Naturals' and the soft-drink companies' machines. For this reason, it's not uncommon to see a Yo-Naturals machine sitting next to a Coke or Pepsi machine, the company said.
Kids Embrace Change
By all accounts, kids seem to be receptive to the idea of healthier snacking options. Sciarretta said that one of the best parts about having a healthy vending machine is that the kids still feel like they have the choice to decide what they want to eat. “We decided, as a school, that we wanted to cut down on high-fat, high-sugar snacks,” he said. “We also knew that if we outlawed these snacks without providing a healthy alternative we would spend the whole year policing the foods students ate rather than focusing on teaching and learning. Having a vending machine with healthy snacks and drinks that taste good means that students still have choice, but now it's from a healthier perspective.”
Anne Ronzoni, director of marketing for Robert's American Gourmet, which makes Pirate's Booty and other brands of better-for-you snacks, noted that parents seem to be drawn to the nutritional appeal of her company's foods — the product line is baked instead of fried, and the snacks are trans-fat and gluten free — while kids prefer the products because they taste good. CLIF's ZBaRs are also a good fit in vending machines because of their convenient size. “They're even made for kids' mouths [and are] narrow enough for kids to take healthy bites,” Jen Yun, brand director for CLIF Kid, told NBJ.
Yo-Naturals is looking to partner with other manufacturers to develop products that are of proper size for vending machines. One of the challenges the company has faced when picking healthy products is finding packaging that is small enough to fit in a vending machine. Trotter said that foods that can fit in a lunchbox are appealing products to offer in a vending machine.
Despite this and other obstacles, Trotter said Yo-Naturals is bullish about the future of healthy vending and hopes to be in 5,000 locations within the next four years. “More and more companies have focused on [rolling out products for the children's market], but it needs to come a lot further,” Trotter said. “The opportunities are endless for savvy product developers and marketers.”
The NBJ Bottom Line
Snacks and beverages in school vending machines are going to continue trending in a healthier direction — regardless of who the vendor is. Legislators are getting involved at the local, state and national levels, and it's only a matter of time until all schools have some form of regulation on the foods and beverages they are permitted to sell. What will be interesting to see is whether smaller companies such as Yo-Naturals and Enlightened Vending are able to garner the multi-year contracts that have typically gone to The Coca Cola Co., PepsiCo and other companies with large distribution and deep pockets. California will be the state to keep an eye on, because, as of July 1 of this year, all beverages sold in schools must comply with new healthy guidelines. Will Coke and Pepsi be able to shift their product line fast enough to keep up with this trend? The answer is probably yes. After all, Coke's acquisition of Glacéau and Honest Tea and Pepsi's purchase of Naked Juice and the IZZE Beverage Co. demonstrate that these companies, too, are serious about the better-for-you market.