August 2022 - 33

revenue was down 71%, according to Lovett.
A few months later, it was back to 60% of prepandemic
levels, and now vending revenue has
returned to 85% to 90% of 2019's figures.
THE SKY'S THE LIMIT
" The market is enormous and we are growing
organically and by acquisitions, which are two
highly related strategies since acquisitions
accelerate organic growth opportunities, "
according to Lovett. " The biggest and fastest
impact to our bottom line is buying smaller
companies and 'tucking them in.' Buying a small
'tuck-in' can drop up to 30% of the acquired
revenue to the bottom line because when their
trucks show up at our warehouse, their revenues
are very quickly increased to our operating
margins without adding additional infrastructure. "
According to Lovett, the Southern California
workforce spends about $35 billion annually on
food and beverages during the workday. That's
about $3,000 per year per individual, or about
$12 a day.
" Our industry is getting only about $1.8
billion of that in Southern California, " he said.
" This is primarily because smaller operators are
focused on selling snacks and drinks out of vending
machines because they're too small to operate
markets, so the majority of the spend - $33 billion
- is heading around the corner to the local deli.
We only need a smidge of that to substantially
increase revenues and margins. You can't do it
unless you have markets and bill them a fair price
for the food that they actually want to eat. You
have to offer better than typical vending fare while
managing theft, spoilage and menu rotation. "
MICRO MARKET CONVERSIONS
This is why Capital Provisions converts every
possible location with vending machines to
micro markets, which is made economically
feasible, even in small accounts, by Vagabond's
vĪv kioskless point-of-sale solution that simply
uses the customer's smartphone.
" Small companies may have trouble
operating micro markets because they don't have
the scale to stock fresh food, manage theft and
eliminate spoilage, " Lovett said. " So every one
that we acquire presents built-in organic growth
opportunities. Converting a vending account
to a market can increase revenue by two to
four times. "
The company sources its fresh food and
meals from local delis that deliver to its markets
and sells them for as much as $13 a piece.
" We bring the delis to our customers, and it's
actually something they want to eat, versus the
packaged triangle tuna sandwich that our industry
typically decides they want, " he said. " We ask
consumers what they want by engaging them
with the technology we deploy, and that's what
determines what we offer, made fresh to order,
and they're willing to pay a fair price for it. "
In addition to markets, Capital Provisions
is ramping up its coffee and pantry business as
it gets its legs. It is focused on efficient vending
operations first, markets second, and it sees coffee
and pantry as areas that will add significant
organic growth.
ACQUISITION DRIVEN
According to Lovett, 55% of workplace
breakroom revenue is earned by the top 5%
of operators and 45% of the breakroom food
and beverage spend - or $810 million - is
generated by the smallest 95% of operators,
prime for acquisition.
" The U.S. vending market is huge but
extremely fractured with around 8,000
operators, the vast majority of whom are small,
undercapitalized, inefficient ... and generating
relatively meager profits because of it, " Lovett
stated. " Our goal is to package up small
operators, create high margins by bringing them
online, establish professional business practices,
and build the region's preeminent workplace
breakroom services provider. At the same time,
we want to partner with sellers to provide them
a fair outcome for their years of hard work and
potentially bring them along for the ride if the
work is a fit for their life goals. "
FULL STEAM AHEAD
To better support its plans to continue to " roll
up " the vending market in Southern California,
Capital Provisions will soon consolidate its
warehouse operations into Riverside, a centrally
located oasis for distribution plants in the region.
This will serve as the central location where all
inventory is received, kits are prepared for the
next day's service, and then delivered overnight
to regional depots.
This will allow the company to centralize
business administration and apply its buying
August 2022 * VendingMarketWatch.com 33
OPERATION
PROFILE
Capital
Provisions
Founded: 2020
Headquarters:
San Diego, CA
Website:
capitalprovisions.
com
Number of
routes: 8
Number of
acquisitions: 9
Number
of vending
machines: 1,133
Number of micro
markets: 26
Technology
providers:
Vagabond
(VMS, telemetry,
mobile credit
card payments,
markets); Nayax
(traditional credit
card payments);
Fixturelite
(market fixtures)
Distributors:
Pepsi, Coke,
Vistar
http://www.VendingMarketWatch.com
August 2022

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