TMVA 2018A Look At Global

Vending and

Regional TrendsGary Massey 9.27.2018

European vending marketA review

Europe Overview•Largest installed base of vending machine in Europe is in Italy, with 795,000 machines in use with an additional 2.4 million OCS machines.

•France, Germany, the UK, Spain and the Netherlands also constitute major markets for vending machines

•Germany has thriving tobacco vending sales

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Europe: Beyond cash

•Bill validators are virtually non-existent mainly due to higher denomination coins in the region.

•Electronic methods of payment such as credit cards, mobile phone payments and key cards are relatively new to the industry. Currently the mix is around 55% open system and 45% Closed site.

Europe: Beyond Cash

•-Mobile payment has been around since the 1990s, but adoption is still limited in most countries •-New types of mobile payment systems don’t require dedicated payment terminals in the actual machine • -these systems rely on NFC, Bluetooth, and QR code technology to process payment via mobile app • -this processes the payment as an online payment, where the amount is directly deducted from credit card, Paypal, or bank

China Self-service, Kiosk and Vending Show, ShanghaiApril 26-28, 2018

Overall Trends of Cashless in China

0

51.67

103.33

155

206.67

258.33

310

’11 ’12 ’13 ’14 ’15 ’16 ’17e ’18e ’19e ’20e

0.1 0.2 1.2 6 12.2

58.8

98.7

165.9

229

307.2

0.1 0.2 1.2 6 12.2

38.555

72.189.8

Fcst Jan 2017 Amount (RMB: Trillion)

0

250

500

750

1000

’13 ’14 ’15 ’16

Transactions (100 Million) Amount (RMB: Trillion)

Mobile Payment Growing in Higher Speed than Expected

Cashless Trends in china• Overall Trends of Cashless in China

• Cashless is the Standard in self-service payment solutions; Cash is Optional. • The growth of cashless payment is fueled by Mobile Payment.

• Why China heads to Cashless (Mobile Payment)? • Major difference from other countries

Facilitators Supporting data

Good Mobile network infrastructure 4G LTE coverage: 98% of population

High Smart phone penetration Mobile internet users: >50% of population

High Ease of use / convenience QR scanning; QR reverse scanned; P2P transfer

Low Cost of ownership Smart phone <US$200; Monthly fee <$10; Printed QR code

Low Profit from payment for money companies

IT giants (Alibaba/Tencent) aim to gain share; They earn profit through data, not payment itself

Low Credit card penetration Credit card holders: <8% of population

Good Government supports Increase transparency; Anti-corrupt

Cashless Trends

• Cashless is the standard configuration of new VMs and cash is optional. • New vending machine 100% online managed.

• Cashless is the standard for new vending machines – 100% • Cash is optional – Now 70% of new VMs with cash and the rate is declining. • Cashless takes 60% of transactions on VMs. Cash will be removed in locations where

cashless takes 90% of transactions – Office / Campus • Cashless Solutions

7” screen Big screen Full screenQR Scanning

QR Scanning

QR Scanning

Observation 1: Compact Vending Machine• Compact Vending Machine becomes a trend. Designed with spiral aisles and cashless only payment

solutions, the compact VM minimizes the cost and brings down the entry level of VM operation. • Terminal price could be lower than 10K RMB. • Payment solutions: (1) Lower cost: Scan static QR code, select good and pay on the phone; (2) Higher

cost: Select good on the touch screen, scan the QR code displayed on the screen to pay. Not upgradable to support cash payment.

TCN: 3 models of compact VM (1) Static QR code; (2) Keypad + mono-color display; (3) InHand Android touch screen

DFB: Partner with a VMS company to promote compact VM (static QR)

Observation 2: Open and Take Cooler• The “open and take” cooler solution reduces the terminal cost to the bottom line. Though the detection

technology is not 100% accurate, it attracts new players in Vending and some of the traditional VM OEMs.

• 3 detection technologies: RFID, weight scale, camera. • Purchase process: (1) Scan QR code. [For the first time, need authorization to the payment account.]

(2) Door unlocked and open; Take the good. (3) Close the door and automatically charged.

CITY BOX

Observation 2: Open and Take CoolerAucma Baixue 3 Squirrels

Haha Bianli Fushibao Xin Dragon

Observation 3: Face Payment• Alipay is promoting face payment in Vending. • The OEM Yile and the software company Siyuan (BCL) is demonstrating the face payment solutions.

(Face recognition algorithm is provided by Alipay, transaction flow also defined by Alipay, while different cameras are selected by the two companies)

• Dual-lens camera is required, which adds ~1K RMB ($150) to the cost.

Yile

Camera

Step 1: Select face pay

Step 2: Scan your face

Step 3: Input phone No

Observation 3: Face PaymentSiyuan (BCL)

Bring it home Tips for US Vending

US Bottlers• Virtually all Cashless Systems are Open Credit Card

-(Very Limited Closed Site solution) • Of the Machines with Credit Card Hardware Installed:

-Number of Vends 51% Credit and 49% Cash -Value of Vends = 55% Credit and 45% Cash

• Credit Card Technology Update Unplanned and Costs Tens of $Millions -2G to 3G Cellular Migration -Now 3G to 4G Migration

• Credit Card Acceptance is Vital but so is Cash..

United States Notes CirculationTotal USD Notes in circulation is at the highest levels ever…

…“Accept what’s in the consumers pocket” Higher denominations ($2 through $20) represent 55% of bills in circulation that a majority of traditional vending machines don’t accept.

Half of Sales From Cash• Cash Is as Important as Ever So here are 2 Tips: 1. Take whatever is in the consumers Pocket- Or

Wrist. • All Denomination of Bills

• $1, $2, $5 and $10. Take $20 Whenever Possible (At Least One Pay Point per Location)

2. Use a Coin Matrix for Change Efficiency

TEST they is a tee

Sample of Bottler Change Fund Matrix

Developing A Change Fund MatrixTwo Key Rules 1. Do Not Run Out of Change! 2. Remove Wasted Change

Use The Changer Technology For Par Settings1. Use Auto Par Setting On Changer 2. Sample in Various Prices and Business Segments 3. Driver Operates Normally for 4 Weeks 4. Document Changer Recommendations

Take Whatever is in the Consumers Pocket!