MAIN STREET — A healthy vending machine, can it be true? Naysayers and skeptics be warned, the answer might surprise you. Though it might sound like more of an oxymoron than a legitimate idea, healthy vending machines have, in fact, become a reality thanks to Santa Monica-based h.u.m.a.n. Healthy Vending.
h.u.m.a.n., which stands for Helping Unite Man And Nutrition, manufactures high-tech vending machines that offer nutritious snacks and beverages, as well as a pinch of educational entertainment with their LCD screens displaying healthy living tips.
Launched less than four years ago, the Main Street company already has over 1,000 healthy vending machines in use across the country and is expecting to approach 2,500 machines by the end of 2012.
“When we first started … the community response was, ‘What the heck are you doing?’ The awareness just wasn’t there,” said founder and CEO Sean Kelly. “Now, for the most part, the response is extremely good. People are more educated about nutrition. They want healthy, convenient foods.”
An undergraduate student at Columbia, Kelly was at a posh Manhattan health club where he worked part-time as a personal trainer when he observed a young woman purchase a Coca-Cola from a vending machine and proceed to run on the treadmill while gulping down the sugary beverage. Kelly, a biomedical engineering student and staunch advocate for health and nutrition, was dumbfounded by the irony of what he witnessed.
“I thought to myself, if wealthy people don’t have access to healthy foods and drinks in a huge health club in Manhattan,” said Kelly, “how is that going to happen for average people in the rest of the country?”
After 18 months of research and development, Kelly launched the healthy vending company in 2008 and sold the first machine in March 2009 with a business model based on the idea that the company would own and operate all of their own machines. However, after running nearly 30 machines in three different states for only a few months, Kelly soon discovered that the requirements for running machines in all 50 states, and eventually globally, far exceeded the capacity of him and his some dozen employees. Thus, h.u.m.a.n. launched a franchisee model, allowing people all across the country to take on ownership of machines in their own territories in a partnership with less than 10 percent of the partners’ earnings going back to the main company.
“Our franchisee model functions on the premise that we can have a much, much larger pie — yeah, we might have a smaller piece of that pie as opposed to if we did everything ourselves — but I think the important thing is that the pie itself, which represents the reach of healthy vending, is much bigger,” Kelly said.
The company began earning profit in early 2011, a little over 18 months from their launch, with their earnings coming from a variety of sources. Over 90 percent of profits come from their franchisees and sales that have to do with their franchise model, including equipment sales and the fee they charge for finding and approving locations for their partners’ machines. Furthermore, they provide their partners with the option to stock their machines with products from the company’s distributors, and if the partners do so, which most of them do, the company earns a rebate.
The company also takes a percent of gross revenue from the partners for royalty and marketing fees. Finally, the company sells digital, “educational” advertisements that play on the large LCD screen at the top of every machine in between videos with various health tips. The combination of these earnings plus the amount they earn from their own centrally operated machines amounts to about $1.5 million in annual revenue.
h.u.m.a.n. has a staff of roughly 30 employees who earn salaries ranging from the low $30,000s to the high six-figures (Kelly declined to give a numerical amount) for the top sales people with an average salary ranging from $50,000 to $80,000. Although these numbers are not modest, Kelly admits that his employees could definitely make higher salaries if they pursued careers in finance or investment banking, but their passion for the h.u.m.a.n. mission and philosophy keeps them at the company.
“Though of course we all want to make money, I can say for myself and I think most of us here that money is not the biggest draw right now,” Kelly said. “Many of us are taking low market rates right now to be in a company that’s a lot of fun and growing really fast, with the understanding of where we’ll eventually be.”
The company’s revenue is not doled out exclusively for employee salaries; 10 percent of their total proceeds goes toward charities aimed at fighting obesity and malnutrition, including the ME3 Alliance, which h.u.m.a.n. helped found last year. The ME3 Alliance, which stands for Movement, Education, Exercise, and Entrepreneurship, aims to empower social entrepreneurs in small communities to fight for education, health and wellness.
With these relatively high earnings, charitable ambitions, and rapid growth, what exactly is it about h.u.m.a.n. Healthy Vending machines that distinguish them from traditional vending machines? Well, each machine is stocked differently, based on the location and demographic, but according to Kelly, the general premise is always the same.
“We focus on all-natural foods with limited or no artificial sweeteners, organic foods that come from the earth, and ingredients you can actually pronounce.”
But Kelly admits that he neither believes in nor adheres to a “perfect diet” philosophy that forbids any one type of food, as long as the overall diet is balanced. Many of their machines, particularly those in middle or elementary schools, offer what Kelly deems “lesser evil” options, including organic cookies, baked pita chips, and gummy fruit snacks. Although these choices are not as nutritious as fresh fruits and vegetables, they are a step above their highly processed, trans-fat laden counterparts.
And for a nation in which over one third of all adults and nearly one fifth of all children are obese, according to the U.S. Center for Disease Control and Prevention, small changes could make a big difference. Although the obesity rates are still high, in the past five years they have started to level off after decades of consistent growth, suggesting that while a significant number of people still are obese, fewer are becoming obese — possibly partially due to the growing popularity of the health food industry.
In the past three years, the health food industry has grown over 8 percent more than the total U.S. food market. Furthermore, in 2009, the year h.u.m.a.n. launched their healthy vending machines, the National Restaurant Association reported that 76 percent of adults said they are trying to eat healthier than they did two years earlier. That same year, the health food industry grew by nearly 20 percent and continues to grow each year.
Kelly has capitalized on those trends, emphasizing that the core goal of the company is to make it easier and more convenient to eat healthy food than junk food, and the social change will inevitably follow.
“If it’s not easy to eat high nutrition food, and if it’s not everywhere, meaning that people have constant access, then we’re not going to solve this massive problem that we’re facing today in terms of inadequate nutrition and inadequate exercise,” Kelly said.
Though the company is making strides toward this goal of “easy nutrition everywhere,” which is their slogan, they face constant challenges within the company, with competitors, and in the community. Though they are the largest healthy vending company in America, many competitors have surfaced in the past few years marketing healthy vending machines similar to h.u.m.a.n.’s, including Vend Natural and Yo Natural Inc.
Apart from the competition, Kelly cites his greatest challenge as finding the best people to represent the company, but this is a challenge that Kelly is happy to take on.
Kelly hopes to reach 10,000 highly successful vending machines in America and possibly globally by 2015. This year, the company is releasing a new line of vending machines featuring a wider selection of options as well as advanced touch-screen technology. And finally, Kelly plans to develop a program to encourage the franchise operators to be more actively involved in their communities to strive for as much social return as financial return.
“The greatest moment as an entrepreneur,” said Kelly, “is that moment when you realize that the success of your organization relies as much if not more on the other people as it does on yourself.”