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Just off the ice at the StarCenter rink in Frisco, Texas, Jenafir Chant held a credit card against a vending machine. A second later, a bottle of Diet Dr Pepper tumbled into view.
The machine takes plastic.
"We were all excited when these went in last week," said Chant, who leads a team of girls who clean the ice for the Dallas Stars hockey team. "I was scrounging around for $2 for a Monster. Now I don't have to scrounge."
The machine at the ice rink is one of 750 that Cadbury Schweppes (CSG, news, msgs) and MasterCard (MA, news, msgs) are testing in the Dallas area, New York and Chicago to answer a key question: Will people spend more at vending machines if they can use plastic?
The early answer is, yes.
Some of the machines were installed in January and have seen sales increases of 5% to 35% without any change in prices, said Mark Jackson, a vice president with Cadbury's U.S. beverages subsidiary, which markets Dr Pepper, Snapple, 7UP and other drinks.
Cadbury's experience fits with sales increases that other companies have reported when they shift consumers from cash to plastic.
Possible explanations vary from consumers not wanting to carry change to ATMs that dispense only $20 bills, which can't be used in most vending machines.
Cadbury is retrofitting some machines to take all major credit cards and debit cards. They still accept cash, too.
The beverage giant carefully selected locations for the machines, looking for those frequented by adults likely to have and use plastic. In the Dallas area, the company installed the machines at City Hall, a convention center, hospitals, a college and recreational facilities.
After three months, Cadbury will evaluate sales data and decide whether to retrofit more machines and introduce them in other cities.
"There is always going to be a degree of cash transactions," Jackson said. "But we recognize the fact we're moving more and more to a cashless society. We wanted to offer consumers a convenient way to buy our products out of a vending machine without having change or getting change."
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An appealing target for banks
The Cadbury machines were retrofitted by USA Technologies (USAT, news, msgs) of Malvern, Pa., created 15 years ago for the sole purpose of developing cashless systems. Executives believed that the day was coming when Americans would want to make nearly all their purchases with plastic."We looked at places that historically only took cash," said Stephen Herbert, the company's president and chief operating officer. "Fast food was the first big stop, and vending was second."
According to Vending Times, an industry publication, vending was a $46 billion business in 2005, and it was virtually all cash. That makes it an appealing target for banks that issue credit cards.
Tests such as Cadbury's are taking place now because the declining cost of wireless communications has helped make operating the machines economical.
Less than two years ago, airtime to connect one machine to the supplier would have run about $20 a month. It's now a 10th of that, Herbert said. Hardware and modems are also cheaper now.
USA Technologies, MasterCard and a Coca-Cola (KO, news, msgs) bottler are involved in another rollout of cashless vending machines that began last year in the Philadelphia area.
Ultimate test for cashless transactions
Credit card vending machines are also being used to sell DVD movies, and Sony Electronics has a few that dispense digital cameras and other gadgets. But cheap items present a special challenge because transaction costs of even a few cents can wipe out profit on a soda that sells for $1.25."Vending is going to be the ultimate test for cashless" transactions, said Nick Montano, the executive editor of Vending Times. "It's going to be five or 10 years before it really takes off."
Selling sodas by credit card could raise interesting issues for consumers, too.
"What if the machine says your card's been rejected?" Chant asked. "Wouldn't that suck to be declined for $1.25?"
This article was reported and written by David Koenig for The Associated Press.
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