Attendees at the Self-Service Innovation Summit on Dec. 14-16 in Hollywood, Florida, will have a chance to hear first-hand how Luke Saunders identified the need for high quality convenience food and designed and executed a business plan to make it a reality.
Who said eating on the go has to be a bad experience?
People who’ve tasted tarragon chicken salad wrap and organic Bolivian royal quinoa know how good such an experience can be as they race to make a flight at Chicago’s O’Hare airport, courtesy of Farmer’s Fridge.
The marriage of fresh food with self-service IoT technology has proven to be a winning combination, thanks to the vision of company founder Luke Saunders, who launched the now-nationwide fresh food vending company in 2013.
The company designs and assembles its machines in-house. All food is made in an in-house commissary and delivered in company-owned trucks. Prices range from $4 to $9.99, shelf life is five to eight days and target food waste is 3% to 4%.
Attendees at the Self-Service Innovation Summit, Dec. 14-16 in Hollywood, Florida, will have a chance to hear first-hand how Saunders identified the need for high quality convenience food and designed and executed a business plan to make it a reality.
Saunders’ keynote presentation, “5-star Foodservice at the Touch of a Button: How Vending Technology Makes it Happen,” will be at 9 a.m. on Dec. 15.
Saunders offered a preview of his presentation during an interview with this website. Following are excerpts.
Q. How did you first become aware of the need for fresh food on the go?
A. I was driving 1,000 miles a week working as a metal-finishing salesman in the Midwest and realized that there weren’t many options outside of fast food restaurants. Gas stations and coffee shops didn’t even have fresh food.
I was thinking, “Why doesn’t great food at an affordable price exist?” And I realized it was the supply chain — the infrastructure to make food that’s going to go bad in just a few days, and get it to your customers with enough time to sell it, and then having them trust it so that they actually buy it. That whole equation had never been tackled in a comprehensive way.
Q. Was vending your first idea?
A. No, I didn’t have vending at all in my mind because I thought of vending as chips and soda. You didn’t see vending machines in places where they were high visibility.
I was thinking this (fresh food) needs to be publicly displayed in a place where everybody can see it. It needs to dispense food. I was describing it to people and they said, “That sounds like a vending machine.”
I wanted to put them in places with high visibility. I wanted to sell food 24 hours a day, seven days a week, without people involved because it’s more cost effective. I realized what I was talking about was a vending machine.
At the time (2013), one of the key elements of selling fresh food was how to position it as a premium, valuable option, and that’s what digital merchandising tools are built to do.
The digital tools were getting cheap and accessible to the point where I could afford to leverage them to help tell that story.
Q. So you started to network with vending technology suppliers?
A. Yes. Some machines were refrigerated but not very flexible, or some were not refrigerated but very flexible.
We started working with AVT Inc., (a southern California-based vending machine manufacturer that has since ceased operations). They had done the legwork to get the vending equipment talking to the software in refrigerated machines. They made our first machines. They had a good product, but we needed to build a lot of back-end infrastructure to scale the inventory management side of our business.
Q. So you became both a machine developer and an operator?
A. Yes. We knew we would have to build all that (software) to scale this. It was much more efficient to do it internally. We hired our first software engineer in 2015.
The way Farmer’s Fridge works today is, we make the food. We leverage the real-time inventory in the fridge to allocate the inventory (to its destinations) on a daily basis. It’s like pre-kitting with a much more robust predictive element.
Now we have a team of 35 or 40 people in our software tech division.
Q. At this stage of the game, why is it necessary to have such a large software division?
A. It’s the constant iteration of making our algorithms more accurate, more tailored to what we do every day. It’s optimizing the customer experience, whether that’s through the fridge user interface that we designed and built or the apps that we run on iOS, Android and the website.
As an example, we’re working on a project to allocate our inventory in multiple steps, so rather than running that allocation at one point in time, we’ll be able to run it continuously as the food gets closer to the fridge. This refers to the allocation of products we have made to the fridges (which) they go to. That is an automated function that runs every day.
We look at all the historical sales from those fridges and those products and make a prediction about what is going to sell best where. The savings that we’ll get from that one initiative will pay for that whole team for this year.
Demand planning is another technology we built. We use a data science model for demand planning created by Uber that they made open source. That allows us to predict what our aggregate demand is going to be, say, a month from now. That allows us to plan our labor, (and to) plan our purchasing, which allows us to be much more efficient on the production side.
On the consumer side, we have put in motion a sign-up fridge experience. We’re testing different user interface prompts to get more people to sign up and give us their phone number and opt in to SMS communication and download the app.
If we can get people into our ecosystem where we can have them using the app for reserving ahead of time, or touchless pickup or earning rewards, they’re more frequent and better customers. If we can leverage the fridge user interface to push more people into our ecosystem, it’s a better use of that real estate.
Q. You now have a national service area and one central production facility in Chicago. How do you manage to deliver fresh food nationwide on a timely basis?
A. We’re really a fresh food logistics business. We centralize the production of the fresh healthy food and then leverage a cold chain distribution network that we’ve built internally, coast to coast, covering 20 markets, getting our food to those fridges in one to two days, max.
What enables that level of reach is the technology and the consumer-facing brand.
Scaling it up, we really couldn’t leverage other peoples’ infrastructure, so we had to build it all ourselves. We have our own warehouses of various sizes. We’ve found it easier to control and lower cost (than would be possible if using commercial warehouses).
We begin with a refrigerated tractor trailer that goes from Chicago to Texas, to L.A. and to New York. Then we have local delivery drivers that are our employees in our trucks in our cold storage (warehouse) and they fulfill the local market.
We figured out how to ship the food and successfully executed that in 2019. We can now get fresh food to San Diego, which is now the furthest away, in 48 hours or less.
Q. Do you have a test kitchen?
A. Yes. It is part of our operations supply chain team. We survey our existing customers. We’ll even get a heat map of which ingredients drew the most attention. We tested 75 different recipes for one of our dressings.
Q. Have you faced supply chain challenges?
A. Yes. Everything from the electronics to build the machines to ingredients in food production.
The avian flu shortage has impacted our ability to produce enough turkey products. But, generally speaking, it’s been manageable.
If turkey gets hard to produce, we switch over to a different wrap that we’ve designed.
Our flexible product supply chain allows us to partner with small, independent foodservice suppliers in addition to broadline foodservice distributors.
Q. What has been the biggest challenge?
A. Consumer-facing. There is still a stigma about fresh food in the vending machine.
Q. How are you dealing with rising food costs?
A. We have been able to reformulate products. Certain types of lettuce have doubled in cost because of heat and seasonal fluctuations in the growing regions. We have been able to switch from those products to a substitute green.
Our food cost has been lower over the last three years than before. We have not raised prices in 2022.
Q. How is your home and business delivery operation doing?
A. We started that during COVID when a lot of businesses shut down. We started doing our own deliveries in 2020. In 2021, we started using UPS.
We are going to deprioritize it in 2023 so we have more momentum in the fridge and retail channels.
Q.How successful has your retail business been?
A. We took it from zero to 250 stores within a year. We have the best-selling wrap in the retail stores that we’re in. We leverage our distribution network to do DSD.
We’re also doing a lot of foodservice partnering with the big foodservice providers.
We’re also in micro markets with different vending operators throughout the country.
The retail/commercial foodservice is probably 20% to 25% of the total.
Q. What direction will the company go long-term?
A. I don’t think it will change. The idea is, you try to make fresh food as accessible as a candy bar. You need to be everywhere you can get the candy bar and then some.
Vending has been the primary mode of distribution, and will continue to be for the foreseeable future, because it solves a real problem in places where you have no other options. The retail piece is about extending that distribution and production that we’ve built.
(To register for the Self-Service Innovation Summit, click here.)
About Networld Media Group
Founded in 2000, Networld Media Group is a leading business-to-business (B2B) media communications company specializing in digital media, associations and events in the tech, banking, retail and food service industries. Online properties include ATMmarketplace.com, DigitalSignageToday.com, FastCasual.com, KioskMarketplace.com, FoodTruckOperator.com, QSRweb.com, PizzaMarketplace.com, RetailCustomerExperience.com, VendingTimes.com and BiblicalLeadership.com. Annual events include the Fast Casual Executive Summit, the Restaurant Franchising & Innovation Summit, the Bank Customer Experience Summit (BCX), the Interactive Customer Experience Summit (ICX) and the Self-Service Innovation Summit.