What did I do during the summer? Hmmm, I rode my bike almost every day, lots of swimming when I wasn't golfing at the local mini-golf course, slept until 10AM (occasionally later) whenever I wanted too, ate peanut butter and jelly triple-decker sandwiches with crunched up potato chips in the peanut butter for lunch, hung out in the shop playing video games, getting in the way of just about everyone, went to a lot of movies, ate too much junk food...oh, you mean this summer? Sorry, I had a 30-year flashback. Although I still eat too much junk food.
This summer's had some really good news. First, our friend Ted Furkin (Illinois operator and former AMOA board member) is finally out of jail, after serving 10 years in numerous federal prison centers. He's working now just outside of Phoenix.
What I didn't do this summer was write many articles for Replay magazine, and for this I apologize. I must confess that my days of being in the mainstream of the street operator's business are behind me. Today, I couldn't tell you the hottest tavern piece right now without making a phone call or two. I'm also removed from the day-to-day politics of AAMA and AMOA, which I used to pontificate about constantly.
What I am living in my professional career is an unbelievable educational corporate experience that I never anticipated, with the largest amusement vending company our industry has ever seen. You would find it fascinating, a lot of really good stuff, if I was able to write about it. In the last six years, for every article I've written, I've deleted two. The reason being that I can't write about what goes on behind closed doors at Sugarloaf any more than you want to publish your monthly profit and loss statement.
I'll let you in on a little secret. Sugarloaf pays me more than Replay magazine. I like what I do, both my day job and my moonlighting as a magazine columnist. So please tolerate my occasional absence, and I promise you I won't consciously put forth a bunch of mumbo jumbo just to meet a deadline. If it isn't interesting to me, I suspect it won't be interesting to you either.
The big news professionally is that the goliath known as Sugarloaf has just gotten bigger. In July, Coinstar, a publicly-traded company (CSTR), acquired Sugarloaf. The summer began with everyone preparing for a sale, and now, after the sale, we're spending a lot of time figuring out the best ways for the companies to work together. That means a lot of meetings, in Colorado and in Seattle, where Coinstar is located. We've had our share of PowerPoint presentations outlining objectives, synergies, responsibilities and all that goes along with combining two companies of roughly equal size. This is, for the first time, beginning to feel like big business. With combined sales fast approaching $500 million per year, it's probably a good thing.
Coinstar has historically been a "one-trick-pony," providing automated coin counting equipment for retail and grocery establishments. If you haven't used one, you simply pour your lose coin into the machine, and it counts the money for you, and issues you a voucher that shows how much money you had, less a small 8.9% service fee, which you take to a cashier or attendant who pays you that amount in cash. They've over 11,000 "coins to cash" machines installed. Their new product is Epay, which I'm still learning about. It's a product, like the coin-to-cash machine, that is totally automated and sells phone cards, prepaid credit cards and other card-related products. Combined with Sugarloaf, which operates a total of 167,000 machines (a number that includes each bulk vending machine head) throughout the U.S. and Puerto Rico, the products the combined company can offer in addition to coin counting, include cranes, bulk equipment, kiddie rides, and video games. We can fill up the front end of most any store with our array of products.
It's a natural evolution combining the two companies. I think everyone's figured out by now that most customers want to deal with as few as vendors as possible. From an administrative benefit, that's fewer vendors and more total accountability. Having a single supplier in your store moves the operator from being category-driven toward being revenue-driven.
What I mean by that is if I'm just a kiddie ride operator, and there is other equipment in the location, I don't care. I'm pushing kiddie rides to my location owner, even if it's not in the overall best interest of the customer. When you provide all categories of equipment, you're going to put in the space what makes the customer the most money.
At Sugarloaf, we've been accused of installing a disproportionate number of cranes and merchandisers in our locations. Sure, that's what's making all the money for the customer in today's market. If the year was 1980 and Pac-Man was just released, a machine that cost $1,100 and ran $400 per week, we'd be pulling cranes and installing video games with really big trucks. To my point, by joining our companies, it's another step toward being revenue driven for our customers.
Coinstar paid a lot of money for Sugarloaf - $235 million, to be exact. The big winners were the owners, Wellspring Capital, who were paid in cash by Coinstar, and every amusement-vending operator in the industry. I'm not a financial analyst, but this transaction impacts the value of many businesses in our industry today, and the impact appears to be positive.
The culture of both companies is very similar. Sugarloaf was a publicly traded company prior to being acquired by Wellspring, and now we're part of a publicly traded company again. Randy Fagundo still runs Sugarloaf. A nice gentleman, Dave Cole, is the C.E.O. of Coinstar. I still spend most of my time working with Wal-Mart, and now Sam's Club, and Wal-Mart International, Kroger, Kmart, and Denny's. My buddy Britain White, whom many of you know from his Wal-Mart days, and I tag team responsibilities. Most every one is still intact from prior to the acquisition.
I've been asked how this transaction affects the rest of our industry. I don't think much, really. Sugarloaf is still the same company we've always been, still aggressive, still making our money from skill cranes (operating and selling) and kiddie rides (same), and operating bulk equipment. Profitable growth is still critical to both companies. Both Coinstar and Sugarloaf have some big customers. There are opportunities where we overlap, and new opportunities where we don't, at least not yet.
Our bulk business has become quite formidable in size since our acquisition of Folz Vending. Learning about Folz and their bulk expertise has been very educational for all of us. They will tell you they are the best at what they do, and I would not argue with that.
Our bulk program has never been better, and the primary reason is the effect that Folz Vending has had on our entire bulk routes. Folz pretty much runs all of the Sugarloaf bulk machines from coast to coast now. Their expertise in product sourcing, hot item analysis, and frequent service cycles have been a pleasant surprise.
I've been challenged in the past when I've suggested that bulk is a pretty straightforward business model. I stand corrected. The numbers speak for themselves. Roger Folz's bulk machines and his program result in more revenue than other bulk programs. The experienced Folz group, including Roger, have taught all of us a lot about bulk vending, and the expertise we were lacking.
One thing that's become clear over the years I've spent in Kansas, and at Sugarloaf, is that the people are the deal. No matter where you are or what you're trying to do, the talent of the people you have working with you, and their ability to interact with others, will decide your success or failure.
If it's a one man hot dog stand in front of the Home Depot, or a company with 1,500 employees, as is Coinstar/ Sugarloaf, talented people given clear direction and autonomy to do a job is a formula for success. It's called "getting the right people on the bus." When you make the inevitable hire that doesn't work, get them off the bus. There's no room for the wrong people. When you find out you've hired the wrong person, you do them a disservice by keeping them around. That's a big difference between my background and the current corporate environment I'm in.
I fired one guy in 20 years, and that's only because we had just lost an account that was 90% of his route, and cried when I did it. Employees have a limited number of days on this planet, and if you know they've no future in your employ, you must tell them so they can do something else that is a better fit for their skill set.
Yes, it's been the busiest summer I can recall, and it's been fun. But
I promise you it's been like no other for me. I hope this finds you preparing
for a profitable fall season, and I'll see you at the conventions.