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A A A A A A A A A i A Al Al At Ar Ar Ai Al Al A A Al. Art Am A-33 AW Am An? AW M At Ar Al An An An Ar Ar Ac Ar At A) The Stated Business Shower of Coins Vending Machines Deluged With Yearly 'Fall* of $4,5 Billion By DON G. CAMPBELL Business and Financial Editor In this dream, you see, I am sitting under an exotic Tree of Heaven softly strumming by balalaika and whistling a bawdy song under my breath. And, all of the time this is happening, people by the thousands are walking across a catwalk above me dropping nickels, dimes and quarters into my lap. This, of course, is the veriding machine business. Or, at least, what the layman IMAGINES the vending machine business is like: you sit there in absolute serenity while the machines that you control — r you chatter softly in the background and deposit a silver (cupra-nickel, actually) shower of coins into your well-lined pockets. Where life and fiction part at the seams, naturally, is in that portion of the dream that deals with the vending machine operator sitting there comfortably on his balled handkerchief. True enough, Americans are dropping an ersatz-silver stream of nickels, dimes arid quarters into vending machines at a horrendous rate — 10.1 billion nickels. 24.4 billion dimes and 5.9 billion quarters in 1967 alone. Throw in the penney gum machines,, and we spent more than $4.5 billion a year churning up the gastric rumbling of the machines that figure so heavily in our lives. And, even as the business gets bigger end bigger, and more bitterly competitive, vending machines are still one of the few businesses Where the loner can stick his toe in the door, get It battered to a bloody pulp, but still hang on. A survey a few years ago revealed that, of more than 6,000 vending firms in the country, seven out of 10 still employed fewer than three workers and one out of five, at the time, was still a one-man operation. More typical of the operation today, however, is Valley Vendors Corp. which, Indeed, grew out of a residential'garage in 1949, finally got the neighborhood so congested with trucks coming and going at odd hours and became so streamlined, that it had no choice but to go big-time. From the 50 to 60 machines that it had in 1949, the company has mushroomed to more than 1,000 machines, more than 50 .employes, about 40 trucks, and has expanded to cover not only conventional vending machine operations and the juke-box, pinball machine fields but even coordinated sound" systems as well. IT'S A BUSINESS that has gotten tremendously complicated in the past 19 years, Valley Vendors president Art Kaufman readily admits. The so-called "coffee" machine of the postwar years, for instance, consisted of a giant vat of prebrewed coffee that might have simmered for 10 hours before the first cup was drawn. And it tasted just about the way you can imagine it would: like sump water that had been vacated recently by its toad-in-residence. Today's coffee machines are so sophisticated, Kaufman said, that they need only NASA clearance to qualify for the launch pad at Cape Kennedy. The ultimate is a $l,600-plus machine that .converts 8& grams of freshly ground grounds'into a single cup of coffee in just 12 seconds — or, for heavier-traffic locations, spews out a 16-to-20-cup pot of fresh coffee in just six seconds. All of this new sophistication, admittedly, runs the investment tab up to a pretty figure. Even the old-fashioned candy machine — which works like a gallows trap and sends the fragile chocolate bar plunging down 18 inches so that it shatters like an egg shell, is a relatively complex piece of mechanism that will cost anywhere from $300 to $400. The more modern, electronic ones — In which the candy bar still shatters like an egg shell — run the tab up to $600 or $700.'Such Is progress. But, while it is true that the cascading shower of coins makes a pleasant sound in the cash drawer, Kaufman said, the vending machine business is hardly the plush racket that it seems to be. Nationally, he said, the profit margin for the vending machine operator is about 3% per cent after taxes and commission to the building owner. This is a somewhat better mark-up than the supermarket operator receives but it is based on a considerably lesser volume. The average cigarette machine, nationally, Kaufman said, dispenses about 90 to 100 packs of cigarettes a week and grosses between $35 and $40 - that's a net profit to the vendor of about $1.22, assuming that he gets no slugs and hasn't had the cash box on the machine ripped open with a crowbar before collection time. LIKE fflVES, the threat of vandalism and theft hangs over the vending machine business as an inbred condition of its existence. The very excuse that the vending machine has for being in the first place — that it doesn't require human attendants and can operate, 24 hours a day in relatively isolated sites — is the very thing that makes it particularly vulnerable to looting. National .figures put the industry's loss at about 2 . per cent of sales, or about double the loss that merchants experience from "inventory shrinkage" — the nicey nice word for shoplifting and other forms of pilferage. Even as the industry, generally, has moved steadily toward more complex machines to serve the public's vending needs — the fresh-brewed coffee machine and the soft drink machine that dispenses crushed ice at the same time being the notable examples — Valley Vendors, too, has done its own share of innovating. Well before the manufacturers of vending machines got the idea, for example, Kaufman was adapting some of his own machines to include a bill changer that made it possible, for the first time, to buy a dime Coke with a dollar and receive 90 cents in change. And, as a logical extension of his preoccupation with coins and the machines that gobble them up, Kaufman's move into jukeboxes and amusement devices with the formation of Valley Amusement under the guidance of his son, Joe, as vice president, was virtually a foregone conclusion. And, again logically, the Kaufmans' involvement in the electronically activated vending machines, phonographs and amusement devices was only a hop-skip-and-jump away from a full-blown entry into the all-electronic world of sound — background music, intercommunications, paging systems, PA systems and closed circuit TV. This came with organization of Valley Sound under the Kaufman label. But it's coins — the endless shower of clattering, tinkling coins falling into a thousand slots — that keeps the Kaufman ship buoyantly afloat. i ^ i THEARIZONA.REPUBLIC usiness • Sunday, Sept, 22, 1968 (Section F) Page 1 ORIGINATOR— Thornell Barnes originated idea in his company of selling according to the barometer. He's veteran in selling technical magazines over United States by long distance phone calls. HIGHS FOR SELLING—Clarence Allie, meteorologist-salesman, places phone call to one of high pressure areas he's just sketched on map behind him. He and other executives of Leland Kent, Inc., at Scottsdale find selling is better in areas of high barometric pressure. 'High Pressure 9 Salesmanship By A. V. GULLETTE Associate Business and Financial Editor On a plastic wall map a metorologist marks up the high and low pressure systems reported by the Weather Bureau teletype to be moving across the nation. From that weather map, the heads of Leland Kent, Inc., in Scottsdale determine where to concentrate the firm's efforts in selling. The firm, which employs 82 persons, handles the more than three million circulation of. 85 trade and technical, publications. The readers and prospects are scattered over the United States, and Lel'atod Kent works by long distance telephone. LELAND KENT executives have found that it's easier to sell in areas of a rising or high barometric pressure. Clarence Allie meteorologist-salesman, puts it this way: "Preceding low pressure areas and frontal systems, there is a thickening of the air and consequently more pressure is exerted on the body, making people much more edgy and irritable and making it very difficult to sell to them." Thornell Barnes, executive vice president, found the barometric pressure clue soon after he started long distance selling in Chicago in 1948. "I'd noticed," he said, "that sometimes I'd be able to sell five out of six persons and then, suddenly, none and that I would go into a state one day with sxtremely good reception and the next nobody bought. "ONE DAY I called a list of lumber dealers in Montana. It was 30 degrees below zero there, but the men were happy, almost giddy. I'd ask about the weather and they'd reply something Jke, 'Just freezing to death. Ha! Ha. 1 ' And they all bought. "I checked up and found the barometric pressure was very high over the area and from that I started predicting where I could sell and where I couldn't." .. Leland Kent, Inc., is an Arizona corporation resulting from a 1965 merger of Barnes' firm and one owned by his son-in-law, Leland Hamilton — Thornell Barnes Co. of Chicago and Leland Kent, a Kansas corporation formed in 1962. It's Leland Kent's job to get new subscribers and renewals for trade magazines such as Advertising Age, Billboard, Business Week, Forbes, Nation's Business and such technical publications as Autobody, Brick & Clay, Computers, Dental Digest, Life Insurance Selling, Playthings, Refrigeration News, and Vend. THE FIRM has 10 salesmen. They use seven leased phone lines. They're called Band 6 WATS-Wide Area Telephone Service—lines which cost a total of $16,500 a month. On five of the WATS lines, Leland Kent can phone prepaid to persons anywhere in the United States outside Arizona, and on two others it can receive calls without additional charge from persons anywhere in the United States outside of Arizona. To get as many calls as possible through these lines, each salesman has a phone operator who lines up his calls and dials them direct. Closed circuit TV lets the salesmen know details about prospects calling on incoming lines. In a day that starts at 4:30 a.m. and lasts until 8:30 p.m., the firm places 5,000 long distance calls and completes 2,000 of them. The salesmen work in four-hour relays—four hours on and four hours off. SIX DIFFERENT business systems are used to line up calls, keep track of them, record orders, render bills to subscribers, and make accountings to publishers. The payrool is $6,000 a week. The postage bill is $38,000 a year. Each specially designed desk has a total of $10,000 worth of equipment. Low-pressure selling is used. Prospects are asked to take or renew a subscription and told the price. There are no premiums. New subscriber prospects are offered a sample of the magazine and asked for permission to call back after they've had a chance to look it over. About 40 per cent of the telephone calls are successful. When Barnes and Hamilton came to Scottsdale in the fall of 1964, they bought two office buildings at 610 and 620 N. Wells Fargo. They're now expanding into the last of that space and have an option on another adjoining building. BARNES FIRST was a newspaperman. He owned the American at Arbuckle, Calif., 60 miles northwest of Sacramento, selling it to prepare for military service in World War II. In 1948, he started his circulation service to trade and technical magazines, representing a group that needed 300 ON PHONE —Leland Hamilton spends days on phone or traveling by jet to meet publishers and promote business of Leland Kent, Inc., specialists in selling technical and trade magazines. Hamilton is president of firm. subscribers to be in a position for a circulation audit. He did the job by long distance and was in business. Continued On Page 4-F Miniature Coil New State Business Timely 'Security' Loan Saved Firm By VINCE TAYLOR Central Arizona Bureau ARIZONA CITY - Arizona is moving into another field in electronics — the manufacture of tiny coils for stereophonic equipment and other miniature electronics uses. Buzzing like bees, a dozen machines turn out the subminiature coils at the rate of 4,000 a day at Merwyn C. Davis' plant here, 60 miles northwest of Tucson. The tiny electric coils, Vt by 3/16 by V» inch, now being turned out, are an important component in stereophonic equipment. Each contains about 2,300 turns on plastic coated copper wire — 45-, 46- or 49-gauge — which is so thin it may be compared to the strands of a spider web. BECAUSE MACHINES of a type needed for manufacture of such a product were unavailable on the market, Davis spent most of the summer designing and making his own. Now, his M. C, Davis Co. has 12 operators trained in the delicate winding process. Each has been carefully instructed in the nine steps required to produce a single coil As they become adept, they can easily turn out 500 or more a day under the plant's rigid quality control program. "To become proficient, a girl must have good eyesight, speed and coordination," explained Ralph Duran, plant foreman. Davis expects employment to reach 50 by Christmas. He hopes to increase his business by manufacture of coils for hearing aids, microphones, electric wrist watches and similar electronic products. "WE EXPECT TO be in a position to meet the demands of this growing field of production," he said. "After all, this is a mini year!" The endeavor is not a new one with Davis, who sold his interest in a coil and transformer business in Forrest, 111., before coming to Arizona. His father, a pioneer in the field, held a number of patents in the manufacture of coils and transformers. HOWARD P. ANDERSON Lost Gun B«t Saved Finn Fate of a Phoenix firm, with sales of $2 million a year now, literally hung on two pawn tickets worth less than $75 only nine years ago. The firm is Continental Security Guards, Inc., which has just held open house for its new $100,000 headquarters at 4010 N. 27th Ave. The pawn tickets were for loans on the police special revolvers of Howard P. Anderson and his partner, U. J. Adams. "We got $25 or $30 apiece," recalled Anderson. "We had to have the money to pay our way to Barstow and Las Vegas to bid on jobs." They got the contracts to guard power plants during construction at Barstow for California Electric Power and at Las Vegas for Southern Nevada Power. But only Adams got his gun back. Anderson said he was a day late to redeem the pawn pledge. The firm then was known as Arizona State Guard and Detective Agency. The $wo jobs got the agency on its way, ending Has day-to-day anguish that twice scuttled Anderson <Juriog fate venture in tne patrol business. He first established Mar^ppa Burglar Patrol in Mesa in 1953. It lasted six weeks. Anderson worked for General Alarm, Inc., from 1954 to 1956, learning the security and burglar alarm business with the hejp of the G.I. Bill. Then in 1956, he opened Arizona State Guard and Detective Agency but after six months, took a leave to work as a boilermaker to keep his business going. He took Adams as a partner, and they managed to get the business going with the aid of the pawn loan. Last year, the firm had 500 employes, and in the year also Adams sold his interest to W. W. Brandt, who now works with Anderson in directing toe company. The firm has acquired 10 other companies in the last two years. It has expanded its services to armored car, security guards, ID badges, patrol, investigation, polygraph, burglar alarms, legal courier, accident report analysis, and security consultation. One of Us contracts is for $525,426 from the Federal Aviation Administration to guard air route traffic control centers In 22 locations in the United States, Alaska, Puerto Rico and the Ca- N1BW PiANT— Merwyn C. Davis, standing, and Arizona City. Tiny coils, used in stereophonic emjjlQyes are shown in new coil winding plant at equinpent, are turned out at rate of 4,000 a day.