Japanese Innovation Comes in Interesting Ways -- How about Vending Machines (KO, AAPL, MC)

Includes: AAPL, KO, MC-OLD
by: Steven Towns

In recent years analysts and investors have occasionally questioned why Japanese firms have been unable to come out with hit products such as Apple's (AAPL) iPod despite their apparent world-class R&D and large number of patent receipts. Japanese firms I'm sure would argue that they are developing hit products and key technologies however; they are doing so in other areas not so obvious to the American investor. Take Matsushita Electric Industrial (MC) for example, which is leading the way in introducing fuel-cell technology into homes. Let's not forget vending machines and all the things that can be sold and done with them.

Below I have posted the text of a Daily Yomiuri Online Newspaper article entitled, "Vending machines go high-tech." I think you will enjoy it and be amazed at the innovations. Some might question the need in some cases but in others the innovations are welcomed as they will help the environment and assist in emergencies. All I can say is that the vending machine experience in Japan is a pleasant one as they are located on practically every street corner (the saturation necessitates innovation) and sell practically everything from your standard soft drinks to bags of rice to porn magazines and now the popular winter dish of oden. Coca-Cola Japan a subsidiary of Coca-Cola (KO) dominates the soft drink vending industry but Coke and rival bottlers and beverage companies reportedly introduce a total of about 1,000 new soft drinks a year amid intense competition.

Vending machines go high-tech

The Yomiuri Shimbun

Vending machines usually bring to mind canned soft drinks and cigarettes, but recently they've started to change, offering such things as hot oden--a dish consisting of various ingredients, including slices of boiled daikon, balls of processed minced fish and hard-boiled eggs--and sushi.

The functionality of vending machines has also improved. There are now machines designed to reduce garbage, offer drinks free of charge after an earthquake or talk to customers.

A vending machine in Akihabara, Tokyo's electronics center, is one of these special machines. Insert two 100 yen coins and a large can containing hot oden will emerge (a can of oden including beef costs an extra 50 yen).

Tengu Canning Co. in Nagoya developed the canned oden in 1985, selling it to tachinomi stand-up bars.

In 1995, the oden vending machine was set up in Akihabara and it soon found favor, selling 10 million yen worth of canned oden a year.

A TV program touted the vending machine as the top money-making vending machine in the country.

Last year, the vending machine also appeared in a TV drama titled "Densha Otoko (Train Man)," a story based in Akihabara about a nerd who seeks advice on an Internet chat room about how to hook up with a woman he meets on a train.

With the cold spell striking the country in December, two oden vending machines set monthly sales records--selling a total of 14,000 cans of oden.

Kenichi Ito, 44, an assistant section chief at Tengu Canning, said it was hard to control the quality of oden; the oden deteriorates if it is overheated.

"The Akihabara site is perfect because the canned oden is constantly being purchased, preventing it from becoming too hot," he said.

Vending machines on the ferries of Tokyo-based Ocean Tokyu Ferry Co., which link Tokyo with Tokushima and Kitakyushu, sell one serving of eight frozen sushi pieces topped with deep-water shrimp, tuna, scallop and other seafood for 500 yen.

When it is thawed up in a special micro oven, the rice with vinegar becomes hot, but the toppings remain cold.

Passengers can purchase the sushi with food cards distributed free of charge when boarding, or with cash.

During the busy season, the company often sells all of the machine's 120 meals in a single trip.

While the product would seem to have a wider appeal, suggesting vending machines selling it could hit the streets, an employee of Sundelica Co., a Tokyo-based food company that makes the sushi, insisted that the product only sold well on ferries because they do not have restaurants onboard.

According to the Japan Vending Machine Manufacturers Association, there are about 5.5 million vending machines, including those selling tickets, in Japan, making it the second largest vending machine country in the world after the United States.

About 2.6 million of them sell soft drinks.

In terms of number, vending machines have already reached saturation point, but now they are being designed to improve the environment.

In November, a "My Cup" vending machines was installed in the annex of the Economy, Trade and Industry Ministry in Kasumigaseki, Tokyo.

People use their own cups to buy juice and coffee in order to reduce the use of paper cups.

A ministry official said that if the experiment at the ministry went well, the ministry would encourage companies to install such vending machines in their offices.

Starting in 2003, Coca-Cola Japan Co. installed vending machines that can be remotely controlled to provide drinks free of charge in case of a disaster.

It has already installed about 1,000 such machines in various parts of the country. The vending machines in the city hall of Nagaoka, Niigata Prefecture, provided bottles of tea and water to residents after the Chuetsu earthquake struck in October 2004.

Vending machines equipped with security cameras and emergency buzzers to protect children have recently been installed along school routes.

Vending machines that sell alcohol are gradually being replaced by models capable of checking the age of a customer by scanning a form of ID, such as a driver's license, thereby preventing minors from buying spirits.

In 2008, cigarette vending machines equipped with a system that can verify the age of a customer by reading a data card--issued to only adults--will be introduced.

Some vending machines can even communicate with buyers.

In 2000, DyDo Drinco Inc. started installing vending machines that can say "Konnichiwa" (Hello) and "Itterasshai" (Have a nice day).

The company has also installed vending machines that can say, "Sorry, I've run out of change" in the Kansai dialect.

During the first three days of the New Year, the machines said, "Thank you, we're counting on you this year."

Fuji Electric Retail System Co. has developed a makeup vending machine that can not only talk to a customer but also features a camera that can help women choose what type of makeup suits them best.

The machine, which has yet to be put into practical use, displays an image of the customer's face on a screen with a mocked-up image of what they would look like wearing a certain shade of lipstick.

The Japan Vending Machine Manufacturers Association predicts that in the future, vending machines capable of offering advice based on users' preferences and health status will be invented.

Tsutomu Washizu, 61, who authored a book titled "Jido Hanbaiki no Bunka (The Culture of Vending Machines)" said that it would become much more convenient for people to get what they liked where and when they wanted it.

"But it could lead to a culture of disposability, leading people to discard things when and wherever they want. Vending machines can make our life convenient, but they can also ruin our lifestyles," he said.
(Jan. 19, 2006)

* Disclosure: The author of this post owns a long position in Coca-Cola (NYSE:KO).

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here