Machinery, Refrigeration, and Service Industry
SIC 3580
NAICS 3334
Refrigeration and service machinery manufacturing includes five major segments: vending machines; commercial laundry equipment; heating and cooling equipment; service station pumps and grease guns; and miscellaneous service machinery, such as floor-cleaning machines and commercial dishwashers and cooking equipment
After the down years of the early 2000s, the global service machine and refrigeration industry enjoyed generally strong growth worldwide. This uptick was fueled by the rapid emergence of several formerly underdeveloped economies into the technological and consumer economy mainstream, with China's seemingly insatiable product demand at the forefront. In 2003, the United States alone exported US$376 million in heating ventilation, air conditioning, and refrigeration (HVAC/R) equipment to China; and China exported 14.8 million units that same year. Sean Zhang reported in Appliance that industry experts expected 60 percent of China's 2005 air conditioner sales would be exported units. Total U.S. exports in that category during 2003 were just over $7.1 billion. By comparison, U.S. imports showed steady and significant growth over the five-year period from 1998, when U.S. imports were valued at $2.89 billion, to 2003, when imports were almost $5.3 billion. World demand for commercial refrigeration equipment was expected to grow through 2008 at about 5.8 percent per year, reaching $25.8 billion, according to researchers at The Freedonia Group.
Freedonia also reported that U.S. demand for heating ventilation and air conditioning (HVAC) equipment was expected to reach US$12 billion by 2007, fueled by increased construction and the growing replacement market. Euromonitor reported U.S. HVAC growth projections of 26 percent. In Europe, the market in France was expected to grow 10 percent, followed by 15 percent growth in both Germany and the United Kingdom. Refrigeration and freezing equipment were the largest sectors for Germany and the United Kingdom, and air conditioners were the largest segment in France and the United States. Environmental and cost reduction concerns led to a new generation of ever more efficient and sophisticated heating, refrigeration, laundry, and gas-pumping technologies.
The same study expects U.S. demand for vending machines to reach US$1.6 billion by 2006, of which beverage sales would account for US$690 million. Europe's large vending machine industry faced the challenge of converting machines from accepting various national currencies to accepting new Euro coins by 2002.
The global heating ventilation, air conditioning and refrigeration (HVAC/R) equipment industry manufactured machines in several product categories in the early 2000s. The largest of these were self-contained, mechanically refrigerated, heat transfer equipment; unitary air conditioners; compressors and compressor units; commercial refrigerators and equipment; room air conditioners and dehumidifiers; and warm-air furnaces, humidifiers, and electric comfort heating equipment; as well as parts and accessories. Miscellaneous industry products included electric heat pumps, furnaces, refrigerated display cases, soda fountains, beer dispensers, and snowmaking machinery.
The HVAC/R industry has historically grown 2 to 3 percent a year. In the United States—one of the world's largest HVAC/R equipment markets—the motor vehicle and building construction industries were the primary end users of HVAC/R industry equipment. New home building was a primary factor in unitary air conditioner sales, which accounted for 50 percent of sector demand by 1999. Because of global agreements phasing out environmentally harmful coolants, the retrofit, or upgrade, of older heating and cooling systems was a significant end use for industry products by early 2000. As the result of these environmental policies, a new industry sector developing energy-efficient "green building" technology had emerged in the early twenty-first century. Common industrial uses of refrigeration equipment in 2000 included food distribution, storage and preparation, and, in the chemical industry, the manufacture of petrochemicals, liquefaction of gases, separation of chemicals, and process control. Heating systems, refrigeration equipment, and air conditioners, manufactured by industry firms, supply the world's office buildings, hospitals, schools, restaurants, supermarkets, hotels, and other nonresidential large-capacity environments that require climate control.
Unlike household air conditioners, commercial and industrial heating and ventilation systems are often customized to match the widely varying needs of each customer's building/installation—from warehouses or stores to high-rises and sports stadiums. Industry firms are motivated by the need to create the most efficient heating and cooling systems possible and to balance that goal with the need for "real-world" functionality. During the final decades of the twentieth century, industry revenues were directly affected by commercial construction activity, such as new office buildings or malls, environmental laws governing refrigerant use and recycling, and the willingness of customers to purchase new units rather than maintain old ones.
According to the National Automatic Merchandising Association (NAMA), vending sales rose from a US$2.5 billion industry in 1960 to a US$38.7 billion industry in 2000. By 2005, annual vending machine revenues were still hovering in that range. When first introduced to consumer markets, automated vending machines were relatively uncomplicated mechanical devices—product (mostly food items in prepackaged servings) was purchased when a coin was inserted in a slot. Later, these machines evolved into more complex electromechanical hybrids capable of dispensing an extremely diverse range of products and equipped to accomplish a financial transaction with paper bills, tokens, prepaid debit cards, and even credit cards. Although traditionally associated with simple coin-operated beverage, snack, newspaper, and cigarette machines, during the 1990s the vending machine industry's global marketing strategy addressed increased consumer leisure time for shopping and a dwindling interest in home cooking. In the early 2000s, economic uncertainty forced corporations to replace full scale food service operations with vending machines, as a labor scarcity made fully staffed facilities impractical. In the two largest vending machine markets, Japan and the United States, automatic merchandising machines comprised more than two-thirds of the vending machine manufacturing market by the late 1980s. In the early 2000s there were more than 5.5 million vending machines operating in Japan, one for every 20 people, totaling some US$56 billion in sales.
Traditionally, vending machines were fashioned from formed sheet metal and metal and plastic parts. Small electric motors and generators drove their product-dispensing mechanism and managed payment validation/acceptance (i.e., verifying the type of currency inserted based on such properties as weight, size, or magnetic qualities). In the late 1990s, the industry trend was toward electronic machines containing microprocessors and modems that were capable of keeping a machine's supplier updated on sales or notified of low product supplies. Such machines were expensive, however, and mechanical or simpler electronic vending machines were still common, particularly in the beverage sector. In 2001 technology allowing vending machine orders and payment via cell phone emerged, promising to reduce mechanical malfunctions of vending coin collection. By 2004, cash vending was emerging as the next big thing in vending machine sales. Reports on vending machine revenue predicted revenue from vending machines could increase to $70 million by the year 2010, according to The Kiplinger Report. This report claimed wireless-activated payments would "revolutionize vending," and that customers would be willing to spend more than $100 on cashless transactions. Customers who used debit or credit cards preferred these machines and were willing to spend more when using them. A pilot test in the United States at Regal Cinemas showed vending sales increased 139 percent over a one-year period, with credit or debit card transactions being responsible for more than 30 percent of total transactions, as reported in Screen Digest.
By far the most common industry practice was to sell vending machines directly to product manufacturers, such as soda beverage bottlers, or to third-party vending machine distributors who installed and maintained them. By 2001, some of the more active global vending machine manufacturers included Germany's...
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