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Monday, 17 December, 2001, 08:23 GMT
Making machines master the euro
The Coinco plant in Willich, near Krefeld
Coinco's plant has been operating at full stretch
The euro has arrived, with the first coins handed out at the end of last week. BBC News Online's James Arnold is on a tour of the eurozone to take the region's temperature ahead of this momentous changeover. His seventh report comes from the German town of Krefeld.

"Many of the smaller operators... are having to sell out to bigger firms, or even close their doors entirely

Norbert Monssen, German Vending Association
In a country where, until recently, it was tricky to buy a packet of cigarettes after one o'clock on a Saturday afternoon, vending machines were always going to take off.

Germany has an estimated 1.2 million vending machines, the second greatest number per head of population in the world, after Japan.

As the euro approaches, switching over all those machines to handle the new coins has proved a money-spinner for a few firms.

But for the companies that own and sell their goods through vending machines, the euro changeover is an expensive headache.

Coinco cashes in

Guenter Kuhl isn't complaining.

He is general manager of the German subsidiary of Coinco, a US-based firm which is a world leader in coin-handling technology.

German euro coins
Handily similar to Deutschmarks
Coinco arrived in the German market in 1999, hot on the heels of its multinational clients - notably Coca-Cola.

And thanks to the euro, its sales growth has been astonishing - 2001 should see a 20-fold increase in revenues, Mr Kuhl says.

This year, Coinco alone has rejigged 35,000 machines, compared with a normal total in the German market of 20,000 machines.

"It has been a wonderful year, but we are conscious that this is very much a one-off event," says Mr Kuhl.

Two currencies continue

The vending-machine changeover is a little peculiar in Germany.

Machines in most eurozone countries are simply being switched over from one currency to the euro on a set date.

Coinco Germany boss Guenter Kuhl
The 'Global E' system has been a top seller for Mr Kuhl
But in Germany, the similarity in size between certain Deutschmark and euro coins - and the relative straightforwardness of the exchange rate, at almost exactly 2 Deutschmarks:1 euro - means that a more gradual changeover can be worked.

As in shops, German vending machines can be programmed to accept and pay out change in either currency for a while.

Coinco's 'Global E' vending machine system accumulates euro coins until it has at least 100 of each, after which it starts to shuffle Deutschmarks into its cash box, instead of paying them out in change.

As a result, it is effectively making the changeover itself, instead of having to be reprogrammed by a technician.

Operators bear the cost

But not everything in the industry has run smoothly.

'Global E' and competing products do not come cheap.

According to Norbert Monssen, president of the German Vending and Catering Association (BDV), readying each vending machine for the euro will cost 1,000 Deutschmarks (317; $462) - pretty much exactly the annual profit of an average machine.

Despite heavy lobbying from the BDV and other groups, machine operators are being given no compensation for the cost of the switchover to the euro.

"Many of the smaller operators - those with 20 or so machines - are having to sell out to bigger firms, or even close their doors entirely," Mr Monssen says.

Contracts rewritten

All is not calm among the bigger operators, either.

Although the euro-Deutschmark exchange rate is very close to two, it is not exactly that - in fact, one euro is 1.95583 Deutschmarks.

A German cigarette vending machine
Not all German vending machines are ready for the euro
So a can of drink selling for two marks before the changeover will have to retail at one euro after - in order to minimise fiddly small change - a loss of almost 3% to the seller.

The seller cannot, of course, hike the price to 1.023 euros in order to preserve his profit margin, because vending machines cannot cope with such prices.

For this reason, almost all contracts between operators and users of vending machines will have been rewritten over the past few months, as both sides jostle to shift the losses away from themselves.

Another change looms

After 1 January, one might expect the vending industry to lapse back into its habitual calm.

But these are stirring times for the business.

Quite apart from the convulsions of the euro, a big change is underway for cigarette machines, which account for two-thirds of the vending machines on Germany's streets.

Impending German child-protection legislation will make it an offence to allow the sale of cigarettes to minors - something that public vending machines effectively does.

This, says Norbert Monssen, is likely to spur vending machine operators to migrate over towards payment-card security technology, enabling purchasers to prove their age.

As cashless payment methods start to catch on, the switch to the euro could soon start to seem like a mere detail.



The euro and you




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