You might have seen one of the large ice vending machines out there offering a large amount of ice for a low price of $2.50 or less. They are typically located on high traffic locations, perhaps next to a gas station, convenience store, or dollar store. They are freestanding and allow someone to drive up and fill up one or more 20 pound bags or even a cooler full of ice. This is a much easier and more affordable way to get lots of ice for a party, a trip to the lake, a hunting or fishing trip, or some other special occasion. Some of the names you may have seen include Twice the Ice, Kooler Ice, Ice House America, Ice Born, and Watermill. Some of the machines also dispense water. For those not familiar with freestanding ice vending machines, here is one example and here is another.
The Economics of Ice Vending Machines
It does not cost very much to make a bag of ice. Utilities vary by area, but water and electricity typically costs about $0.25 per 100 pounds of ice. So a 20 pound bag of ice might only cost $0.05 in utilities. Not everyone takes a bag, some bring coolers, but for the customers that use bags, each one is going to cost about $0.10. So the variable cost of a 20 pound bag of ice is only about $0.15. If you charge $1.75 for a 20 pound bag, your variable profit is about $1.60 per bag.
The fixed cost of the machine itself is another story. Ice vending machines vary from about $20,000 up to $100,000 or more. On top of that, there will be some site work in placing the machine on the parcel and having parking blocks or barriers installed around it. While the vendors claim that ice vending machines last for 20 years or more, the reality is there useful life is probably closer to 10 years (Ice House America says their oldest machine in service is currently 10 years old). A $35,000 machine that has a life of 10 years ends up costing around $300 per month.
Let’s assume your monthly rent was $300 per month. In order to break even at $1.60 in profit per bag, you would need to sell about 375 bags per month. This works out to about 12 or 13 bags per day. Obviously you want to do more than break even, you would like to turn a nice profit. So finding a site where you can attract 30 customers a day or more is critical.
Real Estate is Absolutely Critical
If you are going to find a site that attracts 30 or more customers a day, it is likely going to cost some money to rent. Depending on the area, it might cost $300 to $500 or even more. Gas stations and convenience stores are completely reliant on the same type of customers, so that is probably the first place to look. A traffic count of 10,000 cars per day or more is probably a good starting point. Additionally, good ingress and egress, street level visibility and adequate parking and easy access to the ice machine are all factors to consider.
Using the example of $300 per month in capital costs (machine and site work) and $300 a month in rent, then adding in an additional $100 per month per machine in other permits, maintenance, repairs and other costs, the break even point comes up to about 14 to 15 bags per day. A machine that sold 50 bags per day would yield a profit of about $1700 per month. Not bad if you could own and operate several ice vending machines.