In for a penny, in for a pound at Coinstar

In our house on the top of a bedroom dresser, there is a jar full of coins. My husband, who hates carrying around loose change, fills it with cents, nickles, dimes and quarters whenever he can. Then, every so often, he brings these coins to our local supermarket where he pumps them into a machine that dispenses a voucher for their amount and this voucher can then be redeemed for cash or a store credit.

Coinstar, the maker of the machine, has coin counting machines in 9,400 locations in the United States, Canada and Britain and it has little competition. The Coinstar machine is about the size of fridge and is painted in green and red.

It can quickly count change while filtering out the nuts, bolts, paper clips and other "dirt" that is often found in piggy banks and coin jars. Once it counts the coins, it dumps them into a bin in the machine.

Since the first machines were installed in four San Francisco bay area supermarkets in 1992, the company has turned more than $3.8 billion (€4.3 billion) worth of coins into cash.

Surveys have shown that 73 per cent of American adults save their loose change rather than spend it.

Of those who save their change, 15 per cent of American adults store it in a glass or plastic jar. Nine per cent use a piggy bank. It is estimated that there is more than $7.7 billion in coins sitting in people's homes and the average value of these coin stashes ranges from $30 to $50.

Coinstar keeps 8.9 per cent of the total as a fee. Initially it charged consumers 7.5 per cent for its service but raised it to 8.9 per cent when it found little resistance.

The company estimates that it could take at least an hour to wrap $50 in coins manually - about 78 per cent are pennies, 22 per cent silver - compared to the machines which can count 10 coins a second. The supermarkets that house the machines get 1 per cent one per cent of the total.

Ms Michelle Avila, a spokeswoman for Coinstar in Bellevue, Washington, said the company expects to process $1.4 billion in coins this year, up from $1.2 billion last year. She attributed the increase to more Coinstar machines and "people becoming more aware of our service through our marketing efforts".

Coinstar is currently running a six month, 52 store test in Raleigh, Portland, and Seattle, of a prepaid MasterCard card, which if successful, will be rolled out in late 2002 and will make Coinstar the only self-service machine to distribute a cash card.

When the cash on the card runs low, the consumer can reload it through the Coinstar website, at a Coinstar machine, or by calling a toll-free number. The company went public on Nasdaq in July 1997.

For 2002 and 2003, the company expects to install about 800 machines a year in North America. In Britain, Coinstar will install 250 machines by year end in Asda Stores (a subsidiary of Wal-Mart), Sainsbury's Supermarkets and two Tesco stores in the London area. It expects to install up to 500 in Britain by the end of 2002.

This year, Deloitte & Touche Technology Fast 50, a ranking of the fastest growing technology companies in Washington state included Coinstar at number 20.

The rankings are based on revenue growth for the previous five years. Between 1996 and 2000, Coin star's revenue grew by 1,140 per cent, with revenue of $103 million last year.

The company employs 500, half of whom are field engineers who maintain the machines in their area about once a week.

This year, Coinstar discontinued its loss making venture, meals.com, which sold meals over the Internet and provided recipes that could be sorted by cooking method and cuisine. It is now free to concentrate on its core business: coin machines.

"Coinstar is a young, growing company," Ms Avila said. "The longer a machine is installed, the better it typically does and the more the consumer gets into the habit of using it."

Carol Power is a freelance journalist who can be reached by email at carolpower@ireland.com