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Coinstar to turn change into coffee

By Kristina Shevory
Seattle Times Eastside business reporter

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For the next six months, Coinstar users in three cities can turn spare change into coffee cards at coin-counting machines in Seattle, Las Vegas and Philadelphia grocery stores, company President Rich Stillman said yesterday. It will be available at many Seattle-area QFC stores.

The service won't incur the usual 8.9 percent fee.

Coinstar hopes the test will help bring in more customers willing to pay to use the coin-counting machines.

When coins are dumped into one of the blue-and-green coin-counting kiosks, the customer pays 8.9 percent to Coinstar, 1 percent of which goes to the store housing the machine.

To diversify its business, the company over the past year has introduced a prepaid MasterCard, electronic payroll service, prepaid wireless airtime, and options to buy cellular ring tones, games and graphics. In some locations, customers can pay household bills.

At the end of the first quarter, Coinstar had many of the services installed in more than 700 machines. The payroll service was available at 85 percent of its 10,200 machines.

Coinstar expects to add 1,000 coin-counting machines by the end of 2004 and introduce its prepaid centers into convenience stores, smaller retail stores, airports, train stations and bowling alleys. The company gets a cut of the revenue from the prepaid services.

Coinstar was founded in 1991 by Jens Molbak, who now runs his family's nursery, Molbak's, in Woodinville. A year later, the first Coinstar self-service coin-counters were installed in four San Francisco-area supermarkets. Molbak took the company public in 1997 and expanded into Canada and the U.K.

In 2001, Coinstar became profitable and had nearly 10,000 machines installed. Molbak left that year. In 2003, the company introduced prepaid wireless airtime, prepaid cash cards and electronic payroll service to its machines.

Last summer, it lost its third-largest client, Safeway. The news angered investors, forced Coinstar to cut 10 percent of its staff and sent executives scrambling for new revenue sources.
 
In addition to the Starbucks card deal, Coinstar has signed a couple others recently:

• Earlier this year, it paid $6.6 million for CellCards, a Chicago wholesale distributor of prepaid phone cards and other telecommunications services.

• In late May, it said it would buy American Coin Merchandising, a Colorado vendor of video games, kiddie rides and stuffed-animal crane games, for $235 million.

Both deals allow Coinstar to expand beyond grocery stores and make it less vulnerable if it loses a large customer.

"Their new business moves have raised a few eyebrows because they're going into uncharted business territory," said Alan Robinson, research director for Delafield Hambrecht. "But they've long stated they want to expand their in-store base and build their business ... and this is a way to do it."

Kristina Shevory: 206-464-2039 or kshevory@seattletimes.com