Coinstar: Not Just Coins

The Motley Fool is on the road in Seattle! Recently we visited Coinstar -- now officially renamed Outerwall  (NASDAQ: OUTR  ) -- to speak with CFO-turned-CEO Scott Di Valerio about the 22-year-old company's well-known coin-cashing machines, as well as its more recent acquisition of Redbox, and future initiatives to expand into other aspects of the automated retail market.

We're all familiar with Coinstar and Redbox. In this video segment Scott reveals other Coinstar projects including Rubi machines -- which will dispense Seattle's Best coffee -- and several other initiatives being tested in the food, beauty, and entertainment markets. The full version of the interview can be watched here.

A full transcript follows the video.

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Austin Smith: It sounds like a lot of new products. I believe Rubi is, what, a partnership with Starbucks  (NASDAQ: SBUX  ) as well, right? Seattle's Best is a Starbucks label?

Scott Di Valerio: Seattle's Best is a Starbucks label. We have an agreement with Seattle's Best in certain channels, to provide beans as well as to brand the machines. We certainly are a very good partner with them, but Rubi is 100% owned by Coinstar; we've generated business. It's a partnership that we have with them in bean supply, as well as obviously brand across key channels.

Austin: OK, so it looks like we have Rubi, some sort of food-based vending machines, and some photo-based vending machines. If you were to pick a "favorite child," so to speak, which one do you think has the most growth? Which one are you the most excited about, going out a few years?

Di Valerio: Certainly our Rubi machines. The other businesses are relatively early-stage businesses.

It's always hard to say, "OK, which one's going to hit?" Again, Crisp Market is performing well in the couple of stores that they're in today, the couple offices that they're in today. Star Studio is in around 60-70 mall locations and doing quite well, so we think that could be a nice business there.

We also have a business we call Sample It!, which is beauty samples, today. Think about paying a dollar at a CVS or a Walgreen's  (NYSE: WAG  ) for a couple samples of a cosmetic and a coupon. Not only do you, for a dollar, get to try out whether the product is going to work for you, but then you get a coupon to be able to purchase it.

The machines we have in market there are performing well, and the coupon redemption is quite high, which the brands love, as well as the retailers. In fact, Walgreen's just opened a brand-new banner store in downtown Boston and the sample machine was built into the store there, and again was a key focal point as they opened up the store.

Austin: Sample It!, it seems like you've got some friendships with Walgreen's. I know you have a lot of kiosks with them. What other brands are people sampling? Is it Avon, is it ...?

Di Valerio: Yeah. Right now it's geared on beauty. We think it can extend to personal care and then on past that as well.

If you go into a Sample It! there will be a fragrance product from Halle Berry with the Halle Berry brand, Beyonce has branded products in there. It's across a number of the different traditional cosmetic brands. There's face products, there are fragrances, there are lotions, those kinds of things.

It's, again, starting there. Small samples you can test out, eye care products, see if it works for you and then be able to go back and buy the regular size.


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