On one hand, the growth of the consumer single-cup market has supported the demand for these systems in the office.
On the other hand, this growth has raised concerns about consumers pilfering cartridges in the office as well as concerns about customers buying their office coffee from other sources.
Veteran operators note that such concerns are not new in OCS. Customer location managers have always had to make sure employees don’t steal coffee, and operators have always had to make sure customers don’t buy product elsewhere.
MOST OPERATORS RAISE PRICES
While customers wanted to cut costs, operators still protected their margins, as indicated in the number that raised prices.
Fewer operators raised prices and more lowered them in the last 12-month period than in any of the previous four years as shown in chart 3B, but 66 percent still raised prices.
While OCS pricing was competitive, the retail environment helped OCS operators raise prices. Major retail roasters raised prices early in 2009 in response to higher costs of Colombian coffee.
More than a fifth of the respondents, 22 percent, reported adding payment mechanisms to brewers. This is the first year the survey asked the question, making it impossible to measure any change in the level of this activity.
Most operators indicated a slight increase in the number of customers asking for payment mechanisms in 2008/2009. Operators usually try to discourage this because it cuts consumption, as well as increases service calls and, in cases where the OCS operator services the brewer, requires currency collections and accounting.
In response to these requests, some operators provided the payment mechanism but let the customer collect the money. This frees the operator from dealing with collections and allows the customer to recover some of the cost.
OPERATORS PASS ON FUEL CHARGES
Operators passed on fuel charges for the second straight year in 2008/2009. More operators introduced fuel charges than last year, as indicated in chart 9A: 13 percent more operators charged for deliveries in 2008/2009 than the prior year. This represents a significant cost recovery action, given the decline in fuel costs over the past year.
Operators also charged an additional 76 cents per delivery this year, as indicated in chart 9D.
Price increases were one of several cost recovery actions in 2008/2009. Most OCS operators reported raising prices and absorbing higher costs, as indicated in chart 10.
Staff reductions were fairly common among operators: 45 percent reduced staff while 14.5 percent added staff and 40.5 percent reported no change.
Staff reductions mostly affected delivery personnel, as indicated in chart 11B. This is consistent with the earlier reader survey, which reported less frequent deliveries as the most common action to improve account profitability. Close to half (46.8 percent) of the operators who took action reduced deliveries, compared to 34.3 percent who added products and services, 13.6 percent that took other methods, and 5.3 percent who added brewers.
Among the 14.5 percent who added staff in 2008/2009, most (56 percent) added sales personnel while 44 percent added delivery personnel. Operators recognized the need to maintain good customer communication to protect sales.
EMPLOYEES SHOW MORE COMMITMENT
Like their customers, operators noticed stronger employee commitment as workers valued their jobs more in a recession. In 2008/2009, many operators noticed a reprieve from the perennial problems of high employee turnover.
Operators welcomed improved employee commitment as the demands of OCS have become more challenging in recent years due to the need to become knowledgeable about more products and equipment.
Staffing actions were one area of difference found between dedicated OCS operators and vending operators with OCS operations. (Vending operators who do OCS represent the majority of both the number of operators and amount of sales, but dedicated OCS operators continue to do more OCS business on a per-company basis.)
Dedicated OCS operators sustained staffs more than vending operators with OCS operations, which indicates dedicated OCS companies have a better chance of maintaining and adding sales.