Technology Brings Payment Options to OCS

The recession has forced businesses in all industries to cut costs. The customers of all service industries want options for making do with less.

For the OCS industry, the challenge has been to give customers more cost efficient options and still provide the benefit of a good cup of coffee. Many operators welcome new products and equipment that provide more customer choices.

One option that has emerged has been cashless brewers. While not well established, cashless offers a new option that gives locations the chance to pass on some of the cost of OCS to the end user. The technology that allows cashless payment in a vending machine can be incorporated into some coffee brewers.

Providers of cashless transaction capability face resistance in the OCS industry, which is based on providing free coffee. Any payment option defies the very basis of OCS to begin with. This is why most OCS operators resist adding any type of payment mechanisms to brewers.

Some, however, have found that customers want more options. Cashless transaction capability is a new option which in itself can create interest.

The telemetry technology that supports cashless payment also supports other benefits that OCS operators will find useful. One is the ability to monitor machine activity from a remote location. Another is tracking usage to make sure unauthorized product is not used in the machine.

Still another benefit is the opportunity to analyze consumption habits. Cashless transaction technology gives operators the ability to track item-level transactions by location. Hence, the technology can give operators access to more extensive market data.

Operators surveyed about the new technology recently were not enthusiastic about it. Most are not anxious to invest in more expensive equipment, and the inventory management and data tracking benefits are not seen by most as being important.

Once the technology rolls into the market, however, these benefits could gain credibility. This was the case with the single-cup brewer, which OCS operators initially dismissed as too expensive to justify potential benefits.

PAYMENT MECHANISMS NOT COMMON IN COFFEE SERVICE

OCS operators associate payment mechanisms with added costs, increased service calls, the need to count and carry cash, and most significantly of all, decreased consumption.

As noted, taking the OCS brewer off of “free vend” changes the purpose of the OCS service. “It (a payment mechanism) sends a different message,” noted Jack Kirshner, owner of Philadelphia, Pa.-based Coffee Serv Inc. “It’s a radical step.” His views were echoed by numerous OCS operators nationwide of whom the question was asked.

While operators resist adding payment mechanisms to brewers, the need to offer options to customers is pushing more operators in this direction.

Equipment manufacturers note that payment options are increasing as more locations want to pass the cost onto customers.

Bob Hale, who is both an operator (chairman of Mister Coffee Services Inc. in Toronto) and equipment manufacturer (president of Bodecker Brewed) said that despite the disadvantages of coin op, the present economy is causing customers to consider it. “They’re motivated by the economy to cut their overhead,” he said. He said many customers will be more inclined to add coin op to a single-cup system than revert back to bottle brewers. “They still want the cartridge (single-cup system) because they can meet the needs of the people in the office,” he said.

Dave Manly, vice president of marketing at Keurig Inc., said traditionally about 10 percent of the company’s brewers are equipped with vending accessories, but this number has jumped to 14 percent as of late.

Marguerite Deutsch, marketing manager at Mars Drinks North America, said more customers are asking about the coin-op accessory on the Flavia system in the U.S.

Gary Stevens, co-owner of Cuda Coffee LLC, which sells OCS and vending equipment over the Internet, said the requests for brewers equipped with payment mechanisms has been increasing. He is currently planning to offer a single-cup brewer that accepts credit cards.

Cashless options could be seen as a preferable solution to currency mechanisms.

CASHLESS READERS OFFER AN OPTION

Coffee Serv’s Kirshner said cashless readers might have a bigger role in OCS than currency acceptors. He has heard about cashless systems, and he thinks that in some accounts where employees carry payment cards, it might make sense.

Kirshner is aware that credit and debit cards are being used by consumers for smaller transactions. He was one of several operators interviewed who thinks he would be more likely to use a cashless device on a brewer than a currency acceptor.

As single-cup has become better established in recent years, some operators think options that give the location a way to keep the machine and reduce costs is important.

“You need solutions like this as an option,” said Barry Bleahen, associate vice president of marketing for Aramark Refreshment Services Inc., which has used some of the cashless single-cup units. “There is certainly a place for it.” The system that Aramark has used is supported by a Web-based network that also gives the operator real-time access to product sales information in the machine.

TELEMETRY: REAL TIME ACCESS TO SALES INFORMATION

“We have access to the sales going through the equipment via the payment network, not necessarily the inventory in the equipment, given that we do not know when the client fills it with product/beans/cocoa,” Bleahen said. “It does not perform like a vending machine, which is a closed system that only the operator accesses.”

Chris Stave, executive director at the Vend Marketing Institute, a national network of independent vending operators, said it might make sense to “slave” a single-cup brewer off of a vending machine. This way, the operator could offer a cup of coffee as part of a promotion to a customer who purchases a snack. In such a scenario, it would not be necessary to have a separate card reader for the single-cup machine.

Stave said cashless technology still has to become more affordable for the refreshment services industry to embrace it. “At some time, it will make sense to put card readers on single-cup machines,” he said.

Brian Bradley, senior vice president of operations at S & D Coffee Inc., the Concord, N.C.-based roaster that is also an OCS operator, has examined payment mechanisms over the years but is reluctant to use them. He is aware of the cashless readers being introduced, and he is watching with interest.

INVENTORY TRACKING IMPORTANT FOR SOME

The efficient servicing of equipment is one of the benefits of remote monitoring that has already been used in vending. In the OCS business, the need to track inventory at the machine level has another purpose: verifying the specific product in the machine. OCS operators, unlike their vending brethren, rely on the location to fill the machine with product. Hence, OCS operators have always been vulnerable to location personnel filling the hopper with products purchased elsewhere.

In the OCS universe, remote monitoring of machine activity can provide a “policing” function.

While not all OCS operators believe that unauthorized product use is a big problem, remote monitoring offers other benefits as well.

Depending on the technology used, the data can provide item-level consumption data. The need for such data has not been seen as critical in OCS since coffee brewers have historically carried a small number of selections in comparison to vending machines.

However, the proliferation of multi-selection machines has changed this in recent years. With 12 selections available in many single-cup brewers, the most profitable mix can present a challenge for operators, especially as new blends are introduced.

“It gets us closer to consumer preferences,” said Aramark’s Bleahen. “That kind of information is invaluable.”

MANUFACTURERS ADAPT CASHLESS CAPABILITY

A handful of OCS brewer manufacturers have incorporated radio frequency identification (RFID) into their payment mechanisms, some of which have been demonstrated at vending and OCS trade shows. RFID provides a network for authorizing credit and debit purchases and for transmitting data from the machine to a data collection device.

RFID technology is not new to coffee brewers. It has been used to ensure the proper timing brewing functions in some machines. Some equipment experts argue that this has been technology’s most important contribution to OCS, as it ensures a level of product quality.

The most extensive testing involving RFID technology for cashless purchases and remote data retrieval in OCS equipment has been the Starbucks “E-Cup.”

Starbucks Corp. has adapted USA Technologies’ ePort to its proprietary single-cup brewer, the “I-Cup,” to include cashless transaction capability. The ePort converts the traditional Starbucks “I-Cup” into an “E-Cup.” The E-Cup comes with an ePort card reader that accepts both magnetic stripe and contactless cards. All of the ePorts are connected to the USA Technologies network, via the AT&T GSM network, where the credit and debit card transactions are processed.

OPERATORS CAN VIEW ACTIVITY VIA A SECURE WEBSITE

The Starbucks “E-Cup” operates similar to vending machines with ePort connectivity. The USALive network operated by USA Technologies is a secure Web portal. It allows authorized vending operators and coffee service providers participating in the Starbucks E-Cup program to view the sales activity and review transactions for any and all machines by any time frame the user selects.

A sales and accounting summary allows the user to see all sales activity, including cash total, refunds total and grand total. The user can save and print any report in addition to receiving data in various electronic formats.

USA Technologies also handles the processing of credit card purchases for the operator.

Pat Ballard, director of OCS for Starbucks, said the E-Cup brewer accepts both swipe and contactless credit and debit cards. It does not accept cash or Starbucks cards, although consideration is being given to the latter.

The E-Cup brewer will appeal to locations that want to offer cashless capability. “There will never be a lost sales opportunity,” Ballard said.

Ballard said location managers might opt to allow some selections to be free and others to require payment. Or they may wish to allow the employees to get coffee for free but require customers to pay for it.

Ballard said Starbucks will not have access to the individual operator’s proprietary Website. “We (Starbucks) don’t have a direct link to that,” he said.

DATA COULD PROVIDE MARKETING, SERVICE INFORMATION

Mike Lawlor, vice president of sales and business development at USA Technologies, said the transaction data that the operator gets will assist in determining what products to offer. He said many operators will get a better understanding of what products sell best at what time of day.

Ballard said operators will also know the optimum time to service the machine. “They will be able to track when they should have service technicians in the area and when they should refill the brewer,” he said.

The end result, according to Ballard, is OCS operators will be able to provide more single-cup machines to more locations.

OTHER MANUFACTURERS EXPLORE TECHNOLOGY

VEI Global Solutions LLC has demonstrated its Prosyd (formerly Progema) brewer with RFID functionality. Aviel Dafna, a company partner, said the system benefits both the end user, in that it allows cashless transactions, and the operator, since it allows remote monitoring of inventory in the machine and can control access to the dispensing mechanism.

Dafna said the machine can be programmed to dispense product at the swipe of an RFID tag. The system also reports SKU level consumption data. It can also allow the operator to verify what product was put in the machine.

The benefits aren’t limited to the OCS operator or the location manager, Dafna noted. The verification capability and market intelligence will be useful to coffee suppliers who want to be more active in the growing OCS market. The ability to verify product use could encourage roasters to subsidize machine placements, Dafna said. In addition, machine-level transaction data could provide market intelligence that roasters could use in developing marketing programs.

Tim Wayne, director of sales for Folgers OCS for the J.M. Smucker Co., has seen the RFID in action in a Prosyd machine and said the unit can be programmed to only brew specially tagged containers. This, he said, can assure customer compliance with product usage agreements.

Wayne said the market intelligence will also be useful. “It can help the end user make decisions in how to stock the machine,” he said. Wayne said this type of market intelligence has long been harder for suppliers to find in the away-from-home segment than in the retail channels. “The industry in general is starved for that kind of data,” he said.

CASHLESS OFFERS NEW OPTIONS

Wayne Billings, director of customer strategy for Green Mountain Coffee Roasters Inc., said cashless technology does offer some new possibilities. He points to the way that many vending locations have used payment cards to reward employees. The same cashless method can apply to OCS, whereby the manager loads the payment card with credit to cover a certain number of servings.

Billings also noted the market analysis capability that a stored value accounting system can provide. In the future, he said there will be more interest in the OCS industry in better understanding SKU-level market demands.

Mike Artukovic, general manager at Custom Coffee Plan, based in Los Angeles, Calif., said he has discussed cashless acceptance technology with one of his single-cup equipment suppliers. “They (the program supplier) were addressing the resistance out there due to the cost of the (OCS) program,” he said. “It was directly addressing cost concerns. It (cashless) is a way to place machine at the accounts that are cost conscious.”

OPERATOR RESISTS ADDING PAYMENT MECHANISMS

Artukovic has not yet offered cashless payment. He has provided coin acceptors on some of his systems, but only for those customers who really want it. Artukovic said OCS operators have other options to offer cost conscious customers. Being affiliated with a roaster, he can offer less expensive coffee that will still satisfy customers’ tastes.

For more information, contact:

Bodecker Brewed, 877-293-3330, www.bodeckerbrewed.com
Cuda Coffee Co. LLC, 866-411-2823, www.cudacoffee.com
Folgers, 877-693-654-377, www.folgers.com
Green Mountain Coffee Roasters, 888-879-4627, www.greenmountaincoffee.com
Keurig Inc., 866-901-2739, www.keurig.com
Mars Drinks North America, 877-273-5812, www.myflavia.com
S&D Coffee Inc., 800-933-2210, www.sndcoffee.com
Starbucks, 800-235-2883, www.starbucks.com
USA Technologies Inc., 800-633-0340, www.usatech.com
VEI Global Solutions, 800-321-2311, www.veii.com

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