Bradley said improved quickservice restaurant and convenience store coffee is benefiting OCS because office managers don’t want their employees leaving the work place for coffee. “We hear this time and time again,” he said.
Bradley, whose company’s OCS offerings include pods, claimed that coffee pods are increasing in all geographic regions his company ships to, particularly in urban markets.
RETAIL COFFEE RAISES THE BAR
These sentiments were echoed by Will Billings, senior marketing manager at Green Mountain Coffee Roasters, who said OCS operators should take note of the upgrades that the quickservice restaurants are making. He noted that McDonald’s restaurants in New England are offering Newman’s Own Fair Trade and organic blends. As a result, more office managers will want to have something similar in the office.
“It’s a pretty persuasive argument to invest to keep people in the office,” Billings said.
Geoff Paul, president of Excelso Coffee Co. in Norcross, Ga., said OCS operators are gaining sales as a result of the increased marketing by foodservice retailers. He noted three reasons for this: 1) OCS operators are providing better quality coffee, 2) OCS decision makers understand the benefit of OCS, and 3) OCS coffee is free to the end user.
Paul is optimistic about OCS in general, and he believes that single-cup systems will continue to grab more sales.
“There’s certainly a gourmet coffee shift going on in every channel of trade,” said Henry Stein, vice president of news business development and commercial sales at Caribou Coffee, which markets its brand through K-cups and OCS fractional packs. “We’ve been pleasantly surprised.”
Stein said darker roast coffees have increased in recent years due to the influence of the coffee shops. Stein echoed others interviewed in noting that OCS sales tend to be lighter roast than other channels because that’s what people prefer in the morning.
Stein said coffees of origin are gaining popularity in all channels as consumers become more educated about them. The same holds true for Fair Trade and environmentally friendly coffees. “It spans the entire gamut of consumers,” Stein said of the diverse offerings. “Offices are definitely a part of that.”
Bob Hale, chairman of Mister Coffee Services Inc. in Toronto and president of Bodecker Brewed, thinks the retail competition makes it more necessary for OCS operators to upgrade their coffee. He estimates 60 percent of his own OCS sales are in single cup, and he expects it will eventually grow to 75 percent.
Hale believes that the retail competitors have a lock on much of the morning coffee. “People go to these places for consistency,” he said. “They get used to a taste. People are creatures of habit.”
Dave Manley, vice president of marketing at Keurig Inc., noted that countries of origin coffees are growing. The Kona K-cup posted the most growth recently.
Manley said the success of the various K-cup brands is giving brands a new importance in the office market. This is true not just for coffee, but tea and cocoa as well.
Manley said the growth will continue for some time. He said while Keurig has experienced rapid growth, it has only penetrated 7 percent of the OCS market. He thinks it could reach 30 percent penetration.
Total U.S. retail coffee sales 2002 - 2007 in billions of dollars & Forecast U.S. retail coffee sales for next five years, in billions of dollars. View these charts in PDF format.
SINGLE-CUP SYSTEMS ACHIEVE CONSUMER BRAND STATUS
Katie Ryan-Strimbam, the North American marketing manager for Mars Drinks, believes that the pervasive single-cup systems are becoming consumer brands. “We’re bringing the coffee shop experience direct to them,” she said.
The portion control systems are becoming established consumer brands, thanks to their ability to provide consistent quality, variety and convenience.
“In the sense that the brand acts as an endorsement for the operator and the consumer alike, the answer is yes, absolutely,” said Ennio Ranaboldo, CEO and executive vice president at Lavazza Premium Coffees Corp., which offers branded machines and capsules whose reliability and quality are sanctioned by the brand.