Operators serving markets with high concentrations of financial, high tech, health care and professional employers, such as the West Coast, East Coast and South Florida, witnessed particularly strong growth in the last two 12-month periods.
And while competition from other retail channels has increased, the end result has been a more educated consumer willing to pay for a good quality product in all settings, including the office.
Retail competitors push harder
The intensive marketing by coffee retailers – particularly specialty stores, quick-serve restaurants and convenience stores – impacted office managers in a way that benefited the OCS industry, according to many operators.
Where location managers historically were inclined to reduce expenditures on employee perks in order to save costs, in the last two years they recognized the need to counteract the tendency of employees to leave the work place for a cup of good coffee. According to the National Coffee Association, the percentage of consumers drinking coffee in the office dropped from 64 percent in 2003 to 52 percent in 2006.
The OCS operator, armed with a comparably high quality coffee, emerged as the solution for office managers seeking to keep employees in the office instead of going out for coffee.
The key tool in the OCS industry’s arsenal to provide good quality coffee has been the single-cup brewer, which has been the driving force of the OCS industry’s growth in recent years. Several single-cup systems have proven their reliability, giving the operator the means to offer coffee house quality coffee.
Single-cup provides a solution
Besides providing good quality coffee, the single-cup systems have emerged as the most efficient tool for serving a variety of hot beverages, meeting the demand for different drinks introduced by the specialty coffee shops.
Besides regular and decaffeinated coffee, today’s consumer also wants milk-based drinks, mocha, hot chocolate and teas.
Most OCS operators reported that single-cup systems increased revenues over traditional batch-brew systems by 20 to 30 percent.
Each year, the OCS industry does a better job of meeting the needs of a more educated coffee consumer.
New market research offers consumer insights
The need to do a better job of meeting customer expectations was documented in 2005 when the National Automatic Merchandising Association (NAMA) released some groundbreaking research on how consumers view OCS coffee. The survey, the most comprehensive OCS consumer survey ever conducted, found that consumers overall did not view office coffee as being especially good.
Three quarters of consumers, according to the survey, did not believe OCS operators provided specialty beverages. About 70 percent ranked OCS coffee as average in quality. These findings represented both a challenge and an opportunity.
By providing single-cup brewing systems that provide high quality coffee, OCS operators have been able to demonstrate that office coffee can be comparable in quality to what they can buy at a specialty store.
More investment required to meet consumer needs
In order to provide the better quality service, OCS operators have had to invest more money in equipment, product and employees. The single-cup brewers are more expensive than traditional batch brewers and most of them also require more maintenance. In addition, selling these systems requires a better educated sales person, and servicing them demands a more qualified delivery/service person.
Meeting these challenges has required a high level of commitment, particularly in the areas of recruitment, training and employee compensation.
OCS operators have needed better trained employees at a time when the labor market has not been favorable. Unemployment has remained below 5 percent for the last 12 months, the lowest rates since the end of 2001. (In May of 2007, the U.S. Commerce Department reported the creation of 8 million new jobs since August of 2003.)
While low unemployment helps the OCS industry by raising head counts in work sites, it also drives up OCS wages. Operators continued to fight higher costs in payroll as well as other areas, including health care, taxes, fuel, products, recruiting and training.