Coffee Sales: We’re on the Way, but Not There Yet!

This year’s State of the Coffee Service Industry Report indicates OCS operators are making progress in winning their fair share of the growing coffee business. They are investing more aggressively in the products and equipment needed to meet the needs of a changing consumer. But more needs to be done.

While OCS operators are gaining a bigger share of the business, they continue to play catch-up against the bigger, better financed retail competitors.

There is every reason to believe OCS can win a bigger share of the pie, given the role coffee is playing in consumers’ lives.

Coffee: the new refreshment

Coffee, along with water, energy drinks and tea, is growing at the expense of soda and fruit-based drinks, according to the Beverage Marketing Corp.

While coffee is among the preferred refreshments, the environment for drinking it has also changed.

Consumers used to prepare most of their coffee at home. This is much less true nowadays than when those of us baby boomers were growing up. Stopping for coffee on the way to work has become a popular routine. So has going out of the office for coffee when in need of “downtime.”

According to the research firm, Datamonitor, packaged coffee purchased at retail declined as a percentage of all coffee sold from 50 percent in 2001 to 34 percent in 2006. This trend is set to continue, with retail coffee sales expected to account for just 27 percent of all coffee sales in 2011.

Out-of-home coffee purchases posted a 12.8 percent compound annual growth rate in the five years to 2006, compared to 2.5 percent for at-home consumption.

The preference for out-of-home consumption should benefit OCS. However, most of this increase is not happening in the office.

The percentage of consumers drinking coffee in the office dropped from 64 percent in 2003 to 52 percent in 2006, according to the National Coffee Association.

The competition has a head start

The reason for this is that the big specialty coffee, restaurant and convenience store chains have beaten OCS to the punch. They are well aware of changing consumer habits and they are responding aggressively.

The coffee shops, fast feeders and c-stores continue to battle each other for market share. The OCS industry will become a casualty of this three-way shootout if it doesn’t continue to strengthen its marketing and delivery skills.

OCS has an ally at the office

OCS operators aren’t alone in their quest to increase consumption in the office. They have an ally in the office manager who wants to keep employees on site instead of going out for coffee.

It takes three times as much time for an employee to get coffee out of the office as in the office. This was documented by the Harris Interactive Report released in 2005. By reducing these excursions out of the office, an employer gets more of the employee’s time.

Many office managers are cognizant of this. They see what their employees do and they are aware of the retail advertising that “primes the pump” for these out-of-office excursions.

It behooves OCS operators to drive the point home even stronger. The challenge is to transfer the consumer’s coffee drinking experience from the retail foodservice establishment to the office.

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