Is private label coffee worth the effort?

Why use private label coffee? What are the key benefits to a small OCS operator in having private label?

Private label allows the operator to be different in the sense that the competition cannot sell the same product. Private label is a point of distinction and a statement about the quality of the coffee and integrity of the operator.

There is no doubt that national brands dominate the overall coffee service market. But a properly-executed private label program can dominate the operators' market. In fact, the private label can evolve into the benchmark by which other products are judged.

A promise to the customer
By offering a private label coffee, an operator extends a promise of service to the client. The operator becomes the source of the quality of the product. After all, their name is on the package, and no one wants to be recognized for poor quality.  

When we talk about the quality of the product, we are talking about taste and freshness. This is not something that is communicated by the package alone, although this is very important. A regular coffee consumer can taste the difference between a coffee that is fresh and one that is not. And between a higher and lesser quality coffee.

Hence, to the extent that private label gives the operator more control over freshness and quality, private label can prove an important advantage.

The private label owner can say with confidence that the coffee he is selling was roasted within a certain time period, and that the national brand coffee in many cases might have been sitting in a warehouse for months.

This is a big reason why many OCS operators use private label; it is a strong selling point.

Cost advantages
There are cost advantages as well. By contracting to have a certain volume of coffee roasted for a specific time period, the operator is less vulnerable to price fluctuations as determined by the national branded products.

This does not mean the private label operator isn't affected by price fluctuations. He is. But under most roasting contracts, the operator commits himself to an expected volume of coffee over an extended time period.

Nor does it mean that the national brands don't impact the private label selling price. The movement of the national brands has become a barometer as to when prices can be raised.

The private label operator, does, however, tend to command a better price for a private label product as the perception is generally one of quality, provided that the product is surrounded by a level of service and equipment to support the price. 

Specialty coffee creates opportunity
The "specialty coffee" revolution has created some new opportunities to market private label.

Some of the big retail coffee organizations have become outstanding marketing machines. However, customers visit these retail establishments for more than the coffee; it's the experience, the lifestyle and the "cool" thing to do. But remember, as OCS operators, we are in the coffee business. We can beat some of these national marketing organizations if we know how to market our products, provided we have the right products.

My company offers some of the top national retail coffees, and we sell very little of it compared to our own brand. This reflects the success we have experienced marketing our brand. We have been able to educate customers that our brand is a better value for their money.

Private label better meets local needs
We know the consumer tastes in our market, and we offer coffee that better meets the local tastes. The national retail brands aren't as widely accepted and they don't help the office manager control costs.

This brings us back to cost and benefits, which is what being in any business is all about. What exactly do your customers want? If they want the experience of leaving the office to experience the ambience of a coffee house, there isn't much you can do to compete, short of building a coffee house in the customer's location.