The Ragans were among the OCS operators anxious to find a system that would allow them to compete against Filterfresh. They examined all of the single-cup units introduced in the early 1990s, and decided that the Café System 7 from Crane was the best option. The single-cup unit required a higher upfront investment and more technical support than traditional OCS brewers. Thanks to their vending division, the Ragans had the capability to service these units.
The Ragans immediately recognized single-cup's potential. While the unit required a longer payback period than traditional OCS brewers, it offered more product options, a higher per-serving price, and it drove consumption. The company's sales force marketed the systems to accounts with 50 or more people. In some cases, a rental fee was charged. The units generated an average $400 per month, which was more than double a traditional OCS account.
The company ultimately placed 450 Crane System 7s. This is not to say the expansion was without challenges. As with all new systems, the company had to get used to manufacturer revisions in the first few years.
Single-cup has been the single most significant development for OCS, according to Joe Ragan. "Customers are really excited about a single-cup solution," he said. "You've got the double whammy of a more expensive 'cup,' and they (the consumers) are consuming more of it."
Starbucks changes the field
Like many of his colleagues, Joe Ragan is also grateful to Starbucks for educating consumers about better quality coffee. "Starbucks just verified what we had been doing all those years," he said, recollecting his efforts in the late 1970s to encourage customers to buy heavier pack weights.
To hear Ragan praise Starbucks, one might think he was among the exclusive Starbucks OCS distributors in the early 1990s. But that privilege went to a competitor. Ragan instead used Meridien, a coffee roasted by Starbucks, that was available at a local club warehouse. The company provided it to customers in plastic dispensers that served 2-ounce doses.
Portion packs systems were the next development in single-cup. In 1999, the Ragans were named the exclusive Keurig distributor for their market for a limited time. Keurig provided an even more user friendly single-cup system that was less expensive than the bulk hopper systems. The company did a promotional mailing the first year, along with extensive work by the sales reps, and placed 150 Keurigs.
Keurig proves resilient
When the economy went south after 9/11, the Ragans expected a barrage of Keurig cancellations. Surprisingly, this did not occur. "I was kind of shocked that we didn't get a bunch back," Joe Ragan said. Once customers experienced the benefit of having coffee house quality in the office, they didn't want to lose it.
The company gained another competitive advantage in 2001 when it had the chance to purchase roasting equipment. They moved a convection roaster to a neighboring suite in their business condominium complex. They are now able to provide coffee to customers within two weeks of being roasted, which has proven to be a major competitive advantage. The roaster also enables them to offer customized case counts.
The company added its own water bottling machine in an adjacent suite. The machine disinfects the 5-gallon bottles and utilizes a reverse osmosis process to purify the water.
The newest OCS innovation is the manual pod brewer, and few operators have been as aggressive on this front as the Ragans.
Joe and Dan Ragan have paid careful attention to the development of these systems that can brew portion packs of coffee but are not tied to a proprietary coffee. Several manual pod brewers have been introduced in recent years that are less expensive than the older portion control, brew-by-pack systems and have the added advantage of using pods produced by different roasters.
New frontier: manual pod brewers
The Ragans have opted to carry the Caféjo pod brewer from Aquabrew. The Caféjo is not the least expensive pod system available, but it offers an automatic pod eject feature, and reportedly produces an excellent tasting product.
The Ragans have found the Caféjo a good complement to the Keurig. "We're not trying to undermine Keurig. We think Keurig is a great product," Joe Ragan said.
The sales force is excited by the dual offering of Keurig and Caféjo. "They (the salespeople) are leading with single-cup because they know that's the market," Joe Ragan said.