James Barber, purchasing and warehouse manager, Classic Food Services, Durham, N.C., feels the desire is out there for water systems. "I think a lot of people are concerned with chlorine and city water," he said. Barber added 5-gallon delivery service to his business approximately six months ago. He's fairly aggressive selling his water systems to new and existing customers, saying about the latter, "We should already be in good standing with them, so we approach them first."
Point-of-Use or 5-Gallon?
Barber offers POU by customer request only, saying it is usually more expensive than 5-gallon delivery. Changing the filter is sometimes an inconvenience, and he finds locations are often displeased with taking up a water line or adding one, especially in buildings such as warehouses. Since his company is a division of a Coca-Cola franchise, he chose an affiliated bottler in Kentucky who supplies 5-gallon water called Cumberland Gap.
Lail uses location size to determine whether to push the 5-gallon or POU.
"I use what's going to be the most profitable for me," he said. If the location is only going to use three or four bottles a month, then Lail encourages the POU system.
If the amount reaches 10 bottles a month, then bottled water delivery and the associated costs become easily recoverable. His 5-gallon bottles are filled with certified Spring water, not filtered city water, and people taste the difference. "People prefer bottled," Lail said. He uses Oasis coolers.
The Case for POU
Due to 5-gallon delivery costs and lower quality products coming from overseas, POU manufacturers claim the 5-gallon bottled water sector is diminishing.
Purlogix's Householder further pointed out large soft-drink companies are dominating the single-serve market. That leaves POU as the most logical application. And the rental fee becomes an income the operator can count on. "That's the growth," said Householder. "No more fluctuating bottle purchases or seasonal profits. Take the low hanging fruit and capitalize on it."
Parks is actively dissolving his 5-gallon bottled water business into the POU systems he's selling now. "You can't sell the bottles profitably enough to run a (5-gallon) bottle company," he said. Even water companies are transitioning to POU, said Parks.
Between the labor issues, fuel, repacking bottles, etc., the (5-gallon bottle) water companies are really struggling to keep their model alive, he said.
Put Your Eggs in More Baskets
For operators who already have it all — the location, the driver, and the overhead — these systems open another stream of revenue for little to no added cost. But it doesn't stop there. It can even open a new segment on its own.
"Water is a great market," said Tom Boyer, president of Treasure Valley Coffee, based in Boise, Idaho. In order to be successful in business, Boyer recognizes the need to diversify his business to not only include coffee, but also the added value of water. He has a salesman who aggressively sells water systems to new and existing customers, and separate water trucks for his eight bottled water routes, 5-gallon being the bulk of his water business. He uses POU only on his OCS routes.
For Boyer, water systems don't just help him keep his OCS business from water companies looking to compete; they are also important in raising profits and winning new locations. Water systems are a way to increase revenue and profit from current customers.
In every business, not just OCS, expanding to other related business areas is important, said Kroustalis.
"It's like vending companies deciding to do OCS — two services for one company." Even if the customer doesn't sign on for all that a company offers, having various services is good.
"The point-of-use segment has become more attractive due to the need for diversification and water companies joining the OCS business to attract their customer base," said Purlogix's Householder. "As the market grows, it becomes an easier product sale than coffee or related services. All these items are the reason over 50 percent of our inquiries are OCS and vending related."
Water System Manufacturers Target OCS
More suppliers are taking an interest in OCS operators as a previously untapped market. "We hadn't really been focusing on office coffee service providers until last year," said Hal Voznick, general manager of Vertex, which sells POU water systems. Having dealt mainly with water treatment companies, Vertex realized POU systems lent themselves to office use.