OCS: single--cup brings opportunities
Branding could offer more opportunities in the OCS industry with the rise in single--cup systems. Nor is account downsizing undermining OCS as much as vending.
Most OCS operators interviewed, however, were not any more enthusiastic than vending operators about advertising a particular coffee brand on their machines.
Some OCS operators were quick to point out the concepts that have created the most growth in recent years—single--cup machines and airpot brewers— carry little branding that is known to the consumer. The visual presentation of these systems emphasize the production and quality control processes.
“I think it’s the concept,” said Ron Weber, president of Master Brew Beverages Inc. in Northbrook, Ill. “I don’t think the advertising on a single--cup system makes a huge difference.” Even OCS operators who believe in advertising the product are more likely to emphasize their private label brand. OCS operators have traditionally used branded coffee to win the account, then woo the customer to private label, which is more profitable.
Given the control they have over product quality when using private label, operators have long argued they can provide a better product at lower cost. Which isn’t to say that OCS operators have ignored the concept of brand marketing; rather, the brands they have marketed have been mostly private label.
Private label versus national brand
Ken Shea, the St. Charles, Mo.--based consultant and former OCS operator, said public perception of national coffee brands is one factor contributing to the OCS operators’ unwillingness to brand their machines. Operators know that better quality coffee is what consumers want today, and most of them believe their private label can out--perform the national brands. “You can produce a great cup of coffee at a greatly reduced price,” he said.
Operators need to realize, however, that not all brands carry the same equity with the consumer.
National versus signature brands
Paul Quintavalla, who operates the Broomhall, Pa.--based consultancy Icon Marketing and is a former Service America Corp. executive, pointed out in an Automatic Merchandiser article on branding in April 2004 the pros and cons of national versus signature (private label) brands.
Signature brands are more economical, more flexible, and allow the operator to showcase a point of difference. However, establishing them takes time and can be very difficult for someone not experienced in brand building. National retail brands, on the other hand, have the largest audiences and have proven themselves over time.
Adventures in branding single--cup
M&D Gourmet Coffee, based in Miami, Fla., recently set up 200 distributors of Folgers branded single--cup machines nationwide. The company sells Folgers branded Venus Progema water soluble machines supplied by VE South LLC. “The American consumer is still driven by name brand,” said Manny Rodriguez, owner of M&D Gourmet Coffee.
“People like the product,” confirmed Rodriguez’s customer Tico Moreno, who operates The Java Butler in Naples, Fla. Moreno placed all 10 of his machines in locations that already had OCS. “It’s the brand that sells the most in the U.S,” he said.
Ljiljana Novkovic was a vending novice who came across M&D Gourrmet Coffee on the Internet and has placed eight Folgers machines in restaurants and c--stores in Albany, N.Y. She said the coffee has been well received by customers.
Coffee Solutions Inc., based in Miami, Fla., has placed 120 Lioness, single--cup Nescafe machines in less than a year, noted Patrick Johnson, general manager. The high concentration of Hispanics makes Miami a good market for this product since Nescafe is well established in much of Latin America.
Goldenwhipp Coffee Services LLC, a Puerto Rico--based company that recently expanded into Miami, Fla., markets a Maxwell House branded Venus Progema machine to offices.“It (the branded graphics) gives you that extra push,” noted Julio Aranguren, general manager of the company’s Miami operation. He thinks Maxwell House has a good reputation among customers.