Pod system advantages
The pod brings two key advantages to the table; it is non-proprietary, meaning the operator does not depend on any one coffee supplier, and the machines are competitive in price with standard batch brew systems.
The introduction of non-proprietary product has been a long-time wish of many OCS operators who saw this as a disadvantage to Keurig and Flavia. However, the openness of the system means less quality control. Skeptics note that consumers will be able to buy pods at the supermarket sold in bulk and use them in office pod brewers. The result could be a less than satisfactory experience.
The poor quality of the newly introduced homeowner pod systems is another concern. Skeptics wonder if the negative reviews that have met the homeowner pod systems from Melitta, Black & Decker and Philips portend experiences with commercial pod systems.
These homeowner systems have encountered the following issues: 1) Inconsistent reliability of machine construction, 2) Inconsistent brewing temperature, 3) Inconsistent coffee volume, and 4) Messiness resulting from damp pods not being removed immediately from the brewer.
These issues shouldn't concern OCS operators provided they pay attention to customer service.
Established manufacturing players come forth
To date, five established U.S. equipment suppliers have introduced commercial pod systems: Bunn Corp., Grindmaster Corp., Newco Enterprises Inc., AquaBrew Inc. and Vendors Exchange International Inc. Other manufacturers are in the planning stage.
The fact that established players are offering systems has generated excitement among operators. The pod brewer has the potential to rejuvenate OCS sales in what many have characterized as a mature market. Given the lower price tag of most of these offerings, many operators believe the pod system can generate a reasonable return on investment in accounts that have historically been viewed as too small for traditional OCS.
Pod systems offer a lower investment not only in equipment, but in product as well, which means they can be priced below the portion packs. Most pods cost between 18 and 22 cents, versus an average that approaches 30 cents for portion packs.
"Our game plan is to put them (pods) in accounts with fewer than 15 people and ship product UPS," said Mike Selvaggio, co-owner at Old Time Coffee Services, McKees Rocks, Pa. "Smaller offices are the future." He reasons he can sell 200 cups a month at 42 cents a pod, generating $80, on the low side. This compares favorably to a traditional batch brew system; in the same location, he would sell one case of fraction pack coffee a month for $33.
Capital outlay is also less. With the pod system, Selvaggio doesn't need five or six thermoses to provide variety to a location, as he would with a batch brew system. His total investment will be about $150 for a machine, plus $50 for a pod rack. Pod racks are available from Holiday House Distributing Inc.
Selvaggio recognizes that the first pod units have had some quality issues, but he said the manufacturers have been responsive to his concerns.
An analysis of incorporating pod systems into a route with no single-cup machines is provided on page 42 from industry consultant Ken Shea.
Uniform pod spec arrives
The key development has been the uniform pod, noted Richard Crichton, manager of sales development at Java Trading Co., which supplies pods. The roasters and equipment manufacturers specifically wanted to come up with a pod spec that would be compatible with all pod machines.
Crichton said the pod systems will bring incremental growth. He said the systems will generate 50 percent new sales in existing locations; 30 percent will be from expanded product selections, while 20 percent will be the fact that employees won't be leaving the office. "The key to this business is variety and quality," Crichton said.