Another factor contributing to the OCS industry’s revenue growth was the continued expansion of single-cup coffee systems, a trend that began more than 10 years ago.
The fact that single-cup systems continue to expand during a period of low consumer confidence demonstrates the high value these systems have earned among account decision makers. The popularity of these systems also reflects the high level of value that consumers place on high quality coffee in general, quantified by rising coffee sales in all retail channels.
Single cup has geographic disparities
As single cup has expanded in recent years, the geographic disparity in single-cup’s popularity nationwide has become more pronounced. Single-cup systems are considerably more common in the Northeast, followed in order by the West, the Midwest and the South. In all regions, single cup commands stronger penetration in large cities than small population areas.
Where single cup represents the majority of OCS accounts in New York City, they remain virtually unknown in rural Missouri.
The higher cost of operating single-cup systems compared to batch brew systems has resulted in market dominance by very large OCS operators in the markets where single-cup systems are most common.
As a result, the larger operators have begun to define OCS as a professional specialty, more than at any time in the industry’s history.
Single-cup system manufacturers have played an undeniable role in this development, a role that extends beyond simply providing products and equipment.
The larger operators have enjoyed sales, marketing and training support of single-cup system manufacturers, considerably more than their smaller competitors. The importance of this support on these companies’ professionalism has been significant. The support has included identifying sales leads, sales training, Website development and marketing materials.
Unlike the manufacturers of the more traditional coffee brewers and fraction pack coffee, the single-cup system manufacturers have dedicated resources specifically to the development of the OCS market. More traditional equipment suppliers focused on OCS in addition to foodservice. Fraction pack coffee suppliers focused on consumers, foodservice customers and retailers in addition to OCS.
The OCS professional emerges
The most significant OCS development in 2010/2011 has been the emergence of the OCS professional, an operator more attuned to his customer’s needs, supported by an organization aggressively focused on meeting these needs in a profitable manner.
For operators willing and able to invest in their operations, single-cup providers have directed them to query their customers to better understand their product preferences. The vast array of products available allows operators to meet a variety of customer needs.
The Internet tools that single-cup providers make available allow operators to communicate product features and benefits via their own Websites and by email.
Improved marketing professionalism has proved helpful in light of the fact that many OCS customers value better quality products.
One reason these efforts have paid off for OCS operators is that many OCS customers have demonstrated a new willingness to spend money on OCS despite the recession.
While employers in most industries have not rehired workers they laid off since the recession began, many of them enjoyed record profits and were willing to spend money on productivity enhancing benefits like OCS.
Employer willingness to spend on OCS was not uniform; companies exhibiting this tendency were those that better recognized the value OCS has on employee productivity.
Many employers continued to spend less money on all benefits, including OCS. In these cases, OCS operators were able to meet the need to reduce costs by offering less expensive coffee and/or fewer allied products. As indicated in chart 6, coffee has increased as a percent of all OCS sales for the last five years.