Ownership of single-cup systems jumped to 10 percent from 7 percent in 2012, according to NCA, and 36 percent of those said they have owned their single-cup brewer for less than six months.
Perception of the quality of coffee from single-cup systems continued to improve in 2012, with 25 percent rating the brewers as “excellent” versus 15 percent who did so the prior year, according to NCA. By combining those who consider single-cup brewers as “excellent” and “very good,” 57 percent were positive in 2012 versus 45 percent in 2011.
OCS less affected by economic woes
The OCS industry has fared much better during the nation’s recession than the vending industry, which lost revenue every year since the recession began in late 2007. A key reason being that OCS sales do not rely on consumer confidence as much as vending sales do. The OCS buyer, unlike vending purchaser, is not the end user.
OCS sales are affected by employment levels. Fewer people in the work place translates into less demand for work place services such as OCS. In addition, employers scrutinized all their costs in an effort to improve their profitability. In some cases, they eliminated or reduced spending on OCS.
But as employment levels have improved in the past year, (the nation’s unemployment rate fell from a high of 10 percent in the first quarter of 2009 to a low of 8.1 percent in April 2012, rising to 8.2 percent in May and June), OCS has been quicker than vending to recover. As noted in the Automatic Merchandiser State of the Vending Industry Report, the employment gain did not benefit vending as much as some expected since many workers were less willing to spend money due to uncertainty about their employment security. This dynamic did not affect OCS for reasons stated above.
Another difference between vending and OCS is that the former service has a larger minimum population requirement. The fallout in large worksites has undermined vending far more than OCS.
Employer cost consciousness continues to restrain some employers from spending more on OCS. While many employers stopped cutting their payrolls in the last year, most have not restaffed to pre-recession levels. And while many employers want to provide OCS to improve the work environment, some companies have opted not to have OCS and other benefits until they are able to rehire more laid-off employees.
OCS operators face higher costs
Chart 11 notes that more OCS operators were forced to absorb higher operating costs in 2011/2012 than any of the last four years.
On the positive side, fewer operators reduced staff this past year than any of the past four, indicated in Chart 12a, and a 62 percent majority noted no staff changes.
In each of the last 12-month periods, operators who added staff most frequently added delivery personnel, indicated in Chart 12b. This demonstrates a healthy level of business expansion.
Another positive sign, indicated in Chart 12c, is that OCS staff reductions, where they occurred, did not include sales people. This demonstrates the high level of importance that operators place on sales in their operations.
While fewer operators offered customers online ordering, indicated in Chart 14, more are using social media, indicated in Chart 15a. Operators interviewed noted they view social media as a customer relations tool more than a sales tool.
More OCS operators billed customers for fuel in 2011/2012 than the prior year, indicated in Chart 10a, reversing a decline in the prior year. Operators have increasingly billed for fuel on a selective basis, indicated in Chart 10b.
Single-cup resumes rapid growth
One of the most significant signs of OCS strength in the last two years has been the return to a steep growth of single-cup brewers, indicated in Chart 8. The growth slowed in the prior two years when locations were more cost conscious. Since then, locations have become more willing to spend for good quality OCS. Further strengthening this demand has been rising consumer appreciation of single-cup driven by a rapidly growing homeowner market.
While the homeowner single-cup market has created some additional pricing pressure for OCS operators, the increased awareness resulted in a more vigorous worksite demand for single-cup.