2012 Coffee Service Industry Report: Rebound continues for the second straight year

Such operators gained incremental sales by inviting customers to place coffee orders at the work site for home use. Operators offer the coffee at competitive prices and provide the convenience of delivering it at the customer’s work site. Operators deliver these orders on their routes, incurring almost no additional labor cost.

Operators noted that coffee pilferage does require policing, but this issue predates single-cup coffee and has not become noticeably worse because of it. Operators also noted the issue is often a greater concern to the location manager than reality merits. In such cases, operators are able to address the concern by communicating with location managers.

A bigger operator concern is pricing pressure from retailers on Keurig K Cup^®s, the dominant single-cup product, both at retail and in OCS. Symphony IRI Group, Inc., the retail research firm, noted the K-Cup^® packs from Green Mountain Coffee Roaster’s sold through the grocery channel hold a clear lead over other single-cup beverage packs.

Equipment manufacturers and coffee roasters have developed K Cup^® alternatives to offer OCS operators a more profitable alternative. These efforts increased in the past year in anticipation of the expiration of patents in September, 2012 on some earlier K Cup^®s. (See story on page 12).

Whether or not competing products can offer the same popularity as K Cup^®s remains to be seen.

Manufacturers of soft pod-based, single-cup systems have attempted to offer a more profitable alternative to Kuerig and other cartridge systems for several years.

The soft pod-based systems offer much of the same benefit as cartridge systems in that they have portion and brewing control, but they also offer the added benefit of allowing operators to source coffee from different suppliers. The soft pod-based systems also have the advantage of being biodegradable.

Many operators agree that the soft pod-based systems have improved in quality in recent years. However, these systems are hampered by the following: 1) The initial systems introduced to market several years ago were mechanically faulty and delivered negative customer experiences that need to be overcome and 2) The cartridge-based systems have already secured market dominance.

In addition to these concerns, given the current dominance of the established single-cup systems, any new systems will require OCS operators to invest in additional product and equipment and manage additional inventory.

Some OCS operators are nonetheless enthusiastic about soft pod-based systems on the basis that some of the newer systems deliver a superior tasting product.

Environmental concerns continue

The number of operators offering products that address environmental concerns did not increase in 2011/2012, despite widespread publicity about environmental issues. For the second straight year, operators interviewed noted that consumers say they are concerned about environmental issues but are not willing to pay extra for environmentally-friendly products.

Technological innovation continues in OCS equipment. Brewers have been introduced with remote monitoring capability that makes OCS management more efficient. Brewers have also been introduced with video touchscreens, similar to some of the new vending machines.

These and other innovations continue to emerge at OCS industry trade shows. Operators are evaluating new tools and comparing them to those they already have to meet the customer’s demand for good quality coffee in the work place.

The newer delivery systems are gaining popularity as OCS operators find these tools allow them to provide customers a high quality refreshment experience at an affordable price in the work place.