Editor's note: Charts are available in the PDF format.
OCS continues to return strong sales. Whether operators have full-line vending with OCS or focus just on coffee service, revenues for the segment continued to climb in 2012. The aggregate industry revenue for this year’s Automatic Merchandiser State of the Coffee Service Industry Report increased 5 percentage points to $4.33 billion, a record high in the last 10 years. Single cup is a major factor contributing to OCS growth, especially as operators introduce single-serve alternatives with better margins and educate locations about them.
More profitable coffee wasn’t the only place operators cut costs to increase revenue. Many experimented with paper goods, such as less expensive cups, in order to maintain or grow profits.
Also contributing to the increase in revenue was more aggressive marketing by operators in 2012 with sales departments finding more business, including growing small businesses as the economy improves. Challenges included increased competition from internet retailers and office supply stores, especially on prices for single cup options.
More than 220 operators from the readership of Automatic Merchandiser and VendingMarketWatch.com responded to the OCS survey and provided valuable date and insights, used in the report.
Dropping green coffee prices, as seen in chart 3, contributed to the higher revenues in 2012. Despite this, half of operators again raised prices in 2012, although that represents fewer operators than in 2011, see chart 4a.More than 40 percent made no changes in price. The reason for this is mixed. In some cases, it was due to lots of competition driving acceptable prices, making it difficult for operators to increase them. To maintain profitability in these cases, operators used cost cutting in other areas of their operations, such as in paper goods and services offered. Other operators made no change because they had previously raised prices to a profitable level and coffee consumption increased.
According to the National Coffee Association (NCA), overall coffee consumptions is up 5 percent over last year among Americans. In its National Coffee Drinking Trends Report, the NCA reported that 83 percent of U.S. adults now drink coffee, compared to 78 percent from the 2012 report. Daily consumption has remained strong and steady at 63 percent, with those who drink coffee at least once a week up slightly to 75 percent.
Operators found that despite the recession and price conscious locations, coffee remains a valuable perk employers want to offer employees, especially among new businesses.
Prices increase again
The average price for both single cup and more traditional OCS coffee increased over the past 12-month period, shown in chart 4c and 4d. Single cup increased to 43.06 cents per cup. From operator responses, that number is a median between two industry trends. Either operators increased prices based on supplier/cost increases or dropped prices to remain competitive. If prices dropped, often new equipment and product was offered, such as pod brewers. Single cup is still a powerful trend. Operators report heavy requests by locations for single serve coffee.
The increase in average price per cup for frac pack, plumbed-in and pourover coffee was driven by wholesale price increases and consumers asking for more national brands, as well as heavier pack weights.
OCS locations increase
The average number of OCS locations served by operators went up in 2012, from 2011, by an average of 18 stops. Operators reported that this was due to new sales efforts by their companies and operating efficiencies which allow for delivery to smaller locations. Chart 5 shows that in the past 12 months, operators have added more accounts with less than 10 people. They represent 2.7 percent of OCS accounts nationwide, whereas last year it was less than one percent. Accounts between 11 and 99 employees stayed relatively flat. There was a jump in large accounts, however, as these businesses recovered from the recession and added employees.