Coffee service operators have experienced rapid gains in coffee prices as of late, which led to an informative panel discussion on the topic at the Southeastern Vending Association Convention (SEVA) at the Sandestin Resort in Destin, Fla. Last week.
The session, titled "Getting more green from the little beans," drew a large audience and was introduced by Warren Philips, a SEVA board director and president of Validata Computer & Research Corp.
Geoff Paul, president of Excelso Coffee Co., moderated the panel, which included Don Stoulil, principal at Wolfgang Puck Coffees, Howard Fischer, president of US Roasterie, Rick Dutkiewicz, a partner at National Coffee Service & Vending Inc. based in Lake Worth, Fla., and Vic Pemberton, owner of The Pepi Companies, Dothan, Ala.
Paul got right to the heart of the matter by noting green coffee prices hit $3.13 per pound in May, approaching a historic high point. "We have seen a meteoric rise," he said.
Fischer said OCS operators would have to quadruple their prices in order to protect their margins, something that most operators would agree is unfeasible.
Fischer also noted that the more coffee costs, the more money they lose in shrinkage.
He said the rising cost of oil contributes to the higher price of coffee.
He further noted speculative buying is also a factor. One year ago, he said 5 percent of the market was affected by speculator buying, while it's now affecting 30 percent to 50 percent of the market.
Stoulil said rising world consumption affects the price of coffee as well.
Paul said operators need a plan to raise prices a second and third time. He said operators need to position themselves not as doomsayers but as educators. "You need to sell the service with the commodity," he said.
Stoulil, a longtime coffee service operator before moving to the roasting side of the business, said history has shown that rising coffee prices don't stop companies from making money. He recalled that prices skyrocketed in 1975.
"Even if it (the price) doesn't come down, there's money to be made in the service side of the office coffee business," Stoulil said.
Pemberton, who is both a vending and coffee service operator, said he sets his coffee prices on 3- to 6-month schedules. He said he educates his customers quarterly about coffee prices.
Pemberton said he always asks his customers what is most important to them, and their answer is always the taste of the coffee. When he presents new coffee to customers, he brings donuts and comment cards.
Pemberton said he is also educating customers about health aspects of coffee.
Fischer said operators should resist offering lighter weight coffee packs.