Workplace coffee has been a growing segment for years; ever since consumers began incorporating gourmet and specialty coffee drinks into their daily lives and paying the higher price for better quality. OCS operators have been able to sell more coffee as well as ancillary products that complement a premium breakroom experience. However, the segment requires more than a “one and done” sales approach, with its specific and often regional differences. There are opportunities and challenges and this is how a group of top OCS providers adjusted their service accordingly.
Local business climate changes
Because the industry provides refreshment for employees, it is tied very closely to local businesses, affected by their profits and losses. That’s why it’s important to stay ahead of economic trends in your area to avoid being unprepared for changes. That was a very recent lesson for Kevin Searcy, operations manager at Golden Brew Beverage in Odessa, TX, where 65 percent of his OCS customers are connected to the oil industry. “2015 was a rough year for us,” said Searcy. His sales had been steadily climbing with soaring OCS budgets of $45,000 to $50,000 per year at large oil companies. But when the price of oil dropped at the end of 2014, that all changed. “These large companies halved their OCS budgets,” said Searcy. “Then halved them again.” Golden Brew had to adapt, going away from premium, high end coffees and equipment to a more cost-sensitive solution.
“We have completely removed single cup in large locations. We’ve moved over to more traditional airpots and drip brewers.” For coffee offerings, Golden Brew began partnering with different distributors that could offer product lines locations would be willing to support. Searcy’s team met with different distributors, such as White Bear Coffee in Grand Rapids, MI, and Community Coffee in Baton Rouge, LA, to come up with some value options. He has met with the locations and renegotiated service contracts; plus given additional training to delivery personnel to deal with turnover in facility managers and how to anticipate the needs of the location in order to ensure they know what the company can offer, especially with a workforce constantly in flux. “We don’t want to lose marketshare to another operator because a location didn’t realize we could offer a product or service that they do,” Searcy said. He’s really focused on ways to keep his customer base through this challenging time, which, based on his research, isn’t likely to start a recovery until much later this year.
On the flip side, Pete Tullio, CFO of World Wide Vending and Gourmet Coffee Services in Van Nuys, CA, has adapted to the success of technology companies in his region with higher end, premium service and product options.
“In our area, the economy is recovering,” said Tullio. “Good employees are valued and want to be kept. Offices are doing much more to keep them than even three or four years ago.”
That means offering new and exciting coffee drink options, such as cold brew and single cup brewers with a variety of blends. Large offices are demanding a coffee experience in the workplace, which has led Gourmet Coffee Services to place many bean-to-cup coffee brewers. It also means offering a large selection of coffee from premium to decaf in order to meet everyone’s needs in the workplace. “In order to be successful with it, you have to bring the bean store to the office,” Tullio explained.
A coffee shop isn’t the only thing Tullio has realized California businesses want in their workplace. Food, snack and sundry delivery has also been an important and growing aspect of Tullio’s OCS business under the name pantry service. Pantry service is the delivery of a variety of different products to a location which can include soda, snacks, food, paper products, etc., which are then offered to employees, but paid for by the employer. Pantry service has doubled the number of OCS SKUs Gourmet Coffee Services keeps in its warehouse, increasing the need for good asset management, but it has also been a very profitable addition. “The opportunity is there,” said Tullio, “for providers willing to move out of the old fashioned model and who are very receptive to what offices are demanding today.”
Adapting to local business wants and needs is only part of the balancing act performed by forward-thinking OCS providers. The remainder is looking within to examine if the established business and service models are working today.
For years, OCS was built on a strong service model that focused on creating long term relationships and in-person meetings, but the world is changing. For Howard Chapman, President, Office Beverage Division of Royal Cup, this is what drives him to innovate. “We have been thinking about the overall service model and how it does or does not meet the expectation of today’s Millennial employee and now, more and more, today’s decision maker,” he said. Royal Cup has been examining customer satisfaction from the products it delivers to the way its customers can shop. Through a recent companywide service survey, it found that consumers can love the people and love the service, but still push for a more digital solution. “They want to interact with us on things like service calls and product requests via the Web,” said Chapman. They want flexibility, but they also want to do what they’ve always done.” Specifically, Royal Cup has had to adapt to consumers who are used to ordering from online retailers like Amazon. They expect to order any day of the week and get the product the next day, according to Chapman. This doesn’t fit with a traditional, full service OCS route that uses handhelds and delivers with a prepacked truck.
Chapman wasn’t alone in noticing this 24/7 ordering and next day delivery expectation of today’s OCS customers. All of the operators at the roundtable have felt the impact of Internet sales. “It’s a double-edged sword,” said Tullio, who knows he loses some items to online retailers or big box stores with strong Web commerce sites. However, Gourmet Coffee Services uses the Internet to maintain a steady communication with its customer base. “We want to instill the thought that we are the first source for any of their office pantry needs,” said Tullio, “and strong customer relationships help.”
Jeff Deitchler, general manager of PrairieFire Coffee, located in Wichita, KS, also feels pressure to change and is concerned about the outcome.
“Online ordering really takes the personal service out of coffee service,” he said. “I shudder to think of the day that it’s totally hands off for our sales and our service people to upsell or present new items. But I’m afraid that’s coming because it is a point and click world we live in.” Deitchler cites the changes in meeting attitudes among decision makers. A few years ago, to get in the door and make a sale, locations preferred in-person meetings. Now, they would rather communicate via email or conference call. “I hope it never depletes the value proposition of the service we provide, but for now, our job is to offer and sell a service in the way the customer wants it. We have to be cognizant of that and adapt to it each day.”
So how do you ensure customers value your service in a digital-focused environment? Response time, dependability, strong digital ordering technology and delivery flexibility as well as exceptional innovation for a new and exciting breakroom.
“The number one thing we believe in is quick response time,” said Searcy. In his area of Texas, there are many locations in urban sites that have varied coffee stock, often depleting their coffee at random times. Therefore, Searcy has a rotational route driver in the warehouse from 6am to 10am. This is usually an equipment service technician who has also been trained on routes and selling. If a location calls in needing coffee, the rotational person will be sent to deliver it. “Almost every day someone calls in with a delivery need,” said Searcy. He has also embraced the digital side of ordering by creating something unique for his customers. “Recently, we added a smartphone app instead of a mobile Website,” he said. The app allows his customers to scan the UPC code on items they need to reorder. It creates the order for them, and also notes the location for Searcy’s delivery personnel. While still in its testing phase, Searcy has high hopes as customers at large locations with multiple break areas can take the smartphone with them and create an order electronically. “It’s been especially helpful with pantry service,” added Searcy.
Royal Cup has also adjusted delivery. In some of its metropolitan markets where there is a corporate campus with lots of breakroom areas, the company assigns a dedicated attendant. That person does the inventory, cleanup, ordering, etc. and is considered part of the service. It saves time for the driver and is more efficient. “We even have some hybrids of this idea where there is an account manager for several accounts that are close by one another, all with very varied needs that you can’t really anticipate.”
Delivery isn’t the only way Chapman has increased service. He has also focused on growing segments within OCS. “Single cup continues to be the number one solution in our new account acquisition by a long stretch,” he said. “Water filtration has also been very successful, especially as leak prevention kits have become better.”
In Kansas, Deitchler impresses customers with service in other ways. “You’ve gotta show up,” he said. That means always being there when you say you will be and being responsive to comments and requests.” PrairieFire has one phone number that handles all incoming calls. There is a person, not an automated system, who answers 24/7. That person gauges the issue and severity and then makes a service dispatch plan depending on the time of day. “We definitely hang our hat on service,” said Deitchler. In addition to a focus on reacting to customers, Deitchler also makes an effort to be in front of them and partner with local businesses. “We have always done a lot of community activities but we’ve increased our involvement to more groups. It has given us more exposure,” said Deitchler. The company has entered into some new partnerships as a result and strengthened many existing ones.
These OCS providers haven’t succumbed to the industry’s challenges. Instead, they focus on the great people, the energy of the coffee service industry and the new products and service lines that will better meet the needs of their regional businesses. In short, they adapt. Office coffee service will continue to be a growth segment for those who can balance today’s emerging trends.