Secrets To Winning The Coffee Game

Oct. 1, 2018

In today’s business environment, a successful office coffee service provider needs more than a love of coffee. There are too many competitors, too much volatility in coffee prices, too great a shift in what is important to the OCS decision maker at a facility. It means OCS business owners must stay informed and current, which is the daily goal for Bill Levine, founder and president of American Coffee Services, based in Cleveland, OH.

“You can’t just show up. Otherwise, it’s a recipe for disaster,” he said. “Business people have to be informed.”

This mantra has helped him grow for the past 60 years changing his operation from a vending focus to fully OCS. It is why he has always tried to diversify and take advantage of new opportunities in addition to managing as many fluctuating costs in his business as possible. This allows him to balance offering affordable coffee options with exceptional service and invest in professional marketing that includes utilizing new trends and technologies that appeal to decision makers.

Vending beginnings 

Levine didn’t always have a coffee service business. He started out running Atlas Vending in 1958, which serviced vending machines in Ohio, as well as game rooms in various other states. That was when a friend with a small coffee distributing company asked him for a favor.

“He was going bankrupt and begged me to take the business and just put it in my warehouse,” said Levine. Because it was a friend and the business had a small group of dedicated customers, Levine ultimately said yes. Fast forward a few years and Levine got a surprise phone call from his accountant. “He said, you know that small coffee distributing business you run, but don’t put much attention into? It’s making more money for you than the rest of your segments,” recalled Levine. That was a turning point. Levine bought a much larger coffee distributing company and sold his vending and gaming businesses. That was nearly 30 years ago.

Managing volatility 

Through the years managing a successful business, Levine has developed a strategy of eliminating as much unpredictability as he can. With coffee, that means purchasing it green.

“That’s one of the ways we remain competitive,” said Levine. “There’s too many other extraneous costs that we don’t have control of — bank interest rates, increases in packaging costs, etc.” In his market, consumers are still price sensitive. He can be competitive on price, and still have control of his profit margins, by purchasing and then warehousing green coffee.

While Levine buys green coffee to manage volatility, green coffee prices can themselves be volatile. “Many things can happen that affect the price,” said Levine. “You need to know where there’s rust on plants. Weather patterns are important — an El Nino is a big deal.” He adds that even more can affect the price, such as money market and hedge fund traders. These groups affect the commodities market with speculation, shorting it, longing it and nano trading. 

“There’s a side of our business that’s affected by the stock market,” said Levine. “Coffee is the most traded commodity in the world.” The changes in coffee prices used to be impacted by supply and demand, however, now there is also speculation related to supply and demand, indicates Levine. “The challenge is really in the futures market which is very unpredictable,” he said. “It’s a matter of being observant and watching things closely.”

Because of his dedication to staying informed, Levine ensures he is paying attention to news and events from around the world that might affect his business. “The internet gives you the opportunity to be close to the ground,” he said. “It informs. Use the internet to your advantage.” He recommends trader forums for those looking to educate themselves on buying a commodity, such as green coffee and web news sites for updates related to weather and political changes in coffee growing areas.  

Private label and sustainability 

Thanks to buying green coffee, Levine can have it roasted and packaged into a number of different private label coffees. The OCS division of American Coffee Services alone has 10 different private label varieties with different blends and weights. “We are big believers in private label,” Levine said. “We’ll even be coming out with our own pod soon.”

The prefiltered pod Levine has planned gives America Coffee Services the ability to offer private label coffee for single-cup brewers, an area Levine sees increasing. “Consumers really like the convenience of single cup,” he said. “Keurig created a whole new idea of coffee consumption, much like Starbucks did with coffee awareness. We have to give those brands a lot of credit.” 

The pod not only allows Levine to offer his own coffee, but it is also an ecologically sound option for which customers are asking. “Today’s pods can have a corn-based package around the pod, so it’s all sustainable,” explained Levine. “More and more, ‘green’ is something people look at. If you can get it in a cost comparable to others, they will opt for that choice,” he added.

Diversification proves beneficial 

Besides a dedicated OCS segment, American Coffee Services also has two other segments, in-room coffee for hospitality and an online coffee retail business.

American Coffee Services was a pioneer in the in-room coffee segment. Levine recalls, “25 years ago, my wife called me while I was at an industry event and says ‘there’s a small coffee pot in the hotel room. You should get into this.’ So we did.”

It required finding a national brand to work with, so Levine pursued Conair® and the Cuisinart® brand. “We got the license from Conair and started placing brewers at hotels,” said Levine. American Coffee Services currently providers the in-room coffee for several national hotel chains. “It’s a substantial part of our business,” added Levine.  

Internet marketing is paramount 

When Levine got into the online coffee retail business 15 years ago, he really learned the importance of the internet. “A lot of internet marketing is essential in the retail space,” said Levine. “To succeed it takes money for qualified consultants who optimize your presence and start a pay per click program.” He believes that it really doesn’t matter if an operation is selling to a local area or is state-wide, internet management is a necessity to survive.  

Levine’s retail segment, called, Coffee House Express, has its own website, independent of American Coffee Services. It operates 24/7, shipping coffee to locations across the U.S. Levine credits its success to the investment he has made in enlisting internet marketing experts and reviewing web analytics with them.

“You think you’re getting a lot of traffic, but sometimes it’s not the right kind — the kind that will lead to a sale,” he said. This is the information a true expert can help uncover and optimize a program to create. “You can’t ignore the internet intellect,” added Levine. “You need high level people with knowledge and background. That is costly, but still not as capital intensive as buying equipment such as games for game rooms.”

As the founder and president of American Coffee Services for more than 60 years, Levine has watched the industry change. Now more than ever he says it’s important to balance offering affordable coffee options with service and invest in professional marketing knowledge that includes digital and social consultants. Stay educated on what affects business and stay ahead of trends. Together, it’s a winning strategy he plans to continue using in the future.