INDUSTRY INSIDER Part 2: OCS Opportunities And Pitfalls Beyond The Cup

April 16, 2019

Indeed, it is an exciting time to be an office coffee service (OCS) operator. Opportunities abound, including the emergence of whole bean brewing (which you can read about in part 1 of this series) and employers subsidizing more amenities well beyond traditional coffee and tea. In fact, in my opinion, times have never been better. My opinion regarding this has been solidified in part by what I have been witnessing these past three years regarding expanding revenue generating opportunities. So as we consider emerging opportunities, I must share one of my last oversights while wearing an operator’s hat.

During my last year with Standard Coffee Service, I began receiving an elevated number of calls from many of our route men and women asking that our company bring in sweet and salty snacks, more juice and drink varieties and such. Unfortunately for my company, I dismissed these increasing requests as random, one-off situations and not a real trend nor business opportunity. Was I ever wrong.

Profits beyond the cup

As I re-emerged into the workforce in the months that followed as a consultant, rather than a competitor, my operator friends began opening up to me about successes they were having in providing snacks and drinks to their office accounts. And many were OCS and Water only operators with no vending business. Visiting a California operator friend in 2016, I was astonished to see his warehouse that easily had more than 100 new snack and drink SKUs than they had on my prior visit some 8 years earlier. He went on to say that within just a few years, he had built a huge added revenue stream without adding new accounts. The most exciting news was that his company’s office accounts were providing these new products at no charge!

Progressive operators from coast to coast are reporting similar successes. Some sell full cases or sub-packs. Others sell snack box assortments. And there are the ultra-progressive operators that have fully developed “pantry” programs of varying sizes that are actually amenity micro markets.

Opportunity perspective

Vending and micro market operators have an advantage in that they already carry many high-demand products and have the infrastructure in place to handle weather sensitive items both within their facilities and on their vehicles. For the OCS-only operators, the leap forward is more complex both from product and product handling standpoints. But to have the opportunity to build same account profitability at a double-digit percentage rate, without having to add costly brewing systems or other appliances, is a rare opportunity.

Surprisingly, not all operators are participating significantly in this bonanza. Those that don’t have a higher level of lost account risk. This is a demand-pull, not a supply-push situation. This is driven largely by the ever-increasing numbers of Millennials and Gen Zers within the workplace. Workers within these demographic groups are having fewer big meals, snacking more frequently and desiring more better-for-you offerings, though decadent products still have their place. Employers want to keep employees and keep them at their desks. Having new amenities within an arm’s reach of desire is a relatively low-cost way to accomplish that.

Some naysayers see this as a temporary trend that might end should the economy take a turn for the worse. Most advocates do not see this as a deterrent as there are numerous low-cost, intuitive cashless systems that could easily be implemented to keep the product sales stream active. Payment apps can easily accept payments from the consumers and redirect the collected revenue to the office, which would then fund the subsequent purchase.

Ken Shea is a 35-year veteran of our industry. He is President of Ken Shea & Associates and also serves as Vice President of Coffee Service for G&J Marketing and Sales. Contact him at [email protected].