In February, Royal Cup, Inc. announced that Chip Wann had been named president and chief executive officer of the company. As the first non-family member to lead the company since its inception in 1896, Wann will oversee Royal Cup’s longstanding tradition of coffee roasting excellence and unparalleled dedication to customer care. Automatic Merchandiser caught up with Wann for a virtual cup of coffee to discuss his new role at the company and Royal Cup’s long history in office coffee service.
Q: Congratulations on being named president & CEO of Royal Cup! you joined the company in 2017 as CFO, and then moved to the role of COO in 2019. How does it feel to lead such a well known company with a long history in the industry?
Thank you! I am truly honored and humbled by the opportunity. I came to Royal Cup in January 2017 as the CFO and did not expect to one day be the CEO of the company, primarily because the company was family-owned and family-run. When I was recruited to join Royal Cup, Bill Smith III was the CEO, a third-generation family leader of the company. For all those reasons, it was not something that I expected.
I believed I could add significant value to the company from the CFO responsibility set, as well as on a variety of operational functions given my previous experiences, but, again, never thought I would be the CEO. I am excited about the opportunity to the lead the company and, as your question indicates, I am especially excited about leading a company with such high-quality products. [The company] operates with integrity in everything that it does, has outstanding people across the country, provides an unparalleled continuum of service and provides great value to its customers and their respective customers — all of which has been the core fabric of the company since its founding in 1896.
Q: Royal Cup works directly in foodservice, hospitality, office and specialty coffee markets. How is office coffee service different than these other areas?
Office coffee service is different in multiple ways. First, the product set is typically different and more complex. There has been a significant shift to single-serve coffee, coupled with a need for materially more snack products with the growth in employer-provided or employee-paid snacks. It is less intense on coffee roasting and more intense on the number of products offered.
Secondly, the delivery is different. In office coffee service the delivery is typically through the front door as opposed to the back door, and our employees almost become an extension of the customer’s workforce by helping in their break room to make sure the customer has a smooth and seamless experience. Lastly, the equipment requirements and related equipment service are materially less in the office coffee services environment. The advancement of technology and “smart equipment” in the segment is adding another level of complexity.
Q: Royal Cup has been providing office coffee service for nearly 50 years. How has office coffee service changed during that timeframe?
A: We believe it has changed dramatically in the last 50 years and possibly even more so in the last five to seven years. When the segment started it was simply basic coffee service — a pot of coffee, creamer, sugar, cups and stirrers. Today, it is becoming predominantly single-serve offerings like bean-to-cup machines featuring multiple varieties of coffees to appease a wide variety of preferences.
Additionally, many offices today offer far more items to their employee base, from basic refreshment (water, soft drinks and light snacks) to significant pantry-style programs with literally 100 different snack items (e.g., granola or protein bars, beef jerky, chips, crackers, fruit, yogurt), including specialty coffee drinks and cold brew offerings. To call today’s segment office coffee services is a misnomer; it should be called office refreshment services.
Q: Office coffee service continues to be a growing segment for operators in convenience services. Do you expect this growth to continue throughout 2020? How can operators capitalize upon this and grow their accounts?
A: Generally, we believe the office coffee services segment will continue to grow throughout 2020 as more employers continue to provide enhanced refreshment services to their employees to be more competitive with other employers, as well as to drive enhanced efficiency with their employee base (i.e., if the snack or beverage is already in the office, then the employee doesn’t have to leave or walk down the street to find what they are looking for). Capitalizing on the opportunity generally means the ability to offer a larger variety of beverages, snack or meal options to customers to meet the demands of their employee base and being able to offer flexibility over regular intervals.
A couple of items could slow down or indefinitely suspend that growth. Historically in recessionary times, we have seen employers pull back on free refreshment offerings to employees as a means of reducing costs. Or, as employers offer (or find it necessary) to provide more flexible work schedules for a variety of reasons, that could result in a slowdown.
Q: In your mind, what are the most significant challenges facing the industry? What is your advice for operators in addressing those challenges?
A: We believe many of the opportunities to grow also pose some of the most significant challenges. There is a demand for more products and [for] the flexibility to change out products more frequently. While this provides an increased revenue and related profit opportunity, it also brings more challenges from a supply chain perspective — managing procurement through more vendors with more inventory and an ability to adjust more quickly.
Additional challenges facing the industry are the move to single-serve, which drives materially different and more expensive equipment, and the related service to keep it operational. Simply put, the business model is becoming infinitely more complex. To be successful and address those challenges, we believe organizations like ours need to be representative of who we are and not try to be somebody else. It is very difficult and typically not very profitable to try to be all things to all people. Clearly, operators need to embrace change and constantly innovate AND balance that against their core competencies.
Q: Sustainability is important to Royal Cup. Can you share a little about how the company will meet its 2020 goals detailed in the most recent sustainability report, and long-term goals like going carbon neutral by 2025 and becoming a certified B corporation?
Royal Cup strives to both operate in a sustainable manner and to do what’s best for our employees, customers, vendors, the communities in which we serve and operate, and, more broadly, within the coffee and tea industry. Our Sustainability Team is focused on making sure the company accomplishes its 2020 goals and is committed to finding ways to familiarize our team members with our sustainability efforts where and as needed.
As far as our stated long-term goals, we are committed to evaluating our progress frequently and expect to be challenged by others in unique ways. By setting long-term sustainability goals, we are making a commitment to report on the progress we achieve against defined metrics in our annual sustainability reports. We will leverage the knowledge of both internal and external experts to guide us along the path towards success.
Defining our carbon footprint [and] educating our teams on changes we can — and should — make, is an important step. Making decisions that support the reduction of our carbon footprint, such as a review of our company travel, also means consideration of carbon credits. Being granted a B corporation certification is an aspirational goal that aligns well with the fundamentals and vision of our leadership team. We have begun to embark on this achievement and remain committed to this goal.
Q: What is your favorite coffee drink?
My favorite coffee drink is a cappuccino made with any one of our H.C. Valentine coffees (our artisan roasted coffees from our Specialty Plant). Royal Cup sources and roasts some of the highest quality coffees in the world – it’s pretty tough to compete against that.