Diedrich Bidding War; More than a Footnote for OCS

July 22, 2014
Take a breather from the recession’s cold air, courtesy of Diedrich Coffee: Two big roasters are fighting for dominance in the rapidly growing K-cup market.

Take a breather from the recession’s cold air, courtesy of Diedrich Coffee: Two big roasters are fighting for dominance in the rapidly growing K-cup market.

The bidding war between Green Mountain Coffee Roasters and Peet’s Coffee & Tea over Diedrich Coffee attests to the progress the coffee industry has made building demand for good coffee.

The K-Cup, keep in mind, is a product that the OCS industry introduced to the consumer.

Once exposed to the at-work audience, Keurig marketed its system directly to consumers through retail outlets, where it has exploded. Keurig is among a handful of homeowner single-cup systems creating a ton of buzz at retail.


It is important for OCS operators to understand the role they played in this development.

The single-cup brewer, like the automatic drip coffeemaker (ADC) in the early 1960s, is an innovation developed for the commercial market that later found its way into the homeowner market.

During the OCS industry’s formative period in the 1960s, OCS operators used the ADC to bring quality coffee to the work place. It was easy to use and it brewed a good cup of coffee.

The 5 cents a cup defied conventional coffee wisdom at the time, but OCS pioneers of the early 1960s knew the value they were offering. In essence, OCS launched the specialty coffee industry in the U.S.

That road from its auspicious start to the present had some bumps.


When the Brazilian coffee freeze sent prices soaring in the 1970s, OCS operators surrendered their quality franchise by cutting pack weights. Being a young industry, OCS did not know how to protect its franchise.

It was the specialty coffee retailers such as Peet’s and Diedrich Coffee that later reclaimed the mantle of quality coffee.

In time, OCS operators began paying attention to the consumer. And the single-cup brewer became one of the most important tools OCS operators used in this effort.

OCS was eventually able to reclaim much of its former franchise by using new delivery systems (such as Keurig) and better quality coffee. It is one reason why the OCS segment has weathered the recession better than vending.

The single-cup system suppliers eventually saw a bigger opportunity in the homeowner market, so they adapted the systems accordingly. As a result, single-cup brewers have given new life to the long dormant homeowner coffeemaker business.


The bidding over Diedrich should also remind OCS operators of their symbiotic relationship to the homeowner coffee market.

OCS operators must understand the educational role they play, lest they will lose it once again to other players.

The growth of the homeowner single-cup market has helped sustain the demand for single-cup in the office. At the present time, the commercial (OCS) and homeowner markets are on the same quality focused track. Let’s keep it that way.


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Coffee, tea and hot beverage

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