It'sa fact that consumers don’t mind spending money on coffee and coffee-related items. Coffeeshops are adding more beverage options than ever and trying to blend technology and service to capture the consumer demand. New forms of ready-to-drink cold coffee beverages are hitting shelves to satisfy America's caffeine habit on the go. This leaves office coffee service providers with a great advantage since they are already on site and have an ally in the location who is paying for their service. To keep this hard-won advantage however, operators need to offer new and exciting options. OCS operators across the country shared the fastest growing segments of their operations, and it resulted in five areas of growth that every OCS operator should consider. These are the services and products customers want and will expect OCS operators to have.
Single cup
A single-cup coffee brewer is the most requested program by workplaces looking to upgrade their coffee service. Customers enjoy the personalized and engaging experience of single-cup coffee brewing. “We are growing single cup at a very high rate,” said Howard Chapman, president of the office beverage division for Royal Cup, Inc., a large roaster, distributor and office coffee service provider headquartered in Birmingham, AL. “I would estimate that over 60 percent of our new business today includes some form of single cup.”
Part of the appeal is the variety of coffee and other beverages available in single-cup, which is extensive. That many options comes with a price, however.
Steve Bailey, CEO and Chairman of Merus Refreshment Services Inc. based in Greenville, SC, says single cup is a substantial portion of his business revenue. While in the past customers weren’t willing to pay over 20 cents per cup, they will now pay 60 cents for the single-cup option without a second thought. While so far he’s been successful offering these systems to customers, he does worry about the coffee quality that some deliver. “I’m afraid we’re doing now what we did in the mid 1980s when we dropped weights,” Bailey said.
He is referring to a period when coffee was so expensive that many coffee producers reduced the amount of coffee in the fractional packs served in the office to keep prices low. In the 1980s, coffee drinking had dropped substantially, thought to be driven, at least in part, by the reduced flavor in coffee as well as an old-fashioned connotation. The revival of coffee being profitable happened in the 1990s as specialty coffee became favorable and places such as Starbucks turned coffee from a commodity into a personalized splurge. This idea of a coffee for “me” has driven the desire for single cup where each user can create their own cup of coffee or hot beverage.
Point-of-use water
Before succeeding in OCS, Bailey sold 5 gallon water coolers. Now he offers both 5 gallon water service and point-of-use (POU) and is in a perfect position to see the shift. Many companies are replacing 5 gallon water coolers with POU systems. However, POU is growing organically as well. Bailey has many new customers that had no water service previously. “The term contracts on POU have gotten shorter and the pricing structure has made it possible for more companies to offer water as a benefit,” he said.
Robert Friedman, president of Coffee Distributing Corp., a Canteen branch (since 2011) serving the metro area of New York has also been experiencing this change. “Point of use water systems are increasing in share, compared to 5 gallon,” said Friedman. Currently, POU represents a third of the company’s water sales and is steadily growing.
POU has a number of advantages for both the location and the operator. It is considered a more eco-friendly option as it doesn’t require the bottling and transporting of water. Plus, it saves costs associated with 5 gallon. With the increasing popularity of water as a consumer beverage of choice, offering several water options is a must. According to the latest International Bottled Water Association’s report, bottled water volume achieved a new record exceeding of 11.7 billion gallons. This number has been increasing as many other beverage offerings, such as milk and soft drinks, have been in decline.
Pantry service
The concept of selected snacks offered to employees by their employer at no charge is beginning to take shape, though it has many names. For some OCS providers it is pantry service with a selection of snacks, single-serve beverages and other items delivered to the breakroom for employees to enjoy. For others it might be called a micro kitchen and include a site-specific employee there to manage the break area and serve specialty drinks during the day. Royal Cup offers pantry service with employer sponsored items and an on-site attendant option. The dedicated on-site attendant in selected large accounts is where the company is really seeing expansion, explains Chapman. “This is across our geography and we have developed tight metrics around which accounts might qualify,” he said. “However, in those accounts that do quality, service levels go up exponentially. It also helps increase annual route sales and free up route driver time.”
Chapman believes that the increase in his pantry service business is driven by an example set by technology companies. “If you consider that the Googles of the world offer anything and everything to employees in their Micro Kitchens, we should not be surprised that some traditional OCS accounts, with increasing Millennials in the work force, are beginning to up their game in the interest of attracting and retaining the best and the brightest,” he said.
In New York, Friedman has also seen pantry service grow exponentially. For him, pantry service is synonymous with an on-site attendant since the challenges of New York parking and unloading don’t allow his drivers to visit, inventory and service a customer’s break area. Instead, for the past 4 years, the company has been placing employees at these locations to do the stocking, cleaning and ordering. “Sometimes it’s full-time and sometimes half a day,” said Friedman, “but they are operating independently on-site.” Coffee Distributing Corp. has over 60 of these employees and only sees more growth on the horizon especially with the increase in size of its customer companies and number of items they wish to supply their employees.
“We now carry 4,000 SKUs in our warehouse and many are refrigerated items,” explained Friedman. These items range from apples to a variety of yogurts, but all were requested by the customers at some point. “A lot is driven by high tech companies,” said Friedman. “They may not have many employees, but they cater to their employees who work long hours. It’s the only way to compete.” Friedman sees these companies easily spending $5 to $6 per day per employee, which is much more than traditional OCS.
Despite the high price technology companies are willing to spend, all companies are looking for ways to draw employees back to the office, retain top talent and create a positive company culture. Operators can partner with these companies and benefit with a pantry service, micro kitchen or other similar solution in place.
Cold brew
For Jeff Deitchler general manager of PrairieFire Coffee Roasters in Kansas, the popularity of cold brew came as a bit of a surprise. “We are located in the Midwest and trends tend to hit us slower,” he said, “but cold brew is here. Many more people know about it than I thought.” With that in mind, Deitchler decided he didn’t just want to offer cold brew from PraireFire, but “wow” people with it. “We decided to produce and package our own cold brew,” said Deitchler. The target for this service isn’t the traditional OCS customers looking for something hot and black, but the Millennials and people who travel and have had cold brew in other areas of the country. These people appreciate the fact that a cold brew could be available that is locally roasted. “Local means it is not warehoused for months,” said Deitchler. “We can get to market quicker, so its fresh, not preserved,” he said.
Deitchler has also found that a location does not have to be large for cold brew to be offered. He believes that a location of 10 to 20 people with good volume could enjoy the PraireFire cold brew. There has been some challenges, however. Transport of a beverage that has a short shelf life and that must be kept cold without having a dedicated route was one. Dietchler went to a beer distributor for advice “There are ways to do it,” Deitchler said. The cold brew launch is planned for Summer of 2017.
In many places cold brew is so well established, it’s available in many forms. For offices in New York, Friedman offers a range of cold brew options. “People who want cold brew have a passion for it,” said Friedman. That is why Coffee Distributing Corp. carries five different kinds of cold brew. The majority of it’s cold brew is sold in large kegs that go into a kegerator with nitro. However, Friedman has seen a surge in the ready-to-drink cold brew options the company offers, both in single serve and half gallon containers.
In South Carolina, Steve Bailey decided to get ahead of the curve and start offering cold brew this past year. “We offer cold brew as a 4-ounce filter pack,” said Bailey. The location makes the cold brew themselves in a 64-ounce pitcher with the filter pack, and keeps it in the refrigerator for employees. Bailey admits sales have been slow, but the interest is there.
“Bean-to-cup is a revolution,” explained Deitchler. He sees that customers don’t want to buy from coffee vending machines anymore. The experience is too passive — putting in money and getting one type of coffee. “They like the interaction with the brewer,” he said. The most popular bean-to-cup coffee brewer he places has 34 different drink options.
Chapman also sees the consumer driving a more digital experience in bean-to-cup brewing. “We’re pushing equipment suppliers to include digital touch screens on all their higher end equipment,” he said. “I believe this is how consumers expect our equipment to be equipped based on how important the cell phone and ipad has become in their daily lives.
Adding advanced technological capabilities to a brewer has benefits for the operator too. The new bean-to-cup machines with Wi-Fi have been a win for Friedman. Not only do the customers love crafting their own espresso or coffee-based beverage, but the ability to send messages back to the warehouse has really increased the company’s level of service. “It sends an error code, “ said Friedman, “so we know the machine needs attention from us.” He sees this becoming increasingly important for both efficiency, but also to improve service to those accounts.
OCS is a thriving business driven by the evolving consumer preference for coffee drinks. OCS operators need to consider how best to adjust their service and product mix to match. As Deitchler said, “Regular coffee drinkers are regular coffee drinkers. To grow and stay in business we have to reach more people and that means figuring out how to offer more.”
