April 15

OCS Series

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dg2.epsAs Goliath moved in for the kill, David reached into his bag and slung one of his stones at Goliath’s head. Finding a hole in the armor, the stone sank into the giant’s forehead and he fell facedown on the ground. The story of David and Goliath compares to the current Office Coffee Service (OCS) environment as Big Box stores move in for the kill. Using the competitive advantage requires an understanding of strengths and weaknesses, and having a commitment to success.

OCS is a convenience that began in the late 1960’s with a vision of providing coffee and equipment to offices at a low cost per cup. The OCS convenience was worth $0.05 per cup to the office buyer, and OCS operators had a fast return on the investment in $75.00 brewers. Success creates competition, and many OCS companies started. OCS operators created competitive advantages through additional conveniences designed to improve the customer experience, including allied products, water-connected machines, and inventory service. The industry continues to innovate and create new convenience with single-cup products, internet ordering, and state-of-the-art equipment solutions.

The office buyer wants quality products that are easy to acquire at a fair price. Some office buyers may have more lofty, environmentally-minded goals. Operators must take these requests seriously, and provide solutions for today’s challenges. Convenience, alternative products, and personal service will separate the OCS operators from other channels. However, the OCS operation must clearly communicate these advantages.

The single-cup trend continues to grow because it is convenient. Proprietary suppliers of equipment and cup solutions are motivated to place equipment at little or no cost to the operator in exchange for a signed agreement to purchase a certain number of machines, and to use only the proprietary product. Alternative sales channels and Big Box stores are taking advantage of the low-cost equipment to gain market share through commercial sales. the opportunity to diversify the platform gives the OCS advantage in single-cup.

OCS operators diversify the single-cup platform using non-proprietary products, including bean-to-cup machines and pods. These open platform options require the operator to understand the functionality of the brewing equipment and product choices to optimize the customer experience. These machines are plug-n-play from the factory, but operators can make adjustments that differentiate the product and create coffee-shop quality drinks at a lower cost than a closed platform system. Additionally, some equipment options offer profit opportunities in soluble product not readily available from the different sales channels.

Alternative sales channels are typically catalog-based with a large number of branded products. However, they may not provide specialized beverage products for the office. Some operators use locally roasted products with a story to differentiate themselves from other sales channels. New product opportunities are available from wholesalers. They are easily added to a product listing, and add value to the customer experience. Also, supporting local events or organizations with loyalty programs (i.e. during May purchases benefit…) will encourage organizations to purchase from a hometown operator.

Furthermore, OCS operators have capabilities to provide various water solutions to customers to improve the coffee experience and make drinking water available. In certain locations ice makers are an appropriate add-on item. Water solutions offer options for other beverage and food items including tea, cocoa, soup, and oatmeal. Although these categories are not new, products are available to differentiate operators from main-stream catalog items. Operators should look for products that keep competitors out of the customer location.

Personal service provides a clear advantage versus Big Box stores. Operators should emphasize the interaction between employees and the buyer as a benefit, and accommodate the convenience of the buyer. Some buyers are easily frustrated when the ease-of-use regarding the Big Box Internet ordering process is overwhelmed by an inefficient return process. OCS companies are customer-centric, and provide a valuable resource concerning the buyer experience.

Communication ties the advantages together. The benefits OCS operators offer requires constant communication. The route driver provides a personal service the alternative channels do not. The customer should know the machine is clean and working properly, the product is stocked to an appropriate par level, and new products are available to enhance the customer experience. Everyone in the OCS organization participates in the sales process, and communicates these values each time they interact with the customer.

Regardless of the OCS organization size, communication will improve the customer experience. OCS managers should provide a theme the employees communicate during customer interaction. The theme need not be static. Examples include seasonal product, local product, equipment innovation, and allied product growth. Encourage the employees to provide ideas, and take part in the success of the business.

Success creates competition, and the OCS manager can provide incentives to employees for growth. The incentive should be in line with the goals of the organization. The goal of the organization may be to exploit the competitive advantage by increasing certain product categories. Communicating the competitive advantage encourages a performance culture in the organization, and inspires the employees to be the best in their field. The competition created within an organization is a model for sustainable growth.

Today, the OCS cost of convenience is between $0.10-1.50 per cup versus the $0.05 starting point, and brewing equipment ranges from $100-$3,000. Success continues to add competition in the market, and many options exist for the office buyer. Understand the competitive advantages available in single-cup, product alternatives, and personal service, and then communicate regularly to capitalize on the market. Tradeshows are an excellent resource to find new products, and improve manager and employee expertise. Although the competitors represent different sales channels, the goal for OCS operators remains the same: provide coffee and equipment at a low-cost per cup.

Dan Ragan, Pod Pack International, Ltd

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