I recently concluded West Coast and Midwest market operator visits and had the opportunity to witness firsthand some distinctly different operator tactics being successfully employed to increase their operations’ top and bottom lines. In earlier Coffee Service Corner articles I opined on the willingness of office decision makers to subsidize more than the traditional coffee service and allied products, especially in the categories of RTD drinks and sweet and salty snacks with a healthy dose of “better for you” products. But the array of products and ample quantities of same that I saw during the past few weeks being loaded onto route trucks surprised this columnist for sure.
How much variety can the operator handle?
Having had warehousing and distribution responsibilities in different career positions, I am well aware of product handling, storage and shipping issues of traditional OCS products that for the most part are longer shelf life. In my days as an operator my operations seldom dealt with perishable products having less than 45 days shelf life and very little refrigerated or frozen offerings. Most OCS operations that I visit today have refrigerated and frozen storage capability. While much of that is due to the fact that Vending companies for quite a while have successfully expanded their Coffee Service presence and already had these capabilities. But walking through these coolers reveals much more than frozen or refrigerated sandwiches, pastries and ice cream.
The amount of fruit being shipped to offices was mind blowing. Everybody wants apples, pears and especially bananas! And they want their bananas at the optimal level or ripeness. No black spots, no green….just right. You have to receive green bananas on Friday for your Monday deliveries. You can’t run out. And one of the happiest beneficiaries of the fruit initiatives are the family and friends of the operator’s employees who enjoy a Friday afternoon cornucopia. But every operator handling fruit says that the upside is well worth it.
Another product in high demand is eggs. Company’s such as Nest Fresh offer peeled, hard boiled eggs in a package that includes salt and pepper. One West Coast warehouse manager said that running out of eggs creates more complaints than most any other category.
Perhaps the most interesting category being pursued by some operators is beer and wine. I saw several pallets of beer taps in a few warehouses. Some operators were renting the taps and referring their office accounts to a beverage distributor for the kegs. Others reported that some office menus now included wine and hard liquor too. (For me, the most stimulating beverage ever provided as an amenity was Café Au Lait in the breakroom at the Reily Building in New Orleans when I failed to add the steamed milk).
Other products contributing to building the pantry ticket included string cheese, yogurt, fresh bread and salads.
There are other CAPEX considerations with such expanding offerings. Glass front refrigerators can run in the $1300 range. Display shelving is another consideration. But every operator that I have spoken to insists that providing these products to a well populated office consistently satisfies the necessary return on investment.
Looking beyond traditional OCS boundaries
During my operator days at Standard Coffee Service, we consistently sought business other than the office. We served QSR restaurants, white tablecloth dining establishments, hospitality and convenience stores. Some of my national Vend and OCS competitors did as well but most did through different divisions that specialized in these classes of trade. For the thousands of independents, the majority of revenue was generated through office sales.
This too appears to be changing. A growing number of operators report that they have found that providing well matched brewing systems and quality products coupled with stellar service commitments allows them to write such non-traditional accounts and generate satisfactory margins.
These classes of trade come with service demands that can be more demanding than office coffee service. Having a restaurant account or C-store lose its coffee or tea brewer on a weekend morning or evening will happen. Having route or service personnel on call during evenings or weekends will meet this need but it does add expense.
While most C-store owners are reputable and honorable, the operator has to ensure that they consistently sell ALL products being prepared through the machines that they are providing. It is very convenient for a store manager to add a few cases of cappuccino or powdered milk on their weekly distributor order.
And an operator has to be cautious regarding which drink systems they will provide. Does it begin and end with coffee and tea systems? Will you add a powdered drink system or “slushy” type machine? What level of support will you provide versus what service and maintenance will you expect the account to provide themselves?
One Midwest operator that I visited has their own roasting operation and has developed a multi-state network of coffee shop customers. Besides providing custom roasted recipes of high quality whole beans and/or roast and ground coffee, the invoice can include syrups, sweetener packets and in some cases the lease of appropriately matched brewing systems.
Friend or foe?
For years, office supply companies have experienced growing success in the OCS class of trade by adding coffee supplies to their menus of office supply offerings. But OCS operators have found it hard to compete against the likes of Staples and independent stationers given the scope and breadth of their offerings.
Some East Coast operators have developed partnerships with neighboring office supply houses and have developed a solution that allows the operator to display a full office supply menu on their websites with a fulfillment solution that could promptly go to the operator and be delivered to the office by the operator’s route person along with the coffee supplies. The invoice then coming from the operator. This solution is very underdeveloped but under consideration by many.
The National Automatic Merchandising Association is accurate in re-declaring OCS as “Office Convenience Services”. Our industry lines of definition have been blurring for years. I believe this is a good thing. As we look at what some publications declare as a five billion dollar industry, I suspect that annual revenue figure might be a bit understated. I say that as I observe some companies’ financial statements tracking these incremental sales outside of their historic Coffee Service classifications. Who knows where our organic growth and paths beyond office sales will take revenues?
At the upcoming NAMA Show in Las Vegas, March 21-23, one of the educational sessions will be, “OCS Profits Beyond the Cup”, where a panel will explore the opportunities in front of us. I hope that you can attend.
Until next time