November 15

Coffee Service Corner

Coffee Service Corner Monthly Column

For as long as I can remember, Coffee Service operators in general have resisted providing direct service to accounts with populations of less than 25 employees. In some occasions, the head count rule of thumb would decrease if there was a measurable amount of transient traffic coming through said location. Either way, the decision to serve has been based upon an algorithm that factored in numbers of people and projected amounts of consumption producing satisfactory revenue to justify stopping a delivery vehicle at a prescribed interval. Said another way, “no profit, no delivery.”

A recent project led me to fresh data from a report from “Packaged Facts” that was compiled from the U.S. Bureau of Labor Employment Dynamics data that addressed numbers of offices broken down by numbers of employees in those offices. According to the report, there are 3,754,006 private sector firms with employee numbers ranging from 1 – 19 people! Certainly these folks are consuming beverages (and other things) that they are buying at the supermarket or big box store, buying from an internet commerce site or bringing from home. Most likely the majority are not having a Coffee Service route professional provide a brewer and products.

Some readers will rightfully opine that many of these small offices DO purchase from an internet source and are content with that process. Many most likely prefer it. Even if the number of satisfied, active internet purchasers is one half of the opportunity, that still leaves a very large number of under-served or non-served small offices.

With my operator hat firmly in place, coupled with strong capitalist tendencies and the weariness of the downward pressure on my prices and profits caused by a mature and highly competitive market place, I want to grow the business but hesitate to expand my service area, recognizing that profitability will likely come only with a mature, new route. So I look within my current footprint and realize that my delivery trucks are driving by numerous small locations. Should I reconsider lowering the office population bar?

What has happened in the last ten years that might have changed the viability of this opportunity?
•    The coffee and tea consuming public have accepted brew-by-pack product costs in the 60 – 80 cent per cup range. This translates into a doubling of the profit opportunity for the operator.
•    Millennial demand for higher end, sustainably badged varietals and blends reopens the door for selling the more costly (more profitable) fractional packs. Will you take a drop in GP percentage for a lift in GP dollars? I will!
•    How many idle batch brew systems do you have sitting in your warehouse? The proliferation of brew-by-pack systems have put many of these brewers back on the rack.
•    If you do not have idle assets, many manufacturers and distributors offer low-cost, high-performing UL and NSF approved batch brewers.
•    There is a growing number of single-cup solutions for the smaller office. Look at all of the cups, sachets, pods and other products and systems available now. The small volume in-room brewers are popping up in small offices. Even the popular Café Valet in-room system is now available in offices, coupled with the ability to have the Caribou and Marley blends.
•    And don’t exclude other consumables. Remember, these small offices in many cases are not in large buildings with access to vending machines and micromarkets.
•    In my last article, building the ticket was the theme. Ticket-building opportunities can make the difference when considering the small office placement.
•    Lastly, consider beginning with providing water. $500 in annual rent revenue is not uncommon for a point of use machine. The water category continues to grow.

Do the math. Determine what revenue target it would take to warrant stopping your truck. Consider the minimum service cycle frequency it would take to satisfy your customer and your bottom line.

Reach out to your suppliers, brokers, distributors and equipment providers to explore this big, small opportunity.

All the best!
Ken Shea

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