An Evolving Industry
As I pen this article, I remain in Las Vegas headed back to the final day of the NAMA OneShow convention, short on voice, having been on the presentation side of the podium a bit too much and having robust interactions with my operator and supplier friends discussing our ever-evolving industry. The week has been jam-packed with timely education sessions and one of the more active trade show floors in recent history. In a subsequent article, I will speak to some of the exciting new things I found at the show. For today, I will focus upon some opposing dynamics impacting operator numbers and market share.
Fragmentation to Consolidation?
The Coffee Service Industry has been in existence for approximately one half century. Since its inception, our operator base has been extremely fragmented, beginning with a moderate number of regional entrepreneurs that grew into a national presence of several thousand. Around the early 1980s, a number of second-generation sons and daughters began taking over the family businesses while other offspring opted to move into alternative career paths, resulting in a wave of divestitures, mostly smaller, single market companies. But even with this protracted wave of buying and selling, no operating company emerged with double digit percentages of market share…until now. Even on the supply chain side of the business, mega distributor Vistar now dominates, having been on an acquisition mission since back in the 1980’s.
In addition to the national players, there is a group of well-funded, progressive, regional operators in acquisition mode. A few appear to be well on their way to establishing a legitimate national footprint.
How Big is the industry?
The National Automatic Merchandising Association, trade magazines, and industry analysts generally accept that the Coffee Service industry generates around 5 billion dollars in annual sales. Some believe, as do I, that number might be somewhat understated for two reasons. Sales from E-commerce companies, office supply specialists, as well as purchases from big box stores, are not completely captured nor reported by the trade magazines in their state of the industry summaries.
Secondly, with the fairly recent millennial-driven office snacking tendencies, much of what is being purchased by the Vend/OCS operator community for their OCS businesses is coming through the Vending side of things. Not many operators use discrete account codes even though distributors such as Vistar can accommodate this.
An Expanding Operator Base
Having been an operator for nearly 20 years and active in trade associations and various education committees, I frequently come across individuals or groups looking to get into Coffee Service. During last year’s Coffee, Tea and Water show I had the opportunity to present to the International Bottled Water Association’s contingency. Since they already operate in the same office space as OCS operators, they have a built-in customer base to whom they can solicit. Additionally, most Coffee Service operators offer water in some form and compete with the Bottled Water companies for the right to hydrate. I have not been able to obtain data as to how many water companies are active in Coffee Service, but I can confidently report that the number of participants is growing.
During OneShow I was invited to present to the National Association of Blind Merchants for a question-filled session for Vending operators exploring OCS opportunities. Under the umbrella of the Randolph-Sheppard Act, for the purpose of helping the blind with expanded business opportunities (thusly becoming more self-supporting), priority licensing provisions to operate vending facilities have been provided for many years. Many now see Coffee Service as a natural evolution of this opportunity.
Competition in this industry has always come in many shapes and forms and always will. It’s exciting to see new faces come into the fold, even while market share continues to grow for many others. The one constant that remains is that long term market share will continue to be determined by the operative word in Coffee Service…service.
I should add that the Coffee Service Industry remains in the strong and capable hands of the National Automatic Merchandising Association. Providing a forum for the education and nurturing of those looking to become members of our industry, as well as being the leading-edge revelator of expanding goods and services for all, will help ensure Coffee Service’s future for many years to come.
Until next time – Ken