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WILLINGNESS TO PAY Coffee service operators expanding into micro markets are fnding new chal- lenges such as what types of coffee sells best in micro markets. The overwhelm- ing majority sees the new business as a way to offer more, higher quality choices to the consumer. Some operators are wit- nessing unexpectedly low OCS sales in micro markets, however, most operators are reporting an increase in coffee ser- vice sales in micro markets due to their ability to offer more premium options and the consumer's willingness to pay more for a better-quality cup of coffee. OCS operators expand into micro markets "PEOPLE like many different types of offerings and larger size cups. And they are willing to pay higher prices for a cup of quality coffee versus vending." Wisconsin-based operator "SINGLE-CUP systems break and counter-top brewers do not have the necessary capacity and are diffcult to service. There is currently not a good, cost-effective solution for coffee in the micro markets." Roger Sweeney, Ace Coffee Bar "IN some cases they (micro markets) have not increased sales from traditional vending." Dennis P. Dionne BE'S Coffee & Vending Service, Inc. "PREMIUM coffee has sold, even in locations where we provided free, loose grind brew systems." Texas-based operator "COFFEE service in general has been a challenge in the markets. Having the proper system for the control of cups continues to be an issue. The cups do not have a bar code for scanning and are frequently picked up for other uses." North Carolina-based operator S P E C I A L A N N U A L R E P O R T : S T A T E O F T H E C O F F E E S E R V I C E I N D U S T R Y M Micro markets are a fast growing industry segment and OCS operators don't want to be left behind. In the past 12 months, when OCS providers launched new services, many looked to micro markets for added revenue. OCS providers report adding micro markets to diversify offerings, and many are fnding that consumers are more willing to pay a higher price for a cup of coffee in a micro market than in a vending machine or traditional offce coffee brewer. OCS EXPANSION The 2014 State of the Coffee Industry report found that 33.88 percent of operators expanded into new lines of service. Of those 33.88 percent, more than half of the operators expanded into micro markets. OCS-only operators accounted for 25 percent of those. Types of coffee service system For those coffee service operators who expanded into micro markets in 2013/2014, 14.93 percent placed a bean-to-cup brewer in a micro market location, while 10.45 percent of coffee service operators reported placing a Keurig single-cup brewer in a micro market location. Flavia drink stations were placed by 7.46 percent of operators and 23.88 percent reported placing another type of single-cup brewer. Pour-over, automatic and thermal brewers trailed in micro market placements at 2.99 percent . 40.7% 0 10 20 30 40 50 60 Pantry service Janitorial supplies Water Other Micro markets 54.35% 15.22% 15.22% 6.52% 8.7% 36 Automatic Merchandiser VendingMarketWatch.com September 2014