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quality. Where OCS existed previ- ously, locations often translate prior OCS costs to a per-employee monthly market card load to help offset some of the higher employee coffee cost. Bachtelle recommends avoiding the frst option. "Clearly, not having any coffee in a micro market is the least preferred option. Increased same- location micro market sales over prior vending installations can be sourced in great part to the increased variety of products available, and there is really no difference in terms of driv- ing increased hot beverage volumes by offering better, higher quality prod- ucts than the increase in micro mar- ket food sales that has occurred from an improved fresh food program," Bachtelle said. Matt Caston, CSO of 365 Retail Markets, agrees. "When you offer people a good hot beverage in micro markets, they will pay for it," he said. "Make sure you're not leav- ing money on the table when it comes to offering coffee in micro markets." Caston has found that for 365 Retail Markets operators, coffee is a top-5 seller in micro markets, consistently. Bachtelle also pointed out that cof- fee sales alone are not the only ben- eft from having a micro market hot beverage program. "Every time a con- sumer comes into their micro market for any beverage, there is always the opportunity for incremental, 'bun- dled' purchases. Convenience stores know that coffee is the number one breakfast hour 'destination product', which is often combined with some type of breakfast food or snack. Micro market operators should also be working towards increasing morning food purchases in combination with providing in-market coffee," he said. From micro market research conducted by Bachtelle in 2012, two-thirds of sampled micro market locations did not have a hot beverage program of any type available in the market area. Of those locations with hot beverage programs in place, a number of sites delivered between 6 percent and 10 percent of sales from hot beverages. Today, coffee in micro markets is more prevalent, and Bachtelle projects that in the U.S., the 10 percent hot beverage share of sales "will become the industry standard in terms of location sales objectives," he said. Current challenges and solutions John Ward of Serenity Vending located in Rockford, IL, witnessed the benefts of a hot beverage pro- gram frsthand when he noticed cof- fee became the number one seller in 70 percent of his micro markets. In 40 percent of his micro markets, French vanilla gourmet coffee became the second-best seller. Ward looked into pod and single-serve brewers when he frst got into micro markets, but they weren't right for his locations. Most of Ward's locations are on a limited time schedule, and he found they would not have time to make their own coffee in the micro market. "I came across liquid coffee early on and I had machines for it," he said. "So I've been using that in micro markets." He likes this option, and so do his locations. He also places a 3- to 5-head cappuccino unit alongside the liquid coffee dispensers. Ward has found this solution to be effective; the machines are low maintenance and he gets good margins. He sells 16-ounce drinks for $1.00. Customers pay for their drink by selecting their drink option at the kiosk. Ninety percent of Ward's micro markets pro- vide coffee that is employee-paid for. "We do what works for us and we are utilizing equipment that we already have," he said. Pete Johnson of Quail Mountain Vending located in Klamath Falls, OR, opened his frst micro market in 2013 at a location of 600 employ- ees. "I got into coffee right away," he said. "With our associated vendor group we created a high quality pro- prietary coffee cup with UPC labels and we offer a premium coffee, simi- lar to that of a coffee house." Along with changing to a premium coffee, Micro market hot beverage offerings can increase sales of companion items. April 2015 VendingMarketWatch.com Automatic Merchandiser 21 O C S U P D A T E