Automatic Merchandiser

FEB-MAR 2017

Automatic Merchandiser serves the business management, marketing, technology and product information needs of its readers including vending operators, coffee service operators, product brokers, and product and equipment distributors in print.

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60 cents for the single-cup option without a second thought. While so far he's been successful offering these systems to customers, he does worry about the coffee quality that some deliver. "I'm afraid we're doing now what we did in the mid 1980s when we dropped weights," Bailey said. He is referring to a period when coffee was so expensive that many coffee producers reduced the amount of coffee in the fractional packs served in the office to keep prices low. In the 1980s, coffee drinking had dropped substantially, thought to be driven, at least in part, by the reduced flavor in coffee as well as an old-fashioned con- notation. The revival of coffee being profitable happened in the 1990s as specialty coffee became favorable and places such as Starbucks turned cof- fee from a commodity into a personalized splurge. This idea of a coffee for "me" has driven the desire for single cup where each user can create their own cup of coffee or hot beverage. 2. Point-of-use water Before succeeding in OCS, Bailey sold 5 gallon water coolers. Now he offers both 5 gallon water service and point-of-use (POU) and is in a perfect position to see the shift. Many companies are replacing 5 gallon water coolers with POU systems. However, POU is grow - ing organically as well. Bailey has many new customers that had no water service previously. "The term contracts on POU have gotten shorter and the pricing structure has made it possible for more companies to offer water as a benefit," he said. Robert Friedman, president of Coffee Distributing Corp., a Canteen branch (since 2011) serving the metro area of New York has also been experiencing this change. "Point of use water systems are increasing in share, compared to 5 gallon," said Friedman. Currently, POU represents a third of the com- pany's water sales and is steadily growing. POU has a number of advantages for both the location and the operator. It is considered a more eco-friendly option as it doesn't require the bot- tling and transporting of water. Plus, it saves costs associated with 5 gal- lon. With the increasing popularity of water as a consumer beverage of choice, offering several water options is a must. According to the latest International Bottled Water Associ- ation's report, bottled water volume achieved a new record exceeding of 11.7 billion gallons. This number has been increasing as many other bever- age offerings, such as milk and soft drinks, have been in decline. 3. Pantry service The concept of selected snacks offered to employ- ees by their employer at no charge is beginning to take shape, though it has many names. For some OCS providers it is pantry service with a selection of snacks, single-serve bev- erages and other items delivered to the breakroom for employees to enjoy. For others it might be called a micro kitchen and include a site-specific employee there to manage the break area and serve specialty drinks dur- ing the day. Royal Cup offers pantry service with employer sponsored items and an on-site attendant option. The dedicated on-site attendant in selected large accounts is where the company is really seeing expansion, explains Chapman. "This is across our geography and we have developed tight metrics around which accounts might qualify," he said. "How- ever, in those accounts that do quality, service levels go up exponentially. It also helps increase annual route sales and free up route driver time." Chapman believes that the increase in his pantry service business is driven by an example set by technology companies. "If you consider that the Googles of the world offer anything and everything to employees in their Micro Kitchens, we should not be surprised that some traditional OCS accounts, with increas- ing Millennials in the work force, are beginning to up their February/March 2017 VendingMarketWatch.com Automatic Merchandiser 33 O F F I C E C O F F E E S E R V I C E

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