INDUSTRY INSIDER: OCS Opportunities And Pitfalls, Part 1

During my two decades serving in multiple roles as an Office Coffee Service (OCS) operator, I consistently experienced tension between the juxtapositioned universes of sales and operations. From the sales and new business perspective, there was the desire to be the leading-edge service provider, not a follower. Our team wanted the newest products and the most advanced brewing systems and to be a step in front of demand…and our competition. While wearing an operations hat, the mantra was “SKU management and CAPEX and expense control.” During times of great change and expanding menu opportunities (in which coffee service tends to always be), striking the optimal balance between sales and ops will help ensure profitable growth and a healthy profit and loss (P&L) statement and balance sheet.

As I work with progressive operators today, I see exciting new opportunities that can create higher levels of profitable growth but at the same time present pitfalls of potential peril. For this piece, I will focus on two opportunities that offer both a path to greater operator revenue and potential risk. These opportunities are Whole Bean Brewing and OCS Opportunities Beyond Brewed Beverages. In this first article, I’ll focus on whole bean brewing and the related bean-to-cup phenomenon. Watch for Part 2: OCS Opportunities And Pitfalls Beyond The Cup in April about what has been successful for operators beyond coffee and tea.

The whole bean wave  

Over the last three decades, our industry has seen major changes that include a transition away from glass bowls to thermal decanters, a migration to better quality coffee driven by the Starbucks phenomenon and then the domination of brew-by-pack systems in the workplace and at home, led by Keurig/Green Mountain and Mars Drinks. But over the last 3 to 5 years, both the operator and supplier communities are reporting a dramatic spike in whole bean brewing system placements and consumption.

Opportunity perspective

As an operator, my company’s top three key performance indicators (KPIs) were, in this order: account retention, existing account profitability improvement and adding profitable new accounts.

Account retention is critical. It’s tough enough to add accretive business but adding accounts that only replace what has been lost is doubly painful. The uninstall process is timely and costly and results in an idle asset on your warehouse shelf. Minimizing account retention begins with excellent and consistent service. That is the ante in the poker game of OCS. But not offering your customers new options, in particular a whole-bean-system upgrade, can also put accounts at risk, in particular the larger, more lucrative office accounts. Providing these systems blocks one path that your fellow operators have to taking your business. Most progressive operators have already added whole bean solutions to their arsenals of offerings. Many are leading with them in their sales initiatives. The move to whole bean is well underway.

A second objective is increasing same account profitability. You already have the customer. You can build the ticket and sell them more. You can also upgrade your brewed beverage offerings and offer this type of system. Most operators with whom I interact report a lift in consumption when the office has the ability to concoct multiple custom drinks with high quality, freshly ground, delightfully aromatic coffee as the base ingredient. In some areas, the market even supports monthly rental charges, especially in the less populated offices where consumption might not deliver the necessary return on your asset investment.

As an operator, our company was in growth mode. So adding profitable, new business was a high third on our list of KPIs. This approach is critical for any operator looking to build near-term revenue and long-term value. Whole bean systems are one of the hottest tools to take market share. New business teams get excited when they have such tools in their portfolio. A motivated sales team is a productive sales team … at least usually!

Proceed with care

I also submit three areas of concern for operators considering moving forward with a whole bean program. They are capital expense, service intensity and customer education/participation.

Whole bean, hopper based systems are much more costly than batch brewers and brew-by-pack systems, ranging from approximately $3,000 to $7,000 or more. Having a sound business plan and cash flow model is critical. Placing these systems at accounts that will not generate the proper return can be catastrophic. Purchasing brewers that sit idle can be cash flow killers as well. Many equipment manufacturers will work with their operators on both realistic minimums and financing plans. Most will also assist operators in developing an efficient placement plan. Do your research as there are many product and system options.

Next, ask yourselves if you can effectively support the brewers on location. Do you have enough personnel to both install and respond to service calls? Are they skilled and well trained? These brewing systems have more potential failure points than traditional brewers. Your technicians therefore must understand the performance nuances of the equipment.

As an operator, my company began experimenting with whole bean systems in the late 1990s. We learned the hard way that service issues could prove costly and could give us a reputational black eye and put business in jeopardy. Many of the service calls that we experienced with whole bean systems were not related to brewer performance. To discover that we had dispatched a service tech only to have him/her add a pound of cocoa to an empty hopper was painful.

Our solutions were to more clearly define our service role and commit to a reasonable service schedule, along with outlining what office personnel needed to do to ensure the wonderful new beverage source operated efficiently in between scheduled service calls. While this might involve little more than knowing how to refill the hoppers and do light cleaning, the impact it had on when management called proved significant.

Watch for Part 2: OCS Opportunities And Pitfalls Beyond The Cup in April 2019.

Ken Shea is a 35-year veteran of our industry. He is President of Ken Shea & Associates and also serves as Vice President of Coffee Service for G&J Marketing and Sales. Contact him at [email protected].