Key strategies for the new office coffee service landscape

On May 11, I presented a webinar for NAMA called “Selling OCS,” where I discussed five risk factors that exist in the new office coffee service landscape. If we fail to overcome these negative developments, OCS will become commoditized at a new level – one that gives the upper hand to Amazon, Costco and other delivery alternatives.

That free webinar – now available to be viewed in its entirety – gives operators seven takeaways from the online course that I developed for NAMA, Selling Convenience Services. Part two of the webinar covers the “Power of Storytelling” and is geared specifically for OCS operators.

The five risk factors facing OCS operators are not entirely attributable to the COVID-19 experience. Some have simply evolved while offices were in hibernation and will now be more prevalent as offices repopulate. For each risk factor, a specific OCS operator strategy will be required.

Risk factor 1 – more outside competition

While the number of operators has clearly shrunk due to business failures and an ongoing flurry of mergers and acquisitions, outside competition is bigger than ever. Amazon is still flourishing and newcomers like GoPuff threaten to do their best to get a big slice of the OCS pie.

OCS operator strategy

We need to outperform the outside competition with a focus on six specific areas:

1. More service than ever (with more dedicated customer service reps)
2. More product variety than ever
3. Quality products, including local “Fourth Wave” roasts
4. Equipment that locations simply cannot live without
5. Dedication to cleanliness and employee safety
6. An online ordering system that is supplemented by exceptional service

This approach requires a higher attention to detail than OCS operators may be accustomed to. It is also costly, but it is the differentiator that is required right now if we want to hold our ground against online competition.

Risk factor 2 – single-cup brewer mania

Largely driven by “touchpoint paranoia,” there will be more single-cup brewers on the street than ever before. Typically, that means higher equipment costs for operators, more focus on price and more pressure from locations to trim our profit margins.

OCS operator strategy

If we are going to invest in pricey single-cup technology – we need to use it as leverage to sell more product and not allow outside competition to steal away sales that should belong to us. If we are paying $10,000 for equipment in a location – we want it all – coffee, flavored creamers, teas, cups, beverages and snacks. That needs to be spelled out in writing. Sell OCS as a package. Do not allow yourself to get sucked into a line-by-line cost analysis.

Remember: your online competition is not investing in equipment – YOU ARE!

Risk factor 3 – the disappearance of drip coffee

Drip coffee offers operators the best available per cup/per pot profit margin. That has always been the case, but because of a renewed round of single cup mania, those high margins threaten to be replaced almost entirely by single cup brewers.

We run the risk of seeing drip coffee relegated to hair salons, body shops, tire stores and other two pot per day locations. Allowing drip coffee to disappear from quality locations would be a costly mistake for operators.

OCS operator strategy

We need to keep the high margins of drip coffee in play by making drip coffee a premium product – using “Fourth Wave” local roasters, with clean equipment and sparkling decanters.

In 2019, one New York-based operator was selling about 30 different locally roasted coffees to OCS clients. That is the type of thinking we need to employ because it requires a service to source the products, provide equipment and deliver the coffee. It is a differentiator that sets the OCS operator apart from Amazon and Costco.

Risk Factor 4 – Zoom calls instead of in-person meetings

It is both tempting and cost efficient to opt for video conferencing over meeting with a prospect in person. The move away from in-person meetings is one that we need to resist because it eliminates our competitive advantage against online, price-driven competition. Our industry needs to invest in personal service and relationship-oriented selling whenever possible.

OCS operator strategy

Limit Zoom meetings to internal use only. When a meeting is called for, be there in person, especially on the sales side. Coffee tasting will be a welcome activity again at many offices, a sensory experience, and an opportunity to showcase what your company has to offer. Selling OCS in person, with coffee to taste, confirms your company’s commitment to satisfaction and to earning the business.

Can Amazon, Costco or GoPuff do that? Advantage: OCS operator…

Risk Factor 5 – small offices that demand service

Remember that 50-person account that you had before the pandemic? They spent a good amount of money on coffee and allied products. When they return to the office, demanding the same level of service and pricing, with a whopping 20 employees and an eye on saving money, operators will be faced with a choice:

• A. Do we walk away and let the online services have this account?
• B. Do we explain to the client that to maintain the prior level of service, certain adjustments will need to be made?

OCS operator strategy

We need to price our products intelligently, demand minimums and charge fees to successfully serve small offices. If small accounts want service, make them pay for it, until the employee count is back up to a respectable level.

There is no need to walk away from the account if there is an opportunity to maintain profitability, but if the client does not understand or appreciate your needs, walk away.

After what OCS operators have been through in the past 14 months, the last thing they need is a large portfolio of small, unprofitable accounts. Let those uncooperative small locations buy their own equipment. Amazon, Costco and GoPuff will be happy to serve them.

Once those “do it yourselfers” realize that exceptional service costs money, you just might get the account back under terms and conditions that make sense.

About Bob Tullio Industry consultant and contributing editor Bob Tullio (www.tullioB2B.com) is a content specialist who advises operators in the convenience services industry on how to build a successful business from the ground up and helps industry suppliers to develop successful business relationships with operators. Tullio recently launched a YouTube channel, b2b Perspective, designed to “elevate your business in two minutes” and is currently developing an online course, Leverage the power of LinkedIn to grow your business.