Today's economy has forced many employers to revisit their office coffee service budgets. Many -- to the industry's dismay -- are even resorting to buying their own supplies from local discount retailers to use in equipment supplied by their OCS professional. These and other challenges are forcing even seasoned workplace refreshment providers to take a new look at their marketing and delivery approaches. But what's different today, they say, is that decision-makers are unwilling to stop providing quality coffee as a relatively inexpensive perk to their hard-working, downsized employee bases.
Georgia's Southern Refreshment Service built its current $4 million OCS business from the ground up after selling off its original coffee division a decade earlier. The full-line vending company began rebuilding an OCS operation when the economy turned sharply down five years ago, and that downturn did not impede the effort at all. Industry veteran Jim Mosley, director of sales, became the key person in rebuilding the coffee division. He says his passion for coffee and tea, and his ability to share that with his entire team, became the key to developing an even more successful OCS operation the second time around.
Founded by Alan Plaisted and Dan Hart in 1979, Southern Refreshment is a workplace refreshment services leader in the Atlanta market,with 44 vending and five coffee routes serving 14 counties. Mosley played a key role in helping launch the company's office coffee service program the first time around, in 1995, and in building the segment into a $2.5 million business by 2001, when it was sold to Royal Cup (Birmingham, AL).
photos | At left, Jim Mosley and Southern Refreshment Service OCS sales manager Linda Saldana host coffee tasting at a micromarket where sales of Wolfgang Puck pod-brewed coffee are brisk, despite the availability of coffee in the breakroom. Southern makes it a policy to install micromarkets only in locations that agree to contracting for its office coffee service, too. In right photo: Joining Mosley for a knowledge-swapping session, from left, are support manager Debbie Duncan, office coffee service sales manager Linda Saldana and general manager Dave Carroll.
As part of the sale, Southern Refreshment signed a noncompete agreement that prevented its pursuing coffee service for five years. The company then returned its focus to growing its vending operation, purchasing Canteen's vending business in Atlanta and becoming a Canteen franchise. In 2006, after the pact expired, Southern Refreshment reentered the coffee service arena.Today, the segment has surpassed its original size and generates approximately $4 million in sales, and is growing rapidly, Mosley told VT.
Mosley began his office coffee service career in 1977 as a route salesperson and worked his way up the ranks with workplace refreshment leaders Aramark, Standard Coffee Service Co. and Royal Cup before joining Southern Refreshment in 1990. After taking on a one-year assignment in 2000, to assist specialty coffee giant Diedrich Coffee in developing a nationwide OCS distribution system, he returned to Southern Refreshment when it purchased the Canteen business.
The coffee service veteran said his decades of experience have persuaded him that despite the many challenges OCS providers face -- and they always face some, which vary over time -- there are always new door-opening opportunities too. And the current economy is no different.
For Southern Refreshment, the new micromarkets rank high among current door-openers. "When we try to place a micromarket, we require that we get the account's office coffee service at the same time," Mosley told VT. "Even if they're happy with their current coffee service, it gives us additional leverage. Micromarkets are very expensive to install and maintain, and having the OCS can help the operator pay for the whole program."
Southern Refreshment requires a minimum of 250 employees to install a micromarket. An account of that size generates substantial OCS business, including sales of a wide gamut of allied products, from tea and soups to paper goods, Mosley added.
In its micromarket locations, Southern Refreshment often provides coffee service only in a breakroom and satellite stations throughout the facility. But in some cases, the company also includes an automated hot beverage solution within the self-checkout mini c-store -- generally a bean-to-cup Starbucks Interactive Cup (iCup) vender or Cafection Avalon or a Wolfgang Puck pod brewer. Some employers subsidize these machines as part of their OCS program, while others require employees to pay for micromarket beverages.
Mosley considers Southern Refreshment's entry into single-cup brewer operation a defining moment. This occurred when the company placed its first Keurig machine in 1998. Today, single-cup represents over 50% of dollar sales in Southern Refreshment's OCS division, and continues to grow. The company has expanded its menu over the years to include Flavia machines, pod brewers and portion-pack brewers, along with bean-to-cup systems like the Starbucks Interactive Cup and Cafection's Avalon series.
"If you look at 10 closes for new business, three will be fresh-brew airpot systems, one to two will be bean-to-cup machines like Avalon, two to three will be pod brewers, one will be Flavia and one will be Keurig," Mosley told VT. "That's the current trend for us at this time."
He said that the trend in Atlanta -- a city that lost 30,000 jobs in the past two years -- is that even though businesses are cutting back, people are working harder to pick up the slack, and employers still see coffee as an inexpensive perk. "It's a way for them to show gratitude to their hardworking teams," said Mosley.
Single-cup pod brewers are growing in popularity and now represent a bigger percentage of new placements than the other alternatives. In some cases, companies that have been providing the leading portion-pack brewers for their employees are moving to pods to cut costs. In others, locations using traditional batch brewers are inspired to look at a pod system as an affordable step up for their employees that will reward them for their hard work, but is not as costly as some of the other systems.
"The economy is dictating what companies can and can't afford," said Mosley. "Pods cost less than the alternative single-cup systems. They are also biodegradable, and 'green' sells. And when you brew a pod, you smell it and get back to the ambiance of drinking coffee by involving more senses. The pod equipment manufacturers have stepped up to the plate, and we will see more."
As a Canteen franchise, Southern Refreshment heavily promotes the nationwide vending giant's private-label Highland Estates coffee brand, a cost-effective gourmet Arabica offering, which currently represents more than 85% of its fresh-brew coffee sales.
"It's supplied by a local roaster, so it's freshly roasted and it's in the customers' hands within a week," Mosley reported. "And they can taste that freshness in the cup." All of Southern Refreshment's trucks are logoed with the brand.
Southern Refreshment customers can also opt for brand-name favorites like Folgers, Maxwell House, Seattle's Best and Starbucks, complemented by an extensive range of allied products.
Mosley acknowledged that it's common for workplace decision-makers to focus on price at first, especially in the current economy. But an OCS professional knows how to ask detailed questions to uncover the specific needs of each location, beyond price, and then customize solutions to meet both their needs and their budgets.
"Once it becomes a commodity, you may as well walk away," the OCS expert stressed. "We offer tremendous back-end service. I've developed pertinent questions over the years to find the location's real needs, in order to bring them the most that we can. I can also walk into a breakroom, and if I see a mish-mash, I have a vision to make it cleaner, and rearrange it so it looks better and is easier to walk in and out of, through different systems I've developed. There's value in that."
Most important for any sales professional pitching coffee service, Mosley emphasized, is a thorough understanding of the product the operation provides. Southern Refreshment's roaster trains the company's staff in many of the fundamentals, including the regions in which coffee is grown and the nuances of beans from each of them. Mosley also makes a practice of regularly sharing his wealth of coffee knowledge with his team, and continues to learn as much as he can.
"If it's your career, you have to keep reading and growing," said Mosley. "I share what comes across my desk, and digital news, with our staff to help explain coffee's volatility, and why coffee prices sometimes go sky-high. It's our job -- as drivers or as supervisors -- to inform the client of the role played by demand and speculation in coffee pricing. Even if the price isn't high right now, our customers need to know that we're not the bad guy when it goes up."
Mosley and his team also have an informative video that they share with some clients and prospects that underscores the relatively low cost of a cup of gourmet coffee, given all of the steps involved in bringing it to the consumer.
Southern Refreshments' website also offers a wealth of information, putting the details of its services and products at the fingertips of its customers and prospects throughout the decision-making process and serving as an integral resource for its salespeople.
Once the salesperson zeroes in on the best solutions to suit a prospect's specific tastes and needs, it's essential to let the workplace population "test drive" both the equipment and coffee. Southern Refreshment keeps a selection of all types of equipment in stock at all times for these demonstrations.
"I don't believe in handing out samples, because then you have no control over how they brew," said the OCS veteran. "With our equipment, we're in control; and I believe in that, no matter what the system."
About 80% of Southern Refreshment's OCS accounts also use its point-of-use water filtration service. "Coffee is more than 98% water, so it's advisable to start with the purest water you can for the best cup; we sell that," said Mosley. "A lot of locations in Atlanta are ready to convert to POU, or already have. We're lucky that we don't have a 'lime scale' problem here, which can be a detriment to making the switch."
Another selling point that often inspires companies to change over from bottled water to a point-of-use system is that they can apply the cost savings to upgrading to single-cup coffee, Mosley added.
Looking ahead, Southern Refreshment plans to expand its lineup of janitorial supplies and add office products to its menu to further benefit its clients by serving as a one-stop shop for all their needs.
Southern Refreshments has also been working with website design specialist OCS Access to enable customers to order their products online, which Mosley sees as an important option that can offer a real benefit to busy location contacts.
"We will only add more products and services when we're able to bring them in in an educated, methodical manner," Mosley told VT. "Our sales force must be well-versed in anything new, just as they have extensive coffee training, before ever setting foot in the field."
SPREADING THE WEALTH
"I have a personal passion for coffee, and for making the whole breakroom experience the best it can be, and I bring that to the people who work here -- and do my best to spread it to others in the industry," said Mosley. "It's a whole lot easier to go out there and represent something in the field when you have a passion for it. I'm slowly easing into retirement, and when I fully retire in the next couple of years, what matters to me is that I helped better the OCS profession, not just our company."
The workplace refreshment pro serves on the National Automatic Merchandising Association's Coffee Service Committee. He also trains other Canteen operators in the skills they need for OCS success.
He credited Southern Refreshment cofounders Plaisted and Hart for instilling in him the commitment to make the industry better than it was when he began his career. "I empower our people to think that way, too," he said. "I'm friends with my competitors. We lunch and golf and don't hate one another. NAMA wants to promote the same thing."
Like Mosley, OCS veteran Tom Steuber has become adept at navigating the changing demands of the industry as the second-generation head of Associated Services (San Leandro, CA), one of the largest office coffee service firms in the country. His pioneering parents, Hal and Diane, founded the company in 1972; Tom came aboard full-time in 1986. The senior Steubers retired six years ago, and Tom stepped up to the role of president.
The company serves 7,000 customers in northern California, concentrated in the greater San Francisco Bay area. Steuber told VT that the economy has certainly put new pressures on Associated, but it has learned to adapt to the changing market.
photo | Tom Steuber has expanded Associated Services' products and equipment range to maintain a competitive edge in a tough market. Airpot systems outsell single-cup brewers among his Bay Area clientele, and point-of-use water treatment systems like the one pictured here are gaining momentum.
Not unlike what Mosley reported in the Atlanta market, Steuber said that most prospective locations in his market today are concerned about budgets and costs, but ultimately, still are willing to pay for high-quality coffee for their employees.
"What works best for us now -- and I know we're bucking the single-cup trend -- is gourmet coffee in airpots," Steuber told VT. "It's by far our most successful offering; Peet's is No. 1, and Starbucks does well, too. Brand-name specialty coffee has held up well overall in our market, while private label has decreased for us."
He added that single-cup usage is steady among Associated's clients, but the cup-at-a-time brewing option is no longer expanding as it had for many years. "Single-cup did better for us when the economy was better," he said. "It's still good, but not as good. Even though we're not putting out as many as we used to, Flavia brewers are seeing the strongest demand. Customers in our market like Flavia's new Alterra coffee brand and Bright Tea filterpacks."
Steuber reported that his company has not yet added pods to its menu, but plans to do so in the near future. The pod format may gain traction as a more cost-effective single-cup alternative, he suggested.
Tea is in great demand among Associated's customers, according to Steuber. The company continues to bring in new lines in response to customer demand, most recently the popular Numi brand organic teas.
Point-of-use water filtration systems are also gaining momentum in the northern California market. "In the past few years, point of use has really caught on," the operator told VT. "There used to be a lot of resistance to switching. Now the new business is mostly customers with bottled water who are changing over, and existing bottled-water cooler clients are willing to take a look."
A negative trend impacting the OCS landscape in the Bay Area, which seems to be intensifying, is fierce price competition from other operators. This has forced Associated Services to cut prices to retain and gain business. Compounding that challenge is competition from outside the traditional OCS channel, according to Steuber.
"Customers are buying coffee and allied products from Costco and office supply stores, and on the Internet, which is putting a lot of pressure on us," the operator told VT. "It's always our philosophy to keep a good relationship and work with our customers. But it's hard not to become confrontational. We're reluctant to push the issue, because their alternative can be cheaper and it's hard to compete on price. We do our best to show the value of our service, and keep as much business as we can by cultivating close relationships with our customers." Associated Services' long-standing reputation in its region is extremely valuable in building and retaining business.
In addition to its sterling reputation as a workplace coffee and water expert, Steuber said, Associated sets itself apart from many of its competitors by offering its clients the ability to order online. "A lot of accounts do this now, and I think more and more will order online as time goes by," said the operator. "You have to offer methods that are convenient for your customers, especially in an increasingly competitive market."
The company is also honing its competitive edge by broadening its product selection to address the increasingly diverse demands of its locations. "We've been buying in more than we usually carry -- or ever heard of! -- like coconut water, among a wide variety of snacks and packaged beverages that locations provide their employees for free," said Steuber. "It's a rising challenge to keep up with this desire for constant variety, especially since many of the items people request aren't available through our traditional supply channels."
Like Mosley, and following in his parents' footsteps, Steuber emphasized that the best way for the industry to move forward in the face of its many new challenges is to work together by sharing knowledge and best practices. He has spoken at several NAMA events, and tries to take advantage of every opportunity to exchange ideas and information with his industry peers.