A Matter Of Perspective

Posted On: 3/2/2015

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TAGS: Vending Times, Vending Times editorial, vending industry, coin-op, vending machine, coin machine business, office coffee service, vending machine operator, micro markets, Alicia Lavay, Keurig distribution agreement, Keurig Green Mountain Inc., Keurig-authorized distributor, single-cup coffee

Alicia Lavay, vending

A major refreshment service provider recently ended its nearly 20-year distribution agreement with Keurig Green Mountain Inc. As a Keurig-authorized distributor (KAD), this operation was required to provide its single-cup client exclusively with licensed products from Keurig Green Mountain.

As most readers are aware, Keurig's original K-Cup patents expired in 2012, and alternative single-cup cartridges compatible with first-generation Keurig brewers began to appear. Many KAD operations continue to honor the terms of the agreement, but others decided to make a change in order to provide more options to their clients.

It is getting easier to put together a comprehensive single-cup program for offices without the Keurig system. The availability of Keurig-compatible cartridges has given operators the means to sell their own private labels, and a growing number of premium brands as well. At least one major manufacturer makes a brewer that will accommodate K-Cups and their compatible rivals. There also is talk of a competitive cartridge that will work in Keurig's second-generation brewer, and quite a few gadgets that circumvent the proprietary feature of the new Keurig brewers have become available.

I've heard from many readers who are furious about that exclusivity requirement. They cannot fathom how an OCS operation that invested years in building up a brand when it was new can be cut off after it has become successful, just because it sees the need to sell competitive products, too.

Given this industry "chatter," I thought the time had come to weigh in. The great need, I think, is for perspective. We all will have a better time if we try to see the logic of suppliers (or customers) who are doing something that annoys us. They surely have their reasons -- and it's also possible that we annoy them! I don't know whether Keurig would fare better or worse if it relaxed the restriction on its authorized distributors, but Keurig surely has the right to implement its own business plan, just as every operator does. Within broad limits, we can set our own terms and conditions of sale, as long as we deal fairly with everyone who meets our volume requirements and abides by those terms. And we're not obliged to buy from anyone whose policies and practices offend us.

Over the years, manufacturers and suppliers have taken a lot of abuse from operators. Some of it was justified; most was not. One of my colleagues recalls manufacturers who required prospective operator customers to enroll in a sales program, committing to purchase a certain number of machines within a specified timeframe. This vexed many operators who wanted the freedom to buy a unit if they ever needed one to gain a location, or to save one. The manufacturers argued, though, that they could not survive by responding to occasional operator emergencies.

I was also reminded that in the early '70s, after the OCS industry had familiarized the American public with the small-batch paper-filter brewers and fractional-pound coffee packages originally developed for doughnut shops, some of the major brewer manufacturers introduced home pourover models to sell as small kitchen appliances. Many OCS operators were outraged; if office managers could buy reliable pourover brewers in the local hardware store, what need would there be for operators? They swore never to do business with a company that betrayed its loyal core clientele like that.

Everyone soon learned that those home brewers were not a threat to the OCS industry. The need was for the professional service that the operator provided; any office that insisted on making its own coffee already had found a way to do it. And operators could not reasonably expect a manufacturer to renounce a large potential market to protect the supposed interests of a small one. There was no industry resistance to Keurig's expansion into the retail market -- which, in fact, was generally seen as helpful to operators offering the Keurig system to offices.

Keurig has remained a leader in single-cup programs, even though it has several strong competitors with excellent products and extensive experience; some offer systems that actually predate Keurig's. It obviously is doing something right. Keurig requires operators who wish to become distributors and benefit from its successful marketing programs and diligent image-building to refrain from carrying directly competitive lines.

Most of the operators I've met are just as sensitive to a customer who surreptitiously buys product from a cheaper source, after contracting with them for service. In fact, one of the funniest stories I heard from my colleague came from an operator whose route driver had discovered a client laundering used paper filters and hanging them up to dry in the restroom, in preparation for economical reuse with store-bought coffee.

Again, it's all a matter of perspective. So if you can't beat em', join em', ignore 'em or come up with a better plan of your own.