Pantry Service Holds Promise, Presents Pitfalls For Operators

Posted On: 3/20/2018

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The practice of providing free refreshments to employees is not new; the modern office coffee service industry took shape around widespread acceptance of the idea that employer-subsidized coffee breaks were an affordable employee benefit.

Historically, the free-coffee model contracted when the economy turned down, and expanded – often to include free soft drinks – when business conditions improved. But the contemporary higher-end workplace market is taking the concept to a new level with "pantries" (or "kitchens"), break areas that an operator stocks with beverages, snacks and often food, available at no cost to employees.

Tom Steuber
How this works in practice was explored during the recent National Automatic Merchandising Association's Coffee, Tea and Water conference in Nashville, TN. In a seminar titled "Fueling Employee Engagement, One Snack at a Time," Tom Steuber of Associated Services (San Leandro, CA) discussed the operational aspects of pantry service with an Associated Services client, Marnell Mullarkey of PopSugar Inc. (San Francisco, CA), and Kimberly Lenz, Associated Services' director of sales development.

The PopSugar breakroom includes amenities such as a snack rack, a serving-station for gourmet coffee, kombucha and cold-brewed coffee, and a bar serving beer and wine during daily Happy Hours. Lenz observed that, among the items Associated Services provides are "PopSugar Snack Packs" that contain nuts, cereals and similar fare. Although the program does not provide complete foodservice, it sometimes offers breakfast items.

Marnell Mullarkey
EMPLOYER BENEFIT


Steuber asked Mullarkey why PopSugar provides this bounty of amenities to its staff.

"Engagement," she replied. And the ability to deliver a range of 120 to 150 different items is a real test of the operator's customer service ability, which is the key to the success of the program.

Steuber asked Lenz to explain the ways in which managing this kind of operation is different from managing coffee service.

"It really isn't the same, although I thought at first that it would be," Lenz replied. "In OCS, we set up a menu with our clients and they stick with it. In pantry service, we're bringing in new items all the time – an average of five per week. There are many more elements at work; it requires a lot more usage analysis, which requires more time spent on the task."

An operator in the audience asked about the employee population for which the service is provided.

"In San Francisco, we have about 180 employees on two floors," Mullarkey explained.

Another seminar-goer reported that "We find employers 'self-operating' pantries, buying the products from Costco. How can I compete against that?"

Mullarkey replied that PopSugar typically obtains about 25% of its breakroom supplies from Costco, especially paper goods. "I brought in Associated Services because I wanted single-service products, for health reasons."

Steuber asked Mullarkey to explain that objection to large or bulk packages.

"People would open a large bag, consume a portion and leave the opened bag for others; we wanted to control that," she explained.

Steuber asked Lenz whether she has seen self-op pantries.

"Yes, quite a few of them," the Associated Services executive replied. "But often when the employee population exceeds about 40 people, it gets difficult for location management to handle.

"And we offer service," she emphasized. "We don't drop the orders on their doorsteps; we help with product selection, stock the shelves and generally provide support. There's value in that."

A third question from the audience was, "How do you run a service like that along with an OCS? Do you deliver on the same routes?"

"It's a lot more labor-intensive than OCS," Lenz explained. "We send out a two-person team on a separate route. And scheduling deliveries is different; some clients want the pantry stocked before the business opens in the morning."

"What is the cost to the client?" another conference-goer asked.

"The cost to us is about $4 per person per day," Mullarkey reported.

Another audience member wanted to know, "How do you pick the stock in your warehouse?"

"We have a card for each client that lists the par level for each item they order," Lenz explained.

"Do you clean the equipment?" an operator asked Lenz.

"Yes, we do a lot of cleaning," she replied. Mullarkey added that PopSugar also does some cleaning.

Kimberly Lenz
CONTROLLING WASTE


"What are the shelf-life considerations in stocking and delivering all those different products?" an audience member inquired.

Lenz replied that this is a constraint. "We can't do everything," she said. "We can do milk and yogurt, but an item with a two-day shelf-life won't work."

Mullarkey pointed out that a great many popular items have adequate shelf-lives to work well in a pantry: cheese, hummus, yogurt and others. "These are big for us," she added.

Steuber asked Mullarkey what, specifically, she wants an operator to do for PopSugar.

"Provide service when we want you to," the media executive replied. "And consult us on the budget."

"How do you do that?" Steuber asked Lenz.

"We try to identify and offer items that will work for them, that can be provided in sufficient quantity for everyone," she replied. "We keep close track of product usage, and we're careful not to recommend too many items that are really popular but really expensive."

"If budgeting is done in terms of the cost per person per day, clients must tell you their staffing levels," Steuber observed.

"Yes, they do," Lenz said. "When a client goes over budget, 85% of the time it happens because they hired more people."

A conference-goer returned to the question of the level of foodservice provided by the PopSugar pantry program.

Mullarkey explained that the foodservice is limited. "If we host a monthly lunch, we use a caterer," she said.

"Do you think they'll get bigger and add a full-scale cafeteria?" Steuber wondered.

"I think they'll be creative, perhaps adding a barista," Lenz answered. She added that Associated Services can work with produce, delivering items like fruit and avocados.

"What kind of waste do you experience with fruit?" an audience member asked.

"Very little; it goes really fast," Lenz reported. "But if there are 10 people out at a conference one day and they don't tell us, we can't help it." She added that bananas are the most difficult fruit to handle; apples and oranges are easier.

Another question from the floor involved cold-brewed coffee. "We don't use Associated Services for that," Mullarkey replied. "It's not available every day; we bring it in on special occasions."

"How do you communicate with your employees?" Steuber asked Mullarkey.

"We do periodic surveys, and these convey requests like 'bring back the eggs!' or 'provide more vegan options.'"

"What is the vendor's role in preventing problems with food allergies?" Steuber asked Lenz.

She replied that careful product selection is important: "more and more items today are 'allergy-friendly.'"

"When you evaluate new products, how do you identify something as potentially a good item?" Steuber inquired.

"We look for 'just as exciting' at a lower price-point," Lenz  explained. "We listen to requests and look into fulfilling them. And we hold quarterly meetings with location management to review the product mix and talk about new items."

"You don't provide candy or chips?" the moderator asked.

"A little, but they're our slowest movers," Lenz explained. "Also sodas."

An audience member raised the question of selling a pantry service. "We hear about high-tech industries, sure," he observed. "But what about other industries? Do you go out and sell this service, or do prospects come to you and ask for it?"

Lenz reported that she gets most requests for proposals from companies that have been doing it with Costco. "And it's a hard sell," she continued. "Usually that Costco user already has some level of professional service, perhaps an OCS, and will call us to ask about their options. We can tell them what other businesses do, and we like to get in while they're still small – 40 people or so – and grow with them."

BROADENING MARKET

As for the types of business interested in pantries, Lenz said that she is seeing pantry services expand slowly from their base in high-tech firms to other industries. "Some that aren't 'high-tech' need engineers too; and in my experience, it's engineers who are driving all of this." It's worthwhile for operators to find profitable ways to meet these requests, she emphasized, because it adds to the OCS ticket.

An audience member asked how stock is picked in the warehouse for makeup into daily route orders.

"The staff in our largest warehouse pre-picks everything," Lenz explained. "The orders can be combined with full-service routes when the drivers load their trucks."

Another seminar participant inquired about client meetings. "When you're talking budget with the location, do you speak in terms of categories?" he wondered.

"Not usually," Lenz said. "Most customers want all categories, or will tell us what categories they don't want."

"Variety is the key," Mullarkey added.

"What is the biggest headache in running a pantry service?" Steuber asked.

"Sudden changes at a large client," Lenz replied. "And sourcing. We can handle special orders, but the client has to accept that the desired item will have to sell through."

"Do you have storage-space on site?" Steuber wondered.

"Not for consumables," Mullarkey explained. "We store paper and janitorial supplies."

Lenz added that most clients don't want any back stock, "but a few larger accounts occupying multiple floors will give us storage-space."

An audience member asked about the profit margin in this kind of service.

"It varies widely," Lenz replied. "One client with 12 kitchens is quite different from 12 clients with one kitchen apiece."

In response to another inquiry, she said that drivers receive an hourly wage.

"What are the biggest sellers?" Steuber asked.

"Bananas, hard-boiled eggs and yogurt," Lenz reported. "We do watch usage trends carefully. Most new items will start very strong, then gradually start trending down. When that trend accelerates, it's time to make a change."

An audience member asked, "What kind of fixtures do your pantries require?"

"Usually shelving and two glass-door coolers," Lenz explained. "It varies with location size; we need sufficient space to display all the products."