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The Smallest Locations Drink Coffee, Too

Posted On: 2/28/2014

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TAGS: Vending Times editorial, vending industry, vending editorial, retail automation, vending operator, vending industry history, coin machine, coffee service, food service, Tim Sanford, small location coffee service, OCS news, pourover coffee brewer, OCS operator

The modern office coffee service business was built around small paper-filter drip brewers without waterline attachments. These pourover machines originally were designed for use in small restaurants, and the early OCS operators offered their office clients restaurant-quality coffee at 5¢ a cup. The prospects recognized the kind of equipment it was, because they had seen it in local doughnut shops and fast food establishments, and they found that offer attractive.

Brewers of that sort worked very well in locations that had 10 or 12 people, and that was the kind of location targeted by most of the pioneer OCS operators, initially at least. The typical business model, at first, was to install the brewer at no charge and ship coffee kits to customers by a third-party parcel delivery service.

Very soon, of course, competitive pressures encouraged operators to pursue larger accounts and offer more elaborate kinds of brewer, usually plumbed into a water line, to handle the higher volume. The same pressures spurred development of route delivery, the addition of an expanding array of allied products to increase the revenue yielded by each delivery. This model, refined in many cases by brewers maintaining tighter control of water temperature and volume, brewing into insulated servers, remains prevalent across many regions of the United States.

Viewed in retrospect, this process is very reminiscent of the development of vending between the mid-1950s and the next decade. Small sites could be served profitably with simple, low-cost equipment, although the increasing cost of route service made them less profitable -- or "marginal" -- as time went by. The advent of more sophisticated machines allowed operators to pursue larger accounts, so the return from each stop would be higher.

Interestingly, some OCS operators recognized that similarity early in the game, and some of them set out deliberately to create programs that would appeal to the small locations that had been the industry's original base. Many of these experimenters reported that offices with 10 or fewer employees were delighted to have someone call on them, were happy with a traditional pour-over brewer and content with delivery by common carrier. And some operators who launched programs of this type told us that they thought a location with five or six "heavy" coffee-drinkers was preferable to a place with 15 or 20 casual consumers.

One thing we learn from this is that there is a continual demand for service. Someone might have fun writing an account of OCS through its first two decades, chronicling the series of apparent catastrophes that turned out to be beneficial. One of these was the introduction of paper-filter drip brewers as home appliances. The fear was that office clients would do the math and recognize that they could pay much less for coffee if they bought these little brewers and bought their roast ground coffee in vacuum-packed cans at the supermarket.

In fact, this turned out not to be a problem. Some locations did revert to owning their own brewers, but most of them recognized that what they wanted an operator to do was to provide a consistently good product while freeing them from the need to devise and manage an office refreshment program. And the smallest offices have the fewest people available to run out to the supermarket for coffee or sugar.

The smallest workplaces of all are "home offices." Two decades ago, there was some discussion of whether the OCS industry could find a way to serve this growing segment, but that conversation seems to have been cut short by the cascading transformation that overtook coffee service as it diversified to meet the demand for "total refreshment service." And we always wondered whether a coffee service firm that was doing a good job of promoting the value of its private-label products might not find a way to communicate their availability at home by marketing to consumers in offices: "If you love the coffee at work, why not enjoy it on weekends?"

The coffee service business certainly has recognized the valuable role that the Internet can play, by improving communications with existing customers and, perhaps, by expanding selectively into online retailing across a much broader market area. The growing popularity of mobile Internet terminals like smartphones and wireless tablets, and of mainstream social media, may broaden and deepen this opportunity by making possible a new level of customization, marketing to specific needs and desires. Someone working from a home office might respond favorably to the question, "Are you too busy to run out and buy coffee?"

There is nothing novel about this idea; the trick is to refine it. "Big data" seems to be finding most use in targeting, say, people who have just purchased toasters in order to offer them a selection of toasters. What is needed is small data, marketing messages directed toward individuals to offer them something that they need and do not already have. The coffee service industry was built by innovators who found ways to do that.