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Vendors And OCS Operators Adapt To Shifts In Workplace Environment

Posted On: 6/25/2003

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U.S.A- Vending and coffee service operators confront an unusual set of circumstances today. On the one hand, American business in general remains reluctant to adopt a renewed growth posture that would entail adding staff, enlarging facilities or otherwise incurring new expenses. On the other hand, people at work continue to work long hours, exhibit increased productivity, and demand quality products , especially coffee brewed to the more exacting standards popularized by the ongoing specialty coffee boom.

How operators respond to this challenge is conditioned by the market areas they serve, and also by what kind of operations they choose to run.

The distinction between vending and coffee service never was as pronounced as some thought it to be, two or three decades ago. It could be argued that modern OCS, which emerged in the mid-1960s, was a creative response to the increase in operating expenses and overhead costs that signaled the end of the postwar economic boom. Locations that had been profitable became, at best, marginal, and more and more of the smallest ones dipped below the service horizon.

The business model under which coffee was packaged for easy batch preparation by patrons, using small restaurant equipment provided and maintained by the operator, was a versatile and adaptable solution to this challenge.

From the very beginning, some vending operators adopted this model as a way to continue serving a segment of the business and industry market that they could not address with route serviced vending equipment. Others saw it as an attractive amenity to offer front-office workers in a location whose shop or plant area was a good vending site.

Similarly, a few bottled water distributors immediately saw OCS as an added inducement they could offer their commercial clients, one that also would increase consumption of water.


And, from the very start, there were coffee service operators alert to additional location demands that they could satisfy. The municipal water supply scares , asbestos fibers, giardia cysts, heavy metals , that began in the early 1970s prompted immediate offers by some OCS operators of rental point-of-use water treatment systems.

There always has been extensive crossover among companies delivering refreshments to the workplace. And there always have been companies that strove to excel at one kind of service, resisting the temptation to campaign on too many fronts.

Geographic regions with low population densities tend to favor diversification. An example of successful adaptation to such a market is Pine State Trading Co. (Augusta, ME).

Larry Auger, general manager for vending, music/games and coffee service, explained that the company was founded in 1954 as a candy and tobacco distributor. In a sequence of events not uncommon in the early days of the modern vending industry, the company soon added vending to its roster of services. Today, it also is a distributor of beer and wine.

Auger, who has been with Pine State for 35 years, recalled that it added coffee service a decade ago; it now serves office buildings and industrial accounts as well as some restaurants.

"At some industrial accounts, we do vending for the manufacturing employees and OCS for the office staff," he told VT.

Maine is a large state with a relatively small population, less than a million people, Auger explained. This environment favors a service provider who can meet a variety of demands, maximizing the return from each stop. But there are other reasons for developing the ability to meet a particular need in several different ways.

Pine State Trading conducts its coffee service with Bunn-O-Matic brewers and "Café System 7" countertop single-cup fresh brew equipment from Crane National Vendors. The reasons for a location's wanting a single-cup machine, and for an operator's wanting to provide it, range beyond the convenience of assured freshness and pushbutton convenience, Auger noted.

"At auto dealerships, they have nice waiting areas with comfortable chairs and magazines, and areas where kids can play," he pointed out. "There's less of a chance that a kid will get hurt with a 'Café System 7' than with a glass bowl that can spill and break. The machine is too high for them to reach, and they'd have to put a coin in to get hot coffee."


Of course, the design objective of this kind of machine is to meet the needs of locations where volume varies widely, although demand is constant. Under those conditions, holding brewed coffee over heat can be satisfactory during high-volume periods (although the need to brew new batches repeatedly is an inconvenience). However, continuing to apply heat to brewed coffee degrades it quickly; when a few people, arriving early or working late, require coffee, a system that prepares one cup on demand is necessary.

Insulated servers can meet the need when consumption is a bit more predictable, Auger added. They also meet the demand for a variety of coffees (decaffeinated and flavored, for example), none of which will be consumed rapidly. Pine State offers airpots to accounts that purchase many different kinds of coffee, and to convenience stores , where another plus is that airpots do not shatter when dropped. At present, Auger estimates that 30% of Pine State's drip brewer accounts have airpots, while the other 70% can be served successfully with glass decanters.

Pine State has a sales representative who specializes in calling on convenience stores; he also can sell them beer. And the company offers Compass Foods' "Eight O'Clock" coffee program to suitable c-store accounts; this includes airpot racks and signage, and provides a turnkey approach to providing a specialty coffee destination. And the OCS representative also sells coffee to restaurants, he added; "this isn't a big part of our business, but it's growing."

In general, Auger explained, Pine State regards 20 people as the minimum population that can support coffee service. "We give them a 90-day trial, and they have to order at least a case a month or it doesn't pay to tie up the brewer and the carafes," he observed.

And, of course, any vending location is a potential OCS account. "When we sell vending, we always try to sell coffee service," the industry veteran noted. "And, along with the coffee, we sell them everything else they need, from hot chocolate to herbal tea."

The same logic underlies Pine State's recent move into point-of-use water treatment equipment, leasing the dispensers. Recognizing the growing demand for water of known purity, the company considered that the potential advantages of bottled water distribution were outweighed by the need to tie up a truck and haul heavy containers of water up and down stairs.

"Rather than share an account, we'd rather do it all," Auger summed up. "While we're spending time there, we want to get as much of a return as we can, because service time equals money."


Taking an entirely different approach is Cook's Food & Beverage Co. (Canoga Park, CA), a full-line vendor established in 1985 and presently running five routes.

Gail Cook recalls starting with one vending account, and offering coffee service only to vending clients as the company expanded. "Vending is our industry, but when we were walking through the door, it made sense to deliver anything people wanted," she told VT.

It no longer makes sense in her market. "As the years have gone by, accounts have been cutting down on what they provide their employees at no charge," she said. "Over the past few years, many customers have stopped offering free coffee altogether. We had 12 OCS accounts; now we have one. This simply is because employers no longer want to give coffee away. They want to go to coin-op , but we don't."

Cook's perception is that the employee population, overall, has not decreased because of the economic downturn; at least not in her part of the greater Los Angeles market area. What has changed is the willingness of businesses to spend money on things not regarded as essential. "One very large company even took out its ornamental plants, to save money on the service that maintained them," she said. "They took out the microwave ovens, too; and they canceled the coffee service."

This has been a gradual process, but so far it has shown no signs of reversal. "For years, we sold tons of tea and other gourmet items," Cook said. "But it all stopped. First, they stopped offering soup; then there was only coffee, cream and sugar. Then employees had to bring their own cups..."

A coffee service today, especially one sustained by employees purchasing the coffee, must provide flavors, cappuccino and other specialty beverages, she said. Cook considers single-cup equipment the best way to provide that variety, but she does not regard this as the business she is in. "We're a small owner-operated vending company, so I haven't pursued OCS with coin-op equipment," she said. "I'll leave that for the operations that specialize in OCS."

Cook's Food & Beverage Service offers hot beverage vending through full-sized, full-featured machines, in the context of a full-line route operation. For this reason, Cook explained, "We only pursue accounts with 150 employees or more."

Another approach to specialization, from the opposite direction, is taken by Coffee Systems Hawaii (Honolulu). Tom Meehan, who purchased the business ten years ago from an absentee owner who lived on the mainland and visited the islands three times a year, has expanded the operation from 500 accounts to more than 1,100, and broadened its product lines.

"I sell to offices, restaurants and hotels, and construction sites , I lend the contractors equipment for their trailers," he told VT. "I supply all the major brands of coffee."

Meehan agrees with Cook that single-cup is the way to go in coffee service, and he has embraced it. "I offer 'Café System 7" and Keurig equipment," he reported. Which type to install depends on the volume, and how quickly the coffee must be served. The Keurig system, with its portion-packed sealed "K-Cup" product, is convenient and clean. The per-cup cost is high, "but accounts that want the Keurig don't mind the price," he has found.

Coffee Systems Hawaii runs several coin-operated Keurig brewers, and they work very well, he said. "At one account, the client was not willing to pay the higher price required for Keurig service; but after the employees had sampled the coffee, they said they'd rather pay for it than keep their existing free coffee," Meehan said.


The growing demand for quality is real, the veteran observer emphasized, but the economy tends to work against the higher prices needed to provide that quality. Hawaii depends heavily on the tourist trade, from Japan and the United States, and neither nation has enjoyed the kind of prosperity that encourages robust tourism. Even so, "hotel room occupancy was increasing right up to '9/11'," he said. It is doing so no longer. "It affects the whole state , but we're holding our own."

Demand remains vigorous enough to prompt Meehan to continue exploring new service concepts. Espresso is an acquired taste that has not yet been acquired in Hawaii, he said; there is not enough demand to warrant setting up an esprsso program. On the other hand, equipment dispensing today's gourmet soluble coffee-based and similar hot drinks is in great demand, and Coffee Systems Hawaii runs these dispensers in a variety of public locations, from convenience stores and service stations to hospitals. "They're very popular where a lot of people pass through," Meehan told VT.

He also is exploring small-location vending for offices, and is testing the "Multi-Max" system from Distributed Vending with its modular, cartridge-loading "Twin Win" cold drink and glassfront snack units.

"I think there's a niche out there, offices with 25 to 40 people," Meehan said. "If we can find the machine that will do the job and meet the need, we're interested in it. We're in those locations anyway, providing the coffee."

Coffee Systems Hawaii is a coffee service operator, Meehan emphasized; "battling the big vending guys is not our program." Similarly, he has steered clear of bottled water. "Two big operations here cut each other's throats, and I don't want to get involved in a competitive bloodbath."

As a coffee service, the company is prepared to accommodate any account that uses at least a case a month. "We have no initial limit beyond that, but we keep an eye on sales," Meehan explained. "Some start small, but when you add in creamer, cocoa and tea, and cold drinks, it begins to add up." The company has a 10-case minimum order requirement for soft drinks; there is a market for it, but it is not a large part of the business.

And, as a coffee service, Meehan knows that the service is as important as the coffee. "Service is the key," he emphasized. "We call on every account on a regular basis. We don't wait for a customer to call; we make sure we see them." Most are visited every two weeks; the smallest receive a visit each month, and the largest may require daily service.

The company presently runs three routes and deploys one technician. "And everyone sells their hearts out," Meehan summed up. "We do one thing, and we do it well."