Coffee And Tea Pros Discuss Booming Hot-Drink Market In Todays Workplace

MYRTLE BEACH, SC -- An overview of office refreshment services in an era of smaller workplaces was presented by a panel of experts at the recent Atlantic Coast Exposition in Myrtle Beach, SC. The session was facilitated by Jonathan Childress, Canteen Vending Services (Winston-Salem, NC); panelists were Glenn Cooper, Massimo Zanetti; David Diogo and Jeff Stebbings, Teaja; and Bob Myers, Cafection Enterprises.

The discussion was titled "Coffee, Tea and Beverage Services: Building your Ticket." Childress introduced the panelists and thanked Twinings Tea for its sponsorship of the program.

PHOTO:Shown, from left, are Jonathan Childress, Bob Myers, Glenn Cooper, David Diogo and Jeff Stebbings.

Myers led off with a description of the delivery systems presently in use by workplace refreshment operations. At one end of the spectrum is the classic drip brewer, nowadays usually a low-profile plumbed-in "automatic" that brews into a glass carafe or "bowl." The user makes the coffee and cleans the bowls. This is a low-cost system offering high gross profit, and customarily pays back its investment in six months or so. The drawback is that these brewers hold the coffee, in a carafe, on a warming-plate -- and brewed coffee held in an open dispenser over heat starts to degrade within 15 minutes. A plus to the paper-filter small-batch brewer is that it is relatively "green" in terms of biodegradability, and it's easy to scale for account populations of any size.

Reducing Waste

A step up is the "thermal brewer," which uses the same "drip" filter-brew method but replaces the glass carafe with an insulated server, often with a brew-through lid. This eliminates the application of external heat, which retards degradation of the brewed coffee, Myers explained, and limits exposure to air so oxidation is minimized. This means that less coffee is thrown away and waste is thereby reduced. A thermal brewer can be a low-cost solution that offers relatively fast payback, he noted. The same principle is used in higher-volume (and costlier) brewers that deliver coffee into insulated dispensers designed for easy transport to satellite serving stations in accounts with larger populations.

The alternative to a batch brewer is a single-cup system, Myers continued, and these fall into two categories. The kind prevalent today accepts roast ground coffee supplied in filter-paper pods, portion-pack cups, envelopes and other kinds of packet, many of which are proprietary.

The speaker reported that this type presently represents about 82% of single-cup installations. Its advantages include the availability of a great many selections which even can include "specialty" drinks, usually by using two successive portion-packets for preparation. The equipment is of moderate cost; the product cost ranges from moderate to high. It is easy to use, and some types automatically eject spent packets into a waste-bin that needs periodic emptying. Waste is minimal, but the packets are susceptible to theft, especially if they'll work in widely available consumer brewers. The payback time for this kind of brewer averages three to six months.

Bulk-Fill Option

The other 18% is represented by single-cup machines that are loaded in bulk, either with roast ground or whole-bean coffee. This type of system offers low product cost, but the machines are rather expensive. Because the product cost is low and the machine delivers a "finished" drink, the gross profit is high, and this brewer type is generally best-suited to locations with populations of 50 or more. Bulk-loaded single-cup brewers are very easy for patrons to use; they essentially are vending machines. They often are placed on a "cooperative service" basis, under which the customer is responsible for keeping the product hoppers filled and performing routine cleaning. They are famously "green" from an environmental standpoint, generating only spent coffee grounds as waste.

New technologies finding their way into the more sophisticated workplace coffee brewer types include digital touchscreens, which have the potential to carry advertising messages; WiFi and cellular network connectivity, which offers the additional prospect of remote brewer status monitoring; and fresh milk options. Energy-saving circuitry also is finding favor, Myers summed up; and the venerable "heat bank" contact-heating system, which may use less energy and resist mineral deposition better than the common tank-and-heater architecture, is receiving renewed interest, too.

MZB's Cooper said that the present day is an exciting time to be in the coffee business. "It's a Golden Age of coffee; the recession is over, coffee consumption is up and pack weights are increasing -- even in the South," he reported. During the first three quarters of 2015, interest in coffee continued to grow, a variety of better coffees entered the market and coffee resellers enjoyed higher profits.

"People want your service," Cooper told operators. "But they have many choices, and there's a lot of competition." The classic vending, coffee service and pure water service segments have been growing together to offer clients a single source for their workplace refreshment needs. "You have relationships, and you can extend your services," he pointed out.

At present, Cooper continued, K-Cups have re-energized branded coffees. "You can sell premium products at higher margins -- but you must become coffee experts to do that effectively," he advised.

Also in today's market, the Millennial generation increasingly drives decision-making, and their interests and desires have to be considered when pre­paring a presentation. Their concerns include sustainability and they embrace technology, the speaker observed. "And they like coffee, and will spend money to get what they want: espresso-based drinks -- latte, macchiato, cappuccino. They want all this stuff; they patronize Starbucks and they 'get it.' They're heavily into digital communication, profuse users of social media and likely to favor mobile payments. And their desire is for a 'third place' where they can talk; this is behind the new open office workplace layout concept." Also called the "living office," this is an innovation with which operators should become familiar. Cooper returned to this theme later in his presentation.

The effect of the new enthusiasm for specialty coffee products can be seen in fast-food outlets like Dunkin' Donuts and McDonald's, Cooper pointed out. "The menus used to be simple," he recalled. "Not any more. Look at the frappés and other frozen drinks."

Market Evolution

Coffee consumption in the United States over the past half-century or so has gone through three important shifts. Veteran OCS operators remember when the demand was for "hot and black," and the response was commodity coffee. In the home market, soluble coffee often found favor. The next stage was the rise of the café, which attracted people who did not like the conventional "hot and black" commodity. And we are now in the next phase.

"Coffee today is like wine was, 25 years ago," Cooper said. People have recognized that rich, flavorful coffee does not have to taste bitter or burned, and so pack weights of better coffee are on the increase. "The gold standard in brewing used to be 3 oz. of roast ground coffee to 60 fluid ounces of water," he recalled. Starting, perhaps, with coffee rationing in World War II (when roasters had to add fillers to "extend" the quantity of roast ground coffee), the weight decreased -- and coffee consumption went down. The revival began in the Seattle market a quarter of a century ago, Cooper suggested, with cafés selling "European" coffees brewed at optimum grounds-to-water ratios. "And now we're back up to the old 3-oz. pack," he reported.

Today, specialty coffees drive the business. the speaker summarized. "And people are drinking iced coffee all year round, so you need to offer it," he added. Young people tend to regard beverages as snacks, and so (for example) are attracted to frappé, a coffee-flavored granita.

Also growing in importance are "causal" coffees, including organically grown varieties, beans produced and sold under "fair trade" agreements and other types that appeal to consumers who want their purchases to improve the world. With this demand in mind, compostable coffee cartridges are being developed to reduce solid waste.

Doing Good

Causal coffees are attractive to millennials, but also to other demographics -- and to employers striving to implement "multi-generational" workplaces. "The economy is getting better," Cooper observed. "There are more job opportunities, and employers' biggest problem is attracting and keeping good workers."

Workplace amenities are part of the inducements today's cutting-edge employers offer. The availability of premium beverages is among those amenities; the other part of the incentive is an office laid out to foster informal interaction by members of teams assembled quickly to handle a series of tasks requiring creativity. The "living office" is such a design.

"Look at Google's offices," the speaker instanced; they are laid out in recognition of the appeal of an upscale coffeehouse for encouraging people to sit on couches and talk to one another. "Think of an open breakroom," he added. "What connects everyone is a cup of coffee."

Another new entry in workplace service methods is the micromarket; Cooper estimated that there are approximately 10,000 of these on location. The majority provide coffee, in some way or another, primarily by offering encoded cups or capsules (although some brewers can interface directly with the kiosk terminal. Most micromarkets that don't offer coffee probably are missing sales; "coffee is everywhere," he noted.

Thus, the present is a very good time to be selling coffee; but the favorable trends have brought their own challenges with them. Competition is eroding margins on single-cup capsules and many other common OCS products as large office supply chains become more aggressive purveyors of coffee and breaktime supplies.

And office populations have decreased, the speaker continued. This is partly attributable to "telecommuting," but there has been increasing pushback against this by managers who value face-to-face interaction among employees. All in all, the situation is fluid, and operators need to increase their "knowledge base" in order to stay current and react appropriately to shifts in the market.

"Brewer costs are increasing, and it can be hard to keep up with technology," Cooper said. "Vending's return on investment is different from ROI in coffee service. It's important to understand espresso coffee."

These potential difficulties are part of doing business in a Golden Age, the MZB executive summed up, and overcoming them is a matter of working smarter, not necessarily harder. "Knowledge is power," he reminded the audience.

David Diogo of Teaja observed that tea is growing in popularity in the United States, a process that has been under way for some time and is being accelerated as the beverage finds favor with younger consumers.

He explained that five types of tea are available, and all of them come from the same plant (Camellia sinensis). Tea is grown in many countries, notably China and Japan, India and Bangladesh, Vietnam, Sri Lanka (Ceylon) and Kenya, on the other side of the Indian Ocean. All the major producing countries supply all five types. Tea contains abundant antioxidants as well as caffeine and L-theanine, an amino acid widely thought to promote mood enhancement.

Teaja cofounder Jeff Stebbings added that the five types of commercial tea are white, green, oolong, pu-erh and black. The leaves of the tea plant regrow rapidly, and so can be harvested as many as eight times during the growing season. The "first pick" at the start of the season is considerably more costly than subsequent harvests.

The differences among the five types of tea are the result of different processing after the leaves are plucked. Processes include wilting (or withering), steaming, rolling or otherwise crushing, fermentation (which may be slight or full, the latter producing pu-erh tea), and oven drying.

Diogo reported that tea lends itself to organic cultivation, and the growers have a long tradition of finding many ways to avoid the need for pesticides (the encouragement of insectivorous spiders and bats among them).

"Millennials like 'organic,'" he observed; and this year, for the first time, millennials' purchasing-power will surpass that of the long-dominant baby boomers. Teas are popular with the rising generation, as are tisanes or "herbal teas," which are made by steeping herbs, fruit or flowers in water to make an infusion. "Most don't contain caffeine, so they're good for afternoon consumption; but yerba mate does provide caffeine," he said. It is possible to blend teas and tisanes, he added. Among health benefits claimed for tea is the ability of the pu-erh variety (which is the most fermented) to lower cholesterol and promote weight loss.

The continuing increase in demand for tea has led to events like the acquisition of the Teavana teahouse chain and tea purveyor (Atlanta) by Starbucks, Stebbings observed; tea companies are the focus of intense interest because of double-digit growth in tea consumption, especially in out-of-home markets. "The media are talking about it," he continued. Four out of five consumers drink it, and 87% of them are millennials, he reported.

This demand has inspired a good deal of creativity among tea producers, the speaker noted; new flavors (like coconut) are being introduced in response to the contemporary taste for "something different." And tea formats today extend beyond teabags to single-serve capsules that work in popular brewing equipment and "pyramid" bags for superior infusion. "If you're not selling tea, people will bring it from home," he said.

Telling The Story

"You can market tea," Stebbings emphasized. With detoxifying, calming, energy, digestive, pick-me up and immune-boosting teas, there is a fertile field for marketing. "Be a trendsetter," he added. "Talk about this. You want to be a one-stop shop, and people want tea."

An audience member asked whether there is a chart available that shows the uses of different kinds of tea. Stebbings replied that he has not seen one, but today's consumers -- perhaps especially the growing population of tea fanciers -- read packages carefully, and they recognize desirable characteristics when they see them.