Canadian Vending

Features Coffee Service
Summit Focuses On Growth

New Jersey in February was the place to be this year


April 7, 2008
By Cam Wood


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A New Jersey in February may not rank high among many winter-worn
travellers’ choices of destinations, but for many in the office coffee
service business, it was the place to be this year.

A New Jersey in February may not rank high among many winter-worn travellers’ choices of destinations, but for many in the office coffee service business, it was the place to be this year.

For the first time, the National Automatic Merchandising Association held a meeting of the minds just for the coffee people. And while others may have sunned themselves on Florida beaches to escape the dreary clime, there was nary a seat to be found at the opening session.

summit“I don’t think I’ve ever seen this many coffee operators in one room together … being civil to each other,” quipped Butch Winkler, chairman of the NAMA Coffee Service Committee, in his opening comments.

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And while he was putting a comedic spin on the attendance results, the reality was OCS operators travelled from all reaches to network, share and learn what will be needed to keep their businesses brewing in certain uncertain times.

As we have seen for several years in Canada, coffee remains the top beverage choice, according to Elliott Maras, editor of the American trade journal Automatic Merchandiser.

“Retail sales figures are increasing, but (partly) because prices are increasing and the consumer is willing to pay more for quality,” he said in his presentation on the state of the coffee industry.

“We may be heading into one of the strongest growth periods ever. But growth in consumption is coming at the expense of other (beverage) categories, such as soft drinks.”

In fact, Proctor and Gamble reports that despite growing economic fears in the U.S., there has been no slowdown in consumer sales.

The excitement surrounding the strength of coffee has also not gone unnoticed by quick-serve food giant, McDonalds. The company recently announced their plans to install 14,000 coffee “bars” in their American restaurants.

However, the decision to place barista and “McBarista” against each other was not well met by franchisees. Storeowners are balking at the plan’s estimated $100,000 price tag to cover renovations and initial new equipment.

“There’s a real ground swell of resistance among the franchisees about this,” Richard Adams, a consultant for McDonald’s franchise owners, told the Associated Press last November. He estimated the effort has a 50-50 chance of getting off the ground because of franchise opposition.

And many are concerned that little customer interest in McMochas means it could take years to recoup their investment, even on the famously high-margin coffee drinks.

“They’re going to have whipped cream on their face,” Adams said.

Canadian coffee giant Tim Hortons, which is expanding its own U.S. presence, said customer demand for one-stop food and coffee shopping is growing.

“I think we’re all now competing in the same space,” said spokeswoman Rachel Douglas. “I think the lines are blurring and I think consumers are demanding that.”

Faced with growing competition from cheaper rivals, Starbucks Corp. is selling small cups of drip coffee for US$1 with free refills as part of a test in its hometown.

That’s about 50 cents less than the Seattle-based coffee retailer normally charges for an 8 oz. cup of joe, though prices vary from store to store.

The suggested retail price for a slightly larger 10 oz. cup of premium roast at competitors like McDonald’s, according to a January report from the Associated Press.

South of the border, about one in five adults drinks some kind of espresso-based coffee each day, and the market is supposed to grow by at least four per cent each year until 2011.

“With coffee gaining so much ground, McDonald’s almost has to go there,” said Sharon Zackfia, a restaurant and retail analyst with William Blair & Co. “The feeling that the coffee business is a single pie and everyone is fighting for different slices doesn’t seem to acknowledge that the pie is growing.”

But Maras sees the light in this for the OCS sector. “This means McDonald’s has created a new market and we’ll be able to penetrate new demographics.”

Truth is, with the advances in both product quality and delivery technology, the OCS operator can now become an even more valuable ally for the officer manager trying to keep employees in the workplace. Maras contends most of the needs for bringing coffee into the office can now be met in the office environment.

And while the opportunity continues to grow for the OCS operator, Jim Mosley, from Georgia’s Southern Refreshment Services, said operators should give serious consideration to what the breakroom of the future will look like.

Mosley says operators must maximize the available technology to “our best advantage.”

“We must market our advantages and differences, creating our own value. We have gone from a ‘convenience’ to a breakroom solution, and we must be pro-active in providing new services, equipment and products that will separate us from the competition.”