Category analysis: Breakroom

A look at why office products resellers are making money out of the breakroom category.

The business case for breakroom

The breakroom category continues to be a key driver of growth for office products businesses, particularly in the US, and in some cases companies are offsetting sales declines in other segments by increasing revenues in this burgeoning area.

US wholesaler SP Richards’ breakroom business currently represents 3% of the company’s overall sales, but with 24% annual growth reported for this category in 2011 it is the organisation’s fastest growing sector and has the potential to expand yet further in the coming years. Ashli Moore Holman, Merchandise Marketing Manager at SPR, says the wholesaler foresees plenty of opportunities for new and existing customers to achieve “booming results”. 

“This category consists of high margin products that are everyday consumables,” she explains to OPI.

Coffee sales at SPR have doubled over the last four years, and it is expected that the success of the drink as an OP product can lead to the selling of further consumables in the future. Indeed, data from SPR highlights just how quickly new markets can emerge.

“The coffee market is almost as big as the copy paper business, with coffee being a $4 billion dollar market and copy paper being a $5 billion dollar market,” Holman notes. 

“Once the coffee gets placed, selling a more profitable full mix of disposables and snacks/beverages is essential to complete the one-stop-shop experience. 

“SPR has developed a selling tool for our dealer sales reps to go out and sell the breakroom to their customers. With companies wanting to keep their employees productive and at the office, there is a need to stock the breakroom to maximise office time.”But what about other large wholesalers in the US and across Europe?

United Stationers has recently published encouraging figures for its janitorial/breakroom department, with sales in this category for Q2 and Q3 of its just-ended financial year up 11.5% and 10.6% respectively compared to the same quarters in 2010-2011 (see graph above). The category accounts for about a quarter of United’s total sales and Q4 results published in February showed that sales in this area were up 10.8% year on year, having declined the year before. 

UK wholesaler VOW is also experiencing significant traction with breakroom products, showing the phenomenon is not just restricted to North America. Debbie Nice, Vasanta Group Category Head – Facilities Management, says: “Companies downsizing has meant that businesses are busier than ever and they are unlikely to have spare staff available to go shopping for provisions.

“Wholesalers having direct deals with all the major manufacturers and access to key promotions has been critical in driving the growth through the OP channel.” 

Changing attitudes of the American worker

Some 35% of US employees aim to save money in 2012 by bringing their own lunch to work instead of buying it during the day, according to a study by recruitment firm Accounting Principals. Workers have been spending an average of $2,000 per year on lunch, the study reveals, and now many of them are keen to cut costs. 

Ralph Bianculli Jr, Director of Emerald Brands at Paradigm Group, predicts that the expected upturn in people eating lunch at their desks is the continuation of a longer running trend. “It has led to an inevitable increase in consumption of pantry products including towels, tissues, cups, cutlery and so on, which we have capitalised on,” he explains.

Perhaps it is now time for OP firms to more heavily market this message. Some already are.

Jennifer Northington, Director of Sales & Marketing at The Highlands Group, says: “The breakroom is now becoming something of a social hotspot for colleagues to get together and cross-pollinate ideas. I see companies continuing to promote and encourage that.”

Like many organisations, Italian tissue producer Sofidel has developed a host of new ranges, such as the Papernet Superior CleanDry Extra towel, in order to keep pace with the growth in the breakroom business. 

Offering an insight into recent performance, European Marketing Manager at the firm, Fabio Vitali, says: “Year to date we are very well positioned in the washroom area with hand towels generating some 10% of our total turnover. We believe we can grow with value-added products in the breakroom.”

Meanwhile, Sam Robb, Vice President of Marketing at Atlanta, Georgia-based Georgia Pacific Professional, which manufacturers a range of tissue, packaging and paper goods, says his business continues to adapt its marketing strategies to highlight its relevance to the OP world.

In terms of selling sanitary and food service products into the office products industry, Georgia Pacific has experienced double-digit year-on-year sales growth for at least the last three years, and Robb is confident that this pattern is likely to continue in the future.

“More people are eating in the office – it’s certainly a growth opportunity,” he comments. “You’ve got to build your capabilities in new areas, but the office channel has already seen that it’s an incremental growth opportunity.”

OPI Poll 

Are you increasing emphasis on the breakroom category in 2012?

YES 76%

NO 24% 

The results of this recent poll on opi.net indicate that the office products industry as a whole is still putting significant emphasis on developing breakroom-related products and views the sector as an area of growth in the year ahead.

Ralph Bianculli Jr at Paradigm Group, regards the vast network of items which can be sold in this category, including coffee, water, snacks, paper products and cleaning supplies, as a major reason for the optimism surrounding it. Selling these products, he says, can also result in healthy margins, while buyers can benefit from the various efficiencies that consolidating their vendors can bring.

Kevin McLaughlin, Office Channel Corporate Account Director at GOJO, adds: “I believe that most of the dealers realise that this category represents the greatest potential for growth. They have a large installed base of OP customers that they can tap into. 

“They can sell to current customers using their well-established distribution models to create efficiencies and add value.”

Jim Prestage, Office Supply Channel Manager at Solo Cup Company, suggests the change of focus is a case of “simple economics”

“Independent dealers have experienced increased competition from the big box and club channels over the past several years. By focusing on and providing adjacent category items, such as breakroom products, in addition to traditional office supply items such as technology, furniture and office consumables, dealers are able to secure their position with their customers as a business partner vs. someone that sells them supplies.”

If results of the OPI survey characterise the view of the general OP sector, the breakroom category could continue to be big business for some time. Independent US OP supplier Baumgartens’ recent results are perhaps symbolic of the industry’s direction.

VP and General Manager David Baumgarten says: “Thankfully, despite the downturn, our business has remained stable and will be growing significantly in the breakroom sector in the coming years. Everything we see indicates this area will outperform traditional office supply goods.”

Food for thought

If coffee has been the driver of breakroom category growth in recent years, then the key challenge for office supplies specialists is to leverage this success in order to sell other food and drink items within the industry. So what’s the next big trend?

Jennifer Northington, Director of Sales & Marketing at The Highlands Group, remarks: “I definitely think there’s going to be a lot more innovation in the next few years. Office supplies companies will continue to diversify their offering.”

SPR’s Holman adds that stimulators other than coffee can be beneficial to businesses too. “While the focus is on coffee, as it is the driver of the breakroom category, energy drinks as well as green tea are often viewed as an alternative,” she says. “Supplying coffee and alternative energy boosters in the breakroom can help increase productivity by keeping employees at their desks.”

At VOW, coffee and tea continue to represent the largest share of sales thanks in part to the proactive nature of Nestlé and Tetley and their ability to work closely with wholesalers, dealer groups and dealers.

“Specialist tea is now a recognised category as we see a rise in popularity for alternative products, especially Earl Grey and Redbush blends,” Nice confirms. In fact, Rick Pickering, National Channel Manager at Nestlé Waters, says that ready-to-drink tea is currently a particular area of focus for
 his business.

“It could ultimately be a $1 billion category for us – we’re trying to push this but there’s a long way to go,” he explains. 

One company that has successfully brought new consumable products into the industry is Office Snax. The business has for some time noticed a strong demand from banks and other organisations for hospitality gifts such as lollipops. Around five years ago, when it was noticed that families arriving at drive-through banks often had pets – not just children – to keep happy, a new idea was formed.

Selling dog biscuits through the office products industry has provided a real fillip for the firm, with 1,800 cases of the products sold in the first month they were made available and thousands more sold on a regular basis today. Police and post offices are apparently key customers.

Office Snax Owner Bill Baker comments: “I have been in the OP industry for 40 years. I initially said dog biscuits would not work, but in fact they are a very good idea. We just don’t know the potential of our industry sometimes.”  

Success stories

North American Office Products Awards 2011, Best Product in Cleaning & Breakroom: Kimberly Clark Professional’s Kleenex Slimfold Towel System

European Office Products Awards 2012, Vendor of the Year: SCA

European Office Products Awards 2012, Best FM Product: Dyson’s Airblade Hand Dryer 

European Office Products Awards 2012, Best FM Product (highly commended): SCA’s Tork Premium Liquid Soap System

 SCA’s European Key Account Manager Tue Pederson remarks: “We see a lot of potential in growing the business in the facilities category with our European office supply partners.

“Our concept builds on a strong local market presence generating sustainable branded growth in washroom and breakroom consumables.”

Commenting on the Kleenex Slimfold Towel System, Kimberly Clark Professional’s Channel Manager for Office Products, Dawson Bond, says: “The secret of this ‘small wonder’ lies in designing high-performance towels with an innovative fold, then engineering an ultra-slim dispenser to fit neatly into the tightest spots. A little innovation makes a big difference.”