Sector Analysis: Breakroom

0

 

The big boom

 

The message that an office products dealer must become the go-to place for an office to source everything that it needs is being hammered home in many channels. Luckily, the perfect extension for a dealer’s range could already be prospering – the breakroom sector. OPI talks to some experts in the business to find out why this category is so successful

 

"Breakroom has become a key focus area for office products dealers as they continue to expand their single-source solution to the end-user," says Debbie Nice, Category Head of Facilities Management at Vasanta Group in the UK.

 

She’s not the only person to have this view. It is starting to become unthinkable for an office products dealer not to stock breakroom supplies. Unlike many channels, this area has been surprisingly boosted by the recession, provides an obvious range extension for OP dealers and offers an opportunity to take on the major emerging challengers to the industry – the supermarkets.

 

Nice says: "Only 15 years ago, office products wholesalers in the UK did not stock tea and coffee. Now these products feature in the top 50 lines. Both major wholesalers have now diversified into selling food by offering a range of snacks for boardrooms and staffrooms."

 

The picture is the same in the US. According to Chris Whiting, VP Cleaning and Breakroom Supplies at SP Richards, the breakroom category has seen double-digit growth for the past five years. He says: "The breakroom business is just booming right now in companies across the country. And it’s because of the change in people’s lifestyles, due to the economy.

 

"People are working more hours because, due to downsizing, employees are doing the job of three or four people. They’re having lunch at their desks or eating it during meetings, and snacking so much as part of their away-from-home lifestyles that snacks have become the fourth office meal of the day. And it’s created a lot of exciting opportunities. It’s become a profitable way for dealers to increase their value proposition as a single-source provider."

 

Bill Baker, Business Development at Office Snax which sells a variety of breakroom supplies, agrees. "It’s interesting to note that staffing cutbacks during these economic times actually increased breakroom sales," he says. "As a fringe benefit, it’s a minimal expense to provide coffee, lunch or snacks to your staff. Office products dealers have a high interest in the breakroom category simply because it allows them to sell more products to existing customers, rather than finding new customers to sell to."

 

Whiting believes that it’s not only an increase in working hours that is pressuring employers into supplying snacks for staff. "Keeping employees productive is really important to businesses’ bottom lines," he says. "Everyone needs to have fuel to keep their brains pumped up and highly functioning. By being provided with snacks, employees feel valued and this improves not only their energy levels and performance, but also their sense of commitment to their employer. This is an excellent opportunity for dealers to be the hero and to help their customers ensure that their employees maintain high levels of productivity."

 

Stealing market share

 

Nice agrees that there have been signs for a while that OP dealers are capitalising on this increase in snacking and are stealing market share.

 

"Promotional activity in the office products market by the big brands, especially Nestlé, Kenco, Tetley and PG Tips, has seen demand grow sharply every year as OP resellers win business from supermarkets and cash-and-carry places," she says.

 

Office Snax has taken a different tactic to helping dealers enter the breakroom market. "Our ten-year-old brand is exclusively available to office products dealers," Baker explains. "You won’t find any of our branded products at the Walmarts or Tescos of the world. We find that providing an exclusive, branded product removes pricing pressure and allows everyone in the chain to be more profitable. Office Snax was founded and built by office products veterans, not food industry people."

 

Not only is Office Snax helping dealers to swipe customers from the big chains, it’s not letting supermarkets eat any of the pie at all. This is handing OP dealers a large market on a plate as, according to Whiting, 1.3 meals per day are consumed in a US office and the average employee drinks 1.5 cups of coffee. He goes on to explain what supplying this amount of coffee would mean for a dealer in monetary terms.

 

"For an office of 50 coffee drinkers, your customer is providing 375 cups of coffee per five-day working week, totalling 19,500 cups of coffee per calendar year. The average revenue per cup of potted coffee, including ancillary products such as cups and condiments, is $0.25, providing a potential sales growth of $4,875. The average revenue per cup of single-serve coffee such as Green Mountain K-cups is approximately $0.75 per cup. By upgrading to single-serve coffee, you have the potential to supplement OP sales by $13,650. And remember, this is for just one customer and additional revenues on deliveries you are already making!"

 

This high consumption of coffee has not always been the case. In the UK, 15 years ago a supermarket’s shelves would have been stacked with all kinds of tea, accompanied by only a small coffee section. Nowadays, the amount of coffee and related products on offer takes up half an aisle, with variations such as instant cappuccino and decaf holding a key position.

 

In the US, the opposite has occurred. 15 years ago coffee was the larger section but nowadays tea has slowly crept up to be just as lucrative. The benefits of herbal tea have been widely marketed and types such as peppermint tea have made it onto the warehouse shelves of many office products dealers.

 

Office Snax’s Baker has noted another difference between the UK and US markets. "We sell milk in aseptic packaging, which people understand in the UK," he says. "But in the US, 98% of milk is still fresh and we still have a lot of local dairies. Some people love aseptic packaging because it’s handy, but it’s taken off slowly and been quite an education process for the US consumer."

 

Baker mentions a few other trends, less country specific, that have caught him by surprise over the years. "While sales of snacks have increased, we’re not seeing more meals being sold," he says. "Even breakfast items didn’t take off, I don’t know why. Another category that’s worth noting is soups. We sell two types of microwaveable soups; one you sip, the other has bits in it so you need a spoon. The latter has failed. People like the convenience of sipping."

 

So an employee who doesn’t have time to leave his or her desk for lunch also doesn’t have time to find a spoon. Perhaps the increasingly global message that we must eat healthier food will encourage the consumption of proper meals. In the meantime, there are more pressures at work on the breakroom category than the subject of convenience eating – the environment.

 

The green factor

 

It’s common to see posters around the office – whatever its size – reminding employees to reduce waste and save the environment. This is having a direct impact on the amount of paper, ink and pens that offices get through, and items such as plastic cups and cutlery – key breakroom supplies – are also being affected.

 

The jury is still out on whether using a reusable mug in the long term is better than using a disposable cup, because in the short term the energy that is used to create the mug is actually extremely high. However, it can’t be denied that plastic cups contribute to waste to landfill, so the pressure is on.

 

In recent years, biodegradable cups have entered the catalogues, making claims such as "100% recyclable", "100% oxo-biodegradable" and "Give off no harmful gases when biodegrading". Coffee stirrers created from sustainable wood feature in the VOW catalogue, along with cutlery described as "combustible, biodegradable, corn-based cutlery made from corn starch residues". Staples has just brought out additions to its Sustainable Earth brand such as compostable cups, plates and cutlery.

 

With the price of environmentally friendly products starting to compare very favourably with the non-eco-friendly version, it may not be long before they dominate the market.

 

Geoffrey Betts, Managing Director at Stewart Superior which supplies, among other products, plastic cups and cutlery, says: "Without question, environmental pressures are going to increase. We’ve been constantly introducing products with an environmental focus for the last three years. It’s not giant yet, but certain products are seeing significant growth. We’re talking about landfill, not climate change. People don’t want to be throwing plastic forks or cups in the bin when buying combustible products is an option."

 

Larinda Becker, VP of Foodservice Marketing at Solo Cup, believes that the Solo Cup range has been similarly affected, but is positive about this change. "We see continued growth in the Eco-Forward product categories," she says. "This has positively impacted the sales of our cups, along with the other meal and food service products offered by Solo. Sales of cups have increased in general in recent years, primarily driven by expanding beverage programmes across a multitude of operations, as well as on-premise services in office, lodging and other key sectors we serve."

 

Companies such as Solo Cup and Stewart Superior are taking the need to protect the environment in their stride, while Vasanta’s Nice believes the opportunities for dealers are there for the taking.

 

"Despite environmental issues we continue to see a rise in the demand for disposable paper cups, which we believe is driven by the coffee shop revolution and the need for a quick, easy and hygienic solution for visitor drinks," she says. "We continue to see this as a great opportunity for OP resellers."