Brewing up profits



Imagine a workplace without any coffee, tea, cool water or biscuits at the meeting. We all appreciate, more expect, these little treats as a permanent fixture in the workplace. And in recent years resellers have become aware of the growing reputation of these items as an essential office product. Coffee (and tea in the UK) have long claimed their place as the original office extra that workers expect as their right. Like picking up a pay check, a hot drink first thing in the morning is part of the job and the daily routine. And more fool the manager who decides to cut back on such niceties. Rash decisions to save money like this can have disastrous results on morale and cause mini-mutinies among staff.
Of course the reverse is also true; studies have proved that a well-stocked break room can be an effective sweetener for employees, making an office feel like it’s well looked after. After all, workers are expected to inhabit someone else’s interior for eight hours a day so why not make them feel at home – it shows (and breeds) respect.
Globally, the type of products consumed in the break room varies according to different personal tastes on a national, regional and even office-by-office basis. As a market segment, ‘break room’ can include everything from foodstuffs and utensils to recreational products and hardware (fridges, coffee machines, toasters and so on). We’ve gradually seen an increase in the variety of products offered by resellers but the staple SKUs are still coffee, coffee paraphernalia (paper filters, mini-biscuits, paper cups), sugar, stirrers and a few other utensils, and more recently, bottled water. One of the advantages of working in the OP industry is that we all know what we consume and would appreciate in the kitchen, staff rooms and break rooms of our own offices, so logically we should know what would be popular with the customer. The difficulty appears to have been appreciating these office ‘extras’ as office ‘essentials’ and reaping the rewards of this new and potentially innovative sector.
Peter Damman, VP of European purchasing at Office Depot, says it isn’t as simple as all that. "There are restrictions with this category – they need to be products you can ship because some of them need special requirements. Also, with cleaning and coffee products you have to look country specific because people tend to use brands they recognise and different countries prefer different types of beverage."
So while break room poses its own problems for distributors, the idea of adding such products to an existing order appears to be a well-established one – even if the onus is on the reseller to meet or change the customer’s usual buying habits. "It’s convenient because people buy it alongside OP," adds Damman. "It’s a stable category and has seen slight growth in recent years. But something like coffee is a frequent item order – it’s a convenience item and there’s a lot of competition. Supermarkets always have it on special offer, so what we can do is offer a larger pack for at least the same price and provide a product that the buyer wouldn’t purchase for their own home but they would purchase from their workplace budget. This whole idea follows our philosophy that we offer solutions for companies. Something like coffee is a part of home life as much as work life, so it makes sense for us to offer it to our customers."
Timmermans, the largest wholesaler in the Benelux, has chosen a different tack. The family-run business has an agreement with a leading catering manufacturer which delivers supplies to Timmermans’ dealers, while Timmermans returns the favour by supplying OP to the caterer’s customers. The company, snapped up by Spicers in a €45 million ($54.2 million) deal last year, feels the category is worthy of close attention and two years ago hired someone to specifically concentrate on new channels in the industry – including break room.
"As a wholesaler we should not just accept ordinary OP business but we should open ourselves up," says managing director Michel Timmermans. "We must warm up the dealer and help him to create demand for these products. We must present ourselves as part of the one-stop solution. Although it depends, if you make the right choice of products to sell then it isn’t a problem. If you stock biscuits for instance then that should be ok, but anything more complicated then you would have to stock a lot of produce to make it worth changing the storage capability in your warehouse in order to store these products.
"I can see that in a couple of years we will have to stock these products, but we will have to train our warehouse staff and purchase new transport trucks. Then there’s other new problems such as pest control and so on. It’s just the start and I think we need to work on it still. And that’s something we’ve learnt over the years – don’t be discouraged, just keep on going because it has worked in some other countries. If we can, as a group, convince our US dealers to carry these products then I think we can succeed – but I’m convinced this has a future in OP."
Timmermans is working on offering the products stocked through its catering partnership on its website, with Timmermans stationery available to customers of the catering company at the click of a button. This push follows parent-company Spicers’ current focus on jan/san. The logistical problems involved with stocking foodstuffs mean that a wholesaler like Timmermans could be forgiven for being reluctant to make the leap into stocking more diverse goods that could expand the sector for dealers.
Coffee, the easiest and most popular of break room products, offers no such problems. The "oil in the machine" as it is known in coffee circles has seen a revolution in recent years with the explosion of coffee culture on Western high streets. In response, coffee manufacturers have smelt potential revenue in the OP market as coffee drinkers become more refined in their tastes and expect more from their morning cuppa at work.
"OP sales have grown significantly in the last five years, particularly in the last 12 months," says Quentin Knowlson, commercial director of beverages for Nescafé. "Resellers were just meeting customers’ needs before; if you were making a stationery order then it was easy just to stick a tin of coffee on it, but now that has changed."
Data on coffee consumption at work is hard to come by because the routes to market are more unusual than most. Figures exist for cash and carry but food service out of home (OOH) is almost impossible to measure because SMEs and even large offices will sometimes buy their coffee from retail outlets. For the data Nescafé has collected, it finds itself as the market leader in the UK with business and industry overall accounting for about five billion cups of coffee a year and OOH consumption totalling 11 billion cups a year.
The other major shift coffee manufacturers have seen is in the diversity of types of coffee, especially in Europe. A few years ago people would be happy(ish) with one type of coffee and (in the UK) the most popular brand of tea. But now, with the high-street coffee houses selling everything from cappuccinos to macchiatos, and even frappacinos, all made by hand for the customers drinking pleasure, you would be forgiven for assuming that sales of office coffee have fallen in recent years. Not so, according to Knowlson, who finds that giving resellers information on peoples’ drinking habits pays dividends. Nescafé has had a team dedicated to this channel for the past few years, a team which has increased in size as relationships with OP resellers have grown.
"Our job is to help them become more aware about what trends there are in the market and what products we can offer against those trends. We’ve tailored a lot of activity to a lot of customers – total beverage solutions that are relevant to their customers."
The company works with customers like Kingfield Heath and Viking, using different promotional mechanics to offer specific deals for their dealers. "We say it’s a fairly easy add-on, you can put it on the same vehicle as your OP delivery and coffee is quite a high-value product."
Surveys undertaken by Nescafé have shown that if the person who orders the coffee gets the wrong brand, it can cause a lot of dissatisfaction among the workers.
"It’s expected to be good and if it isn’t then it causes a lot of discontentment. People like their routines and coffee is one of those products where you can tell very easily if it’s poor. If you get your coffee order right then it’s fine, but if you get it wrong then the management will soon know about it."
To cater for such refined palettes, the manufacturer has developed sachets to recreate coffee shop drinks like cappuccino and latté, encouraging workers to stay in the office to enjoy their coffee break rather than wandering off site to their nearest coffee vendor. The rise of gourmet coffee has also been accompanied by a rise in sales of coffee machines. Small machines, perfect for the break room, are currently being developed to enable offices to make high quality coffee to match "consumers’ expectations", for which companies like Nescafé will supply the branded refills. "The aim is to get a machine into the realm of under £100 ($182) making it something that companies would be interested in," says Knowlson, who also predicts big things for the health and well-being category. Products like Nescafé’s Half Caff and Decaff are increasing in OP sales as workers fearing caffeine overload switch to lighter drinks.
All this means opportunities for dealers. Michael Morris, VP of marketing for TriMega, says his members have been keen on increasing their offering in this fast-moving segment. "We are seeing an increasing amount of interest from our dealers looking to penetrate the break room supplies category. Many are recognising the incremental top and bottom line benefits in servicing the break room needs of their existing customers. More than ever, they are looking at ways to demonstrate that they are indeed a reliable and competitive source for items like bottled water, coffee, paper products and more." The purchasing association has recently made some "small steps" in supporting these efforts, including new programmes with Saalfeld, Office Snax and Nestlé Waters.
"We have begun offering break room supplies – focused e-flyers via MarketMate, our email based marketing tool, as a means of helping our members drive awareness among their accounts that they can supply these products as well. Our upcoming convention will feature seminars and content around the cleaning and break room supplies category, in response to dealer feedback for training and education in this area."
After a slow start, it appears this is one OP category which offers room for innovation and good potential for expansion. But it will take care to develop as resellers warm to the idea of offering at lot more than just a tin of morning pick-me-up to their thirsty customers. How far down the catering route they are willing to go, however, remains to be seen. Watch this space.