It’s no longer a surprise to hear successful sales of coffee, tea, tissue and other related goods in the office channel, but conflicting views still remain as to the breakroom category’s exact worth to the industry.
OPI questioned 20 of the leading wholesalers and dealer groups in the UK, North America, Australasia and across Europe to find out their – and their dealer partners’ – top-selling products in the breakroom category. The results indicate that annual revenues would certainly be heavily dented without the presence of coffee in the channel.
Although not necessarily the biggest in terms of volumes sold, coffee – Nescafe products in particular – featured frequently at the top of most valuable breakroom items for the companies questioned. One UK dealer group listed Nescafe’s Gold Blend Coffee and Original Granules SKUs as its two top-selling breakroom items by value, while for UK OP wholesalers Spicers and VOW, coffee products are the best earners in the category by some way.
Debbie Nice, Category Head, Facilities Supplies at UK wholesaler VOW, says: “Beverages turnover represents 90% of the overall breakroom category, and coffee turnover is currently three times the size of tea in terms of value.
“Additionally, sugar is one of our fastest growing areas, which is surprising given that everyone is on a diet! I assume that this is market share gain rather than market growth.”
In the UK, beverages in general are the main drivers of the breakroom category. Neil Basham, Purchasing Director at dealer group Integra, suggests that coffee, tea and sugar are members’ best sellers. When water and soft drinks are poured into the equation, beverages make up around two-thirds of the overall category.
He explains: “Breakroom is clearly growing, with household brands helping to drive demand. Other factors in its success include the greater range of premium coffees and teas, dispenser/vending equipment and Fair Trade goods.
“Our members’ spend across this category solely via the two national OP wholesalers is in excess of £2 million ($3 million), but we know there is significant ‘leakage’ outside the channel to specialist distribution and cash and carry, but don’t have an accurate estimate on that currently.”
Anecdotal evidence suggests that coffee becoming a key line for office supplies resellers has acted as a catalyst for other breakroom SKUs being added to OP resellers’ inventories in recent years.
Almost every company that OPI asked to name its top three-selling products included tea and at least one kitchen or toilet tissue range in the list, while snacks, bottled water and items related to drinking coffee in the workplace, such as stirrers and plastic cups, also featured prominently.
The survey indicates that coffee is typically the best-selling breakroom supply in the UK and Australian OP channels, but in Europe the beverage seems some distance away from being the leading item. Paper towels and toilet papers are often bigger revenue generators in this part of the world.
In North America, a greater percentage of breakroom product sales appear to centre on hygiene-related items. Dealer group IS, for example, splits this category into supplies (48%), food (47%) and appliances such as refrigerators (5%).
Meanwhile, CEO of Canadian dealer group Basic Office Products Sean Macey notes: “Our biggest selling product lines are paper products and garbage bags because they are commodities and are easy to ‘get in the door with’ based on price.
“The breakroom category is one of only a couple that grew for Basics dealers in 2012 so I would say it is very important. That said we are happy with the margin in the category and are working at that both from a buying and selling point of view.”
Big bucks breakroom
At the larger North American corporates, the importance of breakroom does not appear to be waning; in fact, it is arguably becoming a core part of overall business strategies for the coming years. In December, for instance, OfficeMax started referring to itself as “a leader in office and facility supplies, technology and services”, with the addition of “facility” likely reflecting its growing dedication to FM and breakroom.
Facilities products are one of four targeted growth areas for ‘Max, along with print and document services, interiors and furniture, and technology, which together represent about a quarter of total US contract sales.
It is difficult to attach an overall breakroom value to the OP industry, partly because some companies combine sales of these products with revenues made from cleaning solutions and general facilities. Cleaning trade association ISSA claims that the sanitary supplies sector is worth $23.6 billion in the US, but of course this figure does not include food and beverages.
VOW parent company Vasanta Group has estimated that in the UK the facilities market is worth £5 billion, and the OP industry is currently only tapping into part of it, but this estimate may well include cleaning products that just can’t be sold through the office channel. The best indication of how much money-making potential exists in the category, therefore, could be through the trading statements of the larger players.
Staples certainly underlined the importance of facilities and breakroom to its North American Contract business in its full-year earnings conference call in March. It indicated that sales of these products grew in the double digits in Q4 and they now represent $1.8 billion in annual sales to Staples in North America, having grown by an additional $200 million during 2012.
Office Depot’s North American Retail division like-for-like sales decreased 6% in the fourth quarter of 2012, but cleaning and breakroom supplies were one of the growth categories for the business.
Recent SP Richards results showed that the cleaning and breakroom and furniture categories were the best performers in FY2012 Q4, while rival wholesaler United Stationers reported a 1.9% year-on-year revenue rise for its janitorial and breakroom division in Q4.
Mike Miller, United’s VP Marketing and Channel Development, Jan/San and Breakroom, told OPI last year that the category’s percentage of overall sales at the wholesaler “is growing and will probably continue to grow as a portion of the overall pie”
He attributed this phenomenon to dealers becoming more engaged in selling the products and the addition of relevant specialists to their staff, as well as the selling tools and programmes United has created to help dealers make progress in the market.
“As a result of these efforts, independent office products dealers are winning business in these categories from the traditional competitors,” he said.
One tool that was launched this year by United is its ‘Roll-Call’ e-newsletter, which provides information and updates on key programmes and selling tools in the breakroom category, but it is perhaps Miller’s comment about adding specialists to the company headcounts that most emphasises the industry’s commitment to sales growth.
Indicative of this trend is the decision by OP manufacturer representative group The Highlands Group to strengthen its breakroom team in recent months. The move would suggest that more companies from this sector are seeing the potential that lies within OP.
The most recently announced appointment at Highlands was June Schmidt, who has joined as Business Development Manager for the cleaning and breakroom category in the group’s West region. Having arrived from Henkel-owned personal care and cleaning products manufacturer Dial, she is working with end-users and distributor sales representatives, as well as implementing training initiatives within the company.
For small to medium-sized dealers, however, it may not be quite so easy to add specialist breakroom staff to their payrolls. Although there is support and growing expertise from the industry’s purchasing groups and wholesalers, which are already providing much-needed help, recruiting an in-house expert, if possible, could prove invaluable in the long run.
Indeed, Basics’ Macey warns that dealers appear to struggle to compete with the traditional breakroom supplies resellers unless they have a member of staff focused on the category from either a sales or business development perspective.
One thing for sure is that there is still significant potential for breakroom growth across the OP spectrum. The big boxes and major wholesalers have led the way with multi-million (in some cases, billion) dollar annual revenue generated from the category, while dealer group figures obtained by OPI show that the independent reseller community is reporting considerable success of its own in these areas.
Says Macey: “This category is natural for B2B dealers as they already offer next-day or same-day delivery with excellent fill rates. This puts them way ahead of some of the traditional resellers in the category who aren’t inclined to carry the inventory or haven’t set up distribution agreements to have the product delivered right to the end-consumer.
“It will remain one of the only growing categories this year and as a result will have more than a proportionate amount of focus.”