The facilities supplies (FS) sector is still seen very much as a key growth area for resellers in the business supplies arena. But it’s such a diverse, catch-all term that defining it and fully maximising the potential in its key sub-categories can be tricky. OPI investigated the overall opportunities in FS, which include the MRO, jan/san and PPE & Safety segments, while also taking a specific look at the breakroom category.
The term ‘one-stop shop’ may be somewhat overused at times, but in a sector as broad as FS it does seem that suppliers which can truly offer this service in all these different product categories are at a distinct advantage compared to those with a narrower focus.
As Debbie Nice, Category Director at UK wholesaler VOW, admits: “FS is a key focus category for us and one in which we’ve seen double-digit growth for the past five years. Being a wholesaler that can deliver a one-stop FS solution, we continue to win business on the solid premise of offering a broad range of products and services. Our customers are looking for a convenient way to procure all their supplies and it’s our view that this sector will only continue to grow in the OP channel as we take market share from specialists that can predominantly only supply one category.”
And it’s those dealers prepared to commit to the category that are discovering methods to take on the traditional FS suppliers. “Whether it is through national brand suppliers that only offer product through redistribution, specific one-off buying programmes direct to dealers or partnering with alternative suppliers and regional/local suppliers, OP dealers are finding ways to compete,” says Tom Hoffmann, Director of Purchasing at US dealer group TriMega.
At fellow group Independent Stationers (IS), the FS market continues to grow at a double-digit pace, with the bulk of the growth driven by demand for towel and tissue products and breakroom supplies. However, both these ranges present particular challenges for dealers according to Director of Merchandising Mike Foster. “It requires significant space to be in the towel and tissue area and dealing with expiry dates in the food sector means you have to get sufficient throughput of sales to be able to stock it profitably.”
As well as European and US firms, antipodean dealers are also benefitting from the increase in FS sales among the traditional OP community. Australian dealer group Office Brands, for example, has seen a 6.1% overall rise in sales in this category over the past year, with the jan/san sub-sector a star performer, increasing by 8.8%. “It’s the core focus of our marketing campaigns,” comments CEO Gavin Ward, “and we’re specifically targeting this area for further expansion.”
Back to the breakroom, the drinks, snacks and catering equipment that comprise the main products in this category continue to make up an important slice of the overall FS pie. But it’s the coffee market within this sector that many resellers are most excited about.
In the US alone, office coffee is worth over $5 billion a year. This area clearly represents a tremendous opportunity for OP dealers anywhere and is a category where they could be offering a product as well as equipment and service proposition.
In the UK, VOW is seeing a big growth in demand from its resellers for coffee beans and ground coffee, with the barista-style blends such as Nescafé Azera and Millicano proving particularly popular. “Tastes are changing and we’re all becoming coffee snobs,” says Nice. “Coffee machines are a hot topic and the self-serve pod solutions are faring better than ever, with a big expansion in the number of high-quality machines that are increasingly convenient and efficient to use. Machines that don’t require any plumbing still represent an untapped market opportunity as these are ideal products for reception areas and boardrooms. Customers are also looking to us to resolve their serving requirements with products such as disposable cups and this continues to be a big growth area for us.”
But coffee is not the only drink with which money can be made. “Dealers really need to embrace the overall beverage side of breakroom if they want to continue seeing large growth in this category,” says Foster. “The big untapped sub-category is water – particularly the five-gallon bottles and the filtered drinking water systems. The wholesalers are good at providing the typical snacks and foods, but they’re not extensively selling equipment in this area because it requires training.
“It’s not something a company just orders, you have to sell it to them based on their specific water needs and then supply the correct quantities on a continuing basis, all with the appropriate chemicals that need to be added. Energy drinks and flavoured waters are also up-and-coming items that firms now want to buy through their OP dealer.”
There seems to be a distinct geographical divide in opinion about whether the ‘healthy snack’ market offers a significant growth opportunity in OP. In the US the view is that this market is being driven by the increasing influence of millennials in the workplace who are demanding ‘better for you’ products. This is forcing firms that want to retain a younger workforce to seriously re-evaluate their snacking and beverage offerings, consequently producing growth in this area.
Snacks are becoming a focal point in the breakroom, with employers often supplying such offerings as a ‘perk’ of employment. “With the company culture of large tech firms like Google becoming more visible, these perks are now expected by many millennials,” says Hoffman. “For years it’s been said that if you get the coffee business you also get the cups and creamers. Now that’s being expanded and dealers are often adding on the breakfast bar and snack business too.”
Taking the offering even further, in Australia Office Brands is trialling the provision of fruit baskets as an outsourced service with a margin. Although at the moment this business is still very small, it is showing there is demand for healthier office foods out there.
In the UK, meanwhile, VOW’s Nice tells quite a different story. “We’re constantly surprised that there isn’t more interest in healthy snacks for the office. As such, we don’t stock fresh or chilled food and instead focus on the longer-life products that are higher in sugars and preservatives.
“Indeed, we are seeing resellers experience growth in demand for a wider range of sweets and confectionary as well as breakfast solutions.Consequently, we’re likely to concentrate on these areas together with developing product lines that complement the serving of traditional foods.
“We also see promise in innovative breakroom storage solutions that are important where space is often at a premium. We believe that the overall addressable market for office breakroom is around £500 million ($624 million).”
The way ahead
Overall, companies expect to experience continued success in the FS market and are focusing much of their attention on ensuring that they maximise all the opportunities. However, there are likely to be bumps in the road ahead. Ward mentions the long shadow of Amazon that’s now falling across the Oceania region: “Amazon will launch in our market in September 2017 and is reportedly focusing on grocery as its major category. I suspect this will strongly impact on our ability to grow the breakroom category further.”
Foster remains more upbeat. “I believe that a substantial part of a dealer’s growth is going to come from the FS categories, particularly breakroom, safety and MRO products, all of which could lead to some large profits.”
Cleaning up in oz
Worldwide cleaning industry association ISSA is holding its inaugural Cleaning & Hygiene Expo in Melbourne, Australia, from 9-10 May. OPI spoke to Oceania Manager Kim Taranto about the key components and themes, and the reasons why ISSA has chosen to hold an event in the region.
OPI: This will be the first time you’ve held an ISSA exhibition in Australia. What has prompted this?
Kim Taranto: The ISSA Cleaning & Hygiene Expo in Australia is the culmination of a chain of events set off by the merger between the National Cleaning Suppliers Association (NCSA) and ISSA. The former President of the NCSA, Stuart Nicol, was responsible for forging this partnership between the two associations and became ISSA Oceania’s Advisory Council Chairman. It’s thanks to his forward-thinking that the expo came about.
It’s part of ISSA’s remit to change the way the world views cleaning and Australia has always been on our radar. Stuart saw that this merger presented a golden opportunity to make this expo a reality. There were already two competing trade shows – Ausclean Pulire and CleanScene – in the region, but it had become clear that having two events was financially unsustainable, logistically unworkable, and didn’t deliver enough value. So ISSA took on the mission of joining them together and uniting what was a fragmented industry under one banner. A partnership was then formed with Interpoint Events to create this single trade exhibition where all sectors of the industry could come together.
OPI: What are the core themes and events of the seminar schedule and workshop line-up?
KT: As this is our first event in the Oceania region we want to attract a wide audience and offer a broad choice to both exhibitors and trade show attendees.
The Education Theatre will host various first-time events never before presented at previous cleaning industry exhibitions. This will include two keynote speakers, ISSA certified training courses and a collaborative lunch hosted by the Facilities Management Association on the topical Cleaning Accountability Framework (CAF). CAF is an independent, multi-stakeholder initiative that seeks to improve labour and cleaning standards in Australia.
There will also be seminar sessions catering to building service contractors, healthcare workers, carpet and restoration technicians, plus many more.
OPI: What, in your opinion, are the key priorities for companies in the Australian cleaning industry today?
KT: The key priorities centre on those innovations that will increase productivity efficiencies. Because of high labour rates in Australia, contractors in particular are looking for cost-saving efficiencies that will make their employees’ jobs easier and faster, while at the same time still maintaining a high standard of quality.
Another priority would be forging more partnerships and alliances. Working together can make this industry great and it’s the only way forward to raise the profile of the cleaning industry in this region.
OPI: What are likely to be the key innovations that manufacturers in the Oceania region will be looking to highlight specifically?
KT: We’ve already seen a taste of the future in the innovations showcased at the ISSA/INTERCLEAN North America Expo at the end of last year. This began to highlight the technical advances made possible by robotics and augmented reality. I expect further developments in these areas to be a major focus of the show.