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Where is OCS Going?© 2002 Brian Martell In the early 60’s the novel idea of offering a coffee service at the office was taking hold. Pour over machines using the relatively new innovation of paper filters were being placed by aggressive sales people into offices that had never heard of the concept before. Little by little, the coffee service became a familiar fixture in almost all office settings. Fast-forward 40 years and the industry has definitely matured. The nature of the business remains the same but the players, the field and definitely the equipment have all changed. Gone are the days when a rep would have to explain what OCS was all about; office managers are all too familiar with the idea. More and more it is difficult to place a simple pour over with growing demand for automatic or cup-by-cup machines. And if that’s not enough, the major players in the industry have all been at it for at least 20 years, making it hard for upstarts to capture sizable market share. Indeed, the number of OCS providers is actually shrinking through consolidation. And whereas in the past the initial start up capital requirements were relatively low, new competitors in the business may find themselves making capital investments of several thousand dollars…per customer! The market for OCS is dramatically changing as well. Large office pools are giving way to smaller sub units, each requiring their own special attention and equipment. Incidents of telecommuting are growing while further emphasizing the phenomenon of the shrinking office. That being said, the overall market now is greater than it was 40 years ago by virtue of a larger population and more people participating in the work force, most notably women. Further, customers are demanding better coffees and more variety, exploding the number of SKU’s carried by any one operator. To compound the competitive nature of the OCS market, operators find themselves competing more and more not with themselves, but with drive-through windows at donut shops. According to the CAC, fully half of all coffee consumed in offices was purchased outside the office. With all these daunting factors squeezing operators like shifting ice floes crushing together, what are the prospects for OCS in the future? Should the industry hang a Dante-esque sign for all newcomers: "Abandon all hope ye who enter"? The answers for both questions are (1) prospects are still good and (2) put the sign away. True, things are not the way they used to be, but that does not mean there are no opportunities left. It is precisely the new operators who bring innovation to the industry, or else they will cease to exist for very long. Mature industries are usually highly organized with little tolerance for flash without substance. That the industry in Canada has promoted better quality coffees and has opted for greater levels of service is a good indication that the virtues of value-added sales have surpassed the temptation to sell on the cheap. Less than 10 years ago, coffee weights were at a pitiful 1.75 ounces; now they are pushing 2.50 ounces. Offices are entertaining the idea of increasing their coffee budgets by accepting single cup brewers where the cost per cup more than doubles from thermal brewers. These innovations would not be occurring if it were not for the competitive factors that, on the surface, seem to be hurting OCS. With every added challenge, operators are coming up with ingenious ways to surmount them. To paraphrase my kind and gentle mother “that which does not kill you, makes you stronger." I believe the industry is getting stronger.
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