Better by the Day

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Weekly delivery of cold brew kegs from office coffee suppliers who install bean-to-cup brewers filled with boutique local roasts are going gourmet all the way.

By Dan Bolton

Innovation continues to drive market share gains and gross profits in the $4 billion US office coffee segment. Office managers prefer the convenience of single-cup systems even at a higher unit cost to please employees who insist on big selections of coffee (flavored as well as tea, cocoa, and soup).

Each year the National Coffee Association (NCA) asks coffee drinkers to describe the coffee they drank the previous day. The results show that consumption of gourmet coffee has increased three-fold during the past 15 years to the point that more than one-third of US coffee drinkers prefer it. Increasingly that special cup is from a single-serve capsule or pod brewer.

Daily consumption of espresso-based beverages has nearly tripled since 2008, observes NCA spokesman Joe DeRupo. This is more true for coffee drinkers 25-39 years of age, a group highly likely to work in offices. Past-day consumption of gourmet coffee among this cohort rose from 19% to 41% between 2008 and 2016 with 29% indicating a preference for espresso-based gourmet coffee drinks.

Drip switch

Consumption of coffee made on automatic drip brewers (among past-day coffee drinkers) dipped below half for the first time in 67 years, according to National Coffiee Association’s 2016 report Single-Cup Brewing.

“Coffee used to be brewed primarily at home (and still is, among older demographics) but millennials are drinking coffee out-of-home, turning coffee consumption into a public expression of individuality,” according to NCA.  Younger coffee drinkers want a “personal relationship” with their coffee, says DeRupo.

For decades offices from coast to coast drank the same ol’ joe but today the coasts and havens of technology in between such as Austin, Tex., Minneapolis, Minn., and Boulder, Colo. are tapping kegs of cold brew coffee and drinking Blue Bottle and Intelligentsia single-origin roasts, according to suppliers like New York-based Joyride which now serves 1,000 US offices and cafes from Google to Uber.

OCS operators last year supplied 50 million cups of cold brew among the 4.4 billion cups served in offices, according to Studylogic, a research firm that provides NCA with consumption data. Cold brew sales jumped 580% in the five years ending in 2016, according to Mintel International. Researchers estimate cold brew service is up 165% since 2015.

Workers in the Midwest still contend with drip — but they do not necessarily prefer it. In total 55% of coffee drinkers surveyed say there is a drip brewer at work, reports NCA. The study showed 33% of those with a workplace area to make coffee have a single-cup brewer option, up from 30% in 2015. Another 35% would like to see a single-cup machine in their workplace. “This indicates interest in moving away from workplace drip brewers,” said DeRupo.

Static service

“The best way to differentiate the environment is transient population versus static population,” explains Dan Ragan at Podpack in Baton Rouge, Louisiana. “An office that people come to everyday allows different options that could include k-cups, Flavia, pods, Nespresso, or Bodecker, systems that become familiar to the user during daily use,” he said.

Rivalry is more intense in the static segment where corporations put a premium on employee retention and morale.

Shea Coakley, co-founder of Boston-based office food supplier LeanBox, roasts locally and is building a 16,000 square-foot facility in Wilmington, Mass., that can produce as many as 10,000 kegs of cold brew a month, both for offices and coffee shops

He told the Boston Globe “There’s a new coffee renaissance, and people are more discerning about what their coffee should taste like. But as the coffee palate is getting more sophisticated, the office market hasn’t kept up.”

Productivity benefits

The benefits of a successful office coffee program are significant. A daily coffee drinker spends 20 minutes getting coffee offsite. Annually this amounts to 62.5 hours of lost work.

Workers who drink coffee at the office also do better at their desks. On a 5-point scale of importance, coffee positively influences employee workday productivity—ranking a 3.9, according to market researcher Packaged Facts. On a 5-point scale of importance, “high-quality coffee supplied by an employer is an important workplace perk” ranks as a 3.7 among full-time employed daily coffee drinkers, according to Packaged Facts, which reports its findings in “Office Coffee Service in the U.S.”

Opportunities remain for growth as HR managers search for better solutions to keep employees at the office.

“Capsule machines, such as Nespresso, continue to grow in popularity, but Ragan acknowledges that the cost per drink is slowing the placement pace in OCS. Options for pods using the CX-Touch, and k-cups using the Trophy plus provide decadent drink options at a lower cost with large selections, he said.

Capsules have the same opportunity as any other single-cup platform so long as the equipment provides a high-quality drink, with some trendy features, like Bluetooth, says Ragan.

Bean-to-cup systems are one office upgrade slowly gaining market, according to Packaged Facts. These systems allow whole bean coffee to be stored in a hopper attached to the machine, lowering cost per cup compared to capsules while reducing staling. These systems encourage OCS companies to partner with boutique roasters for a “buy local” theme, said Ragan.

Self-service single and dual-station machines with touchscreen technology are approaching barista-level coffee with “unique-to-me” additions like creamer and sweetener dispensers. The transient nature of a customer waiting rooms, or self-serve foodservice environment requires operators to install something closer to a super-automatic. “Super-automatics are significant, but require diligence in regard to ROI,” he advises.

Any equipment manufacturer focusing on quality, and durability has an opportunity to grow their market share, although the products must be sold with confidence to overcome the strength of the Keurig brand, says Ragan.

Keurig and Nestlé together control 24% of the US OCS market followed by Farmer Bros., Peet’s Coffee and Tea and Royal Cup. Fragmentation is prevalent in smaller markets.

Consolidation in the segment provides opportunities for start-up companies, and vertical integration of OCS for vending, bottled water, and office product companies is underway, observes Ragan.

Revenue grew 5% in 2016 as gourmet and specialty blends boosted sales. Growth is expected to continue at that rate as OCS firms profit from corporate clients who want nothing less than the best for their staff.

Cold Brew Pods

Pod Pack Int’l recently announced single-serve cold brew pod developed for Barnie’s Coffee & Tea Co. 

Cold Brew coffee continues to grow in popularity, and opportunities exist for significant growth in this segment, according to Pod Pack c.e.o. Tom Martin.

“Pod Pack continues to create exceptional solutions in the single-cup category, and we are thrilled to be working with Barnie’s as we launch this product”, “We are excited about this product, and committed to its success,”  he added.

Matthew Martin headed the research and development team, charged with developing a high-quality, easy-to-use fresh-brewed product for sale in Publix grocery stores. The pods are produced in Pod Pack’s Louisiana headquarters.

“We are excited to launch the single serve cold brew pods in partnership with Pod Pack. The growth of this category has been phenomenal and we look forward to being a part of it,” said Sonya Hardy, c.o.o. of Barnie’s.

“Our Santa’s White Christmas and Barnie’s Café Blend cold brew pods will be the first of their kind at Publix as well as at barniescoffee.com,” she said.