Break Room, Break Through:

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Break Room, Break Through:

There is no set supplier of breakroom products in most markets. If they act fast, dealers can set themselves up as the number one source for breakroom snacks, beverages and accoutrements.

Breakroom products present an opportunity for virtually every independent dealer. Office snacks and beverages have been provided for employees, in varying degrees, for a relatively long time. More recently industry wholesalers have increased their support of the category by adding more products to their offerings. “They’re making it clear that from their standpoint it’s an important thing to do if you want to survive,” says Steven Sterne, general manager at Keeney’s Office Supply, Redmond, Washington.

It’s not just the wholesalers who are driving breakroom, customers are also stepping up and asking to be served. “As we look at the category, it’s just that there are not a lot of good providers of these types of products,” says Justin Miller, co-owner, Highbar Trading, Memphis, Tennessee. When he is out doing inventory for clients they might ask if Highbar can provide coffee or water. “We probably get more requests for breakroom supplies than almost anything,” he adds.

Almost three years ago Dan Schmidt went to S.P. Richards to see if he could get them to carry soda pop. Schmidt, vice president at Great River Office Products, St. Paul, Minnesota, describes some of the challenges businesses face when they move to acquire breakroom items. A wholesale grocer in his market stopped making deliveries and another had a poor service record when it came to commercial accounts. “My customers love the fact they can order beverages online and have them delivered with their office supplies,” says Schmidt. Using its own drivers, Great River delivers beverages up to the office instead of leaving them on the dock. “Dealers lose this advantage when they rely on their wholesaler to make deliveries,” he adds.

Customers demand breakroom products

The current market for breakroom at Great River also largely gained momentum through requests from customers. Following numerous requests, the wholesaler has started to carry Coke and Pepsi products. More recently Great River added La Croix waters and plans to bring Bubbly on board soon.

One challenge can be getting customers to understand that breakroom is included under the heading of “office supplies”. When customers tell Schmidt they didn’t know he sold water and soda he points out that those products appear on the dealership’s website. “I take out the S. P. Richards breakroom catalog and show them all the flavors of soda pop and water,” says Schmidt. “Then they seem to get it.” The dealership ran through all its breakroom catalogs this year and doubled its order for 2020.

Keeney’s has always sold a number of items that are now included in the breakroom category. “I guess our growth in the category has been easier because the wholesaler made it possible,” says Sterne. He contends that setting up breakroom—and to an extent janitorial too—as separate categories just confuses customers and encourages them to buy from somebody else.

“We’re trying to expand the definition of office supplies so it includes breakroom,” Sterne adds. He believes that telling customers that Keeney’s is also a breakroom dealer or a Jan/San dealer can confuse them. “Office supplies is a larger umbrella that incorporates these other categories,” he says. “So the sales strategy is to expand the conversation to include breakroom.”

Miller’s Supplies at Work has actively sold breakroom products for close to 25 years. “It’s a significant part of our business,” says Wayne Stillwagon, executive vice president for the Lorton, Virginia-based dealership. “We actually stock more breakroom items than we do office products.” Stillwagon agrees that it’s tough in almost any market to find quality breakroom service.

The dealership offers coffee, juices and soda pop. Coke and Pepsi deliver tractor-trailers every week. The dealership also stocks roughly a hundred Keurig K-cup flavors, a whole range of disposable dinnerware as well as more than a dozen varieties of water. “If you walk into our warehouse, it looks more like a breakroom warehouse,” says Stillwagon. “Because it is 25% of our business, depending on the client or prospect, we most likely lead with breakroom more often than we do with office products.”

Going to the next level

Breakroom has been a focus at Workspace Central, Newtown, Pennsylvania, for somewhere close to the last decade. For the past several years the dealership has attempted to reach the next level when it comes to breakroom sales. “We’ve been trying to become the category sole supplier,” says Mike Fitzgerald, vice president.

The sales approach tends to be a cross-sell opportunity with customers. “When there is an opportunity, we try to lead with a local roaster and work with our manufacturers like Bunn,” says Fitzgerald. Salespeople find customer pain points and then provide the solution that makes the most sense.

According to Fitzgerald, coffee buyers typically fall into one of several groups. At one end, there are companies that just brew a pot of coffee for employees and leave it at that. “Then there are companies who see it as a strategic amenity they provide for their employees,” says Fitzgerald. “They’re willing to put in more resources and invest in employee health and wellbeing.” A third group of buyers goes for a single-serve approach, which provides a quick and easy solution.

Of the dealers contacted for this article, only Workplace Central employs a specialist and his expertise is split between janitorial and breakroom. The sales force is trained to always ask the breakroom question and when a sizeable opportunity presents itself the specialist might be called on. “When we are proposing a change or recommendation we will bring in the specialist,” Fitzgerald adds.

Great River has also partnered with a local roaster, a woman-owned coffee house in Duluth, Minnesota. The coffee is both fresh and locally roasted and appeals to those Schmidt refers to as coffee snobs. “There are a few of them out there who want the best coffee and locally roasted coffee sets us apart from the competition,” he adds.

Schmidt recommends staying close to trends when it comes to beverages as you might find hidden breakroom opportunities. He points to iced coffee as a summer beverage with potential. “We have soda pop, water, coffee; well what about iced coffee?” he asks. He’s talking to a local iced coffee manufacturer and expects to offer this beverage in the summer of 2020.

Coffee sales heat up

The introduction of single-serve options close to 15 years ago had a tremendous impact on the coffee market. It came about at roughly the same time that millennials came into the workforce. “Customers began to look for a higher quality of coffee, rather than the burnt coffee in the bottom of the bowl,” says Stillwagon.

Generally speaking demonstrations are not needed for coffee brewers as most people are familiar with the systems, either from experience at home, in hotel rooms or other offices. The bean-to-cup coffee brewers, such as those offered by de Jong DUKE, typically require a full frontal approach.

“Typically it takes two technicians to deliver and set up the equipment, then a sales rep conducts a taste testing,” says Stillwagon. They bring in pastries and hold a session for a select group. “They leave the machine there for about three days before they go back and pick it up.” At that point the customer is usually sold.

Water is just as popular a beverage choice as coffee and many dealers have found that it offers yet another way to get into breakroom sales. At Workplace Central five-gallon bottles of water have turned into a growing business. “We’ve done a good job of removing the traditional water companies, who have had service gaps over the last couple of years,” says Fitzgerald.

Highbar Trading echoes the importance of water sales; it is one of several products that tends to open doors. “We sell a tremendous amount of bottled water,” says Miller. “It’s not unusual for us to sell a pallet to a pallet-and-a-half of water a day.” The downside, he says, is the space that it takes to inventory beverages and the room they take up on delivery vehicles.

Breakroom 2.0

At Miller’s Supplies at Work the typical breakroom customer is a white-collar organization with a minimum of 50 to 75 employees or larger. “We are targeting larger white-collar offices because for them, the breakroom is not just a breakroom, it’s part of their hiring opportunity,” says Stillwagon. The new take on breakroom offers a casual environment where employees can grab coffee and go or find a seat and work on a laptop. “So it’s a collaborative space,” he says. “It’s a selling space for new employees as well as the breakroom.”

One of the biggest changes in recent years has been the effort by businesses to take their breakroom up a level. “There is a push to make the breakroom more than a room with a coffee machine and a microwave,” says Fitzgerald. The latest approach portrays the breakroom as an experience for employees with a full range of products, including coffee, other beverages and snacks. “Businesses need more to hold employees and keep them happy,” he adds.

Another consideration is the relationship people have with breakroom products. “Personal preference is more pronounced,” says Fitzgerald. When it comes to office products people will readily accept a generic substitution; but not so in the breakroom. “Employees are a lot more particular with changes in product selection,” he says. The challenge has been to try and get the exact snacks customers want. “Once they source something, it’s hard to find a suitable substitution.”

Beverage and snacks supplied by industry wholesalers don’t always leave enough margin for dealers to remain competitive, according to several of the dealers we talked with.

In Minnesota, Great River regularly uses a regional wholesale grocer to supply beverages and consumable breakroom items. The wholesale grocer offers delivery services and sometimes delivers to Great River customers. But those customers still want the invoice to come from Great River.

The bane of wholesale clubs

For many dealers, Sam’s Club and Costco remain primary competitors for breakroom business. The need for customers to place $250 orders with the warehouse clubs to qualify for free delivery eats into office products sales as customers pad their breakroom orders to reach minimum order requirements.

When an employee has to pick up product, Miller is quick to point out potential liabilities: whose car is used, what insurance is involved, who pays for gas; the list goes on and on. A lot could go wrong, he says.

To meet customer requests, Highbar Trading has set up purchasing agreements with local suppliers. “We actually have a wholesale agreement with the local buying club stores,” explains Miller. The program with the buying club flies in the face of the local competition these stores represent. Still, according to Miller, at the end of the day they can add far more to the bottom line than you might expect.

“We’re not afraid to work with wholesalers and distributors, even competitors sometimes, to put together a full program,” says Miller. “You have to as the industry becomes increasingly incestuous.”

Just four or five years ago, customers were reluctant to cede the buying club business to dealers. Now they ask Highbar to take over their wholesale club habit. “They’re fine with us taking that over and putting margin on top of it,” says Miller. They appreciate the additional service and they’re more than willing to pay for it.

Keeney’s has experienced similar reactions from buying club customers. Sterne says it is not uncommon for customers to want to unload the hassles involved with trips to Costco. “They pay us a premium on top of the Costco prices to take it on,” he says. He says the wholesale club also has enabled him to offer an expanded selection of soda pop. “We don’t buy a lot from them but if someone wants Diet Dr. Pepper, the wholesaler doesn’t have that,” he adds.

Staying competitive with breakroom requires tapping a variety of product sources. “The tricky part is, bigger competitors understand the potential in this market,” says Fitzgerald. “So we need to be aggressive.” At the same time, he recognizes the threat of the wholesale clubs and their appeal for those customers who continue to run out there to pick up whatever they need. With price sensitivity on the one hand and a different service proposition on the other, for a dealer to win the business it has to be carefully managed.

Toughened competition

Competition has definitely evolved. “With the rise in eCommerce everyone can see pricing,” says Fitzgerald. “We really have to be creative in how we source and how we price to maintain our current business and get new business.”

Price is always important but add in convenience and reliability and a dealer’s competitive position becomes even stronger. Customers don’t have to wait for a scheduled delivery but can have it next day. “It’s convenience on one truck; it’s with your office supplies,” says Fitzgerald. He points out that frequently the same person is ordering breakroom supplies as office supplies, which can make it an easier sell.

One of the biggest obstacles to growth with breakroom sales is the logistics involved with beverages. “Delivering paper plates and cups; that’s stuff is simple,” says Miller. “It all comes overnight from the wholesaler.” The challenge, he says, is how deep a dealer wants to get into breakroom and whether they will start selling coffee, water and beverages.

Beverages take up a lot of room in the warehouse and on delivery trucks and can be a service intensive business. “Clients want those drinks put in specific areas and water and beverages can be damaged as well.”

Damage gets into the area of perishables, and beverages and snacks often come with “sell-by” dates. Schmidt relates how one customer started to buy from Great River because its previous supplier always delivered soda pop that was expired. “So you’re constantly having to turn inventory and make sure you keep fresh, updated goods,” he adds. The warehouse manager has started to mark breakroom inventory with an “X” so drivers know to take those boxes first when filling orders.

“The biggest obstacle to growth is the service proposition that the customer looks for; in addition to selling machines you have to service them,” says Fitzgerald. If the coffee brewer breaks, who will fix it? That service is a crucial component. “If we don’t have a reliable way to service that on-demand then that becomes a challenge to try to convert someone,” he adds. For now Workplace Central does some service itself and works with an outside repair service on other units.

How to grow breakroom sales

For dealers looking to get started with breakroom sales, Fitzgerald suggests that they start small with a targeted approach. “Customers that you have done a good job with, that trust you, are where to start,” he says. If you plan to sell coffee, you need to determine what system you will lead with. “You need to find a strategic partner, either from a machine standpoint or a general breakroom supplier and focus on a subset of items you know you can sell.”

Remember that breakroom items are office supplies. “Don’t make it special; don’t make it frightening,” says Sterne. Breakroom doesn’t require more product knowledge than the average individual already has. “Sell this category with the same confidence and in the same breath as any other consumable office supply category.”

Highbar’s Miller suggests that dealers lean on their wholesaler for coffee service. Generally speaking there is a breakroom specialist or coffee specialist at the wholesaler that can work with a dealer to help get them started. “You have to lean on people to get a knowledge base to sell the product and bundle it into the rest of your program,” says Miller. Align with a product that the wholesaler stocks in quantity and is available from back-up facilities as well. “We’ve sold coffee before where the wholesaler ran out and we had to go with a different manufacturer,” he adds. “People don’t like to change brands.”

An additional breakroom opportunity can arise when there’s a recognized need to add or change furniture to fully capitalize on the revitalized experience that the customer hopes to achieve. The sales team at Miller’s Supplies at Work is reminded to talk about furniture options that work well in a breakroom setting, says Stillwagon.

Furniture and aesthetics was included in a breakroom marketing campaign that went out to Miller’s customers in September and October. The message was essentially that businesses should focus on breakroom design because nothing defines a culture better than a company’s breakroom.

Michael Chazin is a freelance writer specializing in business topics, who has written about the office supply business for more than 15 years. He can be reached at mchazin503@comcast.net.

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