9 minute read
Category Update
from OPI APP JULY/AUGUST 2022 B
by OPI
Next Article
TOPSYTURVY
“In a state of flux” possibly best describes the current situation in the breakroom space, as OPI’s Michelle Sturman finds out…
The breakroom was a category full of promise and endless potential as room designs and food and beverage habits waxed and waned. COVID put the skids on breakroom sales as buildings emptied during the pandemic and, in many cases, are yet to return to pre-2020 capacity as hybrid working persists. For employees that do work in an office, there is a lingering wariness over shared facilities, equipment and utensils.
It’s not all doom and gloom, however. Because of all of the above – coupled with the after-effects of coronavirus in terms of trends such as a renewed interest in sustainability – the breakroom environment is currently being reinvented. The emphasis is on cleanliness, higher-quality products/equipment, and careful consideration of space utilisation.
Importantly, the breakroom is being used to entice staff back to the office. As Emerald Brand Managing Director Ralph Bianculli Jr remarks: “As corporations are pushing for employees to return to the office, they are incentivising them with major investments in pantries, corporate dining facilities and catering.”
ON THE AGENDA
Mark Leazer, Executive Director of US national accounts organisation AOPD, and Craig Church, VP of Sales at dealer Miller’s Supplies at Work, both believe that customers are now far more willing to engage in conversations about the breakroom – including jan/san and facilities supplies – than office products. They agree that the breakroom is part of the back-to-office strategy while OP is not.
According to the Retail Tracking Service from market research firm The NPD Group, the US janitorial and breakroom categories grew 1% in retail dollar sales for the 12 months ended April 2022 versus the prior year. The key drivers of the retail dollar volume growth include paper towels, napkins and dispensers, and tissue and dispensers – mostly thanks to a rise in average selling prices (ASPs) of 8% and 7%, respectively.
Based on NPD’s latest Future of Office Supplies report, the retail outlook for janitorial and breakroom supplies shows dollar sales will be up 10% year on year in 2022, down 2% in 2023 and flat in 2024. Again, the principal growth driver is ASPs within the paper-based categories.
Inflation is already having an effect which, says Office Snax CEO Todd Elmers, has caused significant price increases for commodities and by-products such as sugar and corn starch. This has resulted in steeper prices across the snack and candy product categories. “Shrinkflation will occur following the trends detected in the grocery and big box channels, with items shrinking in size to make up the inflation-related cost increases.”
Leazer agrees, adding that inflation is impacting other breakroom supplies, especially cups, utensils, stirrers and equipment, but is also a factor in coffee and water services.
At Dutch wholesaler/dealer group Quantore, Head of Purchasing and Category Management Dennis Albers predicts breakroom sales will continue to grow through a clear surge in demand
The breakroom is part of the back-to-office strategy while OP is not
for food, drinks and cleaning products. “2022 growth is logical considering the past two years, but even compared to 2019, it is massive. Being able to supply everything for the workplace – at home or in an office – is proving valuable when selling non-traditional categories,” he states.
SMELLING THE COFFEE
Although the consensus is that the breakroom category is on a growth trajectory, certain areas such as coffee consumption are generally trending downward. As David Henchel, CEO of US-based dealer Corporate Coffee Systems, remarks: “With customers abandoning some commercial office space, we’re having to take back or downsize coffee equipment. Some of it can be repurposed, but not all. This also means consumption is down.”
On the positive side, he says customers wanting enhanced options and upgrades to breakroom/coffee offerings have led to more profitable sales. “They are also increasingly open to bean to cup rather than just single cup convenience and want further flavour options.”
Global coffee firm Lavazza knows only too well that quality coffee brands and fresh formats are more in demand than ever following recent surveys with office managers and workers. Across the board, staff revealed that better office coffee makes them feel valued.
Crucially, they seek additional variety and a higher calibre of beverage offerings, but this frequently means heading offsite to purchase drinks unavailable in the breakroom. However, Lavazza points to research which shows it can be up to four times quicker for employees to get their drinks in their workplace than go out to buy them.
Miller’s Church notes customers are willing to spend on superior items with less shopping around as they look to update equipment and products. He also believes that, unlike diverse OP dealers, traditional OCS firms were hit harder by COVID. As a result, their service has dropped off dramatically, making them even more vulnerable.
Warehouse Direct CEO Kevin Johnson expresses the same view: “OCS/breakroom-only distributors are struggling to hire experienced staff to service their customers following significant layoffs in 2020. The experience loss and labour shortages at these operators have presented a very large opportunity for share shift. It has led to diversified distributors like Warehouse Direct gaining many now underserved customers.”
MARKET TRENDS
According to Johnson, there is unquestionably a greater interest in improving the look and function of shared spaces. On the flip side, he points out that full-service cafeterias are less likely to be sustainable in the long run due to fewer employees occupying the office on a daily basis. “This is a factor driving the already unmistakable trend in micro markets,” he says.
On the topic of these micro markets, he believes their impact is the same as MPS had on toner.
Kiosks with self-pay options are becoming more popular
STATE OF THE WORKPLACE IN NEW ZEALAND
Research undertaken by New Zealand-based reseller OfficeMax has revealed what it will take to lure staff back to the office.
The OfficeMax State of the Workplace survey of more than 1,000 office workers found that salary still tops the list. However, ‘softer’ attributes such as purpose, culture, leadership and business integrity are also critically important to employee engagement, alongside a raft of must-haves with clear ties to pandemic work/life.
According to the study, respondents aged 55 and over put a higher significance on having clean spaces (58%) and lunchrooms (51%). Respondents in the younger age group (under 34) placed value on a modern office (22%) and break-out areas away from desks (14%).
More than half of those surveyed (53%) said what’s important to them in an employer has changed over the past couple of years – from personal values to the workplace. For example, 67% stated they would only work for a business that delivers a positive impact on society, while 35% sought out companies providing goods or services that benefit society and do work which serves a local or global need (22%). An ethical supply chain was equally important.
Kevin Obern, Managing Director at OfficeMax, says: “We’ve seen a huge focus on areas like soundproofing, introducing quiet booths, and significant investments in technology and cafeteria enhancements.
“Businesses seem to understand that after spending the better part of a year working from home, employees now expect some of those comforts – like high-quality coffee and ultra-clean workspaces – in the office.”
“The larger the breakroom customer, the more likely they will be interested in a micro market. If you don’t offer this, the breakroom will mostly be lost to the distributor providing this option. A facility will typically need 100-150+ employees to support a micro market. However, as technology and equipment costs are coming down, so the headcount requirement will fall.”
Taking a similar standpoint, S.P. Richards SVP of Sales, Jan/San and New Business Development Nick Lomax states that, while vending is still around, there is a definite shift towards the marketplace format of micro markets. “Kiosks with self-pay options are becoming more popular and potentially offer a larger footprint with an accompanying broader offering,” he says.
BETTER OPTIONS
A more environmentally friendly breakroom is high on the agenda in the post-COVID workplace. The pandemic, says Anil Abrol, President of Canada-based compostable breakroom and foodservice products firm Eco Guardian, brought about a demand for disposables. “Unfortunately, many of them were single-use plastic,” he laments.
Clearly, while this situation was undesirable, the sheer amount of plastic waste created during the pandemic also served to highlight the issue. “Many of our existing and new customers are seeking sustainable/compostable products for the breakroom, which means the industry is advancing faster because of the increased demand. It’s great news for everyone,” notes Abrol.
Indeed, sustainability often encompasses the entire category, as Henchel attests: “More clients are seeking eco-friendly solutions – everything from product sourcing and packaging to better waste management.”
Emerald’s Bianculli agrees: “Our category is exploding due to demand for more sanitary, one-time-use products. Sustainability maintains a strong ‘pull’ from users, and ESG continues to grow. This has all played in Emerald’s favour.
“Additionally, we see more demand for cleaning products, towels and tissue, etc, as protocols have become increasingly stringent within the office environment.”
This is backed up by NPD research: an area within the breakroom category that is driving US retail growth in both dollars (13%) and units (2%) are disposable plates and bowls with a shift towards eco-friendly alternative materials.
In terms of unit sales of disposable plates and bowls by type, sugarcane was up by 136% and paper by 30%, while foam (polystyrene) and plastic fell by 27% and 3%, respectively.
Says Lomax: “Recycled, biodegradable and compostable products are more popular than ever due to the turn away from foam. Furthermore, foam products continue to be some of the most high-profile items constrained by global supply chain issues, which has opened up opportunities for sustainable alternatives.
He continues: “One issue has always been the trade-off between environmentally friendly products which have been around for years against the historic premium pricing to access those items. Fortunately, today several sustainable choices meet various price points, offering operators the chance to provide a strong, sustainable selection at competitive prices.”
And there’s plenty of innovation happening across all aspects of the breakroom too. For example, Eco Guardian has launched wood and fibre cutlery to complement its paper and bagasse range. “We’ve also released new takeout containers with clear lids as more customers are starting to prefer packed food instead of open, deli and buffet-style servings,” adds Abrol.
Meanwhile, Quantore has added its own brand to the disposables and coffee categories and now offers a one-stop service with machines for its members. “We have also extended our ranges of healthier food options,” says Albers.
Sticking with food, Office Snax’s Elmers believes sustainability will accelerate growth in the snack and candy sector in the coming years as we move through the generations. “While salty, meat and nostalgic snacks and brands continue to grow, millennials are focused on organic, non-GMO, etc snacks and treats.”
Healthier options are gaining momentum across the entire supply chain. AOPD’s Leazer, for example, has been engaged with US wholesaler Essendant about its new food and healthy snack offerings for the breakroom. He says dealers need to be tapping into these customer demands – or someone else will.
Customers are starting to prefer packed food instead of open, deli and buffet-style servings
