Heat up your ROI with ice

1. Heat up your ROI with ice

2. Five key takeaways • People like and want ice • You need to help them understand that • Ice is more expensive than water • But it adds value in multiple ways • An ice and water dispenser is not much more than the cost of a cooler and an ice machine • You need to use this to overcome initial price shock (your own or your customer’s) • Think quality, sanitation, and ice type • It’s an investment, so do it right • Include the margins of iced beverages in your pricing equation • It can give you a more easily accepted price point

3. Agenda • Why ice • How to do ice right • How to make money with ice

4. Why consider ice? • People like ice • Ice can contribute to health and wellness • Ice increases capacity for cold water • Ice supports enhanced refreshment • Ice can make you money

5. People like ice… • Americans consume a lot of ice • More than 250 billion pounds of ice used in the U.S. • Over half of U.S. offices have ice • More than ½ the population likes to chew ice • People prefer soft, chewable ice

6. The health benefits… • Ice promotes better hydration • Good hydration is associated withimproved mental acuity and productivity • Chilled, filtered water tastes better • Water stays colder longer with ice • Higher water consumption and better hydration is more likely with ice • And fitness • Metabolizing 8 glasses a day of chilled water consumes the caloric equivalent of 3 – 4 lbs per year

7. More cold water… • The availability of ice can increase the amount of cold water that can besupplied • Solve the problem of running out at break time and other key periods • Increase employee satisfaction since ice keeps drinks cold, longer

8. Ice supports enhanced refreshment • Heart+Mind Strategies study findings reveal that • Water is a significant opportunity for OCS operators • Iced beverages (coffee and tea) during afternoon dayparts can be a another significant growth opportunity Ice supports both of these major opportunities

9. Ice supports iced coffee (and tea) … • 20% of consumers drink iced coffee, • 38% aged 18 to 24 • 11% aged 55 to 64 • 5% aged 65 and older. • 77 percent of iced coffee drinkers say drinking it makes them feel more productive at work Mintel research - http://www.csnews.com/top-story-cold_frozen_dispensed_beverages-iced___frozen_coffee_gains_year_round_appeal_-64228.html

10. Ice supports all the intangibles of enhanced refreshment • Nurturing environment • Impact on morale, satisfaction, and productivity • Keeping people “in the office”

11. You have to convince your clients (and yourselves) that ice is important • Because ….

12. To do ice right is not cheap!

13. Ice machines come in all price ranges • At the entry end • $200 - $400 for small countertop scoop out icemakers • $500 - $1,000 for small ice and water dispensers

14. Ice machines come in all price ranges • For higher capacity, more durable equipment • $1,000 - $2,000 for commercial-grade undercounter icemakers • $2,000 - $5,000 or more commercial grade icemakers and dispensers

15. Pricing reminder for dispensers • An ice and water dispenser is both • An ice machine and • A water machine • When you add the two together, the price of an ice and water dispenser, entry or higher end is not that much different than the price of both machines combined – with usually a smaller footprint • But you have to want ice!

16. Why is ice so expensive? • Bigger refrigeration system • it takes twice as much energy to freeze 32o F water to ice than it takes to chilled the same water from 72o to 32o • Heavier duty mechanical components • Insulated compartments to store ice • More sophisticated controls

17. Key considerations to do ice right • Sizing – selecting machines that will serve the customer’s needs • Quality / reliability of the machines - they have to work and be trouble-free • Sanitary dispensing – you want to avoid hand scooping in most cases • Ice type – the right ice enhances satisfaction

18. Sizing factors • Plan for ½ to 1 pound of ice per person per day • Demand factors include • Number of people that like ice • Usage patterns during the day • Cup size • Other uses for ice (pitchers, cooling, etc.) • Supply factors include • Size of storage bin • Hourly production capacity to produce ice

19. Sizing approaches

20. Sizing models

21. Quality / reliability • There are a wide range of ice machines and qualities • Commercial quality ice machines normally have • Higher capacities with expected lives of 7-10 years • Full warranties of 2-3 years and extended compressor warranties

22. Quality / reliability • Manufacturer’s Installation Requirements • Electrical • Determine voltage • Determine amperage • Plumbing • Determine drain requirements • Not all ice and water dispensers require a drain • Incoming water source • Clearances • Proper ventilation for air cooled icemakers • Accessibility for equipment maintenance

23. Sanitation – get rid of the “Yuck” factor • The break area can be the dirtiest place in the office • The Healthy Workplace Project, Kimberly Clark Professional in conjunction with the University of Arizona

24. Sanitation – get rid of the “Yuck” factor • Scooping = Contamination potential

25. Sanitation – get rid of the “Yuck” factor • Hands free dispense = More sanitary

26. Ice type matters • People love nugget ice compared to cube • Independent market research shows Chewblet ice is preferred by over 70% of consumers in the U.S. • Very popular in convenience stores and QSRs for fountain beverages

27. How to make money – Four approaches • Sell machine to customer • Lease machine for full payback on machine • Give it away as part of an iced beverage program • Mixed model – consider both machine rental and additional product revenue

28. How to make money • Sell machine to customer • Relieves operator of responsibility but places an upfront burden on customer • Who takes care of the machine?

29. How to make money • Lease machine for full payback on machine • $1500 - $3000 expenditure for commercial quality results in a longer payback than operator traditionally desires • Even with that, requires over $100 per month rental fee

30. How to make money • Give ice machine away as part of an iced beverage program • Expensive investment • Ice isn’t used exclusively for revenue producing beverages • Large number of incremental drinks required to pay back machine in full

31. How to make money • Mixed model – subsidize some to generate additional product revenue • Recognize that ice has multiple purposes • Structure lease payment that represents an “upscale water cooler” for the customer • Sell the benefits of ice water over just water • Make up the difference with additional product sales • Extend ROI payback slightly

32. How to make money - Mixed model • Get your customer to recognize that ice has multiple purposes in the office • Iced beverages you can charge for • Ice water for employee hydration • Employee supplied beverages • Pitchers for meetings • Coolers

33. How to make money - Mixed model • Structure lease payment that represents an “upscale water cooler” for the customer • Sell the benefits of ice water over just water • Overall satisfaction • Employee desire for ice, especially nugget ice • Keeps drinks cooler longer to promote increased hydration and extended times between visits to the cooler • The value of ice demands a premium over a water cooler

34. How to make money - Mixed model • Extend ROI payback slightly • Durable, commercial quality ice machines are designed for 5-10 years of life • Match payback to warranties • 2 to 3 year warranties allow you to extend payback with minimal risk • Paybacks of as low as 18 months are achievable if all factors are considered

35. How to make money - Mixed model • Add the profit from additional product sales to the ROI equation • How many iced beverages and can you sell?

36. How to make money – Some examples

37. How to make money – Some examples • Not many sales at $223 per month

38. How to make money – Some examples

39. How to make money – Some examples • Not many more sales at $154 per month

40. How to make money – Some examples • How about at $75 per month and an 18 month payback?

41. How to make money – Some examples • Can you sell more 22 drinks a day?

42. Five key takeaways • People like and want ice • Ice is more expensive than water • An ice and water dispenser is not much more than the cost of a cooler and an ice machine • Think quality, sanitation, and ice type • Include the margins of iced beverages in your pricing equation

43. Thank you!