lots of opportunity

Labeled “cannibalistic” by some, drive-thru coffee kiosks on c-store lots can perk up in-store java sales.

Over the past 11 years, more than 70 of Montanabased Mountain Mudd’ssignature green 8′ by 8′ drive-thru kiosks have popped up in parking lots spanning21 states, and founder Brenda Burkhartsmeier has plans to take over the nationalNo. 2 niche right behind Starbucks…with the help of a few good conveniencestore partners.

Presently, 10 Mountain Mudd kiosks are situated on convenience store sites. The first of these associations began about five years ago, when Burkhartsmeier signed a lease to rent a “pad site” from a Cenex-branded convenience store in Billings Heights, MT. Although Cenex had been “glad to get the rent,” the situation threatened to change a year later when Iowa-based Kum & Go acquired the store, bringing along its own ideas and its own branded coffee offering.

“We were just waiting to be evicted,” Burkhartsmeier recalls.

But when inside coffee sales took an unexpected turn—upward, by about 10%—Kum & Go realized that the Mountain Mudd kiosk was not cannibalizing its in-store coffee business. Rather, the kiosk provided a complementary product and service that, with its upscale products and drive-thru service, appealed to a whole different customer base than the traditional c-store shopper.

When Burkhartsmeier opened her first Mountain Mudd kiosk, she had assumed that her clientele would be predominantly female and affluent. She quickly learned that she was wrong on both counts: Males make up more than half of her customer base, and the income demos go across the board.

Recently, Kum & Go opened a second Mountain Mudd kiosk on one of its properties, this time in Ankeny, IA. But instead of renting the space to Burkhartsmeier, the convenience store chain is launching a separate company to own andoperate its own Mountain Mudd sites. Although Kum & Go couldn’t comment on the venture at this time, Burkhartsmeier believes the retailer might open as many as 20 additional kiosks by the end of this year.

While most c-stores that offer cappuccino drinks use totally automatic equipment,Mountain Mudd has opted for a semiautomatic approach that combines the bestof technology with total customization and personal service.

“The original meaning of the word espresso was ‘especially for you,’ and that’swhat customers who are paying premium prices expect,” says Burkhartsmeier. “Withoutoneonone, customized service, convenience stores can’t expect to get past the99¢ per cup level that is the current benchmark of the segment.”

But customers don’t have to sacrifice speed for service. According to Burkhartsmeier, a skilled barista can easily beat an automated espresso machine’s service time, providing a fully customized drink and a personalized experience in an average of one and a half minutes.

The kiosks use wireless technology, eliminating the need for hard wiring or phone lines. Burkhartsmeier says she is planning to offer operators “webcams” to provide instant online training and technical support.

Ripe for growth
Although Handy Mart, a 45-store chain based in Mount Olive, NC, felt its marketwas ripe for a premium espresso concept, the company couldn’t spare a spot outsidethe store for a drive-thru kiosk. So Handy Mart asked Burkhartsmeier to helpit develop an in-store alternative. This became the first Mountain Mudd EspressoCafÈ, a cozy sit-down spot with brick walls, leather couches and a dedicatedbarista. The new addition hasn’t had a negative effect on existing coffee sales;since opening the Mountain Mudd CafÈ a couple of months ago, Handy Marthas increased sales of its in-store Neighborhood Coffee Shoppe by $2 a day,according to Handy Mart Marketing Director Tony Noonan.

“We’re able to serve two different demographics: our traditional convenience store customer who expects to pay around 89¢ for a cup of coffee,” says Noonan, “and a whole new group of professionals and younger people who are willing to pay $2, $3 or more dollars to get their favorite barista-made beverages.”

To generate more interest in “fancy coffee” among the locals, Handy Mart has invented coffee specialties topped with sugar crystals the same colors as those worn by area athletic teams and bearing names like “Tar Heel” and “Blue Devil.” These innovations havehelped the chain expand coffee dayparts into late morning and after 3:00 p.m., according to Noonan.

While Burkhartsmeier is still willing to rent kiosk space from convenience stores at a rate of $700 per month, she says that, for larger chains, franchising is the most profitable way to go. Up-front costs for a turnkey Mountain Mudd operation run around $75,000. That investment covers the purchase, shipping and set-up of a kiosk built to local specifications, initial supplies and training at Mountain Mudd’s “Coffee College” and ongoing personnel and technical support.

She compares that with the $300,000 to $500,000 minimum investment requiredto open a traditional coffeehouse. For a return on that investment, she quotesfigures from the National Specialty Coffee Association of America, stating thatthe average coffee kiosk nets sales of about $50,000 per year.

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