Capitalizing on Coffee

Opportunity for Growth


54% of the overall adult population drank coffee beverages daily in 2009.
Coffee preparation at home is up five percentage points, with 83% of past-day coffee drinkers reporting that they made coffee at home the day before.
80% of coffee drinkers are doing nothing different despite the economic downturn.
17% are visiting coffee shops less often, trading down, making more coffee at home, buying less-expensive brewed coffee or looking for sale prices.Source: National Coffee Association’s 009 Annual Survey on Coffee Consumption

Cashing in on hot dispensed beverages in the months ahead will mean not just offering a good variety of high quality products, but making noise about it through conventional media and social networks.

In January, for example, Pilot Travel Centers launched a marketing program that includes messages on its fleet of tanker trucks and social media sites to promote its premium coffees and cappuccinos. The program includes the chain’s first Facebook fan page dedicated exclusively to coffee, as well as a brand new Twitter account. Online consumers can print coupons for free hot beverages, redeemable at any Pilot Travel Center or Pilot Food Mart. Facebook fans also can take part in a poll about which Pilot coffee blend is their favorite and learn more about the company’s eight coffee varieties, including gourmet coffees and Pilot’s house coffee.

This approach represents a decidedly different approach to old school coffee promotions. Retailers and suppliers alike agree that to make dispensed beverages important, operators must create critical mass. One or two dispensed items do not make a category important enough. Group all dispensers in one area and umbrella them with branded signage, such as putting a logo on cups and condiments. To get the program off to a good start experts also pairing food items with the new beverages.

“Anybody who is looking for a premium or flavored coffee is now our target customer and we are converting them at an impressive clip with our new coffee program. That is what it’s going to take to compete effectively in 2010 and beyond.”William Walljasper, Casey’s General Stores Inc

 

Gaining Traction
“One thing that’s giving us a lot of traction has been the expansion of our hot beverage area,” said William Walljasper, senior vice president and chief financial officer for Ankeny, Iowa-based Casey’s General Stores Inc.

Most of Casey’s 1,500 stores carry only two types of hot dispensed beverages: regular and decaf coffee, in addition to powdered cappuccino machines. Over the last 12-18 months, however, management has expanded the coffee selection in 120 stores. Coffee, Walljasper said, is one of the highest margin items in Casey’s prepared foods program, which also includes fountain, chicken, pizza and more, whose overall margin tracks above 62%.

“What we are doing is a combination of several things,” explained Walljasper. “Not only are we expanding flavor profiles to offer products like Kona, Colombian, Hazelnut, Irish Crème and some other flavor profiles, but also we have added flavored creamers and syrups. The indications we are seeing have been robust, with strong double-digit incremental sales movement once we go ahead and make that type of conversion.”

By Walljasper’s reckoning, the customer for these new items is, on the whole, new to Casey’s stores. “What we are trying to do is expand our customer base with this particular product line. Anybody who is looking for a premium or flavored coffee is now our target customer and we are converting them at an impressive clip with our new coffee program. That is what it’s going to take to compete effectively in this segment,” he said.

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