Capitalizing on Coffee Trends

Hot beverages anchor the industry’s foodservice offering, but the category is also a top in-store destination and among the most profitable.  

By Howard Riell, Associate Editor.

Numbers don’t lie–and when it comes to consumers and coffee, they show a category poised for even greater growth in the months ahead.
Coffee consumption among consumers aged 18-29 has rebounded to 2008-2009 levels, following a decline in 2010, according to the National Coffee Association’s (NCA) 2011 National Coffee Drinking Trends (NCDT) data. The study also found that the coffee category remains strong.

“2011 NCDT data show that coffee’s relevancy remains strong amid a proliferation of beverage options,” said Robert Nelson, NCA’s president and CEO. “A rebound in consumption among younger drinkers demonstrates strong category loyalty, which suggests a solid customer base for future growth.”
According to the 2011 study, 40% of those between the ages of 18-24 said they drink coffee daily, up from 31% in 2010 and the same as 2009. Among consumers between 25-39, 54% said they drink coffee daily, a gain over the 44% in 2010 and just ahead of 2009’s 53%.

Greater confidence in respondents’ finances was a major cause for the recent uptick. Gourmet coffee continues to account for a healthy portion of total coffee consumption.

Presentation and Offering
Given that coffee is such a high-growth category that represents strong profit potential, it should be no surprise that the industry’s leading retailers are focusing a lot of effort on solidifying their offerings. More often than not, the program begins with studying what customers want.

“To me, coffee is about presentation and offering,” said Jerry Weiner, vice president of foodservice for Rutter’s Farm Stores in York, Pa. “That’s what it is. You create price/value, and you don’t have to get into these hot price battles with McDonald’s. In this market, over the past year they were promoting all cup sizes for just 69 cents— and then they went to $1 for any cup for the balance of the colder months. A lot of the competitors here went down into that valley to try to compete with them, and I just was not going to go there.”

Instead, the 55-store chain took a different approach, finding ways to add value proposition. “We wanted to get the price/value in the consumers’ minds, and that’s where the triple rewards came about,” Weiner said. “That proved to do the job, and of course now we’ve expanded that.”
Selling coffee effectively, Weiner insisted, is about visual presentation. “I’m constantly looking at ways to enhance the visual and make sure that we have a rather extensive offering, which I’m a big believer in.”

Both product and condiment offerings must be sizeable. “I think we’ve reached an era of customization in which people really want to have it the way they want to have it. It’s not just light and sweet anymore,” Weiner said. “They want to really add a lot of things to their coffee, and it isn’t just about having sugar and Sweet ‘N Low. It’s long past those days.”

Brewing Excitement
The Pantry Inc., which operates 1,650 stores in 11 states, last year unveiled a massive coffee re-launch program in the Southeast with the goal of serving its customers a fresh coffee experience in a fast, friendly and clean store environment.

New and improved high-quality Bean Street Coffee is now being served at The Pantry’s local Kangaroo Express convenience stores. “This coffee re-launch reflects the transformation taking place at The Pantry,” said The Pantry’s Senior Vice President of Marketing and Foodservice John Fisher. “Chattanooga and Dalton are already among Kangaroo Express’ top 10 leading markets in coffee sales, which make them prime locations to introduce our new Bean Street Coffee. Our goal is to impress our customers with the quality and value Kangaroo Express delivers in coffee and customer service.”

In addition to improving the taste of the new Bean Street Coffee, The Pantry has enhanced coffee serving stations with spacious counter space, upgraded cups, lids and other coffee accessories. Guests can customize their coffee to their liking with a variety of blends and options such as sweeteners and flavor shots. Cappuccinos, lattes and flavored coffee are available as well.

The Pantry is also increasing associate training to ensure guests always receive a great tasting cup of coffee. A hospitality-certified associate in each store will provide fast, friendly service, maintain the cleanliness of the coffee bar and help customers get in and out quickly.

“Coffee is typically the first foodservice product that customers try in a store, and I encourage all of our guests to try our new great-tasting coffee on us,” said Fisher. “Our goal is to be the customer’s choice for a delicious, satisfying and convenient cup of coffee.”

The relaunch was heavily supported with promotions and The Pantry’s “We Brew It – You Do It” marketing campaign, highlighting the variety of ways guests can customize their Bean Street Coffee.

Weiner agreed that coffee promotions generate traffic. “I’ll tell you the truth,” he said. “Our biggest effort was when we did a triple rewards promotion and tied it into our rewards program, which is really about cents off a gallon of gas.”

Rutter’s customers always received a penny off gasoline when they bought the coffee, but when they went to a triple points reward aimed at increasing fuel gallons sold, it had a dramatic impact on coffee sales.

“Coffee sales based on cups sold per day spiked by more than 20%,” Weiner said. “We did that in January and February, but the important note was that we’ve had a residual impact of about 7% so far, and that’s been holding relatively true.”

Rutter’s first triple-reward promotion was so well received by customers that the results helped to establish a new strategy for the company.
“It actually was so successful that we followed it up with a breakfast sandwich promotion with triple rewards that did equally as well,” Weiner said. “We’ll have more of them coming.”

Customers Express Confidence in Convenience

Research firm Technomic Inc. conducted an online consumer survey—”The Convenience Store Foodservice Consumer Trend Report”—with a nationally representative sample of more than 1,500 American consumers. Among its findings: coffee beverages are one of the main draws to convenience store beverage programs. In fact, 31% of consumers who purchase coffee at convenience stores said they do so more often than once a week.
• Convenience stores continue to develop coffee offerings, highlighting specialty preparations and a wider variety of flavors.
• Since many are purchasing coffee for everyday occasions, regular coffee is probably the option that most consumers choose because it is inexpensive and quick.
• Consumers reported that they purchase hot specialty coffee, such as a latte or cappuccino that is dispensed from a machine, iced or cold brewed coffee, and retail coffee beverages, at least occasionally.
• Females are more likely to purchase specialty coffee and prefer flavored coffee blends.
• Many younger consumers are purchasing convenience store coffee more often than they did a year ago, likely as the result of trading down from other foodservice locations.
• Consumers who have cut back on coffee purchases are doing so due to a lack of disposable income and a negative outlook on the future of the economy.
• Two-thirds (66%) of consumers who visit convenience stores for breakfast said that they purchase some type of prepared coffee at least occasionally (or about once every 90 days) when they visit convenience stores for this meal.
• A strong coffee program can drive traffic. About one-fifth (18%) of consumers said that they choose their favorite store based on their individual coffee preferences.
• Preferred coffee offerings resonate most strongly with so-called Super Heavy Users. More than a third (37%) of Super Heavy Users (compared to just 18% all consumers) said they visit their preferred location because it offers the coffee they prefer to drink. “This suggests,” Technomic noted, “that offering high-quality coffee is likely to drive repeat business and perhaps daily visits since consumers in this user group typically visit convenience stores for food or a beverage every day.”

 

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