Price Drives Coffee Sales, but Quality Makes it a Destination

businesses-celebrate-national-coffee-day01When it comes to your brew program, can you compete with the big boys or are you willing to concede this important customer?

By Jim Callahan.

Starbucks taught the industry that consumers will readily pay double and even triple the normal price for a clean, upscale and trendy atmosphere where they can obtain a more robust cup of coffee.

Starbucks’ wide variety of coffees, lattes, cappuccinos and espressos are so unique that they are discussed and consumed everywhere from the board room to construction sites. The brand has succeeded in building and achieving universal appeal and acceptance.

McDonald’s, too, recognized that consumers were gravitating toward a bolder brew and brought to market a redesigned and upgraded coffee program at more affordable prices, all during the worst recession this country has experienced in 75 years. 

With the knowledge that price alone no longer rules consumer purchasing decisions, McDonald’s developed an upscale coffee program centered around a genuinely superior cup of coffee. Through massive advertising, they convinced a flavor-craving motoring public that a great cup of coffee at a reasonable price was waiting for them.

But I’ve watched the hamburger chain double down its bet across all of its beverages. McDonald’s has also found great success in bringing back the popularity of milkshakes, sundaes and frappes, all of which can be deliciously dressed up with mountains of swirled whipped cream, chocolate syrup and other tasty toppings.

Having experienced this success, McDonald’s continues to make serious inroads into our fountain drink business by periodically offering ultra competitive prices–prices that are almost too difficult for even our loyalist customers to ignore.

Fighting Back
So, where does this leave us?  For the vast majority of c-store chains it creates an even greater sense of urgency to get dispensed hot and cold beverage programs in order. Between retail powerhouses like McDonald’s and Starbucks and the c-store industry’s top quartile chains like QuikTrip, RaceTrac, Wawa, Sheetz and the like, the level of competition is quite simply as difficult as it has ever been.

The good news is that our industry has topnotch coffee suppliers that are willing and able to create an upscale coffee program for chains of all sizes. Plus, these supplier partners routinely express a continued desire, initiative and commitment to give your  coffee program the kind of attention it needs not only to satisfy your existing customers, but to also attract new business. This is so important for small and mid-sized chains because they risk losing market share to these bigger chains. As the larger chains grow, it has to come at someone’s expense.

My advice is to understand two things: First, coffee cannot be a niche item. It must become a destination and it must be treated as such. Second, learn to appreciate that the highly discriminating morning coffee drinker will spend much more than almost any other customer that walks through your front door. If they like your coffee, they will be back for many other things. These are customers you must keep to be successful, so own up to your shortcomings. 

Resolve to improve your offerings. Invite your coffee supplier in to elevate your hot beverage program. Tell him your vision and ask for his advice on how to help you achieve it. Learn from his expertise how to deliver an upscale coffee offering using new equipment that keeps the product fresh and is still attractive in design.
Finally, advertise and promote your offering. Make sure your employees are on board. You can be great like the top quartile chains. Showing patience and making informed decisions are the first steps toward getting there.

Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan502@msn.com.

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