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NATIONAL REPORT -- Specials are brewing nationwide as convenience stores pour on the promotions to perk up profits from the coffee category.
7-Eleven Inc.’s fourth annual 7-Election Presidential Coffee Cup Poll, which lets customers vote by picking a blue donkey- or red elephant-themed cup, is in full swing. Meanwhile, Pumpkin Spice coffee has returned to Wawa Inc.'s stores, while Pumpkin Spice cappuccino is wooing The Pantry's Kangaroo Express customers through this fall. And promotions aren’t limited to a single season.
Kangaroo Express is also enticing java lovers with its Roo Mug, a reusable Bean Street Coffee mug that debuted Oct. 3 and retails for $1.69 — the same price as an extra-large coffee. The first fill is free and refills are just 99 cents. Customers can build their own brew and share it with Facebook friends at www.beanstreetcoffee.com. Those who join The Roo Club can save even more by texting “ROOCLUB” to “THEROO” for deals like 49-cent coffee and free refill days.
The growing prevalence of coffee promotions underscores the important role this hot beverage plays in today’s competitive marketplace. As industry experts explain, coffee is key to driving store traffic and increasing profits in the process.
“McDonald's has upgraded its offering and other retailers like Subway have entered the breakfast market with quality programs,” said Dean Dirks, CEO at Dirks & Associates, a consulting firm that advises the convenience store industry on foodservice issues.
“Foodservice is the differentiator for c-stores and continues to be a growth engine. That includes hot coffee, which is a top 10 category just behind candy, and a top three margin category from a profit perspective,” added Paul Weitzel, managing partner at Willard Bishop LLC, who leads the consulting firm’s efforts to provide cost reduction and profit-building solutions to the grocery, convenience, mass, drug and foodservice channels. “Coffee is a trip driver and very important for satisfying the morning on-the-go shopping occasion...If done right, coffee can be one of the most important levers for loyalty.”
Wawa is taking differentiation a step further as it rolls out a new made-to-order hot and cold espresso beverage program this year to its 600-store chain. As reported earlier by CSNews Online, the made-to-order cappuccinos, lattes, chai and other beverages are part of the chain’s latest foodservice reinvestment initiative.
The new line is an extension of the chain's smoothies and frozen cappuccinos, which launched in 2010 along with a complete coffee section reimaging. While all employees are trained to make the new drinks, there are associates designated to be the lead on making beverages for each shift. Currently, its espresso menu offers more than 22 options, in addition to the smoothies and frozen cappuccinos.
By the Numbers
Driving store visits and building customer loyalty have become essential goals as demand for gasoline and tobacco products has waned, according to the recently released Nielsen report, “Growing Appetite for C-Stores.”
“While sales trends are crucial, trip and purchase incentives are equally important,” the study stated. “Consumers will respond strongly to promotions as seen by a 14 percent growth in promoted unit sales, which is over four times the rate of growth of non-promoted unit sales.”
Coffee promotions can help meet those goals—especially since coffee already is the top planned c-store purchase. Ninety-six percent of coffee buyers know they are going to buy a cup of coffee when they enter the store, and more than two-thirds of customers buying coffee at c-stores do so four or more times per week, according to information from Willard Bishop Consulting.
Despite the growing popularity of specialty hot drinks, traditional coffee still dominates in the convenience channel. In 2011, it accounted for three quarters of all hot beverage sales, according to the Convenience Store News 2012 Industry Report. Coffee, including flavored, accounted for 75.2 percent of hot beverage sales, while cappuccino/specialty coffee comprised 16.4 percent of dollar sales in the category.
And coffee’s popularity shows no sign of slowing. Daily coffee consumption soared by seven percentage points in the past year, moving coffee ahead of soft drinks, according to the 2012 National Coffee Drinking Trends (NCDT) report from the National Coffee Association.
The NCDT also revealed that total coffee consumption jumped from 68 percent to 73 percent for past-week consumption and from 76 percent to 78 percent for past-year consumption, while gourmet coffee consumption moved from 37 percent of all cups of coffee consumed in 2011 to 46 percent in 2012.
Best Practices, Improved Sales
While special prices for mugs and refills and limited-time seasonal offerings are among the most popular strategies for increasing c-store coffee sales, there is room for improvement in coffee marketing campaigns.
Willard Bishop's Weitzel, for example, believes the power of seasonal promotions remains largely untapped. “Starbucks does the best job of this and has created great seasonal demand and excitement,” he said. “Right now, most coffee programs are straightforward with standard flavors every day. I think c-stores can learn from [Starbucks’ approach] and create their own seasonal offerings.”
Leading c-store executives recognize that improved coffee programs can boost coffee sales. They shared information about their companies’ best practices at the 2012 Convenience Store News Foodservice Summit, presented in partnership with Tyson Foods, in March.
Wawa, for example, focuses on customization and employs a master coffee roaster who oversees the specifications of all its roasts — an approach that facilitates the product development process within its supplier relationship, said Mike Sherlock, Wawa’s director of foodservice.
Alimentation Couche-Tard Inc.'s Circle K stores are revamping coffee presentations, moving away from flavored coffees, and tapping into the “Make it Your Way” trend. "We're going to more robust varietal blends, limited flavors and offering customization,” Larry Brueggemier, director of foodservice development, said. Circle K is also replacing standard glass pots with soft heat containers — a move Dirks sees many retailers making because they can’t control the quality of the coffee in open glass pots.
Creating an in-store presentation that draws customers to the hot beverage section is also proving a profitable plus. Case in point: When Kwik Trip remodeled its hot beverage area and added an island-style layout, coffee sales increased 5 percent to 15 percent, depending on the store.
As Jim Bressi, Kwik Trip’s director of food research and development, stressed when summing up how to attract more coffee lovers to c-stores, "You have to make the customer believe it's a wholesale change for them.”