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NATIONAL REPORT — Hot coffee’s first cousin, iced coffee, can be an excellent premium alternative to hot java for some consumers and warrants consideration in any convenience store’s beverage portfolio, according to the Convenience Store News How To Crew panel of foodservice experts.
“We continue to try different versions of iced coffee in the stores,” said Chad Prast, How To Crew retailer and senior category manager of fresh foods and dispensed beverages for Murphy USA Inc. “It is a great item, but comes with lots of complications.”
For example, one might assume the natural placement for iced coffee would be at the coffee bar. Except for one little hitch: It requires ice. “That causes customers to either go to the fountain first to add ice, or requires you to purchase an additional ice machine,” explained Prast.
Still, one thing iced coffee can do is more easily extend coffee’s presence throughout the 24-hour cycle —particularly in the summer months, when a customer stops in after working a full day in sweltering heat looking for a coffee beverage pick-me-up.
“Iced coffee appears to be a different daypart than hot coffee,” noted How To Crew panelist Paul Pierce. “The launch of iced coffee did not cannibalize [hot] coffee, but may have had a slight impact on other iced drinks.”
Just like hot coffee, consumer’s preference for their iced coffee varies depending on geographical region.
“Areas where you would have strong [hot] coffee might take a stronger flavor iced coffee, and areas where the [hot] coffee is a little weaker, you may find a need for a sweeter iced coffee,” continued Pierce. “As with most iced drinks, there is some seasonality to iced coffee.”
There may also be more of a seasonal skew for iced coffee, certainly in colder locales.
“Stores in the North are certainly going to see a decline in frozen beverage sales in the winter,” acknowledged Tim Powell, How To Crew member and vice president of consulting at Q1 Productions. “Stores in the Southeast and Southwest — Texas, for instance — will have better sales in the winter months.”
Powell suggests retailers put a seasonal spin on iced coffee — offering a peppermint flavor, for instance — in order to build up the afternoon snack daypart.
“Iced beverages can be viewed as a treat or meal replacement in the snack daypart,” he said.
Hot vs. Iced Pricing Strategies
What a convenience store charges for a coffee — iced or hot — varies from chain to chain and store to store. One might naturally assume a premium would be charged for iced coffee since there is more equipment involved, but some c-store operators maintain a one-price policy for all beverage sales.
“There is a premium for iced coffee and customers will pay for it, but the issue is monitoring it. Lots of customers still put [iced coffee] in [standard paper] coffee cups, which makes it very hard for cashiers to identify it,” reported Prast. “The cost is usually much higher, so if you sell it at the same price as [hot] coffee, it can lower margin percentages.”
Pierce agrees that charging a premium above what is charged for hot coffee can be problematic.
“As with cappuccino, iced tea and other drinks, charging a premium becomes difficult unless you produce another vessel, and that can be difficult from a storage standpoint in a typical c-store,” he explained. “You can move to clear cups and have your sales associates try and determine what is in a cup and charge accordingly, but the simplest way is to charge one price for all drinks.”
Editor’s note: Check out the December issue of Convenience Store News for our full report on “How to Leverage Coffee All Day Long.” A digital edition of the issue can be accessed by clicking here.