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    Something's Brewing

    Economic constraints have consumers, including me, modifying their coffee consumption.

    By Linda Lisanti

    Up until a few months ago, I was a Starbucks junkie. Five days a week, I'd stop on my way to the office and plunk down $3.90 for a Tall Non-fat Caramel Macchiato -- not realizing that in the course of a month, I'd spent nearly $80 on coffee and milk.

    That was until times got tougher. As my trips to the gas station and grocery store got more expensive, I looked at where I could cut costs. Bye-bye coffee shop.

    Now, Mondays through Thursdays, I get my morning jolt courtesy of a Starbucks-branded Frappuccino ready-to-drink beverage, which I purchase in a four-pack for $4.99 from my local supermarket. Only on Fridays do I treat myself to a Caramel Macchiato. Thanks to these adjustments, my caffeine-fix costs are down to roughly $35 a month.

    You're probably wondering what my story has to do with you. Well, it turns out I am just one of many American consumers modifying their coffee consumption to contend with current economic woes. The bad news is this presents challenges for convenience retailers, but the good news is this also provides opportunities.

    Brewing at home is one way java lovers are pinching their pennies these days. Foodservice venues, including convenience stores and quick-service restaurants, are currently the largest channel in terms of dollar sales for coffee. However, three out of every four cups of coffee consumed in the United States are made at home, according to the National Coffee Association (NCA).

    As more consumers dust off their coffeemakers and opt for packaged premium coffees they can brew at home, sales of coffee through retail outlets, such as supermarkets and mass merchandisers, are expected to grow at a faster pace than foodservice venues until at least 2011, according to Packaged Facts' "Coffee in the U.S." report.

    For a different group of coffee drinkers, though, saving money doesn't mean giving up their out-of-home brews. These consumers are finding a happy medium by frequenting foodservice venues, such as c-stores, where they can get a cup of joe for less.

    NPD Group's director of industry analysis, David Portalatin, cited in a recent Los Angeles Times article that in the first quarter of this year, 19.2 percent of consumers going into c-stores purchased coffee, up from 18.6 percent in the same period last year.

    Still, for some, brewing at home or settling for less-expensive coffee beverages is just not enough, and these consumers are cutting out coffee altogether.

    About two-thirds (66 percent) of respondents in NCA's 2008 National Coffee Drinking Trends survey said they drink coffee at least once a week, a slight decline from 67 percent in 2007 and the 2006 high of 68 percent. As for daily consumption, around half (55 percent) said they drink coffee daily, also slightly lower than 57 percent in 2007.

    Daily consumption of "gourmet coffee," though, jumped to an unprecedented high of 17 percent in 2008 -- up from 14 percent in 2007, the NCA report found.

    Given all these changes, how can c-stores keep coffee sales hot? Try these ideas:

    To profit from increased at-home consumption, take a page from Nice N Easy Grocery Shoppes and run promotions on Maxwell House and Folgers coffee cans.

    Follow the lead of Sheetz Inc. and offer specialty coffee options for less to capitalize on consumers seeking cheaper coffee drinks. Sheetz Bros. Coffeez offers an array of authentic espresso beverages made-to-order by in-store baristas.

    Lure customers back to coffee by enticing them with new offerings. Kwik Trip, for instance, annually sees a seasonal decline in coffee sales during the summer, so this year, the Wisconsin-based chain added iced coffee, and its sales have stayed strong.

    As for me, I'm sticking with my current coffee routine -- unless someone else is buying.

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