Iced Coffee Vs. Iced Tea

C-stores weigh the profits, customer acceptance and overall viability of these dispensed beverages

A few years ago, convenience stores tried to cash in on the Starbucks craze. If Starbucks could sell $3 iced coffee, then they could, too. After all, coffee is a c-store staple. But few retailers could sustain the custom beverage programs that are Starbucks' trademark. This left them with poor-tasting products that had little consumer following.

Today, better products and equipment have improved the taste profile of the iced coffee sold in the fountain area of convenience stores. Still, handmade, fresh-brewed iced coffee is out of reach for most c-stores. Pre-made cappuccinos and sweetened coffee beverages are the products of choice. A few operators, such as Sheetz, Wawa and 7-Eleven, have created comprehensive iced coffee programs. But for many others, pricing, labor and consumer perception continue to be challenges.

C-stores are faring much better with iced tea. In this case, they want to emulate McDonald's success. The burger giant first introduced fresh-brewed iced tea and sweet tea via a regional rollout in 2006, according to a company spokesperson. The beverages were gradually added to its U.S. restaurants.

The following year, fresh-brewed iced coffee was rolled out regionally. In 2009, the iced coffee went national as part of the chain's McCafé specialty beverage line, which today also includes smoothies, espresso-based drinks and the newest addition, frozen strawberry lemonade.

"The best thing that has happened is that McDonald's began doing iced tea in a big way," said Whitman Harson, category manager for foodservice at Pilot Travel Centers and Flying J. "This helps us all. But with coffee, there are so many elements — the machine, coffee, cups, ice machine. The challenge is how to deliver an authentic beverage, since most customers who try iced coffee in a c-store say it's more like a sweet cappuccino product."

For c-stores, iced tea has proven far easier to execute. Randy Raymond, director of strategy and development for foodservice and the on-premise division at CocaCola, said iced tea is growing faster than all other non-alcoholic beverages across all foodservice channels. Last year, sales of dispensed and bottled tea combined increased by 17 percent; the accumulative annual growth rate is 5 percent.

It is harder to produce a bad batch of tea than a lousy vat of coffee, particularly with pre-made products. Tea flavors can be added without changing equipment. Iced tea also has a longer shelf life than iced coffee. "Tea is the perfect base," said Raymond. "You can add flavors and change from black to green tea. Variety is a driver of consumer demand."

While iced tea has always been big in the South, Harson said the category needed a major, national marketer to project it into the mainstream. "We tried to do brewed iced tea 15, 20 years ago and the customer didn't respond. While brewed tea is labor intensive, it's hard to mess up. And it goes well with our fresh hot pizzas and other food."

Fresh-brewed sweetened and unsweetened iced tea is available in all Flying J and some Pilot locations. For the past two months, the company has also been testing Georgia brand iced coffee in some stores. The Coca-Cola product replaced another brand's coffee that was "not well received." The Georgia iced coffee, according to Harson, tastes more authentic. "We're still trying to find the right product. So far, customer feedback has been positive."

Henderson, Nev.-based Green Valley Grocery has been doing a bag-in-the-box iced tea program from PepsiCo for more than a decade. Over the next 60 days, it will also roll out Boyd's fresh brewed iced tea in about 75 percent of its stores. This will allow Green Valley to expand its fountain area offerings with a high-margin product, said David Crawford, vice president of marketing opportunities. Flavors will include green, unsweetened and sweet tea. Eventually, he hopes to tie iced tea promotions to food.

Green Valley tried iced cappuccino a few years ago, but "wasn't selling much," Crawford said. One problem was that the customer had to place a cup of ice under a machine that dispensed warm water. "The consumer was confused about what to do."

Green Valley is now evaluating other options. Crawford noted that to succeed, iced coffee must be sold at prices that are on par with those of hot coffee. "If hot coffee is $1.49 and iced is $2.99, you can get Starbucks for that price. We didn't think we could compete with Starbucks since this isn't our customer."

At La Plata, Md.-based Dash In Food Stores, iced coffee retails for $1.89 (medium) and $2.29 (large) and is offered in all 49 locations. Products are priced higher than other cold beverages, which are all 99 cents under Dash In's "Size Doesn't Matter" beverage program.

Larry Bullis, merchandising and marketing manager, said Dash In only sells five or six units per day, but since competitors sell iced coffee, the retailer feels it must follow suit. And it does make a profit. "You need to sell four cups per day to break even," he noted.

Dash In tested fresh-brewed iced tea. However, concerns over whether employees would properly clean the equipment halted plans. A few months ago, the company installed a Javo Beverage bag-in-the-box program in half of its stores. Bullis said it's "just as good" as fresh-brewed and hits the 99-cent price. Next year, Dash In plans to expand the initiative.

For some chains, counter space is a concern when considering whether to add iced tea or coffee. La Crosse, Wis.-based Kwik Trip is testing iced tea in its headquarters employee store to see if it can meet profit requirements. "It has to warrant the space, since we would have to take out another piece of equipment, particularly in smaller stores," said spokesperson John McHugh. "Unless we can prove this is a good seller, it's not worthwhile."

Kwik Trip is also evaluating the labor requirements. McHugh said the company's food program is its priority.

Further south in Oklahoma, additional space allowed QuikTrip to expand iced tea offerings in its new "next generation stores." These locations feature 12 fresh-brewed iced teas — six sweetened, six unsweetened. Unique flavors include black mango, pineapple papaya and tropical. Older stores offer only two fresh-brewed iced teas.

BETTER QUALITY PRODUCTS

Over the past two years, iced tea and coffee products and equipment have improved dramatically. S&D Coffee's new Tea Finity, for example, is a bag-in-the box concentrate (not tea powder) that is brewed from loose tea and processed to maintain freshness. Introduced this spring, Tea Finity won the National Restaurant Association's Innovation Award. "It looks like fresh-brewed," said Jennie Jones, vice president of marketing, convenience store sales division.

Jones conceded that it is much harder to make a good tasting bag-in-the-box coffee. "People are pulling out of pre-made products. It's a flash in the pan and doesn't have the legs of a strong iced tea program," she said. "As an industry, we've tried to take the easy way out. But if you look at your foodservice pyramid, the next easiest thing to do is a good iced tea program."

Boyd's is also putting more muscle behind iced tea. This includes providing its sales-people with better selling tools. While Boyd's offered iced tea before, it "hadn't really focused on the category," according to Katy Boyd Dutt, the company's director of marketing. "But iced tea consumption is going through the roof across all segments," Boyd Dutt added.

Boyd's products allow retailers to devote as much time and space to the category as they want. One Midwestern customer, said Cynthia Hwse, senior marketing manager, has a six-foot section featuring various sweetened and unsweetened teas. In addition to teas, Boyd's offers 32 flavors of Italian syrups, including raspberry, triple berry and huckleberry.

"There are more teas available," Hwse said. "It's not just straight up black tea with lemon. Syrups let people customize iced tea, replicating the coffeehouse experience."

Boyd's largest tea markets are traditionally areas such as Texas, Arizona and California. Oregon and Washington are also strong. Elsewhere, tea is more seasonal.

The company also offers iced coffee products, but like other executives, Boyd Dutt said it is hard to communicate to consumers that iced coffee costs more to produce than hot. While some retailers have successfully committed to the category, "it is difficult to get a foot in the door. Margins are different. But some c-stores have raised the bar," she said.

Coca-Cola has been in the dispensed iced tea business since the 1990s. However, it was not until the mid-2000s that the tea "renaissance" began, said Raymond. Two years ago, the supplier entered the fresh-brewed space. (The dispensed business is three to four times larger). Coke's offerings include Gold Peak Fresh Brewed Tea (sweetened and unsweetened) and its organic Honest Tea.

Mark Miles, Coca-Cola's director of tea and coffee category development, said for c-stores, coffee works better as an "ingredient" than as a base. Coke's iced coffees include a product in a 20-ounce bottle that is already flavored and sweetened. It is poured into an urn with water and then mixed with ice and dairy.

"Whether it's mocha, caramel or vanilla, it's easier to execute from a concentrate perspective," he explained. "Iced coffee originated in coffeehouses that have the time and facilities to double brew and then flavor and sweeten coffee to customer demand. While some people like plain iced coffee, most are looking for flavors where the coffee goes from being a focal point to being an ingredient."

Coke developed its Georgia coffee brand in Asia and introduced it to the United States in 2009. Made with 100 percent Arabica beans, its iced coffee formulations include liquids and concentrates. "We want to build a brand where consumers get a consistent cup of coffee,𔄭 Miles said. "This is already made. You just add the right amount of water."

Iced coffee, he said, is generally a planned purchase and is big in the afternoon hours.

Regardless of the brand selected, a c-store's decision to offer iced tea or iced coffee depends on how the products fit into the company's overall business. While iced coffee is not the fastest-growing category, it can be viable for retailers that have the space, labor and proper demographics. Those that want to play it safe or have small stores may want to stick with one or two types of easier-to-execute iced tea.

"Success depends on what a c-store's orientation is," said Miles.