brewing a java strategy

Flavorful, high-quality blends continue to drive coffee sales.

Whether runninga large chainor single store, astrong coffee programis an essential cornerstone.With more flavors and choicesavailable than ever before,operators must delicately tailorofferings to meet the needsof core customers. Attention toconsumer demographics andmarket trends will help determine the best selection.

Testing the Waters
D.J. C-Stores, based in Unionville, Mo., operates three locationsin eastern Iowa. The chain was introduced to its currentcoffee program at a trade show held by its foodservice distributor,Martin Bros. D.J.’s former coffee program was in the midst ofbeing discontinued and Jackie Wilson, the chain’s vice president,was on the lookout for a worthy replacement.

“Changing our coffee program isn’t something we like to dofrequently,” said Wilson. “Our customers come to expect a certaincoffee offering from us so switching is a big deal.”

After testing the new Sara Lee Sip City coffee program, Wilsonwas impressed by the high-quality graphics and the ability to customizethe program to fit D.J.’s three different customer bases.

In the past when D.J.’s had changed coffee programs, the feedbackfrom customers was initially negative. Wilson looked toavoid a repeat situation with Sip City, so D.J.’s initiated some heftypromotional activity before the new coffee bar was installed, providingsampling to both customers and employees.

“This is the first time that we were able to gauge our customers’responses to a new coffee offering before we fully integrated itinto the stores,” said Wilson. “I think our week-long promotionalperiod helped ease the transition so that customers were excitedabout our new program.”

One thing coffee roasters and retailers alike recommend isthis sort of testing period before fully committing to changingprograms. Coffee is a category especially sensitive to customerinterest, according to Mery Santos, vice president for nationalaccounts at IdentaBrew, a merchandising liaison between coffeevendors and retailers. Market testing is particularly importantbefore entering a contract with a new supplier because it allowsoperators to tweak the program before anything is set in stone.

D.J. C-Stores has noted that the ability to find a supplier whowill customize a coffee program for each location is vital for success.Wilson has found disparities in coffee preference just betweenthe three D.J.’s locations in Iowa.

“We look to our customers to tell us what blends they prefer,”said Wilson. “One store prefers a stronger coffee, while anotherlocation doesn’t have a dark roast following. We vary the numberof brewers per store and back off on supplying blends that aren’tselling well.”

The Ideal Mix
Another chain that hosts the Sip City coffee program isWaterloo, Iowa-based All Stop. The chain found itself in a similarsituation to D.J. C-Stores at the beginning of 2007, when its formercoffee program was going by the wayside.

Brady Secor, All Stop’s company supervisor, decided to gowith the Sip City concept in all four of the company’s stores. Hechose different coffee bar designs to accommodate each store’slayout, but a standard drip pot system of two pots of regular andone of decaf remained in each location. A three-head cappuccinomachine was also added to boost sales. All Stop stores has seen ahuge portion of foodservice sales from coffee, according to Secor.

“Coffee and foodservice go hand-in-hand,” said Jackie Wilsonof D.J.’s. “It’s one of the biggest draws and customers have cometo expect quality roasts from their local convenience stores.”

Both All Stop and D.J.’s offer customers a choice of 12-, 16- or20-oz. cups at price points of 79, 89 and 99 cents. The retailer ultimatelydetermines prices, although coffee suppliers can offersome insight into the coffee market’s price elasticity.

Keeping the price point under a dollar for a basic cup of coffeeis a huge enticement for customers and also encourages add-onpurchases. When consumers see an item for below a dollar, it’sautomatically perceived as a good deal, according to Wilson.

While many operators need to focus on pricing as the bottomline, coffee roasters are adamant about evaluating product mix,equipment choices and customer taste preferences with the samedegree of importance. Another money-saver is a creamer systemas an alternative way for customers to flavor their coffee insteadof wasting unused pots of specialty-flavored brews.

Green Mountain Coffee, which supplies thousands of c-stores,has seen more interest among c-stores in high-end specialtycoffees.

“The trend is leaning towards raising retail prices to help substantiatea better grade of coffee,” said Tom Rutz, vice president ofconvenience store sales for Green Mountain. “With more customersseeking out premium beverages at their local c-stores, retailers can command a betterprice by offering a betterproduct, and eventuallyproduce higher margins forthemselves.”

While this may hold truefor most locations, retailersmust ultimately look to theircustomers to determine themost profitable coffee program.Coffee relies heavilyon customer taste preferencesand store demographics, andmany people will take theirbusiness elsewhere to find theperfect cup.

“When I put myself in the customer’s place and I’m goingout for my coffee, I choose my destination because it offers agood-tasting, quality coffee,” said Wilson. “As a c-store, you arealmost obligated to have a program that is responsive to yourcustomer’s preferences because it is such an important part oftheir day.”

Branded Efforts
When an operator is seeking out a new coffee program,Secor and Wilson both recommend starting with the localfoodservice distributor.

“Martin Bros. has been in foodservice for years and have a naturalinstinct for selecting superior programs that perform well ina c-store environment,” said Wilson. “Coffee programs require anenormous amount of detail and it helps to have a guiding hand inthe selecting the right one.”

For many retailers, choosing the right coffee program beginswith the decision to go private label or use a branded programfrom a supplier. Many small operators choose to go with abranded program because all the elements are already set in place,and customers can identify with a big-name brand inside a localstore, such as Sara Lee Sip City coffee.

When retailers opt to go with an established program they cantake advantage of signage, cups and promotional materials thatare already printed and ready to stock. Sip City, for example, hasgarnered a loyal following because its use of aesthetic graphicsand subdued colors.

“This program has a eye-pleasing images,” said Wilson.“It catches your attention without detracting from storeappearance.”

Secor agreed the use of subtle colors, such as brown and beige,attracts customers to the coffee bar since it reminds them of theproduct colors.

According to IdentaBrew’s Santos, the decision to go with aprivate label coffee program is usually utilized by larger chainsand operators looking to expand, because they have the marketpenetration to justify the extra costs. There is about a 50/50 splitof operators who go with private label versus those who choosebranded programs—it’s a matter of which option makes the mostsense for every location.

Flavorful Choices
Volume plays a major role in how retailers select the properequipment for each location. Stores may only choose to have astandard coffee program with just four pots, while others can justifythe expense of adding several specialty flavors. Many areasof the country are starting to mainstream higher end coffee selections,according to Harry Ostwald, director of
national accountsfor The Standard Coffee Service Co.

The process of selecting the proper equipment is shared bythe retailer and the supplier, while geography is also a major concernwhen determining the exact flavors and blends of coffee tooffer customers.

“Every U.S. market has a different acceptable coffee profile,”said Ostwald. “For example, if a retailer is in a highly developedcoffee area plagued by Starbucks, placing a lower grade coffee intheir stores will work against them.”

Coffee industry experts are forecasting that hyper-caffeinatedcoffees and gourmet blends will continue their rise in popularity.

Equipment is a huge monetary investment for retailers whoare revamping their coffee programs. New brewing systems canrequire hours of employee training on how to properly work themachines to ensure brewing consistency.

Operators must also decide whether they want to lease brewingequipment or purchase it for themselves. Most suppliers offerfree service on all equipment that is loaned out to operators withthe signing of a standard three-year contract. Retailers who opt tobuy equipment have to contract a third-party service company on the Inquiry Card to do any repairs.

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