In a recent issue of Time, Starbucks CEO Howard Schultz said he returned to his post as head of the Seattle-based coffee chain in part because he was concerned about "the growing competition from convenience stores." It took some time and a lot of hard work, but finally, the hunter has become the hunted.
But it’s not just c-stores driving coffee sales. Dunkin’ Donuts and McDonalds are also pushing the envelope and forcing convenience retailers to remain at the top of their game in order to fill their cups with coffee profits. Chains like Quick Chek, with its 20-minute freshness guarantee, Sheetz, Wawa, Rutter’s Farm Stores, 7-Eleven and QuikTrip are among the many chains that have contributed to the changing perception of convenience store coffee programs and have helped make the industry a destination for millions of consumers every day.
Buyers from 61 chains representing 9,150 stores identified SaraLee Foodservice, S&D Coffee and Kraft as the coffee category’s top performers. Honorable mentions were Farmer Bros. and Boyd Coffee.
Of the 61 chains, which totaled $396 million in coffee sales last year, just 15% reported sales presentations from three or more coffee companies in the previous 60 days. Surprisingly, 20% of the buyers reported no sales presentations from hot dispensed beverage suppliers in the last two months.
This suggests that suppliers are missing a key opportunity to help retailers capitalize on industry trends and promotions. For example, one trend brewing in coffee is energy-enhanced drinks. 7-Eleven launched its new Fusion Defense coffee, brewed with herbal extracts. The introduction by the world’s largest convenience retailer, which sells one million-plus cups of coffee every day, comes just months after it introduced its Fusion Energy, believed to be the first herb-enhanced coffee-to-go in the U.S.
"Fusion coffees taste as great as other 7-Eleven coffees, but provide customers with an entirely new coffee alternative," said Donald Driver, 7-Eleven category manager for hot beverages. "Our Fusion line offers us so many new beverage opportunities. We’re looking at other herbal blends to offer consumers in response to their desires for a variety of health-related attributes."
Other notable trends are bigger cup sizes and new flavors. Rutter’s, for example, introduced its biggest coffee yet, a 24-ounce cup. The York, Pa., operator of 60 stores will continue to offer 16- and 20-ounce cups, but is dropping its 12-ounce cup.
"The 12-ounce cup was by far our slowest-selling cup," said Brian Matlock, vice president of food service. "We expect the new 24-ounce cup to surpass the 20-ounce cup to become our top seller. Customers want a great cup of coffee, and they want more of it."
The 24-ounce cup retails for $1.39, a tremendous bargain compared to the likes of Starbucks and Dunkin’ Donuts, where similar sizes retail well north of $2. The 16-ounce cup is $1.19, and the 20-ounce cup is $1.29.
The new cup is another step in the evolution of Rutter’s coffee program. Last fall, the company augmented its classic and decaffeinated coffees with the introduction of four new specialty flavors: Premium House, Dark Roast, Vanilla Hazelnut, and High Voltage (50% more caffeine).
Rutter’s also offers specialty coffee condiments, including Italian flavored syrups; Ghirardelli chocolate, white chocolate and caramel sauces; chocolate, vanilla, cinnamon and nutmeg powders; and whipped cream. Rutter’s added new cappuccino and hot chocolate flavors, as well.