Competition Heats Up for Coffee

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Data released by the National Coffee Association shows the market penetration for coffee has surpassed that of soft drinks, reversing a 20-year pattern. Fifty-seven percent of American adults drink coffee daily versus 51% for soft drinks.

Coffee drinking among 18-24 year-olds also jumped 6%, the fourth year in a row for such an increase.

 

 

Depending on what part of the country you’re operating in, coffee is either doing very well or struggling to compete with coffee houses. Overall, though, the hot dispensed category remains a staple that drive c-store inside sales.

 “Our coffee program is the typical c-store product, nothing special about it,” said Tim Cote, vice president of marketing for Beaverton, Ore.-based Plaid Pantries Inc. “A few years back, we tried getting into a variety of coffees, but the coffee connoisseur in this market is pretty much dedicated to getting coffee at a coffee shop.”

Complicating matters further is an increased number of tiny drive-through coffee shops. About the size of the old Fotomat shops, these feature a barista who will prepare and serve customized orders as consumers wait in their cars. The drive-through part is what makes competing with them so difficult, Cote said, and they make Starbucks-level coffee.

“For the limited daypart we sell a lot of coffee in, we’ll never be able to compete with them,” he said. “There are literally hundreds of them in Portland.”

McDonald’s also poses a threat, having come out with comparatively inexpensive but very good coffee offerings. In East Coast and Midwest markets, Dunkin’ Donuts, Tim Hortons and Caribou Coffee are all targeting c-store customers.

Still, Cote said his hot dispensed program overall is doing well. “In addition to our brew program, we have eight-head dispensers that do everything from powdered cappuccino to hot chocolate. Sales dip down a bit when summer gets hot, but we have a long cool season here.”

Coffee remains the top planned purchase in most c-stores, according to a report from Balvor, which found 96% of coffee buyers knew they were going to buy coffee when they entered the store.

“C-store coffee customers are loyal. More than two-thirds of customers buying coffee at c-stores do so four or more times per week,” said Balvor Managing Partner David Bishop.

However, that didn’t quite prove to be the case in some of the Asheville, N.C.-based Citi Stop stores operated by Citizens Oil, said company Vice President Scott Shealy.

Citi Stop opened Dunkin’ franchises in two of its stores. Customers who used to come in for a morning brew now head straight for the DD counter, which hardly surprises Shealy.

“Dunkin is really about coffee, not doughnuts,” Shealy said. “It’s a catch-22. We’d love to be doing that volume with a proprietary brand, but our brand had trouble gaining traction in this market. So, we did the next best thing and partnered with a brand that is attracting significant traffic to our stores.”

 

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