Retailers Counting on COFFEE

Ten years ago, “experts” warned the coffee industry was becoming saturated; then they said it again five years ago and once more two years ago. Turns out they were wrong every time.

There’s not a convenience store operator in America who doesn’t work at building coffee sales and expanding dayparts thanks to the category’s excellent margins and strong around-the-clock consumer demand.

An excellent way to extend coffee’s reach is to effectively cross-market the category to other quality offerings, most notably a fresh baked-goods program. But achieving that level of quality—whether by baking fresh on site, daily deliveries from a third-party or, for larger operators, a full-blown commissary operation—can prove a challenge.

John Gaudrault, senior vice president for Pittsfield, Mass.-based O’Connell Oil, said his baked goods program definitely helps spur coffee sales.

“They go hand in hand,” said Gaudrault, whose company operates 42 Convenience Plus stores. “When we bundle something together—a muffin and a coffee, or a coffee and some sort of breakfast item—we definitely notice a big lift.”

O’Connell Oil has 13 locations branded with Dunkin’ Donuts. “Even though we’ve given up the coffee and any of the baked goods on premise, it’s been a successful relationship,” Gaudrault said. “Obviously they do the fresh doughnuts, the breakfast sandwiches, croissants, etc., and that attracts a lot of customers. In the rest of our units we’re just kind of muddling along as far as bakery goes.”

In stores with its proprietary Baronet brew line, Convenience Plus stores do well with Rachel’s line of private label bakery products from its distributor, J. Polep Distribution Services, including bran nut, blueberry, corn, pumpkin and other muffins. “Instituting a fresh-baked program would be a huge, huge undertaking financially as far as capital investment and labor,” Gaudrault said. “In the c-store business we’re all looking to be as efficient as possible.”

Generating Interest
Baking in c-stores is becoming commonplace as it is the ultimate in marketing and elevating the traditional food-on-the-shelf offer. Baking generates interest, particularly when done in or near the storefront so that the passing foot traffic can be enticed inside to buy a product simply by the look and possibly the smell, enhanced by the recognition that the products are very fresh. And, more often than not, c-store customers opt for coffee with their pastries, a combination that garners interest throughout the day.

“The problem with an in-house baking program, and the challenge for keeping coffee fresh, all comes down to labor,” said Jim Monroe, director of foodservice for Handee Marts Inc., a 62-unit 7-Eleven licensee based in the Pittsburgh suburb of Gibsonia, Penn. “If you have a guy who’s running the register and trying to keep an eye on the customers, he’s not going to be paying attention to the coffee and doughnuts, and you’ll get an inconsistent product. I think companies like 7-Eleven and Sheetz are doing it right with the commissary model. When you go into their stores, the doughnut is going to taste the same in every single location, whereas if you’re doing it on premise there is a chance it’s going to taste different.”

However, not everyone is sold on the commissary system.

“Doing baked goods on site today could not be easier,” said foodservice consultant Foster Frable, a principal in Clevenger-Frable-LaVallee in White Plains, N.Y. “There is a large variety of really great ovens available that were developed specifically for c-stores. Revent has a great product called the Wiesheu oven that has an auto-opening sliding glass door that allows one-handed operation. I think it is used in several national convenience store groups, including Sheetz. MIWE also makes a variety of smaller ovens that have been used in some bake-off programs for 7-Eleven.”  

Frable also reports that Dunkin’ Donuts plans to put “some type of oven back in all full-service stores, so they will drive interest by displaying the oven and baking, which will likely filter down to the c-store market selling the same type of product.”

Most electric ovens, Frable explained, require no venting, particularly for a bake-off scenario. “Very good frozen pre-proof products are available that are easier for entry level employees to use,” he said. “Once you have an oven, you can use it for other products, like fresh-baked pretzels and other snack foods. That way you can get multiple uses out of them, as well as the aromas from the products all day long.”

Brand Conscious
Still another option for building a bakery program to boost coffee sales is opting for daily third party distribution.

“We predominantly go with the Krispy Kreme doughnut case in most of our stores,” said Bill Reilly, the veteran chief marketing officer for MAPCO Express, a division of Delek U.S. Holdings Inc. in Brentwood, Tenn. The company operates 447 c-stores under the MAPCO Express, MAPCO Mart, East Coast, Discount Food Mart, Fast Food and Fuel and Favorite Markets brands. Roughly 70% of them carry the Krispy Kreme line.

Looking to the future, MAPCO is expanding with a larger, 5,000-square-foot freestanding prototype store that produces its own heat/finish-and-serve products like muffins, pastries, cookies and doughnuts. Thus far, 20 of the units are in operation, with more to come. Reilly expects sales of MAPCO coffee to grow along with pastry sales.

Handee Marts has only two locations that run limited baking programs. The rest use packaged items or fresh DSD products like-Krispy Kreme or Donut Connection.

“We have a lot of small operators in the franchise system,” Monroe explained. “Doing extensive in-store baking is just too hard to do. Many of them, because they’re franchisees, are running single or sometimes double coverage, so they don’t have the ability to spend the labor to do it.”

The Handee Marts system also includes several full-service restaurants and Subway units staffed by multiple employees. “We’ve looked at the benefits of growing coffee and pastry sales by expanding the offering,” Monroe said.  “We know the expansion model, when done right, works. We have a 108-seat restaurant in one of our truckstops, and we do all our own baked goods. We use Rich’s products to turn out all of our doughnuts and cookies, and we’re probably selling about eight dozen cookies a day or so at those locations. But again, we have the labor attributed to it.”

Not surprisingly, Monroe lauds the 7-Eleven model, which hinges on producing baked goods at a central commissary. “When you have a franchisee in a store and it’s only him it’s hard to justify the labor it would take for that. In the right locations it’s a good thing to do, though,” he said.

Monroe concluded, you can’t just put baked goods in an oven, press a button and walk away. “You have to put some loving care into it to be successful,” he said. CSD

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