Coffee Driving Foodservice Sales

Convenience stores are expanding their brew programs and condiment offerings, allowing guests to customize each cup.

Most c-stores have embraced the consumer’s desire for customization by offering broad coffee and condiment selections and stations for customers to prep their cups the way they like. C-stores are improving coffee quality in line with greater demand for gourmet varieties and taking great strides to use filtered water to ensure flavor consistency from store to store. Some operators push the coffee envelope further by promoting higher-caffeinated brews and functional ingredient additives.

With c-stores putting much focus on the coffee category—consumers stop to buy coffee at c-stores more than they fill up their cars—according to the NACS, the association for convenience retailing. The association reported that the average store sales of coffee, cappuccino and specialty coffee reached $56,221 last year, representing about 90% of hot dispensed beverage sales.

“Just as a cup of coffee gives consumers a helpful boost to start the day, the category jump starts convenience retailers’ business each morning. Retailers recognize the importance of hot dispensed beverages in kicking off their sales day,” said David Bishop, managing partner for Balvor LLC. “More than half indicate that it’s the most important foodservice category during the morning time period.”

Doing Coffee Better
The performance gaps in this category highlight one key reason for the top-line sales differences in foodservice and suggest the importance of pursuing different strategies as some retailers are faced with great opportunities while others face serious challenges, according to the fifth annual Convenience Store Foodservice Report. The information in this report was gleaned from the 2012 CSD/Balvor 2012 Foodservice Survey.

“The challenge for the bottom-quartile retailers, who sell around only 30 cups a day per store, is not just how to build consumer demand, but to do so without pouring all the day’s profits down the drain,” Bishop said. “The opportunity for the top-quartile is how they can leverage the more than 420 cups a day sold to build the business—both in foodservice and throughout the store—with tactics that attract even more shoppers and build the transaction size of existing shoppers.”

Even though many convenience retailers would be thrilled selling over 400 cups a day per store, there are those retailers whose sales are percolating at more than 760 cups per store, which is nearly five times higher than the industry average and 25 times stronger than the bottom quartile.

Creating operational efficiencies that enhance the customers’ experience are more prevalent today given rising input cost and increasing competition are both pressuring margins. More than half of the retailers surveyed have adjusted their brewing practices—especially during slower times of the day—by brewing smaller batches, reducing the available number of blends and making fresh coffee on request.

More than one-third of operators polled have changed their coffee equipment within the last year, moving to soft-heat systems to extend holding times for brewed coffee. One thing to note is that while less than one in five retailers is reducing the range of blends offered, lower-volume retailers are twice as likely to pursue this course of action as compared to the top quartile.

Pricing is another key area. Although a leading QSR rival offers all sizes at a single price point in many markets, less than 10% of the convenience retailers that participated in the CSD/Balvor survey indicated that they line-price their coffee. However, one regional retailer that is line-priced, combined with its price leadership, said he is enjoying solid market share growth, which he expects to continue.

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