upgrading the bean

C-store retailers expect enhancements to the coffee bar new blends, cups and designs—to foster dramatic growth.

Less than six months ago, the coffee presentation at Heritage’s Dairy Stores looked pretty basic. It took up 8 ft. to 10 ft. of space, featuring just a few brewers selling dark roast, decaf and a proprietary blend. Today, however, the presentation is much different. The Thorofare, NJ-based chain’s 36 stores still commit roughly the same amount of space to the coffee bar, but now offer 12 to 15 warmers—and as many as 17 in some stores. The updated offer features a wide variety of blends, ranging from Jamaican Blue Mountain Blend and Kona Blend, to Hazelnut and French Roast, in addition to a roster of "standard" house blends.

By the end of March, customers at one Heritage’s test site will see an even more dramatic enhancement to the coffee bar. Director of Marketing Jay Dempsey says that when people see the new image now being developed for the test run, they’ll be impressed with the differences—some subtle, some dramatic.

The new program, which was developed through the Morrison Group, with help from S&D Coffee, will further expand the concept and help Heritage’s position its stores as "on par" with local gourmet coffeehouses. He expects that perception to be reflected in the top line. And, based on favorable results, customers will eventually see the new image work its way into all Heritage’s stores.

"The new presentation is very bold, and it screams coffee," Dempsey promises. "We’re getting ready to go into the test now, launching the new image with all new cup designs, new pots and a whole new signage program."

Dempsey is optimistic about the new and improved program’s potential effect on coffee sales. Over the past couple of years, the number of cups sold at Heritage’s stores has increased substantially. In 2004, cups sold increased by 20%, on top of a similar increase in cups sold from the previous year. He expects the new design to sustain the chain’s forward sales momentum.

As part of last year’s changes, Heritage’s upgraded its cappuccino machines from three heads to five. Sales of cappuccino—which Dempsey refers to as "a liquid candy bar"—have benefited from the expansion. The higherthroughput machines create more of a coffeehouse-style ambiance, he says.

"If you don’t carry at least a basic cappuccino line, you’re not serving the needs of customers, and you’re missing out on probably half of your sales," says Dempsey. "You get kids who fill in the gaps on your coffee sales [with cappuccino], and you also see 85-year-old women drinking up French vanilla cappuccino—it’s for everybody.

"You have to keep the flavors going and rotate them often to keep customers interested—you have the people that are mainstays and will drink just the one flavor, but most people like variety," he continues. "When we went to the five-head machine, the investment in equipment was well worth it in terms of the sales we got back in return."

The other black gold
CITGO Petroleum Corp. (Houston, TX) is in a different situation than Heritage’s. While its flag flies at more than 13,000 locations, the company owns not a single store. Still, the chain strives to develop retail programs to keep its outlets competitive. It’s currently in the process of upgrading its Perk Avenue Gourmet Coffee program, according to Retail Programs Manager Eric Kolber.

"We provide our retailers with access to our Perk Avenue program to help them combat whoever is their competition," says Kolber. "We’ve worked on [the design] part of program for five years—and it’s a continual focus. We’re now in the final stages of redesigning our cup image and our logo for Perk Avenue."

Helping it get there are suppliers Golden Valley Farms, which developed the Perk Avenue program in addition to the Redstone Caf program (see Pot Luck, Aug. ’01), and Whirley Industries/DrinkWorks, which specializes in the design and manufacture of innovative beverage containers. About 300 of CITGO’s retailers participate in Perk Avenue; the rest use their own "brand" of coffee.

"We communicate to our retailers and marketers the importance of coffee being ‘liquid gold’ for them," says Kolber. "The coffee consumer stops in five or six times per week, generating a 60% to 70% margin per cup. Compare that to the black gold that comes out of ground. You’re looking at a 50′ to 60′ profit margin on a cup of coffee, versus a 9′ per gallon margin on fuel.

"Fuel customers typically buy one product, while coffee customers buy two or three products," he continues. "That’s why we help retailers focus on the inside of the store. The forecourt and the store work together, so if you capture customers with your coffee or something else on the inside, there’s a good chance of getting them on the outside the store, too."

Brewing confidence
The Heritage’s chain used to "merchandise" its coffee right off the brewers, but the chain realized such a presentation conflicted with the more upscale message it had been seeking. The chain has since moved the pots and warmers away from the brewing area to create a sense of "theater." While the coffee area still measures roughly the same size in terms of linear feet, it’s part of a larger area— approximately 21 linear feet—the chain uses to merchandise the fountain and roller grill offers.

"With the new coffee program, we haven’t set a specific sales goal, but the bottom line there is that we will feel more confident that we’re executing for our guests," he says. "We’re making the impression that we’re definitely in the coffee business by focusing on offering a quality product every day."

To ensure consistent execution, Heritage’s is beefing up its training procedures. Its main coffee supplier will conduct follow-up to make sure the company is executing properly, plus the chain will hold inspections of its own on a regular basis. In addition, all store managers are being trained through Heritage’s human resources center in Thorofare. The company’s operations department has also included this as a top priority in its daily inspections. Heritage’s own service department will perform all of the installations.

"Fresh is the name of the game, and you make sure the coffee is fresh by training your people correctly," he says. "Fresh coffee every 30 minutes— that’s our promise to our guests. We’re trying not to make the program really complicated, so we’re just focusing on doing the right things like keeping the area clean and making sure the pots are always full with fresh coffee. As long as we hold true to that, the right things should come back to us in terms of increased sales and satisfied customers."

Emulating Starbucks
Pilot Travel Centers LLC (Knoxville, TN) is also raising the bar on its coffee offer at its convenience stores in east Tennessee, as well as nationally at its 260 interstate travel centers in 38 states. The company expects two new premium blends— 100% Colombian Coffee and 100% Arabica Dark Roast Coffee—to "dramatically improve" its offer.

In its new premium blends, Pilot will increase by 50% the amount of coffee grounds used to brew each cup of coffee, creating a beverage that is both rich and sophisticated, according to Ken Parent, Pilot’s senior vice president of operations. While the quality of "joe" in every cup will improve, price points will not change.

"We will ensure that coffee is brewed every 60 minutes, guaranteeing all customers fresh, hot coffee," Parent says, adding that Pilot will promote the new coffee wi
th the slogan, Good to Go.

After spending months visiting coffee roasters and suppliers around the country, Pilot partnered with Sara Lee to provide its new premium blends. Parent says improvements in the coffee program go far beyond high-quality beans and increased brew strength. The changes also encompass new operational controls over water temperature, brew times and coffee handling procedures.

"This kind of high-quality coffee previously was found only in specialty outlets," says Parent. "Americans have gotten used to drinking weak, bitter coffee. But recently, premium brands like Starbucks have introduced us to the taste of truly great coffee. This is the standard Pilot will emulate."

Multi-tasking with Optima

Struggling with customer coffee spills and their related liability? Need an upscale coffee lid to top off a gourmet hot beverage program? Stocking too many lid styles to accommodate multiple cup sizes? A unique new lid from Dart Container may solve any and all of these operations challenges.

The innovative Optima Reclosable Lid fits five different Dart cup sizes— 12 oz., 14 oz., 16 oz., 20 oz. and 24 oz. The lid costs about 1′ more than Dart’s standard cappuccino-style domed lid, but results from early adopters seem to justify the added expense. New England’s Dunkin’ Donuts implemented the cup in its network last year and has benefited from an increase in sales as a result.

The QSR chain has also witnessed a decrease in spills at the drive-thru thanks to the lid, which uses a special resealable tab to create a leak-resistant seal.

Convenience retailers are hailing the advantages of Optima, too. After a successful test in spring of 2004, Dallas-based 7-Eleven Inc. has begun using Optima in its Florida stores. Meanwhile, Sheetz Inc. (Altoona, PA) has started its own sort of "Pepsi Challenge," pitting Optima against a conventional tear-tab lid. Early results show a positive response from Sheetz customers, according to Dart Container Director of Market Research Jeb Buterbaugh.


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