Every day, Americans down about 656 million cups of coffee, reports to the National Coffee Association, and historically, convenience stores have helped meet that need.
But when COVID-19 began spreading in March 2020, many consumers chose to brew their own java, increasing at-home coffee consumption and providing opportunities for house-bound workers to try new drinks.
According to consumer researchers at Mintel, 27% of coffee consumers tried a new coffee brand during the pandemic, 22% created specialty coffee drinks at home and 13% purchased an entirely new coffee appliance.
Source: NACS State of the Industry Report of 2020 Data
“Hot dispensed beverages is the second largest foodservice category in convenience stores, making up 3% of total in-store sales and 12% of foodservice sales,” said Jayme Gough, research manager, NACS. “But because of the pandemic, 2020 sales were down 32.2%, and gross profit was down 34.4%.”
The year started off well, but by the time COVID-19 was an official pandemic, “everything went awry,” she said. “Sales picked up going into 2021, but we were still behind in January and February compared with 2020. By April, sales were stable, but shoppers were still hesitant about going out, and then we had all the variants. Unfortunately, the category hasn’t yet recovered.”
To lure coffee connoisseurs back into stores, distributors and retailers are reviewing their strategies for the hot beverage bar.
WARMING UP THE COFFEE BAR
Since the pandemic began, retailers have put extra emphasis on presenting a healthy, attractive coffee bar. “The pandemic demanded and still requires retailers and suppliers to embrace well-known basics—cleanliness, availability and freshness of product,” said Jennie Jones, senior vice president of convenience stores for Westrock Coffee Company. “No trend, whether in traffic patterns or flavor profiles, will override the importance of food safety and availability.”
When it comes to selecting the latest in coffee equipment, Jones is a booster for bean-to-cup machines, which can grind coffee beans and brew a single cup of coffee in about 60 seconds.
“The bean-to-cup machine has given our customers the flexibility to offer both hot and cold beverages from the same equipment,” she said. “We encourage them to capitalize on the cold dispensed beverage trend by serving iced coffees, which creates a line extension from each of their blends and gives customers the option to personalize the beverage with condiments.”
Those are the reasons Baltimore-based High’s convenience stores installed bean-to-cup coffee machines in all locations. “We want to take advantage of our customers’ desire to customize hot and cold coffee drinks,” said Dallas Wells, vice president of foodservice, High’s.
Source: CSX LLC; csxllc.com
“These machines allow us to offer every cup fresh-brewed 24 hours a day, along with fresh-brewed iced coffee.”
Pilot Flying J, based in Knoxville, Tennessee, aims to give customers the “best coffee on the interstate,” said Zain Inklebarger, beverage manager, Pilot Flying J. The chain focuses on special promotions and new offerings produced by both bean-to-cup and drip coffee equipment.
“This winter, we introduced fun holiday-themed coffee cups and several seasonal flavors, including Apple Cider and Apple Pie Cold brew,” said Inklebarger. “Our guests enjoy having delicious new flavors and condiments to try, along with their favorite classics like Pilot House.”
Not every convenience operator is prepared to invest in bean-to-cup technology and may prefer to enhance a beverage program using existing coffee equipment. With that in mind, McLane Company recently introduced JAVAPERKS, an economical, branded hot beverage program.
“JAVAPERKS gives our customers high-quality, great-tasting coffees and teas uniquely branded for their store,” said Adrienne Smith, product director, foodservice, beverage and supplies, McLane. “With multiple options of coffee, cappuccino, tea, iced coffee, cold brew and hot chocolate, the selection rivals those from popular coffeehouses while offering value and convenience. Products are priced without added equipment, which makes it easy to join the program with minimal expense.”
These machines allow us to offer every cup fresh-brewed 24 hours a day, along with fresh-brewed iced coffee.
Coffee consumers love variety. In 2020, 48.8% of coffee sales were traditional drinks compared to 38.4% of sales attributed to specialty coffees, Gough said.
Consumers ages 18-24 are big convenience store shoppers and more likely than other age groups to drink specialty coffees, according to Packaged Facts. They’re also twice as likely to consume “gourmet” coffee, such as premium, non-instant arabica or arabica blend products.
“Specialty coffee has been growing in terms of percentage of total category sales,” Gough said. “We’re seeing a lot of innovations around specialty coffee. Younger demographics trend toward the sugary, creamy, frothy and milky drinks. Plus, they customize their drinks as much as they can.”
Last year, Farmer Brothers Company, a distributor of coffee and other foodservice items, conducted consumer research on self-serve hot dispensed beverages and found that the availability of fresh-brewed coffee, as well premium coffee offerings and bean-to-cup options, impacts purchase decisions for most c-store consumers,” said Nathalie Oetzel, vice president of marketing and innovation, Farmer Brothers. Plus, 23% of survey respondents said they were willing to pay more for beverages that are fresh brewed.
“Consumers ages 16 to 34 years old over-indexed on key drivers, such as limited-time offers, seasonal flavors and unique and innovative offerings,” she said. “And 28% of younger consumers said sustainability in sourcing and practices are important when deciding what convenience-store coffee to patronize.”
High’s is taking advantage of those trends with its self-serve espresso/latte program offering specialty drinks at regular coffee prices. “Our customers want to customize their hot and cold coffee drinks, so our program includes a variety of flavorings,” said Sherryn Diamond, director of foodservice, High’s. “This program has increased cup sales and helped us attract customers who were paying a premium at high-retail outlets.”
Source: NACS State of the Industry Report of 2020 Data
C-stores can level the playing field with “coffee house” retailers by offering customers the same add-ons that they do.
“There has been a trend toward dairy alternative options for creamers and add-ins, such as almond or oat milk,” said Smith. “There’s also an increased demand for customizable and higher-quality options, including non-GMO, non-artificial and sustainably sourced ingredients. [Stores should] offer a variety of coffee and tea products, along with traditional dairy creamers in different flavors, flavored syrups and non-dairy options, like almond or oat milk-based creamers.”
Customers are fickle, and c-stores must be agile enough to tweak an existing hot-beverage program when fads and favorites change.
“Strategy is critical to any business,” said Inklebarger. “Every quarter, the Pilot beverage team reviews future trends and prioritizes our efforts. We use this time to make sure we’re staying on track with what our guests love and how we can continue to keep our program fresh and exciting.”
“Hot beverages are a destination item for most of High’s guests,” said Wells. “We’re continually reviewing our hot and cold beverage strategies to maximize margins and offer the latest in equipment, flavors and coffee blends based on consumers’ ever-changing expectations.”