Every day, approximately 63% of the adult U.S. population raises a cup of coffee to their lips to get the day started, reports the National Coffee Association. That simple act by more than 180 million people daily has made the neighborhood convenience store a mandatory morning stop.

There, coffee is king, making up 71.5% of hot dispensed beverage category sales. Additional subcategories include specialty coffee (11.8%), refills (8%), hot chocolate (8%), coffee club mugs (0.4%), hot tea (0.1%) and other offerings (0.2%), according to Jayme Gough, NACS analyst. Generating the largest gross margin of any category within foodservice (62.45%), hot dispensed beverages represented 4.11% of in-store sales in 2018, slightly down over the previous year.

“Within foodservice, hot dispensed beverages were the second largest percentage of sales (12.4%) behind prepared food (73.3%), and the largest beverage category in foodservice,” Gough said. “The category generated $83,397 in sales per store and $52,077 in gross profit dollars in 2018.”

Thanks to new equipment and beverage offerings and morphing customer demographics, there are more ways for retailers to leverage America’s love affair with java.

Quality and Customization

While there is no significant change in the quantity of coffee being consumed, it’s obvious that coffee drinkers expect quality. Whether they choose traditional or gourmet brews, add flavorings or sweeteners or enjoy their coffee black, they want their own personalized cup of joe.

Last November, Casey’s, the Ankeny, Iowa-based retailer, unveiled a refreshed coffee program featuring six different coffee offerings, all created from 100% Arabica premium coffee beans. Guests have options ranging from Casey’s Classic, a blend of Central and South American coffees, to the Java Estate, a sweet combination of fruity Ethiopian Yirgacheffe, according to Tom Brennan, chief merchandising officer, Casey’s.

“Our guests are looking for a consistent, high-quality cup of coffee with the ability to customize,” he said. “And we carefully selected suppliers that could provide us coffee beans from the best coffee regions around the world, including Central and South America, North America, Africa and Asia.”

A fuel reward is what seems to drive the customer.

Customers also want something indulgent on occasion, and a hot beverage can satisfy that need. “Dayparts have changed dramatically,” said Bob Pierce, senior vice president, North America, for Bunn, the equipment manufacturer. “People are often using coffee as a snack.”

At Rutter’s, the York, Pennsylvania-based chain, “The standard classic coffee still reigns as top dog, but we’re seeing limited time offers grab some attention and engage the customers,” said Chad White, category supervisor for Rutter’s. “We recently did a Cinna-doodle coffee, and this was a big hit for our customers. A lot of the growth we’re seeing is in cold-coffee specialty drinks. Frappé, iced lattes and cold brew are continuing to gain traction with our customers.”

Coffee technology—new equipment that can create assorted drinks and often clean itself—helps retailers class up the coffee bar while cutting back on in-store labor. RaceTrac of Atlanta, with locations in a dozen states, has installed state-of-the-art equipment that grinds and brews one perfectly portioned cup of coffee at a time, guaranteeing freshness.

Our guests are looking for a consistent, high-quality cup of coffee with the ability to customize.

“This equipment also brews iced coffee, which is unique and lets us offer all bean varieties iced,” said Tiffany Plemmons, director of food and dispensed beverages, RaceTrac. “We even offer rotating seasonal creamers to add variety, including Reese’s, Peeps, pumpkin and other fun creamers. This variety of bean flavors and add-ins allows our guests to be their own barista for a price that’s just as satisfying.”

In addition to pleasing the customer’s palettes, there are side benefits to the new brew equipment.

“Historically, you brewed coffee to get the right extraction, and that takes three to four minutes,” said Pierce. “Bean-to-cup gives you a cup of coffee in a one-minute timeframe. Plus, you don’t need the same type of staff to manage the coffee brewers because it’s self-serve.

“With bean-to-cup, consumers have a beverage made just for them. They hear the beans being ground and see the coffee being brewed right into the cup. But nobody else in the store is doing the work. We’ve made the equipment much more intuitive for the guest and easier to operate and clean for the retailer. That way they can manage it effectively and efficiently and still keep up with customers’ desire for a high-quality coffee beverage,” Pierce said.

Promotional Appeal

The key to a great c-store cup of coffee is taste, and true coffee aficionados will drive out of their way to purchase their favorite beverage. But formally promoting coffee still has its appeal.

Casey’s announced its recent coffee upgrades with an aggressive $1-any-size campaign for the first 30 days. “We’ve now transitioned to a $1-any-size-coffee offer that bundles coffee with our popular breakfast foods—breakfast burrito, sandwiches and pizza,” said Brennan. “Our new coffee, coupled with our launch and sustaining promotions, has resulted in increased unit velocity. Feedback from our guests is very positive.”

RaceTrac monitors up-and-coming beverage bar trends. “We are looking at promotions that bring coffee guests back in the afternoon daypart for a great iced coffee pick-me-up,” said Plemmons. “While we don’t offer a cold brew or nitro product yet, we are keeping a close pulse on our guests to see if this is something they want us to introduce.”

Adds White, “We find success in pairing our coffee and fuel rewards program. We recently ran a double gas rewards promotion and saw good success.” Rutter’s also bundles coffee with various food offers at a special price, but “a fuel reward is what seems to drive the customer,” he said.

Perfecting the Program

For large chains like Casey’s, it may be easy to develop a proprietary hot beverage bar program, but for smaller chains or independents, there are comprehensive programs in the marketplace that have already done all the work and can deliver a competitive operation.

One example is Arcadia Bay, a trademarked coffee program from Core-Mark that is available à la carte and customizable. It features everything from equipment and coffee to condiments and dairy alternatives.

“Sometimes the equipment can be earned through coffee purchases or you can actually buy it outright,” said Jac Moskalik, corporate director of Fresh for Core-Mark. “It depends on what’s best for the customer at the time.”

In addition, the company has a Core Solutions team that performs category reviews and makes coffee bar recommendations based on a retailer’s existing program, current demographics and neighborhood competitors.

“Arcadia Bay also offers a nitro and cold brew program,” said Moskalik. “It’s definitely more trend focused and performs better in highly populated areas. Those beverages will probably never outpace hot coffee, but they speak to a different demographic—the millennials. To stay relevant in coffee, you must innovate, and that’s just another way to innovate.”

Before making any changes to an existing coffee program, take time to study your current customer base and consider your target customer, Moskalik advised. “Check out the competition around you, and understand your market,” she said. “Once your program is in place, work hard with your distributor to market it. You can have the best coffee out there, but if you don’t tell the story, customers won’t know about it.”