So, as you may have imagined, I’ve been pretty busy these last couple of weeks. Joe Bush of CSP Magazine chronicles the recent Hot Beverage trends symposium that I moderated following the SCAA conference in Minneapolis. It was a productive, fun-filled and yet exhausting weekend. Joe has all of the details:
MINNEAPOLIS – Convenience store operators can be good Samaritans and boost their bottom lines, all while increasing their legitimacy as a foodservice destination, just by selling high-end coffee. Andrew Hetzel, director of Kamuela, Hawaii-based Cafemakers, a coffee-industry consultancy, told attendees of CSP’s inaugural Hot Beverage Plus Symposium May 5-6 that the specialty-coffee industry needs them as much as c-stores need to upgrade their coffee business.
As consumers’ tastes have demanded more than the infamous “gas-station coffee,” c-stores have scrambled to meet the demand and capture breakfast traffic in a crowded and daunting competitive marketplace, he said.
The symposium began as the Specialty Coffee Association of America’s (SCAA) trade show was ending, and many of the attendees and sponsors visited the show floor. The SCAA defines specialty coffee as being “made from exceptional beans grown only in ideal coffee-producing climates. They tend to feature distinctive flavors, which are shaped by the unique characteristics of the soil that produces them.”
Hetzel said there were only 22,000 retail sites for specialty coffee globally. “Convenience stores could help expand that,” he said. “You have the opportunity to redefine what consumers think of convenience store coffee.”
The event featured presentations by Hetzel on current and future trends of coffee and tea; Technomic ‘s Tim Powell on hot-beverage usage across all channels; Retail Growth’s Chris Fink, with c-store-centric consumer research; a retailer panel, moderated by Hetzel; and breakouts on marketing and operations.
Hetzel said while coffee trading is down—it is the second-most-traded commodity behind only crude oil—more higher-quality coffee is being served. It is 60% of the specialty-foods market, which includes olives and olive oil, cheeses, vinegars and meats. Palettes are becoming more sophisticated, and coffees are being treated as wines.
Among other results of this, said Hetzel, is that with an appreciation of coffee flavors, there is less use of dairy and creamers and sweeteners. The trend is heading away from darker roasts to lighter, because there is no need to cut through mixers, and from larger portions to smaller.
Hetzel’s quick fixes included the foundations of a coffee program—ingredients, water and execution. Each site’s water should be tested and improved (a cup of coffee is 98.5% water), high-quality coffee should be used and personnel trained accordingly. “The additional pennies (spent) will earn you dollars and also repeat business,” said Hetzel. “Incremental enhancements in any of the three can be dramatic.”
And never, ever let the coffee sit longer than two hours. “There’s no difference in flavor whether it’s brewed in 5-gallon containers or a single cup, as long as it doesn’t sit,” he said.
Powell’s data showed that from 2004 to 2006 specialty coffee sales grew 14% before being adjusted for inflation, far outpacing regular coffee ‘s 3.5% increase. Surprisingly, the data also showed that of the four main away-from-home locations to buy hot-dispensed beverages, c-stores (12%) trailed limited-service restaurants (35%), full-serve restaurants (21%) and vending (15%).
The number that stood out the most, however, was that 77% of c-store hot-beverage purchases were beverage only. When paired with research that shows that most people buy breakfast where they buy coffee, it’s clear that c-stores must improve both as they fight for share of coffee and breakfast business.
The retailer panel said thus far the sagging economy had not hurt business. Kum & Go ‘s Greg Tornberg said same-store unit sales were up over 2007. Sheetz’s John Notte said his $1.99 12-ounce latte was an example of one of his chain ‘s advantages. “We’re in a good position for any trading down,” said Notte.
There was a lot of talk of energy—competition for coffee from vault drinks, especially. While Circle K has tried to combine the two with a cappuccino infused with its house-brand energy drink, others wonder if cold energy drinks are taking business from their coffee sections.
Southwest Convenience Stores’ John West wondered during the marketing breakout if the younger generation would ever switch to coffee from energy drinks. He’s trying to help the transition with iced coffee. Further, he suggested that perhaps the low-maintenance aspect of the cold drink favored its expansion at the expense of the high-investment, high-maintenance coffee section.
He and Circle K’s Chris Wilson debated, with Wilson saying coffee drinkers posted larger basket rings. Thus, coffee was an entry to foodservice. And energy drinks didn ‘t engender loyalty like coffee did. West countered by pointing out energy drinks’ higher penny profits.