C-stores Must Keep Pace With QSR Coffee Upgrades

The recent news that 7-Eleven is switching to modern urns from the chain's classic glass pots is a good sign for the c-store channel. While updates to coffee programs have been a common occurrence among c-stores lately, across the street, quick-service restaurants (QSRs) are making similar upgrades and improvements at a comparable pace. For example, Subway rolled out its program with Seattle's Best in the spring, and Burger King is following suit. Jack in the Box also recently upgraded its coffee to premium Kona beans and of course, McDonald's just beat May same-store-sales estimates, thanks in part to the success of its increasingly popular hot-beverage program.

With this, c-stores must continue to put forth a sustainable effort in the hot-beverage category, considering that the competition with QSRs will only heat up. While there are multiple reasons to continue to emphasize and improve hot-beverage programs, there are five in particular worth noting:

1. Hot beverages are the second most profitable foodservice item behind fountain

Gross margins for hot coffee and related specialty coffee are nearly double that of prepared foods. Operators can often realize gross margins of 70 percent or more for hot coffee.

2. Hot beverages draw the repeat customer

What also makes hot beverages attractive is their ability to draw the repeat customer. This speaks to the need for a quality, fresh brew that fits the flavor profile of a particular c-store and its operating region. For example, consumers in the Midwest may want a lighter roast, while consumers in the West seek a heavier brew. Most c-stores have adapted to this need by offering a dark and a light brew. Whatever the solution, if consumers like the coffee, they will regularly select that c-store for their daily fix.

3. C-store coffee drinkers are more affluent, spend more than average c-store consumers

Hot coffee and specialty coffee drinkers at c-stores earn higher incomes ($50,000 or greater) on average and are more likely to have graduated from college than the average c-store consumer. Moreover, hot coffee drinkers spend more than average, per transaction, than the average c-store consumer.

4. Original brands of coffee help achieve differentiation

There is no better way to differentiate a coffee offering from other c-stores or channel than by offering a unique brand name. Further, this gives consumers a reason to select a particular store instead of simply any c-store. C-stores may take the route of offering a national brand (such as Seattle's Best), but leaders in the space have already developed their store-only coffee brands that have been a success: Consider Cumberland Farms' Farmhouse Blend, Maverik's Bodacious Bean Coffee and Thorntons' Java Lava.

5. Creamers help meet the customization call

Nearly 75 percent of consumers who purchase regular coffee at a c-store customize it with some kind of additive, whether it be creamer, half-and-half or flavored syrup. Offering consumers self-serve condiment stations, a concept pioneered by Quick Chek and Circle K, will only increase consumer satisfaction and help develop repeat business.

Manufacturers are in a strong position to assist c-store operators with enhancing hot-beverage programs, whether it's in developing a proprietary blend or an original recipe that incorporates syrups and creamers. Moreover, many manufacturers have strong relationships with QSRs and fast-casual restaurants and can provide merchandising and training support to c-stores specific to their hot-beverage programs.

Tim Powell is C-store Foodservice Program director for Technomic, a fact-based research and consulting firm that helps restaurants and food suppliers grow profitably with business-building guidance. He can be reached at [email protected].

Editor's Note: The opinions expressed in this article are the author's, and do not necessarily reflect the views of Convenience Store News.