Coffee on Ice

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Coffee on Ice

By D. Gail Fleenor - 08/27/2007
Ice cubes aren't just for fountain drinks anymore. Consumer demand for iced coffee continues to grow. Dunkin' Donuts has offered it for some time, and McDonald's also added the option to its menu at select locations. Savvy convenience store chains are also following the trend, including Wilson Farms Neighborhood Stores and Irving Oil's Bluecanoe and Mainway stores, both with successful programs.

"We have offered iced coffee year-round since June 2006 and continue to experience growth in this category," said Rick Pajak, category manager of foodservice at Wilson Farms Neighborhood Food Stores, Williamsville, N.Y.

Consumer desire for iced coffee doesn't show signs of waning and may just be the key to increasing c-store coffee bar sales with the addition of new day parts.

Americans drank more than 450 million servings of iced coffee in restaurants in 2006, up 16 percent from the year before, according to NPD's Consumer Reports on Eating Share Trends, demonstrating demand for, and acceptance of, the beverage. Consumers relate iced coffee to a time of day rather than a specific season, according to consumer studies, so marketing campaigns are focusing on day parts rather than touting iced coffee as a summer-only beverage. Research conducted by Dunkin' Donuts showed 24 percent of consumers purchase iced coffee as an "early break" (10:30 a.m. to noon) and 11 percent purchased the beverage as an "afternoon reward" (after 1 p.m.).

"The iced coffee market in c-stores is still relatively small at $25 million in sales last year, but is growing quickly," said Joe Pawlak, vice president of Technomic Inc., a research and consulting firm for restaurants and foodservice in Chicago. "The total hot coffee market in c-stores is $4.8 billion. Where we've seen growth is in hot specialty drinks like lattes and espressos. These are dispensed through an automatic machine near the coffee pots."

Iced Coffee and More

"We offer iced coffee at 53 of our 200 locations," said Wilson Farm's Pajak. "We choose locations based on demographics and geography -- mainly food-adventurous consumers and college areas."

Either a two-head or four-head Bunn dispensing unit was added at all Wilson Farms' iced coffee locations using product from Javo Beverage Co. "What we offer is more of an iced latte and is branded Wilson Farms," Pajak said. "We do have two flavors of iced coffee offered in 16- or 24-ounce cups, with French vanilla latte as the top seller. The 16-ounce size is more popular. We charge a little more for iced coffee and latte than our normal coffee due to a higher product cost."

The iced coffee is self-serve at Wilson Farms stores, and Pajak explained he found consumers not familiar with how much ice, creamer or French vanilla flavoring to add.

"There is a learning curve in getting our customers accustomed to mixing an iced coffee as opposed to preparing a cup of regular coffee," he said. "Because of this, we've gravitated to latte, which is a finished product."

At two locations, Wilson Farms is currently testing a fresh-brewed iced coffee made with the company's proprietary blend coffee and served over ice. "The coffee is served in what looks like a typical coffee dispenser, so consumers are more comfortable with how to prepare it." The test has gone well, according to Pajak.

"We are looking at ways to drive our coffee sales throughout the year, regardless of the weather," Pajak said. "That is why we are exploring new items and complimentary items in the coffee bar category."

Another c-store chain, with more than 500 stores in New England and throughout eastern Canada, is also enjoying brisk iced coffee sales. "Our Bluecanoe and Mainway convenience stores offer a fantastic iced coffee program," said Marc Daft, category manager of foodservice at Irving Oil, based in Portsmouth, N.H. "Served throughout the majority of our company's U.S. network, we offer four flavors of both traditional brewed iced coffees and iced lattes.We offer a core set of three flavors and often use the fourth flavor as a seasonal/rotational variety." Cup size ranges from 16- to 44-ounce, and customers are encouraged to customize their beverage.

Fresh product in the iced coffee program is a must, according to Daft, because it reflects on the rest of Bluecanoe's food program. The company has the option of changing varieties by season or trend to meet the needs of customers and also keep the program from growing stale.

"Iced coffee retails for a slightly higher price than the rest of our hot beverages," Daft said. "With regard to iced coffee, if you want to serve a quality product that is always fresh and always consistent, the cost of the product is slightly higher."

Sales are going well, especially during the warmer part of the year, according to Daft. "We look forward to cup sales growing beyond expectations. Customers love the program, and perhaps more importantly, customers who love iced coffee, love it," he said.

Beyond Traditional

Many c-stores, when asked if they offer iced coffee, mention frozen coffee service instead. "We have got about 12 machines doing a 'slush puppy' version -- it's frozen coffee in iced mocha flavor," said Tim Lowman, senior vice president of convenience store operations for the 33-store Quality Mart chain, based in Winston-Salem, N.C. "We started with five machines, but quickly doubled that number. We locate the machines in stores with higher traffic and a younger demographic." Lowman said his frozen coffee sales are going "surprisingly well. This is just another opportunity for the coffee bar other than breakfast coffee. It opens up a different day part for coffee."

At Radiant Food Stores, a 16-store chain headquartered in Tampa, Fla., the company is taking a similar frozen approach. "We have a frozen coffee machine in every store," said John Matlock, buyer/foodservice director at Radiant. "It does well, but is kind of seasonal. We keep it simple with two flavors, and sell it for the same price and in the same cups as our other coffee." Radiant has no plans to add traditional iced coffee to its program. "Our coffee bars are pretty full now," Matlock said.

Space on the coffee bar is also an issue for Smitty's Convenience Stores, based in Grandview, Wash. "We already sell cold coffees out of the cold case," said Rick Smith, vice president of retail operations for the 13-store chain. "We have Rick's Coffee Bars in our stores where we sell our own gourmet blend coffee. If we do latte or espresso, that will take more counter space. But we're always open to look at new opportunities; we haven't considered iced coffee yet."

Technomic's Pawlak thinks iced coffee sales in c-stores will continue to grow. "Iced and frozen coffee will continue to expand as consumers get these in other venues and expect them. Having these is a natural extension for c-stores."