Strategies for Hot Beverage Domination

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Strategies for Hot Beverage Domination

By Mehgan Belanger

From syrups and Splenda to high-tech machines and water filtration systems, retailer attendees to Convenience Store News' Foodservice Roundtable cited several strategies they are using to gain and retain customers from other channels in the heated battle of hot beverages.

Retailers listed Dunkin' Donuts, McDonald's, Tim Hortons and Starbucks as main competitors, and most retailers agreed their coffee customer is more in line with McDonald's than Starbucks. However, growth in c-store hot beverages may lie in luring the upscale retailer's customers, according to one roundtable attendee.

"Growth [in the convenience store industry] will be Starbucks' customers looking to get a bargain," said Chad Prast, foodservice director for Indianapolis-based Village Pantry. The catch, though, is very few convenience retailers have real espresso machines, and usually use powder to make espresso-based beverages, including lattes and cappuccinos, he said.

Two retailers at the roundtable have experimented with real espresso machines -- Wawa and Petro-Canada's Neighbours concept. Michael Sherlock, director of foodservice brands for Wawa, said the chain's research showed customers have found self-service espresso machines intimidating to use.

While luring Starbucks' customers might be an opportunity for convenience stores, McDonald's strong breakfast program is another story, according to Christy Howell, c-store marketing manager at Boyd Coffee Co. "[Convenience stores] have to get [the morning] daypart under control," she warned. "If you aren't nervous about McDonald's, you should be -- they give a good cup of coffee and hot food at an appealing price."

Retailers also detailed the strategies that have brought success in the hot beverage category. All the participants on the roundtable have adopted an increased throw weight, or the amount of coffee used in a brew. Throw weights ranged by retailer, but many agreed that the ideal range is between 2 and 2.5 ounces of ground coffee, resulting in a stronger tasting beverage.

"We were at a 1.75 [throw weight], and we upped it," said Prast. "The problem was that people got used to [the former weight], and when you change they notice."

It is important to note customer preferences in roasts and weight vary by region, said Vickie Grimes, national c-store channel manager for Boyd Coffee Co. Midwest customers prefer a lighter roast coffee, while the West and East enjoy a larger throw weight of 2.75 to 3 ounces and a dark roast, she said.

Regardless of region, all retailers at the roundtable agreed using Colombian coffee can be successful, as customers perceive it as high-quality. In addition, the majority of retailers at the roundtable use one price point per cup size, instead of separate prices for each type of hot beverage, to prevent confusion for both customers and cashiers.

Offering flavored coffee is profitable, but only if retailers employ the correct strategy for their situation, roundtable guests said. Wawa, which generates a high volume of coffee sales, offers several flavors of coffee in glass pots, according to Sherlock. Other retailers, including Village Pantry, have found offering flavored creamers or syrups is one way to provide customers with the variety of flavors they seek while ensuring little waste. Similarly, Village Pantry found adding Splenda sweetener to its lineup made a "huge difference" in sales, despite its high cost, according to Prast.

Terry Messmer, NOCO Express' merchandising manager, said the western New York chain curtailed flavors "back to the basics" after surveying stores, and now has limited-time offers once a quarter.

Water quality for hot beverages is another important area of focus for two retailers at the roundtable. Since water makes up approximately 98.5 percent of the product, Wawa uses water treatment systems in stores to ensure quality flavor, said Sherlock.

Petro-Canada has used a reverse osmosis system to filter its water, but found that method removes too many minerals. Currently, the chain is looking to replace some of what is taken out during filtration, said Tim Doherty, national foodservice category manager for the chain.

Another critical factor for quality coffee is the type of brewing equipment used. From glass pots with a hold time of 20 minutes to airpots' six hours-plus hold time, the equipment used at retailers' stores varied significantly. All guests agreed that if done correctly with the proper volume, glass pots, such as those at Wawa stores, should be used.

To ensure its coffee is fresh, Wawa has dedicated labor focused on the coffee area.

Ultimately, customers' perception of freshness is based on the temperature of the coffee, not its age, Messmer said, citing airpots' holding times, which he finds particularly beneficial for low-volume stores.