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Winning with Coffee

August 29, 2018

Whether it’s served by a barista, or made by a well-designed brewing machine, good coffee helps c-store sales flow.

The U.S. retail value growth for ready-to-drink coffees is projected to reach nearly $1.6 billion between 2017 and 2022, according to Euromonitor International. Conversely, cold brew has experienced 150% revenue growth in the past year.

Despite those impressive growth tracks, quality hot coffee programs are helping drive convenience store foodservice sales.

Fresh coffee remains a hot prospect in convenience stores, even in the face of newer innovations in the packaged coffee arena, according to industry experts and convenience store managers.

In 2017, hot dispensed beverages were the second largest category in foodservice at 14% of sales, according to data from the National Association of Convenience Stores (NACS) State of the Industry Report for 2017. Coffee continued to lead this category, making up 58.6% of sales, followed by cappuccino (18.5%) and refills (12.2%). Competition for convenience store retailers in hot dispensed beverages comes primarily from quick-service restaurants (QSR).

The cappuccino subcategory has performed strongly between 2015 and 2017, and it showed improvement in 2017 in average store sales, gross profit dollars and gross margin percentage. Customers want their coffee fresh, affordable and consistent, according to NACS.

Specialty hot coffee is also a rising star in the coffee world, according to data from the Specialty Coffee Association (SCA). The market share of specialty coffee, in cups, increased from 40% in 2010 to 59% in 2017, with an average of three cups consumed per day, per drinker.

RAISING THE BAR
Coffee consultant Bruce Milletto, president of Portland, Ore.-based Bellissimo Coffee Advisors, sees a tremendous opportunity for convenience stores to tap into the specialty coffee market.

“In the last five years, convenience stores have raised the bar on quality of coffee they serve,” said Milletto. “They’ve seen the many advantages of premium coffee given the fact that people will stop in to get coffee, and end up getting something else.”

Milletto noted that coffee provides a high-profit margin way to draw traffic into the store, but emphasizes the importance of quality and freshness in convenience store coffee.

“Once a customer has had a great cup of coffee, their palate remembers that, and they aren’t going back to drinking poorly made coffee that’s been left out for hours,” said Milletto.

In fact, a quality hot coffee bar is a way to draw more customer traffic to the convenience store.

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