That is the conclusion of a new report released by research firm Packaged Facts, which forecasts that retail and foodservice sales of coffee will top $48 billion in 2014. Of this amount, the company expects $11.2 billion (or 23%) to come from retail sales and $37 billion (or 77%) to come from sales at food service establishments.
For convenience stores, coffeehouse and quick-service restaurant (QSR) operators, attaching food to the purchase of coffee is more important than ever. Brands are aggressively innovating on both the beverage and food side of the menu to provide customers the ammunition needed for more pairing firepower. But more and more of these players are also branching into other beverages, which has the potential to dampen coffee sales growth.
And yet, despite all the variety, hot coffee is still the go-to beverage, with 75% of coffee consumers users saying that among 10 choices “hot coffee” is the coffee drink they drink most often.
As c-store and restaurant operators race to launch loyalty programs, coffeehouse chains are fertile ground for programs that blend and harness social media, mobile technology and rewards. Our research suggests that coffeehouse users are receptive to social media and brand interplay, and
when it comes to adapting to technology, these consumers are also ahead of curve.
Single-Serve Trend Brewing?
On the retail side, the rise of single-serve could be poised to change the way retailers brew coffee during slower times of the day. Coffee co-branding is also moving beyond coffee shop brands to align with other indulgent brands. Building off coffeehouse expectations for a wide variety of options, retail coffee manufacturers are also embracing variety, and sourcing has become a key element in coffee premiumization. And innovation abounds: To combat attrition, instant coffee marketers are trying to breathe life into the category focusing on quality products underscored by variety, functional, and value positioning.
Convenience store operators are moving swiftly to promote their coffee brands.
For example, The Pantry’s Kangaroo Express brand, which is the leading independently operated convenience store chain in the southeastern U.S., will celebrate National Coffee Day on Sept. 29 by offering a 12 oz. Bean Street Coffee for just one penny to guests at its more than 1,500 Kangaroo Express convenience stores.
To keep the deals brewing all year long guests can also purchase Bean Street Coffee from its reusable “Roo” coffee mug retails for just $1.99. Refills are just 99 cents all year long.
Coffee at c-stores has evolved to the point that most leading chains are now offering customers choices and ways to customize their coffee in a pleasant retail environment, said John Bennett, retail operations manager for Robinson Oil Corp., which operates 34 Rotten Robbie stores in Santa Clara, Calif. “Pricing remains a key to success. If it’s too high they will go elsewhere, if it’s too low, you sacrifice quality.”
Another key for success is not overcomplicating the offering, said John Zikias, chief operating officer for Holmes Oil Co. in Chapel Hill, N.C. “Whether you do your own roast or get something that comes from a supplier, you’ve got to start with a great roast.” The other often-overlooked component—perhaps the most easily overlooked of all—is water.
Indeed, water filters used for coffee need to take some of the lime out, which cannot be done with fountain systems. Holmes Oil runs its water through a scale inhibitor before brewing at its 24 Cruizers c-stores. “You can’t take a lot of the minerals out when doing fountain drinks because then it doesn’t carbonate properly,” Zikias explained. “So we put it through the main filter system, then put it through the scale inhibitor to take out the lime and other mineral deposits.”