The best means for c-stores to edge out the competition lies in promoting quality and providing better value.
By Howard Riell, Associated Editor
When considering a quality coffee product, differentiating the offer from those of competing convenience stores and quick-service restaurants (QSR) is vastly important, experts say. However, too much thinking and tinkering can result in substandard coffee, which isn’t ideal when going after more market share. Tom Pirko, managing director of Bevmark Consulting LLC of Buellton, Calif., said there’s opportunity brewing in the convenience channel’s competition with fast-food chains to gain traction in the category.
“Given QSR’s (desire) to establish coffee—to hold off McDonald’s and Dunkin’ Donuts, who both focus on attacking Starbucks, they have left themselves open to challenge and head-on competition from c-stores. (It’s a) wonderful opportunity.”
Indeed, c-stores can outflank fast feeders most often by promoting the convenience factor and better value by co- opting the very concepts that “specialty coffee” retailers have cultivated.
“What c-stores must remember is that they are emerging from old and stale images of inferior coffee,” Pirko said. “What should be promoted in every way in stores is a challenge. The message is that the stores have better quality coffee than McDonald’s and Dunkin’ Donuts, and you don’t have to sit in the drive-through and be forced to eat QSR food.”
Whatever coffee program strategy is deployed, a c-store shouldn’t cut corners when it comes to a quality coffee program.
Specializing in foodservice business growth and product development, Deborah Holand, president of Dallas-based consulting firm Food Sense Inc., recommended that caution be exercised when it comes to everyday value and how it’s derived.
“Bundling retains value, and customers appreciate a great cup of coffee and will pay a few extra dimes. It’s a penny profit game, not percentage,” Holand said. “When structuring the department as a profit center, all condiments, packaging and commodity costs must be considered; that is, consistency in quality level across all elements of the pro- gram, supported by a highly visual branding strategy.”
The overall retail experience is a vital element of any coffee program, she added.
“For instance, we can price ourselves as a c-store channel, but that doesn’t mean we need to offer fast-food quality when procurement and branding supports the full value proposition elements,” Holand said. “It’s not enough to be right on price. Quality, variety, freshness, cleanliness, consistency, atmosphere and service all are factors in a strong value proposition.”
QUALITY, QUALITY, QUALITY
In weighing the best coffee product, convenience retailers must look at the basics, first and foremost, experts suggest. “It should go without saying the best way for retailers
to differentiate their coffee offer is to have a great product,” explained Steven Montgomery, president of b2b Solutions LLC in Lake Forest, Ill. “This might include the actual coffee blend, the throw weights being used, etc. However, it does no good to have a great coffee offer if the customer’s perception of it is that it is not great. At a macro level, if your location doesn’t look like it has a great coffee offer then no matter what you do you will not get credit for it.”
That quality message must be reinforced uniformly throughout the store, however, up to and including the sales floor and even the restrooms, Montgomery continued.
“Remember that c-store clean is not the same as restaurant clean,” he said. “A simple test is this: would your mother, wife, daughter stop to buy coffee at your location? If not, then why should customers?” Retailers seeking to differentiate their coffee offer have to first hold themselves to a higher overall standard of appearance and cleanliness, he stressed, including employees.
“If you want to sell me coffee then you need to let me know it is important to you,” Montgomery said. “I should see it as a key component of the foodservice area when I enter the store. Customers don’t have to hunt for where the coffee is at a Sheetz, Wawa or QuikTrip.”
The ergonomics of the coffee station are equally important in conveying the quality concept, he added.
“Do you have separate brewing, serving and condiment areas? Do the customers’ path to complete their purchase make them cross the paths of others? How and what are you communicating to your coffee customer? Are you telling them anything about what makes your coffee great? This might include country of origin, blends, hold times/freshness, etc.” Another point of differentiation might be the cup that the coffee goes in. 7-Eleven just announced its change to a coffee cup with better heat retention qualities.
Of course, taste and customer preferences go hand-in-hand. “Consumers are becoming more selective about the coffee they drink, and are demanding higher quality and expanded options,” said Chuck Moyer, food service category supervisor for Rutter’s Farm Stores, headquartered in York, Pa. “They have even shown a willingness to pay more for a quality product as long as the purchase experience is enjoyable.”
This is especially true of the emerging shoppers and Millennials that Rutter’s executives believe c-stores should be focusing on. “This consumer craves customization and personalization,” Moyer said. “C-stores must expand their hot-beverage selections to include a wider variety of coffees, teas, espresso, lattes and frappes. Gourmet beverages and specialty drinks are the new drivers of the coffee category.” Taste enhancers are also an integral part of the equation.
By offering a variety of creamers, sweeteners, syrups and coffee toppings, the retailer can create a beverage program that appears to have an infinite amount of possibilities.
“Of course, none of this matters if you can’t properly execute your program at the store level,” Moyer said. Companies should never underestimate the value of proper training. “The ultimate goal is to ensure consumers have the ability to get the coffee they want, how they want it, whenever they want it.”
Moyer warned against basing a coffee program solely on price. “Companies try to gain a competitive advantage by offering discounted everyday pricing to keep desired margins, (but) this often comes at the expense of quality.”
In fact, convenience stores often offer a greater variety of products than quick-service restaurants, which can only bundle coffee promotions with their food offerings.
“We have the ability to get very creative with bundling coffee,” Moyer said. “Coffee and a muffin at breakfast, with a candy bar for that afternoon snack time (and) now and later with your cold vault selection are all options that can set you apart.”
It’s true that a regular cup of joe doesn’t impress most U.S. consumers any more.
“Coffee customers are a sophisticated bunch,” said David Crawford, vice president of operations for convenience chain Green Valley Grocery in Las Vegas. “Every part of the coffee experience is important to them. If you want a good program you need quality coffee from a roaster who cares about the product, the growers and the industry.”
Just as integral to the experience is the presentation to the customer—from POS to cups, lids and equipment.
“People will pay for quality,” Crawford said. “You don’t have to treat the category like a commodity and work on low prices/margins. Equipment innovation will change how we sell, price and market coffee in the years to come.” There are, Crawford pointed out, products and promotions that go hand and hand with coffee to make your offering stand out such as fresh baked goods.
“They should be merchandised together. Coffee should be visible to the customers when they walk in the store. If it’s in the back of the store you will miss impulse sales.”