Through a special arrangement, presented here for discussion is a summary of an article from Convenience Store Decisions magazine.
Convenience store operators need to focus on meeting consumer demand for a quality cup of coffee as McDonald's, Dunkin' Donuts, Starbucks and Caribou Coffee all announced plans to step up their brew programs to reel in consumers during a tough economy.
The coffee war escalated in May as McDonald's embarked on a national advertising campaign to position its McCafé line at the front of consumers' minds. At the same time, Dunkin' Donuts began promoting its 99-cent lattes and 50-cent iced coffees. In addition to its instant coffee launch, Starbucks is offering an ad campaign of its own, touting quality. "Beware of a cheaper cup of coffee. It comes with a price," one recent Starbucks ad warned. Caribou is offering a medium cup of Caribou blend coffee for $1 on Mondays.
C-stores are fighting back to keep their core customers from straying by investing more in hot dispensed beverage programs and recognizing them as a critical component of the morning daypart.
Targeting the Starbucks consumer and those in search of a stronger, dark brew, 7-Eleven recently added Brazilian Bold to its coffee bar and earlier this month announced a new iced coffee program. The new coffee is the same price as all other 7-Eleven hot dispensed beverages and offers a value-priced alternative to coffee houses and doughnut shop brews.
"We learned that many young coffee-drinkers prefer a strong, rich flavor, so we developed a coffee to fit that flavor profile," said Paul Pierce, 7-Eleven's senior director for merchandising.
Kwik Trip Inc., which has 353 stores in Wisconsin, Minnesota and Iowa, offers eight flavors of coffee daily, including chocolate macadamia nut and hazelnut, which all are very popular in the morning daypart. In addition to speaking directly with consumers, using store checks to see what is selling and gathering information from suppliers can help determine the types of coffee offered already successful in the market place.
Once you know what consumers want, using limited-time-only items is a way to drive new flavors for two to three months, whether to create excitement with a holiday flavor or to test out new blends before adding them to the line. Some 29 percent of retailers have increased the use of limited-time-only items compared to last year, according to a CSD/Balvor Foodservice Retail Survey in March 2009.
Since coffee is typically a planned purchase, c-stores tend to reward customer loyalty with club or punch cards that offer a free cup of coffee after a certain number of purchases. Some 26 percent of retailers increased the use of punch cards for hot dispensed beverages compared to last year, according to the CSD/Balvor survey. One way to encourage additional purchases is with bundle meals, offering coffee with a muffin or breakfast sandwich.
Discussion Question: How can convenience stores better compete in the coffee category with quick-serve restaurants, doughnut shops and coffee chains? What advantages do c-stores have that they should be emphasizing more?
Of the three major chains, which is most vulnerable to competition from c-stores for coffee sales?