Will a new subscription program make Circle K a daily stop for members?

Discussion
Photo: Getty Images/jetcityimage
May 06, 2021

Circle K is rolling out a monthly subscription plan that will allow customers who pay $5.99 a month to stop in one of its stores daily to pick up their choice of a 100 percent sustainably sourced cup of coffee, tea, Froster slushie or Polar Pop fountain drink at no additional charge.

Circle K, which has around 9,800 locations in the U.S., decided to roll out its Sip & Save program after it ran a successful pilot in more than 100 stores in the Augusta, GA, and Columbia, SC, areas.

Kevin Lewis, chief marketing officer of Alimentation Couche-Tard, the convenience store giant that owns Circle K, told CNBC that the pilot showed that trips to test stores increased as did market baskets.

Circle K is planning to run Sip & Save for 90 days, but Mr. Lewis said the retailer would be “hard-pressed to say stop” if the broader program produces similar results to those in the test markets.

The chain was working on a drink subscription program prior to the pandemic but took its foot off the pedal when the novel coronavirus began cutting into people traveling to work and going to convenience stores.

Many of the pandemic-related conditions are now being lifted as a growing percentage of Americans have been vaccinated against COVID-19 and Circle K sees Sip & Save as another means for it to differentiate itself in the minds of consumers.

It is not, however, the only company to offer a beverage subscription plan.

Panera Bread last year launched an $8.99 a month subscription plan for members of the chain’s MyPanera loyalty program that covers purchases of hot and iced coffee and hot tea every two hours all day long. Cold brew iced coffee, espresso and cappuccino are not included.

The chain continues to promote the subscription plan on its site including a promotion that offers new members three months free and “exclusive rewards” on items bought with their drinks.

The Panera program came out of a three-month test in Cleveland, Columbus, Nashville and Raleigh. The restaurant chain said that it saw a 200 percent increase in the frequency of visits, a 70 percent jump in food purchases made with the coffee and a 90 to 95 percent renewal rate among those who subscribed to the program.

Burger King discontinued a $5-a-month coffee subscription it launched in 2019 after a few months.

DISCUSSION QUESTIONS: Do you expect Circle K’s Sip & Save subscription plan to drive incremental customer visits and sales for the convenience store chain? Will similar subscription programs become more commonplace within the convenience channel?

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Braintrust
"At the moment these schemes are rare in the market. If it works that will mostly likely change pretty fast."

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30 Comments on "Will a new subscription program make Circle K a daily stop for members?"


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David Naumann
BrainTrust

Many consumers love a great deal and if a Circle K is on your daily path, the unlimited monthly cups of coffee, tea, Froster slushie or Polar Pop fountain drink is a bargain. Circle K should see a boost to store visits and other purchases, because if consumers see their beverage as nearly free, they may opt for an impulse food purchase while in the store. Coffee, tea and fountain beverages have very high margins so this is a smart strategy that will likely be a big success.

Jeff Weidauer
BrainTrust

There’s not much downside for for Circle K to launch a subscription program. As people start to return to work and get back into the daily commute, this is an opportunity to create new habits for commuters who have been WFH for the past year. There are two major challenges: letting consumer know the program exists, and ensuring it continues to add value over time.

Shep Hyken
BrainTrust

The subscription model will help create repeat customers that make going to Circle K a habit. Similar to Amazon Prime, this promotes a commitment to wanting to do ongoing business. If a customer pays for the service, they want to get their money’s worth. And while the customer is there, who knows what else they will buy?

Suresh Chaganti
BrainTrust

Very innovative thinking. Panera is the only other beverage subscription program that comes to mind. I am a Panera subscriber, but coffee is almost never warm in the afternoons when I typically pick up. That’s where Circle K has to be careful. We know “gas station coffee” is not exactly gourmet, but some of them are really bad.

Assuming the quality of coffee is decent, Circle K certainly packs more value and they have wide category of products and services that they can extend the subscription. Think of car wash, oil changes, etc. Certainly the right way to think about monetizing the foot traffic and getting customers back.

Gene Detroyer
BrainTrust

A dollar saved on a bad cup of coffee is $5.99 wasted.

Gary Sankary
BrainTrust

If customers are already stopping at Circle K for their morning coffee this is a great way to incent them to continue to do so. I think the overall traffic increases will be modest, but I do expect to see growth in incremental sales. Customers may be more willing to pick up another item because they perceive the coffee as being “free.” This is the time for Circle K to make this move. At the moment these schemes are rare in the market. If it works that will mostly likely change pretty fast. Kudos to Circle K for trying this.

Cathy Hotka
BrainTrust

Get. Customers. Into. The. Store.

Paula Rosenblum
BrainTrust

I honestly don’t know what to say about a program that offers organic coffee and a Froster slushie and Polar Pop fountain drink as part of the program. Who is the target customer? It’s a rare beast that cares about organic coffee but doesn’t care about having a glass of sugar at the same time. I guess it’ll work. We have become a strange nation.

Gene Detroyer
BrainTrust

If I like Circle K coffee and I am stopping in every day for my cup, I love the plan. If I don’t like Circle-K coffee (or Starbucks, or DD or anyone else) nothing will make me stop there. If I must go out of my way to take advantage of it, it doesn’t work for me either.

The economics seem to be that Circle K hopes that there will be enough additional purchases that it covers the loss of revenue on the regular coffee drinks which they would have sold off subscription. I doubt that will happen. Or that loss of revenue is covered by new trials — they better bet that the coffee is good.

I think this is one of those ideas where someone kept adjusting the XCL spread sheet until the numbers worked and never took into account consumer behavior.

Jeff Sward
BrainTrust

At a minimum, this is a tie-breaker on where I stop for my next tank of gas. If gas prices are competitive, then Circle K just won me as a new customer. The big problem will be resisting all the junk food I will be tempted by, but then I guess that’s part of the whole point.

DeAnn Campbell
BrainTrust

I think they are banking on our willpower being weak. 🙂

Richard Hernandez
BrainTrust
Richard Hernandez
Director, Main Street Markets
1 month 16 days ago

I remember when the Burger King promo came out, thinking that Burger King was betting on the fact that the customer would also make a purchase of a sandwich to go with coffee, but I am guessing that did not happen. While I can see that happening initially, I don’t think it was sustainable which is why you eventually have to cut your losses if it is not working. I will be interested to see the success of this program.

DeAnn Campbell
BrainTrust

Burgers and coffee. You’re right, probably not the ideal program for their most frequent customer. At least with c-stores and Panera they offer a lot of coffee adjacent foods like pastries or donuts.

Brian Cluster
BrainTrust

Yes! As the price of gas continues to creep up across the U.S., this is one way to combat the potential loss of customers looking for the lowest price per gallon. The subscription model will help increase the frequency of their light customers and potentially bring in new customers. What I like about this program is the fact that they made it a little different by going beyond coffee to include slushies and other soft drinks. With the right execution and merchandising geared to generate incremental product sales, this can be a successful program.

DeAnn Campbell
BrainTrust

A smart move. Panera Bread grew program participation from 100,000 to over 700,000 subscribers within the first eight months of the program. Moreover, frequency of visits jumped 200 percent with a 70 percent increase in additional food purchases for subscribers. Given that fuel is the primary driver for the majority of c-store visits, and that fuel sales are already on the wane due to increased mileage efficiency and growing prevalence of electric vehicles, any program that places focus on the store rather than the pump is going to be vital. I’m just surprised it’s taken this long for c-stores to institute.

storewanderer
Guest
1 month 16 days ago

Panera has been closing quite a few locations in the past couple years; they were having problems before the COVID pandemic and that has only continued. However, offering the subscription program to the existing base of loyalty program members was a very smart move.

Also the 700,000 subscriber figure, needs clarification. I cannot find that figure anywhere. However, Panera told Restaurant Business in October 2020 that they had 500,000 paid subscribers, and at one point before that had a peak of 800,000 subscribers (when they were offering people multiple months free just to sign up- so that doesn’t really count).

Matthew Pavich
BrainTrust

More so than most retailers, c-stores are a frequency game. While a lot of retailers are able to grow traffic via omnichannel capabilities, it still remains a strategic imperative for c-stores like Circle K to leverage their numerous physical locations to grow sales via new customers and increased frequency. This program appears to be a logical way to achieve that objective. Based on the GA/SC test, it seems to be achieving its intended objective. For Circle K to remain successful, they will need to monitor the program, learn about their customers and continue testing ways to make the program even more successful. One low-hanging fruit example is understanding which products are appearing in the same baskets as the Sip & Save ones and figuring out ways to maximize each trip. In all cases, frequency will increase as vaccinations progress and the economy improves – the best retailers will find ways to drive even larger increases.

Joel Rubinson
BrainTrust

This is perfect for workers who are on the road every day! Just speaking from personal family experience, I think it is most likely an offering for a blue collar outdoor worker (they stop and get pre-made sandwiches and snacks too). Not sure how they will police people not stopping multiple times or a crew (gardeners for example) not all piggybacking on one person’s monthly plan. Anyway, I think this program will be a winner.

Venky Ramesh
BrainTrust

More people working from home means less commuting, home-brewed coffee, and fewer fueling stops. However the trips to convenience stores should be up and what better way to ensure the customer makes it a habit to stop at Circle K to shop, get a free coffee and top off their gas tank while they are there. Hats off to Circle K for being bold enough to experiment with new concepts.

Rich Kizer
BrainTrust

I remember hearing an executive in this business praise the fact that for every gallon they pump, a dollar is spent in the store. I believe this is the agenda here. And if it works like that, it’s a great strategy. However I agree with David Naumann: if it is on my daily path.

Rob Gallo
BrainTrust

This is a great move. Morning day part trips are down due to COVID-19. Most c-stores saw their coffee business down well into the double digits. This is a way to build that business back and potentially grab share as consumers start resuming morning routines. Of course, a quality cup of coffee will be critical. C-store coffee has come a long way so I don’t see that being as big of a challenge as some others.

Ryan Mathews
BrainTrust

Well — let’s think about this for a minute. If I am a fan of Circle K beverages, this is a great deal. Of course, Circle K will be losing a lot of money on me if I am the kind of consumer who shows up every day, gets a cup of coffee (and nothing else), and rolls on down the highway. If I don’t like their beverages, I’m not going to start liking them because I can get 30 drinks a month for under $6. Will some people be attracted to Circle K that normally wouldn’t shop there? I’m sure there will be. Will some customers buy something else when they stop in for their “free” beverages? Probably. But this feels a lot like a discount that benefits customers you probably aren’t going to lose anyway.

Ken Morris
BrainTrust

It’s all about store/restaurant traffic. If you can get them in the door you can upsell something; gas, food, etc. I believe the program will work much like it works in other segments like BJ’s Wholesale Club and Costco. Membership has its rewards.

Steve Montgomery
BrainTrust

When Circle K purchased Stat Oil’s retail assets, there was a successful annual subscription plan, although based on the IT cost, I doubt it was profitable on a standalone basis. Now sure, this one isn’t either, but the KPI here is what it does to trips and their research based on the test indicates it has a dramatic impact making it a wining program.

It also may get them off the one-price-for-all drink size competition that occurs every summer in the c-store industry. Would not be surprised to see other c-store retailers add a drink subscription program to their marketing.

storewanderer
Guest
1 month 16 days ago

Easier said than done on the West Coast, California specifically. Circle K has a mix of corporate operated and franchise operated store locations (mostly franchise). The franchisees in California do not get to use Circle K’s point of sale system so I am not sure how they would do this or how they would get paid for it (most are with Shell, 76, a few with Chevron or other gas brands).

Panera has been trying to sell me a subscription program for a long time now for coffee. I’m not getting the impression people are running for it.

Also I would expect the price to rise soon, or be higher in certain markets.

Kenneth Leung
BrainTrust

I am guessing the initial tests worked well with delivery vehicle operators who are on the road early and refuel regularly, especially fleet vehicle drivers on an Easy Reward program. I think it will definitely drive traffic to the store for the regulars and convert some of the “fuel and go” customers to drop in.