6 Trends Driving Hot-Beverage Sales
By Alaina Lancaster on Mar. 27, 2018ROSEMONT, Ill. -- As seemingly every retail channel tries to encroach on the business of convenience, the category of hot dispensed beverages continues to emerge as a point of differentiation for c-stores.
When CSP’s Hot Dispensed Beverages Forum launched a decade ago, there was no Amazon Go, and mobile ordering likely meant calling a pizza joint with a flip phone. In today’s crowded convenience market, 85% of operators say the foodservice beverage category is more important now than it was three years ago, said Aimee Harvey, managing editor for Chicago-based data firm Technomic.
Speaking at this year’s Hot Dispensed Beverages Forum in Rosemont, Ill., she said, “[Hot dispensed] is where c-stores are winning right now, and there aren’t many gaps between brands in terms of performance.”
Here's a look at six consumer trends allowing c-stores to brew up success ...
1. Hot tea heats up
Coffee drinks often get the spotlight in the hot-dispensed category, but retailers might want to turn their attention to hot tea. “What we’re seeing is hot tea is on the fast track,” said Harvey (pictured above). Seven percent more operators offered the beverage in 2017 compared to the previous year, according to Technomic data. And consumers say they want more tea on the menu, with 40% purchasing hot tea more often now than two years ago, she said.
2. Strong competition brewing
Are c-stores the new coffee shops? They can be if they want to be, said Frank Beard, GasBuddy’s analyst and evangelist of c-store trends. Although c-stores must compete with the trendy interiors of Starbucks and independent coffee shops, it is not just about atmosphere. C-stores still need to convince consumers of the quality of their offerings.
According to GasBuddy data, 16% of consumers said gas stations have higher quality coffee than quick-service restaurants, compared to 11% that say QSRs have higher quality coffee. But 35% of consumers said the quality of c-store and QSR coffee is similar. Getting guests in the door in the first place can be tough. Few consumers say c-stores have higher quality food than QSRs, and 26% more consumers purchase food at QSRs than at c-stores, he said.
3. Changing demographics
The most frequent c-store customers come from Hispanic and African-American backgrounds, Harvey said. When it comes to occasional visits, however, demographics are changing. The difference in occasional visits between male and female consumers is lessening, too, she said. But if c-stores are looking for the coffee trendsetters, it's Generation Z, not millennials, she said. And as more young folks get behind the wheel, they will likely increasingly stop at convenience stores.
“But Gen Z is a smaller generation [than millennials], so betting on them is a risk,” she said. C-stores will have to decide if Gen Z can sustain the momentum of the category in the long term, she said.
4. A holistic approach
Lake Jackson, Texas-based c-store chain Buc-ee’s has the highest-rated coffee on the GasBuddy app. And some industry watchers say the 32-store chain has a cult following. But having a cult following isn’t just about the foodservice experience, according to Beard. Buc-ee's also has a fun overall retail experience with cute mascots and restroom signs that say, “Your throne awaits.” The brand’s clean restrooms could also influence its high coffee rating. “C-stores with above-average bathroom ratings saw a 33% increase in foot traffic over those with below-average,” he said.
5. Marketing what matters
With clean and sustainable foodservice labels becoming the norm, it can be hard to know what resonates with consumers. Harvey said a good bet for coffee is fresh-brewed. About 83% of millennials and boomers and three-quarters of women are more likely to purchase coffee described as fresh-brewed. “Your consumers want to know what fresh means in c-stores,” she said.
Also, price and value are about as important to consumers as convenient location, she said. But don’t confuse value with cheap. “Nearly half of consumers perceive c-store coffee as high quality,” she said. “You don’t want to degrade that value perception that’s already very high” with a dirt-cheap price.
When consumers ask for a fresh, high-quality, customizable, cost-effective cup of coffee, it can be hard to know what to deliver on. Harvey warns operators not to try to fulfill every consumer desire. “It’s so much more valuable to do one thing and do it very well,” she said.
6. Have a good time
More customers today know what they want when they walk in the store, Beard said. “Since we’re in the business of time, only step in when needed,” he said. However, a more frictionless experience doesn’t have to be lifeless. Beard said he walked into a Kwik Trip and was greeted by an engaging employee who gave him extra glazed doughnut samples. That kind of positive interaction with employees can have an effect on customer’s overall experience. He said he sees a difference at chains where leaders ask, “How much can I do for my employees” vs. “What can I not do for my employees?”
In running day-to-day operations, c-stores can forget that retail should be fun, he said. “It’s not that retail is dead; boring retail is dead,” he said. “No one has to choose boring retail.”