Apig is not the first thing to come to mind when thinking about coffee, but for the 20 retailers and two dozen supplier reps at CSP’s 2010 Coffee Bar Development Summit in May, it represented the minimum standard that the industry is trying desperately to transcend.
“You can’t start with those sows’ ears—you have to start with silk purses, or at least nice cotton ones,” said opening speaker Ric Rhinehart, executive director of the Specialty Coffee Association of America (SCAA), Long Beach, Calif., citing the old proverb. “But then you’ve got to make a goodlooking purse out of it, so you’ve got to apply the math, the technique and use the equipment to make a good-tasting beverage experience out of that coffee.”
“Put lipstick on that baby,” said presenter Tim Powell, director of research and consulting for Technomic Inc., Chicago, referring to yet another pig expression. “It’s what marketing is for. Make it enticing.”
“If you’re just trying to put lipstick on it, it’s not enough,” said Bill Kennedy, vice president of retail operations for design firm CBX, New York. “A hat, a nice dress, teaching it to sing and dance: That’s what’s going to create differentiation.” Getting from Sooie to Miss Piggy doesn’t seem like a big step, but the stereotype of c-store coffee—weak, overcooked, flat brew in a nondescript cup— is a tough one for the industry to shake.
“The perception of coffee in c-stores hits you automatically,” said Kathy Meija, senior category manager for BP/ampm, La Palma, Calif. BP, which aims to offer the best coffee among the competition, has set high standards for itself, she said. The company performs frequent tastings and customer intercepts to gauge its status, but communicating that quality story to consumers can be incredibly frustrating.
The key, said Rhinehart, is differentiation. Indeed, at a time when seemingly every foodservice venue is gunning for consumers’ coffee business—whether McDonald’s with its McCafé concept, Burger King and Subway with Seattle’s Best Coffee, or Dunkin’ Donuts with its expanded espresso-based lineup—standing apart from the crowd is critical.
“How do you make your product different from the other guy’s product?” Rhinehart asked. “How do we not all be Seattle’s Best consumers in the QSR market? What’s the opportunity that’s extant for you as operators of c-stores?”
Convenience is the key hook for cstores, he said. In a recent SCAA study, coffee consumers said convenience was the No. 1 driver for their choice of a coffee house, ahead of quality and brand. “Convenience” covers more than store location, however; it also incorporates ease of entry into the store, access to the coffee bar, the ability to prepare coffee efficiently and comfortably, and a quick transaction time.
“So how do you win? Bring the barriers to use down: Make it easier to get a cup of coffee, a great cup of coffee,” said Rhinehart. “Increase the perceived value. When you’ve got a range of cups, and you can put anything in that cup for 99 cents, you’ve made a value statement that is not differentiated.”
Retailer attendees of the Summit said the 16-ounce cup size was the most popular among their customers; Rhinehart pointed out, however, that when given a choice, most consumers will almost always pick that medium size. A greater opportunity exists in the smaller sizes of better-quality coffee, priced at a premium because of the better value equation.
This approach is becoming increasingly relevant as the prices for highquality coffee beans continue to ratchet up in the face of a supply shortage—one that shows no signs of improving. “You need to change the value equation in the consumer’s mind,” Rhinehart urged. “The $1 cup of coffee is not sustainable. There will either be abrupt price increases or slowly diminishing quality, [with the] hope that no one notices.”
Executing the Offer
Whether proprietary or branded, consistent execution is key to success for any coffee program. For Wilson Farms, Williamsville, N.Y., which has four different formats within its 188-store footprint, and heavy competition from Dunkin’ Donuts and Tim Hortons, it presents a particular challenge.
To help ensure its new Fresh n’ Ready coffee program maintained a high level of execution, Wilson Farms partnered with its coffee vendor, S&D Coffee Inc., to develop an online execution survey. The retailer’s district managers and field specialists visit each store twice a quarter and rate how well it meets more than 70 cleanliness, service and presentation standards.
The unifying principle behind all of Wilson Farms’ execution criteria is to make the same effort for customers in store presentation that one would for guests visiting one’s home. Thus, the first question on the survey focuses on first impressions: Are floors and rugs clean and presentable?
The completed survey is e-mailed to the store’s manager, district manager and supervising regional manager, among others. The store has seven days to remedy any standard that has not been met.
When the survey was first launched, less than one-fifth of stores met Wilson Farms’ execution criteria. Today, that number is 81.7%. It has helped identify why some stores’ coffee sales may be slumping, and upcoming upgrades will allow the retailer to benchmark store sales by manager.
When asked what effect the survey has had on cups per day, Wilson Farms’ category manager, Rich Pajak, was honest. “We’ve been flat,” he said, “and have yet to meet expectations. But our standards are better.” It has proven such a valuable tool that Wilson Farms plans to apply it to other categories. Next up: tobacco and perishables.
Revisiting Neighbours
The story behind the Petro-Canada Neighbours c-store concept is already well-known [CSP—May ’08, p. 30]. A major oil company attempts to shake free from the conventional gas-station box and go after a broader demographic. With the help of design firm CBX, the resulting concept is a sophisticated, foodservice-centric store with a distinctive stone-clad façade and expanded coffee bar.
Petro-Canada has since been acquired by another major oil—Suncor— but the commitment to Neighbours is still strong, said attendee Ed Burcher, director of foodservice. Since its pilot test began in 2005, the concept has evolved subtly. The fuel island, formerly connected to the c-store by a canopy, is now completely separated. Drive-thrus are also becoming critical to help Neighbours compete more effectively with Canada’s coffee giant, Tim Hortons.
Burcher highlighted a few other best practices from the past five years:
Sampling. To encourage customers at the pump—who account for 60% of Neighbours’ transactions—to venture inside the store, employees brought out samples of food and educated them about the inside offerings. While the share of transactions that are fuel-only is still the same, customers’ visit frequency has increased the rest of the week, said Burcher.
Power of Free. For each new store, Suncor sets aside a portion of its marketing budget for plastic travel mugs to hand out to customers for free. Of course, at $1.76 a pop, the mugs are not free for Suncor, but they have proven a powerful means of encouraging coffee trial.
Price It Right. While Rhinehart of SCAA suggested a single-price model for all cup sizes isn’t the best way to communicate a coffee program’s value, for Neighbours it has encouraged trial. Suncor has offered all sizes for $1.19. The tactic has worked specifically because none of the competition was doing it.
LTOs. “Everything is about LTO” in Neighbours’ coffee program, said Burcher. The retailer introduces these blends twice a year in four-week promotions, serving up Guatemalan, Costa Rican and other regional brews, highlighted with customized graphics for each.
Back to Glass. While the restaurant channel and many c-store retailers have moved away from the glass carafe, for Neighbours, it has been a necessary component of its coffee program, largely because its competitors have trained consumers to expect it.
“If you don’t understand who you’re competing with and meet their standards, you’re not going to win,” said Burcher.
Rounding Out The Competition
Three competitors were on the minds of CSP Coffee Bar Development Summit retailers: Starbucks, McDonald’s and, more generally, QSRs such as Subway and Burger King. Each won praise and criticism from the group:
Starbucks. Two solid quarters have resulted in a genuine turnaround for Starbucks, which only last year was pointed to as a casualty of the recession. Its aggressive pruning of stores—600 sites were lopped off in 2009 alone—is a large part of its success. Another part: sticking to its “story.”
“Starbucks for years was completely on point with the concept that not only was it a better cup of coffee, but it was a better coffee experience,” said Rhinehart of SCAA. “You were in a cleaner store with smart people around other consumers who were like you, well-educated, well-off, upwardly mobile, we’re all wonderful people together. … Each of you has the opportunity to craft a message, get on point with it, and stay on point with it. The message has to reflect back on those three things: why you’re different, why your product is worth more and why the value equation is better.”
McDonald’s. Rhinehart said McDonald’s has done a “great job” improving the quality of its brewed coffee, starting with better beans, tighter quality controls and a more substantial drop weight. It has also helped introduce younger consumers—15- to 18- year-olds—to coffee.
Rhinehart cited McCafé’s sweet, milk-based drinks as the main bridge for this new generation and suggested that c-stores take advantage of the groundwork McDonald’s is laying. The entry point, interestingly, is not the morning day-part; rather, these younger consumers are coming in for an afternoon hot or cold coffee beverage.
QSRs. Neither Burger King nor Subway has yet developed a breakfast program as successful as McDonald’s or Dunkin’ Donuts, but they are charging aggressively at the coffee business with their adoption of Starbucks’ Seattle’s Best Coffee brand. In the clamor, however, lies opportunity for c-stores.
“It certainly creates an opportunity for you,” said Rhinehart. “The word that’s going to emerge a lot is ‘differentiation.’ You have an opportunity around differentiation that’s not just brand resonance but the real tangible qualities we talked about.”
Convenience is one key quality to leverage, and more powerful than the price war that QSRs are attempting to win. “The No.1 tool in their bag to compete with traditional coffee retailers is price, but I suspect that tool is getting quite dull at this juncture between the need to invest in marketing campaigns and the continued supply and price pressure,” said Rhinehart.
Certifiably Confusing
Approximately 16% of all coffees sold globally are certified in one way or another; consider that only 10 years ago these coffees made up less than 4% of the market, and the growth curve is dramatic. The main certifications include:
Fair Trade. Overseen by the Fairtrade Labelling Organizations International (FLO), the Fair Trade certification is meant to ensure that small-scale agricultural co-ops and workers in poor countries receive fair pay for their product and work. Farming co-ops pay the FLO a yearly fee for Fair Trade certification, which ensures a minimum price per pound and a certain amount of funding for local community projects. Certified farms also have to meet minimum living standards for their workers.
Rainforest Alliance (RA). Similar to Fair Trade certified coffee in that it is awarded by an international organization dedicated to improving the lives of farmers. However, RA certification— the symbol of which is a tree frog—is overseen by the New York-based Sustainable Agriculture Network (SAN), which also focuses on conservation and protection of wildlife habitat. According to SAN, 1.3% of the world’s coffee is RA-certified, and annual sales ring up to $1 billion globally.
Organic. The USDA National Organic Program awards organic certification to coffee that is produced without insecticides or herbicides and preserves soil fertility. Third-party certifiers actually carry out the certification audits. According to the Organic Trade Association, the North American coffee market totaled $1.3 billion in 2009.
In a pre-meeting survey, 60% of the 20 retailers attending CSP’s Coffee Summit said they sell certified coffee. Opinion was mixed, however, on whether it was a competitive advantage to offer these blends—largely because consumer understanding of the various certifications is shaky. Organic has “the highest alliance” between the certifier’s goals and the consumers’ understanding of the certification, said Rhinehart of SCAA. Fair Trade is next, followed by Rainforest Alliance, which is poorly understood by consumers but has a “high positive response.”
“In general, the more personal income you have and the higher your education, the more likely you are to be a consumer for Fair Trade, organic or Rainforest Alliance certified product,” said Rhinehart. “The question is, do you have a toehold in that most educated, most wealthy group, and if not, do you want to?”
Both Burcher of Suncor and Pajak of Wilson Farms said their companies have offered LTO Fair Trade coffees and saw no real lift. “As soon as we looked at the differentials and the price kept climbing, we asked, ‘What are we getting for that?’ ” said Burcher. “When we took it out, we didn’t miss one iota of sales. What I don’t know is: Were we appealing to the 18- to 24-year-olds? Who is that consumer?”
Meeting Buzzwords
Differentiation. As Subway, Burger King and other QSRs sign on with Seattle’s Best Coffee, c-stores have an opportunity to catch consumers’ interest through a differentiated, private-label coffee program.
Value. Whether it’s through a better brew, classier cup, greater variety, sophisticated graphics, ergonomic coffee bar or all of the above, enhancing the value of your coffee offering is key to earning larger transaction sizes and sealing customer loyalty. Millennials. The next generation of coffee consumer is not loyal to brand but demands that corporations—retailers and suppliers alike— make the world a better place. Certified coffees and iced beverages in the afternoon may be the keys to winning their business.
Convenience. The No. 1 criteria consumers have for choosing a coffee house is convenience—ahead of quality and brand. C-stores have the advantage, but they must communicate convenience beyond site location and expand it into the store, coffee bar layout, transaction speed and more.
Participants in CSP’s 2010 Coffee Bar Development Summit
held May 3-4 in Rosemont, Ill.:
RETAILERS
BP/ampm
Kathy Mejia
CHS Inc.
Gary Braaten
Graham C-Stores
John Graham, Thomas Williamson
Handee Marts Inc.
Jim Monroe
Love’s Travel Stops & Country Stores
Jerry Hamm
Pilot Travel Centers LLC
Whitman Harson
Royal Buying Group Inc.
Sharon Porter
Suncor Energy Inc.
Melanie Au, Edward Burcher
TA/Petro Travelcenters
Kirk Matthews
Thorntons Inc.
Bob Compton
Tom Thumb Food Stores
Timothy Young
Valero Energy Corp.
John Kupfer
Walgreens Inc.
Emily Miller
Western Refining Inc.
Robert Moffett
Wilson Farms
Richard Pajak
Wilson Fuel Co. Ltd.
Theresa Banfield, Jennifer Fancy, Janet McLeod
SUPPLIERS AND SPEAKERS
Boyd Coffee Co.
Christy Rosser, Mary Toohey
CBX
Bill Kennedy
Concordia Coffee Systems
Denise Evert, Robin Mooney
Filterfresh Coffee Service
Ed Holloran, Dave Larimer
GSP Marketing Technologies
Greg Erfani, Jeffrey Hausman
Insight Beverages
Michael Cruz, Andrew Dun
Kerry Group
Robb Anderson, Jennifer Faren
Kraft Foodservice
Randy Imai
Java City
Chuck Van Vleet
Presence From Innovation LLC
Don Miller, Addison Thomas
S&D Coffee Inc.
Fred Graham, Nancy Waldron
Sara Lee Foodservice
Catherine Porter, Jim Whitaker
Specialty Coffee Association
of America
Ric Rhinehart
Technomic Inc.
Tim Powell
WhiteWave Foods
Bob Connolly, Jeff Vorst
Wilbur Curtis Co. Inc.
Stephen Bradley, Dan Schneider
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