10 Highlights From CSP’s 2020 Dispensed Beverage Forum

CHICAGO — The past seven months dominated by a global pandemic have caused major sales declines, staff layoffs and waves of concern in the convenience-store industry. Yet, at the end of the day, c-stores—deemed essential businesses by the U.S. Department of Homeland Security—continue to operate.

Over the course of two days in late September, about 30 c-store retailers and other suppliers, product manufacturers and industry analysts gathered to discuss the highs and lows of dispensed beverages in 2020. From consumer purchasing habits and coronavirus safety standards to daypart trends and coffee innovation, here are 10 highlights from CSP’s 12th annual—and first virtual—Dispensed Beverage Forum. ...

Those who purchase self-serve beverages differ greatly from those who prefer made-to-order beverages. Self-serve beverage customers often tend to be female, Caucasian and are either millennials or older, while made-to-order c-store beverage consumers are usually men, African-American, Hispanic, Gen Zs and millennials, said Jill Failla, senior foodservice analyst for Chicago-based research firm Mintel.

“It makes sense that [men] are the main subset of c-store made-to-order, because they are also the top c-store foodservice consumers overall,” she said.

It appears that c-store consumers are eager to visit for foodservice. While 64% of consumers reduced the number of c-store foodservice visits during the pandemic during this year’s second fiscal quarter, 75% said that they expected to return to typical foodservice visit frequency within a month of restrictions being lifted, according to CSP sister data firm Technomic, Chicago. Fast forward to this year’s third quarter, and 37% of consumers said that they already feel comfortable returning to c-stores for foodservice. Nineteen percent said they’d be comfortable returning to c-store foodservice within three months, while 16% said they will wait at least a year to do so.

While encouraging that four in 10 consumers are eager to return for foodservice, this is still a “less-than-ideal outlook,” said Robert Byrne, director of consumer and industry insights for Technomic.

“The reality is, things haven’t gotten too much rosier since early on,” he said. “The main takeaway here is that it’s necessary to roll this into any strategic planning we’re doing right now with this moderated outlook.”

Most c-store consumers plan to revisit c-store foodservice at some point. Eighty percent of prior purchasers said they will return to dispensed coffee and soft drinks, while 70% said the same for self-serve roller grill and bakery cases, according to Technomic.

The question of when these customers will return to c-store foodservice heavily depends on their confidence in their store’s safety standards, Byrne said.

“The overarching question is: How do we communicate our dedication to the health and safety of c-store customers?” he said. “You have to look at what’s changed on a foundational level for the consumers. Concern for immune systems and not getting sick from this terrifying pandemic is where consumers are.”

Consumers were increasingly able to use self-serve beverage formats in c-stores during this year’s third quarter. Forty-three percent said they were able to serve coffee by themselves as usual during this period, compared to 32% who said the same during this year’s second quarter, according to Technomic. A similar trend was noted for both self-serve soft drinks (44% vs. 33%) and frozen beverages (42% vs. 34%).

Companies going remote have hurt dispensed beverage consumption. People working from home have eliminated their morning commute which, for many, often included getting coffee from a convenience store. Nearly three-fourths (73%) of consumers said that they started working remotely at some point after the COVID-19 outbreak, according to Technomic. Of that 73%, 40%—more than half (53%) of whom are “heavy c-store users”—said they are still working from home, Byrne said.

“Morning trips to hot coffee gave way to other types of visits, like mid-day break and road trip dayparts,” Byrne said.

Consumers prioritize c-stores that offer or use technological amenities for foodservice. Half of consumers said that it’s either important or very important when selecting a c-store for foodservice that the brand offers mobile payments—a 13% increase from this time last year, according to Technomic. Forty-nine percent said the same for online ordering capabilities, while only 37% agreed during third-quarter 2019. Finally, 44% said the same for a store offering free WiFi access, while only 37% agreed during this time last year.

“The tech needs to be there, and it needs to work,” Byrne said. “Consumers aren’t looking for you to reinvent the digital experience, but they want to know that it’s reliable, that it exists and that it’s easy. Don’t make them work to place their order digitally—it will turn them off into another direction.”

Retailers who have already implemented these technologies have had great success. More than a third (34%) of consumers said that they ordered hot-dispensed beverages from c-stores via online or mobile during this year’s third quarter—an increase from 23% in the second quarter and 20% in the first quarter, according to Technomic. The same goes for fountain (31% in the third quarter, 18% in the second quarter, 22% in the first quarter) and frozen dispensed beverages (29% in the third quarter, 22% in the second quarter, 19% in the first quarter).

Consumers purchase hot-dispensed and cold-dispensed beverages for completely different reasons. During this year’s third quarter, more than a quarter (27%) of consumers said that they purchased hot-dispensed beverages from c-stores to satisfy a better-for-you need state—more than any other reason, according to Technomic. Healthy was followed by convenience (26%), craving (23%), needing an experience (12%) and comfort (12%).

Cold-dispensed is another story. During the third quarter, nearly a third (32%) of consumers said they sought out cold-dispensed beverages from c-stores because they craved it or out of convenience, according to Technomic. Needing it healthy—which outpaced the rest in hot-dispensed—was only needed in 14% of cold-dispensed purchases.

“Demand for comfort foods has not waned at all,” Byrne said. “In fact, the need states for healthy and craveable items have emerged as the primary drivers for choices of where to source foodservice in c-stores.”

Traditional coffee operations have changed during the pandemic, said Courtney Williams, founder of Chicago-based food and beverage consultancy Collaborate. In the past, c-store coffee hosts would speak to customers about coffee varieties and upkeep the coffee bars to ensure they are fresh and stocked. Today, many coffee hosts are gone, with chains now relying on fresh bean-to-cup machines to do the work. Customers also expect higher coffee quality than in the past, Williams said.

“Customers are expecting a fresher, higher-end coffee product,” she said. “Coffee leads into foodservice, and this applies to other foodservice areas as well.”

Retailers may want to explore coffee subscription programs to boost the category, said Failla of Mintel. Nearly a quarter (21%) of millennials said they are interested in c-store coffee subscription plans, according to Mintel, and restaurants have already taken these on and they have cut c-store coffee sales, Failla said.

“Coffee subscription programs can boost repeat traffic and collect revenue on visits that haven’t been paid,” she said. “We will see more of these programs emerge in the c-store market in the coming years.”

While innovation is needed on every front, it’s especially crucial for cold and frozen dispensed beverages. The category declined in sales and overall traffic during every daypart in this year’s third quarter—breakfast, lunch, afternoon snacking, dinner, late-night snacking, beverage-only and dessert-only—according to Technomic.

A few ways to innovate this category include offering frozen alcohol options that are available in sealed containers; made-to-order smoothies; and even cold beverages purchased through vending machines, Williams said. Retailers must also explore drive-thru and curbside pickup if they want to boost this section, she said.

“Regardless of COVID-19, people want the convenience of something that is brought to your car,” she said. “This will continue in the future and will take away shares from restaurants simply because of that convenience factor.”

Bottom line: The coronavirus pandemic has hurt c-store beverage programs. For retailers to dig themselves out of this hole, they must innovate to no end, said David Bishop, managing partner for c-store sales and marketing firm Balvor LLC, Barrington, Ill. Innovation is achieved through strategy, execution and performance, he said.

“Innovation is finding ways to create more value for your customers,” he said. “This is done through delivering and satisfying your customer—delivering what your customers want that they’re not getting enough of is the key.”