Building a Better Bean

Convenience, value and differentiation more than buzzwords when improving the coffee offer.

Samantha Oller, Senior Editor/Fuels, CSP

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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.:



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


Boyd Coffee Co.

Christy Rosser, Mary Toohey


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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