C-stores are pouring money into upgrading their coffee offerings as consumers come to expect more premium drinks. Retailers from 7-Eleven to GetGo Cafe + Market to Arko’s array of brands have been updating their java programs in recent months.
“Coffee customers are more discerning than ever, which applies to all segments of the industry, a shift being driven by millennial and Gen Z consumers,” Tim Cox, marketing manager for Franke Coffee Systems Americas, said in an interview.
This trend goes all the way to the top of the c-store world. 7-Eleven revealed in its most recent earnings call that it’s updated the coffee program at nearly 5,000 of its 13,000 North American locations, with more to come. The modernization includes bean-to-cup coffee and an increased focus on specialty and iced options, along with more baked goods to accompany them.
Coffee can represent a big market for c-stores. Roughly two-thirds of Americans drink coffee daily, and 91% of customers get coffee away from home at least once a week, according to the National Coffee Association.
It can also work well in tandem with a rewards platform. Coffee pairs well with fuel discounts, said Scott Love, senior vice president of retail client solutions for research firm Circana, and many retailers offer a free cup after shoppers buy a certain number. Some c-stores now offer membership programs that include coffee.
But why are so many retailers upgrading their coffee programs now? And where is this trend headed?
Changes in the c-store coffee space
Coffee hasn’t always been a point of pride for convenience stores. For a long time, it was often characterized by pots of batch-made drip coffee in carafes, often going stale from sitting out on the warmer too long, and using low-quality beans, experts noted.
“[The coffee they used] was pretty much whatever the foodservice distributor had,” said Love.
But over time, as consumer expectations for quality changed, so did the c-store approach to the caffeinated brew.
“They think about the cups, they think about the presentation, they think about the management of it, the beans that go into it, and that's a very different process than [it] was historically,” Love said.
Some convenience stores really want their customers to know about the shift. In a novel marketing campaign earlier this year after installing bean-to-cup across its 7,000-store footprint, Circle K offered free coffee from a truck, with one catch. Instead of the familiar red K logo, this coffee was handed out from a truck branded “Kafe,” so customers would leave preconceived notions about c-store coffee behind.
Circle K had previously found in a commissioned survey that 55% of customers expect c-store coffee to be inferior to other sources, a company spokesperson said.
“I expected it to be a new local brand or something,” said one of the people who partook in the experiment, after hearing the coffee was a Circle K brew.
As part of c-stores’ coffee rethink, there has been an increasing focus on bean-to-cup machines. Having the ability to brew a cup at a time not only gives more control over the product but can also avoid hours-old coffee sitting on warmers.
“A lot of retailers are putting machines to basically make a single cup at a time. So it's always the best experience possible,” said Love.
The benefits of bean-to-cup machines aren’t just on the customer experience side either.
Dash In, a 300-location c-store retailer based in Maryland, updated its coffee program to bean-to-cup in 2018, a move which has seen “resounding success,” Barbara Nova, senior director of food, beverage and retail programs, said in an interview.
“In addition to elevating the coffee experience, it has demonstrated remarkable efficiency, a reduction in waste, and simplified maintenance,” Nova said. “The bean-to-cup approach allows us to seamlessly cater to our valued Dash In franchisees and store managers, ensuring that excellence remains effortlessly attainable at all of our locations.”
Why have so many c-stores updated their coffee service in the past few years?
To start with, coffee programs lean into what is already a strong part of the day for convenience retailers.
“Convenience as a channel has really been doing very well in the morning day part,” said Love. “And so you've combined them doing well with people stopping on their way to work.”
Demographics also play a part in current — and potentially future — wins in the convenience space, making coffee worth a little more focus.
“With younger consumers' warmer attitudes toward c-stores, the channel has more upside now than in recent years,” said Cox.
Cox also noted that younger coffee drinkers tend to be more tuned into craft brews, with half of coffee drinkers ages 25-39 identifying as specialty coffee drinkers, according to the National Coffee Association.
Despite consumer worry over inflation, specialty coffee drinkers still crave convenience, driving them to c-stores for their cup of joe, Cox said. Additionally, offering specialty coffee not only helps bring these drinkers into c-stores, but helps them — and regular coffee consumers — learn more about different types of brew.
“Adding a premium coffee allows [retailers] to drive those incremental trips, and then also capture the incremental revenue versus classic drip coffee,” said Love.
But at the base of it all, these moves are happening because it’s what c-store customers are looking for.
“When we see major c-store chains doubling down on coffee quality by transitioning to bean-to-cup brewing and implementing espresso-based-beverage programs, this really indicates the extent to which consumers have made these preferences clear,” said Cox.
What’s in a good program?
While bean-to-cup machines are becoming table stakes for quality c-store coffee, there’s more to a solid program.
First, retailers should make sure they think about the quality and type of beans they’re using, Cox noted.
Many retailers develop their bean blends in conjunction with large coffee companies — Dash In, for example, developed its Chesapeake House Blend in collaboration with Westrock Coffee, formerly S&D Coffee, said Nova.
Meanwhile, Kum & Go announced in June that it would expand its partnership with local roaster Blk & Bold to more than 300 of its locations. Both companies are based in Des Moines, Iowa, and had tested the waters for their partnership in early 2022.
Customers also increasingly want variety. About a third of coffee drinkers prefer flavored coffee, with popular options including vanilla, mocha, hazelnut and caramel, according to the National Coffee Association. Beyond that, more than half of consumers had specialty coffee at least once a week, with lattes, espressos and cappuccinos making up top picks.
Popularity of specialty coffees
Love agreed that there’s a boom in many specialty coffee areas.
“Espresso, ice-brewed coffee, lattes, cappuccinos are all growing,” said Love.
But it’s important that, while thinking about these extras and add-ons, retailers don’t forget about the basics.
“What's interesting is that across all of foodservice, regular coffee in convenience has a much higher share,” said Love. “[Regular coffee is] 30.5% versus all foodservice at 17.6%.”
Additionally, for c-stores with a drive-thru, making coffee available through that route can be important. About 59% of daily coffee drinkers who bought a cup from a cafe or convenience store used the drive-thru, according to the National Coffee Association data.
Is it important to upgrade?
Many of the major c-store players already updated their coffee programs, or are in the middle of a modernization. And done right, the results can be dramatic.
Arko, owner of c-store operator GPM Investments, has updated its coffee program to bean-to-cup at 700 of its locations, with another 230 targeted for upgrades by the end of the year.
Already the program has seen an increase of 278,000 more cups, or gains of 71%, year over year.
For smaller players, if their coffee segment is struggling, an update may be in order.
“I think it is fair to say that if their coffee business isn’t growing, change is past due,” Cox said.
He pointed out that looking at what the larger c-stores are doing can give other companies a feel for where trends are headed
“Things like quality, flavor variety, bean-to-cup, espresso-based-beverages and iced coffee beverages are really the baseline standard now and should be considered when building a coffee program,” he added.
It’s also important to keep tabs on the competition, said Love. C-stores not only need to keep up with their peers if there are plenty of coffee options around, but being the only provider in the area could be a huge opportunity for a strong program to make its mark.
“If there's not someone in that drive path, then it's an easy way to drive extra revenue,” Love said.