No ordinary Joe

NACS reports that hot dispensed sales at convenience stores fell 33.4% in 2020, again reflecting the drop in footfall amid stay-at-home orders and work-from-home schedules. C-stores in Canada, which experienced some of the longest lockdowns in the world, were also hit hard.

The grand reset

I’m old enough to remember the sound a pinball machine would make when you put one or two quarters in, or you succeeded in scoring enough points to earn a free game. That sound was the promise of a new start. The post-COVID economy will be a bit like that. The initial challenge for operators will be to get consumers out of their stay-at-home routine, and back into the mode of AFH consumption. Good news is that the pump is primed, and your customers are fixing to splurge.

A recent Bank of Canada Survey of Canadian Consumer Expectations revealed that, while incomes are expected to stay flat over the next 12 months, Canadian consumers are anticipating a spike in their spending. This gap between growth in wages and increased expected spending is unprecedented, fuelled by accumulated forced savings due to COVID restrictions. According to the survey, “(consumers) anticipated spending more than one-third of extra savings from the pandemic over the next two years.”

Connect with coffee

For convenience operators, coffee is a great way to re-engage with your customers. The question is, what is the best way to do that? The coffee category has many facets. Taste and experience are central, but consumers are increasingly paying attention to issues of sourcing transparency, sustainability, and the offering of non-dairy options like nut/oat milk. Younger consumers, a key c-store demographic group, are looking for something beyond marginally better drip-filter hot coffee.

Cold coffee offerings have the potential to heat up sales for convenience operators. Mintel/Lightspeed research in 2021 asked U.S. consumers, “Which offerings would motivate you to visit foodservice coffee/tea locations more often?” The top answer for Gen Z and Millennial respondents was “Larger selection of cold beverage options,” followed by “More indulgent flavoured drinks.”

Frozen and chilled segments are shaking up the coffee market (Exhibit 1) and beverage companies of all sizes are developing canned RTD products to meet this need. Gen Z and Millennials, in particular, are choosing cold coffee options with greater frequency. Tastewise, an AI-based food intelligence service tracking billions of menu and social media data points (Exhibit 2), confirms that segments like nitro coffee are trending. 

Pivoting to a post-COVID outlook, Tim Hortons’ management reported a mug more than half full, which can be seen as sign of good things to come for c-store (both those with in-house Tim Hortons offerings and those opting to go it alone—Couche-Tard continues to hone its Simply Great Coffee program): The latest financial results for Q2 2021 show a 33% jump in system-wide sales, compared with the same period in 2020. “We are encouraged by the momentum across our business,” says Jose Cil, CEO, Restaurant Brands International. 

And, research shows most consumers (75%) intend to resume c-store foodservice patronage at the rate they were accustomed to pre-pandemic, according to a 2020 C-Store Consumer Market Brief from Technomic. The exciting news? Self-serve coffee maintains a broad appeal, with 75% of consumers saying they’d be likely to grab a cup of Joe.

Of course, the new era of coffee consumers won’t settle for any ordinary Joe. Mintel research suggests that, even in the transition period post-COVID, consumers generally will seek out coffee beverages that they can’t make for themselves at home. Flavour-forward coffee drinks, including innovative cold coffee options, promise to deliver the unique coffee experience that your core customers are craving. 

Reaching the new remote worker

Without the daily commute, more consumers opted to create at-home coffee experiences during pandemic lockdowns. However, as people venture out more, the Mintel, Foodservice Coffee and Tea Report, 2021 highlights several opportunities to target remote and hybrid workers.

·  Remote workers may purchase coffee/tea away-from-home (AFH) less frequently but will gravitate toward higher-priced beverages.

·  Of note, Remote workers will treat themselves to premium afternoon beverages.

·  Consumers will seek out coffee drinks that they can’t make for themselves at home.

·  Flavour innovation is central to providing consumers a unique coffee experience.

·  Indulgent flavour-forward coffee drinks appeal to Gen Zs, while Millennials and Gen X tend to go for less-sweet flavours—offer a targeted mix.

·  The future of coffee and tea is cold.

·  While consumers will source basic coffee/tea drinks from home, they will purchase more cold specialty drinks AFH.

·  As Gen Z consumers gain more spending power, they will be future drivers of increased cold coffee consumption.

·  C-stores must be bold and create unique specialty drinks that appeal to remote workers.

·  Pairing coffee with premium food options (breakfast or snack) will draw in customers.