Offering customers free coffee as ’bait’ to get them onto your site is the way forward for the coffee-to-go market. That’s the view of Jason McNally, chief executive of Simply Coffee.
"Simply Coffee has developed a new cost-neutral programme which enables the retailer to dramatically increase the store’s net margin, while at the same time adding a real point of difference which competitors may struggle to compete with," explains McNally.
He suggests a deal such as ’Free Coffee when you buy 30 litres or more of fuel’. "Saving the consumer a minimum of £2 on a cup of coffee could change their shopping habits and increase their spend with the forecourt retailer instead of their spend in a traditional store or foodservice outlet," he says.
"Everyone likes something for free and this promotion mechanic will certainly help drive volume. It is our belief that using free coffee (a low cost, but perceived high-value product) as a marketing strategy is the real future of coffee-to-go on the forecourt."
McNally’s view is that coffee is not the great money-spinner that some people believe. He says profit margins that are bandied about in the industry are greatly reduced once you factor in the cost of milk (both used and any wasted), the utility costs, VAT and staff costs for cleaning and replenishing the machine.
Then there’s the actual uptake of hot drinks-to-go in the first place. McNally says industry data shows that less than 5% of forecourt customers buy a hot drink. And he says the reason for this is typically price but there’s also a social aspect.
"On the high street, people going into coffee shops buy a drink and in doing so rent space for the next 15 or 20 minutes, so it’s more of a social occasion."
He says that by offering free coffee, forecourt retailers can increase that all-important dwell time in store. "A freshly ground coffee solution dramatically increases the customer’s dwell time by at least 60 seconds. And it is that increased dwell time which is key for the forecourt operator, as the customer spends on average another £3.80 in store (source IGD).
"It is this additional spend which should be the focus of the forecourt retailer having the right product offering (hot food, baked confectionery etc) placed strategically next to the coffee solution will only help maximise the return for the retailer."
As for Simply Coffee’s free coffee model, McNally would not go into great detail but says the company is trialling the concept with a couple of independents. His company has also received funding from Lombard to move forward with the concept.
"We’ve looked at competitors’ contracts and they preclude a competitor from selling coffee-to-go but that doesn’t mean they can’t give coffee away. So sites could have free coffee and paid-for coffee to give customers a choice," says McNally.
Simply Coffee still offers a paid-for model, providing retailers with a complete turnkey solution free equipment, free product and free service all in exchange for a 50/50 revenue share, subject to contract and a minimum of eight cups per day. The company currently has nearly 1,000 machines in the market, over 50% of which are in forecourts. The coffee is triple certified (Fairtrade, Rainforest Alliance and organic) and machines also dispense fresh brewed leaf tea, hot chocolate and Chai. Drinks sell for £2.
Meanwhile, a new player in coffee-to-go is EasyCoffee, part of the EasyJet company. Its orange branding is integral to its success, as it will be easily recognised by the 80 million-plus people who fly with EasyJet each year.
EasyCoffee is keen to push its offer to forecourt retailers following a successful pilot stage and eight store openings across the UK.
The company’s CEO and co-founder Nathan Lowry says there has been considerable interest from potential franchisees, with the brand planning to open another 200 coffee shops in the next three years and already having secured development partnerships with seven franchisees that have committed to delivering 50% of these.
"EasyCoffee offers fantastic value beans-to-cup Fairtrade coffee of its own speciality blend at its coffee stores and vending machines nationally," he said.
"As well as tie-ups with sister brands EasyHotel and EasyGym, the brand has also partnered with Thorntons to provide a luxury hot chocolate drink at its coffee stores. Its vending machines are located in well-known retail outlets across the UK of different sizes and in a variety of sectors, from DIY stores to convenience shops and petrol station forecourts."
Lowry says the coffee brand would compete well on the forecourt with its quality and £1.60 price point.
"EasyCoffee vending machines offer a ready-to-go business with no upfront investment and a large support network via Selecta (the largest vending group in Europe), providing customers with the same quality coffee at a value price as that sold in the EasyCoffee coffee shops."
Galaxy Mocha Latte and Galaxy Thick Hot Chocolate have recently joined the Mars’ hot chocolate range, to help consumers recreate ’coffee house moments’ at home.
A new Yorkshire Tea Decaf price-marked pack is available exclusively for the wholesale and convenience channels. The new pack has been introduced due to a strong performance for Yorkshire Tea Decaf along with the overall positive performance of decaf in the tea market.
Sales of Cadbury Freddo Drinking Chocolate have more than doubled in the last year (Nielsen). While sales of hot chocolate peak in the winter, retailers need to remember that it can be enjoyed cold during the summer. The best-selling brand in the marketplace remains Cadbury Drinking Chocolate.
The Tetley Supers range of teas appeals to shoppers who want to take the additional vitamins they need through their diet. The range spans Super Black, Greens and Fruits.
"As part of our extensive refit we really embraced the store-within-a-store concept and have two Costa Express machines that sit at the heart of our on-the-go section, highlighted with a striking canopy which really creates theatre and engagement for our customers. Our is a very busy shop, particularly with taxi drivers coming in all day long. We sell around 150 cups of coffee a day from the Costa machines and another 100 through Subway.
"Keeping on top of things is key to our success. Stores that are not as busy as ours can probably get away with checking their machine once a day but we have a routine where our machines are checked every two hours. We make sure there is enough milk, coffee beans, sugar and cups and that everything is clean. I cannot emphasise the cleaning enough because if your coffee area looks like a disaster, people won’t use it.
"We like to attract passing trade so our giant Costa cup has a prominent position on our forecourt entrance.
Once the customers enter the store the canopy sign really makes the Costa area a key feature of our store."
Tetley’s top tea tips
Think service: dedicate enough space for your on-the-go sales to make it easy and pleasant for shoppers to buy what they want.
Think brands: shoppers will not return if they have a poor taste experience. Well known quality brands reassure shoppers, so take advantage of free pos material from suppliers to make sure your customers know what you are offering.
Think clean: look to offer a solution which is quick to serve and minimises fuss, drips and mess something like Tetley On The Go provides a cost-effective, one-stop shop solution. Insulated branded cups mean a warm drink with no need for paper sleeves, non-drip drawstring bags enable bags to be removed easily with no mess, and sip lids make it easy to drink on-the-go.
Think extra sales: tea drinkers tend to buy something extra to have with their tea so make sure that added extras like pastries, biscuits and cake are all within sight and easily accessible.
Think Variety: on-the-go sales are not just for the busy breakfast period, offering a variety of different teas to cater to different tastes and age groups will encourage sales throughout the day.