When it comes to a cup of coffee, us Brits are growing increasingly fussy. The likes of Starbucks and Costa Coffee have raised the bar on what we as a nation demand in a hot drink, according to Mark Rhodes, marketing manager at Westomatic.
And this quest for a premium cuppa doesn’t stop when we get to a forecourt. Rhodes explains: "Consumers’ expectations for high-quality coffee and tea have been raised by high street coffee shops, so vended hot beverages must compare. Catering in a retail environment for people on the go requires reliable hot beverage vending machines that produce delicious drinks quickly."
Premium is big news and factors like fairtrade can also play their part. According to the Institute of Grocery Distribution, 25% of shoppers are prepared to pay a little extra for fairtrade products.
Rhodes believes there is room for forecourt retailers to grow a profitable hot beverage business as part of their total retail offering. His company’s sales of premium hot beverage machines increased over the first two quarters of 2010 with speciality drinks like latte, mochaccino, cappuccino and flat white proving especially popular. He says: "A hot beverage machine sited in a forecourt environment offers premium-tasting drinks at a fraction of the cost when compared to the high street coffee shops. Busy office workers, tired shoppers and impulse buyers can grab a tasty drink-to-go, which gives the retailer an advantage over competitors."
Euro Garages has been blazing a trail in this area, and earlier this year it opened its first ’drive-thru’ Starbucks coffee store at a site in Deeside, North Wales. The standalone outlet has been such a success that it has opened another two in Shrewsbury and Blackburn and a fourth was due to open in Cheshire this month.
Euro Garages director Mohsin Issa says it’s essential for a company like his to work with strong brands that share its commitment to innovation. Euro Garages, number three in the Forecourt Trader Top 50 Indies list, has a licensing deal with Starbucks to open up to 30 such coffee stores in the UK some on forecourts and some as standalone outlets.
A Euro Garages spokesman said: "We’re really pleased with how much traffic the Starbucks have attracted. They’ve performed exceptionally well. Part of that is down to the locations, they’re all on main arterial routes with lots of passing traffic. And, of course, Starbucks is a huge influential brand.
"The Deeside Starbucks was the first of a roll-out of this type of drive-thu concept in the UK. They are standalone stores but customer behaviour varies some buy a takeaway drink at the drive-thu or sit in the Starbucks with their laptop and have a break, others go onto the forecourt and buy fuel and then go into the c-store. So we offer a choice.
"The new Starbucks in Blackburn is right near the Royal Blackburn Hospital so it gets a huge amount of traffic."
There’s no doubt that hot beverages is a growing category for forecourts. According to the Convenience Tracking Programme 2010 report from Harris International Marketing (Him), 12% of forecourt shoppers said they were buying more hot drinks compared to 12 months ago. And most hot drinks’ customers were male and aged 35-54.
Susan Nash, trade communications manager at Cadbury UK, says motorists are happy to splash out on a little treat when they stop at a forecourt.
"When consumers are on the road or taking a break from work or their daily routine, they are often looking for an extra indulgent treat, and their expectations may be increased," says Nash. "This provides a great opportunity for forecourt retailers to ’premiumise’ their hot beverages offering and, as a result, improve profitability. For example, retailers can serve Cadbury Hot Chocolate with that added extra, such as whipped cream, marshmallows or a Cadbury Flake 99." According to Cadbury, hot chocolate-based beverages were worth an estimated £40m last year, and Cadbury was the number one manufacturer in the hot chocolate category within the foodservice market with a substantial 63% market share (Maude Roxby 2009 UK Foodservice Market Overview).
Meanwhile, Westomatic’s Rhodes predicts that healthy vending will be a key driver as consumers become more concerned about issues such as hydrogenated fats and trans fatty acids. He says: "We believe that consumers should be offered healthy vending options as standard. We work closely with ingredient manufacturers to create virtually fat-free café-style hot beverages."
Westomatic has developed two drinks-to-go hot beverage concepts for forecourt retailers wanting to maximise retail space: the Prelude table-top machine and Coffee2go Sigma a free-standing vending machine. Rhodes says both machines can create a very profitable 24-hour coffee business, delivering freshly ground bean-to-cup gourmet coffee and freshly brewed leaf tea in less than a minute per cup.
The machines come with extra large canister sizes so drink options that use a lot of ingredients such as hot chocolate and cappuccino don’t have to be refilled as often.
Rhodes says: "With the Prelude and the Coffee2go Sigma there is now a high quality yet simple-to-operate vending solution for retailers wanting to take advantage of the rapidly growing ’coffee-on-the-go’ sector. Both solutions dispense 9oz or the highly popular 12oz drinks in retail style paper cups complete with ’coffee-to-go’ sip lids. A machine vending just 300 9oz cups per week can generate a weekly profit of well over £100, while 300 12oz cups per week could generate well in excess of £270 per week."
WMF UK recently launched its new 2000S coffee machine which it says enables anyone to make coffee ’like a barista’ thanks to its advanced, integrated milk foaming capabilities.
There are three WMF 2000S models available, from the standard version with integrated milk frother and steam milk version for manual frothing of milk, to the dual milk version that combines both types of preparation in one machine.
Florian Lehmann, WMF managing director, explains: "It is the air supply that regulates the quality of the milk froth and we have developed a sophisticated system that delivers a choice of three qualities of milk froth in the steam milk/dual milk versions Standard, Fine and Superfine. Standard delivers 50% volume and is generally used for making drinks such as latte macchiato. Fine gives 40% volume perfect for the creamy topping on a Cappuccino. Superfine offers an extremely dense 30% volume, with a shiny, creamy consistency, ideal for latte art creations."
Coffee Nation, which is present in 356 forecourts, says its sales have increased at many sites despite rising fuel prices and fierce competition. This growth has been achieved by heavily promoting the Coffee Nation product externally and working with retailers to maximise use of point-of-sale to drive footfall. For example, it says sites en route to festivals can see a significant uplift in sales during these events. It has been running promotions at these sites this year and saw coffee sales increase by approximately 20% during festival periods such as Glastonbury.
According to research carried out for Coffee Nation by The Oxford Research Agency, Coffee Nation is a proven destination driver and 77% of customers surveyed in forecourts said they purchased from the same Coffee Nation machine at least once a week. Researchers also found that buying a hot drink was the primary driver for more than 50% of visitors to stop at forecourts.
Retailer Clive Gardner, owner of Gardner Garages, says sales have seen a lift since he started offering Coffee Nation to customers. "Since replacing our tabletop machine with a Coffee Nation concession, we have seen a three-fold increase in coffee sales at Cheltenham Filling Station.
"The range of gourmet coffees offers customers an ’on the go’ alternative to the high street coffee bar and, coupled with internal and external promotion, has not only increased consumer choice and awareness of the brand but encouraged new customers to try the products. There is also a loyal following of regular customers."
Scott Martin, Coffee Nation chief executive officer, says: "Forecourts and service stations have always been important sectors for Coffee Nation and sales in existing sites are strong. The economic downturn hasn’t had a major effect on our sales as coffee has increasingly become a staple of daily life rather than a luxury item."
Instanta sales and marketing director, Nick Neal, says hot beverage sales have fared reasonably well since Christmas with a gradual increase across the food-to-go sector as a whole. But he describes the market as enthusiastic rather than buoyant. Instanta supplies a wide range of counter-top and wall-mounted beverage-making water boilers to the forecourt sector.
Neal points out that the weather plays a big part in forecourt hot beverage sales: "The sustained period of poor weather at the start of the year coupled with rising fuel costs did mean fewer vehicles on the road and so hot beverage sales at forecourts did not fare quite so well. That said, a hot beverage machine still represents a very good medium-to-long-term investment as it will increase spend per visit and produce excellent margins, especially if the beverages on offer are combined with a good quality food-to-go offer or meal deal."
Instanta also supplies soluble ingredients so it says the cost of purchase and installation compares very favourably with the more expensive ’all-in-one’ machines.
Neal adds: "Given that a retailer should expect to make at least £1 profit on every cup and that one of our boilers could be bought and installed for as little as £450, even if only three or four cups per day are sold, the machine could pay for itself in just three or four months."
Although coffee is by far the most popular beverage, Neal urges retailers to remember to offer plenty of choice by introducing speciality teas, fruit teas, herbal teas and also hot chocolate.
Stephen Clifford, marketing controller at Country Choice, says the coffee market has fared quite well in the past 12 months with an increase in sales linked to a general upturn in breakfast trade which is when most hot beverages are sold. Sales of tea and coffee are largely linked to a food purchase such as a bacon bap or sausage roll as well as other complementary items such as newspapers. And Clifford says that with the appropriate deals in store, retailers can expect to make a food sale with every second cup of coffee or tea sold.
He adds: "These days, consumers are far more discerning in their appreciation of coffee so quality is paramount. Retailers should look to offer a range of coffees using a ’bean to cup’ machine to ensure the coffee is freshly ground and uses fresh milk."
Country Choice supplies fairtrade pure Arabica medium roast coffee which it believes is a ’good middle option suitable for all coffees from milky varieties such as latte to strong varieties like espresso’. The machines offer six varieties of coffee as well as tea and hot chocolate.
Clifford says medium volume retailers should be looking at a minimum of 20 cups per day which would yield around £6,000 profit per year. Higher volume customers will be serving around 60 cups per day and making in excess of £18,000 profit a year. Typical payback period on a machine is between four and five months.
Pearces Garage is a family business that has been trading for 30 years in Gunnislake, Cornwall. Run by retailer Tracy Boniface, the Texaco forecourt has a Nisa c-store with a fish and chip shop and jet wash on the same site.
The forecourt recently revamped its in-store bakery, including a Café Joe drinks kiosk from Drinkmaster, and added benches outside for customers to enjoy a take-out coffee with a pasty. The revamped bakery is located by the entrance of the shop with equipment and signage from Country Choice. And the business has seen increased profits with Café Joe.
The Café Joe drinks machine has replaced a counter-top Nescafé & Go machine and Tracy says it is much better because it is a plumbed in unit so can be left on all day. She explains: "We used to close the bakery at 2.30pm and empty out the machine because it wasn’t plumbed in. But now people can help themselves to hot drinks until we close at 9pm. It’s much better, we’ve been surprised at how popular it’s been.
Hot drinks are sold for £1 and Tracy says the early mornings are most popular for tea and coffee.
Coffee and Hot Beverage customers
Most customers are aged 35-54 (54%)
Most are males (69%)
61% are C1C2 Middle Income earners
34% are busy providers
88% are on a food-to-go mission (aside from fuel)
12% are buying more hot drinks compared to 12 months ago
31% say their main importance is immediate
5% failed to purchase matching the CTP average
31% buy food-to-go items
14% also bought sausage rolls/pasties
Source: Harris International Marketing (him) CTP 2010