Inside the home, we Brits remain a nation of tea drinkers, but step outside the front door and premium coffee has become the hot drink of choice. As big brands such as Starbucks and Costa dominate the high-street coffee bars, discerning drivers are also increasingly on the look out for a high quality cup of coffee.

According to the IGD’s Café Culture report, the branded café market is currently worth £821m and is expected to top the £1bn mark by 2009. Speciality coffee is the driving force behind this growth, accounting for 43% of purchases. And while the big-name high-street chains dominate the market, an increasing number of time-strapped consumers - labelled ’on-the-go energisers’ - are getting their coffee fix from the roadside, with 6% now regularly visiting forecourt cafés.

With the average European making four journeys a day, and spending at least an hour on the move, according to research by Datamonitor, this trend can only be expected to grow. In fact, the company’s analysts believe that quality coffee has more growth potential for forecourts than any other premium product. It currently accounts for 5% of forecourt shop sales across Europe and this is expected to increase to 7% during 2007.

A quality coffee offer can increase overall trade - particularly if your site’s on the early-morning commuter run - and also boost sales with additional impulse purchases. For example, there is a strong correlation between coffee and newspaper sales - whether a driver buys a newspaper is likely to be influenced by the availability of a decent cup of coffee.

Andrew Phipps, client director at convenience retail consultancy SRCG, says: "Research has shown that coffee has one of the highest loyalty ratings of any category. People who buy Starbucks’ coffee will travel out of their way to get that coffee and nothing else. People are driving past petrol stations every day - coffee can be used to make them stop at a particular site. It can be the differentiating factor between one store and another. The key is to make sure the coffee offered is one that people want."

What people certainly don’t want is a half-hearted effort. "A coffee offer that is not exciting or, even worse, dirty or unappealing will do more to put people off a store than running out of Coke," adds Phipps.

Some of the oil companies have been quick to catch on to the lure of premium coffee, and in the case of BP’s Wild Bean Café, the industry has created its own brand to rival the high street chains.

Worth in excess of £50m, Wild Bean is now available to independent retailers as part of the Connect franchise scheme. And the cafés have proved such a hit that Andy Davis, BP Retail’s trading director, hints at the possibility of the brand going it alone outside the petrol station environment. "We’ve no plans to separate Wild Bean Café from the Connect package on the forecourt, however, we haven’t discounted the possibility of it being a standalone offer in other locations - we are looking at the idea of putting the brand elsewhere," he confirms.

The first Wild Bean Café opened in 2001, converted from an earlier concept called Café Zip. "The fundamental aim was to meet the increasing need for quality food and drink on the go. We felt there was - and still is to some extent - a huge gap in the market for quality food and drink, served quickly, in roadside locations," explains Davies.

Last year Wild Bean Café saw 17% like-for-like growth in coffee sales, against overall growth of 12% for the brand as a whole, according to Davies, who is quick to point out that coffee is only part of the overall mix. "We aim to provide a complete drinks offer. Tea and hot chocolate are also an important part of the package - we’re seeing significant growth in hot chocolate and are working on some developments in this area," he says.

Aiming to match the innovation consumers have come to expect from the high street coffee chains, BP has invested in a dedicated team of food technologists, who ensure the offer is up to date, and, more importantly, can be delivered quickly, and then easily consumed on the go.

New drinks formats - and the equipment solutions to make them - will be trialled on sites in the next few weeks, and include cold drinks for the summer and healthy products such as smoothies. "We’re looking to develop products along the lines of the major coffee houses, but for us this is more of a challenge. The dwell-times on a forecourt are much shorter, so the challenge is to deliver quality at speed," says Davies.

Building a brand that the customer recognises and values takes time and, of course, money. BP has worked hard to promote Wild Bean, with a significant marketing budget and clever campaigns, such as text vouchers and humorous radio ads.

Teaming up with an established player, however, can present an easier, not to mention less risky, route into selling premium coffee. By working with Costa as part of its On The Run format, Esso has quickly been able to establish its offer, by using the expertise of one of the market leaders and reaping the benefits of instant customer recognition of the brand.

Dave Richardson, Esso’s convenience retail manager for UK & Ireland, says: "Coffee has been a key factor in driving sales success at all our On The Run stores and, together with foodservice, accounts for about a quarter of all sales at On The Run sites.

"We have a variety of means of delivering Costa Coffee, dependent on size of store, but our preferred method is still fully served via a trained ’barista’.

"Delivering a quality, served, branded coffee offer requires significant discipline and investment and Costa Coffee holds us accountable to some very rigid brand standards, but from our point of view we regard it as a point of difference and a competitive advantage."

Some independent retailers have been as quick as the oil companies in spotting the potential in developing a quality coffee offer. Peter Bellini, for example, introduced a café and the Costa brand at his site in Ilkeston, Derbyshire, in September 2003 - a month before Esso’s first On The Run opened. Peter says business has since developed extremely well and mainly by word of mouth. "It now accounts for around 5% of shop turnover, at extremely good margins," he adds.

Peter says he, like Esso, chose Costa for the brand recognition, training and expertise, however, he adds: "Unfortunately Costa runs a two-tier system of wholesale and retail. As a wholesale customer we do not have access to its retail development - we effectively only buy the beans. I think the company is missing a big opportunity to grow and strengthen the brand with quality independents like ourselves."


For retailers who don’t have the space, resources or inclination to run a full-scale coffee shop, the options are also increasing.

Self-service machines offer quick and easy coffee solutions; the main problem with them has been that vended coffee, on the whole, has had a bad reputation for quality. A number of new players have entered the market in recent years offering fully-branded bean-to-cup machines, which they say can offer a menu of speciality coffees to compare with Wild Bean or Costa - without the need for dedicated staff.

Coffee Nation has established a strong foothold in the forecourt sector, and its branded ’gourmet’ machines can now be found on almost 400 sites. The company’s sales and marketing director, Carl Jackson, has big ambitions for the brand, claiming it will have more outlets than Starbucks or Costa by the end of 2007. Recent contract wins have included Esso and Sainsbury’s, while Welcome Break, Tesco Express, Somerfield and leading independent, the Malthurst Group, are also customers.

Coffee Nation operates on a revenue-share basis, providing the machine, ingredients - including 100% Arabica beans - and maintenance support, while taking a commission based on the number of cups sold each month. Jackson says that an established site should deliver the retailer £10,000 profit per year from just one metre of selling space.

"The key to our success is relentless focus on product quality and consistency," he explains. "To support this we have a dedicated in-house team of engineers and account managers. In addition, each site is linked to a 24-hour call centre via a telephone line, which allows us to deliver on-line site support, fault diagnostics and detailed sales analysis."

My Coffee operates along similar lines, and offers eye-catching machines using fresh milk and beans. The company has recently linked up with motorway services operator Goldstar Extra in nine locations. Founder and managing director, Mark Heron, says: "Retailers have realised that replacing instant coffee with freshly-made specialities not only increases volumes sold, but also revenue per unit. Speciality coffees command an average selling price on forecourts of £1.60 to £1.90."

Again, there is no capital outlay for the retailer and Heron says a busy site, selling 50-plus drinks a day, could generate extra profits of more than £175 a week.

The main disadvantage with revenue share deals is that they often exclude smaller sites in less busy locations. A company supplying a machine free of charge will want to be sure of making a decent profit from it, hence Coffee Nation only works with multiple site owners, while MyCoffee favours retailers in high-footfall locations, such as on A-roads.

Simply Coffee also offers its machines free on loan to operators who meet certain criteria, however, anyone can buy a package outright. These come in entry, standard and high-volume levels, with the standard package costing £6,495 and including a Swiss-made Franke coffee machine and merchandising unit, which fits a one-metre space. This can serve espresso-based coffees - made with fairly-traded Rainforest Alliance beans - as well as chocolate and tea options. What’s more, in exchange for the purchase price, the operator is given sufficient free stock to effectively fund the cost.

Around 140 sites currently serve the Simply Coffee brand, and the proposition allows retailers to offer coffee at the cheaper price of £1 - and still make higher-than-average margins, according to managing director Jason McNally.

Typical throughputs, he says, can deliver a cash margin of £6,000 per year, as well as boost the average spend among core shoppers, typically from £3.87 to £5.85.


=== Equipment solutions ===

- A new compact bean-to-cup machine is available from First Choice Coffee. The 400mm-wide counter-top Tiger machine is said to be ideal for lower- volume outlets like petrol stations. It grinds fresh beans and textures milk using a patented ’texmilk’ system. At the same time, the machine has automatic cleaning systems to keep maintenance at a minimum. It is available as a self-service option, compatible with coin and cashless systems, and starts at £4,250 plus VAT.

- Nescafé.go, available from Nestlé Foodservices, offers a quick and easy hot drinks solution. The system is basically a branded water boiler and merchandiser unit. Customers choose their drink, pull a foil seal off the cup - designed to keep the ingredients fresh - and press a button on the front of the machine to add hot water. The unit holds 60 cups, offering six drink varieties: Nescafé black, white and decaffeinated coffees, cappuccino, hot chocolate and Tetley tea. It requires no plumbing and Nestlé says it can generate profits of up to 50p per cup. The machine costs £239. Point-of-sale kits are also available to help drive sales.

- The Coffee Machine Company has become a distributor for the Swiss-built Egro range of machines, including the Egro 50 series. Described as an ultra-compact bean-to-cup machine, at just 30cm wide, the Egro 50 is said to give the highest cup output of any machine in its class, making it suitable for businesses with a medium-volume demand. Sales manager Bill Davy says it is ideal for markets where staff retention and training are issues, as it will produce excellent quality speciality coffees automatically time after time. It is available in various colours and finishes, from just under £5,000.