The perks of coffee

If McDonald’s can sell quality coffee — and do it very well — why can’t you? By Amanda Baltazar.

People thought it couldn’t be done. How could McDonald’s even hope to launch a premium coffee offering to compete with the likes of Starbucks and Dunkin’ Donuts?

Well, it did, and by mid-year, the quick-service restaurant’s McCafé espresso-based coffee program will be a new and viable competitor in your neighborhood.

With McCafé, McDonald’s is exploiting a key in-store staple of convenience stores. It’s also creating some serious competition to retailers like Whitehouse Station, New Jersey-based Quick Chek, whose coffee sales rose 10 per-cent in the 11 weeks up to January 19, 2009, boosted partly by the chain’s recent advertising campaign, which tells consumers to “Cut spending. Keep drinking.”

Create a need

A good, well-executed coffee program is an ideal sales opportunity for convenience store operators, said Stan Constantine, president of Baltimore Coffee & Tea, a successful coffee shop (three locations with 10 more coming) and wholesaler for 15 years.

If customers like your coffee, they will likely stop by every day — or at least five days out of seven — and become loyal customers, unable to cut ties with you once they’ve established a morning routine.

“What we’ve found is that we’re creating a coffee drinker,” said Danya Proud, a McDonald’s spokeswoman. “These customers are already visiting us so we’re giving them everything under one roof,” she added, noting that the keys to a good coffee business are speed, convenience and value.

Essential to McCafé’s speed of service is where the coffee machine is placed. In all McDonald’s stores serving the espresso-based coffee beverages (currently 7,000 of its 14,000 stores), the coffee machine is built into the left part of the front counter, which also makes it easily accessible for drive-thru business (70 percent of the chain’s sales) as well as in-store purchases.

The machine’s location also has a second purpose. “One of the things we learned during testing is that customers’ perceptions of quality are fulfilled when they see what’s being made,” said Proud.

“They can see the equipment, see the beans being ground and the milk being steamed. It’s very important because customers want to be part of the experience and want to know the coffee is fresh.”

It’s the people

Also essential to speed of service: proper employee training, easy-to-use equipment and the right number of coffee choices.

McDonald’s experts will typically teach two to three employees per restaurant, as well as the manager, how to make McCafé coffee beverages. During peak hours, one dedicated employee makes the coffee, but at quieter times, he or she may have other responsibilities. Properly trained employees can also help create the perception of a quality coffee business — which may prove extremely important to McDonald’s, given its reputation for dollar menu items and inexpensive fast foods.

Whether a QSR, convenience store or coffeehouse, having employees who can talk to customers about coffee helps build trust and atmosphere, Constantine explained. “Your employees can’t look at [coffee] as a commodity, even though it is,” he said. “It’s got to be marketed in a romantic way.”

Emeryville, California-based Peet’s Coffee & Tea hires people who enjoy interacting with customers and passing along knowledge about the beverages they prepare. This helps educate customers, which, according to spokes woman Erica Hess, leads to strong customer loyalty.

It’s in the beans

However, without the most fundamental ingredient to a coffee business, you are putting the proverbial cart before the horse. Quality coffee should come before anything else.

“Unfortunately, many convenience stores are concerned about margins, but if you use cheap coffee, people will only drink it once,” said Constantine.

“They’re being penny-wise and pound foolish because Starbucks has raised the bar for what people expect from their coffee.”

And even if you have a great product, you need to care for it well. Many convenience stores hold coffee in open glass pots, Constantine pointed out. Once the coffee is made, the water starts to evaporate, taking flavor and aroma along with it and making the beverage taste bitter. To ensure great-tasting coffee, convenience-store operators should keep it in an airpot.

Sampling for success

Once you have a good coffee program in place, let your customers know about it. Marketing your coffee business doesn’t have to be cost-intensive. McDonald’s runs simple programs like sampling and free coffee Mondays.

“We’re very aggressive with sampling because once [customers] taste these beverages, it creates the desire and the necessity,” Proud explained.

Peet’s offers samples when a new coffee is available, and customers who receive its newsletter get special offers such as “buy one, get one free” coupons. “The more Peet’s educates its customers, the stronger they identify with the brand, and remain loyal,” said Hess.

And make sure you pay attention to your demographics; it’s vital, Proud explained. The age of your customers makes a difference: “Iced drinks skew quite a bit younger,” she said, “but if you’re closer to a retirement community, you’ll probably sell more hot beverages.” If your clientele is older, you’re likely to see more demand for decaf coffee, Constantine added.

Whatever your demographics, now is a great time to launch a coffee business. The economy’s actually doing you a favor: As customers cut corners to save money, out goes their $5 venti cappuccino from Starbucks and in comes your more affordable cup of Joe.

This article first appeared in NACS Magazine. For more information or to subscribe please visit www.nacsmagazine.com.