Actionable Insights From APT's Retail Practice

Convenience Stores Betting on Beverages

February 16th, 2017 | Posted by APT in Retail

A recent study from Convenience Store News found that purchasing beverages is one of the most common reasons to shop at a convenience store. Capitalizing on their status as a beverage go-to, many convenience stores are investing in new drink programs to drive traffic into stores and encourage customers to spend more. As c-stores increasingly bet on beverages, they must carefully evaluate the considerations accompanying each new program.

Coffee Craze

Convenience stores are getting creative with their coffee offerings, introducing trendy caffeinated beverages to appeal to new customer demographics, as well as a range of customization options to more broadly cater to customers’ preferences.

For example, SuperAmerica and Kwik Trip have introduced cold brew coffee, making a play for coffee connoisseurs, while Sheetz spices up its menu with a proprietary coffee line boasting stronger brews and new flavors like Crème Brûlée. As RaceTrac expands in Florida, it is launching a remodel initiative for its older Florida stores that will include an expanded coffee area with more counter space, plus customizable options like five blends of fresh-brewed coffee and various sweeteners – and even toppings like whipped cream.

Innovation in coffee may not always be all it’s brewed up to be. Do customers like these higher-end products, or do they risk losing loyal customers who preferred the standard offerings? If they require more space, from which product lines or categories should they take space to make room for this new offering? How should they bundle coffee options with food to create combo deals? Answering these questions is critical before rolling out new offerings chain-wide.

Bold Brews

Convenience stores in many states have always focused on beer sales. Many c-stores are now riding the wave of changing consumer preferences and catering to a more discerning customer. Rutter’s, for example, rolled out a new beer cave concept in some locations, which includes craft, domestic, and imported beer and cider. Some Express Mart locations also include beer caves, featuring local and regional craft beer, and certain Stripes stores include a “beer super cooler,” designed to house adult beverages at below-freezing temperatures.

Keeping in mind that more costly craft beer options may attract new customers but deter others, how can retailers determine in which locations different assortments will be most successful? And how can they determine how much space to allocate to beer without pulling too much space from other items and cannibalizing their sales?

Fresh Finds

Other retailers leverage “better for you” beverages, like fresh-pressed juices and smoothies, to drive traffic. RaceTrac’s Florida remodels, for example, will offer smoothies freshly made to customer specifications, and some QuickChek locations will also feature blended-to-order smoothies. Other convenience stores are offering cold-pressed juices with all-natural ingredients like hemp milk and coconut water.

Fresh offerings like juices and smoothies pose another type of problem: spoilage. Will investing in fresh ingredients for healthy beverages boost convenience stores’ bottom lines, or lead to losses if they spoil before selling? Handmade drink options like smoothies also raise an important labor and operations question: will the time-intensive process of making fresh beverages from scratch require additional employees to keep up with traffic? How can convenience stores determine optimal staffing to accommodate custom-made menu offerings?

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Each of these approaches to enhance beverage offerings holds great potential for convenience retailers, if rolled out strategically. Fundamentally, each of these initiatives is geared toward attracting new customers and building basket size. But could these offerings potentially deter convenience stores’ existing customer base? The most reliable way for decision-makers to evaluate new offerings like these and determine how customers will react before deploying them on a broader scale is by conducting in-market experiments. Taking this “Test & Learn” approach of evaluating a new beverage strategy in a subset of locations and comparing their performance to that of a group of similar locations that do not introduce the new offering enables retailers to measure each initiative’s incremental impact.

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