Brewing up a storm: Installing hot beverage facilities

Running late and need that extra jolt of caffeine to get you going? Or perhaps on cold winter mornings you find that it's impossible to get anything done before that first cup of tea. If you feel like that, then it's a fair bet that many of your customers will as well, so a quality hot beverages offer presents a huge opportunity for retailers to cash in.

Mike Howe of Londis in Clyst St Mary in Devon has had a hot beverage machine in his store for three years and it has given a great boost to his business. "It's been a welcome addition to the store," he says. "The morning rush and lunchtime are the two busiest times when most of our tea and coffee sales are made."

Mike finds that it's a good way to generate additional sales. "Before we had the machine in, we had people coming in looking for snacks and hot food. Now we can give them all of these things and offer a hot drink as well. It's a great way to round out our service to the customer."

At the moment, Mike has a simple bean-to-cup machine and a boiling water tap for tea and hot chocolate, but he hopes to upgrade to a system that will offer more choice. "Right now the machine we have suits our demands, but hopefully next summer I'll invest in an upgraded machine - economy permitting of course!"

He says cleaning the system is straightforward. "It has its own cleaning function so all it takes is refilling and five minutes cleaning per day to keep it all working."

Dean Holborn of Holborns in Redhill, Surrey recently had a Tchibo hot beverage machine installed that serves a wide range of coffees as well as tea and hot chocolate, and is very happy with his new acquisition.

"It's been very successful so far. We get a lot of business from it on Saturdays for football matches. It's very popular with passing trade, people just popping in for a cup of tea or coffee."

HOT PROSPECTS

Hot beverage equipment suppliers such as Coffee Nation say that the average machine can generate sales of over £40,000 a year. “Convenience stores are among the growing destinations for the sale of gourmet quality coffee on-the-go, a category that is estimated to be worth in excess of £500m per year,” says Scott Martin, CEO of Coffee Nation. “The consumer demand for convenience-led coffee is still continuing to grow and the outlook for 2009 remains very positive. Self-service machines bridge the gap between manned coffee bar chains and traditional coffee vending, and enable retailers to capitalise on the growing consumer demand.”

Martin believes that consumers now want quality products even when they are on-the-go. This is the reason why Coffee Nation’s installations have grown year-on-year. “Installations of our gourmet self-serve coffee machines have risen by 44% from 486 in September 2007 to 700 in September of this year,” he claims. “UK consumers on the move now demand high quality real coffee made with fresh milk, and real espresso. “Savvy cash-strapped consumers recognise the excellent value that the Coffee Nation offering provides in relation to the same product from a high street chain,” he adds.

Linda Chiodo, European director of sales and marketing at hot beverage equipment manufacturer Bunn, also believes that hot beverages are a lucrative market for retailers and that a store with decent facilities can make additional sales of associated products. “Hot beverages such as filter drip coffee, cocoa and hot tea are enormously profitable and require very little operator work to brew and serve,” says Chiodo. “For example, if a convenience store pays £2.50 per case for coffee and sells 100 cups per day at £1.60, the annual profit is more than £57,000.

“A hot drinks system allows convenience stores to address the needs of their consumers – especially working parents, students and shift-workers – by fulfilling more than one need. Besides coming in to purchase a coffee to go, a customer can buy a prepared sandwich or muffin, a container of fresh- or pre-ground coffee, or a meal of prepared food before commuting home or to the office.”

WHAT'S BREWING FOR 2009?


Chiodo believes that the hot beverage market will again be profitable for retailers in 2009 as long as they are willing to diversify.

"The market experienced double-digit growth during 2008 and convenience stores that added complete beverage programmes saw up to 58% more sales and profits," she adds.

"Convenience stores will continue to fight the price war that started in 2008. Window signage offering deals designed to get the consumer in the store, and to compete with the

c-store down the street are part of that competition. Of course, convenience stores should exercise some caution next year, while still continuing to grow. They should add proven products and programmes with service support and stay with programmes that have proven success."

Coffee Nation will be focusing on convenience retailers in the next 12 months. Next year will see the roll-out of a new high volume machine, which is currently being field-tested. According to Martin, this will be supported by some innovative product extensions to the Coffee Nation range including new payment options and menu additions.

GRINDING OUT PROFITS

Steve Mooring, director of beverage equipment manufacturer Caffe Society, says that the opportunities for high profit margins are massive without skimping on quality. "The days of the UK consumer paying for a cup of instant coffee are almost gone," he says. "Believe it or not, using fresh gourmet beans not only produces the best tasting coffee, but the cheapest too.

"There is potential for over 1,000% profit on a cup of coffee. A top quality brand including the takeaway cup, milk and sugar can be produced at a cost of 15p and sold for over £1.50."

Caffe Society has seen a busy 2008 and Mooring hopes that next year will be the same. "We have been very busy in the past year, especially in convenience stores, petrol forecourts and newsagents," he says. "We believe 2009 will be similar. Retailers are looking for other revenue streams to help beat the economic downturn. A coffee machine is an obvious choice because it can return such a huge profit."

Mooring adds that the machines require very little upkeep. "All that's needed is a daily clean that takes 15 minutes. However, to maintain the quality of the drinks and keep the machine working to its full potential, an annual service is always recommended."

Martin agrees that there is very little work needed to maintain a hot beverage machine. "An average convenience store would need to replenish ingredients in a machine two or three times a day and complete a daily cleaning cycle, which in total takes less than 30 minutes."

Mooring adds that the retailer shouldn't feel restricted to a particular size of machine and that they can be tailored to suit their customers. "We can build stands to suit any needs: any size, colour or with extras that may fit a particular retailer's store. There are machines that generate between 100 and 500 cups a day depending on the demand."

Chiodo points out that Bunn customers aren't restricted to a particular brand of produce when using one of their machines. "Because we work with a wide variety of product suppliers across the globe, convenience store operators have great flexibility and plenty of options for their beverage programmes," says Chiodo. "They're not limited by their beverage equipment choices, and they can select products that are profitable and successful with their customers."

With manufacturers looking to support retailers in 2009 with new products and machinery, retailers who are willing to invest in hot beverage facilities and back them up with deals for their customers could see their business boil.