New ground for coffee

Many industry analysts predicted it, and sure enough it has happened. The high street is practically saturated with coffee bars, and coffee sales are stagnating. As a result, coffee suppliers are looking at new ways to drive the market.

Coffee sales are declining 1-2% a year in terms of volume, according to Martin Armitt, trade marketing manager for Douwe Egberts. He thinks what we eat has a lot to do with it - more processed foods with higher salt levels lead consumers to choose cold drinks over hot. Added to which, many consumers are trying to cut down on caffeine for health reasons.

"But while the volume of coffee consumed may be going down, the quality is rapidly improving, and real coffee has increased relative to soluble and instant," he says. "The key is getting customers to trade up."

Those still drinking coffee want good quality and they're willing to pay for it. The drive for real coffee is having an effect on markets traditionally used to poorer quality. "We're seeing a shift in consumption from the workplace to the high street, for example," says Armitt. "In urban areas, people actively go out to get a better cup of coffee than the office vending machine."

Enticing them to stay in the office with a better coffee offer on site is a growing trend. Douwe Egberts' Coffee Corner concept provides a self-serve coffee area and furniture all within a square metre - a social meeting point rather than a machine in the corner.

But not just the workplace is being targeted. The roadside has traditionally not been the best place to get a decent coffee, but that's now changing, too. Douwe Egberts is helping BP to change the image of forecourt coffee with its Wild Bean Café concept which offers fresh food and espresso-based coffee 24 hours a day. There are now about 90 across the country.

One area with definite potential is the student market. Nestl‚ has relaunched its student coffee project this year. The company has been involved with university campuses since 1991 but has jazzed up the offer to bring a high-street feel to campus. "There's been a lot of hype about brands," says Peter O'Brian, Nestl‚'s new retail solutions manager, "but the bottom line is that students want good value but not necessarily cheap coffee. Until now, students have been used to quite an institutional offer, or coffee from vending machines. That means in cities they've often gone elsewhere."

The new project is intended to create a high-street feel at affordable prices - about 75p for a regular or £1 for a large cappuccino compared with £1.75 to £2 on the high street. It's essentially a turnkey operation, with Nestlé taking care of design and doing the sums on what to charge and sell. Nestlé uses its size to negotiate national rates with suppliers, passing the advantage on to the client and part-funding the project up to a maximum of £9,000.

A contract runs for three to five years, and Nestlé offers operational support, but the university or college employs its own staff to run the bar. As well as coffee, a typical outlet offers tea and hot chocolate as well as water and carbonates. For take-away outlets, Nestlé also provides the cookies and confectionery, but any other food is down to the on-site caterer, although there is a consultancy service to help on food presentation. For the college, as well as being able to offer an added facility to students, there's the chance to generate some cash rather than see students spend their money on the high street.

Nestlé now has 115 university coffee outlets across 76 campuses. West Cheshire College in Ellesmere Port opened in early April and is being followed by three more at Easter. According to O'Brian, students are trading up from an average of £1.05 to £1.28 per transaction and expect to pay 55p for standard vending machine coffee.

Cafédirect, the Fairtrade coffee brand, has also seen the potential in the education sector, adding an ethical slant to coffee drinking in student bars. It teamed up with education food service provider Scolarest (part of the Compass Group) last May in response to growing demand from universities and colleges for Fairtrade products, and 13 universities have signed up so far.

"We've introduced Fairtrade beverages at the majority of our higher education contracts in addition to our existing brands with the aim of providing our customers with a wider choice," says Mike Bond, managing director for Scolarest independent schools, colleges and universities. "The Fairtrade offer supports and expands on our existing products, which has associated benefits for us and our customers as well as encouraging fair deals for Third World producers."

Sales for Fairtrade beverages have increased on average by 50% year-on-year since 1994 and, according to Nicola O'Donnell, Cafédirect national account manager for food service, interest in ethical products is especially high in the education sector.

Recently the company launched a branded mobile Cafédirect Café Bar which folds away when not in use. First Choice Coffee has also launched a Smart car mobile coffee unit which is 2.5m long and takes minutes to set up. For £22,000, First Choice supplies the Smart car fully branded and colour-coded to customer specification and barista training comes as standard. It's simply driven away when no longer needed.

Tchibo Coffee International, meanwhile, has been focusing on its own branded coffee shop concept, which includes beech and cherry wood furniture, Tchibo beverage equipment, tables and seating. As well as Tchibo coffee, clients can choose up to six back-counter units, different seating ideas, parasols, framed pictures with lighting and a range of seasonal promotions.

The idea is aimed primarily at self-service areas but the Sheraton Park Lane, for example, has a manned take-away outlet which is open to both guests and public. Tchibo was already supplying the hotel with its coffee when an opportunity arose to turn a store cupboard into an additional money-spinner.

Buy or lease options are available on the equipment over 12-18 months. So far, Tchibo has 25 of the concepts up and running since their launch in March 2002, mostly in hotels, universities and conference centres, with a couple in petrol stations and one each in a gym and an office.

Armitt, however, thinks hotels may be missing a trick in trying too hard to emulate the coffee-shop experience. "We believe people still like coffee being served to them on a tray," he says. "Hotels should think about returning to traditional values of service when it comes to coffee, offering that something special which no one else can."

Nurse! the coffee
In an average 500-bed hospital, thousands of hot drinks are drunk every day, and it's one market Kenco is hoping to corner with its new Gemini Beverage System. The key to this ward trolley is flexibility - a machine that can take crockery as well as disposable prefilled cups. It has the features you'd expect in a ward environment such as directional castors and dual brakes, as well as a lockable cup and storage area and a secure coin box for voluntary contributions. Branding is an important part of the offer, so patients and visitors can recognise familiar names on in-cup and loose ingredient options.

Contacts
Cafédirect 020 7490 9520
Douwe Egberts 020 8236 5000
Kenco 0870 241 4820
First Choice 01582 418222
Nestlé/Nescafé 0800 745845
Tchibo 01372 736250