Operators are looking to coffee to reinvigorate brand loyalty.
This article first appeared in the 1 September 2009 issue of Restaurants & Institutions (R&I).
R&I is the USA's leading source of food and business-trend information and exclusive research on operators and restaurant patrons. Editorial coverage spans the entire foodservice industry, including chains, independent restaurants, hotels and institutions. Visit the R&I website to find out more about the magazine or to search its recipe database.
By Christine LaFave Grace, Associate Editor
It's not an easy time to be in the espresso-selling business. Few other consumer purchases have come under such heavy attack by self-styled home-budgeting experts, who regularly trot out calculations of the thousands of dollars consumers could save in a year if they were to give up their daily away-from-home latte habit.
And even if consumers aren't inclined to give up their grandes entirely, many have found themselves making a coffee run less frequently, and/or opting for a less-expensive java fix. In a July survey of American workers conducted by Cleveland-based WorkPlace Media, 40% of respondents who drink coffee said they're spending less than top dollar on coffee drinks because of the recession. More than one-third (35%) said they've stopped buying on-the-go coffee.
In the middle of the worst recession in a generation, then, there has been an unprecedented push across foodservice segments to use coffee as a traffic-driving tool. Oak Brook, Ill.-based McDonald's launched its McCafé line of espresso beverages nationwide in May. Several national coffee and bakery-cafe chains have turned to value bundles to give java-jonesing consumers their morning jolt and persuade them to try a baked good or a breakfast sandwich, too. Other concepts have rolled out new beverages to satisfy consumers' still-strong interest in sweet coffee treats. Regardless of the strategy they employ, these coffee-pushing operators are selling the idea of ritual as much as they're selling beverages themselves. Here's a look at the opportunities operators have grabbed to keep coffee sales-and store traffic-percolating.
"We have to work a lot harder to earn our visits [now]," says Alfredo Martel, senior vice president of marketing for Minneapolis-based Caribou Coffee. The economic realities of an uncertain job market, stagnant wages, declining investments and falling home values that had consumers cutting back on discretionary spending at the end of 2008 led Caribou this winter to turn to a proven tough-times tactic: value bundling.
In February, Caribou debuted More ‘Bou for Your Buck, a monthlong promotion that offered customers any baked item for $1 with the purchase of a large coffee. "We wanted to be cognizant of the fact that people were looking for breakfast solutions out there," says Martel. At around $3, he says, the bundle offered a higher-quality breakfast than consumers would find at a convenience store and a cheaper alternative to a morning meal from other coffeehouses. "It [was] a message of ‘You deserve better,'" Martel says. "It was a very effective strategy for us."
Dallas-based Corner Bakery Cafe introduced a new value bundle, the Morning Rush, at the end of June. For $2.99, guests can get a small coffee and their choice of a muffin or a bagel with cream cheese. "At $2.99, it's something we can live with," says Ric Scicchitano, Corner Bakery's senior vice president of food and beverage. The promotion is ideal for urban locations, he says, where in-transit, grab-and-go customers account for a larger portion of store traffic.
Scicchitano adds that Corner Bakery hasn't seen much customer pullback on coffee. Coffee-beverage sales remain "pretty strong"-a testament again to how ingrained customers' caffeine habit is, he says. The consumer commitment isn't the same with other beverages. "The one area where guests are managing their checks is beverages other than coffee," he says. "You see them getting water instead of a soda."
COUNTING ON QUALITY
The economic downturn has allowed some coffeehouse concepts to capitalize on what they offer beyond caffeine: a relatively inexpensive place to unwind. "After the recession started, we got a little busier, actually," says Bob Roumbos, owner of La Spiaza coffeehouse in Wheaton, Ill. "People saw us as a cheaper alternative to going out to restaurants. You're not going out and spending $40-$50, but you still get that relaxing experience."
Seattle-based Starbucks launched a coffee-and-breakfast-item value pairing in March in an attempt to woo back consumers who had deemed the chain too expensive for regular visits. Though some observers praised the chain for trying to demonstrate that it appreciated consumers' spending concerns, most saw the move as indicative of lost focus at the world's largest coffeehouse concept: Did Starbucks want to be a value player or a higher-end coffee purveyor?
In May, then, as McDonald's was launching its McCafé line nationwide, Starbucks debuted a different message-one emphasizing the chain's gourmet coffeehouse roots. A print and online campaign featured ads reading: "It's not just coffee. It's Starbucks." The company insisted that the message was meant to remind consumers of the company's commitment to top-quality coffees from around the world, including Fair Trade coffees. Another ad from the campaign, featured in print and online, offers a less-subtle jab at java-on-the-cheap providers: "Starbucks or nothing. Because compromise leaves a really bad aftertaste."
CHEAP AND EASY DOES IT
The "we're more than coffee" approach by Starbucks, Caribou and others contrasts with the one taken by McDonald's and Canton, Mass.-based Dunkin' Donuts, both of which have promoted their new cold coffee beverages-the McCafé iced drinks and the Frozen Cappuccino, respectively-as offering a welcome if brief respite in on-the-go consumers' busy day while providing a boost to get them through the rest of the afternoon. "McDonald's and Dunkin' Donuts have been very effective in establishing their brand presence and what they are to consumers," says Andrew Hetzel, founder of Kamuela, Hawaii-based coffee consultancy Cafemakers. By sending a message of, "This is what we'll give you: a drink that you'll enjoy, at a price point of around $2-$3-no more, no less," they've set up a marketing message that's "clean and powerful," Hetzel says.
Check out a time line of 2009's Coffee Clash.