Full of beans

The iced coffee revolution still has plenty of get up and go!

The iced coffee revolution still has plenty of get up and go!

For convenience stores looking to give their bottom line a bit of a pick-me-up, iced coffee could well be the way to go. Australia remains in the grip of a caffeine love affair and this high-growth, high-margin segment offers retailers a fantastic opportunity to kick-start a profit surge.

The facts speak for themselves. Iced coffee sales through convenience grew at nearly 14% last year and the segment now accounts for more than 60% of the flavoured milk in convenience market. And there are a swag of exciting new variants hitting the fridge all of the time, backed up by innovative promotions and big-budget marketing campaigns. Opportunity knocks for the C-Store operator prepared to have a long, hard look at his or her beverages chiller.

A regional fan base

There are a few major players in the iced coffee world, each brand boasting a strong regional following in particular states and territories.

National Foods has been enjoying great success with its Farmers Union, Masters and Big M products, Parmalat the same with its Ice Break, Pauls Iced Coffee and Rush brands, and Dairy Farmers is extremely pleased with the way Dare, Oak and Moove have been performing through convenience. Similarly, Fonterra’s Chill brand has been selling well in Western Australian C-Stores.

And as the country’s coffee tastes become ever more sophisticated, the major players have all reacted speedily and aggressively to a perceived demand for stronger variants.

“The launches of Big M and Masters Double Strength, as well as Farmers Union Strong Iced Coffee have been 100% incremental to the brands’ base sales,” said National Foods General Manager, Beverages, Mark Davis. “They have all performed fantastically since launch and, nationally, strong iced coffee products have grown by 30%.”

Parmalat, the manufacturer of the popular Ice Break brand, has also recognised that a sub-segment of stronger iced coffee flavour profiles has been developing.

“Parmalat was at the forefront of this market sub-segment, with the launch of Rush Intense Coffee in 2005,” said Daryl Rumble, Parmalat Category Executive — Non-Grocery. “More recently, Parmalat has further targeted this growth trend with the launch of Pauls Iced Coffee ‘Double Shot’ in the Northern Territory.”

For its part, Dairy Farmers has been thrilled with the way its new Dare Double Espresso has been greeted by the iced coffee loving public.

“ Consumers are seeking stronger tasting and premium iced coffee products and Dare Double Espresso is performing particularly well in the market and has been rewarded for its great taste,” said Catherine Cannings-Bushell, Dairy Farmers Group Marketing Manager for Milk. “ Over the past 12 months, we have certainly seen a trend towards stronger tasting flavours.”

So, who is drinking iced coffee and will it continue to become an ever more important component of a convenience store’s business?

A wide appeal

Iced coffee tends to appeal to a wide audience, but is particularly popular with men aged from 16-35. The peak consumption period is the morning, with many people picking one up on the way to work as part of their breakfast routine. Interestingly though, purchases remain quite steady throughout the day in the convenience channel. This could be because iced coffee products can fulfil a variety of needs for consumers … perhaps as a mid-morning booster, something filling in the afternoon, or a guilt-free sweet snack at any time of the day.

Mark Davis from National Foods says all of the evidence suggests that Australians’ consumption of iced coffee will continue to grow, and people ‘on the go’ will be leading the charge.

“The convenience channel offers consumers the accessibility to their iced coffee products when they want them, during the day,” he said. “Morning is a key time for iced coffee sales, but we are seeing an increase right through the whole day, especially late afternoon for a pick-me up on the way home from work. If you walk into a coffee chain, consumers all have their own variety or style of coffee that they purchase. Offering a range of iced coffee options will help bring more consumers into the category.”

Mr Davis says iced coffee is a habitual purchase for consumers and that the more space C-Stores give it, the more store traffic will increase as people come in seeking their favourite brand.

“C-Stores should make sure they have sufficient shelf space, facing and stock weight of iced coffee products,” he said. “Also, they should consider the location of iced coffee products so they are easily accessible to consumers.”

For its part, Parmalat says there are three key strategies that C-Stores can employ to maximise sales and profit of iced coffee products. These are: to carry sufficient stock to avoid out of stocks; to stock the key market leading brands; and to have a dual location within the store.

“Flavoured milk is an impulse purchase in many cases and, as such, should be placed in order to grab additional impulse sales,” said Parmalat’s Daryl Rumble.

He says that C-Stores need to see flavoured milk as a beverage and give it the space that it deserves.

“When Ice Break is placed in impulse fridges near the front of store, the results are significant incremental sales,” he said. “Retailers are certainly becoming more aware of the importance of increased facings, maintenance of stock weights on shelf, and fridge positioning in store.”

Mr Rumble advises that retailers should evaluate which brands are strongest in their region and then concentrate on them in order to maximise the sales opportunities.

Allocate adequate space

“Breadth of range should only be considered if the core market-leading flavoured milk brands have adequate space allocated within the beverage category,” he said. “Broadening the consumer offer too much may lead to greater out of stocks on the core market-leading brands, as insufficient space may be allocated to cater for sales volumes.”

Parmalat’s Ice Break brand is the number one iced coffee in Australian convenience stores, and has enjoyed exceptional growth for the past four years … 17% so far this year compared to last. Its success has been underpinned by the running of the Ice Break Win a Ute promotion — an annual on pack promotion that has run for the past seven years. Similarly, Parmalat’s other top brands — Pauls Iced Coffee and Rush, which is 99% fat free and has 30% less sugar than regular flavoured milk — have been well supported.

“Trends towards snacking behaviours show that people seek on-the-go solutions in their time-poor lifestyles,” said Mr Rumble. “Flavoured milk and iced coffee in particular tend to service this need for this snacking occasion.”

He said that iced coffee could be either an habitual or impulse product purchase, meaning it is either part of the routine of consumers, or it meets an on-the-go need state for consumers.

“The convenience channel sits perfectly to meet these consumer purchases,” he said. “Meal associations are an effective way to encourage impulse purchase and increase sales, as they provide a ‘value’ offer to consumers. They are also a convenient meal solution to time-poor consumers — important in the convenience channel.”

Packaging styles and sizes evolve

The changing consumption patterns of the user — to consume on the go over a longer period of time — is helping iced coffee packaging to evolve. In some, but not all, areas we are seeing the rise to prominence of the bottle with a resealable cap.

There has also been a trend towards bigger pack sizes. In the convenience channel, the bulk of iced coffee sales are taken up by the 500ml pack size, but more 750ml products have recently been introduced.

For Dairy Farmers, the launch of Dare 750ml is helping to drive further incremental growth in the category.

“ Dare’s loyal consumer following continues to expand rapidly with the brand currently the fastest growing iced coffee in Australia,” said Catherine Cannings-Bushell from Dairy Farmers. “Over the past year, this growth has been further accelerated by the introduction of a 750ml pack size. Packaging has always been an important factor in a consumer’s choice of product, and iced coffee is no different.”

Ms Cannings-Bushell says the Dare brand’s broad range of iced coffee flavours, including espresso, cappuccino, caramel latte and the new double espresso, has been central to its success.

“Consumers have wide-ranging tastes; therefore a convenience store can capitalise by having a variety of iced coffee flavours on shelf so they can choose what best suits their needs,” she said. “Having identified the good growth opportunity in iced coffee, dairy manufacturers are looking to innovate the market by introducing new flavours and products.”

Recent promotions for Dare — and other Dairy Farmers products that have iced coffee flavours like Moove and Oak — have been centred around multi-buy offers. These are said to be particularly attractive in convenience stores as many purchases are made with other people present. For example, those visiting a petrol station are likely to buy multiple items at a discount rate if others are travelling with them.

“Iced coffee products such as Dare deserve substantial space in convenience stores if the store is looking to drive sales, given the strong growth in the category,” Ms Cannings-Bushell said. “In fact, iced coffee is one of the fastest growing categories in the entire convenience channel, so it makes sense that these products are given ample support by stores.”

She says that among the ways that convenience stores can drive expansion and growth in the category is to increase the chiller space dedicated to iced coffee to ensure products are easily visible to consumers.

“In-store displays and merchandise can further help to build excitement about products in store,” she said. “Stores should also consider introducing a second opportunity to buy the product. The best way to do this is by placing iced coffee and other milk beverages in smaller fridges as close to the cash register as possible. This then acts as a reminder for consumers entering a convenience store to make other purchases.”

Fonterra — which makes the nationally available SupaShake Cappuccino, as well as Chill — agrees that although iced coffee products are in high growth, it is still very important that retailers support the products in-store to help achieve higher sales.

“The best advice would be for retailers to ensure they're adequately stocked on iced coffee products, positioned in the best impulse locations within chillers, and are allocated significant in-store presence with shelf blocking and point-of-sale material to capitalise on the strong growth and subsequent sales increase,” said Jayden Kahl, Fonterra’s Brand Manager - Flavoured Milk. “It's generally optimal for retailers to allocate flavoured milk shelf share based on a ratio of sales compared with other beverages in the chiller. This is to ensure chillers are adequately faced on the products that sell the most, make the most profit and likely to stimulate additional growth.”

Chill, which comes in strong percolated coffee, iced coffee, light iced coffee and mocha flavours, has been selling very well in cartons in Western Australia, and in bottles in Queensland and New South Wales.

“With some strong upcoming activity, such as the Chill My Ride major consumer promotion, and a growing iced coffee market, the expectation is that Chill sales will continue to increase,” Mr Kahl said. “It would be appropriate for retailers to review their chiller arrangements to ensure Chill and competing products are appropriately faced.

“The convenience channel, as the name suggests, is stimulated by on-the-go consumers with a need for quick and easy purchase. As such, the majority of products sold will be single serve, which, within flavoured milk, is the 500-750ml pack size.”

Unistraw’s innovative Mai’a straw is not so much a flavoured milk as something to flavour your milk with. The product comes in three variants — espresso, cappuccino, and mocha — and gives white milk a real kick when it is sucked up through the flavoured beads.

The more adult-focused Mai’a coffee-flavoured straw follows on from the success of the Sipahh straw, which contained more child-friendly flavours.

“We started off with the Mai’a straw in grocery last November and it has been well received so we are now rolling it out in convenience,” said Unistraw’s National Brand Manager, Katherine Taylor. “It is a great way for C-Store operators to increase sales of white milk, and they also end up selling two products instead of one.”

Ms Taylor says that the Mai’a straw, which retails at about 50 cents, can be particularly successful if retailers bundle it as part of a meal deal … maybe with a sandwich and a carton of white milk.

“Retailers can keep it on the counter as it is a good change taker and can maximise impulse buys,” said Ms Taylor. “But it can also be displayed with the white milk and it doesn’t do it any harm being stored in the fridge.”

The product, which contains no preservatives or artificial flavours, only ½ teaspoon of sugar, and is as fat free as the milk it is drunk with, is targeted chiefly at women aged 16-40 who are looking for convenience and control.

“For the health-conscious consumer it is a great way to encourage them to drink more white milk,” said Ms Taylor. “For the retailer, it is a great way to encourage the customers to come back again and again to stock up on milk.”

And that perhaps sums up the reason iced coffee is going to play such a key part in the C-Store’s future success. Quite simply, it keeps the customers coming back for more. And that is all any retailer can really ask for.