48 MAY 2015 nacsonline.com - Whirley

48 MAY 2015
nacsonline.com
This article was written by NACS with support from Whirley
DrinkWorks!, a NACS Hunter Club member. Research for this
article was conducted by the NACS Shopper Panel, part of
the Convenience Tracking Program (CTP).
A STRATEGIC REFILLABLE MUG
PROGRAM HELPS BUILD AND SUSTAIN
BEVERAGE SALES, ACCORDING TO NACS
CONSUMER RESEARCH.
BY JERRY SOVERINSKY
It’s no secret that in-store sales and
the foodservice category in particular
are critical growth areas for retailers.
While commissary and fresh-prepared
food are garnering significant attention — both as non-traditional convenience store fare as well as items
offering healthy profit margins — not
to be overlooked are the ubiquitous
convenience store staples: fountain
drinks and coffee.
“Our research shows that dispensed
beverages, which includes soda and
coffee, not only deliver great margins
but are tremendous traffic drivers,” said
Leroy Kelsey, director of industry analytics for NACS. “In fact, more than half
(51%) of the respondents in our Convenience Tracking Program cited them as
the main product they intended to purchase [upon entering the store].”
In addition to offering equally generous returns as their more ambitious culinary siblings, carbonated soft drinks
(CSD) and hot dispensed beverages
(HDB) require far less specialty equipment and labor to manage, making them
attractive convenience store staples.
But it’s not a simple matter of, “If you
pour it, they will come.” Indeed, when
it comes to soda, consumption in the
United States recorded its tenth con-
secutive year of decline in 2013, falling
1% to 12.76 billion gallons, according to
Beverage Marketing Corp., a management consulting and research firm to
the beverage industry. Some historical
perspective illustrates just how far the
category has fallen.
“The level of per capita consumption
[in the carbonated soft drink category] in 2014 — about 674 eight-ounce
servings per person per year — was the
lowest since about 1986,” reported Beverage Digest, “CSD volume is now back
to where it was in [the] mid-1990s,” and
off more than 7.4% in the past four years.
The news is dispiriting to convenience store retailers, who have confirmed that hot dispensed beverages
and cold dispensed beverages are failing to pull their weight in the trending
up foodservice category. According to
recently released NACS State of the
Industry (SOI) data for 2014, sales of
the duo both registered a meager 0.8%
rise in 2014, the weakest performers in
the foodservice category, trailing prepared food (up 7.7%) and commissary
(up 9.8%).
“Whether it’s QSR, fast casual, drug
or even big box, customers are looking
[beyond convenience stores] for their
fountain and coffee beverages,” Kelsey
NACS Magazine
MAY 2015
49
51
%
Said beverages are the
main purchase drivers make
when visiting a c-store
C-stores own the
frequent dispensed beverage consumer
3
Visits for coffee
per week
4.5
said. “That threatens not only direct
sales, but also those of ancillary items —
the incremental items that accompany a
coffee or soda purchase.”
The numbers and shopper data reveal
both an opportunity and a challenge:
With their inherently healthy profit
margins (according to SOI data, HDBs
and CDBs contribute more than 50%
in gross margin percentage), CDBs and
HDBs present critical income potential
for convenience store retailers, especially as regulations force a shift in the
channel’s strongest performers. “Given the demand destructions occurring
in motor fuels and cigarettes in recent
years, foodservice remains a priority for
convenience operators,” wrote NACS in
its State of the Industry Report of 2013
Data. Indeed, the mission for retailers is
clear: Maximize their sales.
Mugging It Up
It’s a straightforward challenge with at
least one solution that traces its roots
back more than 30 years: a refillable
mug program.
50 MAY 2015
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Visits for fountain
drinks per week
“A refillable mug program can be a
very easy way to build customer loyalty
explained Jacqui Cintron, vice president
of marketing for WhirleyDrinkWorks!, a
manufacturer of custom products (including refillable mugs) for the food and
beverage industry. “When well executed, a refill program can help retailers
achieve their fountain and coffee category objectives.”
As part of a dedicated loyalty beverage
program, the refill cup idea was hatched
in the early 1980s, according to the New
York Times — an idea “largely the result
of ‘coffee club’ promotions by convenience stores” — and one perfectly suited to the on-the-go consumer who was
seeking a more durable option than a
paper or Styrofoam cup.
While for some retailers, those ubiquitous commuter mugs carry a modest, 10cent discount — an eco-friendly gesture
that retailers consider a trade-off for the
price of a paper cup — a robust, refillable
mug program goes much further.
Through strong brand graphics and
generous price incentives, a strategic
refillable mug program can increase trip
frequency, loyalty and basket size while
tapping new demographics, Cintron
said — a Holy Grail of convenience store
retailing. “The opportunities are huge,
with the ability to drive store traffic
and even sales of ancillary categories,”
performance boosts that are finding a
strong reception among retailers.
Survey Says …
That’s not industry spin but bottom-line
results that were culled from objective,
third-party research. Partnering with
NACS and its NACS Shopper Panel, part
of its Convenience Tracking Program
(CTP) that annually polls more than
17,000 shoppers at 680 stores across 42
states, Whirley incorporated its own set
of questions to a subset of respondents
seeking to measure coffee and fountain
drink loyalty at convenience stores, and
more specifically a refillable mug program and its impact on trip frequency,
basket size and loyalty.
Key takeaways from the study include
the following:
• Traffic drivers: 51% of respondents
said beverages are the main purchasing driver when visiting a c-store.
• Preferred for loyalty: Convenience
stores are the most popular destination for the frequent dispensed beverage consumer, who purchase on average 3 coffees per week or 4.5 fountain
drinks per week.
• Increased trips and spend: Beverage loyalty program participants visit
c-stores 5% to 7% more with spends
that are 70 cents higher per trip than
non-loyalty shoppers.
• Popular: 40% of c-store shoppers
participate in a beverage loyalty program. Among those, females represent 24%, skewing higher than males.
• Refills = Loyalty: 30% of beverage
refill mug users participate in a beverage loyalty program.
• Casting a wide net: Travel mug pur-
THE MOST LOYAL
OF THE LOYAL NOT
ONLY LOOK AT THE
TRAVEL MUG AS A
FIXTURE, THEY IDENTIFY WITH YOUR
BRAND THROUGH
THE MUG.”
chases appeal to nearly every demographic, including Millennials, GenXers and Boomers.
• Basket builders: 50% of refill mug
users are more likely to purchase food,
snacks or merchandise when refilling
their mug.
The results speak to growth opportunities among hot and cold dispensed
beverages, information that participating retailers have validated through
their own proprietary programs.
Country Fair
“Our travel mug program enhances
and extends our dispensed beverage
program,” said Guy Strayer, director
of foodservice for Pennsylvania-based
Country Fair. “We have a great coffee
program with a premium brand — our
Roasters Cup — and our travel mugs
provide the opportunity for our customers who identify with Country Fair and
our coffee brand … to share their love of
our product.”
With sales of hot dispensed beverages representing nearly three-quarters
of Country Fair’s dispensed beverage
sales, Strayer said the company’s coffee program was the perfect vehicle for
launching a travel mug program. Working with Whirley, the retailer began offering a variety of mugs with attractive
designs that generated brand awareness
and found a warm reception among its
customers. “We primarily launched it as
a brand extension to promote the premium nature of our coffee product,” Strayer said. “But we found loyalty increased,
with our customers collecting the different Roasters Cup mugs.” Country Fair
swaps out its cup designs three or four
times each year, which “continues to invigorate the category.”
Country Fair offers its Roasters Cup
customers 79-cent refills for any size
mug, which drops to 50 cents after 5 pm,
30%
40%
24% Women
16% Men
Participate
in beverage
loyalty
programs
Of beverage
refill mug
users participate
in beverage
loyalty
programs
GOOD ADVICE
To maximize sales opportunities with a refillable
mug program, Corner
Pantry’s Charles Lovett
recommends the following
best practices:
Design: An attractive design helps engage customers and drive sales.
Location, location, location: Stock the mugs strategically within the store,
making sure they’re highly
visible to customers.
Signage: Promote the
mugs via in-store signage
that emphasizes program
incentives and discounts.
a traffic driver of hot dispensed in the
normally quiet evening daypart. “We’re
doing almost 100,000 refills in the evening,” Strayer said. “And overall, more
than 14% of our hot dispensed program
comes in refills.”
The company has started a similar program for its CDBs, selling more
than 50,000 cold refills annually at all
stores. “That’s not insignificant but
we’re looking to launch a new program with the same vigor as our coffee
program,” Strayer said. And he’s confident the program will generate the
same success.
“There’s no question in my mind that
travel mugs drive loyalty,” he said. “With
the number of refills we have, it’s bringing customers back to our stores. The
most loyal of the loyal not only look at
the travel mug as a fixture, they identify
with our brand through our mug.”
NACS Magazine
MAY 2015
51
Participants
Participants
in beverage
in beverage
loyalty programs
loyalty programs
visit visit
c-storesc-stores
Beverage
Beverage
refill refill
mug users
mugareusers are
50%
5-7%
5-7%50%
more often
more often
and spend
and spend
70¢
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more permore
visitper visit
RaceTrac
SodaPalooza is the iconic refill program for RaceTrac, an extension of a
refill cup program that the company
launched in 2010.
The program is unique in that refills (in
some regions) are free for a limited time,
a time sensitivity that creates urgency
among customers. “If you spend $7.99 on
our SodaPalooza cup, you’re committed,”
said Dayna Reed, director of promotions
for the Atlanta-based retailer. “And then
from May through July, refills are free.”
Reed said the goal of the program “is
to make it simple for our guests,” providing them with coupons inside the cups
for complimentary items as well as bundling offers that help drive sales. “People
see that added value and take advantage
of the offers. We also try to do cross merchandising with in-store signage.”
While Reed said RaceTrac doesn’t
(yet) track the specifics of basket size
on refill customers (Reed said it’s challenging because a customer getting a
free refill doesn’t need to stop at the cash
register; hence the transaction is not recorded), “anecdotally, we’ve seen an increase in incremental sales in items like
roller grills.”
To drive awareness for SodaPalooza,
RaceTrac deployed a fully integrated
media campaign, leveraging a partner52 MAY 2015
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more likely
more likely
to purchase
to purchase
food, snacks
food, snacks
or merchandise
or merchandise
when refilling
when refilling
a mug a mug
ship with the Atlanta Braves (which
included over-the-air mentions of the
program as well as prominent ballpark
signage), while launching radio ads, billboards and social media.
While RaceTrac won’t release sales
data from its SodaPalooza program,
Reed eludes to its success. “We keep
doing it, so it’s working. As a value proposition, SodaPalooza increases guest
loyalty and promotion, it’s something
that our guests get excited about.”
Corner Pantry
When Charles Lovett joined Columbia,
South Carolina-based Corner Pantry
as its foodservice director a little more
than a year ago, one of his first tasks was
reinvigorating the retailer’s coffee program. “We didn’t have a mug program,
and we were looking for a distinctive
mug design that would complement our
existing disposable coffee cups.” Working closely with Whirley, Corner Pantry
went through a handful of versions before settling on its current iteration, an
eye-catching mug that immediately resonated among its customers.
“It took off tremendously,” Lovett said.
“We saw a 20% lift in refill sales in just the
first couple of months of the program.”
The 16-ounce Corner Pantry Mug
costs $2.99 and offers refills for 99 cents,
compared to $1.49 for a one-use cup. “So
they’re saving 50 cents plus taking advantage of weekly food pairings — like
muffins and pastries in the morning,”
Lovett said.
Corner Pantry promotes its mugs via
prominent in-store signage, radio and
on at 30 billboards in areas served by its
stores. The company also offers a loyalty component on top of the loyalty program, offering a free refill for every six
purchased. “Whirley actually inserted
the loyalty cards into the cups after they
produced them,” he said.
The company’s refillable mug program has indeed reinvigorated coffee
sales, boosting refill sales 20% in just
the past year. “We’ve seen a lift in basket
size, too,” he said, “with average transactions definitely higher.
“The program has identified us as a
major beverage competitor, which is important as we see a lot of cross-channel
competition.”
Optimizing Profit
As fuel margins intensify, credit card
fees and compliance costs continue to
impact operational costs, and competition from non-traditional channels
intensifies, the need to optimize the performance of your store’s healthiest profit generators becomes paramount. With
its inherent loyalty offering — a tactic
that builds basket size and trip frequency while pulling in coveted demographics — a strategic, refillable mug program
can build sales of cold and hot dispensed
beverages, essential categories for a successful foodservice program.
“Making your refill program work
harder for your business can drive
customer loyalty and beverage sales”
Whirley’s Cintron said. “And most important, they just work.”
Jerry Soverinsky is a Chicago-based freelance writer. He’s also a NACS Magazine
contributing writer.