Like most 20-somethings, Travis Messerschmitt loves coffee. A graduate student at the University of North Texas in Denton, Messerschmitt drinks several cups every day, usually adding milk, along with vanilla or peppermint coffee creamer.

“I’ll also try the pretty wild coffee flavors, if it’s seasonal,” he said. “But I tend to avoid spending $5 to $7 on a cup of coffee if I can.”

Messerschmitt’s most memorable coffee experience occurred not long ago at the Palace Coffee Company in Amarillo, Texas. “They put cayenne pepper and paprika in it, and it was amazing,” he said. “It’s not worth a six-hour drive out to West Texas, but if you’re ever within a one-hour radius of Amarillo, go there. I highly recommend it.”

Specialty Coffee

Specialty coffee falls into the hot dispensed beverage category, and like most foodservice categories, “hot dispensed beverages struggled in 2020 because of shutdowns due to COVID-19 and decreased store traffic,” said Jayme Gough, research manager, NACS. “Hot dispensed beverage sales fell 32.2% from 2019 to 2020, and gross profit dollars per store annually were down 34.4%.”

But when customers did pour coffee, many poured specialty brews. Despite last year’s disappointing sales, specialty coffee made up the second largest percentage of hot dispensed beverage sales (38.4%) in convenience stores.

“Single origin coffee is about as premium as you get in the convenience-store channel. Single origin imparts a very distinctive flavor and has a unique profile,” said Mark DiDomenico, director of customer success, Datassential, a market research company for the food industry. “But since January, there seems to be more of an emphasis on flavors instead of origins.”

So far, 2021 has been a big year for sweet flavors, including a toasted caramel crunch latte and a cinnamon coffee at Wawa, a Peeps marshmallow latte from 7-Eleven, a raspberry crème brûlée from Kum & Go and a rainbow cookie-flavored brew from QuickChek.

During the pandemic, “consumers got used to making coffee at home, and they’re buying premium coffee to brew at home,” DiDomenico said. “But they can’t replicate a toasted caramel crunch latte. That’s where the opportunity is for retailers to provide something that consumers can’t do for themselves at home.”

Offering a generous selection of flavored coffee doesn’t mean eliminating flavor and syrup options at the coffee bar. “People will get a cup of French vanilla that is already flavorful and sweet, and they’ll add a couple more shots of vanilla to it,” he said.

My Coffee’s Cold

Four years ago, the National Coffee Association began including statistics about Gen Z coffee drinkers in its annual report on coffee consumption trends, and the importance of that consumer group keeps growing. The generation born between 1997 and 2012 is 68-million strong and the largest age demographic in the U.S. Today, consumers between 18 and 24 have $150 billion in spending power and influence everything in the marketplace, including the coffee category.

Gen Z also loves cold coffee. According to the National Restaurant Association’s “State of the Restaurant Industry Outlook for 2021,” regular hot coffee remains the most popular choice for 47% of java fans, but cold brew coffee is the fastest-growing coffee drink, with sales increasing by 4.6% year over year.

Younger customers, especially millennials and Gen Zs‚ are looking for customized options.

“Cold brew coffee, nitro cold brew and frozen coffee beverages continue to lead the growth in premium coffee beverages,” said Jeff Ulrich, strategic account manager, BUNN, an American manufacturer of dispensed beverage equipment.

Because Gen Zs are accustomed to instant gratification—think on-demand entertainment and one-hour delivery—they have different expectations, and that attitude causes many retailers to complain that younger shoppers aren’t loyal to a brand.

“Younger consumers 18 to 24 are loyal to themselves,” said Ulrich. “They’ve never known anything but customization. They like innovation and being at the forefront. They like cold coffee and convenience stores, and 40% of 18 to 24 year-olds wish their local c-stores had more cold coffee offerings.” Cold coffee is a blank canvas for younger consumers. “They like that they can customize [their beverages], because that’s what they’re used to,” he said. “As for cold coffee in a can, the flavoring is pre-set. But if you have dispensed coffee, you can mix, match, add flavors or do whatever you like to your drink. Putting in different flavors, syrups and creamers gives them the ability to make it theirs.”

Coffee-to-Go

In 1964, a Long Island 7-Eleven store offered consumers the first coffee-to-go, a product that quickly became the norm, and this year, 7-Eleven began tweaking its coffee program to allow more customization.

“Between the coffee machines and toppings bar at select 7-Eleven locations, you can create over 3,000 different menu items, so we offer something for everyone,” said Dave Strachan, innovation implementation leader, 7-Eleven. “We’ve dramatically expanded and enhanced our coffee offerings in more than 1,500 stores across the country, including in Los Angeles, San Diego, Washington, D.C., Manhattan and Queens and many cities across Virginia, New Jersey and Maryland as part of our biggest beverage and food renovation ever.

“Younger customers, especially millennials and Gen Zs, are looking for customized options, whether that be the shopping experience itself or menu customizations,” he said. “Where we have revamped our coffee innovation, we’ve received great feedback. Customers love the different customizations available. Even more so, they love the low cost compared to other retailers as the cost is determined by the size of the cup, not what’s in it. That allows customers to get creative without paying extra.”

Transparency

Gen Z also expects transparency in the foods and beverages they consume. “Sustainability is a big buzz word right now, and 73% of consumers say they’d change their coffee consumption habits to ensure their coffee was sustainable,” said Scott Reed, communications and data
specialist for BUNN.

One thing helping to grow the cold coffee business is the fact that “there is equipment available to prepare it consistently,” said Jason Greb, regional account manager, BUNN. “Even before the pandemic, we saw a lot of operators looking for ways to reduce waste and present a consistent, fresh-ground product. Bean-to-cup technology is a way retailers can differentiate themselves and put a better, more premium product in front of the customer.”

While coffee lovers can find bean-to-cup coffee in most large markets, there are still opportunities to kick an existing coffee program up a notch with new brewing technology. In 7-Eleven stores with the enhanced program, “touchscreen machines allow customers to brew custom hot coffee drinks, such as lattes and cappuccinos, in seconds with coffee beans that are ground fresh for every single serving,” Strachan said.

The stores also feature self-serve taps that let customers be their own baristas, pouring cold beverages like nitro cold brew, cold brew and tea and creating custom orders.

Updated beverage equipment can be pricey, but the investment can be worth it for the right operator. “An average convenience store doing 80 to 100 cups of coffee a day can see an ROI
on bean-to-cup equipment in two to four months,” Greb said. “The life span on the equipment is seven to 10 years, and a lot of that has to do with the store’s water quality and whether the retailer follows the recommended maintenance schedule.”

No matter what kind of coffee a store serves, always start with the basics, he added.

“The key to any coffee program is freshness and cleanliness. That’s never going away,” said Greb. “As we emerge from the last 18 months, this is a great time to start something new. New consumer habits are forming every day, and now is the time to be innovative.”