By: Pat Pape | March 9, 2023
Hot coffee is on the rebound, but the real heroes of the category are hot chocolate and customization.
ALEXANDRIA, Va.—After two years of working from home, Marty Ruiz returned to her office on a part-time basis. On the three days she commutes, she stops at a convenience store for a rich, hot latte. Other mornings she brews java in her kitchen, adding oat milk and sweetener.
“Coffee in the morning is non-negotiable,” she said. “When I drive to the office, stopping for a cup that I can customize myself is part of my ritual. But when I work at home, I never go out that early. So, I make it myself. It’s cheaper.”
For decades, most convenience store hot dispensed beverage sales occurred between 6 and 8 a.m. on weekdays. But during the pandemic, one-third of morning commuters were working at home, according to the U.S. Census Bureau. Although more employees are back in the workplace, morning hot dispensed beverage sales have not returned to pre-pandemic levels (2019) but were slightly higher in 2021 compared to 2020.
“According to the U.S. Census Bureau, in 2021, about 68% of workers drove alone to work, compared to roughly 76% in 2019,” said Jayme Gough, research manager at NACS. “That corresponds to nearly 15 million fewer people commuting.”
Convenience store coffee sales rebounded in 2021, but relative to other dispensed beverage subcategories, coffee did not recover to the same degree. The NACS State of the Industry Report of 2021 Data indicates that although coffee sales improved by 6.9% year over year to $3,976 per store, per month, this modest increase did not prevent coffee from declining from 82.6% of hot dispensed beverage sales in 2020 to 79.1% in 2021.
Coffee gross profit also rose slightly, improving by 5.2% to $2,672 per store, per month. Coffee gross margin was impacted by rising costs, however, resulting in a decline of 1.10 percentage points to 67.20%.
Sweet sales came from hot chocolate, which rose from 6.9% of hot dispensed beverage sales to 9.0% in 2021. Hot chocolate gross profit also expanded, rising to $289 per store, per month in 2021, an improvement of 35.7%, according to the NACS State of the Industry Report.
Among consumers purchasing hot dispensed beverages, nearly 90% chose coffee and specialty coffee. “From 2020 to 2021, specialty coffee’s share of the category increased from 6.5% to 9.7%,” said Gough.
“Equipment innovation, such as bean-to-cup machines, permits greater consumer customization and lets retailers better meet the needs of shoppers looking for something like a cappuccino or latte. Generation Z loves to customize their beverages as much as possible,” she said.
Read the remainder of this month’s Category Close-Up, “Hot Coffee for On the Go,” in the March issue of NACS Magazine.