Article
QSRs pull coffee off the back burner
With competition tighter than ever, brands look to better brewing for a more robust offering.
January 18, 2010
Not long ago, coffee was a minor consideration for most quick-service brands. Little thought went into the hot drink's flavor profile, and few segments beyond the donut category had much invested in the offering.
Then along came a little company from Seattle. The rollout of Starbucks stirred a national interest in coffee that raised the standard of what consumers would accept as good — and what they were willing to pay. Coupled with increased competition in the breakfast daypart, the upscale trend in coffee sent QSRs in search of better beans and, perhaps more important, better roasting techniques.
McDonald's improved its brew several years ago, and now smaller chains, including Chick-fil-A and Hardee's, are following suit. Coffee is no longer an afterthought but a necessary differentiator.
Given that the average cup of QSR coffee costs the operator 25 cents and retails around a dollar, brands also realize they can no longer ignore the impact on the bottom line.
Mitch Eastman, senior national account manager for specialty coffee equipment manufacturer Fetco, said QSRs have begun studying the elements of good brewing techniques as competition has increased for all dayparts. And they've been losing sales to coffeehouses and even c-stores, which are now in the better coffee business.
"(Considering those factors) along with trying to get more customers during more dayparts, especially at breakfast, they needed to look at coffee," he said. "They realize now what a great profit area that the coffee is to some degree."
Chains mind their brew
McDonald's turned up the heat in the QSR beverage category in 2006 with the launch of its Premium Roast Coffee. And it paid off. In the company's second quarter 2007 earnings call, McDonald's CEO Jim Skinner said the product upgrade helped boost coffee sales 30 percent. Those improvements then paved the way for the chain's McCafé espresso-based beverages.
More recently, Chick-fil-A introduced a medium-roast, 100-percent Colombian blend called Chick-fil-A House Roast Coffee, both regular and decaf, at the end of 2009. The offerings replace the chain's current Coffeehouse Light and Bistro Dark coffee.
Hardee's also has a new coffee. The chain quietly introduced the Colombian Blend Coffee in November, but except for a few tweets, is waiting for greater customer acceptance before launching a campaign, said Bruce Frazer, Hardee's senior vice president of product marketing, research and development.
"One of the things we've experienced is whenever you make lot of noise about your new coffee, you always get a lot of people saying they miss the old coffee," he said.
The company has switched its packaging for coffee, but has yet to place merchandising materials in stores.
Hardee's developed the new coffee after realizing that its Midwest and Southeast customers didn't share the same tastes as its West Coast cousin, Carl's Jr. Hardee's had adopted Carl's Jr.'s popular Channel Island Coffee a few years ago. But soon after, Hardee's franchisees were reporting that customers didn't like it.
Carl's Jr.'s customers appreciated its coffeehouse-inspired European roast. But many Hardee's stores are located in small towns that typically don't have a Starbucks or other coffee bar. So the darker roast was an unfamiliar and sometimes unpleasant flavor profile for many customers, Frazer said.
Coffee's profitability |
A cup of coffee requires about seven grams — or ¼ ounce — to make. At $6 a pound, that's 9.4 cents per ounce. Add in 10 to 15 cents for the cup and lid, and operators have a large profit margin when charging around $1 per cup (excluding equipment and filtration costs). *Source: Mitch Eastman, senior national account manager for Fetco |
Then, Hardee's began seeing consumers who ranked Hardee's as their favorite breakfast QSR but choose other brands for their favorite coffee. As important as the breakfast daypart is to the brand — 45 percent of the burger chain's sales — having customers go elsewhere for coffee was unacceptable.
"The last thing we would want is for people who really love our (Made From Scratch) biscuits to not feel like they were getting a good cup of coffee," Frazer said. "So what we're doing is just get up to the quality level that our biscuits are at."
Components of good coffee
To develop the new coffee, Hardee's R&D looked at the leading donut chains, where a good brew is essential to the experience. Those coffees were also close to the type Hardee's wanted to offer, something with a lighter roast but full flavored.
The chain addressed three main variables in its product development, looking first at the blend of coffee beans it would use. The flavor profile of coffee beans varies by the region in which they are grown, so Hardee's tried a variety of blends before choosing the profile it wanted.
Next, the company determined the degree of roast. A too light roast would be too bland, while one that was too heavy would have a bitter aftertaste, Frazer said.
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Finally, the R&D group chose the coffee's throw weight, or how much ground coffee would be used per pot. The throw weight impacts the fullness of the coffee's flavor, with a too light throw creating a bland drink and too heavy, a bitter character.
Hardee's R&D continued to play with those variables until the blend satisfied them. "We didn't stop until we had a coffee that beat (the donut brands) in a blind taste test," Frazer said.
Fetco's Eastman said that having QSRs consider elements like throw weight is an example of how their approach to coffee has progressed in recent years. Many chains had fallen into the mentality that using fewer grounds would save money. But consumers noticed the weaker coffee and defected to other brands or to coffeehouses.
"The thinking used to be that we're saving a few pennies, but in truth, if you're serving a product that's not desirable, people usually won't even tell you," he said. "They'll just not come back for your product."
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