The Reinvention of Sweet

Published in C-Store Canada, November-December 2009:

Energy drinks have made a big splash in the retail market, with such brand names as Red Bull and Rockstar often visible as soon as you walk into a convenience store.
That’s a big change from 10, 15 or 20 years ago, when the highly caffeinated Jolt Cola was practically the only recognizable "energy" drink of any kind. (And it’s really nothing at all like the energy drinks of today.)
Now fledgling entrepreneurs and more established firms have set their sights on another high-energy niche in the market with energy mints, gums and similar confections.
We popped a mint or two and had caffeinated discussions with some successful players in the energy confectionery game.

Luke Van Vliet is business development manager for Toronto-based Big Sky Brands, which markets the Jones and Warp energy mints.
While the extra energy in Jones mints comes from caffeine and taurine, Van Vliet says Warp, on the market for about 10 years, has "more natural" verve enhancers. The key Warp energy ingredients are ginseng and guarana.
To the original peppermint Warp the manufacturer has added green tea and cinnamon varieties.
Who buys these products? "Typically teens and young adults," Van Vliet observes.
"It does veer toward the lower range of the demographics as far as age goes. However, there are customers in the older demographics who will grab the energy products instead of grabbing a coffee.
"Our strategy has kind of changed since the Warp launch back in 1999. It was innovative at the time, as there were really no energy confections to speak of on the market at the time.
"At the beginning, it was a huge part of the strategy as far as the company goes, but since then we’ve kind of moved on and our strategy has changed. We’ve diversified."
The mints are a success, though not nearly of the same magnitude as energy drinks.
There’s no Red Bull-sized success in the energy confectionery market, Van Vliet notes. "I would say that the reason is that people don’t really want to eat caffeine as much as they want to drink it."
He has some ideas on how retailers should place energy mints for consumer response. "Well … you obviously want to get the counter space (at point-of-sale) as much as you can. You get the best profile there," he says.
"Other than that, if you put it on the mint rack it probably would kind of get lost and maybe lose its meaning. It’s hard to communicate what you’re trying to sell on the mint rack.
"You could merchandise it in front of your energy drinks, with maybe a clip strip or some kind of hanger on the cooler door."

Justin Waxman has a success story in the energy gum market and it starts in his university years, which weren’t long ago.
He and Eric Pilon-Bignell were shooting hoops in Waxman’s Hamilton backyard when an errant shot knocked over Pilon-Bignell’s Red Bull.
In reaction, a peculiar remark came out of the latter’s mouth: "They should make an energy drink that doesn’t spill."
At first Waxman thought the response silly, but then he got to thinking about how Pilon-Bignell’s wish could be realized and turned into business vehicle.
Launch Energy Drink Gum – enhanced with caffeine, taurine and B vitamins – was born while Waxman was still completing his business degree.
Waxman marketed the product at McMaster University while Pilon-Bignell introduced the product to students at Queen’s University, where he was in engineering. Nationwide distribution began in January 2009.
"It started as a university product and it kind of ballooned from there," Waxman says at his Hamilton office.
"There’s a learning process that needs to take place, about gum as a delivery vehicle for an energy ingredient," he adds.
"A lot of it is just getting it into people’s hands, getting them to try it."
To that end, packaging and placement are critical. A name containing the words "energy drink" helped define the product, of course. But packaging Launch in narrow cans really drove home the point that it’s no ordinary chewing gum.
Such retail heavyweights as 7-Eleven, Mac’s and Husky have further cemented the link by placing Launch next to energy shots like Red Bull and Monster.
Waxman sees "unlimited" growth potential for Launch. "One of our keys is the constant growth of our team of grassroots Launch reps, athletes and brand ambassadors," he says. "We are truly embedded within the energy and extreme sports culture and our social, customer-focused growth strategy is paying dividends."

South of the border, another young company is celebrating a major breakthrough in the Canadian c-store market. Revive Energy Mints snagged a deal with 7-Eleven Canada in early September.
Revive mints contain caffeine, green tea, ginseng and anti-oxidants for what the Denver-based manufacturer calls "sustained energy."
Its retail program got a makeover with the addition of the 8 Hour Power Pack, a two-mint (instead of eight-mint) package that gives consumers a chance to try Revive at a low price.
Revive Energy executive co-chair Justin Biel says the core market is males "ages 16 to 30 or 35" – people who’ve "grown up with Red Bull."
The company is less than a year old and, like Launch, was founded by two 20-something entrepreneurs. Biel says "about a year and a half" of product development preceded Revive’s launch in early 2009.
Store placement is ideally near point-of-sale for visibility and impulse buying, Biel says.
He agrees distinguishing energy mints from regular mints is crucial to giving sales the kind of boost Revive is designed to give consumers.
"That’s definitely a marketing challenge from our end," he avers.
But he says the young company is up for it, as evidenced by how it’s “been growing on a regular basis, month after month.
“We’re growing upwards of 15 or 20 per cent per month right now in regards of the number of distributorships that we’re procuring. That means we have a lot of people out there promoting our product.
"We are attaining some of these larger retail accounts in such a short period of time. To us that really means that we have a very, very good niche product and we’re satisfying consumer demands that weren’t being met in the energy product market."

Brewing Profits

Published in C-Store Canada, July-August 2009:
A recession plus competition from a mighty Canadian coffee Goliath doesn’t equal bad times for java sales at Mike Hammoud’s Newsbreak store in Dartmouth, N.S.

“It is on the upswing, definitely,” says Hammoud. His Dartmouth store has had considerable success selling hot coffee, even though it’s located next to a Tim Hortons.

“The hot drink market right now is something that probably needs more focus on it by convenience store retailers,” he adds.

Hammoud, who is also president of the Atlantic Convenience Stores Association, offers two big reasons for that position: margins and traffic.

The profit margins on coffee, tea and hot chocolate are significantly higher than on such typical c-store fare as cigarettes and candy bars, he notes. And selling a good cup of joe can boost customer traffic, with many of those extra customers buying other items with their coffee purchase.

Laniel Canada sales director Bob Charbonneau’s read on the c-store coffee market differs slightly from Hammoud’s.

“With the current economic situation, it’s flat,” Charbonneau says at the coffee and equipment supplier’s headquarters in Montreal.

“But normally it would be up,” he adds. “For the past two years we’ve seen the convenience stores buying more and more coffee machines for their premises.”

Charbonneau says one big advantage convenience stores have over the coffee-and-doughnut shops is, well, convenience. “When they stop at Tim Hortons, they have to wait in line. When they go to the convenience store, they get their coffee and pay and leave – it’s faster. The problem at convenience stores is, most of the time they don’t offer quality coffee.”

That Newsbreak store’s proximity to a Tims hasn’t hindered Hammoud in his pursuit of java success, as he isn’t trying to go head-to-head with the coffee-and-doughnuts giant by offering a near-identical product.
“You cannot directly compete with Tim Hortons and expect to succeed,” he says. “You just can’t.”

Instead, he has built Newsbreak’s coffee program on quality, with high-grade, organic, Fair Trade beans. A cup costs a little more than Tims charges, but it’s a way different product, and that has garnered loyal customers.

In his books, it’s all about quality. If you use an average coffee, you likely won’t have great success; offer top-drawer stuff and coffee sales will perk up.

The goal of a coffee program should be to get customers to think of a store as their java destination, says Marie-Claude Dessureault of gourmet coffee supplier Van Houtte. “The only way c-stores are going to be successful in creating a destination is variety and quality. That’s one reason why so many are associating their coffee programs with a successful brand.”

Canterbury Coffee’s Gary Senez agrees that quality is indeed the key to winning the hearts of coffee swillers is quality.

“Like anything, stores have to have good product,” he says from the specialty coffee roaster’s head office in Richmond, B.C. “The product has to be fresh, and they have to have the selection that the customers are looking for.”

Senez says it’s important to remember that the competition includes big companies that emphasize the freshness of their fare. “If you’re going to be in the same market as these guys, you’ve got to be fresh.”
Okay, so quality is important. No surprise there. But how do you deliver quality?

“My suggestion for a very good coffee program is to use a whole-bean system,” Hammoud says. Key components in his prescription include finding a local roaster, offering a variety of coffees (possibly including a flavoured coffee or two), and grinding it on-site.

Senez agrees it all starts with good beans, and says that’s why Canterbury sells 100 per cent Arabica beans of the highest quality.

It’s also important to brew with the right coffee-to-water ratio and find the right grind for your needs, he says. (The finer the grind, the more bitterness.)

Don’t be stingy and load the brewing machine with too little coffee for a good brew, adds Charbonneau. “If a store cuts on costs with a smaller bag, if it tries to get away with making more with less, then it will not make a quality cup and the customer will not come back. But if it does a strong coffee, a coffee that people like, then customers will return.”

Equipment-wise, Charbonneau says a thermos system is usually a good choice for convenience stores.
“Thermos systems require some time from the store owner to make the coffee in the morning and (replenish the supply), but this is fast for the customer. When the customer comes in, he just pushes a lever and gets the coffee right away.”

Thermoses retain flavour and temperature for about two hours, making them much better choices than any hot-plate system that cooks the coffee to an unpleasant bitter taste in that same time period.

“The other fast way to do it is with an automatic machine, but then it’s a much bigger investment, which is not good for every convenience store,” Charbonneau remarks. “Some don’t want to invest that kind of money. These machines can cost $5,000, while a small thermos machine would cost $500.”

Initial cost shouldn’t be the only consideration, however. Dessureault, Van Houtte’s director of brewing technologies, points out that machines that brew one cup at a time cost more initially but can save money over the long term because they produce “absolutely zero waste.”

And you’ll save on labour with single-cup equipment, she adds, “because you don’t have to make new coffee every 90 minutes.”

Making sure the machines are running as intended is an important of quality control, Charbonneau adds.
“A key part of the strategy would be to make sure that the machines are well-adjusted, because a machine can do a good coffee but the adjustment is not always there. Tim Hortons has standards, and they make sure that the standards are always maintained.”

Convenience stores typically don’t maintain such standards due to personnel limitations, he says, because proprietors and personnel have little time to maintain equipment.

For location, Charbonneau and Dessureault both recommend any place in the store that is highly visible and say signage is important, to make sure store visitors are aware coffee is available.

“You need to draw people in,” Dessureault says from Montreal. “If you tuck it in a corner, it doesn’t look like a destination.” The hot beverage station shouldn’t look like an afterthought, she says.

Like Hammoud, Charbonneau has seen proof that c-stores can compete with Tims-like neighbours. He cites a downtown Montreal store that, undaunted by the presence of two coffee purveyors nearby, implemented a coffee program with great success. So much success, in fact, that its owners copied the program at other stores of theirs.