Hot Beverage Buzz: Trends Stirring Up Convenience Stores

Americans love coffee.

TikTok and Instagram Reels are flooded with “hacks” to perfect your latte and instructions on how to order the newest secret menu items from Starbucks and Dunkin’. And in case you forgot to mark your calendar: January 18 is National Gourmet Coffee Day (followed six days later by National Coffee Break Day on January 20), March is National Caffeine Awareness Month, September 29 is National Coffee Day, and Irish Coffee has a whole week dedicated to it in the fourth week in January.

The data reflects the obsession: According to the National Coffee Data Trends by the National Coffee Association, 18% of Americans consumed a latte in the past week, and 15% consumed a cappuccino.

Convenience stores have long been a staple for the morning commuter’s coffee, but they’ve also been hopping on newer trends by releasing coffee LTOs year-round and constantly adding new coffee types and flavors. The category is constantly evolving and retailers need the latest data to keep up.

Here is what NACS State of the Industry Data says about convenience store sales trends and the opportunities we may see in 2024:

Sales and Profit Trends in Hot Beverages

NACS State of the Industry Report® of 2022 Data shows that hot dispensed beverages were 9.4% of foodservice sales. This may seem small, but it maintained the highest gross margin among foodservice categories at 66.92% in 2022—making it an extremely profitable category for convenience retailers.

The category (which is primarily driven by coffee subcategory sales) was one of the hardest hit during the pandemic and is still struggling somewhat to build itself back. Hot dispensed beverages decreased in sales by 0.4% relative to 2021, falling just slightly from $6,173 to $6,147 per store, per month.

There was, however, a bright spot within the category. Cappuccino and specialty coffee, which was almost 20% of category sales (18.7%) in 2022, was up double-digits in both year-over-year sales and gross profits. Sales went up from 10.0% to 11.9%, and gross profits increased from 59.86% to 60.89%.

Commuting rates battered by the pandemic are slowly creeping up thanks to the growth of hybrid working styles and more employees being called to work in-office. With about 4 or 5 Americans reporting having coffee with breakfast, and the morning daypart (6:00 a.m. to 8:00 a.m.) capturing almost a quarter of hot dispensed beverage sales (24.85%) in 2022, the demand for a morning cup of coffee never left—but there’s still a huge gap that convenience retailers can take advantage of.

Challenges and Opportunities in Hot Beverage Sales

Customers are expecting complex, coffee shop-quality drinks from their local c-store, and are also leaning more towards barista-style beverages that are sweeter and more indulgent than a classic cup of coffee. Many retailers have already begun to update their offerings by bringing in barista-style beverages and creating menus that rival a coffee shop.

Hot dispensed beverage LTOs can be flashy, easily hopping on flavor trends popular on social media, making them a perfect fit for most convenience store marketing strategies.

But did convenience retailers do enough to bring back hot dispensed beverage sales in 2023?

Stay tuned. NACS State of the Industry data will soon show how the category performed in 2023, and will be presented at the NACS State of the Industry Summit on April 3-5, 2024 in Chicago.