Fresh coffee a cash cow for Taiwan’s convenience stores

CITY CAFÉ at 7-Elevens sold about 300 million cups of coffee in 2017, and sales continue to grow because of the company's focus on getting each cup right.

In the land of tea, the humble cup of freshly brewed coffee has emerged as a major driver of sales and profits for Taiwan’s convenience stores, leading them to hone their strategies to take full advantage of local consumers’ growing coffee demand.

Sales of fresh coffee rose 17 percent in 2017 to NT$16 billion (US$520 million) at Taiwan’s five convenience store chains — 7-Eleven, FamilyMart, Hi-Life, OK Mart and TSC Million — according to the Fair Trade Commission’s annual survey on convenience store chain sales last year.

That accounted for 40 percent of the NT$40 billion in beverages those chains sold, the data showed. Notably, coffee ranked fifth in terms of sales by product at convenience stores, after tobacco, other drinks, sandwiches and hot meals, but it had a gross margin of 50 percent, the highest of any product category sold in those stores, the survey found. That may be why the chains put such a high priority on making their coffee offerings appealing to consumers through high-quality requirements, branding, and other marketing strategies.

Lillian Lin, head of public relations at President Chain Store, which operates 7-Eleven, said that CITY CAFÉ at 7-Elevens sold about 300 million cups of coffee in 2017, and sales continue to grow because of the company’s focus on getting each cup right. “We insist on high standards in eight areas” that ensure consumers will enjoy a good, high-quality cup of coffee every time in a fashionable atmosphere, Lin said.

The eight factors, she said, were the water, machines, roasting process and coffee beans used, the people making it, the coffee’s message and visual aesthetic, and the pleasure derived from drinking coffee, she said.

The brew’s success, however, was not always a given at 7-Eleven. President Chain Store made inroads into Taiwan’s coffee market with drip coffee in 1986 and a “Street Coffee” brand in 2001, but neither gained popularity because the coffee craze had yet to take off in a country that was still in the habit of drinking tea.

It was not until the company successfully launched the CITY CAFÉ brand in 2004 that its coffee sales started making a difference. FamilyMart joined the club in 2009 with its “Let’s Cafe” brand, which generated more than NT$3 billion in revenues last year.

Huang Cheng-tien, head of FamilyMart’s fresh foods department, said FamilyMart’s coffee sales have shown steady growth because of the company’s membership program and the refining of its brews, and it is targeting NT$3.5 billion in coffee revenues this year.

Because coffee drinkers are generally loyal to one vendor and have a constant demand for the drink, FamilyMart said it decided to launch a line of coffees last year each made from single bean from specific farms to give consumers the taste of where the coffee is grown.

In just six months, the company has sold NT$150 million worth of the “single origin, single bean” freshly brewed coffee at FamilyMart chain stores around Taiwan, Huang said.

Not to be outdone, Hi-Life has adopted a strategy of promoting hot coffee drinks flavored with ginseng in colder months, and OK Mart showcases a super floating ice coffee to appeal to consumers. By the end of 2017 there were a total of 10,662 convenience stores around Taiwan, or one for every 2,211 people.

The density is thought to be the second highest in the world, trailing only South Korea, which had one convenience store for every 1,452 people as of the end of 2016, according to data compiled by the Fair Trade Commission.