Mon, Dec 14, 2009 page12

• FEATURE : Competition to sell fresh coffee heating up quickly

  • By Jason Tan / STAFF REPORTER
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  While many consumers are attracted to 7-Eleven’s City Cafes (城市咖啡), many do not know that Taiwan’s leading convenience store has long been serving freshly brewed coffee.

  It used to offer coffee brewed in a pot, but unlike their Western counterparts, Taiwanese consumers at the time didn’t have a taste for coffee.

  “We poured out more coffee than we sold,” said Lilian Lin (林立莉), public relations manager of President Chain Store Corp (統一超商), the operator of 7-Eleven in Taiwan.

  But things started to change when Uni President Group (統一集團) brought Starbucks into Taiwan 11 years ago. The US coffee chain quickly stirred up a caffeine fad. E-Coffee (壹咖啡) emerged in 2002 and aimed at coffee drinkers on a budget, offering cups for as little as NT$35.

  In July 2004, the first outlet of 85º (85度C) opened in Taipei and made waves in the market with its cake-and-coffee priced from NT$69. The Taichung-originated company swept consumers off their feet with “down-to-earth” price tags.

  Sensing that more people were making the switch from tea to coffee, 7-Eleven re-launched its model in 2004 by unveiling City Cafe and installing coffee machines behind store counters.

  Now, 3,300 of its 4,800 stores nationwide serve coffee at prices ranging from NT$25 to NT$50.

  The homegrown brand has gained momentum among consumers — especially with office workers, who often grab a quick cup during their lunch break.

  Lin said that total sales of 7-Eleven’s City Cafe coffees would grow threefold to 90 million cups this year.

  The success of coffee at 7-Eleven has changed Taiwan’s coffee landscape, with fast food operators now also aiming to grab a slice of the pie.

  Last month, McDonald’s said it would raise sales of its coffee by 60 percent within two years to 50 million cups, up from 30 million cups this year.

  “There is a growing number of young adults who just love sipping coffee,” said Vicky Lee (李意雯), McDonald’s Restaurant (Taiwan) Co marketing director.

  The international fast food giant is selling about 10 types of coffee, including latte and cappuccino, with prices ranging from NT$30 to NT$65.

  Coffee sales account for nearly 6 percent of total revenue at McDonald’s in Taiwan and the company expects the portion to rise in line with the growing population of coffee lovers.

  McDonald’s Taiwan switched to 100 percent Arabica coffee beans in 2006, which helped boost coffee sales by 50 percent over the past two years, Lee said.

  To ensure it does not lose out in the brewing “coffee war,” McDonald’s announced last month that it had improved the taste of its American coffees by using new blends designed by US coffee expert Kenneth Davids, cofounder of The Coffee Review Web site.

  Vendors, including McDonald’s and 7-Eleven, said there was no official tally on the market size for fresh coffee in Taiwan, but agreed the potential was promising given that more people were making coffee a daily habit.

  “When Starbucks debuted here, it changed the perception of coffee and helped make people willing to pay for a top-class latte,” said Hsu Yin-Chieh (�?�), a marketing and distribution management professor at National Kaohsiung First University of Science and Technology.

  Hsu said that when 85ºC made its impact with an eye on the mass market, sipping a latte while nibbling on cake was the hip thing to do — not to mention the low cost.

  Later, 7-Eleven rapidly grabbed a share of the market with its nearly ubiquitous outlets. With economy of scale enabling it to save on material costs, the company can offer cheaper cups, Hsu said.

  “This is a natural move for franchise operators, including 7-Eleven, who want to develop new products to boost revenue,” said Daniel Liu (劉汝駒), secretary-general of Taiwan’s Association of Chain and Franchise Promotion (台灣連鎖加盟促進協會). “Larger coffee chains will feel the heat.”

  Dante Coffee (丹堤咖啡) told the Chinese-language Apple Daily on Dec. 6 that its take-away coffee sales were affected by convenience stores. To weather the impact, Dante is offering 25 percent off for its large lattes until the end of the month. But Liu said it didn’t mean the bigger chains would be squeezed out of the market due.

  They will have to continue innovating in services, product tastes and a sit-in environment to keep customers coming back, he said.

  Despite its late entry to the market, Taiwan FamilyMart Co (全家便利商店) is also jumping on the bandwagon.

  FamilyMart joined hands with King Car Industrial Co (金車) to sell the latter’s Mr Brown Coffee (伯朗咖啡) at its 1,200 stores — half of its total in Taiwan. It also plans to expand store numbers that offer Mr. Brown Coffee to 1,700 by 2011.

  With a slogan of “Take a break … Let’s cafe,” it aims to appeal to convince urbanites to let their hair down and sip a cup of joe at prices similar to those at 7-Eleven. The company recently recruited local star Mark Chao (趙又廷) as its spokesman to hype the product.

  Pan Jin-tin (潘進丁), FamilyMart chairman, told reporters last month that it planned to invest NT$150 million in new coffee machines and pour another NT$30 million (US$930,000) into its marketing campaigns to boost brand awareness.

  Meanwhile, 85ºC has expanded abroad and is now serving customers in China, the US and Australia. Its successful expansion in China has grabbed domestic media attention; reports say its price of 10 yuan (US$1.50) per cup and 24-hour service has created a solid fan base there, with shops seeing long lines as they become hangout spots for hipsters.

  But 7-Eleven expects its City Cafe to continue winning over coffee drinkers.

  “It is not solely about the price factor,” Lin said on the growing heat of the freshly brewed “coffee competition.”

  “If the taste sucks, consumers won’t buy the coffee, even if it’s very cheap,” she said. “The taste factor will decide who wins the battle.”
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