GOURMET COFFEE PERKS UP FAST-FOOD

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The Starbucks revolution has caused fast-feeders far and wide to wake up and smell the java.

Coffee sales are back on the upswing, but consumers aren't buying ground coffee at supermarkets to make at home. Instead, they're heading to McDonald's or Texaco or 7-Eleven for a fresh cup.

And flavored coffees and espresso drinks-highly profitable beverages that in some fast-food stores cost as much as a sandwich-aren't just for Starbucks Coffee Co. anymore. Truckers who once stopped at the Texaco station for a thermos of strong, black joe may now instead choose a cup of hazelnut coffee. Or a grande cappuccino. Or a mocha latte.

Retail sales of specialty coffee beverages doubled to $1.5 billion from 1979 to 1989 and are expected to double again by the end of the decade, according to the Specialty Coffee Association of America. And automatic espresso machines that grind and brew beverages are making it possible for almost anyone with an electrical outlet to serve the Italian-style coffee.

This is old news in Seattle, Starbucks' home market, where 25 McDonald's Corp. restaurants house automatic espresso machines and 85 Burger King Corp. outlets have manual machines.

And throughout the Pacific Northwest, Texaco, BP Gas and Chevron Corp. stations have automatic machines.

Burger King franchisee Lee Fritz, president of the Western Washington Association of Burger King franchisees, said: "Most of the kids in the store already know how to make espresso anyway."

David Lamb, owner of a Subway Sandwiches & Salads store in Seattle, said his store sells 50 to 70 cups of gourmet coffee a day, spurring sales of his new breakfast menu.

But interest is brewing outside the Pacific Northwest. McDonald's franchisees in California, Ohio and Connecticut are also testing espresso, but a company spokeswoman said McDonald's currently has no plans to take espresso national.

McDonald's East Coast franchisees recognize the potential in promoting even regular coffee these days. A new TV commercial from regional agency Arnold Advertising, Boston, touts the special blend of beans used in McDonald's regular coffee.

Aside from 12 stores in Washington, the 268-unit Starbucks has not yet entered the Eastern market, where land and labor costs are high. Both Starbucks and Chock Full o'Nuts Corp., a New York-based marketer of specialty coffees, have announced plans to develop stores in New York and Boston this year.

Restaurant analyst Ron Paul of Technomic, Chicago, said though Starbucks has already set the standard for coffee quality, McDonald's and other fast-food chains have an edge in convenience.

"Maybe it's not as good, but I can get it through a drive-through window," he said.

Surprisingly, espresso has been relatively slow to develop at convenience stores, where regular coffee sales have always been brisk. Southland Corp.'s 7-Eleven is the front-runner, testing automatic Acorto machines in 50 stores in the Seattle and Portland, Ore., markets. With 6,100 stores in the U.S. and Canada, 7-Eleven is the largest convenience store chain and has heavily promoted its coffee.

AM/PM, a division of the Atlantic Richfield Co., is testing espresso in 10 Seattle stores, and Circle K Corp. carries it in two Seattle stores.

What seems to be catching on more at convenience stores is flavored coffee. Last March, 7-Eleven unveiled a Cafe Select line of 18 flavored coffees nationwide with a six-week radio campaign from J. Walter Thompson USA, Chicago. The first three weeks of the "Not the Same Old Grind" campaign promoted regular coffee, switching to commercials for flavored coffee in the second three weeks.

In Chicago, 7-Eleven competes for coffee sales with White Hen Pantry Inc., the 365-unit chain based in Elmhurst, Ill. When 7-Eleven began promoting flavored creamers last spring, White Hen agency Jordan Tamraz Caruso, Chicago, countered with a radio campaign positioning White Hen as "The coffee place" and touting the chain's brewed flavors.

Last October, WaWa began pouring six different flavors in its 510 WaWa Food Markets on the East Coast. A radio spot from Earle Palmer Brown & Spiro, Philadelphia, that ran in Novem- ber to promote the flavors boosted coffee sales substan tially, said Bever age Planning Manager Gus Durso, and WaWa will test espresso in sev eral Philadelphia stores this year.

Starbucks has spawned a gaggle of innovative and unlikely gourmet coffee retailers. Krispy Kreme Doughnut Corp., Winston-Salem, N.C., a doughnut marketer and retailer, will blaze new trails this month with double-drive-through dessert and gourmet coffee stores in Memphis, Tenn.; Cincinnati; and Indianapolis.

The one major coffee brewer that hasn't pushed specialty coffee, at least for the moment, is Dunkin' Donuts. The No. 1 doughnut chain has sold coffee beans in its stores for more than a decade, with TV and radio support for two years from Ally & Gargano, New York. Now, the chain is testing flavored coffees at 20 stores in Boston, a spokesman said, though Dunkin' Donuts is not making any major push to develop the product nationally.

But with coffee accounting for roughly half of total sales, it may not be long before gourmet coffee is on the front burner.M

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Espresso machines are finding homes in some unlikely places: at a Texaco minimart (above) and in the land of the golden arches (inset).

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