Convenience chain 7-Eleven has begun selling coffee with an herbal boost of ginseng, guarana and yerba mate to attract consumers hooked on Starbucks and Red Bull. Called Fusion Energy, it's the first mass-marketed java to capitalize on the swelling popularity of functional drinks. The newest entry in the competitive $18 billion coffee-to-go market is just the beginning of what promises to be a new platform for the convenience-store chain of juiced-up joes that enhance immunity, mental focus and appetite control.
"We saw so many customers were looking for energy beverages and wondered: could we possibly look for an energy product in a coffee product?" said Donald Driver, 7-Eleven coffee-category manager. Energy drinks are the fastest-growing segment in the convenience store's cold vaults, up 20% so far this year compared to the same period last year. Moreover, consumers ages 18 to 24 who are increasingly downing energy drinks in the morning are also the fastest-growing segment of coffee drinkers. The total daily coffee habit for that age group has nearly doubled in the past three years, according to the National Coffee Association, with 57% of them consuming coffee every day.
Ready-to-drink-coffee volume grew 10.4% to 43 million gallons last year, according to Beverage Marketing Corp., while energy-drink volume grew 49.1% to 227.4 million gallons. Merging the two trends was a no-brainer at 7-Eleven, where one in four sales involve coffee, which contributes 6% of total sales and 12% of profit.
The Fusion Coffee brand is sold from decanters with bright-yellow rims and handles to differentiate it from the dozen other varieties and flavors on the coffee bar. 7-Eleven supported the launch mainly with a video news release and bold yellow-and-black in-store displays and at gas pumps at co-branded petroleum units. It set a deal with USA Today to promote the brand on newspaper racks, offering a free paper with a 24-ounce cup of coffee. It also bought quarter-page ads in the paper on Mondays and Fridays on the back page in the sports section to take advantage of March Madness readership. FreshWorks, Dallas, a virtual shop from Omnicom Group comprising team members from Tracy Locke, TPN, Integer and Dieste Harmel & Partners, is 7-Eleven's agency.
Within six weeks, 7-Eleven's line had helped push coffee sales and units up double digits, especially on the West Coast and in Texas; the energy coffee accounts for 11% of those sales. "In just a month and a half, it's been amazing what this product has done," Mr. Driver said. Franchisee Sajid Ahmed, who owns four stores in Chicago's southwest suburbs, keeps two pots going at a time. He said of the 300 to 350 total cups of coffee he sells per store daily, about 65 to 70 cups are the Fusion Energy coffee. "They're saying this is the future of coffee," he said.
Source of nutrition
Tim Stock, managing director, ScenarioDNA, says the brand is in line with a trend he calls "ironic consumption," where both baby boomers and Gen Y pursue more-healthful beverages but in different ways. "Gen Y buys potion beverages while their boomer parents down drinkable yogurts to build their immunity," he said. "What's going to be critical for 7-Eleven is keeping up with the ingredients. The consumers that respond to the Fusion program will be packing a lot into that moment of imbibe. They'll be seeing their coffee as a source of nutrition and looking for it to do more and more as new functional-foods concepts get introduced."
That's coming soon. In the fall, the chain plans to unveil Fusion Defense to boost immunity and is mulling iced and frozen versions of the line. It's too early to tell whether the strong early results will continue, but industry observers think 7-Eleven is on to something. They're not alone. Beverage marketers in traditionally indulgent segments under pressure for having empty calories are also going functional. Soft-drink giant Coca-Cola Co. last week launched its Diet Coke Plus, enhanced with vitamins and minerals, while PepsiCo this fall will launch Tava mineral-enhanced sodas.