8 minute read
FEATURE: HOT BEVERAGES
Brewing resilience
Hot beverages remain a key profit driver in convenience, despite softened growth and evolving consumer preferences.
Words Deb Jackson
IN THE EVER-EVOLVING landscape of Australia’s petrol and convenience (P&C) retail channel, hot beverages – particularly coffee – have long played a pivotal role. While the category experienced a marked cooling in growth during 2024, it continues to play a strategic role in driving margin and customer engagement across the sector.
According to Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), the category remains resilient – even as it adjusts from rising prices over the last two years. Automatic push button coffee unit sales have continued to come under pressure from increased QSR market competition, barista coffee unit sales continue to deliver strong growth aligning with the Australian consumer’s love of great barista coffee.
“After two years of double-digit value growth, it’s no surprise to see the category settle back somewhat,” Foukkare says. “In 2024, hot dispensed beverages grew by just +2.2 per cent in value, which is the softest we’ve seen since the COVID period. But that still represents a $9 million increase, taking the category to $433 million in annual sales – proof that coffee continues to be a high-value traffic driver.”
Despite a second consecutive year of declining unit sales the category has held firm on margins, delivering a total margin increase of $5.5 million year-on-year.
“Convenience retailers should take heart in the fact that margins remain incredibly strong,” Foukkare explains. “Even with a slight dip from 71.9 per cent to 71.6 per cent, hot beverages are still one of the most profitable categories in-store. Retailers who deliver quality and consistency in this space are being rewarded.”
Our coffee machines are placed front and centre in-store, and we’ve introduced designated wait benches to encourage interaction between customers and baristas.
– Haydn Tierney, Managing Director, Bowser Bean Café
There are signs of a maturing category, with growth normalising after substantial price increases implemented in recent years. However, market share remains on an upward trajectory. The dollar share of hot beverages rose slightly from 4.1 per cent to 4.2 per cent in 2024 and has increased steadily from 3.4 per cent in 2019.
“What’s important now is to focus on refining the customer experience and using hot beverages as a value proposition – not just a volume play.”
With Australian capital city coffee prices now averaging $4.78 for a small flat white – far below the cost in many global cities – the P&C channel remains well positioned to appeal to price-conscious consumers seeking café-style convenience on-the-go.
Personalisation, loyalty and quality on show
Retailers across the country are continuing to invest in hot beverages, recognising the category’s enduring value to consumers – even in a tightening economic climate.
At 7-Eleven, the company’s $2 coffee offer has become a mainstay for commuters and everyday shoppers alike.
“Our freshly ground coffee continues to be part of daily routines across the country, offering quality, value, and choice for just $2 a cup,” a 7-Eleven spokesperson said.
The My 7-Eleven app plays a critical role in reinforcing loyalty and frequency, with customers receiving a further $0.50 discount on each cup. The app also provides a platform for ongoing engagement and personalisation, while the expansion of alternative milks and reusable cup discounts reflects growing customer expectations around customisation and sustainability.
APCO, meanwhile, continues to elevate its Café 24/7 offer through a focus on barista quality and local sourcing.
“Cappuccinos continue to be the top choice among our patrons, followed closely by lattes,” said Beverley Eastgate, Category Manager – Food Service. “We’ve also seen oat milk consumption grow by 46 per cent in 2024, and piccolos are gaining popularity as our reputation for high-quality barista-made coffee grows.”
The brand’s educational campaigns, loyalty activations like ‘Win Free Coffee for a Year,’ and barista competitions reinforce APCO’s focus on craft and connection with coffee-conscious consumers.
Regional favourite Bowser Bean Café has also seen positive growth despite an extended warm season, thanks to its ongoing investment in staff training and store design.
“Our coffee machines are placed front and centre instore, and we’ve introduced designated wait benches to encourage interaction between customers and baristas,” said Managing Director Haydn Tierney.
Bowser Bean also highlights drive-through service as a significant future opportunity for the channel, combining accessibility with the quality of a café experience.
Gen Z and iced formats changing the game
From the supply side, changes in consumer behaviour are clearly visible. According to Jono Goldthorpe, Coffee Ambassador at Grinders Coffee, the category’s performance has softened in the P&C space but remains robust in other retail channels.
Gen Z often enters the category via indulgent iced drinks, customised with flavours to suit their personal tastes.
– Jono Goldthorpe, Coffee Ambassador, Grinders Coffee
“After consecutive years of double-digit growth, the last 12 months have slowed to around 2.2 per cent growth in P&C,” Goldthorpe explains. “However, retail coffee sales overall continue to grow steadily with no signs of slowing.”
One of the standout trends is the rise of customisation and indulgence, especially among Gen Z consumers.
“We’re seeing increased demand for ancillary products such as syrups, and iced coffee formats are rapidly growing,” said Goldthorpe. “Gen Z often enters the category via indulgent iced drinks, customised with flavours to suit their personal tastes.”
Grinders also points to health and wellness, including the continued rise of plant-based milk alternatives.
According to their research, 30 per cent of milk-based coffees sold in cafés now use a dairy alternative – a trend being mirrored in convenience.
Loyalty and omnichannel marketing are also critical tools for driving frequency.
“Loyalty cards and app-based rewards work really well in this channel,” Goldthorpe added. “With 52 per cent of decisions made in-store, presenting cross-sell opportunities – like bundling coffee with food or fuel – is key to increasing spend.”
(Sources: AACS State of the Industry Report 2024; CMA Shopper Report 2024; CCEP Commercial Insights; Australia Shopper Mega Research, June 2024.)
Modest growth with clear opportunities
Sustainability also remains a core concern. Retailers investing in reusable cup incentives, transparent sourcing, and compostable packaging are better aligned with consumer values.
The near-term forecast for hot beverages in the P&C channel is cautious but optimistic. While cost-of-living pressures and price increases have impacted unit sales, the channel’s convenience, value proposition, and evolving quality position it well for future gains.
Grinders Coffee projects +6.7 per cent CAGR growth in the channel by 2030, driven by returnto-office trends and the continued appeal of quick, accessible indulgences.
“Purchasing a hot coffee remains one of the top reasons for shoppers visiting a P&C outlet,” said Goldthorpe. “The channel offers great value, and we expect it to bounce back stronger as economic conditions improve.”
In a market that’s maturing and recalibrating postpandemic, the hot beverages category continues to offer strong margin, brand engagement, and shopper loyalty opportunities.
As the category shifts from high growth to steady value, those who focus on customer experience, flexibility, and loyalty will be best placed to thrive.
FUTURE SIPS: WHAT’S BREWING NEXT?
Innovation and changing habits are reshaping what hot beverages mean in the P&C space. The next generation of hot beverages will be customisable, tech-enabled, and purpose-driven.
• Gen Z loves it cold: Younger drinkers are entering the coffee category through iced and indulgent formats.
• Plant power grows: 30 per cent of café milkbased coffees now use dairy alternatives –with oat leading in-store.
• Flavour is back: Syrup additions and seasonal variants are gaining traction, merging café trends with convenience.
• Drive-through demand: Operators like Bowser Bean see huge opportunity in delivering caféquality coffee with no need to park.
• Smarter loyalty: App-based rewards and time-of-day offers are shaping the next phase of engagement.
• Sustainability shift: Consumers increasingly expect transparency on sourcing, cup compostability, and reuse incentives.
(Sources: Grinders Coffee, Beverley Eastgate/APCO, Haydn Tierney/Bowser Bean, CCEP Commercial Insights)
KEY RECOMMENDATIONS FOR RETAILERS AND SUPPLIERS:
• Invest in quality and consistency: Equipment, training, and sourcing are critical to building trust with coffee-savvy consumers.
• Leverage digital loyalty tools: Apps and reward programs drive repeat purchase and allow for personalised marketing.
• Embrace customisation: Offer a range of milk types, cup sizes, syrups, and formats to meet evolving consumer needs.
• Educate and engage: Communicate sourcing stories, sustainability credentials, and product variety to elevate perception.
• Optimise placement and bundling: Use hightraffic areas and combo offers (e.g. coffee and breakfast) to drive cross-purchase behaviour.
HOT BEVERAGE STATS AT A GLANCE
• $433 million total value of hot beverages in P&C in 2024
(Source: AACS 2024 State of the Industry Report)
• +2.2 per cent value growth in 2024 – the category’s slowest since COVID
(Source: AACS 2024 State of the Industry Report)
• 73 per cent proportion of male shoppers buying hot beverages
(Source: AACS 2024 State of the Industry Report)
• $2 is the price of 7-Eleven’s standard coffee, with app discounts saving a further $0.50
(Source: 7-Eleven)
• 46 per cent year-on-year growth in oat milk usage at APCO
(Source: Beverley Eastgate, APCO)
• 52 per cent of hot beverage purchase decisions are made in-store
(Source: Grinders Coffee / CCEP Commercial Insights)
• +6.7 per cent CAGR forecast growth of the P&C hot beverage category through to 2030
(Source: Grinders Coffee)
