Seasonal Surge Drives Dispensed Beverages

coffeeicedCold and frozen dispensed beverages are undergoing some major changes these days that continue to make the category one of the hottest in the convenience store industry.

By Marilyn Odesser-Torpey, Associate Editor.

Spring has sprung and with it comes a renewed focus on cold, frosty and refreshing beverages.

For Pat Kelly, purchasing director for Hanover, Md.-based, 51-unit High’s Dairy stores, that starts with the basic question: cubed or chewy? “We believe in giving our customers choices and that goes all the way to letting them decide which way they want their ice,” she said. The company is currently looking at a piece of equipment that can dispense both.

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To offer more fountain soft drink variety, High’s is also installing machines with 10-12 valves instead of the usual six when new equipment is due to be purchased. In addition to the traditional drink flavors, the company is working with a supplier to test a rotating selection of limited time offers (LTOs), such as cherry limeade, under the High’s brand.

High’s also wants to own its fountain dispensers so it can be free to offer a variety of soft drink brands. “With cold dispensed, you can’t hit everybody with one brand, so we don’t want to be limited to offering either Coke or Pepsi products; we want to be able to offer a mixture, as well as some products of our own,” Kelly said.

While frozen drinks may not be anything new to the industry, they are new to High’s, she said. The company has five or six of the machines in stores with an eye toward including them in remodels and new-to-industry locations. In addition to the No. 1 selling Coke slush drink, High’s plans to offer red cherry and/or blue raspberry, as well as some LTOs.  

As a dairy store known for milk and ice cream, it is no surprise that some of the High’s Dairy Stores offer handmade milkshakes, but in newer stores High’s is opting for f’real milkshake machines augmented with smoothie and frozen cappuccino machines. “We introduced them in about five stores last fall and customers really like them, so we’re going to put all of our future efforts into f’real,” she said.

Value and Variety
Cold and fountain beverages are so hot at Kum & Go that when the company does its new builds, it is tripling the size of the category footprint from 30 to 90 inches, and the number of heads from 16 to 30.

“Overall, Kum & Go has enjoyed a tremendous growth in cold and frozen beverages over the years, so we’re turning that part of the stores into a destination,” said category manager Keith Clark. “Customers are always looking for more options and by giving that to them we can further differentiate ourselves from the competition.”
Iced teas sales at the West Des Moines, Iowa-based chain are soaring, he said. So are sales of f’real products which were first tested in the stores in 2008 and are now in 125 of the chain’s 425 stores. The f’real program will also be expanded as stores are remodeled and new ones are built.

While iced and frozen coffees still have good momentum, iced teas are up and coming, according to Mathew Mandeltort, managing consultant with Chicago-based Technomic market research. “You can see different kinds, such as sweet tea and fruit infused variations, showing up on fast casual restaurant menus all over the country.”

He also noted that just like with food items and hot coffee drinks, LTOs can keep beverage selections fresh and exciting for consumers.

New Opportunities
In interviews with 75 c-store decision-makers, Datassential research company found that nearly 60% offered some kind of non-coffee-based frozen dispensed beverage while around 40% offered some kind of coffee-based frozen beverage. Less than 20% offered smoothies or milkshakes.

About 20% of the operators felt coffee-based frozen beverages and milkshakes offered opportunities and indicated they would consider adding them if space allowed. About 15% of the operators felt that way about smoothies.

In an online survey, more than 2,000 regular c-store customers were asked about their purchase intent for a number of beverages, assuming they were available, on a scale from 1 to 5 where “1” is not at all likely to purchase and “5” is very likely to purchase. Nearly 60% of the respondents indicated a “4” or “5” for milkshakes, non-coffee based frozen drinks and smoothies. Nearly half indicated a “4” or “5” for coffee-based frozen drinks.

Ted Roccagli, retail marketing manager/business coach for Gainesville, Ga.-based Mansfield Oil, which services 350 c-stores, is also exploring ways to take advantage of the seasonal momentum for cold and frozen dispensed beverages. Mansfield has named Wow-Brands Inc. a preferred vendor for its Jelly Belly frozen drinks line and f’real for its milkshakes.

“We’re seeing a lot of momentum in the dispensed cold and frozen beverage category because there is great demand for these products and they yield a high profit,” Roccagli said. “The category gained momentum in 2012 and is going strong in 2013.” He introduced the items in January and February to make sure the stores would be ready to meet the upcoming warm weather demand.

Roccagli likes the “better-for-you” appeal of Jelly Belly’s all-natural ingredient frozen beverages. He is introducing four flavors to start, but said he would like to expand into more of the brand’s innovative flavors as the program rolls out.

Marketing Matters
Dash In Food Stores, with 57 locations in Maryland, Delaware and West Virginia, first introduced the f’real program into its beverage sets in 2009. It is now in 25 of the stores and Larry Bullis, who handles brand development for the company, said that an additional 3-5 f’real units will be added each year in existing stores where space exists, and will be installed in all new ground-ups.

During peak warm weather season, the f’real units can sell between 50-75 shakes, smoothies and cappuccinos a day, Bullis said. The program also encourages repeat business. “Once customers taste the product, they come back for it and while they’re here, they generally buy other things,” Bullis said.  

 The equipment, especially the new model with its LED lights, attracts shoppers’ attention just as it did at the trade shows where Bullis and his category managers first saw it. Bullis has found that with a show-and-sell product like f’real shakes, merchandising is an important component of fueling sales. Point of purchase materials must be prominently displayed and sampling should be an integral part of the product’s debut in the stores, he noted.

Since 2009, Dash In has been running a campaign that has made dispensed cold and frozen beverages the stores’ No. 1 selling item in terms of unit sales, even more than cigarettes. The “Size Doesn’t Matter” campaign offers any size fountain drink, including soda, frozen drinks and iced tea, for 99 cents. Its 49-cent, 12 ounce “kids’ cup” is also popular.

Last summer, 7-Eleven launched a “Flavors of Summer” campaign with the introduction of Slurpee Lite, sugar-free versions of its iconic frozen drink. This year it is adding flavors, including peach mandarin and winter white mixed berry. Slurpee Lite drinks have 50% fewer