With margins from tobacco and fuel lagging, frozen beverages have stepped up as a pleasant surprise for retailers—whose goal now is to keep the momentum going.

“It’s really a growth category for us, even though it has not been something we’ve spent a lot of time on in the past,” said Jennifer Vespole, senior category manager of foodservice for Quick Chek Corp. in Whitehouse Station, N.J. “Obviously it’s a high-margin category for us. It’s got fun promotions and different rotational products moving in and that keeps the category exciting.”

The family-operated chain of 119 fresh food locations, which operates throughout New Jersey and southern New York, has run a number of interesting promotions involving frozen beverages starting in the spring and ending, most recently, in November. The effort proved worthwhile: according to Vespole, the chain has enjoyed triple-digit growth in the category.

Slurpee Summit
Led by 7-Eleven’s Slurpee, frozen beverages have become part of American culture. When President Obama joked in a campaign speech prior to the mid-term elections about Republicans sipping on Slurpees, the White House press corp. had a field day with rumors that he and incoming House Speaker John Boehner would hold a so-called “Slurpee Summit.” 7-Eleven is taking full advantage of the publicity by running what it is calling the Slurpee Unity Tour 2010 in Dallas. The tour hit the road within 48 hours of Obama having spoken the words “delicious” and “Slurpee Summit” during the press conference. As part of the promotion consumers are offered red, white and blue Slurpees, as well as a “Purple for The People” flavor.

“This is a great opportunity for the Slurpee brand, but I think it’s also an opportunity to make a broader statement, which is that Slurpees are about having a good time and bringing people together,” said Laura Gordon, brand director for Slurpee.

“We’re a 7-Eleven licensee, so we’ve always had Slurpee,” noted John West, director of sales and marketing for Dallas-based Alon USA Energy Inc.’s Southwest Convenience Stores. “I know a lot of other people are getting into (frozen beverages), especially out West. We had a good summer with it, and it has been one of the categories that has grown.”

What West admitted “surprised” him and his colleagues in October was the category’s persistence. “When the weather turned a little bit colder people expected coffee sales to jump. Actually, our fountain and Slurpee lines upticked instead.” One reason was undoubtedly the steady flow of new flavors.

Southwest runs continuous frozen promotions, West said, and maintains a Crystal Light option for health-conscious Slurpee customers. “That is our low-calorie option, without the high sugars. It’s got the artificial sweeteners; people with dietary concerns want a beverage like that, and this is their place to go. We’ve had it on there for two years now and it’s become a very stable product on our Slurpee machines.”

Name It, Claim It
Depending on the size of the store, Quick Chek will have two-, four- or six-barrel dispensers. Customers can find both Coke products, as well as some private label options.

Quick Chek generated a lot of excitement and buzz with its popular “Name it… Claim It” promotion, which called upon consumers to help name its collection of frozen drinks. Consumers were asked to visit www.nameitclaimitgame.com not only to submit their frozen drink name suggestions, but to try their hand at a new online game requiring the skill to fill up a Quick Chek frozen drink cup in just 60 seconds while avoiding penalty ice cubes. The winning name, “Quick Freeze,” was selected from more than 1,800 entries.

“The point of it was to draw some attention to the category by having customers become involved in coming up with a cool name, which they did,” said Vespole.

For the year ahead, Quick Chek has been testing a variety of approaches to make sure the growth continues. For instance, said Vespole, “We are testing expanding the department. We have a design company we’re working with right now to help us refresh the category as a whole so we can come out and be more cohesive with the category inside the entire store environment, and also draw attention to it.”

Another initiative has been testing the addition of Pepsi products alongside its current lineup of Coke items. “The obvious benefit for us is to make customers happy,” Vespole said. “That’s really the goal, to make sure we’re offering what customers are looking for when they shop that category, and hopefully increase our sales by doing so.”

Numbers and Lessons
“Our latest research is telling us 3% of consumers who are going into a convenience store are purchasing a frozen beverage or slushy drink,” said David Portalatin, director of industry analysis for market research for the NPD Group in Port Washington, N.Y., which has been tracking convenience channel purchase behavior since 1998. “Now, 3% may not sound like a lot, but in terms of the consumer base we’re tracking that would translate into about 30 million slushies just from January through September, so it’s a lot.”

NPD’s research also shows that the top two frozen flavors are still cola and cherry. In fact, those and other fruit flavors make up about 85% of frozen purchases. “Having said that, there certainly is a lot of diversity beyond that, and a lot of room for innovation and growth,” said Portalatin. “One of the things consumers that buy this category are telling us is they are choosing the store they purchase from in large part based upon the selection and quality of products.”

That is important, Portalatin explained, because 79% of these purchases are planned. “People are setting out for the convenience store specifically to get a frozen beverage. They know where they’re going. Their destination is going to be a place they know they can get the flavors, the variety and the quality they’re looking for, so for this set of customers it can be a traffic driver.”

There is a larger lesson here for c-store operators, Portalatin emphasized. “The reality is if you choose a category to make a distinctive point of competitive advantage in the marketplace, you absolutely can differentiate. I think that’s one of the keys to success in convenience retail: to find the spots where you are distinct and have a differentiated offer from your competitor. This is certainly one of those categories where you have an opportunity to do that.”

Case in point: when consumers who buy this category were asked by NPD why they chose the particular store they buy from, they were more likely than other consumers to say it was the name of the store or chain.

“In other words, those stores that have an identity in this category are the ones sticking in the minds of these consumers—and when they are looking for this category that is where they are going to go. The best example of that, obviously, is 7-Eleven and Slurpee, which was the originator of the category way back when. Those names still resonate with consumers.”