Bundling and smart marketing help keep frozen dispensed beverage sales hot as summer arrives.
By Howard Riell, Associate Editor
Sales of frozen dispensed beverages in convenience stores show no sign of slowing down, with flavor extensions and in-store marketing resonating with consumers of all ages.
“The frozen dispensed category at convenience stores continues to soar with flavor extensions and limited time offers continuing to draw consumer interest,” said Matthew Hudson, president of Rick Segel & Associates, a retail consultancy based in Kissimmee, Fla.
As the hot days of summer unwind, demand for frozen concoctions are playing out across the c-store industry. With its high profit margin, the category is still a delight at the register. According to the National Association of Convenience Stores (NACS), the frozen dispensed beverages were one of the most profitable food-related categories in 2014, generating an average gross profit margin of 55.78% per store, per month, last year.
Anna Schnider, vice president and marketing director for in Centennial, Colo.-based Bradley Petroleum Inc., which operates 50 convenience stores, said has seen her customers continue to purchase the frozen drinks even throughout this past winter.
“I think business does go down a little bit during the colder months; we’ve seen a bit of a decline, but nothing to where we didn’t run the product,” Schnider said. “Kids are still going to want it, and the people who are taking it back to their offices.”
For the latter group especially, she continued, coffee alone isn’t a good enough option.
“Generally this is what they want. They’re not drinking coffee all day long; I don’t think it’s something people do,” Schnider said. “There are people even in our own office who switch off (from coffee to soft drinks) in the middle of the day. I’ve seen in our store around the corner—people purchasing those drinks for our office.”
Tony Bonnell, director of retail for Feather Petroleum Co. in Grand Junction, Colo., which operates 16 Stop-N-Save stores in Colorado, said consumer demand for frozen dispensed beverages rises, as expected, along with the thermometer reading.
“It’s really something. We get temperatures in the upper 90s and even the low 100s for part of the summer here where we live, and it is most definitely a product that we go through a lot of.”
That success extends to two lines that his stores carry: Boyd coffee drinks and the Pepsi Slurpee, to which a lot of his stores have converted. “It’s the flavored Slurpees that the kids like. So at a minimum in all our stores we’ve got two, if not four flavors of both the coffee- and fruit-type drinks. They’re kind of a summertime staple.”
When the weather turns colder, however, it is the coffee drinks that maintain sales levels more consistently. “The coffee one tends to sell all year long; even in the winter we see them continue to move,” Bonnell said. “The other ones obviously slow down a lot. But the nice thing about the Pepsi drinks is that they are actually a bag-in-box product, dispensed automatically.”
Maintenance at that point, then, becomes simpler and less frequent. The Boyd machines generally need to be cleaned more often than the Slurpee units, Bonnell noted.
“But I think we turn enough of the coffee flavors that that’s not an issue, so we just keep the machines going,” Bonnell said. “Obviously, we cut back on how much is in the machines during the cold months. It’s not a full machine, but people still like them.”
Feather stores don’t market frozen dispensed drinks aside from some occasional pump toppers.
“We really don’t run them on deal, we don’t run them on promotion,” Bonnell said. “We don’t really have any additional signage, either. Some of the stores are self-serve, and in some of our bigger locations where we have more staffing and more prepared food-type items we actually have them behind the counter so customers have to ask for them.”
Feather c-stores have not yet tried bundling frozen beverages with food offerings, but that may change with the recent arrival of a new director of foodservice.
“We have a guy who just took over all of our foodservice in a position we created about six or eight months ago,” Bonnell said. “He is starting to do a lot as far as getting the (food offerings) out there, like the hotdog, drink and chip specials. So I can see something like that coming down the line.”
Removing frozen dispensed beverages altogether during winter months when sales drop off may not be wise, Bonnell suggested.
“Part of it is that you just have to have it available when customers are in the store,” Bonnell said. “Obviously, you get yourself into trouble when they walk into the store a couple of times and find your frozen dispensed beverage machine is empty, even in the wintertime. They just stop coming to your store, and go somewhere else.”
Bradley Petroleum trumpets its frozen program by using Pepsi-supplied banner tracks over its front entrances.
“The people who made them famous are 7-Eleven,” Schnider said. “We buy the track and then run whatever is going on. At the beginning of coffee season, we’ll run coffee programs. We’re just going into March now, so we’ll go back to promoting the slushie drinks and coffees.”
Slushies range in price from $1.29 to $1.59.
In addition, Bradley’s chain does quite a bit of bundling with other product offerings.
“We like to use fast food for bundling, and we definitely utilize the drinks as part of the campaign depending on the season,” Schnider said. “We’ll do that with Pepsi and Frito Lay, because they’ll do campaigns where they say, ‘If you get a drink we’ll give you a bag of chips.’ We’ll bring in the smaller bag of chips for those promos.’”
Fast food is a strong suit for Bradley, whose stores offer pizza, hotdogs, burritos, sandwiches and gourmet sandwiches.
“We don’t do anything fried,” Schnider said. “We have a few local restaurants that do their burritos through our stores.” The hotdog and coffee programs utilize branded Sara Lee products. “We have a bag-in-the-box coffee that we do with them, so there’s zero waste.”
Schnider said her company switched to a Pepsi program for frozen dispensed beverages about a year and a half ago. The equipment has proven a plus.
“The good thing is it’s a machine that shuts itself off and cleans itself up. It does that on the overnights, and it’s good to go all day.” The previous program, Schnider added, proved too expensive. “And we really didn’t have the (return on investment) to take it throughout the chain.” Under the Pepsi program, equipment is neither leased nor owned. “You’re just buying the product, so it’s much better.”
The program is running in the 33 largest units, and is unlikely to go chain-wide, she added. “Some of the stores are very small, almost like kiosks.”
The units carry five or six drinks, depending on the season.
Schnider thinks c-store operators who take the time and go to the effort to build sales of their frozen dispensed beverages will find it worthwhile.
“I think they need to look at the region that they’re in and see if it’s something that’s trending. I don’t know if I would make a huge investment out of the gate,” Schnider said. “I might do some research on it first. I definitely would recommend that anybody doing a program like that getting with NACS because that would give them a great look at what’s going on besides the usual suspects that they always sell, as would evaluating what your competitors are doing.”