Ramping up cold and frozen dispensed beverage promotions during the summer months can create a profit center for convenience stores.
By Lisa White, Contributing Editor
In the past, summer fountain drink wars only took place in the convenience channel.
But with today’s quick-service restaurants (QSRs)trying to capture c-stores’ beverage business, this is no longer the case.
“As the convenience industry’s overall foodservice quality has improved, it has made QSRs more aware of c-stores as competition,” said Steven Montgomery, president of b2b Solutions, LLC, a convenience store consultancy based in Lake Forest, Ill. “The foodservice industry’s analysis has shown the importance of drinks that were formerly seen as an ancillary sale to meals.”
The potential in this segment is evident. This past Memorial Day, retailers representing approximately 15,000 U.S. convenience stores reported beverage sales were up 5.5%, compared with 4.9% over the same period in 2015, according to a report by New York City-based Wells Fargo Securities.
Although the frozen dispensed beverage category encompasses a small percentage of overall sales in a typical convenience store, these items are available in 71% of c-stores, reported the National Association of Convenience Stores (NACS). It’s fountain drinks, not the cold vault, that offer the highest profit potential.
“Retailers who distinguish fountain offerings can leverage this highly profitable category,” Montgomery said.
Atlanta-based RaceTrac Petroleum’s 661 stores offer up to 30 fountain options that include Coca-Cola, Dr Pepper and Pepsi products, and up to 18 frozen options that include Coca-Cola, Dr Pepper and Fanta flavors. The chain also has a private label frozen beverage brand, Numb Skull.
“RaceTrac’s fountain and frozen beverage program has benefited from our recent remodel program, which has allowed us to expand offerings at our legacy stores,” said Lisbeth Horehled, associate category manager for dispensed beverages. “The remodel program, which is tracking to be completed across all six RaceTrac regions by the end of 2018, brings a more modern look and feel to all our stores with updated building architecture, Swirl World frozen treat stations, an expanded coffee area and additional indoor and outdoor seating and lighting.”
At MAPCO Express Inc.’s 349 stores, there’s been double-digit growth of cold and frozen dispensed sales over the previous year. The Brentwood, Tenn.-based retailer’s locations have 8-16 head fountain machines, brewed iced tea and both frozen uncarbonated and carbonated beverages.
“Our growth has come from the carbonated category and can be attributed to our MY Reward$ [loyalty card program], simplified store execution and the addition of Coke Freestyle machines in strategic locations,” said Linda Schultz, director of dispensed beverage.
MAPCO’s fountain beverages are cross merchandised with its made-to-order food programs. The retailer also has a promotion running until mid-September where customers can get a 20-ounce bottled soda for $1 with the purchase of a fountain drink.
The chain is currently evaluating other fountain program options, which could include expansion of the frozen
category; the addition of non-carbonated, low-calorie offers on the fountain machine; and replacing fountain machines with Coke Freestyle machines in high-performing stores.
Rutter’s Farm Stores, a York, Pa.-based chain of 60 stores, revised its fountain program in winter, rather than summer.
“This way, we could do a slow rollout to gear up for the peak season,” said Chuck Moyer, food service category manager. “There are times, especially on the frozen side, where there’s an opportunity to bring out new flavors during the peak season, but we’re at the mercy of major beverage manufacturers.”
Rutter’s stores typically offer 16 fountain flavors with four flavor shots. Its higher-volume stores have begun incorporating a touchscreen fountain unit that offers 20 flavors and four flavor shots. The goal is to have the new systems installed prior to the summer months.
Although the retailer typically hasn’t run special pricing programs during the summer, it recently launched a new refillable mug program.
“This is a contest we’re running for the first time this summer, where customers who purchase fountain drinks in June, July and August are eligible to win a year of free refills,” said Moyer.
Those who purchase a refillable mug also are eligible for Rutter’s summer sweepstakes program. Running from May through August, the top winner receives a 2016 Jeep Wrangler. Other prizes include free gas for a year, free coffee for a year and concert tickets.
“We’re promoting this contest with heavy signage on multiple items, both retail and foodservice,” Moyer said.
CST Brands, a 1,900-store chain headquartered in San Antonio, rolled out Coca-Cola Freestyle machines across the San Antonio market.
“At Corner Stores, we dedicate significant square footage to our total dispensed beverage floor plan,” said Richard Poye, director of food service.
According to Montgomery, many retailers don’t have a goal for summer promotions.
“Even those that [run summer promotions] often don’t do the follow up analysis necessary to determine if goals were met and at what cost or benefit in related categories,” Montgomery said.
Retailers tend to stick with what works. Sodapalooza is RaceTrac’s most popular annual summer fountain and frozen promotion. With this program, customers who purchase a reusable Sodapalooza cup receive unlimited free refills from May 4 to July 31, 2016. Coupons inside the cups range from $20-$100.
“We continue to promote this program across our standard marketing channels, which include store signage, radio, billboards and social media,” said Horehled.
CST Brands’ most effective promotions are combo specials with fountain drinks during all dayparts.
“Our category managers collaborate on a range of cross-merchandising strategies, which allows us the opportunity to deliver on seasonal needs and LTO (limited time offer) products,” Poye said.
KEYS TO SUCCESS
No matter what the season, store location is important to running a successful fountain beverage program.
CST Brands’ newer locations have the dispensed beverage area situated against walls to provide a clear line of sight from the front door.
It’s also important to keep summer fountain beverage promotions current.
“We’ve seen great success with our annual Sodapalooza campaign by working internally to keep the promotion fresh each year,” said Horehled. “For example, this year we leveraged our recently-launched guest loyalty program, the RaceTrac Rewards app, to provide added value to the Sodapalooza cup.”
Customers who download RaceTrac’s app to a smartphone can access a $2 coupon for use on up to three Sodapalooza-style cups, which are priced at $11.99.
“This year, we’re also encouraging customers to take a selfie with their cup as part of our new Sodapalooza Selfie contest,” said Horehled. “Those with the most fun and creative photos will be eligible to win a summer road trip.”
In an effort to create a fountain program resurgence, Rutter’s is taking customer feedback into consideration with new flavor offerings.
“For years, we’ve been seeing the same fountain drink brands and flavors, as most of the innovation has been on the bottle and can side,” said Moyer. “We want to offer customers flavors they are accustomed to seeing in our cold vaults, like vitamin water, lemonade and energy drinks.”
These additions to Rutter’s fountain program have been successful, particularly with younger consumers who are accustomed to finding new beverages in the cold vault.
Retailers devoting the extra time and effort to promoting cold and frozen dispensed beverages during the summer months are more likely to see a payoff from higher sales and profits by fall.