Opportunity Flows from Fountain

More drink flavors and savvy promotions can help wring the most out of a c-store’s cold dispensed beverage program.

By Howard Riell, Associate Editor

From teas to functional carbonated beverages and specialty frozen drinks, the cold dispensed category is seeing an influx of new opportunities to capture customer dollars as traditional carbonated soft drinks decline.

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“Fountain is a staple, and the majority of our cold dispensed unit sales,” said Lisa Luben, foodservice sales manager for 72-unit Country Fair Inc., based in in Erie, Pa. “We have a great partnership with f’real—smoothies, milkshakes, frozen coffee—follow planograms, and promote both with LTOs (limited-time offers) and pricing from time to time.”

Luben pointed out a good dispensed beverage program is about competing and generating sales.

“We are not the most convenient—we have no drive-throughs—and therefore require a compelling reason for customers to choose our channel over quick-service restaurants,” said Luben. “Therefore, a successful program needs (operators) to know who their customers are—coffee drinkers in Boston, super-sugar, frozen carbonated beverages in Texas—and provide a compelling offer to drive traffic. What makes an offer compelling? Variety, a roomy, pleasant shopping experience, freshness and cleanliness and value.”

Frozen uncarbonated beverages don’t spike sales, Luben noted. “But (they) are an economic way, equipment-wise, to get into a frozen beverage program.” Frozen carbonated drinks, on the other hand, provide differentiation from quick-service restaurants (QSRs) since they are thought of as a beverage destination for some consumers, and offer a lower cost-per-ounce opportunity.

“The first thing retailers can do to increase their cold dispensed and frozen beverages is to ensure they are selling a quality product,” said Steven Montgomery, president of b2b Solutions LLC in Lake Forest, Ill. “The primary ingredient in both is water. This is an often-overlooked fact when trying to increase their sales.”

Retailers should ensure they are properly filtering their water, Montgomery added. “This means changing the filters as required or, in some cases, utilizing a double-filter system.”

David Collins, president of Birmingham, Ala.-based DC Oil Inc., which operates Quick Shop c-stores in central Alabama, emphasized brand recognition. “Frozen carbonated is by far the best product. Always have the best-selling flavors available. Waste is much higher than you think, so consider that when setting your prices.”

Bob Schulte, director of commercial sales for Cubby’s Inc., which operates 36 convenience stores and supermarkets in Nebraska, Iowa and South Dakota, said a component to a strong c-store dispensed cold and frozen beverage program lies in operations. “Four or more flavors/heads, (and) never be down.”

The facets of a successful program require less innovation than basic attention.

“One of the biggest keys to getting people to try new products is merchandising them well so the products stand out and don’t get lost in the myriad of products convenience stores carry,” said Gary Hemphill, managing director of research for Beverage Marketing Corp. “Placing a new product near checkout is a tried-and-true way to encourage impulse purchases of new products. Sampling is another option; people are more likely to buy a product if they have the opportunity to try it first.”

Impulse sales are often generated by beverages, noted Nicole Leinbach Reyhle, founder and principal of Retail Minded, a consulting firm in Denver. “Customers may not even be thirsty, but the idea of a refreshing cold drink is enticing. Keeping this in mind, consider how multiple displays versus just one in your store can help increase sell-thru.”

DC Oil’s Collins recommended retailers try to get their frozen beverage company to install two machines if there is space. “This way you will have one running if the other goes down, and it allows you to offer more flavors. The most important thing is to keep the machine running.”

Collins explained that sales can drop by as much as 50% during winter months, and suggested running a lower price for all sizes. “For example, any size $1.29. You will not make much on the largest cup, but most people buy small or medium anyway. Your distributor might give you some product to help with promotion.”

Country Fair’s Luben said limited-time flavors should be kept on seasonally, for three months. “It allows variety while not exaggerating the inventory issues between promotions.” In northern states, she continued, sales are seasonal.

“That is why hot dispensed is so important for having an integrated dispensed beverage program,” said Luben. “Extending sales is helped with our stores when we offer/market bundled sales with our highly-successful foodservice program.”

Luben also favors price promotions to entice customers.

“When we are faced with a new competitor, we’ve done some extended free fountain or coffee for not just foodservice, but to maintain and even grow, in some cases,” said Luben.

When it comes to signage, Luben feels digital with motion works best. “Our target audience has a short attention span. We are challenged to get their attention in the store, let alone when they are identifying our store versus some other offer within or outside our channel.”

Cubby’s Schulte said his stores’ limited-time drinks are kept on hand for a month and, if popular, are brought back sooner rather than later. A series of monthly promotions helps sustain interest through the colder months. Thirty-foot storefront banners hung above main entryway help draw attention to the deals. “Feature the largest size at the smallest size cup’s price,” he advised.

“For us, it has been branding the fountain program and offering any size for 99 cents,” said Jeff Chase, controller/director of convenience store operations for Ed Staub and Sons Petroleum, Inc. in Klamath Falls, Ore., which operates 18 Ed’s Fastbreak locations.

Chase said he advises c-store operators that promotional products should be left in place for about two months. “I feel if they come in and out too quick you never really get good traction—but if it remains too long, it may get stale.” Ed’s Fastbreak stores also use window clings or snap frames in the front of the store, and danglers in other areas.

Cleanliness Matters
Sanitation is paramount to a successful dispensed program, Luben stressed.

“Cleanliness determines if a customer buys from you or someone else,” said Luben. “The equipment and sales area requires constant vigilance for cleanliness, and a schedule/checklist must be maintained to ensure that sanitation standards are maintained.”

“Get set up on a thorough preventive-maintenance program and promote, promote, promote the product,” Schulte urged colleagues. “Use national branded flavors (like) Coke, Mountain Dew, Dr Pepper, Sunkist Orange, A&W Root Beer” and others. “Have no less than four heads, and preferably eight heads.” He added that dispensing machines must be put in thaw mode and cleaned weekly.

Robert Grimes, director of property and maintenance for CoGo’s Company in Pittsburgh, which operates 47 convenience stores, advised having store staff clean the dispensing units weekly at a minimum. “We schedule daily cleanings of certain parts, and a full cleaning weekly.”