Frozen Sales Heating Up

Since its invention about half a century ago, the frozen dispensed beverage has become a convenience store tradition, with three out of every four U.S. convenience outlets housing a frozen beverage bar.

While frozen dispensed beverages are not a huge portion of the typical store’s overall sales, the product is profitable, thanks to a gross margin of about 50%. Although the slush-style drink was a c-store original, other retailers recognized its potential, and today, frozen beverages with a variety of names and logos are available at cinemas, snack bars, amusement centers and entertainment venues.

The competitive QSR industry knows a good thing when it sees it and is encroaching on c-store industry sales. Several QSRs have adopted the product, including Taco Bell, which introduced a signature line of frozen drinks called Frutista Freeze, served with a topping of real fruit; Bruegger’s, the bakery-cafe chain that recently rolled out its first frozen blended coffee; Panera Bread, now offering frozen lemonade; and Einstein’s Bagels, which added frozen Colada’s in berry and strawberry flavors to its menu. Plus, Dunkin’ Donuts’ Coolatta line has expanded to include coffee and fruit flavors with Tropicana juices.

With so many outlets for these products, it’s no wonder that sales of blended beverages, frozen drinks and iced coffee drinks was nearly $1 billion last year, according to The Mintel Group, a Chicago-based global consumer, product and market research firm.

Changing Consumer Tastes
U.S. soft-drink sales are on the wane. In 2008, sales fell for the fourth year in a row. According to Beverage Digest, a trade publication and data tracking service, the U.S. soft-drink volume dropped 3% last year, the biggest decline the industry has ever seen.

Some experts attribute a portion of the sales drop to an ailing economy and increases in beverage pricing. Others point to the public’s growing concern about nutrition. Because many customers want an alternative to soda, forward-looking convenience operators are investigating new flavors and better-for-you products. One of these is MAPCO Express, a Brentwood, Tenn.-based retailer with more than 500 stores throughout the Southern U.S.

Currently, MAPCO offers Extreme Freeze, a seasonal, noncarbonated frozen beverage made from a powder-mix base, which “has been well received by customers,” said Tony McLarty, senior director of administration and foodservice for MAPCO Express. “MAPCO is exploring private label options in iced coffees, frozen fruit juices and frozen energy drinks.”

Bucky’s Express of Omaha, Neb., carries Icee brand frozen drinks and, according to Rick Seidl, beverage category manager for the 31-store chain, “kids are going to get an Icee before they get a fountain drink.” Current flavor favorites are Coke, Mountain Dew and strawberry kiwi, but Bucky’s is open to new offerings. “We’re looking at energy drinks (for the frozen beverage bar),” he said.

Loaf ‘N Jug, the Kroger-owned c-store chain with 174 locations primarily in Colorado and Wyoming, plans to integrate Turkey Hill’s line into an already extensive frozen beverage offering. “Our research shows they are the No. 1 ice tea in the East, and they also have lemonade, pomegranate lemonade and ice tea lemonade,” said Anitta Skul, advertising and promotions manager for Loaf ‘N Jug. “It’s a cleaner, more refreshing flavor and not as sugary.”

Smooth and Shake
The frozen category continues to prosper as line extensions are added, and new price cuts and innovation are keeping the category fresh, something retailers credit for increasing consumer demand.

Two popular cold beverages are smoothies and shakes, both of which can serve as a meal or a between-meal indulgence. When made with fruit or energy additives, they are perceived as healthy. They also are convenient and portable.

A four-year old California company, f’Real Foods, is producing one of the hottest products to hit the category in years. The company has essentially created a dairy subsegment of frozen dispensed with its line of classic milk shakes, real fruit smoothies and frozen cappuccinos, which are whipped up by the customer in a patented blender. Customers simply select a flavor from the store’s freezer case, put the shake in the f’Real machine, choose a thickness setting and let the blender go to work.

C-stores currently carrying f’Real products include Sheetz, the Altoona, Pa., retailer with more than 300 stores; Wawa, a chain with more than 560 stores in Pennsylvania, New Jersey, Delaware, Maryland and Virginia; and Rutter’s Farm Stores, a 57-store chain headquartered in York, Pa.

Cold Coffee is Hot
Currently, the latest rage in cold beverages is chilled coffee, which has been extremely successful for QSRs, whether over ice or slush-style. Dunkin’ Donuts reported coffee is the most popular flavor of its Coolatta frozen beverage line, which also includes strawberry, vanilla bean and Tropicana orange. The Boston-based baked goods chain also has seen tremendous customer response to iced coffee at its 6,000-plus U.S. locations.

This year, McDonald’s made a major play for Starbucks’ business by installing McCafé coffee bars in more than 11,000 restaurants across the country. The McCafé offering includes iced coffees in several variations. The company also has carried a frozen coffee beverage similar to Starbuck’s Frappuccino.

C-stores have embraced cold coffee drinks, as well. A year ago, 7-Eleven stores combined java with its iconic Slurpee brand to create a coffee-flavored frozen beverage dubbed Slurpuccino. The drink came in two flavors—hazelnut and café latté—and was marketed to males and females ages 18-34.

Recently, the Dallas chain introduced its own version of iced coffee, which is self-served from refrigerated beverage dispensers at 4,500 U.S. stores. Customers dispense the coffee drink, available in French vanilla and mocha, over ice in clear cups and have the option to blend flavors.

“Our flavor profile was developed specifically for 7-Eleven and was tested with consumers before its launch,” Jay Wilkins, category manager for Slurpee, said of the iced coffee. “We have received very good feedback from customers.”

Demographics on iced coffee squarely point toward an urban female, Wilkins added, “which is a customer we love to invite into our stores, but we also have observed that this product appeals to young males.”

Stop-N-Go, the Madison, Wis.-based chain with 34 locations in Wisconsin and Illinois, currently sells Boyd iced coffee, a self-serve drink in either vanilla or mocha.

“People do like the flavor,” said Bill Ripley, director of marketing for Stop-N-Go. “It’s sweet and tasty, but doesn’t have a strong coffee taste. If you don’t like coffee, that doesn’t mean you won’t like this.”

Ripley also appreciates two of his major competitors: McDonald’s and Starbucks. He believes their extensive advertising campaigns for cold coffees have ignited consumer interest, and that helps smaller retailers selling similar products. “People know what it is, and if they can get it without running around, they will,” he said.  CSD

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