Cold and Frozen Beverages Offer Promise

Inside the Numbers: J&H Family Express Stores

60+% Profit margin on fountain drinks.
$5,000 Amount spent on cold and frozen dispensing equipment per store.
10 Stores Scheduled to have cold/frozen equipment upgraded in 2010.
2 Years Anticipated ROI for the beverage units.
10% Projected percentage of store sales from cold and frozen dispensed beverages with the new equipment and product variety.

Making money with cold and frozen dispensed beverages means giving customers what they want—lots of choices, leading brands, trendy items and good deals on bundled meals.

“I think you’ve got to offer choices—and you’ve got to offer choices that consumers are looking for,” said Sandy Arrasmith, director of foodservice operations, vice president and co-owner of J&H Oil Co. in Grand Rapids, Mich. The 34-unit chain, which operates stores under the J&H Family Express brand, features Piccadilly Pizza and owns and operates 11 Subway sandwich locations.

While many c-store executives work hard to make sure they don’t offer consumers too many dispensed beverage choices, Arrasmith, whose father founded the company more than 30 years ago, was outspoken in her belief that there is no such a thing as too many choices. “I don’t want to corner my customer into buying what I think they want to buy, but offer them something they may be interested in,” she said. “It might be out of the norm, but I think there are strong opportunities for fountain and frozen beverages in 2010. That’s why we keep an open mind and want to look at new things our competitors do not have.”

That said, Arrasmith knows cannibalization can occur, which is why traveling off the beaten path is so important. “I think what you want to offer is something new, but not something repetitive,” she said.

Operators need to know that selling dispensed beverages is highly profitable and a way to differentiate their brand, explained Arlene Spiegel, a veteran retail and foodservice consultant and president of Arlene Spiegel & Associates in New York City. “The consumer can buy bottled, canned, mainstream and boutique beverages anywhere,” she said. “By offering proprietary cold beverages, the operator compels the guest to visit his establishment to get these items.”

Don’t Forget Frozen
Dual-branded fountains with Coke and Pepsi alongside frozen beverage machines are becoming a ubiquitous presence at c-stores across the country. Figuring out what consumers want in them isn’t always easy. But one starting point is statistical insights gleaned from suppliers—the preferred strategy at J&H.

“Quite often we’ll ask customers what they’re looking for. We may also look at what they’re buying from the cold vault to determine what to put in the fountain,” Arrasmith said.

When the weather turns cold and consumers’ thoughts turn away from cold and frozen beverages, J&H brings them right back by bundling drinks with hot food items—its combo meal, for example, offers cold dispensed drinks with a hot dog and chips at a discounted price.

Each J&H store has a fountain dispenser with 10-16 heads, the minimum needed to compete effectively in bigger markets, Arrasmith said. Many locations also offer some type of frozen beverage program, including a fruit-based slush program or a frozen dairy product.

To increase variety, the company recently pulled out of its long-time fountain program agreement with Pepsi, which had been supplying its dispensing equipment, and bought its own for about $5,000 per location. “We are still offering their top products, like Pepsi and Mountain Dew,” Arrasmith noted, “but the program limited us as to what we could offer since it was their equipment. Now I can offer Coke, Diet Coke, Pepsi and Mountain Dew all on the same piece of equipment, which is extremely important to us to remain competitive.” n

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