Marketing the Beverage Bar

While frozen dispensed beverages are not a huge portion of the typical store’s overall sales, the product is proving to be quite profitable, thanks to a gross margin north of 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 slush-style drink was born back in 1965 when 7-Eleven introduced its famous frozen carbonated Slurpee, a colorful concoction in assorted sugary flavors. With its unique properties, plus a witty, well-planned promotional campaign, Slurpee quickly became a favorite of young adults nationwide.

Over time, customers’ demands evolved, and the iconic Slurpee was tweaked to keep up with trends. Today super-sweet flavors remain popular, but Slurpee now has sugar-free options, such as Peach Dragon Fruit from YoCream International, or Crystal Light limeade.

“Slurpee is an indulgent treat, but there is a segment of consumers looking for a sugar-free product,” said Jay Wilkins, beverage category manager for 7-Eleven Inc. “Our sugar-free offerings are targeted toward someone who wants a healthy alternative and moms who want to cut back on the sugar their kids consume. This gives them an alternative.”

Know Your Customer
Despite heavy competition from other convenience chains and manufacturers, 7-Eleven has kept Slurpee in the forefront of frozen beverages by promoting the product to the people who drink it most often.

“Young adults are interested in movies, music and gaming,” said Wilkins. “We take what the customer loves and pair ourselves with it.”

Through May, Slurpee will promote the release of Iron Man 2, the Marvel Comic-based motion picture, by providing Slurpee patrons with premium cups and straws featuring the movie’s action heroes. Plans for summer promotions will incorporate computer games and youth-oriented entertainment. “We know our customer well,” Wilkins said.

Make Room for Frozen
Successful convenience retailers give frozen beverage customers a wide selection of product to choose from. At 7-Eleven, the typical store has a six-head frozen-beverage dispenser that allows customers to mix and match colors and flavors. Some retailers believe more is better, such as Bucky’s Express, the Omaha, Neb. marketer with 30 locations and 12-head machines in every store.

Nice N Easy Grocery Shoppes, the New York-based retailer with more than 80 stores, reports positive results after deleting its two- and three-barrel dispensers in several stores and carving out 12-linear feet of store space devoted to its new proprietary frozen beverage program branded “Chillville.” Customers may choose from carbonated and four non- carbonated drinks.

Whatever the beverage bar format, the average retailer enjoys a 52% margin from the traditional frozen drink, according to NACS’ 2009 State of the Industry data. And some store operators curtail costs by working with syrup vendors that provide frozen dispensed beverage machines at no charge to stores that purchase their products.

Smooth or Slush?
Consumers are always looking for the next big thing, including the newest and best in frozen beverages. Many c-stores have followed retailers such as Jamba Juice, Planet Smoothie, Smoothie King and Robeks, in offering packaged and made-to-order smoothie drinks.

Currently, smoothies are a drink of the younger crowd. According to Mintel, the market research organization, 18-to-24-year-old consumers are much more likely to say they have had a smoothie within the past month than those in other age groups. While most consumers choose a smoothie over another beverage because they prefer the taste, a recent Mintel report noted creating and promoting products that “help prevent specific concerns” can reach new customers, many of whom are older and more health conscious.

Recently, Red Mango, the 61-unit yogurt and smoothie chain based in Dallas, announced a menu expansion that includes probiotic smoothies at participating locations. The products are being marketed as a meal replacement with the advertising tagline “Re-Think Lunch.”

Associating its new product with health and youth, McDonald’s introduced its Real Fruit Smoothies at the Vancouver Olympic Games in February, serving them at the chain’s three restaurants there. Available in strawberry banana and wild berry flavors, the McDonald’s smoothies are set to roll out to U.S. restaurants this summer as part of the company’s McCafe offering.

Meanwhile, Jack in the Box continues mixing made-to-order fruit smoothies in strawberry, banana and mango. “It’s perceived to be a healthier alternative to shakes,” said Brian Luscomb, company spokesman.

Do It Yourself
Few retailers have the facilities and staff to whip up made-to-order smoothies while customers wait, and most opt for premade products in the cooler. For those retailers, a wide range of popular bottled smoothies are available, featuring healthy ingredients and exotic additives. Two examples are the Odwalla Superfood Red Rhapsody Fruit Smoothie Blend, a product featuring strawberries, raspberries, pomegranates and rooibos tea with beets and tomatoes, and Naked Protein Zone Double Berry Juice Smoothie made of strawberries and blueberries and touting 30 grams of soy and whey protein

One smoothie-style drink that has been adopted by several chains, including Sheetz and Wawa in Pennsylvania, is the f’Real milkshake.

The serve-yourself treat is premade from milk and ice cream and merchandised in its own mini-refrigerator located near the store beverage bar. Customers choose a flavor ranging from strawberry and vanilla to chocolate malt and cookies ‘n cream, and place the opened container in the f’Real blender on the counter.

The blender is plumbed to a water line and uses a small quantity of hot water to prepare the frozen shake based on the customer’s thickness specification. The water connection also allows the blender to rinse itself after each use. The time required from selecting a flavor to taking the first sip of smoothie is about one minute.

LaCrosse, Wis.-based Kwik Trip, has been selling f’Real milkshakes for four years and is pleased with customer acceptance. “We don’t have exact demographic studies of whether the shakes are cannibalizing our frozen dispensed beverages,” said John McHugh, a spokesperson for Kwik Trip. “But we have pulled much of our frozen carbonated beverages out of our stores. We kept our shakes in because they do much better.”

When the program was first rolled out, some customers were hesitant to use the do-it-yourself blender, but “now that they know how easy it is and they use it comfortably,” McHugh said.

During the chilly winter months, the sale of frozen beverages tends to slow. “Even though Wisconsin is the dairy state, our winters are not conducive to frozen shakes,” said McHugh. “But once the warm spring weather kicks in our frozen sales start growing again.”

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