Dispensed Beverage Sales Heating Up

Fueled by new flavors and supported by high-quality equipment, the cold and frozen category shows unlimited potential.

By Howard Riell, Associate Editor

The cold facts go like this: with margins from tobacco and fuel still lagging headed into the summer of 2012, the booming frozen beverage segment has been a pleasant top-performing surprise for convenience store operators.

The variety of products and flavors, together with some inviting promotional offers, have been driving this growth. And for at least one chain, frozen beverages is generating some very real excitement among customers and employees alike.

“Currently what we’re doing is running a promotion with f’Real frozen milk shakes, as well as Icee frozen beverages,” said Tom Moser, general manager for Tevis Oil’s Jiffy Mart chain in Maryland. “We’re running a two-for-$5 promotion on those.”

The promotion, which ran through June, resulted in a sharp sales spike. The lesson for any curious convenience store colleagues looking at Jiffy Mart’s approach to frozen beverages should be the realization that success is often all about focusing and executing, according to Moser.

“In the c-store industry your cigarette margins are so low and typically such a huge part of your business that you have to learn how to focus on those other high-margin categories to pick up the slack,” Moser said. “We made the decision to put a big focus on beverage sales, especially frozen beverages, as well as foodservice in our stores. We have a Subway sandwich program, for instance. We put all that focus on it to pick up the slack for waning categories.”

Jiffy Mart’s successful frozen drink promotion last year and in 2010, which will resume in July or August of this year, is called Happy Hour. For the promotion, the company’s four stores gave away free frozen beverages during a four-hour block of time. The promotion carried with it benefits, not just for customers who left with freebies, but for store staffers, who got a charge out of the excitement it generated. The PR machine kicked into gear a month ahead of time—via newspaper ads, radio spots, in-store signs, outside pump ads and social media sites such as Facebook—to let people know when to arrive. One of the locations gave away an estimated 150 shakes per hour.

“This was the first time we did a two-for-$5 offer,” Moser reflects. “I can tell you that the Happy Hour is always very popular, so it’s going to be tough to top it going forward. The last time we did it we had been averaging about 10 shakes per day. After we did the Happy Hour promo we saw a spike to 18 or 19 shakes per day, so there was a lot of sales activity we saw afterward.”

Jiffy Mart attributes the summertime sales spikes in frozen beverages of 30% or more to the quality and variety available in the f’Real line of shakes, as well as Icee branded drinks, which it also promotes. Marketing also plays a role.

“We have interactive pump displays in our locations where, when the customer is fueling, the pump actually rolls ads. When they see one they like they can hit it with their finger on the touchscreen. They can generate a coupon that way,” Moser said. “Our hope is that we can draw more traffic from the pumps into the store.”

Plus, punching up a frozen drink ad on the pump screens saves customers 30 cents on each cup they purchase.

Building New Profit Centers

Moser conceded that the sales lift generated by frozen beverages in the summer months helps make up for lagging tobacco profits and fuel margins. “Cigarette margins are typically very low. For us, I believe it’s about a 14% margin in the tobacco category because of the competition in the area,” he said. “On the other hand, we see about a 45% margin on frozen beverages. It’s pretty good.”

Interestingly, though Jiffy Mart has had some good results from bundling promotions, it has been a while since the company has included frozen drinks in such offers.

“We haven’t done a lot of that,” Moser said. “Typically, someone coming in to buy food is also going to buy a drink. Of course, in the colder months it’s typically something warm. But in the summer months they begin looking for something that will relax them, so they buy cold beverages. That’s why we try and promote them at this time of year.”

Pairing frozen drinks with food offerings is something Jiffy Mart has not done in a while. “It’s something we have done in the past, and it has worked in the past, but it’s not a strategy we have been pursuing lately,” Moser said. “Bundling in general is very successful with the right offering,  but we prefer to take advantage of other discounts and promotions. That’s what customers respond to.”

The reason for Jiffy Mart’s not having included frozen beverages in its bundled promotions of late is purely a software issue.

“Right now, my problem is that our point-of-sale (POS) doesn’t automatically recognize the bundle,” Moser said. “When we were upgrading our system this feature was overlooked, so we are now in the process of correcting it to allow these transactions going forward.”

Once that correction is made, frozen beverages will be added to the foodservice menu.

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