Cool Category Carries On

Perhaps there is no “destination category” that best captures the entrepreneurial spirit of the convenience store industry as does cold and frozen dispensed beverages.

More and more when patrons enter a c-store, they are likely to encounter dedicated spaces known as the “Chill Zone,” “Siberian Chill,” or “Cold Corner.”

Cold dispensed beverages remain a staple in c-stores, with about 98% of c-stores reporting offering cold dispensed products, according to data presented at the National Association of Convenience Stores (NACS) 2016 State of the Industry Summit, which is preliminary and derived from company submissions as of March 31. Top-quartile performers had cold dispensed profits that were 5.46 percentage points more than those in the bottom quartile.

“We find the more dispensed beverages we offer, it picks up overall sales in our stores,” said Jamy Flory, vice president at Flory’s Convenience, Gas & Delis, a four-store operation based in Fishkill, N.Y. “Rather than two barrels of frozen drinks, we’ll have three with six flavors to increase total cup sales.”

To that point, the advent of frozen coffee beverages at Starbucks, Dunkin’ Donuts and other foodservice venues has spurred significant competition in the convenience channel.

DISPENSING INNOVATION
While much of the excitement in this category was centered around flavor shots years ago, more recently the buzz is about new types of drinks more akin to craft beers. Younger consumers, particularly Millennials, are designing their own concoctions by mixing flavors. Stores are then displaying the innovative virgin cocktails via social media.

“Much like with the beer industry, where we’ve seen an increase in craft beers, not at the expense of regular favorites but to enhance these, we are seeing the same with c-store cold dispensed beverages,” said Jeff Lenard, NACS’ vice president, strategic industry initiatives. “Stores that have unique offerings in this segment can take the pressure off with gas prices, since customers will seek out these beverages.”

It helps that there is no other type of product more tied to convenience stores than frozen dispensed beverages, and this is a big positive for retailers. It bears keeping in mind that this category is not just for summer or regions with warmer weather.
“7-Eleven has stated that frozen dispensed beverages are most popular in Michigan all year long,” said Lenard.

More retailers are taking advantage of the opportunities by offering signature mug programs. For example, RaceTrac has seen great success with its Sodapalooza promotion, which offers coupons and discounted refills for customers who purchase its branded mugs. Likewise, 7-Eleven’s Free Slurpee Day on July 11 has become a traditional event.

“This does two things,” said Lenard. “First, it takes one of the most in-demand products and encourages people to purchase other items and second, it encourages these customers to come to your store instead of the competition for discounted cold or frozen drinks.”

Flory’s stores recently added more dispensing equipment for these beverages at two of its stores, which have led to an overall sale increase.

“At our flagship store, we’ve created an arctic theme and will do that in our other site now,” said Flory. “This spring, we have plans to create a theme for frozen drinks to be proactive and stay ahead of the curve.”

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