By David Bennett, Senior Editor
A March 2016 survey by Mintel Group Ltd. showed that convenience store visitors want a wider variety of fresh food and beverages as part of their shopping experience.
As part of the report, 912 internet users aged 18 or older were asked: “Which of the following made-to-order or fresh foods/beverages have you purchased at convenience stores in the last three months,” 48% of respondents said fountain beverages, which was the top choice among food and beverage offerings.
Some years ago, the fountain category and the concept of fresh appeared contradictory. C-stores were known for a limited dispensed drink selection, with few promotions to push product. Frozen beverages often came out of a 7-Eleven Slurpee machine. However, convenience retailers today provide U.S. consumers a vast selection of cold and frozen dispensed beverages including fruit-infused slushes, milkshakes, iced coffees, novelty soft drinks and frozen beverage concoctions. The result is a category that continues to provide momentum when it comes to in-store sales.
EXTENDING FOODSERVICE SALES
C-store foodservice programs generated more than one-third of in-store gross-profit dollars in 2015, with cold and frozen dispensed beverage sales being key contributors, according to the National Association of Convenience Stores (NACS) 2015 State of the Industry report. By gross margin sales, cold beverages per store, per month grew to 50.86% in 2015. Frozen beverages weren’t that far behind with a gross margin percentage of 46.05%.
NACS’ preliminary State of the Industry report for 2016 will be out soon. When it is published, cold and frozen beverages will likely be strong performers again.
Arguably, the c-store channel has already earned the title as the cold dispensed beverage destination champ. Now, convenience retailers are adding some polish to the title in the form of new product offerings and flavorful deals to keep customers coming back—and not just to the cold vault.
“The thirst occasion is one of the primary reasons customers come to a c-store and a cold beverage is a great way to quench that thirst,” said Steven Montgomery, president of b2b Solutions LLC, a convenience store consultancy based in Lake Forest, Ill. “The question is: are they going to buy a beverage from the cooler or a dispensed beverage. The answer lies in the consumers’ personal preferences and how they perceive the retailer’s dispensed offers.”
Steve Magestro, president of Saukville, Wis.-based Mad Max Convenience Stores, counts dispensed beverages as a significant contributor to the company’s in-store profits and is looking to extend its advantage. Mad Max at the beginning of 2017 began installing a new generation, Pepsi Spire machine that offers consumers multiple drink selections at the touch of a button.
The chain operates 12 locations in Wisconsin, which in the winter, can be natural barrier to cold and frozen dispensed beverage sales. With the new machines, Magestro anticipates a big uptick in category sales when the weather begins to get warmer.
“Cold and frozen beverages always increase for us from April through September,” Magestro said. “Because of the temperature difference in our region, cold and frozen slow way down because of the cold weather. I think it will be flat from previous (winters).”
However, for the upcoming summer season, which is often marked by road trips and consumers on the go, convenience stores also benefit from the high margins produced by salty snacks in the bag, or fresh and healthy snacks in grab-and-go portions. And where there are snacks, there are cold drink purchases.
“An advantage the c-store maintains is the tremendous selection of snacks that we offer that can be bought to go with the beverage,” said Montgomery.
Though snacks provide a natural boost to c-store dispensed beverage sales, the channel will continue to experience pressure from quick-serve restaurants (QSRs), which in the last few years, have positioned hot and cold dispensed beverages as stand-alone sales generators.
“Their strategy has shifted from being focused on selling the protein with the accompanying drink being an ancillary sale to one that understands that drinks can be a destination driver,” Montgomery said. “An example from the hot beverage category is shown to be McDonald’s emphasis on coffee. To date the only QSR that has already made the change for cold dispensed drinks is Sonic.”
Sonic Drive-In in the last few years has successfully marketed itself as premium place for dispensed beverages, where consumers can mix and experiment with drink combinations between its fountain drinks and slushes. Currently, the fast-food chain is promoting half-price shakes and ice slushes after 8 p.m.
That’s not to say the c-store channel isn’t concocting its own beverage strategies.
Anymore, c-store channel surfers can find popular beverage options such as Jolly Rancher Frozen Beverages, Hershey’s Freeze Frozen Beverages and Sour Punch Slushes.
Chilly coffee drinks have also gained traction in a growing number of c-stores.
Still, carbonated soft drinks continue to generate a bulk of cold and frozen dispensed beverage sales in the c-store channel.
For instance, Atlanta-based RaceTrac Petroleum offers up to 30 fountain options including Coca-Cola, Dr. Pepper and Pepsi products, plus another 18 frozen offerings. The retailer also has a private label frozen beverage brand, Numb Skull.
The c-store chain has expanded upon the model of a destination with its annual promotion known as Sodapalooza. Sodapalooza is RaceTrac’s most popular annual summer fountain and frozen marketing event. Customers who purchase a reusable Sodapalooza cup receive unlimited free refills on a variety of fountain drinks, teas and energy drinks at nearly 450 stores in the southeast.
Sodapalooza has become a favorite among RaceTrac promotions because of the timeliness of the promotion, as well as the exclusive access it provides, said Marianne Simpson, promotions manager for RaceTrac. 2016 was the fifth year RaceTrac has hosted Sodapalooza.
“Our guests are able to come into a RaceTrac like a VIP and refill their cup for free during the hottest months of the year, no questions asked,” said Simpson. “Additionally, in recent years, the cups have included general and regionally-specific coupons that add even more value to their refillable cup (e.g. all cups include Coca-Cola coupons while Atlanta guests may have a buy one, get one free Braves ticket, and Orlando area guests could receive discounted Sea World tickets). Finally, our store teams look forward to this promotion each year we have executed it, and team member engagement drives increased guest excitement.”
While the success of the beverage campaign is measurable, the planning that the annual promotion entails is demanding.
“It’s not always a guarantee that Sodapalooza will occur each year,” said Simpson. “Once a campaign ends, our marketing team works closely with our fountain category team to determine if the promotion was successful from a sales and brand-building perspective. If our internal teams determine the year’s campaign was a success, we will begin planning for the next year’s campaign in September, with plans to launch in the April or May of the coming year.”
Last year’s campaign ran from May 4-July 31, 2016.
Accompanied by clever advertising and social media campaigns, the beverage promotion has been a boon to RaceTrac in terms of attracting new customers.
“Social media is an integral part of the Sodapalooza promotion, as it allows us to leverage paid and earned tactics to increase awareness and drive purchase of the cups while engaging with our guests with channel-specific activities,” Simpson said.