Whether it’s the dog days of summer or the hazy shade of winter, innovative promotions can help maintain frozen beverage sales all year long.
By Howard Riell, Associate Editor
Convenience store operators know customers seek cold and frozen dispensed beverages when the thermometer outside rises.
However, what can c-stores to do promote sales when temperatures drop?
Keeping sales of chilled and icy dispensed beverages hot when the weather isn’t presents a challenge that savvy retailers respond to in several ways. They can include changing up the product mix, leveraging brand power, paying attention to consumer demographics, and offering incentives through discounts and bundled promotions.
“There is an opening for the category to evolve past warm weather months,” said Tom Pirko, president of BEVMARK LLC, a retail consulting firm in Buellton, Calif. that specializes in beverage marketing. “The beverage industry has become, more than ever, focused on innovation through flavors and, to a lesser extent, sweeteners.”
The emphasis instead is on product attributes, Pirko continued.
“Frozen drinks sell in cooler months, not so much because of their refreshing iciness, but rather through flavor innovations, and in some cases a nod to the kinds of sweeteners used,” Pirko said. The bestselling frozen and cold dispensed beverages, he added, remain those that have a brand name attached. “The power of branding remains important in this category.”
Tedeschi Food Shops Inc., based in Rockland, Mass., sees sales of cold and frozen dispensed beverages drop off by 20% or more in the fall and winter. Indeed, cooler weather turned out to be a factor during this past summer as well, according to Joe Hamza, vice president of sales and marketing.
“We had a terrible summer this year, with unseasonably cool temperatures, so we’ve had to promote more,” Hamza said. “That’s the only way we can stimulate demand for many of our products.”
In August, the family-owned convenience store chain, which operates 186 locations in Massachusetts and New Hampshire, upgraded its fresh produce program, which includes smaller pack sizes and three store deliveries a week. The fact that the program drives higher customer traffic to its stores has helped boosts sale of drinks along with offerings. But it’s prepared and packaged food programs that have enabled Tedeschi, which generated more than $600 million in annual revenue last year, to zero in on its cold and frozen dispensed beverage sales.
“When it comes to promotions,” said Hamza, “it’s all about price and trying to drive demand through price discounts.” Discounts on these beverages range from 20% to as much as 40%, he explained, and are offered throughout the day.
Another form of discounting is Tedeschi’s ongoing program of bundling these beverages with a variety of food items—sub sandwiches, wraps and even salads—together with a bag of potato chips for just $1 more. “In the stores that don’t have delis,” Hamza said, “we have packaged sub sandwiches and salads as part of the bundle.”
ANALYZING THE MARKET
Changing up the offerings along with the seasons is another proven strategy for maintaining sales.
“The bottom line for us is obviously that we have to look at our trade area,” said Amer Hawatmeh, president of St. George Oil in St. Louis, operator of Coast to Coast convenience stores. “Within that trade area, in the stores that carry the dispensed beverages in the urban markets, we do well with the slushie-style products.”
As Coast to Coast’s volume has increased it has received increased attention from its beverage suppliers, Hawatmeh pointed out.
“We’ve gotten to a point now with our volume that we’ve been able to go to the guys who make our syrup and start creating new flavors—watermelon, coconut and things of that nature, which is neat,” Hawatmeh said. “Normally it’s the traditional red and blue flavors, but now we’ve got additional flavors that we can introduce.”
The menu of dispensed beverage flavors changes every six months in order to keep consumer interest high. Sales still routinely drop by between 20-25%, he added. “But at least they’re still there. That’s not bad. Cherry is a year-round part of the program. Everybody likes cherry,” Hawatmeh said. “Then we bring in coconut, watermelon, raspberry, blueberry and others. We keep trying new things to keep it fresh.”
Stores outside of urban markets carry fewer choices, he added. “I’ve carried as many as six at one time, but I found that six is overkill. I look here in town at some of my buddies and I don’t understand why they are carrying 10 and 12 flavors.”
Hawatmeh aims for maintaining a 30-35% profit margin on his dispensed beverages in order to keep the price down.
“Even at a five-to-one (syrup-to-water) ratio, the price, especially of the specialty mixes, is a little bit high, so we’re trying to do one size, 24-ounce for $1.39. That’s only a 35% margin, but I would rather have a 35% margin than no margin and the machines just spinning and using up electricity.”
One tactic that Coast to Coast stores no longer employ is tying dispensed beverages to loyalty programs.
“We tried that years ago and I didn’t believe that it was really working,” Hawatmeh said. “By the time you print the card and go through all the other steps, it didn’t pay. We just went to the automatic price reduction.”
BASKET BUNDLING
On the other hand, Fabulous Freddy’s Car Wash in Las Vegas has had strong results from linking its dispensed beverages with its loyalty program, according to category manager Lori Bull. “As part of our loyalty card program, once our fabulous customers buy 10 fountain drinks, the 11th is free. We do the same thing with our hot beverages as well.”
Coast to Coast also bundles beverages with food items.
“The way we do it in any store that has hot food or even cold sandwiches is that if you get any fountain beverage there is an automatic price adjustment in our system that is around 20%,” Hawatmeh said. “So when you get a sandwich or a pizza, we marry those into the system. When the two get rung up together, the fountain automatically drops 20%.”
“The best way to ensure sales during colder months is using cold beverages as part of a combo meal or bundle,” said Jerry Weiner, vice president of foodservice for 59-unit Rutter’s Farm Stores in York, Pa. “Consumers are already predisposed to add the cold beverage to a food order.”
David Crawford, vice president of operations for Green Valley Grocery, a 52-unit convenience store chain in Las Vegas, said he doesn’t shift gears with cold and frozen dispensed beverages to help sales keep pace when the
seasons change.
“Better to focus on the products that sell as the weather changes than to try and stimulate sales of items that are in a seasonal decline,” Crawford said. “That said, pricing, selection and operational execution still need to be maintained.”
Seasonal flavors and products can do well, Crawford conceded, but too often have a very limited product life cycle. Carbonated frozen beverages, such as Icee, seem to always do well, Crawford said. “The f’real brand is doing well and provides a good selection of flavors and products, like frozen coffee, milkshakes and smoothies.”
Rutter’s Weiner and his managers have also found that non-carbonated beverages constitute the growth segment now, and that new flavors always help.
“Cola is still the best seller,” Weiner said. “Cherry is always number two, and after that it can be different by store. If there is a high customer count in the younger demographic then the sweeter, brighter colors will prevail. If there customer base is a little older you would want to move to the flatter colors and not so sweet and sugar-free offers, if possible.”