By Pat Pape
Cold dispensed beverages are a convenience store classic, and almost all convenience stores (94 percent) carry them. Margins are good (45 percent) and customers continue to buy, making cold dispensed beverages 12 percent of all convenience store foodservice sales in 2007, according to NACS State of the Industry data. And in a CSX review of more than 3,200 convenience stores, the cold dispensed beverages category enjoyed a 5.6 percent bump in sales from January to October 2007 compared to the same period in 2008. But changes are taking place in the soft drink industry that could influence what happens at the beverage bar.
Long popular and iconic soft drink brands are suffering from an ailing image. The American Journal of Clinical Nutrition reports that sugary beverages provide as much as 9 percent of the total calories for adults and children. Teenagers are bigger soft drink fans, getting 13 percent of their calories from carbonated and noncarbonated beverages. Last year, an issue of Circulation: Journal of the American Heart Association noted that drinking more than one soft drink per day, whether regular or diet, may be associated with diabetes or an increased risk for heart disease.
In the wake of this recent publicity, it is no surprise that consumers are open to trying new beverages, and many are seeking “better-for-you” options.
According to the Rudd Center for Food Policy and Obesity at Yale University, Americans drank 22 gallons of non-diet soft drinks per person in 1970. By 1997, that figure had nearly doubled to 41 gallons per person — and obesity had jumped 112 percent. The Center for Science in the Public Interest, a consumer advocacy group in Washington, D.C., reports that U.S. consumption of carbonated soft drinks peaked in 1998, when every person drank an average of 56.1 gallons that year. However, consumption experienced a drop of 7 percent by 2004.
“Consumers are looking for more choices, natural choices and better-for-you choices,” said Kathy Lenkov, communications manager for Nestlé Foodservice North America. “And we expect that trend to continue.”
To that end, Nestlé Foodservice has created a fountain-dispensed beverage that provides options for health-conscious customers. Currently available only at fast casual restaurants, Nestlé’s Sjora fountain beverage includes 10 percent milk and 5 percent juice. It comes in mango peach and tropical pineapple flavors; in either regular or diet versions; and has no high fructose corn syrup, carbonation or caffeine.
Coca-Cola has introduced three new flavors under the Gold Peak premium tea brand — White Citrus, Diet Black and Diet Green — plus Minute Maid Light Pomegranate Lemonade for the fountain.
“A good example is the success of Coke Zero on fountain in convenience retailing, QSR and in theaters,” Coca-Cola spokesperson Ray Crockett said of the drink designed to be a sugar-free variation of the original Coca-Cola. “Coke Zero is performing well in the convenience chains that have placed it to date,” he said. “We believe it can help grow overall fountain incidence [at convenience stores] because of its strong appeal to the core shopper and because, like Coke Classic, it is an excellent complement to meals and snacks.”
A clean, attractive beverage bar, featuring a variety of products and well stocked with cups, lids and straws, is mandatory for a successful cold dispensed beverage program, but operating a money-making program is more complicated. Every cold beverage program must focus on four important qualities that are critical to generating sales: presentation, promotion, variety and facility.
Presentation refers to the soda and ice, which are equally important. Ice can make up to as much as 50 percent of a fountain drink, and research reveals that more than half of all fountain customers, despite dentists’ warnings, like to chew the ice from their drinks when the liquid is gone. As a result, customers want soft, chewable ice — not hard cubes — in their cups.
Flash Foods, based in Waycross, Georgia, now dispenses soft ice at its 160-plus stores. “It is a nugget ice,” said Phil Settle, director of marketing. “It’s much smaller and softer than traditional cubed ice. Many restaurants and c-stores have been transitioning to this over the past couple of years. It seems to be preferred by many customers.”
Nugget ice is not as clear as cubed ice and is slower to melt than flaked ice. The process used to make it uses requires less water and significantly less electricity than producing the traditional cubed product.
Spinx convenience stores, with more than 75 locations in North and South Carolina, is serving “chewy ice” at its newly constructed locations, according to Bryan Zeiger, marketing coordinator at the company’s Greenville, South Carolina, headquarters. “We want to see if we get a positive response [first],” he said, when asked if the softer ice would be rolled out to all stores.
Promotion includes the price-value perception. Currently, Spinx is offering any size fountain drink for 99 cents, and as expected, most customers go for the largest cup that Spinx sells. “We offer that promotion on and off,” Zeiger said.
Although the beverage bar is a familiar part of the convenience store landscape, retailers need to remind customers about cold dispensed beverage options. Spinx advertises fountain drink specials at the fuel pumps via an interactive color monitor in the gas pumps and again with promotional materials inside the store. Some Spinx stores even feature electronic message boards on the street corners outside the store, which management feels has been an effective tool for driving traffic.
Quick Chek, which operates more than 100 stores throughout New Jersey and southern New York, has an ongoing promotion with 32-ounce fountain drinks priced at 99 cents every day. In the past, the chain also has offered occasional meal deals, which featured a food item plus a beverage at a discounted price.
At E-Z Mart, with more than 300 locations in the South and Southwest, “we are signing the cooler with fountain prices because we feel we can offer a better value to the consumer at the fountain and save them money,” said Bubba Kirkland, vice president of merchandising for E-Z Mart.
Product promotions also have a big impact on beverage bar activity. Fountain beverage cups are a great place to print a convenience store logo, but they also can serve as an effective and low-cost marketing tool. Several years ago, Circle K wanted to leverage the chain’s sponsorship of the Carolina Panthers football team. Working with a promotional marketing company, Circle K created 32-ounce keepsake collector’s cups featuring the team’s most popular players.
The promotion was such a big success that Circle K built on that concept by later producing Panthers cups with 3-D graphics highlighting the team’s most memorable moments on the field. The cups were available only at Circle K, where they sold for $1.99 each and could be filled with soda for free. Other cup promotions can be as simple as a peel-off game or discount coupon.
Continual change and variety are important at the Quick Chek beverage bar. “We play up the seasons and keep the area new and fresh,” said Mandy Steindl-Kwiecien, Quick Chek category manager.
In addition to the traditional soft drink choices, Quick Chek fountains feature the energy drink Vault and the sports drink PowerAde, both produced by Coca-Cola. A separate dispenser provides customers with cups of fresh brewed iced coffee. “We do very well with it,” Steindl-Kwiecien said of the coffee drink. This echoes a recent report by The National Coffee Association, which stated, “[P]ast year consumption of iced and frozen coffee is up significantly from 2007 levels.”
E-Z Mart also serves PowerAde at the fountain, as well as SoBe Lifewater, a clear beverage enhanced with C, E and B complex vitamins. The company recently made beverage bar changes to give customers more choices. “We are almost through with an upgrade of our machines and graphics, where we added new machines and heads in about 200 stores,” said Kirkland, “We went away from an exclusive contract and signed with Coca-Cola, Pepsi and Dr Pepper to have representation on our machines.”
Facility refers to the beverage bar itself, including customers’ freedom to serve themselves and create the perfect combination of ice and liquid. A few years ago, some stores added flavorings to the beverage bar, which customers can use to enhance either coffee or soft drinks.
La Crosse, Wisconsin-based Kwik Trip has offered a selection of flavored syrups for the past two years. While the flavors vary by store, “cherry and lemon seem to be popular,” said John McCue, Kwik Trip spokesman.According to Coke spokesman Ray Crockett, success at the beverage bar depends on doing the basics and executing well. “Our shopper insights tell us that the main reasons people don’t purchase from the fountain more often are value, ease or convenience and quality.”
The foodservice area “is a destination for convenience shoppers. They are attracted to stores where they feel that they can get a quality beverage at a good value, and get in and out of the store quickly,” said Crockett. “The retailers who lead in fountain incidence do all of these things consistently well.”
Pat Pape worked in the convenience store industry for more than 20 years before becoming a full-time writer. She is a NACS Magazine contributing writer.