Cold & Frozen dispensed beverages: Mixing it Up in Cold Dispensed

Average per-store sales of cold dispensed beverages experienced modest gains that shouldn’t give retailers pause when they manage this category, as leading c-store chains are showing that big profits can spurt from some tiny fountain heads.

Ricker’s c-stores, for instance, a 30-store chain headquartered in Anderson, Ind., has shaped much of its identity on its successful and regionally recognized fountain-drink program. Owner Jay Ricker said Ricker’s Pop has been essential in driving the chain’s continued growth over the past few decades and has "been the centerpiece of our stores and why we’ve prospered."

Industry data from the National Association of Convenience Stores (NACS) showed a 1.9% growth rate in average per-store sales for this category in the past year, and the number of c-stores adding fountain drinks and frozen beverage dispensers to their in-store offerings has also grown.

To be sure, the cold dispensed category continues to be among the top 10 profitable in-store categories, according to NACS 2008 State of the Industry (SOI) study, though there were slight declines in the overall contribution to gross profit dollars.

Innovation Drives Sales

Leading convenience store chains continue to dominate the cold dispensed category as they have for decades, offering new spins on old ideas as a way to bring new, profitable trends into the fold. Innovations by equipment manufacturers like San Antonio -based FBD have helped retailers capitalize on emerging trends.

Frozen beverage powerhouse 7-Eleven, which has shuffled more than $6 billion Slurpees out the doors of its c-stores since the product was first introduced in 1966, concocted a coffee-based Slurpee earlier this year, the Slurpuccino, which draws on two unmistakable c-store trends: iced coffees and healthier products.

7-Eleven’s Slurpuccino is a caffeinated, fat-free product with just 61 calories and less caffeine then a cup of coffee. The coffee- and caramel-flavored drink targets the 18-to-34-year-old group—the traditional Slurpee purchaser—but it can also appeal to older demographics, the company said.

In a broader look, soft drink dominance is dwindling and giving way to coffee overall, according to the National Coffee Association, whose data shows that iced and cold coffee sales grew by a compound annual growth rate (CAGR) of 32% since 2002 to become a $3.4-billion segment.

This critical twist in the beverage segment, a growing demand for coffee-based drinks and a perpetual demand for better-for-you and good-for-you products, is prompting retailers like 7-Eleven to expand their frozen and cold-dispensed beverage programs to meet consumers’ shifting needs. The traditional Slurpee beverage, however, remains a staple of 7-Eleven’s frozen beverage offering. The company has been launching a barrage of marketing campaigns alongside major movie releases, such as "Ironman", "The Incredible Hulk" and such, to further target its product at the key 18-to-34-year-old demographic.

Manufacturers are responding in kind, too, picking up on the health focus for the cold-dispensed category. Nestle recently introduced a cold-dispensed beverage, Sjora, which contains 10% milk and 5% juice and has 90 calories in the standard eight-ounce serving and 15 calories in the diet version.

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