Demographics Driving Cold, Frozen Sales

From movie promotions at 7-Eleven to new flavors, the cold and frozen category is generating some excitement despite the presence of chilly temperatures in many parts of the country.

Actually, where you live may well play a large part in what customers want to see in your cold dispensers.  Mike Thornbrugh, manager of public affairs and government relations for Tulsa, Okla.-based QuikTrip, said it is forecasting strong growth across the board for the cold and frozen dispensed category and its adjusting store sets to reflect those projections.

“The cold dispensed fountain drink business has been very, very strong, and we’re not about to change our strategy,” Thornbrugh said. “We finished a huge time- and labor-extensive remodel expanding our fountain offer a few years ago that involved every single store within the company.” With more than 500 stores, that takes a lot of time and money.

QuikTrip also invests quite a bit of marketing dollars into its cold and frozen program, which has enabled the chain to cultivate a loyal following. New products and flavors help keep the category fresh. But demographics play an important role as well. Retailers in rural areas that don’t have high store volumes could find the investment in dispensed to be cost-prohibitive. As a result, they are missing out on an opportunity to capitalize on a program that’s generating excitement in other parts of the country.

For example, Eric Huppert, president of Spring Valley, Wis.-based Team Oil Co., pulled his soda fountains out about three years ago. Huppert, who operates stores in small towns with no more than 1,500 residents, averages about 500 to 600 transactions a day and 700,000 gallons of gas annually. Cold and frozen beverages were merely an afterthought to these core customers.

“I was giving away a fountain drink with every gas fill-up, and I couldn’t go through enough to use the syrup before it went out of date,” Huppert said. “It used to be that people bought a huge container of fountain soda. I don’t see that happening anymore.”

Perhaps the most interesting consequence of Huppert removing the cold fountain: The only customers who complained were those looking for free ice and cups, not soda. “Not only was the fountain costing me money from having product go out of date, it was costing me money because people were getting cups and ice for free,” Huppert noted. “Ice machines cost a lot to maintain. You’ve got to be making some money with them.”

Frozen Trends
Even though some of his vendors told him they aren’t pushing fountain installations these days because sales in his markets have dropped, Huppert is getting innovative in other areas. He’s using his slushy machine to make energy slushies using energy drinks like Monster and Rock Star. The most notable advertising Huppert did for the new concoctions is found in a sign next to the slushy machine, reading: “This isn’t your little sister’s energy drink.”

“When you put an energy drink in the frozen dispensed machine and dare people to drink it, it encourages them to try it,” Huppert said. “I think there are so many options in cold dollars now that fountains with five or six flavors just can’t compete, so they have to be innovative. The cooler these days has dozens and dozens of choices.”

Like many others chains, Huppert’s has a full cooler door just for energy drinks and 4 square feet of displays for energy shots near the cash registers. Given the success of his energy slushies, Huppert plans to look carefully at new cold energy options some vendors say are about to hit the market.

The phenomenal growth in liquid energy sales may be at least partly attributable to the fact that a rapidly growing number of people are working longer hours and finding less time to sleep. “It really comes down to people needing to do more to get by everyday and needing more energy to do it,” Huppert said.

Team Oil has also installed an ice cream shake machine with eight flavors on the deli counter to capitalize on the growing trend of frozen dairy beverages, which have also had success at chains like Quick Chek Food Stores and Rutter’s Farm Stores.

“It’s one of the very few things I’ve ever bought that has actually performed as well as the salesman said it would,” Huppert said. “Our town doesn’t have any fast food, only one café and one restaurant. I think our frozen beverage machine fills the ‘let’s go get a treat’ niche for families.”

Huppert is also considering adding a few more slushie machines, primarily because his vendors will supply the machines free of charge if he buys product from them. “The shake machine cost me $14,000, but there’s no upfront investment with slush machines,” he said. “I’m sure the product is a little more expensive, but you can amortize that cost, and if the machine breaks the vendor fixes it at no charge.”

While acknowledging that the energy drink category is growing at a greater percent, Thornbrugh said his stores aren’t seeing a fountain sales decline. “We’re kind of different because we have such a large variety,” he noted, referring to QuikTrip’s 24-head fountain dispensers.

One way Thornbrugh’s fountain offerings will always change: flavors. “We let people mix and match,” he said. “Our customers know their palates better than we do, so we give them a lot of choices and they make their drinks the way they want them. We’re always looking for new flavors. We test things all the time, but the old standbys are definitely not going away.”

Chilly Southern Reception
Despite an overall increase in energy drink sales, Brad Eaton, category manager at The Spinx Co., in Greenville, S.C., said that when his company added dispensed energy drinks to the fountain a couple of years ago the results were underwhelming.

“We went with a private label, and it tested really well in half a dozen stores, but once I ran it through all the stores it flopped miserably,” Eaton said. “I ended up with a bunch of product I had to do some fancy footwork to get rid of because it all went out of date.”

Eaton said he can’t attribute fountain energy sales strictly to demographics because test-marketing was in both urban and rural stores. “Perhaps the newness wore off after people tried it, or customers just couldn’t correlate energy in a cup as opposed to a can or shot format,” he said. “One cashier told me she drank three or four of them and got a headache.”

Spinx stores offer Icee products and Kraft Lifesaver KoolAid and Countrytime products. For the past two years, the company has also offered a proprietary line of dispensed carbonated soft drinks in cherry, cola, green apple and blue raspberry flavors, all of which Eaton said are doing extremely well.

“I’m not sure where the category is going this year,” Eaton said, adding that while energy shot sales have taken off they haven’t come at the expense of cold and frozen dispensed.

Eaton hasn’t tried energy slushies yet, but thought it may be something to look at. The company is innovative in a lot of categories, but in fountain and frozen drinks, it’s sticking  to what sells.

“Down here in the South, when it gets hot we don’t have any trouble selling a frozen drink,” Eaton laughed. “You can put anything in a frozen drink machine and it will sell well here.”

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