Dispensed Beverages Thrive on Innovation and Marketing

A wide selection of frozen dispensed beverages can make your chain a destination for thirsty customers.

Dispensed cold and frozen beverages enjoyed another solid year of growth in 2010, and 2011 is shaping up to be another strong year, according to the NPD Group in Port Washington, N.Y.

“Our latest research is telling us 3% of consumers going into a convenience store are purchasing a frozen beverage or slushy drink,” said David Portalatin, director of industry analysis for NPD, which has been tracking convenience channel purchase behavior since 1998. “Now, 3% may not sound like a lot, but in terms of the consumer base we’re tracking that would translate into about 30 million slushies just from January through September, so it’s a lot.”

NPD’s research also shows that the top two frozen flavors are still cola and cherry. In fact, those and other fruit flavors make up about 85% of frozen purchases. “Having said that, there certainly is a lot of diversity beyond that, and a lot of room for innovation and growth,” said Portalatin. “Consumers are choosing the store they purchase from in large part based upon the selection and quality of products.”

That is important, Portalatin explained, because 79% of these purchases are planned. “People are setting out for the c-store specifically to get a frozen beverage. They know where they’re going. Their destination is going to be a place they know they can get the flavors, the variety and the quality they’re looking for, so it can be a traffic driver.”

There is a larger lesson here for c-store operators, Portalatin emphasized. “The reality is if you choose a category to make a distinctive point of competitive advantage in the marketplace, you absolutely can differentiate. I think that’s one of the keys to success in convenience retail: to find the spots where you have a differentiated offer from your competitor. This is certainly one of those categories where you have an opportunity to do that.”

Delivering Value and Variety
Eric Huppert, president of Spring Valley, Wis.-based Team Oil Co., offers consumers a three-head Slush Puppie machine as well as a Flavor Burst shake machine. “Obviously sales drop slightly in the winter, but we’ve got strong sales projections for what we’re expecting to do in the summer,” he said

Myriad factors can and do affect sales at any given location. As a result, chains must focus on the value proposition and rotating in new products and flavors to keep the category exciting. Effective marketing is also crucial. In addition to its regular in-store programs, Team Oil works with local schools, distributing drink tokens to teachers, who use them to reward students. The ripple effect carries over even further. Parents typically take their kids to the c-store to redeem the tokens giving the chain an opportunity to upsell  to the parents.

“If this gives us a slight sales advantage, we’re satisfied,” Huppert said.

Frozen Hot in Afternoons
While frozen dispensed beverages remains a hot category, the industry’s top-quartile retailers have higher expectations for the popular beverage segment. According to the fourth annual Convenience Store Decisions/Balvor 2011 Foodservice Outlook Survey, 5.4% of the top-quartile retailers surveyed anticipated growth in frozen beverage sales versus just 0.1% for bottom quartile operators.

78% of retailers questioned thought the greatest growth opportunity for frozen beverages lies between 2 p.m.-6 p.m.

14% said the biggest opportunity is between 6 p.m.-10 p.m.

8% reported midday from 10 a.m.-2 p.m. as the biggest growth opportunity.

Source: THE CSD/BALVOR 2011 FOODSERVICE OUTLOOK SURVEY

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