Mixed News for Dispensed Beverages

Coffee comes under attack as CSDs continue to wane

Robert Lillegard, Freelance writer

CHICAGO -- With dispensed beverages promising more than 70% gross margin, it's no wonder they make up one of the most important categories for convenience store operators. But as a percentage of menu mix, they actually declined slightly in both c-stores and food/drug stores last year, according to The NPD Group.

Specialty coffees, which saw 4% growth in share of hot dispensed beverage sales from 2008 to 2012, are expected to see a decelerated growth of 2% this year.

Tim Powell of Chicago-based research firm Technomic said the explosive growth a few years back was primarily due to the fact that coffee was just then receiving an overhaul from retailers. And since then, QSRs have muscled their way back into the beverage space with expanded specialty coffee and smoothie programs.

"Limited-service restaurants started taking it back," Powell told CSP Daily News. "That's really why it dropped off a little bit."

Cold beverages also remain an important part of the menu mix. But the percentages are starting to shift. Carbonated soft drinks, long a mainstay, remain popular, accounting for 77% of cold dispensed beverages sold in c-stores in 2012. But that percentage hasn't grown at all in the past four years, and Technomic actually projects that it will decline by 1% in the next three years. The NPD Group has also noted a decline, particularly in the food and drug channels.

"My big concern here would be beverages," Bonnie Riggs of NPD told CSP Daily News. "That has been such a hot area and a growth area. What's probably pulling that number down are carbonated soft drinks."

Juice and iced tea are both expected by make considerable gains in share of cold dispensed beverage sales, according to Technomic, propelled by appealing price points and a healthful connotation in the eyes of the consumer.

"Right now I think the stress is going to continue to be about calories," Datassential's Mark DiDomenico said. "We're seeing a lot of zero-calorie beverages on the cold side. It's less about thirst-quenching and more about functionality at this point--energy, vitamins, make me productive."

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