Insights on Bettering Dispensed Beverage Business

ROSEMONT, Ill. — Did you hear the one about the convenience-store cups that sweated?

It’s no joke. And it hammered sales.

Discussions on dispensed beverages, and doing this category better, were the focus at CSP’s Dispensed Beverages Forum held April 20-22 in Rosemont, Ill.

Topics included product extensions, water filtration, hot beverages and frozen carbonated beverages.

Jessica Williams, founder and CEO of Louisville, Ky.-based consultancy Food Forward Thinking, moderated the forum.

Click through to read more …

“A great product extension will up your level on quality,” said Deborah Holand, president and founder of Richardson, Texas-based Foodservice911.com, which helps companies develop winning business strategies in concept-development foodservice and retail meal solutions. “You need to be consistent and have appeal or it won’t make it.”

In a session called “Little Secrets to Greater Growth,” Holand said that dispensed beverage product extensions, which can boost sales, include fountain, cold brew, teas, juices, water, blenders and frozen.

Holand noted the attributes of great product extensions include serving as a primer for promotional limited-time offers (LTOs) and seasonal consumption, and elevating quality, consistency and appeal.

Holand also discussed the benefits of incorporating purified bubbles into fountain service. “Proper filtration and frequent Brix testing will noticeably reduce costs,” she said. A Brix test measures dissolved solids in a liquid, according to Genesis Ag.

In frozen carbonated beverages, Nolan said high unit sales don’t always predict profitability, and maintenance costs can undermine profits; however, “shakes and smoothies,” he said, “are worth the risk in high-potential locations.”

The frozen-carbonated beverages category has supported itself well during the pandemic. “You pretty much can’t walk over to the cold vault and get a similar product there,” he said.

Nolan then revealed the biggest mistake he ever made in his career: bringing in a new fountain cup that sweated. “I wanted to get into environmental cups but made a mistake not testing it,” he said, adding that the cups dripped in the middle of summer, lowering sales by 20% in a week. “It took six months to rebound,” he said.

Nolan also discussed the urgency in getting hot beverages to rebound in the next 12 months. “To draw back the consumer in the a.m. drive, we have to do better telling consumers what we have with coffee.” To lure those from home offices, serve unique beverages they can’t make at home, he added.

Diving deep into data, R.J. Hottovy, head of analytical research at Los Altos, Calif.-based location-analytics company Placer.ai, discussed what has and hasn’t changed with hot-dispensed beverage programs as the pandemic subsides.

“Consumers see coffee and other hot beverages as a necessity,” he said in the session “Adapting to the Changed Consumer: What Coffee’s Post-Pandemic Resurgence Means for C-Stores.”

“Urban locations still matter despite work and school at-home preferences,” he said.

Other aspects have changed, however:

• Visitation times are still below pre-pandemic levels, bolstering the importance of convenience.
• The change to late morning visits (9 a.m. to noon) appears to be permanent.
• Drive-thru coffee is here to stay.
• Trade areas expanded for many specialty coffee chains and continue to evolve because of increased drive-thru penetration and gas price inflation.
• Seasonality offers opportunities for cold and frozen beverages.

In dispensed beverage engagement, fountain/cold dispensed remains the clear leader in c-stores, with 40% buying, down from 42% in 2019, said Robert Byrne, senior manager, consumer insights at CSP sister research firm Technomic, spoke on “Decoding the New Dispensed Environment.”

Carafe/hot dispensed is second at 31%.

In hot beverages, this category is purchased during morning and “beverage only” occasions 51% of the time, with the afternoon snack daypart accounting for 20%. More than half of hot-dispensed consumers, 53%, say this purchase is made Monday through Thursday, versus 50% of c-store customers in general.

Not surprisingly, the main reason for buying hot dispensed among hot-dispensed consumers is the quality, at 53%, versus 45% among c-store customers in general.

In cold-dispensed beverages, midday accounts for three-fifths of such orders, and there are more opportunities with afternoon snacks, Byrne said, noting that 65% of these purchases are unplanned among cold-dispensed consumers (vs. 61% of all c-store customers).