Cold, Frozen Drinks Tout Destination

March 11, 2015
CSDecisions
Iron Man Slurpee cups and strawsVery few categories within the convenience store industry say ‘destination sales’ like cold and frozen beverages. That’s because over the last five decades, the category has grown up side by side with the c-store industry—the whole time reflecting the changing tastes and cultural propensity of the American consumer.
According to The NPD Group, the iced beverage market, including frozen drinks, since 2010 has shown double-digit growth year on year. This resulted in the average purchases for iced beverages nearly doubling from 2010 to 2014.
Moreover, frozen beverage servings at convenience stores and total foodservice outlets experienced double-digit growth in 2014, said Bonnie Riggs, NPD Group’s restaurant industry analyst. Currently, Millennials seem to be the biggest opportunity for future category growth—until the next generation puts their purchasing power into play.
“I think that convenience store chains have done a good job of branding and promoting frozen beverages,” Riggs said. “Many c-stores have become a destination stop for frozen beverage consumers. They visit a store or chain specifically to purchase a slushy or other frozen drink.”
A new wave of carbonated beverage flavors, frozen coffees and other “chiller” drinks have garnered consumer appeal, but even more critical for retailers, they provide a higher price point relative to soft drinks, ready-to-drink teas and other cold beverages.
Margin Relief
According to the National Association of Convenience Stores (NACS), dispensed beverages overall contribute approximately 30% of foodservice sales and an average of 57% gross margin. Not surprisingly, more than 70% of convenience stores sell them. That’s likely because they’re the kind of item that can draw customers into a store.
To keep them coming back, the category should offer something new, as long as it’s meeting customer expectations, said Alison Umbarger, RaceTrac’s category manager of cold dispensed beverages.
“Flavor extensions and limited-time offers (LTOs) have become a staple in the category,” Umbarger said. “Our partnerships with both large and small beverage producers are important as we continue to customize our offer for different regions. We continue to pay close attention to food/beverage trends—cherry limeade, for example—and are excited to follow in the footsteps of our hot dispensed category in exploring seasonal LTOs and flavor tests and expansions.”
The length and type of promotion offered can also impact seasonal beverage sales. Alongside the limited flavors, RaceTrac offers special deals to customers in order to get them to try something new or different.
That’s not the only means by which RaceTrac is engaging customers. This April, the chain is updating branding for RaceTrac’s Numb Skull frozen drink offering, which is set to debut in more than 400 RaceTrac stores. In November 2014, RaceTrac was considering a rebranding effort for its Numb Skull frozen drink offering and decided to survey patrons.
The updated branding is a result of that customer engagement. Of course, the variety of choice and flexibility in service make the cold/frozen category a treat convenience store retailers and their customers still bank on.
“RaceTrac guests count on us to provide them with endless beverage options, and the frozen category doesn’t disappoint,” Umbarger said. “Guests can choose from up to 12 different frozen-cold beverage (FCB) flavors and they have the flexibility to mix and match to their hearts’ content. That ability to customize frozen drinks continues to appeal to our guests.”