Beverages: Dispensing Dollars

By
Abbie Westra, Editor-in-Chief, Convenience Store Products

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

Specialty coffees, which saw 4% growth in c-store sales from 2008 to 2012, are expected to see decelerated growth of 2% this year. Technomic principal Tim Powell says that the explosive growth anew 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—stealing back customers along the way.

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 a stalwart category, 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 projects that it will decline by 1% in the next three years.

NPD has also noted a decline, particularly in the grocery and drug channels.“My big concern would be beverages, “says Bonnie Riggs of NPD. “That has been such a hot area and a growth area. What’s probably pulling that number down are carbonated soft drinks.”

While some dispensed-beverage sales are softening, others are just ramping up. Juice and iced tea are both expected to make considerable gains in share of c-store sales of cold dispensed beverages, according toTechnomic, propelled by appealing price points and a healthful connotation in the eyes of the consumer—especially parents.

Overall, beverages have become functional item. There’s a general idea that a beverage should be healthy and make customers productive.

“I think the stress is going to continue to be about calories,” Datassential’s director of business development Mark DiDomenico says. “We’re seeing a lot of zero-calorie beverages on the cold side. It’s less about thirst quenching and more about functionality.”

This focus on health could have an impact beyond customer preference. In New York, for example, c-store operators almost became renegade outlaws just by serving large sodas.

Of course, it’s important to keep these sales and consumer trends in perspective. Most city governments are not considering legal shifts, and even the changes on the customer side are small percentage changes, not massive overhauls. Regular coffee and soft drinks continue to be far and away the leaders in their categories and, based on previous years’ trends, will continue to stay that way for a long time.

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