Category Close-Up: Frozen Dispensed Beverages

Category Close-Up: Frozen Dispensed Beverages - Frozen Assets
By Pat Pape

With snow melting and winter winds morphing into spring breezes €" at least in some parts of the country €" its time to focus attention on the frozen beverage category. A strong focus is particularly important now since business at the frozen beverage bar has taken a hit in recent years, with average store sales dropping almost 7 percent in 2009 compared to 2008.

Several good reasons should encour­age retailers to re-think the frozen dis­pensed beverage category. For one, consumers no longer purchase bever­ages simply because they are thirsty. To­day, beverages compete with other snack items €" and each other €" to sat­isfy consumers€™ nutritional and emo­tional needs. In fact, research indicates that consumers typically consume the refreshing frozen drinks during the af­ternoon or the snack daypart.

Chains that have upgraded their foodservice menus have discovered that related categories €" such as frozen beverages €" can complement those offer­ings. Best of all, there are good margins in frozen beverages. According to NACS State of the Industry data, the average convenience store enjoyed a 52 percent margin from the frozen beverage bar last year, a figure up slightly from 2008.

The Right Offering
Frozen dispensed drinks have been around since 1965 when 7-Eleven intro­duced the original Icee, which was colorful, sweet and served at a cold 28 degrees. Later re-named Slurpee be­cause of the sound it made coming through a near-empty straw, the con­coction caused an immediate sensation among Baby Boomers, thanks to its ar­ray of bright colors and tasty flavors. Soon, slush-style drinks were available at venues ranging from stores and movie theaters to amusement parks and fairs.

Despite the drink€™s long-enduring popularity, simply installing a frozen beverage bar does not guarantee imme­diate success in the category. Just ask Casey€™s General Stores, the Ankeny, Iowa-based retailer with more than 1,400 units. Casey€™s tested the product in the past but it was "not as successful as we hoped," said Bill Walljasper, se­nior vice president and CFO of the chain. Now things are changing.

Since 2008, Casey€™s has been adding frozen beverage bars to the company€™s new store format €" which combines an expanded fresh food menu, including made-to-order sub sandwiches €" with a more upscale look that customers find appealing. As a result, the frozen bever­age bars "appear to be doing better this time around," he said, adding that cold, slush drinks and the fresh store format seem to complement each other, result­ing in a lift in beverage sales.

Just over a year ago, Nice N Easy Gro­cery Shoppes, an 80-plus store chain in New York, replaced its two- and three-barrel frozen beverage dispensers with a proprietary frozen drink program dubbed "Chillville." The company gave the icy product 12 linear feet of store space and its own identity. "It€™s doing well," said Jack Cushman, vice president of foodservice for Nice N Easy. "We€™re happy with it, but we€™re still in the tweaking phase."

Since Chillville€™s introduction, Nice N Easy has tested various frozen beverage offerings, discarding the ones that weren€™t a hit. Currently, customers may choose from eight flavors, four carbonated and four non-carbonated, but a frozen energy drink is no longer available. "It doesn€™t seem to be in demand in this market," said Cushman. "I generally see small children and preteens consuming the product€¦ and they go for a sweet taste."

The stores also experimented with a smoothie-style drink that contained pieces of fruit, but the addition of fruit required extra cleaning and maintenance of the beverage equipment, a no-no in the demanding c-store environment.

New Choices, Old Favorites
When it comes to frozen beverages, the more choices, the better, according to Rick Sidel, beverage manager for Bucky€™s Express convenience stores, a 30-store chain based in Omaha, Ne­braska. "I think you do better the more barrels you have," he said.

Most Bucky€™s locations feature 12 barrels. All stores offer Coke and Sprite, and they recently added Mountain Dew and Dr Pepper.

With the emphasis on good health and better-for-you products, many food manufacturers are producing a wide range of juice-based products or 100 percent juices for use in retail and insti­tutional slush machines.

As concerns about good health grow, "people are going for better-for-you prod­ucts," said Katie Whiting, marketing manager for Juice Tyme, a Chicago man­ufacturer that produces concentrates and bag-in-the-box juices. "Even some bars want to advertise their cocktails as being madewith100percentjuice."Inaddition, more schools are asking for 100 percent juices to serve to students. "And trends that start in college foodservice make their way into the marketplace," she said.

But for many retailers, like Brian Mc­Kee, vice president of merchandising for Pak-A-Sak stores of Amarillo, Texas, the tried-and-true frozen beverage flavors remain the most popular. "We still do the best with Coke and cherry," he said.

Tools of the Trade
Choosing the right frozen beverage equipment can be as challenging as se­lecting the perfect flavor menu. Nice N Easy recently began using equipment from Frozen Beverage Dispensers (FBD) of San Antonio, Texas. "The engineering is the best," said Cushman. "It is rock solid."

Frozen beverage equipment requires attention, however. Store employees must address sanitation issues promptly and make certain that equipment filters are kept clean. "You must also ensure a 4-inch clearance around the equipment," said Cushman. "You don€™t want the compressors to overheat."

Bill Kanawati, owner of KE Bever­age in Hackensack, New Jersey, mar­kets Elmeco granita machines, an Italian import, to convenience stores, restaurants, malls and parks, including the Statue of Liberty and Ellis Island parks. The machines are easy to clean and require no lubrication, he said, adding that the Elmeco frozen bever­age dispenser should have its own ded­icated breaker, which ensures the compressor will turn itself off before the equipment could overheat. "That€™s why we give a five-year warranty on the compressor," he said.

A New Type of Frozen
Some beverage bars are moving beyond the traditional slush drink and adding new taste treats to attract new customers. The f€™Real Milkshake, an innova­tive version of the conventional ice cream drink, is garnering fans nation­wide. Produced by f€™Real Foods of Orinda, California, the serve-yourself treat combines ice cream and frozen milk with an assortment of flavors. Customers simply select the product from a refrigerated holding unit at the beverage bar, remove the lid and foil seal and then place the cup into f€™Real€™s blender on the counter. Three settings permit customers to whip up a thick, regular or thinner shake.

The equipment dispenses a small amount of hot water into the cup while the product is being blended, and that

means the machine must be plumbed into a water line. The same water source rinses the equipment after every use, which helps cut back on la­bor. "It is so simple to use," said Jim Farrell, president and founder of the company. "Our whole goal was to cre­ate an old-fashioned milkshake in less than one minute."

The company currently offers five flavors: chocolate, vanilla, strawberry, chocolate malt and cookies 'n cream. Seasonal flavors scheduled for this year include Reese€™s peanut butter chip and mint chocolate chip, and Farrell expects to offer more flavors associated with brand-name candies in the future. "It never hurts to add a great brand like Re­ese€™s," he said.

The company also sells a variety of fruit smoothies with a single serving of fruit in each cup and a selection of fro­zen cappuccino shakes in three flavors: classic coffee, caramel and mocha.

According to Farrell, consumers go for the do-it-yourself milkshake year-round, but "summer sales are twice what winter sales are. We€™ve had chains that were concerned that our shake would displace the slushy drink, but they don€™t seem to cannibalize each other," he said, adding that the milkshake€™s margins are close to 50 percent, about the same as for a slush-style beverage.

Currently, Tulsa, Oklahoma-based QuikTrip; the Kwik Trip chain based in La Crosse, Wisconsin; Wawa stores of Wawa, Pennsylvania; and the Sheetz chain headquartered in Claysburg, Pennsylvania sell the f€™Real Milkshake.

Farrell believes there are many op­portunities at the frozen beverage bar for retail operators who want to boost their business, particularly now when consumers are watching their wallets. "When the economy is not so good, people like a treat that doesn€™t cost a lot," he said.

Pat Pape worked in the convenience store industry for more than 20 years before becoming a full-time writer.