NPD Group: Revenue-generating beverage orders on the decline

Oct. 25, 2011 | by Alicia Kelso

New data from foodservice market research firm The NPD Group shows that tap water is one of the fastest growing beverages ordered at U.S. restaurants, while revenue-generating beverages have been declining over the past five years.

Tap water servings currently represent 8 percent of the 50 billion beverage servings ordered at restaurants, according to NPD's CREST service, which continually tracks consumer use of restaurants.

Within the past five years, restaurant traffic has dropped 1 percent, and total beverage servings, excluding tap water, have witnessed a 6 percent drop. This is a decline of 2.7 billion servings, according to NPD's report "Beverages at Foodservice: Satisfying Our Thirst for Beverages."

Tap water servings have increased by 2.8 billion servings since 2006. The report, which includes a survey of 5,500 adults 18 years and older, finds that the decline in beverage orders at restaurants is driven by the largest categories — carbonated soft drinks and brewed coffee — which represent 49 percent of all beverage servings.

"Although the economy and high unemployment are factors in tap water's upswing and beverage servings declines, some beverages, like carbonated soft drinks were declining prior to the recession," said Bonnie Riggs, NPD restaurant industry analyst and author of the report. "A key learning from this report is that much of the declines in beverage servings are tied to the price/value relationship the consumer perceives."

One of the many reasons consumers gave for not ordering carbonated soft drinks and other non-growth beverages was the cost of these drinks.

"Some declining beverages will fare better as the economy recovers, but beverage providers will need to address consumers' concerns and poor value perceptions to stem further losses," Riggs said.

Not all bad news

Still, there is a category bright spot as iced tea, smoothies, iced/frozen/slushy drinks and specialty coffee drinks have experienced growth.

"Not all beverages are on the decline. New flavors, addressing taste interests, preparing fresh/freshly made, and creating new versions of existing beverages are factors in the beverages that are growing," Riggs said.

For example, last year, the National Restaurant Association listed specialty iced tea as the No. 1 nonalcoholic beverage trend. Mintel Menu Insights' forecast calls for a 53 percent increase in iced tea beverages from 2008-2013.

These predictions were partially influenced by the launch of McDonald's $1 Sweet Tea offering, which is just part of the wildly successful McCafe line.

Freestyle boost?

One factor that may play a part in turning around the carbonated beverage downswing is the increased deployment of the Coca-Cola Freestyle machine throughout the industry. Chains such as Five Guys Burgers and Fries, Firehouse Subs, McDonald's, Wendy's, Burger King, Subway, CiCi's Pizza, Qdoba, Popeyes Louisiana Kitchen and El Pollo Loco have either rolled out the equipment or tested it in select markets.

Coca-Cola's proprietary Freestyle equipment is a touchscreen-enabled fountain dispenser that features more than 100 varieties of beverages, including derivatives of the carbonated classics. It earned an innovation award from the National Restaurant Association this year.

"If any can turn (the downward trend) around, it will be Coke. Consumers like new and, if they like the Freestyle machine, they will continue to use it, which could soften carbonated soft drink declines," Riggs said. "However, it will still come down to consumers' perception of the price/value relationship."

Read more about trends and statistics.

Photo provided by Tom Gazpacho.

Topics: Business Strategy and Profitability , Food & Beverage , Trends / Statistics

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with, and has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, and Franchise Asia magazine.
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