Article

Beverage trends impact QSR sales

Energy drinks, bottled water and more are taking over as the consumer's choice.

June 27, 2007 by Valerie Killifer — senior editor, NetWorld Alliance

Menu trends have long been limited to burgers, sandwiches and salads; however, beverages have become the latest vehicle for operators looking to drive sales and increase profits.

 

But beverage-sales growth isn't coming from traditional carbonated soft drink powerhouses such as Coke and Pepsi. Energy drinks, bottled water and specialty coffees are adding to the drink mix.

 

"It's very hard to tell what's going on," said John Sicher, editor and publisher of the trade publication Beverage Digest.

 

Sicher said while soft drink sales continue to thrive at quick-serve and Mexican restaurant chains, bottled water sales are seeing substantial increases at sandwich shops and grab-n-goes.

 

Coke Classic, which held 17.3 percent of the carbonated soft drink market in 2006, saw its share drop 0.3 percent compared with 2005. And second-place Pepsi saw its market share drop 0.2 percent during the same period, according to a Beverage Digest report. 

 

Meanwhile, a National Restaurant Association survey found that only 6 percent of quick-service restaurant operators reported an increase in the popularity of carbonated drinks in 2006, while operators reported a 65 percent increase in the popularity of energy drinks sold at their establishments. Bottled water came in at 57 percent, with nearly six in 10 quick-service operators saying bottled water is gaining in popularity.

 

Coffee tops the list

 

The only trend to beat both bottled water and energy drinks appeared in the espresso/specialty coffee market, which came in at a close 66 percent.

 

Taking a nod from coffeehouse giant Starbucks, Oak Brook, Ill.-based McDonald's Corp. last year introduced a pricier premium coffee in its restaurants. The switch followed similar moves by Burger King and Dunkin' Donuts.

 

McDonald's U.S. restaurants serve more than 500 million cups of coffee each year, accounting for about one in every 10 cups of coffee sold outside the home in the United States.

 

"McDonald's has long been a destination for customers seeking great tasting, breakfast menu choices," said Don Thompson, McDonald's USA chief operations officer. "With breakfast accounting for roughly two-thirds of all the coffee consumed throughout the day, McDonald's Premium Roast coffee offers our customers their favorite breakfast and a premium coffee all in one place."

 

Per-unit coffee sales rose 15 percent following the introduction of its premium coffee, the company reported.

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Earlier this year, the burger giant began adding espresso drinks, iced coffee and smoothies at outlets across the United States. The move was an effort to develop "destination beverages" in order to attract new customers throughout the day, according to McDonald's president Ralph Alvarez.

 

Smoothie operator

 

According to the NRA, 32 percent of operators reported an increase in the popularity of smoothies. 

 

Restaurant chains such as KnowFat, Jamba Juice, Dunkin Donuts and Sonic have banked on the smoothie trend to boost profits, and continue to do so.

 

"Smoothies, which debuted in January, have been very strong sellers and fit very well in our consumers' lifestyles," said Sonic Industries president Scott McLain. "It sells at all times of the day, including the morning."

 

The addition of smoothies has added to Sonic's already full line of specialty drinks and also speak to consumers' desire for more healthful beverages.

 

According to the Research and Markets report, "Magnificent Seven' Drinks Trends to 2012", seven key beverage trends are making their mark on the beverage industry. The seven trends include: health, convenience, exclusivity, ethics, "free-from" and customized beverages.

 

"The following "magnificent seven" trends are already stirring interest in various sectors within the global drinks industry, and we believe that they are set to explode over the next six years due to a combination of micro and macro drivers," said a Research and Markets representative. "As disposable incomes rise and GDP growth exceeds expectations in emerging markets such as China, premiumization and health will become more salient trends."

 

Additionally banking on the popularity of frozen and energy-drink trends, Dunkin' Donuts continues to add to its Coolatta lineup. The drinks are available in two varieties and eight flavors, including the Tropicana Orange Coolatta and the SoBe Energy Coolatta, launched in 2005 and 2007, respectively.

 

"Dunkin' Donuts is committed to developing innovative, on-trend menu choices that address the latest trends and needs of our customers," said Robert Rodriguez, Dunkin' Donuts brand president. "Our new partnership with SoBe is a perfect fit for the Dunkin' Donuts customer, who is always on the go and looking for a fast way to refuel."

 

During its most recent Coolatta launch, Dunkin' Donuts cited several statistics indicative of the current beverage direction: According to Chicago's NPD Group, both the frozen fruit and energy categories were rapidly expanding, up five percent and more than 20 percent respectively as of March 2007.