Article
QSRs bank on beverages
Specialty drinks add up to higher checks as beverage sales soar.
August 11, 2008
A burger, fries and a drink, please — a common enough order at any quick-service restaurant. But with the rise in specialty beverages — from flavored coffees to blended-iced treats — drink sales are claiming a larger portion of the check.
According to information from Chicago-based foodservice consultancy Technomic Information Services Inc., beverage sales experienced a 15.6-percent growth in 2007, while the hamburger, chicken and Mexican segments saw sales increases of 4.6 to 6.3 percent.
With the economy softening, Technomic has adjusted its 2008 beverage forecast to only 9 percent of sales growth, a number "still well above the industry growth rate," said Darren Tristano, executive vice president of Technomic.
For concepts such as Cinnabon bakeries, specialty beverages are one way for QSRs that offer only baked goods or snack items to draw from a previously untapped market. At Cinnabon, beverages claim 25 percent of sales, said Jason Simons, director of Cinnabon marketing.
"As the mix within the actual beverage category has shifted, the trend has become more geared toward specialty beverages . . . away from soft drinks into more blended beverages," he said.
While the stores' juices, soft drinks and bottled water often cross the counter alongside a baked good, specialty beverages "act more like a travel driver," he said. Customers who order a baked-good item tend to sit in the store while those who order the stores' Chillattas or MochaLotta Chills often grab them to go, Simons said.
Simons said sales of Cinnabon's blended-iced drinks tend to be seasonal. There also is a direct correlation to the company's marketing efforts and the drinks' success.
"When our point-of-purchase materials feature these drinks, we see a spike in these drinks," Simons said.
Another factor driving beverage sales growth at QSRs like Cinnabon is that consumers are picking up specialty drinks as individual purchases more often, sometimes in place of a meal.
"It's a snack in itself," Simons said. "It's more competitive (to the company's) classic roll."
Healthy options drive sales
Concepts that carry beverages with added nutrients or drinks that fall in the better-for-you category also can pick up new customers.
Jenn Johnston, senior vice president of brand marketing for NexCen Franchise Management, said NexCen Brand's QSRs concepts have seen an increase of beverage sales, including as individual purchases, since the company partnered with Freshëns to deploy its smoothie line.
"We're seeing a rise in smoothies as a meal replacement for breakfast or lunch or as a snack," Johnston said.
And Tristano said specialty beverages are satisfying consumers' desire for early-morning, mid-morning and afternoon snack cravings, but only a small segment are likely to use the drinks to replace a meal. Enhanced drinks, especially those with infusions of nutrients like omega-3 fatty acids, also may tend to satisfy consumers who typically skip a meal altogether.
Johnston said Freshëns' smoothies are particularly popular with women and teenagers in NexCen's QSR concepts, which include Great American Cookies, Pretzel Time, Pretzelmaker, Marble Slab Creamery and Maggie Moo's Ice Cream & Treatery.
Women tend to gravitate to the smoothies because of the health benefits of the fruit and fortified ingredients, especially antioxidants, Johnston said. The drinks' health benefits drive sales year round, rather than limiting the ice-blended drinks to warm months.
One pretzel concept franchisee said smoothies accounted for 15 percent to 23 percent of total sales in existing stores. Newly opened stores were seeing Freshëns smoothie sales make up 8 percent of total sales, Johnston said.
"That means it's a healthy component of the menu mix," she said.
Higher price points, profit margins
Technomic's Tristano said specialty beverages are capturing a larger part of sales because of their higher price points and profit margins. Fountain drinks may have the highest profit margin, but specialty drinks have a higher profit margin over most food items.
The price points on specialty beverages, which can be $1-$4 higher than soft drinks, also increase check averages. For example, Taco Bell's new Frutista Freeze line sells for $1.89 compared to $1.19 to $1.79 for fountain drinks.
"Where a typical check average for a traditional quick-serve chain can be $3 to $7, these (drinks) can now account sometimes for 50 percent of the check average, where they used to be in line with 20 to 25 percent," Tristano said. "They're able to charge more, and as a result they're able to earn more on each sale."
To cash in on drink sales, large burger chains such as McDonald's are adding specialty beverages to their menus. McDonald's is in the process of rolling out its McCafé concept, which offers coffeehouse-type specialty beverages and baked goods. Other chains have seen success adding ice-blended drinks to their menu.
Arby's is studying the market before adding to its beverage offerings but has found success by simply expanding its flavor profiles, said Ed Gleich, senior vice president of concept innovation for Arby's.
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Arby's also is responding to customer demand for more flavors — and the decline of carbonated and sugar-sweetened drinks' popularity — by adding raspberry-flavored tea and sugar-free lemonade to its fountain soft drink offerings. It also has added two new diet carbonated soft drinks.
"(Consumers) are requesting variety more and more," Gleich said. "People's palates are changing, and the availability of them has changed over time, and Arby's has reacted to that by making more options available."
Bubble may have burst
Those chains yet to add more drink options to the menu may find the high beverage growth rate already has peaked. Growth has trended up for the last five years, Tristano said, and as is typical with trends, specialty beverages have expanded throughout the marketplace, including into QSRs. As a result, the drinks have lost some of their cachet.
"Where you had to go to a pretty nice café to get a cup of cappuccino, . . . you can now get one at a McDonald's, you can get one anywhere," he said.
Specialty beverages also may soon experience the so-called Krispy Kreme effect, in which the donuts lost their cult appeal as more outlets opened and the donuts were sold in retail outlets.
"They're not as popular because they're so readily available," Tristano said.
