Striking the Right Balance

Convenience stores can find dispensed beverage success at the intersection of smart innovation and excelling at the basics

By Angela Hanson

THE PAST two years have been challenging for all convenience store product categories, but particularly so for dispensed beverages. Hot, cold and frozen dispensed beverages all experienced notable declines during the COVID-19 pandemic, at the same time that many consumers opted to quench their thirst with packaged alternatives.

With most c-store operators now predicting that dispensed beverage sales will see little improvement in 2022, it makes sense to temper expectations — but there is room for optimism if retailers make the most of the opportunities that still exist.

“One of the biggest challenges in our industry is to change the customer’s habits and create a new habit in our stores,” said Chad White, foodservice category manager at York, Pa.based Rutter’s.

He noted that while the 80-store chain saw a hot beverage decline during the pandemic as customers made significant changes to their daily habits, a return to more normal work habits has brought many of them back, presenting Rutter’s with the opportunity to become part of their new schedules.

“With customers out of their normal routine, we are working to bring them into our stores and build loyalty with our offerings and quality products,” White explained.

In the still-developing new normal, dispensed beverages can serve as an often-overlooked yet key contributor to the c-store industry’s ability to compete with quick-service restaurants (QSRs). This competition intensified during the pandemic as consumers explored new options for away-from-home food and drink purchases. Prepared food often gets the spotlight when it comes to c-stores vs. QSRs, but beverages can be a tiebreaker for those customers seeking both.

“If they can come to you for a warm breakfast sandwich and make their perfect cup of coffee, you offer something most QSRs can’t and you win the business,” pointed out Heather Davis, director of foodservice for Savannah, Ga.-based convenience store chain Parker’s.

To get customers back, c-stores must offer condiments that allow them to make their coffee the same way they would at home.

When it comes to c-stores vs. QSRs, prepared food often gets the spotlight, but dispensed beverages can be a tiebreaker for those customers seeking both.

To make the most of dispensed beverages, experts suggest retailers rigorously execute on the basics, and then build onto that established reliability to add innovation, which itself should be carefully planned.

“In order to successfully innovate, you must have a station and the product should be a quality item that the customer wants to come back for. If those areas are not met, innovation will do nothing,” White said. “Innovation on the dispensed beverage station may look a little different than food; it may not be new products, but new marketing or promotions that bring value to the customer.”

Dispensed beverages are also a relatively bright spot in the ongoing supply chain woes. Retailers report that the segment has experienced less of a negative impact than other categories, with steady procurement of supplies aside from cups and straws. Being able to offer a reliable beverage program makes it more likely that consumers will add it to their usual routines, and sets operators up to be able to boost innovation when supply chains have stabilized.

“Work closely with your supplier partners to understand their capabilities now and over the next year,” Davis suggests. “Things will improve and while you may not be able to execute now, you can absolutely plan now, so you are ready when you can execute.”

Retailers also should look for ways that make it easier for customers to order. After installing self-ordering kiosks at some locations, Temple, Texasbased CEFCO Convenience Stores saw 9-percent growth in cold dispensed beverage sales compared to non-kiosk stores.

Experts shared insights on the best paths to take for each dispensed beverage type:

Reviving Hot Dispensed Beverages

Hot dispensed beverages experienced the largest sales decline in the segment due to the pandemic. That said, it could also be the dispensed beverage type most primed to bounce back due to coffee’s longtime status as a pillar of the convenience channel offering.

A key factor in whether that happens is whether consumers who grew accustomed to making their own coffee at home, exactly how they want it, will go back to making regular c-store coffee runs. Some industry insiders have suggested that the coffee consumer base may be permanently diminished due to the rise in working from home. However, opinions are mixed on how likely this is to be a permanent shift.

“There will be a small percentage of people who never come back, but I think a majority of people will return,” Davis said. “Providing them with bean-to-cup coffee and condiments that allow them to make it the same way they would at home are important factors to get them back in the door.“

She views bean-to-cup coffee as a “must-have” for retailers looking to capture the at-home coffee consumer. “They get the same experience they get at home, which makes you an easy choice for them,“ she noted.

Reorganizing the coffee area to emphasize minimal contact and individual servings can help reassure consumers who want to feel that a store has adapted in response to the pandemic.

“We’re seeing equipment manufacturers continue to address this issue with touchless beverage technology that allows consumers to return to their favorite dispensed beverages while feeling confident about their health,” said Chris Travisano, senior vice president of sales and marketing at Sugar Foods Corp., a supplier of coffee bar products. “Removing multi-use canisters and pump-style containers of flavored syrups and liquid whitener/ creamers provides an upgraded cleanliness and sanitary solution to condiment stations.”

is also a must-do to provide the customization level that consumers want today.

“We see key mainstay flavors such as French vanilla, mocha and hazelnut maintain popularity with consumers,” Travisano noted. “Additionally, research shows customers are looking for ways to limit or avoid sugar and carbohydrate consumption.”

Cold brew coffee and single-origin, sustainably sourced coffee like 7-Eleven Inc.’s premium 7-Reserve line are growing in appeal as well. However, experts caution that c-store operators who aren’t prepared to offer these types of coffee should focus on doing well with standard brewed coffee rather than overextend themselves.

“You can still have a high-quality cup of coffee with the offering centered around brewed coffee,” White said. “While these items have a lot of positives, there are also some challenges.”

Reviving Frozen Dispensed Beverages

Whether it’s through a proprietary program or a vendor partnership, the frozen dispensed beverages segment is a space for both classic favorites and opportunity to trial new flavors.

At Parker’s, the Fresh Blends program lets customers choose from 30-plus flavors, but the top two smoothie varieties are the classic strawberry-banana and strawberry.

“What we are seeing from Fresh Blends is the choices are not outside of the box,” Davis said. “Consumers are sticking with familiar flavors.”

At the same time, operators should keep an eye on demographic flavor preferences as 68 percent of Generation Z consumers and 46 percent of millennials drink frozen beverages, according to research from The Coca-Cola Co.

Retailers looking to innovate in this segment can consider launching a spiked slushies program if it is legally permissible where they operate. Rutter’s and Pittsburgh-based GetGo Café + Market both found success with and expanded their frozen alcoholic treats over the last year.

“Our spiked slushy program has been a huge success for us. Customers are enjoying the option of getting their favorite beverage in a slushy format,” reported Rutter’s White. “As the program has evolved, we began introducing seasonal flavors to continue bringing attention to the spiked slushy program. We believe we have only scratched the surface of the potential for this program and will continue to look at new and exciting flavors.”

Spiked slushies may be required to be kept in a separate area from regular frozen beverages, and staff will need to be trained to check IDs as they do with other alcoholic beverages.

“We have placed a focus on ensuring the units are cleaned regularly and filled with product at all times and this requires additional hours for the store location,” White added. “However, the successes of the program far outweigh the challenges.”

“There will be a small percentage of people who never come back, but I think a majority of people will return. Providing them with bean-to-cup coffee and condiments that allow them to make it the same way they would at home are important factors to get them back in the door.”

— Heather Davis, Parker’s

Reviving Cold Dispensed Beverages

The future of cold dispensed beverages is strongly tied to prepared food, as consumers are more likely to buy a fountain drink alongside their meal or snack purchase, especially if a bundle deal is offered.

It could serve c-store operators well to reexamine the mix of fountain beverages they have available and question whether they meet consumer demand. While popular favorites like CocaCola and Pepsi will always have a place, many consumers are looking for more, such as dispensed sports drinks and vitamininfused water.

According to research from The Coca-Cola Co., 83 percent of c-store shoppers are willing to pay more for dispensed beverages with functional benefits.

“We have worked hard to bring value to the self-dispensed program through both marketing and elevating the self-dispensed program,” White said, pointing to Rutter’s addition of Pure Craft Beverages. “These items are made with real sugar and come in many unique flavors such as Orange Dreamsicle, Ginger Beer and Blood Orange.”

Cold dispensed beverages are also a prime opportunity for special promotions that encourage repeat purchases, such as Rutter’s Fountain Fridays program, which gives customers double fuel rewards when they purchase a fountain drink.