Strategies to grow sales at the soda fountain

A three-channel look at how retailers are battling carbonated soft drinks' decline.

GRAPEVINE, Texas—It’s well documented that carbonated soft drinks are a challenged breed in the packaged-beverage arena. Two-percent annual sales declines seem to be the norm for the subcategory, often attributed to the growth of energy drinks, which many argue should be considered part of the CSD (carbonated soft drinks) category.

But while continual decline of CSD cooler-door space has become the norm, three days at a foodservice conference highlighted that the same struggle is occurring at the fountain, where energy drinks aren’t really a factor.

“If you look at the data, you see that hot- and cold-dispensed beverages are growing at about the same rate,” said Sharon Porter, director of sales and marketing for Insight Beverages, during a FARE Conference breakout session titled Maximizing Margin: Chilled-Beverage Trends, Promotions and Products. “But if you take carbonated beverages out of cold-dispensed, it really pops. It shows the growth of emerging drinks and flavors.”

Porter underscored that these “emerging drinks” can be relatively new additions to the beverage category—flavored waters and iced coffee, for example—or beverages with long histories—lemonade and iced tea—that are growing on the back of consumer trends, such as the desire for customization or healthfulness.

The obvious conclusion for retailers, Porter said, is “the more selection they can provide, the more consumers” they can please.

Here’s how retailers from three different channels are trying to stay ahead of the trends in the cooler and at the fountain.

The Convenience Retailer

“This category can easily be commoditized and people just look at price,” said Frank White, director of retail operations for Tri-State Petroleum, Wheeling, W.Va. “That makes customization important. … The consumer wants to be able to add syrups or whipped cream, but they also want those standby flavors.”

To that end, Tri-State is trying to entice customers with limited time offers, bundling and healthier offers.

“I could drop my fountain price to 79 cents, but that just erodes profit,” White said. “If I can get the customers to come in to try something new, that makes my store a destination and gives me the opportunity to sell [those customers] something else.”

One tactic White is using is bundling drinks with beef jerky or fruit. “By pairing [the beverage] with something healthy, customers feel like they’re doing well for themselves.”

Also in the works at Tri-State is a healthier smoothie program that uses current equipment to keep costs reasonable.

“Ten years ago, smoothies were the rage, but they weren’t really a healthy offering,” he said. “Today, QSRs are putting healthier smoothie programs together. We, as a channel, need to get there. It’s about making it happen with the equipment we already have.”

The Medical Center

James Roth, executive chef at Elmhurst Memorial Healthcare, Elmhurst, Ill., is seeing the dip is CSD sales, but he’s not upset by it. In fact, he finds it encouraging.

As the leader of the foodservice program at a medical center, Roth is concerned about patients, employees and guests consuming too many sugary beverages. To encourage better eating habits, Roth is on a constant search for healthier drinks, which he divides into three color-coded sections in his cafeterias and stores: green for no calories or sugar, red for full-calorie and yellow for somewhere in between.

“We want to offer a full line of beverages, but there’s an education component attached to it,” he said. “And we’ve seen growth on the green and yellow beverages while red drinks decline.”

One addition Roth is looking at is including a plain carbonated-water fountain and allowing customers to flavor the water however they want with syrups or powders, addressing the desire for customization.

The University

At Purdue University Residences in West Lafayette, Ind., Kari Glebe has a relatively captive consumer group. Still, the multi-unit manager, grills, has also seen a drop in CSD sales as more college-aged customers move to bottled water and iced tea for refreshment.

Efforts to maintain a profitable fountain program have included adding Coca-Cola Freestyle machines to allow for customization and to test a soda cup with an attached computer-chip loyalty program. The effort allows the student to buy anywhere from $10 to a semester’s worth of drinks at one time. The amount on the chip in the cup is read by the Freestyle machine, and the customer doesn’t even have to go through the checkout if that’s all he or she is buying.

Grebe has also tested programs where a cup is included in each new tenant’s dorm room when they move in. As long as he or she brings that cup to the dining hall during the semester, refills are free.

Other efforts to improve beverage sales include pairing coffee with a bottled water and plans to add a vitaminwater fountain tower.

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