Americans continue to cool off in the hot summer months with frozen dispensed beverages (FDB), and by offering customization and noncarbonated options, convenience retailers are well positioned to meet customer demand in this category. “Frozen beverages and treats continue to grow and be in demand,” said Natalie Peterson, vice president of marketing for The ICEE Company. “As one of the highest-growth segments in beverages, frozen carbonated beverages are poised for continued growth in the c-store channel.”

Although 2020 sales dipped during the first quarter because of coronavirus shutdowns, those numbers recovered during June, July and August—usually the highest sales months for the category. “Depending on where your stores are located, FDB sales typically spike in the summer and dip in the winter,” said Jayme Gough, NACS research manager. “This year has seen improved technology driving increased sales of smoothies and frappés.”

Frozen dispensed beverages are the smallest category within foodservice, representing 1.78% of in-store sales in 2020 and 5.0% of foodservice sales, according to the NACS State of the Industry Report of 2020 Data. “Margins for the category are typically very high, and in 2020 they were the second largest of the foodservice categories,” Gough said. “2020 gross margins increased 1.42 points year over year to reach 64.94%, which pushed the category’s gross profit up 6.5% to $22,382 per store annually.”

The frozen dispensed beverage category is an inherently adventurous space within nonalcoholic beverages.

Staying Competitive

In the retail environment, frozen dispensed beverages used to be the domain of convenience stores, but lately quick-service restaurants have made inroads into the category. “Unfortunately for the channel, we compete directly with QSRs in FDB, which have also upped their offerings in the category,” Gough said.

To stave off QSR competition, convenience retailers should consider using technology to offer more personalization in FDB. For example, ICEE recently launched its new touchscreen customizable “mix it up” equipment that lets each customer have a unique beverage with up to 32 flavor combinations. “This new technology allows operators to offer consumers a customizable experience by giving them the option to mix in one to four different flavor shots,” Peterson said. “Retailers can also create a beverage destination by offering fun, seasonal flavor names and expanding their line not only with frozen carbonated beverages but also with noncarbonated frozen dispensed beverages.”

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Coca-Cola sees seasonal limited-time offers (LTOs) as key to bringing millennials and Gen Z customers into convenience stores for FDB. “Thirty-four percent of convenience shoppers have purchased a seasonal LTO from a c-store in the past month, and another 32% say they are interested in doing so, according to recent Mintel data,” said Erin O’Malley, senior manager of dispensed beverage innovation for the North American operating unit of The Coca-Cola Company. “This represents an opportunity for c-stores to cater to these customers. In addition, convenience retailers can lean into the successful approaches we’re seeing in the QSR space, such as serving chilled or frozen variations of the same beverage side by side to drive efficiency.”

GPM Investments, headquartered in Richmond, Virginia, is one retailer taking advantage of the buzz LTOs can build. This summer, GPM Investments rolled out Tangerango Frazil frozen slush as an LTO. The company also plans to have multiple, unique frozen dispensed beverage LTOs throughout its “100 Days of Summer” promotion.

Summer Sales

There is also a built-in opportunity for convenience retailers to promote and highlight FDBs. “Tying in frozen beverage promotions to summer holidays like the Fourth of July or outdoor activities like going to the beach can create excitement in the category,” Gough said.

Some retailers offer summer discounts or loyalty rewards tied to FDB. For example, retailers could create a “Happiest” Hour in the afternoon that highlights frozen dispensed beverages. “Frozen can be much more than a beverage—it can be a treat that is perfect for the afternoon snack daypart between lunch and dinner,” said Peterson.

“Others have experimented with a variety of different flavors or pairing a frozen beverage with another discounted item to drive excitement and sales,” Gough said. For example, Peterson recommended pairing snacks, especially savory ones like pretzels and popcorn, with frozen beverages.

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Frozen Trends

With more consumers interested in drinking their treats, FDB has met that need with innovative flavors and an expanded line of noncarbonated frozen beverages. “Some of the flavor trends ICEE has seen include a desire for whimsical and experiential flavors like ‘Llamacorn’ and ‘Mermaid’—pop culture, apparel and toy trends that have translated well into flavors in the frozen space,” Peterson said.

The pandemic also spurred consumers to seek out familiar or nostalgic foods and beverages. “Classic brands and flavors that remind consumers of their childhood, such as Frozen Coke and our new LTO Fanta Birthday Cake, are performing well in this category,” O’Malley said. “That said, worldwide travel restrictions have created an opportunity for beverage innovation to give consumers small moments of escapism they would usually experience on getaways.” She pointed to globally inspired flavors and tropical profiles such as dragon fruit and mango as examples that have popped up in frozen beverages.

Even healthy trends have spilled over into frozen dispensed beverages with the growth of frozen uncarbonated beverages. For example, Coke put Barrilitos Aguas Frescas and Hubert’s Craft Lemonades in its frozen dispensed lineup, while ICEE’s Peterson added that “consumers are also looking to frozen coffees and teas, smoothies, energy drinks and frozen lemonades as healthy options in the frozen space.”

An Icy Future

The overall outlook for FDB in the convenience channel remains positive. “The frozen dispensed beverage category is an inherently adventurous space within nonalcoholic beverages, so we expect to see continued premiumization, experimentation, unique flavor profiles and playfulness in the category,” said O’Malley.

“Consumers can’t replicate these frozen carbonated beverage treats at home, so they look to retailers for that experience,” Peterson said. “When a retailer creates a frozen destination in-store, they start to drive frequency, loyalty and growth. Everybody wins.”