The 100 days of summer are under way. That means the weather is warm, outdoor activities are plentiful, road trips are on the calendar, and the demand for refreshing cold drinks is on the rise.

The cold dispensed beverage category is a winner for convenience stores. It provides high margins (49.38% in 2018) and gross profit dollars ($25,045 per store in 2018), according to recently released NACS State of the Industry data. The largest percentage of the category continues to be carbonated soft drinks from the fountain, but new drinks with less or no sugar or additives are in demand.

Cold dispensed beverages have always attracted customers to the store, but during the past few years, QSRs and other channels have taken a bite out of convenience-store sales with lowball pricing and special offers. “Cold dispensed beverages are great convenience traffic drivers, but retailers are always looking for ways to increase basket spend on those purchases, so combining a cold dispensed beverage with a prepared food offer or other high-margin items is key for convenience retailers,” said Jayme Gough, analyst for NACS.

Coca-Cola’s own research reinforces this message, according to Randy Raymond, director, Foodservice in Retail, for Coca-Cola North America. “Leveraging combo meals and food and beverage bundles can help drive dispensed beverage sales,” he said. “Convenience shoppers spend 37% more money on average when food and beverage items are bundled as a combo deal, such as $4.45 when purchasing a combo, compared with an ‘off deal’ spend of $3.24. These basket-building strategies are particularly effective when leveraging fountain because fountain shoppers are 24% more likely than cold-vault shoppers to also purchase deli/prepared foods.”

Pepsi also has done extensive research into meeting consumers’ needs. “The data show us that people are drinking cold dispensed beverages the most during lunch and in the late afternoon,” said Aziel Rivers, senior director, Foodservice Innovation, for Pepsi. “We know the purchases are usually spontaneous, made by parties of two or more, who’re seeking convenience on-the-go. It’s important to offer combo/bundle options and to think about ease of consumption in the car so people have a positive experience.”

Don’t ignore other proven methods for attracting beverage buyers, said Gough, such as “refillable mugs and limited-time offers, which require marketing efforts to ensure customer awareness.”

What Shoppers Want

According to Technomic’s “2018 Beverage Consumer Trend Report,” 39% of consumers overall buy four or more foodservice beverages per week. They know what they want, and they patronize retailers that provide it. When it comes to cold dispensed beverages, “customization is particularly important to young customers,” said Gough. “They love to experiment with flavors and create something as unique as they are.”

According to Coca-Cola research, only 35% of shoppers say they are satisfied with the cold dispensed beverage selection at stores offering 10 or fewer brands on the fountain. However, satisfaction jumps to 68% when drink options number 40 or more.

“Looking at Gen Z shoppers specifically, 63% say they prefer c-stores that have a wide product selection, and 88% say product selection impacts how satisfied they are with their trip,” said Raymond. “Since the need for a beverage is a primary driver in-store, optimizing your current valve lineup is key in differentiating your fountain and creating shopper loyalty. The importance of variety is one of the reasons why we’re expanding our portfolio of beverage options for c-stores.”

In addition to many options, consumers want healthier beverages. “Nearly half of all consumers—and 58% of millennials—believe it is important to purchase and consume food and beverages made with real, clean-label ingredients,” said Raymond. “To help our customers meet their shopping needs, we offer more than 800 beverages in the U.S., including 250 low- and no-calorie options.”

In addition to name-brand basics, Coca-Cola also offers Diet Coke Ginger Lime, with a “bolder taste” and new Diet Coke flavors, including Strawberry Guava and Blueberry Acai, as fountain offerings, Raymond said.

Pepsi has its traditional drink options, along with root beers, juices, Crush, Gatorade, Mountain Dew and Sierra Mist for the fountain. 7-Eleven recently opened a lab store in Dallas that offers an on-tap version of kombucha, a fermented sweet tea with a culture of yeast and bacteria that is usually bottled and sold at health food stores or in a grocery’s “better-for-you” section.

Water, Water Everywhere

The sparkling water industry is flourishing today as consumers read nutrition labels and become more conscious of added sugars. In 2018, the United States saw almost $49 million in sparkling water sales, a 22% increase from the year before, according to Nielsen.

When it comes to water at the fountain, Coca-Cola sells Barrilitos aguas frescas, a line of flavored, non-carbonated waters with a hint of sweetness that are enhanced with real fruit juices, purees and/or spices. Company research found that approximately 50 million fountain beverage consumers are interested in the aguas frescas concept, and the drinks appeal to millennials and Hispanic consumers, both core convenience store demographics. Meanwhile, Dasani Sparkling Water fills a specific need for zero-calorie, unsweetened fountain beverages.

Early last year, Pepsi released a zero-calorie, flavored sparkling water dubbed bubly. “It features our unsweetened sparkling water with natural fruit flavors to provide a delicious taste with no calories and no sweeteners,” said Rivers. “Bubly bridges the gap between carbonated soft drinks and non-carbonated beverages by attracting health-conscious individuals. It allows retailers to optimize the fountain set and deliver a product people want.”

Fountain shoppers are 24% more likely than cold-vault shoppers to also purchase deli/prepared foods.

All in One

In 2009, Coca-Cola rolled out the Freestyle fountain drink machine, providing shoppers with a wide range of drink choices and combinations in a minimal amount of floor space. Freestyle uses “micro-dosing technology” to deliver more than 150 sparkling and still beverages on demand, including more than 70 low/no-calorie options and 90-plus caffeine-free selections. The newest version features Bluetooth connectivity. When customers visit a restaurant using the Freestyle and they connect via the Coca-Cola app, the dispenser recognizes them and pours their favorite beverage.

Spire is the name of Pepsi’s state-of-the-art line of beverage dispensing fountains, which can produce 1,000 different drink combinations. In addition to its mixology talent, Spire knows which brands and flavors customers choose most, allowing individual locations to optimize their offerings based on actual usage data.

To be successful, retailers need to know their fountain and their customers, as well, said Rivers. “Cold vault and fountain purchases are often made by two different people,” she said. “Some of the strongest retail programs promote fountain beverages to a cold vault consumer and vice versa. Bundling across categories delivers a ‘now and later’ proposition to equip people with the right product for different consumption occasions.”

When presented as a value package, fountain drinks strongly appeal to shoppers. But it’s important that retailers communicate with them from the time they drive into the store parking lot.

“Mobile apps, social media and outdoor media are useful ways to gain consideration,” said Raymond. “Pump toppers and window signage are simple, effective methods for driving shoppers into the store. Convenience retailers should focus on curating their fountain selection to ensure that there are options for everyone. They can do this by optimizing their fountain lineup to more closely mirror that of the cold vault, providing a variety of category and brand choices on fountain. Then, they can drive repeat visits by closing the loop with loyalty programs.”