Menu Innovations | July 2012 | By Barney Wolf

No Fizz, No Problem

Many customers like the option of noncarbonated cold beverages.

There’s nothing quite as revitalizing as a cold drink on a hot summer afternoon. These days, however, restaurant guests are looking for more than just refreshment from their cold beverages. They are seeking fewer calories, healthful options, or, perhaps, a jolt of energy.

Cold beverages, particularly carbonated ones, have been part and parcel of quick-service restaurants from the time the first units opened. Coca-Cola, for instance, has been served at White Castle since 1921, the year the business began.

Fizzy drinks, as a group, are still the most popular beverage option at limited-service restaurants, but noncarbonated drinks are picking up steam. Iced teas and coffees, various waters, lemonade, and juices have been growing quickly.

“There is absolutely more consumer interest in a wider array of beverages, and restaurant operators have realized that,” says Maeve Webster, research director at Datassential, a food industry market research firm and consultant with offices in Chicago and Los Angeles.

This is partly an aspect of the overall customization bent, which focuses on giving diners more options to meet their wants and needs.

“The marketplace is splintering,” says Gary Hemphill, senior vice president of information services at Beverage Marketing Corp. (BMC), a New York–based research and consulting firm. “People want more variety now and that means more beverage choices.”

This trend has been developing for the past few decades, but has become increasingly notable in recent years. According to BMC statistics, carbonated drink volume has declined seven consecutive years as consumers gravitate to noncarbonated choices.

“These are often items that have a healthier image, whether or not they really are, including teas, bottled waters, and functional products like energy drinks,” Hemphill says.

The BMC annual report for 2011 found that major carbonated brands made up half of the top 10 liquid refreshment beverages and bottled waters took three more spots. The other two were PepsiCo’s Gatorade energy drink and Tropicana fruit brands.

Energy drinks, which appeal to young males, were the fastest-growing beverage category, with annual volume jumping 14.4 percent. Coffees and teas also showed strong gains.

“[Quick-service] restaurant operators understand what is going on in the marketplace, with people looking to make different beverage choices,” Webster says. Offering a variety of drinks “increases owners’ flexibility and gives them the opportunity to compete better.”

Excepting carbonated beverages, the beverage offered most at limited-service restaurants is tea, particularly iced tea, which is on the menu at 63.2 percent of quick serves, according to Datassential. That is followed by various waters, which are on 57.5 percent of menus.

The water total may be underreported since many restaurants don’t list water on their menus if it comes from the tap or from a tab at the fountain dispenser.

Various brands of bottled water are in 46.6 percent of quick serves, while penetration is 5.5 percent for spring water, 4.3 percent for vitaminwater, and 3.1 percent for sparkling water.

The vitaminwater brand showed the biggest compounded annual growth of any beverage at fast feeders over the past five years, rising more than 27 percent per year. The next two are green tea and San Pellegrino mineral water, both at about 16 percent a year.

An old favorite, lemonade, is on the menu at 54.4 percent of limited-service units, while coffee is on 51.6 percent and orange juice is on 51.1 percent.

Juices, mostly orange and apple, appeared increasingly on menus in recent years as more quick serves added breakfast or replaced carbonated drinks on children’s menus.

“The push to get kids to move away from sodas and eat healthier led to the boost in juice offerings, even if they may not have less sugar,” Webster says. “It’s all about feeling better about what you are ordering.”

Offering a wide range of beverages also “is a way for [quick serves] to differentiate themselves from the competition,” Hemphill says. “Historically, [quick serves] have lagged a little in trends, but if an operator can figure out a way to move faster, there is opportunity.”

Not surprisingly, limited-service restaurants have been adding noncarbonated cold beverages at a rapid pace. According to statistics from MenuMonitor, the menu-tracking database created by restaurant market research and consulting firm Technomic Inc., there were more than 200 new cold beverages recently added at quick serves.

Iced teas made up the largest chunk of those additions, followed by iced coffee and waters.

“There have been a lot of innovations in tea because it has such a healthy halo,” Hemphill says. “It’s also a base for innovation, like green tea, that appeals to the sophisticated tea drinker but also for those seeking a healthier option.”

An increasing number of quick serves offer or have added fresh-brewed iced and sweet teas to meet consumers’ growing demand for a fresher, better-tasting product.

At the same time, iced and chilled coffee, espresso, and related beverages have grown steadily in the wake of aggressive marketing by coffee chains, such as Starbucks, and the addition of these types of drinks at McDonald’s and other extended-menu fast feeders.

“Americans had traditionally consumed coffee hot, but the cold coffee hurdle has been leapt,” Hemphill explains. “Most Americans are now comfortable in drinking coffee cold. So now it’s a year-round product, hot more often in winter, cold more often in summer.”

Iced coffees carry fairly high margins, he adds, and while some of the products may be labor intensive and time consuming, restaurants can do well with these items if they become part of the core strategy and generate strong repeat purchases.

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