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.
While fountain drinks are a long-time staple at limited-service eateries, a number of outlets, including pizza parlors, sub shops, and fast-casual restaurants, also feature refrigerated cases that contain bottled or canned cold drinks.
The cans and bottles—glass or plastic—in fast-casual refrigerators, for instance, are often drinks not available at the fountain, including upscale carbonated beverages, flavored waters, teas, vitaminwater, and even beer.
As some mainline quick serves try to compete with fast casuals, they are considering adding their own refrigerated cases. Wendy’s is testing several ideas at its new prototype units, including a refrigerated case that includes some regular items (bottled water, milk and chocolate milk, and packaged apple juice) as well as nontraditional ones, such as canned NOS energy drinks.
The units are also trying out several iced coffees and Coca-Cola’s Freestyle dispensing machines, which offer Coke’s Dasani still water and other brands in a variety of flavors.
Wendy’s continues to measure customer feedback, sales, and costs for all these offerings, says company spokesman Denny Lynch.
Firehouse Subs is already sold on the customization potential of the Freestyle dispensers. The chain last year completed installation of the machines in all 500 of its restaurants.
“There are so many possible drink permutations,” says Don Fox, CEO of the Jacksonville, Florida–based company. “The Dasani water, for instance, has seven different flavors and those can be mixed any way the customer wants.”
The Freestyle offers more than 120 drink options, and that “certainly adds value,” Fox notes. “It’s all about segmentation and satisfying the consumers.”
Even with all of the beverage possibilities, Firehouse would not have added the machines if Coca-Cola did not include one thing not typical for the beverage company: a noncarbonated cherry syrup drink for making the chain’s cherry limeade.
Cherry limeade makes up 21 percent of the chain’s beverage sales.
“When our first restaurant opened in 1994, the cherry limeade was hand mixed,” Fox says. “Later we went to a mix [for the cherry drink’s base], but the founders weren’t really happy with it, so it was never sold outside Jacksonville.”
Within the past four years, however, the cherry base was deemed good enough to go system-wide. Guests squeeze lime wedges into the cherry drink to make limeade.
“We know it’s expensive to do that, but we build that into our cost of doing business,” Fox says. “It adds a quality halo to our beverage offerings.”
The Freestyle has helped Firehouse attract more dine-in business, particularly among families, and boosted the average ticket from $10.25–$10.50 to $11.25–$11.50.
One chain that combines a coffee house with a fast-casual bakery-café is Cosi. The company resulted from the 1999 merger of Xando Coffee and Bar with Cosi Sandwich Bar and provides guests a range of cold beverages, from coffees to specialty lemonades.
“We think it’s important to our guests to give them the combinations they want,” explains Keith Stewart, marketing director of the Deerfield, Illinois–based chain.
The company has seen an increase in customer demand for water products, but not at the expense of other beverages. “It’s additive,” Stewart says, “particularly with drinks like smartwater and vitaminwater,” which include electrolytes, minerals, vitamins, and herbs.
Cosi also has made a point of creating proprietary cold teas and coffees, including Ginger Green Tea, which the company will be premiering this year. And then there are the lemonades: Strawberry Pomegranate and Mango Pomegranate.
This year, Habanero Watermelon Lemonade, a limited-time offer, will return. The sweet drink, which has a hint of heat, arrives with four big pieces of watermelon on a skewer.
“We have so much produce on our menu that it’s easy for us to have strawberries to garnish a beverage or to add watermelon to our order,” Stewart says.
At Quiznos, beverages “are a very integral part of our offerings,” says Zach Calkins, vice president of culinary creations. “It’s a natural fit to combo” a drink with food.
Tea and noncarbonated bottled beverages, particularly waters, are popular with salads.
Last year, Quiznos, with about 2,300 U.S. locations, relaunched its tea offerings with three new blends: unsweetened, black tea infused with raspberry, and green tea with lemon, lime, and honey. Sweet tea is available at locations in the South.
The Denver-based company is also upgrading its lemonade. A new honey lemonade was tested last year in six markets and is now rolling out system-wide. Franchisees can choose this variety or the traditional raspberry lemonade.
“It’s optional,” Calkins says. “Markets like Salt Lake City and Albuquerque love this new lemonade, while markets in the South want the raspberry lemonade.”
Quiznos also offers a wide range of Pepsi’s Sobe bottled beverages. While some varieties, like green tea, consistently do well, the company regularly switches flavors in and out.
“We rely on our partnership with Pepsi to see where consumers are and what they want,” Calkins says. “It depends on what is popular in a particular area. They may tell us that a drink is really moving and recommend we put that in our cooler.”
The idea of having many beverages available gives customers plenty of choices, so there is less chance for drinks to result in a veto vote.
“By having all these options, we have not seen a downtick in our carbonated drinks at the expense of more people choosing other beverages,” Calkins explains. “You’ve got to zig and zag with consumers and try to stay ahead of them and what they crave.”
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