Are Full-Service Beverages Right for You?

Without question, full-service beverages such as smoothies, milkshakes and specialty coffees — both cold and hot —are popular among Millennials and Generation Y consumers. One need only witness the exponential growth in the category by not just Starbucks, but others including Dunkin’ Donuts, McDonald’s McCafé, Jamba Juice and myriad other quick-service restaurants (QSRs) and limited-service restaurants (LSRs).

Consumers indicate that service beverages would prompt them to visit a particular convenience store over another, according to data from foodservice consultancy Technomic Inc. Thirty-eight percent of consumers say they are slightly or much more likely to visit a c-store offering service beverages, with that figure rising to 45 percent among younger consumers (aged 18 to 34).

While there have been some success stories in the convenience store industry in this foodservice segment, so far the players have been few and far between, with Sheetz Inc. and Wawa Inc. not surprisingly leading. There is good reason, however, that few convenience store operators are exploring this otherwise growing segment, according to Convenience Store News’ How To Crew of experts: Full-service beverages should only be contemplated by advanced foodservice operators that excel at full-service food and have established credibility.

“This is an area where you must have already gained brand recognition in your markets for delivering fresh food in some form,” one How To Crew retailer asserted. “As this is crew-served foodservice, customers will want to have some confidence in execution in advance.”

Joseph Chiovera, of XS Foodservice & Marketing and a member of the CSNews How To Crew, concurred: “Get bored with easy before trying something that you are probably not ready for.”

Another How To Crew retailer said c-store operators should proceed with caution in this category, but for different reasons. “Anything that slows service tends to impinge on speed and convenience, two of our most important products,” the retailer explained.

Service beverages would only be appropriate for stores that are “equipped with seating, and have customers and facilities that encourage and capitalize on lingering,” this retailer added. In other words, if you offer custom-made food for which the customer must wait, service beverages can be an add-on sales opportunity as they’ve proven to be in other foodservice venues and channels.

KEY CONSIDERATIONS

So, if you are considering service beverages, what should your top considerations be? Our panel of experts say program design, labor, food safety, equipment, and training and execution.

“The critical elements for beverages are the same as for food,” one retailer noted. Just as with food, service beverage programs should be branded and integrated into the foodservice brand.

First and foremost, service beverages must fit within a convenience store operator’s overall foodservice offering. It should be a natural extension from the core food operation.

“If you’re primarily playing in grab-and-go foods, then a made-to-order beverage program may not make sense to the customer and will likely not fit with your operational capabilities,” said Donna Hood Crecca of Technomic who is also a member of the CSNews How To Crew. Service beverages require time to prepare and by their very nature will slow down customer service, so it’s important to select menu items that are not extraordinarily complex to make and can be executed quickly and consistently, she added.

Before operators go too far down the planning path, store size and volume will indicate if a service beverage program is feasible. Operators should identify stores where they believe the program could fit and work, and then move on to the offering — cold beverages, hot beverages or both. Most experts agree it is easier to consistently deliver high-quality cold and frozen service beverages than it is to serve up specialty hot beverages.

“Smoothies are the easiest to execute because they are basically ice, fruit mix and a blender,” one How To Crew expert said. “Frappes and iced lattes are next, but require the addition of espresso coffee and a variety of syrups and sauces to deliver the consumer expectation.” Although cold and iced coffee beverages are more popular than hot cappuccinos and lattes, “if you have espresso for the iced drinks it makes sense to offer those hot as well.”

Similar to custom-made food, service beverages require more skill and labor hours to execute well. Training and execution must be flawless to gain customer trust and repurchase.

“Train thoroughly,” said one retailer. “If you try to sell a new double espresso drink and the employee has no clue what it tastes like or what it’s made of, the program will most likely struggle.” A possible consideration to reduce labor is to set up the service beverage program near the checkout so associates can cover both the checkout and the beverages.

If top executives at your company are not prepared to provide training support to launch and keep the program going, that should be a red flag not to proceed to full rollout and execution, Chiovera said. “In our industry, executives forget that a training budget is never ending, especially with foodservice because of our turnover,” he said. Service beverage food safety must be part of the training, as it is with all foodservice, he added.

One of the last key considerations is service beverage equipment, which is more expensive than self-service beverage units. But equipment considerations are the same for service beverages as they are for any foodservice equipment — it should be compact, functional and durable, easy to use, and easy to clean and maintain.

Additional equipment and labor costs certainly come into play when calculating retail pricing and margins for service beverages. So, retailers should ask themselves: How much of an increase in retail price will be required to make the same margin dollars as other self-serve beverages? Will your customers pay a premium for the product?

THE COMPETITION

Starbucks and QSR competitors such as McDonald’s and Dunkin’ Donuts have a big head start in this category because service beverages are either core to their offering or they added them in recent years. Either way, they’ve had time to perfect their execution. In the hot barista-style beverages, Starbucks is the top competitor, while Dunkin’ Donuts, Jamba Juice and McCafé dominate in cold service beverage offerings.

Most of the CSNews How To Crew experts agree that it would be hard, maybe even impossible, to deliver the same experience as Starbucks. “That by itself is not necessarily a bad thing. You can easily offer the same or higher quality as Starbucks but at a lower retail, and for the Starbucks customer on the go that will be enough,” one CSNews expert said. “There are other c-store competitors that do coffee bars and do it well, and those are the ones you need to be competitively priced against since the shopping experience in those locations will be similar to yours. But with proper equipment and training, you can still become a destination for this product.”

Menu selection is very important, just as it is with food, this expert added. You need syrups and mixes to offer seasonal flavors and beverages. Part of maintaining a competitive edge is continuously offering and rotating in new flavors to create excitement and keep the customer coming back for more. “Don’t allow for menu stagnation or the result will be similar to what happens if you do that in your food operation,” he cautioned.

Chiovera contends that operators who do not have the training, advertising and operations budgets to compete with McDonald’s McCafé or Starbucks should not even contemplate service beverages. “Have a comprehensive plan complete with innovation and limited-time offers, as well as a marketing and promotion plan,” he said. “Don’t waste your time if this cannot be committed to.”