With gross margins of nearly 50%, frozen drinks are profit powerhouses.
BY JAMIE HARTFORD
With close to 50% gross margin, frozen dispensed beverages are among the most profitable items c-stores sell.
balls to students to incentivize a reading program. “In the three years we did
it, we were giving away about $12,000 a
year in Snowballs,” said Cheryl Reeder,
owner and president.
Though Reeder’s had geared its marketing toward kids, a funny thing happened: Most of the customers coming
in for the drinks were adults, Reeder
said. That’s not uncommon either. According to the NACS SOI Report, adults
between the ages of 18 and 34 are the
target demographic for frozen drinks.
In the minds of consumers, con- venience stores are the places to get frozen dispensed beverages. And that’s good news for operators. With close to a 50% gross margin,
frozen dispensed beverages are among
the most profitable items convenience
stores sell. Icy drinks brought in more
than $5,800 in average sales per store
in 2010, a 10% increase over 2009, according to NACS State of the Industry
(SOI) data. Profitwise, frozen beverages contributed $2,868 to the average
store’s bottom line in 2010, up more
than 7% from the year before. (2011
data will be released at the NACS State
of the Industry Summit April 3 to 5 in
Still, the drinks account for less than
2% of sales in the foodservice category
and less than 1% of all in-store sales
— yet more than 70% of convenience
stores sell them. That’s likely because
they’re the kind of item that can draw
customers into a store.
“To position a convenience retail
outlet as a complete beverage destination, frozen beverages are now an essential component of the package,” said
Don Matlock, senior planning and development manager for Coca-Cola Refreshments.
NOT JUST FOR KIDS
Reeder’s Service Center, an independent convenience store in Tulsa, Oklahoma, began offering the frozen drinks
it calls Snowballs five years ago. To promote them, the store partnered with
the local school, offering free Snow-
ONE SIZE DOESN’T FIT ALL
Dan Fachner, president of the ICEE
Company, agrees that frozen drinks
aren’t just for kids. “Our target customer varies greatly by the location that
we’re in, but in convenience stores the
target customer is the blue-collar male,”
With that demographic in mind, the
company, which besides ICEE carbonated frozen drinks also manufactures
Artic Blast, Slush Puppie, ICEE Slush
and Java Freeze lines, is rolling out a
larger cup. ICEE hopes the 44-ounce
size will appeal to customers with a big
thirst for frozen beverages.
But not every customer is looking for
a jumbo size. “Consider growing the
category with trial sizes, which introduce new consumers to frozen beverages,” Matlock said.
Frozen drinks are often impulse buys,
and to sell them suppliers say operators need to promote them. “You need