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QSRs, c-stores tap better-for-you beverages to drive sales

Fresh, simple, functional options appeal to consumers

Consumers are looking for better-for-you beverages and consumption is driven by personalization and convenience, notes the Hartman Group in a March thought leadership piece. Beverages are great vehicles for food businesses to build incremental business. Through the prism of ”healthy”, consumers are choosing beverages termed “better for you.” They define healthy in a variety of ways – functional, clean-label (“free from”), natural, organic – which all fit into a paradigm of wellness and personalization. Thus,lower calorie and lower sugar are no longer necessarily the defining attributes of a healthy beverage.

For context, the Hartman Group, a food research firm based in Greater Seattle, provides these key consumer-driven evaluation points: “Your beverages should be personalized to your individual tastes and health needs; beverages should reflect your values and aspirations; and you can drink what you want, when you want it (mostly).” These perspectives then converge with convenience: accessibility (staying hydrated), portability (“drinking on the go”) and meal replacement (if desired).

Alltown Fresh is a convenience-store concept focusing on fresh and healthy offerings. Shauna Seidenberg, manager of category marketing of dispensed beverage & fast food for Alltown Fresh, says, “In terms of healthy beverages, we’ve seen a demand for functional beverages and choices, such as kombucha on tap with probiotics, and made-to-order smoothies with all organic produce and add-ins like maca (root) and spirulina. We’ve also seen demand for non-gmo and organically-sweetened options made with natural colors and flavors develop…”

Innovative flavors are key to driving customer trial. Orange blossom, honeysuckle, jasmine and chamomile are trending flavors for cold beverages and water-based beverages, according to ingredient manufacturer Kerry’s 2019 (Food Navigator). Consumers are drawn to flavors they know from other experiences, but haven’t yet tried in a particular beverage.

Keeping it simple with water

Quick-service restaurants (QSRs), including fast-food shops and fast-casuals, as well as convenience stores have been tapping into the better-for-you trend, offering beverages that are functional or simple in terms of ingredients. Water continues to be on-trend favorite as consumers seek beverages with few ingredients. According to research firm Packaged Facts’ U.S. Beverage Market Outlook, 2019, retail sales of bottled and enhanced waters will grow at a 6.4 percent CAGR (compound annual growth rate) between 2018 and 2023.

In the water category, QSRs have ample room for choice as flavored waters, enhanced waters and sparkling waters & seltzers all increasingly respond to consumer demand and provide differentiation for restaurant brands.

While total bottled water and enhanced water grew at a CAGR of 6.3 percent between 2016 and 2018, carbonated and seltzer water grew at 14.9 percent. “Fizzy” water can be popular: Los Angeles-based KOPU water has been carried at hotels and restaurants throughout California, including the Montage Beverly Hills, The Waterfront Venice and Neighbor on Abbot Kinney, SB Public Market, Savoy Cafe, Jinya Ramen Bar and Mesa Cafe.

The marketing of ‘luxury’ water

From an artesian aquifer “deep below the Bay of Plenty in New Zealand,” KOPU is an example of a choice that appeals on taste and eco-consciousness. It comes in a resealable aluminum bottle that fits with branding of traditional and polished fast-casual restaurants, in addition to sit-down restaurants. Bottled water producers are looking to eliminate single-use plastic bottles to help the environment and differentiate in a crowded beverage category. KOPU also has naturally-occurring silica, the company says, and includes the ingredients magnesium, potassium, and calcium. In beauty industry circles, silica is purported to have skin-enhancing properties.

“KOPU’s fine champagne-like bubbles are a unique complement to tasty cuisine and provide a smooth experience for cleansing the palette,” says KOPU Co-Founder Justin Mahy. “They also communicate a message of environmental respect and also have practical advantages of avoiding the dangerous breakage that comes with glass.”

KOPU cites data from the Aluminum Association that nearly 75 percent of all aluminum created remains in active circulation. Since the water is imported here by boat, the company also suggests it’s helping reduce carbon emissions and energy use related to truck delivery.

New-wave water

In the water category, Packaged Facts says that customization through packaging and delivery systems presents a big opportunity for producers. That’s because consumers are opting increasingly for sustainable and environmentally-friendly packaging, including aluminum and recyclable paper. Flow Water, an alkaline water with a pH of 8.1 containing electrolytes, is another unique brand. “Further, Flow has a low carbon footprint, using a 100% recyclable Tetra Pak paper carton made from 70% renewable resources and a sugarcane-derived plastic lid,” notes Packaged Facts in its report.

CBD-infused water may make sense for some brands. Restaurants have shown a willingness to test the market with limited-time and permanent CBD-infused food additions. Why not water? CBD claims many associated health benefits, not yet fully-proven, such as easing stress, pain, anxiety, and insomnia. These associations generate a health-halo effect and link CBD with wellness in consumers’ minds.

Pushing the envelope, Lagunitas Brewing Company unveiled a sparkling water that has both THC and CBD in its Hi-Fi Hops, which it calls an “IPA-inspired” sparkling water. According to Packaged Facts, this water is sold in California dispensaries and contains no alcohol or calories.

But QSRs have local and state ordinances to consider, as well as federal regulations. The U.S. Farm Bill passed by Congress and signed by President Trump in December 2018 “includes a provision to legalize hemp nationally.” This would go a long way in furthering production of hemp-derived beverages. The FDA is currently in a comment period for review of regulations around the safety and regulation of hemp-derived products, including foods that contain CBD. Consistency on the treatment and regulation of non-psychoactive ingredients by the FDA will be helpful.

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Teas provides functionality

In the tea category, many brands and formulations can speak to functionality, from relaxation and energy to probiotic and wellness-enhancement. Cold formulations of tea offer a myriad of choices. For the grab-and-go refcon, cold, RTD (ready-to-drink) teas are an optimal choice. As consumers look for pick-me-up beverages with specific functionality and implied benefits (that may have yet to be proven, in many cases), they’ll seek out these portable drinks. QSRs benefit from a diverse portfolio of to-go beverages and tea to drive incremental business.

Many tea brands are de-emphasizing caffeine and spotlighting other ingredients, which have health halo (health-implied) formulations. These include “stimulants like guayusa, green tea, and matcha, but also yerba mate, which is starting to catch on with young Millennial consumers who are more adventurous with their food and beverages,” says Packaged Facts of this trend. DanoneWave’s STōK brand has the stimulant Yerba Mate. A strong collection of drinks can help satisfy customer demand and increase average check. This is an opportunity that materializes during the busy, lunch daypart, and in post-lunch snacking.

Kombucha, a health-halo beverage

Kombucha, made by fermenting sweet tea, is the new darling in the tea category. With claims of probiotic benefits from fermentation, kombucha is on the rise as a better-for-you beverage option. Gut health is an “enhanced functionality” that it promises, says Packaged Facts. Also, kombucha is a big driver of the tea market’s growth, helping the total tea & RTD category to grow from a current run rate of 2.1 percent to a projected 3.1 percent in the next five years.

Serving kombucha on tap offers convenience and a trendy experience at retailers like Whole Foods and Alltown Fresh. “By providing fresh options such as kombucha and organic juice, Alltown Fresh is welcoming non-traditional c-store consumers who typically wouldn’t consider themselves fountain beverage drinkers to give it a try,” notes Seidenberg. Consumers enjoy having healthy choices, particularly when presented in a self-service format. Vermont-based Aqua ViTea, the kombucha on-tap provider of for Alltown Fresh, offers flavor varieties. These include Peachmint and Hibiscus Ginger Lime.

Alltown Fresh provides customers with on-tap kombucha beverage options.
Alltown Fresh provides customers with on-tap kombucha beverage options. Photo by Alltown Fresh.

Attesting to its popularity and mainstreaming, Target stores carry a kombucha line packed under its Simply Balanced Store Brand. Also, Packaged Facts spotlights the Dr. Brew brand, which packages kombucha in cans. its manufacturer is the first to do so. Yet another top on-trend example: Dr. Brew also carries kombucha in bottles, which is preferable to consumers who like to see a kombucha product prior to purchase.

In-house preparations of teas, lemonades, smoothies

Fast casuals like Cava offer in-house beverage options that appeal to consumers looking for flavorful, better-for-you beverages. For QSRs, cold refreshments that are prepared or finished-off in-house convey freshness and craft-like qualities. Consumers can perceive these beverages as more natural if QSRs use real ingredients and not powder. Cava has carried Unsweetened Black Tea, Jasmine Tea and Peach Green Tea as seasonal, spring varieties.

South Block Juice, a Washington D.C.-based chain of cafes, has built its business on providing healthier drink and food options. Customers can pick from a robust selection of fresh-brewed and cold-brew coffee, plant-based juices, smoothies, and acai bowls. The chain continues to expand rapidly and its popularity can be attributed to aligning its products with a healthy lifestyle.

At South Block consumers select from a wide array of smoothie options. At its recently opened Ballston Quarter location, green smoothie selections include Avocado Butter, Green Caveman and Super Green + Smoothies. Top fruit-based smoothies include the likes of PBJ and Pink Smoothie.

At Alltown Fresh, smoothies are the best-selling cold beverage item at its Plymouth, Mass. location. “The Awake smoothie blends coffee with cacao powder, almond butter, banana, honey and yogurt while the Refresh is made with berries and cucumber for a nutrient-packed, hydrating beverage,” says Seidenberg. “We’ve found that flavors and products that feel functional – whether it be hydrating or energy-boosting – and flavors that feel indulgent, such as chocolate or cacao, are what our guests look for.”

Offering a tasty selection of lemonades is also a big opportunity for QSRs. As a self-service option and with portability in to-go cups, fresh lemonade surfaces as a top beverage option. Particularly in the warm months, tangy citrus flavors can be quite appealing as a refreshment. Panera’s choices are on trend here: flavors change seasonally and include Agave Lemonade and Blood Orange Lemonade.

Photo credit: Kopu Sparkling Water

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