Competitive Beverage Landscape 8.4.11


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A look at beverages within the fast food space

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Competitive Beverage Landscape 8.4.11

  1. 1. Competitive Beverage Landscape What’s happening with drinks in QSRs August 2011 1
  2. 2. Table of Contents  Beverages Overview  Soda  Iced Tea  Bottled Water  Coffee  Smoothies  Slushies  Shakes 2
  4. 4. Who Serves What? 4
  5. 5. Bottled Iced Energy Sports Smoothies QSR Soft Drinks Tea Coffee Slushies Shakes Water Coffee Drinks Drinks Coca Cola √ √ √ √ √ √ √ McDonald’s Dasani Poweraid Coca Cola √ √ √ √ √ Nestlé Seattle’s Seattle’s Burger King Pure Life Best Best Coca Cola √ √ √ √ √ Wendy’s Nestea Nestlé Pure Life Coca Cola √ √ √ √ √ √ Gold Aquarius Kona Jack In The Box Peak Spring Classic Coca Cola √ √ √ √ √ √ √ Hardees Nestea Dasani Channel Monster Poweraid & Carl’s Jr. Islands Coca Cola √ √ √ √ √ Chick-fil-A Dasani Coca Cola √ √ Popeyes Churchs Coca Cola √ Pepsi √ √ √ Bojangles’ Le Bleu Coca Cola √ √ El Pollo Loco Nestlé Pure Life Pepsi √ √ √ √ Arby’s Nestlé Pure Life √ √ √ √ √ √ √ √ Sonic Coca Cola Sonic Poweraid Wave √ √ √ Subway Coca Cola Seattle’s Best n/a √ √ √ √ √ Dunkin’ Donuts KFC Pepsi √ √ 5 (local) (local)Source: Respective QSR Online Menus
  6. 6. Overall Beverage Leaders McDonald’s: With the recent launch of McCafé, McD has been able to make their mark in coffee, iced coffee, and smoothies. They market bottled water with their healthier menu items, and their $1 price point for Sweet Tea makes it easily accessible to everyone. Sonic: Probably home to the widest variety of beverages in QSRs, they make an event out of their popular slushies with Happy Hours, and offer drinks that you can’t get anywhere else. Dunkin’ Donuts: They expanded upon the basic coffee offerings and make each product a stand alone celebration of beverages. 6
  8. 8. The Soft Drink Category “Soft drinks account for  Coca Cola more than 25% of all  Pepsi-Co drinks consumed in the United States. Meaning  Dr. Pepper that ¼ drinks consumed in the US is a soft drink.” 8Source: 1
  9. 9. Soft Drink Stats  The consumption of soft drinks has increased 500% in the last 50 years, according to the US Department of Agriculture.  56% percent of 8-year-olds drink soft drinks daily, and a third of teenage boys drink at least three cans of soda per day.  Soda is the #1 source of calories in the average American’s diet, and 7% of the average person’s caloric intake. 9Source: 1, 2, 3
  10. 10. Soft Drink Stats 10Source: 4
  11. 11. Soft Drink Sizes A study from Duke University shows that consumers shun the smallest and largest sizes when choices are available. To increase profits, the research team at Duke says fast-food restaurants eliminated small (12- ounce) soft drinks because the larger, 16-ounce, beverage was more popular. Once the 16-ounce beverage was the smallest on the menu, sales of the next larger (21-ounce) soft drinks went up while sales of 16-ounce beverages dropped. At the opposite end of the scale of size options,  The average fast food chain offers the sale of 21-ounce beverages was higher than soft drinks in the following sizes: the largest size offered, the 32-ounce  Kid’s Size: 12oz beverage. When a 44-ounce serving size was  Small: 16oz introduced, however, sales of the 32-ounce  Medium: 20oz - 22oz beverages rose.  Large: 30oz – 32oz  Extra Large: 40oz – 64oz 11Source: 5 - Duke University Study: Joel Huber, Kathryn M. Sharpe, and Richard Staelin
  12. 12. Soft Drinks Mixology Trend While soft drinks themselves are nothing new, the ability to mix and match that makes them exciting. Mixology, a term more commonly used for alcoholic beverages, has become a new trend in soft drinks. Instead of filling up on just one flavor, consumers are being encouraged to take in all the options and mix them up to create their own personalized drink. 12
  13. 13. 100+ Possibilities  2009: Coca-Cola’s debuted the Freestyle machine: a touch screen soda fountain that offer customers a much wider range of beverage selections, including flavors that were previously not offered in the U.S., like Orange Coke and flavored Dasani waters.  Several franchises that have the Freestyle Machine in one or more locations include:  Wendy’s  Five Guys  Boston Market  Qdoba  Fatburger  Subway  Jack in the Box  Popeyes 13Source: 6
  14. 14. Soft Drink Promotions As most every restaurant and QSR has soda on the menu, there aren’t many promotions focused around this beverage variety. However, some promotions include discounted or free 2-liters with pizza purchases, or $1 for any size drink. 14
  15. 15. ICED TEAIN QSRS 15
  16. 16. The Iced Tea Category  Arizona (Arizona Beverage Company) “In the United States,  Lipton (Pepsi) Iced Tea makes up  Nestea (Coca Cola) about 85% of all tea  Snapple (Dr.Pepper Snapple Group) consumed and is very popular as an  Gold Peak Tea (Coca Cola) alternative to  Honest Tea (Honest Tea Inc) carbonated soft  Peace Iced Tea (Peace Iced Tea) drinks.” Did you know? June is National Iced Tea Month 16Source: 7, 8
  17. 17. Iced Tea Facts  Worldwide, tea is the 2nd most popular beverage after water, but ranks 6th in the US.  Most of the U.S. consumes unsweetened teas, however the Southern states still cling to their sugar and drink mostly sweetened tea.  On any given day, over 154 million Americans are drinking tea.  In 2010, Americans consumed well over 65 billion servings of tea.  Iced tea mix comprises about one fourth of all tea prepared in the U.S. 17Source: 9, 10, 11, 12
  18. 18. Recent Iced Tea Promotions 18
  19. 19. Bojangles’  Included in TV ads since 2006  Current promotion on for their Legendary Sweet Tea  Available in individual serving and half gallon sizes 19
  20. 20. Dunkin’ Donuts  First introduced July 2007 in New England & Upstate NY,  Available in Original, Raspberry, and Peach flavors  Unsweetened Tea has just 5 calories (in 16oz size)  Also available frozen  Promoted annually via frequent LTO offer of any sized iced tea $0.99 20
  21. 21. McDonald’s  Introduced in 2007  Originally promoted 32oz size priced at just $1  Currently, any size tea is just $1  Promoted on TV, In-store, and online  This Sweet Tea is in addition to the regular tea from the fountain 21
  22. 22. Popeyes  Nationally Launched in May of 2010  Available sweetened and unsweetened  Available as single serve or one gallon jugs  Had a Free Tea Giveaway on 6/12/10  Promoted via Facebook, TV, and Website 22
  24. 24. Bottled Water Category  Aquafina (Pepsi) “Bottled water can  Dasani (Coca-Cola) cost up to 1,900  Nestle Pure Life (Nestle) times more than  Evian (Danone Group) what flows from your tap.”  Ice Mountain (Nestle) 24Source: 14
  25. 25. Bottled Water Stats  Bottled Water is the fastest growing segment in the beverage industry.  70% of consumers say they drink bottled water. American demand is 8.6 billion gallons per year.  The 2011 market forecast is $87 billion, an increase of just over 40% since 2006.  Plastic water bottles are the fastest growing form of municipal solid waste in the United States.  Every 27 hours Americans consume enough bottled water to circle the entire equator with plastic bottles stacked end to end. 25Source: 13, 14
  26. 26. Bottled Water - Go Green  Bottled water packaging is using lighter-weight plastics and fewer natural resources than ever before.  Many bottled water producers have reduced the plastic container weight for water bottles by an average of 27 percent, maybe even more.  Ice Mountain uses an Eco-Slim cap, which along with the bottle use 20% less plastic than their original Eco Shape. 26Source: Ice Mountain
  27. 27. Bottled Water Promotions There are no major promotions around bottled water, but the product is frequently featured as the beverage choice for healthier menu items and meals. 27
  28. 28. COFFEEIN QSRS 28
  29. 29. Coffee Stats  Coffee shops make up the fastest growing part of the restaurant business, checking in with a 7% annual growth rate.  Americans consume 400 million cups of coffee per day, making the United States the leading consumer of coffee in the world.  Coffee represents 75% of all the caffeine consumed in the United States.  According to a recent study by the National Coffee Association, 86 %of past-day coffee drinkers prepared their coffee at home. 29Source: 15
  30. 30. Iced Coffee  According to a survey by Dunkin’ Donuts, nearly 80% of iced coffee drinkers are drinking more iced coffee now than they did one year ago.  56% of iced coffee drinkers prefer iced coffee to hot coffee even in the winter months. 30Source: Dunkin Donuts, 16
  31. 31. Recent Coffee Promotions 31
  32. 32. McCafé  Line of premium coffee drinks launched in 2009  Summer 2009 launch promotions included “Free Mocha Mondays” where 7oz iced mochas or and 8oz hot mochas were free  Other promos include $1 off coupons or a LTO of small drinks for $1 32
  33. 33. Dunkin’ Donuts  Line of premium coffee drinks launched in 2009  To celebrate their 60th birthday this year, Dunkin’ Donuts held a variety of regional promotions, including “Free Iced Coffee Day” at 13 US locations where they gave away 16oz iced coffees 33Source: 17
  35. 35. Dunkin’ Donuts Frozen Drinks Survey Dunkin Donuts recently conducted a survey of 500 Americans to determine the role frozen beverages play in keeping people refreshed and running. Here are some of the findings:  93% plan to spend more on frozen beverages this summer.  45% said they drink two frozen beverages to feel cool, 12% said they drink three, and 10% said they drink at least four.  37% prefer a frozen beverage that is Coffee flavored, and 29% said Vanilla. Strawberry (16%), Orange (10%), and Blue Raspberry (8%) are other favorites.  66% prefer drinking frozen beverages between 12 pm and 3 pm.  75% said that being stuck in a car in traffic is the worst place to be without a frozen beverage. 35Source: Dunkin Donuts, 16
  36. 36. Smoothies  The name "smoothee" or "smoothie" was originally used by books, magazines, and newspapers for a product made in a blender.  Smoothies became popular in the mid 1960s, when there was a resurgence in the United States in macrobiotic vegetarianism. 36Source: 20, 21
  37. 37. McCafé  McDonald’s introduced Smoothies in 2010  The brand has promoted their smoothies with free samples, free coupons, and $1 off coupons.  Latest flavor promotion is for Mango Pineapple 37
  38. 38. Jack in the Box  Jack in the Box introduced Smoothies in 2008  Flavors include Mango, Strawberry, and Strawberry Banana  Smoothies are made with Minute Maid® fruit juice and nonfat frozen yogurt 38
  39. 39. Slushies  There are two major types of slushies:  Made with frozen, carbonated water and flavorings and colorings (exa: Slurpee, ICEE)  More simply made with stirred slush and flavorings and colorings (exa: coffee-flavored ices and alcoholic drinks like margaritas and daiquiris) 39Source: 22
  40. 40. Dunkin’ DonutsCoolatta The Coolatta was introduced in 1997 New flavors were added in July 2010 In July 2011 Twitter fans could celebrate “Dunkin’ Donuts Frozen Fridays” and submit their unofficial name suggestions for one of the new Coolatta frozen slush drink mixes with hashtag #DDMIX. “Cool” names have a chance to win a $50 Dunkin’ Donuts Gift Card. Dunkin Donuts will serve up a new flavor combination for consideration each Friday, with one winner per week to be selected by the Dunkin Donuts social media team. 40
  41. 41. Sonic Drive - In  Sonic promotes their wide variety of slushes with a daily happy hour: ½ price drinks from 2-4 pm every day.  There are 398,929 fountain drink and slush combinations to choose from 41
  42. 42. Shakes  The original frosty was introduced when Wendy’s opened in 1969. The flavor is actually a mixture of chocolate and vanilla.  A 2003 study on milkshakes found that"...nearly half of all milk shakes were bought in the early morning", and usually, the "...shake was the only item purchased, and it was rarely consumed in the restaurant." 42Source: 24
  43. 43. Wendy’s Frosty’s  Instead of just adding strawberry to the current chocolate and vanilla Frosty line up, Wendy’s went a little more upscale in 2011.  The new line includes Oreo and Caramel Apple Parfaits, and a Wild Berry Frosty Shake. 43Source: 25
  44. 44. Wendy’s Frosty’s  To promote the new Frosty line, Wendy’s donated 50 cents to the Dave Thomas Foundation for Adoption for each frosty sold June 18-19, 2011.  If you donated $1 to the Dave Thomas Foundation by 6/30/11, you received a free key tag which you can show to get a Free Frosty Jr. with any purchase through 12/31/11.  Donations for Father’s Day have become an annual event, promoting the frosty products. 44
  45. 45. CONCLUSION 45
  46. 46. Implications for KFCKFC should consider the following beverage ideas to help increase relevancy and drive traffic to stores: Soda: capitalize on the mixology trend and offer a greater diversification of flavors and combinations Iced Tea: break through the iced tea clutter and create a branded tea authentic to Kentucky and the Colonel, then offer it in a variety of flavors Bottled Water: go green and promote a KFC Branded Nalgene or Sigg reusable water bottle Coffee: form a partnership with a well known coffee brand like Illy, or a chain like Caribou Coffee to provide consumers with another option for their mid- afternoon or evening caffeine fix Frozen Drinks: take advantage of the growing demand for frozen beverages and break into new dayparts with new innovative offerings Other: consider offering other beverages from the Pepsi Portfolio like Gatorade or Energy Drinks to give consumers something new for QSRs 46
  47. 47. Sources Soft Drinks: 1 2 3 4 5 6 7 Iced Tea: 8 9 10 11 12 Bottled Water: 13 Coffee: 15 16 17 Smoothies, Slushies, Shakes: 18 20 21 22 23 24 25 47