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What’s happening with drinks in QSRsAugust 2011

Competitive Beverage Landscape

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Table of Contents Beverages Overview Soda Iced Tea Bottled Water Coffee Smoothies Slushies Shakes

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BEVERAGE OVERVIEW

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Who Serves What?

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QSR Soft Drinks Tea Bottled Water Coffee Iced

CoffeeEnergy Drinks

SportsDrinks

Smoothies Slushies Shakes

McDonald’s Coca Cola √ √Dasani

√ √ √Poweraid

√ √

Burger King

Coca Cola √Nestlé

Pure Life

√Seattle’s

Best

√Seattle’s

Best

√ √

Wendy’sCoca Cola √

Nestea√

Nestlé Pure Life

√ √ √

Jack In The Box

Coca Cola √Gold Peak

√Aquarius

Spring

√Kona

Classic

√ √ √

Hardees & Carl’s Jr.

Coca Cola √Nestea

√Dasani

√Channel Islands

√ √Monster

√Poweraid

√

Chick-fil-A Coca Cola √ √Dasani

√ √ √

PopeyesCoca Cola √ √

Church's Coca Cola √

Bojangles’ Pepsi √ √Le Bleu

√

El Pollo LocoCoca Cola √ √

Nestlé Pure Life

Arby’s Pepsi √ √

Nestlé Pure Life

√ √

Sonic Coca Cola√ √

Sonic Wave

√ √ √Poweraid

√ √ √

Subway Coca Cola√ √ √

Seattle’s Best

Dunkin’ Donuts n/a √ √ √ √ √

KFC Pepsi √(local)

√(local)

Source: Respective QSR Online Menus

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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.

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SOFT DRINKSIN QSRS

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The Soft Drink Category

Coca Cola Pepsi-Co Dr. Pepper

“Soft drinks account for more than 25% of all

drinks consumed in the United States. Meaning

that ¼ drinks consumed in the US is a

soft drink.”

Source: 1

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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.

Source: 1, 2, 3

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Soft Drink Stats

Source: 4

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Soft Drink Sizes

The average fast food chain offers soft drinks in the following sizes: Kid’s Size: 12oz Small: 16oz Medium: 20oz - 22oz Large: 30oz – 32oz Extra Large: 40oz – 64oz

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 sale of 21-ounce beverages was higher than the largest size offered, the 32-ounce beverage. When a 44-ounce serving size was introduced, however, sales of the 32-ounce beverages rose.

Source: 5 - Duke University Study: Joel Huber, Kathryn M. Sharpe, and Richard Staelin

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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.

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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

100+ Possibilities

Source: 6

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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.

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ICED TEAIN QSRS

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The Iced Tea Category Arizona (Arizona Beverage Company)

Lipton (Pepsi)

Nestea (Coca Cola)

Snapple (Dr.Pepper Snapple Group)

Gold Peak Tea (Coca Cola)

Honest Tea (Honest Tea Inc)

Peace Iced Tea (Peace Iced Tea)

“In the United States, Iced Tea makes up

about 85% of all tea consumed and is

very popular as an alternative to

carbonated soft drinks.”

Did you know? June is National Iced Tea Month

Source: 7, 8

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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.

Source: 9, 10, 11, 12

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Recent Iced Tea Promotions

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Bojangles’ Included in TV ads since

2006 Current promotion on

bojangles.com for their Legendary Sweet Tea

Available in individual serving and half gallon sizes

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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

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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

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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

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BOTTLED WATERIN QSRS

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Bottled Water Category Aquafina (Pepsi)

Dasani (Coca-Cola)

Nestle Pure Life (Nestle)

Evian (Danone Group)

Ice Mountain (Nestle)

“Bottled water can cost up to 1,900

times more than what flows from

your tap.”

Source: 14

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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.

Source: 13, 14

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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.

Source: Ice Mountain

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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.

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COFFEEIN QSRS

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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.

Source: 15

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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.

Source: Dunkin Donuts, 16

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Recent Coffee Promotions

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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

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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

Source: 17

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SMOOTHIES, SLUSHIES & SHAKESIN QSRS

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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.

Source: Dunkin Donuts, 16

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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.

Source: 20, 21

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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

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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

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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)

Source: 22

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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.

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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

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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."

Source: 24

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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.

Source: 25

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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.

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CONCLUSION

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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

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Sources Soft Drinks: 1 http://www.washingtonpost.com/wp-dyn/content/article/2005/07/12/AR2005071200783.html 2 http://abcnews.go.com/WN/soda-statistics-empty-calories-add/story?id=10303246 3 http://parentingtips365.com/2010/01/27/15-reasons-not-to-drink-soda-pop-of-any-type-regular-diet-or-natural/ 4 http://thevreelandclinic.wordpress.com/2010/04/12/statistics-on-soft-drinks-youll-be-amazed/ 5 http://medheadlines.com/2008/08/american-waistlines-grow-as-soft-drink-serving-sizes-do-2/ 6 http://www.qsrmagazine.com/news/live-freestyle-innovation-continues-nra 7 http://www.packworld.com/news-31654

Iced Tea: 8 http://www.drinkarizona.com/index_national.html#featured_content 9 http://en.wikipedia.org/wiki/Iced_tea 10 http://www.heavenoftea.com/tea-in-america/tea-in-america-facts-on-tea-drinking-in-the-us/ 11 http://www.weeshare.net/2011/05/celebrate-national-iced-tea-month-with.html 12 http://alltea.wordpress.com/2011/05/15/tea-facts/

Bottled Water: 13 http://www.ewg.org/bottled-water-2011-how-much-do-we-drink http://green.yahoo.com/blog/the_conscious_consumer/154/worst-bottled-water-brands.html

Coffee:15 http://coffee-statistics.com/coffee_statistics_ebook.html16 http://news.dunkindonuts.com/dunkin+donuts/dunkin+donuts+news/dunkin+donuts+iced+coffee+survey.htm17 http://www.csmonitor.com/Business/new-economy/2010/0511/Not-so-free-iced-coffee-day-at-Dunkin-DonutsSmoothies, Slushies, Shakes:18 http://www.qsrmagazine.com/news/dunkin-wants-you-beat-heat?microsite=15640020 http://www.qsrmagazine.com/news/smoothie-king-customers-lean-us?microsite=15640021 http://en.wikipedia.org/wiki/Smoothie22 http://en.wikipedia.org/wiki/Slush_%28beverage%2923 http://www.sonicdrivein.com/menu/viewSection.do?sectionId=43680224 http://en.wikipedia.org/wiki/Milkshake25 http://foodbeast.com/content/2011/06/20/wendys-reveals-new-line-of-frosty-parfaits-and-frosty-shakes/