Beverages remain a rich target for engineering higher sales and margins, but discerning between drink trends and fads complicates that development more than ever.
That was the conclusion drawn by executives who gathered at the 2014 Beverage Innovations Roundtable during the National Restaurant Association Restaurant, Hotel-Motel Show in Chicago.
Penton Restaurant Group — which publishes Food Management, Restaurant Hospitality and Nation’s Restaurant News — in cooperation with Smucker’s Foodservice, convened menu innovation leaders from some of the most forward-thinking companies in the restaurant, hotel and campus dining segments to share best practices for gaining insight into what consumers want from their drinks and for turning that feedback into sales-driven beverage strategies.
Below are highlights from their roundtable discussion, moderated by Nation’s Restaurant News senior editor Mark Brandau.
• Darci Forrest, senior director of menu innovation, McDonald’s Corp.
• Stan Frankenthaler, senior vice president of food and beverage innovation and menu development, CraftWorks Restaurants & Breweries Inc.
• Donna Josephson, chief marketing officer, McAlister’s Corp.
• Tim Knowlton, director of foodservice research and development, Smucker’s Foodservice
• Rob Morasco, senior director of offer development, Sodexo Education USA
• Ken Toong, executive director of auxiliary services, University of Massachusetts
• Greg West, vice president of product innovation, Bob Evans Restaurants
• Shirley Whelan, director of restaurants and bars, Hilton Worldwide
Mark Brandau, Nation’s Restaurant News: How are your beverage lines an opportunity not only to drive sales, but also to extend your branding?
Donna Josephson, McAlister’s Corp.: We use McAlister’s Famous Sweet Tea as an embodiment of what the brand stands for: generous tea hand-crafted with quality, and then that generous portion is always free refills. That will always be some place where we maintain the brand, and elsewhere we’re going to borrow equity.
Shirley Whelan, Hilton Worldwide
On demand for premium beverages:
“We’ve seen a great increase in what people are willing to spend on a quality glass of wine from a restaurant standpoint. People really will push that $20 mark to get what they want by the glass. We’ve had great success with our seasonal cocktail programs, and the training was certainly the hardest part of that. There is no fail-stop between a bartender and the guest. We’re spending as much care and time to make a nonalcoholic beverage as we do for a cocktail, and that translates well to catering and events.”
Stan Frankenthaler, CraftWorks Restaurants & Breweries: I don’t think that you can own every one of your beverage platforms necessarily; you certainly need the help of some good partners who have their own dominance in the space too. It’s really important to determine which one of those key platforms you do really want to own within your category and which ones your might need to sort of participate in. In the ones you want to own, it goes beyond marketing and really is the tie that binds the customer.
Darci Forrest, McDonald’s Corp.: McCafé started with a credibility opportunity for us, so we invested in really changing our coffee in 2006 in premium roast under McCafé, and then it grew from there into espresso. That was a brand we chose to create, a sub-brand if you will, rather than partnering. We wanted to expand that portfolio into other areas.
Brandau, NRN: Are sales of specialty teas and coffees starting to overtake sales of your standard drinks?
Rob Morasco, Sodexo: The sales in campus facilities that have a Starbucks or Argo Tea — the swing to specialty or the “six-sentence order” is definitely taking over. We’ve got our own coffee and tea concepts that are doing pretty well. Even in that space, though, you have to leverage what you’re good at … and where we’re not the experts, we go to someone who is and say, “OK, how do we do this?”
Tim Knowlton, Smucker’s Foodservice: For us, it becomes a shift from providing a finished product versus something more ingredient-based. As we start to get more into the specialty side, it becomes difficult to do because the critical mass and volume just aren’t there, even for you, to have a finished product. So we ask how can we change and understand what ingredients are the critical base ingredients that you’re going to use, and that’s what we start to manufacture.
Brandau, NRN: That would seem to allow for more customization. Is that trend as prevalent on the beverage side as it is on the food side?
Shirley Whelan, Hilton Hotels Corp.: Speed of service is certainly an issue. The big green machine of Starbucks has trained the American public to get exactly what it wants. When they come up to us, they want soy or almond milk or whatever, and the line is down the hall. Trying to get union staff to move quickly with that is not easy. So we balance the amount of options we can give to that. But from the alcohol perspective, bartenders have been doing it forever, because there are 28 kinds of vodka on the back bar, and you get it exactly the way you want it.
Brandau, NRN: How do you know if some of the things consumers ask for — certain flavors, energy drinks, bubble tea, etc. — are passing fads or trends you must adopt?
Stan Frankenthaler, CraftWorks Restaurants & Breweries
On training employees to optimize beverage programs:
“You know, a great bartender is a professional, and we dedicate a lot of training to them, and they take a lot upon themselves to be top of their game. We don’t really put that much emphasis on the person who is working the coffee station or blender station, but maybe as we see the value of those sorts of beverages increase, it would seem that we should probably up that effort. Starbucks does and is a great example of professionalizing the barista and engaging them in the business of the customer and their choices.”
Greg West, Bob Evans Farms Inc.: We would never pursue fads. We’re about great food, service and hospitality. But trends become real insights you need to act on. Clearly, one is less sugar, even for baby boomers and 70-plus guests. The other is real food, and the days of high-fructose corn syrup and microwaving stuff in view of the guest are over. For something as simple as fountain drinks, only having six taps or six flavors of soda is inadequate, because soda pop is still a huge part of your beverage portfolio if you’re a nonalcoholic establishment.
Ken Toong, University of Massachusetts: At UMass, we have 26 student ambassadors. They are on the meal plan, and we test products with them for a month to ask for feedback and get them to talk to their peers. … We recently decided to find a bubble tea that can appeal to everyone. We believe that bubble tea is the future. It could take us a while — even just one location takes three or four weeks to roll in a new product — but I think there’s some real excitement there.
Brandau, NRN: Are consumers always leading you to new products, or can you lead them into beverage trends you notice?
Forrest, McDonald’s: We’re probably not doing a whole lot of ‘if we build it, they will come’ types of things. But our Real Fruit Smoothies were an example of creating something and having folks come to you for it without it being a new invention, per se. The place where you need to get is, ‘what is the consumer insight, and what is your brand going to bring to the party?’ There are ‘greens fees’ of speed, value and convenience, but depending on what is driving that and if there are any gaps in what competitors are offering, that might be our way in.
Brandau, NRN: What about consumer needs for organic, fair trade and/or sustainable beverage programs?
Morasco, Sodexo: The two big buckets for us in this conversation are the fair-trade aspect and the ecological aspect. When you talk about beverages for college students, that’s what they’re looking at. And trust me, they don’t want a Sodexo certification on that. It has to be third-party, because students don’t want to be our friend on Facebook, and they’re not going to believe what we tell them. In our space definitely, a premium will be paid for that if you have it. A few years ago, we actually created our own coffee brand for the cafeteria space, something we could control the cost of, could source, and could make fair-trade and bird-friendly, all that stuff. We mandated it in our residential dining plans, and it saved us a lot of money because it was our offer and worked out well for us.
Donna Josephson, McAlister’s
On pursuing trends while staying true to the brand:
“We know what we do well, and we want to continue to do that well. We’re not going to go be bad at something just to be on-trend. So it may take us a little bit longer to make sure we can deliver that great experience, but eventually we’ll get there the right way. Bubble tea is something we have our eyes on, but only if it works for us. Or customers really want green tea, because it’s healthy and full of antioxidants. If we can crack that code and develop great-tasting green tea that is consistent, we may have something there. But guests are going to expect them to be really, really good, and we have to make sure that we deliver on that.”
Forrest, McDonald’s: Our customers are more and more curious about these issues; you see it in social media all the time. Right now the big thing from a marketing standpoint is being able to talk about our espresso beans being 100-percent Rainforest Alliance-certified. We’re working with our sustainability team to mine where the advancements are, and coffee is just a big, obvious one.
Brandau, NRN: I see the healthfulness question as linked with the question about soft-drink sales. Is soda dying out in restaurants because of health concerns?
Josephson, McAlister’s: We do tell the ingredient story of our sweet tea and say it’s sweetened with pure cane sugar. There is an unsweetened option, and it is Rainforest Alliance-certified, but we’re not going to hide and say the sweet tea is all good calories. We’re honest about it, and people like our tea and feel happier when they have it.
West, Bob Evans: All companies have a nutritional strategy, and it starts with choice. You’re not going to eliminate soda pop in the short term. If I’ve been a Coke Classic consumer in the past, maybe today I’m a Coke Zero drinker. Brands were a little slow making that available to everyone, but we’ll have that on the fountain at Bob Evans in the next six months.
Frankenthaler, CraftWorks: Carbonation equals refreshment. You can’t say soda is going away when SodaStream is one of the most successful companies of the moment. It’s about finding your place in reinvention.