Maybe no sector is undergoing quite the metamorphosis as the beverage sector. Actually, maybe no part of the restaurant industry is undergoing as much change as is the beverage part of the business.
To wit: According to the Technomic Top 500 Chain Restaurant Report, system sales for coffee shops and quick-service beverage chains grew 25% last year.
The sector includes some of the industry’s fastest-growing businesses, including 7 Brew, the drive-thru coffee shop that increased sales by 267% last year. But it includes Scooter’s Coffee (41%), Dutch Bros (24%) and Ziggi’s (28%). Among other beverage concepts, there are HTeaO (54%) and Swig (39%).
And as a reminder, Starbucks was flourishing last year before its social media-fueled sales challenges, growing 12.5% last year.
Don’t tell this, however, to traditional restaurants. Beverage attach rates at many chains have fallen over the years as more customer business shifts to mobile order and delivery.
When Subway changed its beverage contract back to Pepsi after more than a decade, it did so in part because it wanted to inject some energy into drink sales, which had been slowing.
In other words, customers will get beverages from restaurants. But they are far more likely to get beverages from beverage restaurants and less likely to buy them from traditional concepts.
And even within those beverage concepts, the types of drinks they’re getting has changed. Coffee shop chains are selling far more cold beverages and a lot fewer hot ones.
“It used to be that you would get your hot coffee in the morning and your cold coffee in the afternoon,” Tom Sebok, managing partner with the New England Consulting Group, said at the National Restaurant Show this week. “Now you go to Dutch Bros and get cold coffee all day.”
The show demonstrated the shifting beverage demand, as a huge number of vendors pushed an ever-wider variety of drinks, including more interesting alcohol-free options and plenty of weed-infused beverages.
And the traditional players are fully in on this shift.
Coca-Cola boasted a wider variety of beverages than it ever had, including Costa-Coffee, which it acquired in 2019, and Topo-Chico, acquired in 2017. Visitors could test Fairlife or Body Armor or they could flavor their slush beverages with boba.
The shift in the beverage market is also playing itself out at McDonald’s.
The Chicago-based fast-food chain opened CosMc’s late last year. It is opening them across Texas now. The shops appear to be drawing plenty of interest.
But franchisees have been wanting a piece of the action.
“How about taking the top two CosMc’s beverages and bringing them to McDonald’s?” the National Owners Association, an independent group of McDonald’s franchisees, told its members in an email over the weekend. “That would be exciting for our guests and our employees.”
In theory, as the operators say, there is some opportunity for restaurant chains to take some share of the beverage market by being more innovative on the drink front.
Some chains certainly are trying, particularly fast-casual brands such as Jersey Mike’s, Cava or Sweetgreen. Traditional chains too often rely on a small selection of drinks for their customers. Yet younger consumers in particularly are broadening their drink preferences.
In theory, brands like McDonald’s could court customers frustrated with some of the higher prices charged at beverage specialty shops. And it could provide a boost in sales at a time when operators desperately need it.
Yet consumers are also treating beverages much like they’re treating any other menu item: They prefer they come from brands that specialize in drink offerings. In other words, they may not necessarily want boba with their burrito.