he traditional carbonated soft drink (CSD) has been a mainstay of the foodservice business, helping drive operator profitability as it quenched consumers’ thirst. Many operators, however, are finding that consumer tastes have changed, and traditional carbonated soft drinks aren’t providing the return they used to. The soda fountain is losing ground to single-serve drinks, and more and more of these are not traditional cola drinks.

Beverage choices within foodservice are becoming more innovative. Foodservice sales of dispensed CSDs are expected to decline by around 3 percent per year over the next several years, and packaged CSDs won’t fare much better. The move toward alternative options for customers is well underway, and the number of products available to choose from is staggering.

Specialty suppliers include Stewart’s, Sea Dog Root Beer, IBC, Jones, Jarritos, and many others. The innovation and investment in new flavors, products, and formats has been immense.

To be sure, the success of these products in foodservice is not guaranteed, and most of the sales of these products are still made in the grocery aisles. While foodservice is typically the area where consumers are more willing to experiment and try new beverages, the operational realities from a hotel’s perspective tend to limit the overall choices available to the consumer. Consider:

• Any new dispensed specialty soft drink supplier looking for placement either must invest in its own equipment or partner with one of the major soft drink brands.
• Operators tend to have a limited number of fountain heads available for new products. Most have either six or eight head fountains, and there’s not enough room for additional flavors. Additionally, most don’t want another soft drink dispenser in their operation.

Single-serve specialty drinks have proven more successful. There is no concern about the number of fountain heads available, and single serve is definitely on-trend with consumer dynamics. Here again, space becomes an issue, not only for storing a large inventory of bottles or cans but also for the cooler space needed to display and sell single-serve products.

While single serve is where the growth is occurring, the reluctance of operators to move in this direction is not related just to space and storage issues, but also to profitability. Typically, single-serve products have a lower gross profit percentage, particularly relative to dispensed. However, the ability to charge a premium for specialty sodas and other beverages may mean that the dollar profit is similar for dispensed and single serve, something many operators probably don’t know.

Despite the issues, a number of restaurants have found a way to make their beverage programs a centerpiece of growth and differentiation. The best example is probably Red Robin, which has built a following around its unique beverage offerings. Sonic upgraded its beverage equipment so it can customize customers’ drinks. Potbelly Sandwich Works offers 58 beverage choices such as soda, water, and tea as well as “boutique” soft drinks.

For hotel foodservice operators, specialty sodas and other beverages can provide a point of differentiation and a source of incremental revenue. These products are certainly on-trend, and we expect to see greater innovation and experimentation in this category going forward.

CORRECTION: In my column last issue (“Bottled Water: On-Trend or Losing Steam,” March/April 2008), the parent company of Big Bowl was identified as Levy Restaurants. In fact, it is Lettuce Entertain You (LEYE) Restaurants. I apologize for the error.