For most foodservice operators, beverage incidence rates (the percentage of transactions that include a beverage order) have been declining for years.
The causes have been well documented: consumers are looking for better-for-you options, new flavors and beverages with functional benefits. As a result, soda consumption per capita nationally has been steadily falling since 1999 and is projected to continue to decrease for the next five years.
For businesses that depend on beverage sales to keep their doors open, this was already a reason for alarm.
And then… the pandemic hit.
Declining Beverage Incidence Rate Accelerated by the Pandemic
In 2020, restaurants rushed to refine their model, pivoting quickly to delivery and carry-out services. For beverages, that often meant rapidly introducing bottles and cans to the menu, which were better able to be transported and enjoyed off-premise.
In fact, from 2019 to 2021, our restaurant clients saw their mix of packaged beverage sales increase by nearly 5,000%.
In other words, in 2019 approximately 1 out of every 2,000 beverages sold at our restaurant clients was either a bottle or a can. By 2021, that ratio had shrunk to just 1 out of every 40 beverages sold.
Delivery and carry-out services offered a lifeline to the foodservice industry during the darkest days of the pandemic, and packaged beverages became a must-stock item for most chains. By all indications, the trend toward delivery and take-out isn’t going away anytime soon. Delivery and take-out are here to stay.
Yet, despite its rise in popularity, packaged beverages provide operators with some significant challenges. For one, restaurants’ legacy beverage agreements often focused primarily on fountain products as opposed to packaged products. Even though the contract dictates exclusivity in the packaged products, the financial terms often are not optimized (or perhaps even considered) for this category. Additionally, cases of bottled products take up significant storage space, and small drop sizes make the economics difficult for local beverage bottlers.
Beyond these challenges, however, resides a much larger problem – and one that has a significant impact on both revenue and the bottom line.
Despite the increase in packaged beverage sales, the rise of delivery and take-out unfortunately gave consumers even more reasons to skip the beverage on their order.
Consider the following statistics:
- Only ~50% of digital orders from restaurants include a beverage sale
- Incidence rates via delivery are ~65% lower than via physical stores
When combined with the fact that packaged beverages are typically less profitable than fountain counterparts in the first place, solving the delivery incidence problem is critical.
Why Do More Guests Ditch the Beverage When Ordering Delivery or Takeout?
Before trying to jump into fixing the problem, it’s helpful to step back and understand why customers are choosing to forego a beverage in the first place. In our research and conversations with restaurant operators and beverage company executives, we’ve found there are four primary reasons:
Alternative Options
It’s hard to compete with the beverage that’s in the refrigerator. If a guest is ordering off-premise, it’s easy to grab a can out of that 12-pack he or she purchased earlier in the week from the supermarket (at a lower price point).
Higher Prices
After accounting for all fees and tips, delivery prices can be as much as 2x the cost of ordering a meal at a physical location. Skipping the beverage is an easy way for a guest to cut down on the ticket size.
Out of Sight
When ordering delivery, food is top of mind. If the beverages aren’t readily available and seamlessly integrated into the ordering process, it’s easy to forget about them.
Lack of Variety
If the beverage category, flavor, or size you prefer is not available via delivery, guests are more opt to skip it altogether. In addition, if bottles and cans are not available, guests may not order for fear that the fountain beverage could spill, be watered down by the time it’s delivered, or not kept sanitary.
4 Ways to Improve Beverage Incidence Rates for Off-Premise Sales:
Fortunately, foodservice operators are not helpless when it comes to beverage incidence – even via delivery. We’ve previously written about five ways to increase beverage incidence rates. While most of these strategies were specific to on-premise business, the underlying principles can be applied and adapted to the delivery and take-out business to impact beverage sales.
Here are a few examples of how operators can significantly increase revenue by improving beverage incidence rates on away-from-store sales.
Unique Options
If a customer might be tempted to source a drink from their home, foodservice operators can provide unique beverages that are hard to find in bulk at the supermarket. Offering a beverage pairing specifically tailored and matched to the type of food they are ordering increases the likelihood that a customer adds a beverage to their order.
Example: Taco Bell’s Mountain Dew Baja Blast Freeze
Example: Chipotle’s Tractor Beverage Offerings
Meaningful Value
Offering value via the delivery process is perhaps the most significant way to drive incidence. Enacting “buy one, get one” promotions, bundling beverages with a meal combo, offering a discount (i.e., $0.99 fountain or $1.49 bottle) to add a beverage purchase to an entree or discounting beverages during slow periods (“happy hour”) have all been shown to meaningfully drive sales. For concepts with loyalty programs, beverages can be discounted or add extra points to the program when ordered.
Example: McDonald’s “Golden Deals”
Example: Coca-Cola’s “Magic Weekends” Collaboration with Doordash
Thoughtful Ordering Process
The ordering process – whether via web, a dedicated app, or a third-party service – must be intentionally designed. Food should be shown with appropriate beverage pairings in the pictures on the site, and beverages shouldn’t be hard to find. The ordering process should include a dedicated beverage page during the sale or include a reminder prompt if the customer has not added a beverage to their order.
Strategic Variety
Ensuring your locations can source the beverages that customers are looking for – in the right format (bottles versus fountain), is key. While typically the vast majority ordering delivery or take-out are still looking for a carbonated soda, teas, lemonades, and waters are an important part of the portfolio. Offering a large or group size package (like a 2-liter option) or altering the beverages offered depending on the time of day can impact sales.
Improving Incidence Rates is Possible… And It’s Worth the Effort
If you’ve let your beverage program run on auto-pilot, you’ll be surprised to learn how much money can be made by developing and implementing a focused strategy aimed to increase beverage incidence. In fact, we’ve seen cases where restaurants have doubled their beverage incidence rates through deliberate planning, testing and execution. If you want to get started, here are three tips to consider.
Improving beverage incidence takes effort
Impacting beverage incidence is not rocket science, but it does require effort. You need focused, dedicated attention to plan, test, refine and execute strategies aimed to achieve your objective. Someone needs to “own” this.
Partner with your beverage company, but don’t rely on them
Beverage companies have an immense amount of data, case studies and best practices to help you with your effort. They want to sell more beverages, too. Include your beverage partner in the planning and implementation from the beginning. Just know that the beverage company does not have the resources available to dedicate the amount of time, strategy and analysis required to continually drive an impact – and they also have motivations to sell the particular brand in which their company is currently focused. You need to set the agenda and roll out the plan.
Test, test, test
Try several different strategies at various locations. See what works and ditch what doesn’t. The great thing about this work is that you can measure the results and remove all of the mystery.
Free Consultation Call
Perhaps you know your beverage program could use a little TLC, but you don’t have the energy or bandwidth to focus on it. Or perhaps you’ve seen beverage incidence slip quarter after quarter, and you need some fresh ideas and expert analysis.
We love seeing creative, fresh, successful beverage partnerships emerge, and we partner with concepts of all sizes and geographies to help increase top-line beverage revenue.
Contact us today if you’d be interested in receiving a free consultation to receive ideas to help improve your beverage sales.
Additional Resources:
How to Increase Beverage Revenue: The 5 P’s of Growing Beverage Incidence
How the Pandemic has Changed Restaurants’ Beverage Deals
8 Ways COVID-19 Will Impact Future Beverage Deals
