Consumers continue to look to the foodservice segment for quick and convenient snacks and meals. From 2015 to 2017, the limited-service restaurant (LSR) segment grew 11.8 percent, according to Chicago-based Mintel.. “LSRs have key opportunities with consumers when it comes to offering convenience and affordable prices, and specific chains have started to find a stride with what works,” the market research firm states in its December 2017 report “Dining Out in 2018.” As evidence of this, Mintel points to the growth of New York-based Shake Shack, Atlanta-based Arby’s and Irvine, Calif.-based Taco Bell, which have announced plans to open more locations in the coming years. Mintel projects that the LSR segment will continue to grow 4 percent a year to $353 billion by 2022.

Beverages are playing a key role in the foodservice segment’s growth. Chicago-based Technomic, a Winsight Co., reports that beverages accounted for more than $181 billion in annual sales and more than 113 billion servings in 2016. Staples, such as carbonated soft drinks (CSDs) and coffee, are driving the overall volume, but specialty coffee, bottled water and energy drinks are growing rapidly and are projected to continue this growth throughout the next three to five years.

“Beverages account for $1 out of every $5 consumers spend away from home,” said David Henkes, senior principal at Technomic, in a statement. “They are a critical part of the overall experience and, because of their central importance, it’s absolutely crucial for restaurant operators and their suppliers to understand how innovation impacts consumer satisfaction.”

For instance, consumers are showing an interest in non-alcohol craft beverage innovations. According to Mintel’s Beverage Tracker, away-from-home consumption of CSDs dipped 1 percentage point from October 2016 to October 2017, but consumption of natural and craft sodas and fruit water each increased 4 percentage points in the same period. “Premium beverages are not an area for operators to overlook, especially since they drive a higher price point,” Mintel advises.

In line with this, St. Louis-based fast-casual chain Panera Bread rolled out a new line of craft beverages last year. The line-up includes unsweetened Iced Black Tea, unsweetened Plum Ginger Hibiscus Tea, naturally sweetened Prickly Pear Hibiscus Fresca, Passion Papaya Green Tea, Blood Orange Lemonade and Agave Lemonade.


Balanced beverages

These new beverages also tap into another trend in the foodservice category: healthy beverage choices. Panera Bread describes the beverages as “100 percent clean” and says they do not contain artificial sweeteners, flavors, colors or preservatives. Many of them do not contain any added sugar, and the Papaya Green Tea, Blood Orange Lemonade and Agave Lemonade contain less than 35 grams of sugar per 20-fluid-ounce serving. This range gives consumers the opportunity to choose a beverage with a sugar level that fits into their diets.

In addition, Panera Bread has been making an effort to share the nutritional information of its beverages with consumers. In March 2017, the company posted signs at its beverage fountains to be more transparent. As a result, the company noticed an 8 percent shift toward increased consumption of medium and lightly sweetened beverages compared with fountain carbonated soft drinks. To take this initiative a step further, Panera Bread released a Sweet Facts cup that lists that calories and added sugar of each of the six new craft beverages and compares them with a regular soda.

Atlanta-based The Coca-Cola Co. also is working to inform consumers’ foodservice beverage choices. The Coca-Cola Freestyle 9100 machine, which will begin rolling out nationally in 2019, features an on-screen calorie display feature and offers more than 100 low- or no-calorie options. The new machine also is equipped with a new user interface; Bluetooth connectivity to interact with the Coca-Cola Freestyle app; and built-in microphones, speakers and optical sensors for future interactive developments.

More than half of consumers also are seeking healthy beverages that offer a functional benefit, according to Mintel. This trend is challenging restaurants to take a deep dive into beverage ingredients and highlight signature elements that offer health benefits, the market research firm says.

Atlanta-based Tropical Smoothie Café offers a line-up of superfood smoothies as well as seasonal and limited-time functional beverages. Earlier this year, the chain launched a limited-time Citrus Cactus Smoothie, which blended orange, apple, mango, pineapple and freshly squeezed lime juice with cactus, which is an excellent source of antioxidants, vitamin A and the electrolytes potassium and magnesium, the company says.


The buzz factor

In addition to these health benefits, the Citrus Cactus Smoothie’s exclusivity likely contributed to its success. The variety was only available for a very limited time — about two weeks on average at most locations — but 80,000 smoothies were sold in this period across the company’s 600 locations.

Other foodservice operators are deploying similar exclusivity tactics. This summer, Chicago-based McDonald’s and The Coca-Cola Co. are rolling out a new Sprite variety exclusive to McDonald’s. Mix by Sprite Tropic Berry joins the McDonald’s core beverage lineup and combines Sprite’s lemon-lime taste with flavors inspired by tropical fruits.

The Coca-Cola Co. also released three new Diet Coke varieties — Diet Coke Ginger Lemon, caffeine-free Diet Coke Ginger Lemon and caffeine-free Diet Coke Ginger Lime — exclusively for Coca-Cola Freestyle machines. The company says it hopes these new varieties will appeal to “new and current fans who seek out new, exciting flavors and experiences.”

After success with its Unicorn Frappuccino last year, Seattle-based Starbucks Coffee Co. again tried to capitalize on the exclusivity trend with its limited-edition Crystal Ball Frappuccino. The crème-based beverage was infused with peach flavor and turquoise sparkles and topped with peach-flavored whipped cream and colored candy gems that turned the beverage blue, green or purple, which the company says foretold fortunes of adventure, luck and magic, respectively. Although the media and consumers generated thousands of social media posts about the beverage, the Crystal Ball Frappuccino did not perform as strongly online as the Unicorn Frappuccino. MarketWatch reports that the Crystal Ball Frappuccino drove 0.4 percent of the social media mentions for the quarter, compared with 6.5 percent for the Unicorn Frappuccino during its launch.

Still, social media is a driving force for beverage sales in the foodservice channel. Mintel reports that 54 percent of social media users visit coffee shops at least once a week, compared with 35 percent of consumers who do not use social media. In addition, 93 percent of Americans use social media. Although not all of these users are active posters, many of them scroll through their networks and stumble upon images of food and beverages and read about foodservice trends. More specifically, 40 percent of iGeneration consumers and 25 percent of millennials note that social media exposes them to food and beverages they previously have not heard of.

On top of that, 63 percent of millennials enjoy taking pictures of their food, according to Mintel. These social media trends open up opportunities for foodservice operators to generate buzz about their beverage offerings. Mintel suggests that foodservice operators add more branded elements to their products and ensure that their beverages are photo-ready when they reach the consumer. However, the market research firm cautions that beverage-makers need to be wary of wasteful additions, as some consumers are becoming more wary of sustainability and food waste. Still, analysts predict that artistic presentations will continue to be an important foodservice trend, as consumers are now accustomed to enjoying their food and beverages visually before tasting them.

To help with this, Purchase, N.Y.-based PepsiCo Inc. launched Pepsico Flavorworks in May. The new platform contains insights and information to help foodservice operators craft unique, post-worthy menu items featuring PepsiCo beverages. “PepsiCo Foodservice has deep expertise in flavor exploration and culinary ingenuity and, through PepsiCo FlavorWorks, we are thrilled to extend that expertise to our valued partner operators so that they can craft one-of-a-kind menu items that will make their consumers’ mouths water and prompt social media-worthy images to post,” said Anne Fink, president of PepsiCo Global Foodservice, in a statement. The new platform includes more than 500 innovative recipes featuring PepsiCo food and beverages, trend information and insights about consumers’ foodservice interests, and customizable point-of-sale materials to help market new menu items.


Growth on-the-go

Looking ahead, foodservice operators also need to ensure that their beverages are properly prepared and packaged for delivery.

“As delivery services become more widespread and the technology improves to make the experience of ordering delivery more seamless, more innovation will be required to ensure that beverages remain an important part of the equation,” says Stephen Dutton, senior consumer foodservice analyst at Chicago-based Euromonitor International, a market research provider. “Innovation in packaging, for example, to ensure beverages travel well, look good upon arrival, are not watered down by melting ice, and are tamper proof, are all things operators and delivery companies will need to think through.”

Dutton also notes that the growth rate of food delivery is faster than any other dining occasion type. According to Port Washington, N.Y.-based The NPD Group Inc., revenue from restaurant deliveries has increased 20 percent in the past five years, as consumers have trended toward ordering breakfast and lunch for delivery as well as dinner. As delivery demand rises, more restaurants are moving into the delivery space. San Diego-based hamburger chain Jack in the Box announced a partnership with Grubhub, Chicago, in May to offer delivery in select markets. Dublin, Ohio-based fast-food chain Wendy’s announced an exclusive delivery partnership with DoorDash at the end of last year, and Denver-based fast-casual chain Chipotle Mexican Grill launched a national delivery partnership with the San Francisco-based delivery company at the end of April. About a week after the partnership launch, which included a promotion for free delivery for orders that cost $10 or more, Chipotle reported a 667 percent increase in weekly delivery orders. Chipotle orders were previously available for delivery through other services, including Grubhub; Postmates, San Francisco; and Amazon Restaurants, Seattle.

Panera Bread launched its own delivery service nationwide in May. The company originally began offering the service in test markets in 2016, and since then the service has delivered consistent sales growth. Panera leaders decided to launch the service nationwide to meet the pent-up consumer demand for clean-eating options, the company says. The company employs its own drivers, who deliver food and beverages to locations within an eight-minute drive of participating locations in 897 cities across the United States. The service connects with MyPanera, the company’s loyalty program, to allow consumers to save their favorite orders, earn and track rewards, and receive one-to-one tailored content.

The NPD Group expects that the delivery market will continue to grow in the next five years, with growth particularly coming from non-traditional delivery outlets and dayparts. This means that foodservice operators will need to figure out how their offerings fit into this new market environment and even craft new items to meet consumers’ food and beverage desires at different times of day and night.