The beverage segment is undergoing re-invention similar to that in various other menu categories this year, and Technomic research shows a number of the same influences at play:
  • As in other menu categories, the perception of health has become a paramount driver of success.
  • Exotic scented and flavored teas are gaining favor with consumers.
  • Smoothies and teas are poised for growth, much as specialty coffee was two decades ago.
  • Beverages, which grew 22% in 2004, will continue to experience sales gains.
  • Adult beverages will continue to see ongoing innovation, particularly among specialty drinks, which now command their own menus in many full-service restaurants (FSRs).

    The niche market for chocolate beverages shows that opportunities for chocolate beverage innovation remain despite earlier failed attempts by operators such as Starbucks, with its Aztec-influenced Chantico. Max Brenner, Chocolate by the Bald Man has opened its second unit in Manhattan. Continuing on its path to expand primarily in New York, Max Brenner specializes in chocolate candies and treats as well as hot chocolate drinks, s’mores, chocolate-flavored stout and cocktails made with milk chocolate or white chocolate. Meanwhile, Starbucks, in an alliance with Hershey, will introduce a blend of dark and milk chocolate cubes in three flavors. When mixed with non-fat milk, the cubes produce a beverage less thick and intensely flavored as the failed Chantico.

    Iced coffee and coffee alternatives for kids are growth areas for the coffeehouse segment. Java Detour specializes in custom-made, premium coffee drinks made with special coffee blends. The most popular offering is the Cold Rush line of ice-blended espresso beverages in which the top seller is Oreo Cookie Latte Cold Rush. In addition, Java Detour’s proprietary preparation methods and pumping systems ensure that a drink is delivered to the customer in seconds. The chain also sells coffee beans in bulk for customers to brew at home. Notable on the menu is the Kids Club section, listing a number of 8oz drinks, including fruit smoothies, milkshakes and flavored milk served warm or cold. Children can choose among the Berry Berry, Monkey Berry and Tropic Freeze smoothies ($1.99); and Mooshakes—chocolate, vanilla or strawberry milkshakes.


    • Coffee, Tea and Smoothies

    There is no doubt that Starbucks remains the leader in the limited-service beverage segment with almost a 50% market share. Technomic looks at how other concepts in the coffee category compete with Starbucks given its dominant position. Emerging chains such as Port City Java, Mocha Delites and Coffee Bean & Tea Leaf list specialty coffees on their menus, but some also offer food items as a way to distinguish themselves from the competition. Still other concepts with menu offerings that differ dramatically from Starbucks also compete with the chain in the larger beverage segment.

    Four operators with innovative beverage programs include Teavana, Froots, Cha for Tea and Maui Wowi, which focus on tea and smoothie offerings. The perception of health benefits is one key way these concepts are attracting customers. Tea, particularly green tea, has long been known as a good source for antioxidants, and as a whole, tea has less caffeine than coffee. Tea concepts like Teavana and Cha for Tea appeal to consumers who not only like tea, but who also appreciate its health benefits. Fruit smoothies also are known for their health benefits, and Froots and Maui Wowi emphasize this positioning with nutritional supplements that can be added to the drinks.

    While this healthy positioning may initially attract customers, it is the quality of the beverages, measured in taste, which will retain customers and keep them coming back. All four concepts address this issue with menus that offer a variety of flavors likely to appeal to a majority of customers. Froots and Maui Wowi feature numerous fruit smoothie concoctions based on different juices and fruits, while Teavana and Cha for Tea list teas infused with exotic scents and flavors. While consumers may recognize certain items as being more healthy than others, ultimately, they will order what tastes best.

     If these concepts successfully deliver great-tasting, healthy beverages, they will be poised for success in a category that continues to grow. As a whole, the beverage category grew 22% in 2004, with sales topping $9.8 billion. Though Starbucks accounted for the lion’s share of those sales, other operators should be able to experience success meeting customer needs in those areas where Starbucks cannot fulfill them.

    New Directions for Adult Beverages Build Bottom Line

    In U.S. restaurants, adult beverage menus today are growing, becoming almost as large as food menus. Technomic research shows these menus are comparable in terms of the number of items to food menus. While adult beverage selection and sales vary dramatically by segment and restaurant type, almost all of the top 250 FSRs offer white wine. Surprisingly, fewer offer beer, according to Technomic MenuMonitor.

    Full-service restaurants are also big on specialty drinks. Flavored martinis have become a big trend in their own right in recent years, and Technomic provides data on consumers’ flavor preferences in specialty drinks. Some examples of martinis in the marketplace include: Copland’s of New Orleans’ Cajun Martini, described as vodka marinated in a blend of special Cajun spices; Kona Grill’s Desperate Housewife Martini with Alize Red Passion, Grey Goose vodka and cranberry juice; and uWink Bistro’s Tootsie Roll Martini blends Ketel One vodka with Godiva and Grand Marnier liqueurs.

    The top three preferred flavors of specialty drinks were lime, citrus and coconut, but preferences differed by ethnicity. Hispanics show a preference for lime-flavored drinks, while Asians favor cherry-flavored drinks.

    The revenue contribution of adult beverages varies widely. Quick-casual restaurants typically offer only a few wine and beer choices, and Technomic research shows that these beverages usually only make up about 5% of sales. Italian restaurants’ bar menus usually account for 5%-10% of sales. Varied-menu restaurants, which offer the most specialty drinks, tally 10%-15% of their take in bar sales. Restaurants such as Bahama Breeze and Cheeseburger in Paradise have bar sales that account for 15%-30% of revenues. Fine-dining restaurants can take in 10%-25% of sales from adult beverages.

    With adult beverages making such a large contribution to the bottom line, it is increasingly important for restaurants to innovate and update their drink menus as often as food menus. An increasing number of restaurants are offering specialty drinks for a limited time to accompany and complement similar limited-time food items. Red Lobster launched four specialty drinks to be paired with its limited-time Endless Shrimp menu promotion last year.

    To ensure a competitive variety of drinks on the menu, Technomic’s Adult Beverage Insights Group recommends that operators closely monitor competitors’ adult beverage mix, inside and outside their segment. If adult beverages make up half the menu, it is worth the effort to push sales and profit contribution to the highest possible level.

    Operator Profile: The Human Bean

    In 1998, Dan Hawkins and Tom Casey opened The Human Bean in Ashland, Ore. Most of the concept’s stores are still based in Oregon, but nearly 30 recently signed area development agreements will facilitate the opening of 110 new units nationwide. More than a quick-service coffee chain, The Human Bean is committed both to high-quality products and to supporting social responsibility for farmers in coffee-growing regions around the world.

    The Oregon-based chain funds local improvement projects in Central America, South America and Africa through its Farm Friendly Direct program, which also ensures a steady supply of premium coffee beans. This attention to quality stands out as The Human Bean emerges as a national brand through franchising. The menu showcases espresso-based drinks and non-coffee beverages.

    The Human Bean’s signature espresso blend combines African, Cen--tral American and In-donesian beans to create a blend that is bold yet smooth, with a mild berry flavor. Other organic blends include beans from South America, Ethiopia and Yemen. The Human Bean offers classic latte beverages as well as several sweet or frozen coffee selections. Some favorites are:
  • The Human Bean Supreme—Espresso, steamed milk, mocha and white chocolate.
  • Kahlua Madness—Espresso, steamed milk and Kahlua flavoring.
  • Mexican Mocha—Espresso, steamed milk and a chocolate shot with added sugar, cinnamon and nutmeg.
  • Milky Way Latte—Espresso, steamed milk, caramel, cocoa powder, chocolate shot and almond flavoring with whipped cream on top.

  • Snickers Latte—Espresso and steamed milk with hazelnut, chocolate shot and caramel syrup.
  • Almond Joy Latte—Espresso and steamed milk with a chocolate shot and almond and coconut flavoring.
  • Granita—Ice-blended, frozen espresso beverage; decaffeinated espresso is made using the Swiss water process, a chemical-free decaffeination method that the chain says results in a better-tasting, richer decaffeinated coffee blend.

    Customers who prefer tea can choose from among several different beverages, including chai tea made with steamed milk. Traditional Italian sodas are another option, as are steamers and smoothies in an assortment of fruit flavors. The selection includes:
  • Chai Latte—Chai tea with steamed milk.
  • Chai Charger—Chai tea with a double espresso shot.
  • Italian Soda—Carbonated water, ice and syrups in several flavors, including pink grapefruit, Mandarin orange, lemon-lime, berry and pomegranate.
  • Creamosa—Choice of flavored Italian soda with a splash of cream, finished with a dollop of whipped cream on top.
  • Flavored Steamer—Steamed milk with a shot of fruit, nut or chocolate flavoring.

    The Jet Tea branded Smoothies include Strawberry Bomb, Mango Mania, Extreme Peach, Wildberry Blast, Caribbean Colada, Perfect Pear and Intense Green Apple. In addition to tea, soda and smoothies, fresh fruit juices are especially popular during morning hours. Breakfast and snack items include muffins, bagels, croissants and several pastries.

    For more information about foodservice beverage trends and exclusive industry data, contact Patrick Noone at Technomic at 312-506-3852.