Tiny bubbles, big profits for pizzerias

 
Aug. 23, 2006
Fast Break Pizza's proximity to a several new home developments sends hungry construction workers to the pizzeria's all-you-can eat lunchtime buffet. Co-owner Scott Hack said some workers will quaff three 32-ounce fountain sodas in a single visit, but their extraordinary consumption doesn't bother him. A former construction worker himself, Hack empathizes with their thirst. Plus, he knows the $1.89 he charges for each beverage more than covers his costs.
 
"It all balances out," said Hack, whose shop is in Crestwood, Ky. "You get guys like them, and then you get some who drink one glass."
 
Mathematically speaking, most customers would be challenged to beat the boss when it comes to soda consumption.
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September 20-21, 2006

A finished blend of syrup, water and CO2 costs between 1 and 1.5 cents per ounce, virtually ensuring customers' bladders will give way before Hack's beverage cost goes down the toilet. By comparison, 20-ounce bottles of soda cost about 3 cents per ounce. (Two-liter bottles, commonly used in delivery, cost a little more than a penny per ounce.)
 
But while fountain soda is cheap, it isn't free. Though not significantly, cups, straws and ice add to the cost. Where soda can cost an operator is in reputation. In a soda-savvy culture, fountain mixes better be right or customers will notice and complain.
 
Tim Taft, chief executive of Pizza Inn, said that means operators and soda providers must have a good partnership or business for both will suffer. Taft said the soda account person not only must know his product, but how to maintain the machinery mixing it. The soda rep also should know the pizzeria owner's business and his customers' specific preferences.
 
"Their whole brand and relationship hinges on the account person that they put on your business," Taft said. "If (the operator) takes the time to educate the rep about the subtle nuances of his brand, and then you have constant turnover of the rep, their ability to positively impact your business is nullified."
 
In more than two decades in the restaurant business, Taft has seen his share of good and bad soda reps. The best, he said, knew his franchisees' preferences, reminded them when preventative maintenance was due and were diligent about delivering their rebate checks in a timely manner. "They didn't wait until there was a problem to do what was spelled out in the contract. They understood the need to partner with the franchisees."
 
Bad ones were reactionary, Taft added. They'd come when the operator called about a problem, but by then, customers were already complaining.
 
While working for another restaurant chain, Taft was forced to find a new soda provider. The change was so positive and apparent to customers that soda consumption increased by 10 percent.
 
Free refills: Blessing or curse?
 
In cranking out $5 million in annual sales, Pizza Shuttle in Milwaukee serves a lot of soda. Currently customers have to come to the counter for free refills, something co-owner Mark Gold believes they don't like. His employees like it even less.
 
"If they've got to stop and get somebody a refill, they're not taking an order and the line's not moving," said Gold.
 
Part of Pizza Shuttle's current renovation includes the addition of a 12-valve self-serve soda fountain topped by a 300-pound ice dispenser fed by a 900-pound ice maker. The hurly-burly pace of his dining room is no place for a shortage of soda or ice, especially with late-night college crowds that tend to get a little rowdy.
 
"It's important to get

Jones Sodas come in flavors as sweet as Banana and as surprising as Broccoli.

them out of the line fast so they don't bump into each other; that can turn into something," said Gold. "They also perceive it to be a better value when they can get refills themselves."
Taft agreed self-service boosts satisfaction because the customer has more control over the dining experience. But he said the biggest gain is in overall operational speed. When customers fetch their own refills, the staff stays focused on the buffet and taking orders.
 
Such time savings were even greater when he was chief operating officer at Whataburger, which stayed open round the clock. Seconds saved by adding self-serve fountain drinks meant higher throughput at the counter and at the drive-thru window. "The value of having self-service in the dining room far outweighed any incremental increase in syrup costs if people drank more."
 
But to be certain the self-service model is a win for Pizza Shuttle, Gold is switching cup sizes and charging a nickel more per soda than he does now.
 
"Right now we use a 30-ounce cup, but we're going to a 24, and we'll start charging $1.45," Gold said. "I'm sure there will be people who say they're getting water and then go get a soda, but I don't have time to worry about that."
 
Hack has a little more control over his refills, since servers cruise the dining room with pitchers of soda. Even then, guests don't always accept the offer to top-off. "There are some who, when I try to give them refill, they act like they'll float away. Not everybody likes to drink a lot of it."
 
Premium potables
 
Currently, fast-casual and casual-dining chains are leading the way with sales of premium bottled sodas and soft drinks. Panera Bread Co. and Chipotle Mexican Grill serve several 12-ounce single-serve options for around $2 each. Brands like Jones Soda and SoBe not only come in eye-catching containers, but with jazzed-up images as well. Such brands have earned a cachet similar to that granted imported beers, plus their unusual flavors fit the desires of those seeking something beyond Pepsi and Coke. Jones sells flavors as creative as Blackberry Cream and Banana, and as interesting as Broccoli.
 
Premium bottled soft-drinks have an additional advantage over fountain drinks: they travel well and are resealable. Dave Zambory, beverage director for Subway, told Brandweek magazine in June that because 60 percent of its business is takeout, customers kept asking for non-fountain offerings. "Offering the right brands in the right packages made all the sense in the world," Zambory said.
 
Brandweek also

start quoteIf (the operator) takes the time to educate the rep about the subtle nuances of his brand, and then you have constant turnover of the rep, their ability to positively impact your business is nullified.end quote

— Tim Taft, President, CEO
Pizza Inn
reported that stalwart soda makers like Coca-Cola are teaching customers to experiment with new flavors based on Coke. Coke called on the Culinary Institute of America to create new drink recipes such as the Hot Tamale, which includes a blend of Coke, fresh lime, black pepper, Worcestershire and hot sauce. Just as customers go to restaurants to enjoy foods they don't prepare at home, they want the same thrills with beverage choices, said Therese Gearhart, Coke foodservice vice president of marketing. "(T)hey want different drinks. They want to be spoiled," she told Brandweek.
 
Hot Lips Pizza in Portland, Ore., got on the cutting edge of the supreme soda trend when it started brewing and bottling its own fruit sodas in 2005. Co-owner David Yudkin, a longtime proponent of locally grown produce, started receiving excess fruit from farmers who provided him other ingredients. At first, Yudkin didn't know what to do with the backlog of berries showing up at his back door. But as he was dreaming up new ideas to generate revenue, Hot Lips-brand fruit soda came to mind.
 
Using a local organic brewery, Yudkin produced his first batches for trial at a local festival he expected would draw about 10,000 people. The soda was a hit.
 
"People went nuts for it, so we knew we had to get it in our stores," Yudkin said. "It's a money maker already, and from a marketing standpoint, it's a home run."
At $2.25 a pop, sales of raspberry, blueberry, blackberry and strawberry Hot Lips Soda make up 48 percent of the company's total beverage sales. Fruit flavors change with every season, and the sodas are sweetened with cane sugar, not corn syrup.
 
Jeana Edleman, Yudkin's wife and partner in the four-unit company, said Hot Lips Soda is selling in select stores and restaurants up and down the West Coast and she sees even greater sales potential.
 
"What's neat is our soda is fabulous just poured over ice cream," she said. "It's also great with vodka, so upscale restaurants are serving it at their bars."

Topics: Marketing , Operations Management


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