• by Teresa Buyikian , January 23, 2024

I have written about the intensity of focus on the beverages category in QSR ad nauseam since Q4 of last year, beginning with the Pumpkin Spice Latte onslaught of 2023, to new cold drinks with glitter, coffee that tastes like cake, and drinks with health benefits. Of course we can’t forget CosMc, McDonald’s beverages-first, food second, experiment location.

Then there was last week’s announcement of Wendy’s new CEO Kirk Tanner, formerly Pepsi CEO of North American beverage, leading to speculation over Wendy’s focus on beverages moving forward.

Thus I think it’s safe to say drinks will be top of mind for the coming year in QSR, fast casual and beyond.

Recently, management consulting firm Technomic released its global beverage category insights, which only seemed to solidify Beverage Mania.

"Beverages are undoubtedly one of the hottest menu categories on the global restaurant stage. Growth among specialist chains is robust and outperforming other key menu categories," said Aaron Jourden, director of international research and insights at Technomic, in a statement. "But competition is heating up among global players and local brands alike."

The report cited data that “about a third of consumers globally order a drink as a snack between mealtimes from restaurants and foodservice providers.” Drinks are no longer an add-on to a food order—they are the order. And this trend may have something to do with consumers’ shrinking wallets.

“There's an old Ray Croc line that goes something to the effect of ‘I don't know what McDonald's will be selling in 40 years, but it will be whatever the customer wants’,” Morningstar analyst Sean Dunlop told QSR Insider. "Part of it ties to catering to consumers' desire to dine out without breaking the bank—the affordable luxury argument—in a world where full restaurant meals are growing increasingly inaccessible or infrequent due to budget constraints. ‘Going out’ for a premium beverage but spending less than you would for a meal could be a natural adaptation.”

What also stands out in the report is that chains are preparing for, not just reacting to, the ever increasing off-premises consumption of their meals and beverages. Many are developing new drive-thru formats, as Taco Bell announced last week, and to-go-focused prototypes in expectation for the beverage-only trend to further grow.

“Another big piece of the puzzle is the migration of restaurant trade areas and consumption habits toward the suburbs,” added Dunlop. “Roughly 20%-25% of work hours still come from the home,” which means “that consumers could be trading the morning coffee or breakfast run and/or the downtown lunch for a more indulgent mid-morning or mid-afternoon premium beverage occasion.”

Is the focus on beverages a fad that’s cool because everyone is doing it, or is the trend here to stay? Dunlop said of the second alternative, “Yes—probably. We think. What is less clear is what the final evolution looks like—how large that market is, how frequently consumers visit for what's clearly a more indulgent occasion, and how many players are needed to service demand.

QSRs are playing around with premium beverages, and some (such as McDonald's and Wendy's) have massive home market footprints. The volume of potential competitors begs questions of how many incremental concepts (CosMc?) or incremental platforms at QSR brands will really be needed to scratch this consumer itch.”