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2017 Second 100: Premium brands take lead in Beverage-Snack segment

Segment posts double-digit growth in the Latest Year

This is part of the Nation’s Restaurant News annual Second 100 report, a proprietary ranking of restaurant brands Nos. 101-200 by U.S. systemwide sales and other data. This report is a companion to the Top 100 report.

Once dominated by brands serving up affordable, sweet indulgences, the Second 100 Beverage-Snack segment continues to grow strongly due to the success of brands offering premium products — including those often perceived as better-for-you — that consumers can customize. 

Second 100 Beverage-Snack chains posted the third-highest segment aggregate sales growth, at 10.8 percent. (Just two categories, LSR/Burger and Other, comprised of one chicken chain and one C-Store chain, performed better, with combined sales growth of 12.9-percent and 11.2-percent, respectively.) 

Among Second 100 segments, Beverage-Snack had the highest Latest-Year segment average growth in Estimated Sales Per Unit, at 3.6 percent. Also contributing to the Beverage-Snack segment’s aggregate sales increase was an 11.5-percent segment average rate of growth in Latest-Year U.S. systemwide sales, following a 12-percent average increase in the Preceding Year.

Leading the segment’s growth was New Orleans-based Smoothie King, which grew sales 21.4 percent in the Latest Year, more than any other chain in the segment. Packing a powerful one-two punch, Smoothie King grew those sales through a combination of 12.8-percent unit growth of and 8.2-percent ESPU growth. 

“The lifestyle choices, especially people who live an active lifestyle, are seeking things out that fit that lifestyle,” said Kevin King, Smoothie King’s chief development officer. “Consumers want healthful food choices and Smoothie King fits into that.”

Among the choices helping to boost Smoothie King’s impressive growth is the continued addition of innovative “smoothies with a purpose.” 

For example, last summer, the chain introduced a line of coconut-water-based flavored smoothies focused on hydration. King said the chain will re-offer the flavored products again starting this month, but with a stronger focus on their purpose — to hydrate.  

The chain also recently launched a line of Coffee High Protein Smoothies made with cold brew coffee and packed with 30 grams or more of protein that are targeted at customers simultaneously seeking energy and a caffeine fix.

“It’s resonating with existing customers, and I think it’s bringing in some new customers, too,” King said.

The chain will continue to expand, he said, this year adding a total of 110 new domestic stores — the most stores it’s ever opened in the U.S. in a single year — including many with drive-thrus and a number of others that will be new freestanding stores. 

Also helping to lift up the lifestyle-centric segment was Destin, Fla.-based Tropical Smoothie Cafe and Encino, Calif.-based Menchie’s Frozen Yogurt, two brands with better-for-you products consumers can customize.

Tropical Smoothie Cafe grew sales by an impressive 20.2 percent in the Latest Year, second only to Smoothie King. That growth was largely due to unit expansion, but also some positive unit performance. In the Latest Year, Tropical Smoothie Cafe grew units by 16.1 percent, the highest rate of the segment, and it grew ESPU by 4.8-percent. 

Menchie’s Frozen Yogurt, which rapidly ascended to the Second 100 a few years back through aggressive franchise growth, and then fell off the list last year, has returned to the Second 100, posting the third-highest sales growth of the group, at 11.6-percent in the Latest Year. The chain continued to focus on unit expansion, growing units by 6.1 percent in the Latest Year, on top of 22.7-percent Preceding-Year growth.

However, the chain’s ESPU growth continued to be negative, though much less so than the Preceding Year. In the Latest Year, Menchie’s ESPU declined 1.7 percent, on top of 9.3 percent decline in the Preceding Year. 

After several years of challenges, Minneapolis-based Caribou Coffee appears to have righted itself. In the Latest Year the coffee chain was positive on all fronts, growing sales by 7.5 percent, units by 5.3 percent and ESPU by 2.9 percent. 

One possible contributor to the chain’s return to growth is that it has been teaming with sister brand Einstein Bros. Bagels to create Coffee and Bagels stores, a new brand built around customizable coffee and bagels.

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