Packaged ice cream and novelties, along with self-serve ice cream and frozen yogurt, have made c-stores a destination for many consumers, experts say. However, even though the products are bringing in more money due to higher prices and innovative products, consumers’ inflation concerns are dampening growth.
While c-store sales of ice cream and sherbet jumped 10.2% for the quarter ending March 26 and 7.7% for the year, according to Circana, those numbers are “driven entirely by inflation,” said John Crawford, vice president of client insights-dairy at Circana.
Overall ice cream and sherbet units fell 4.5% for the quarter and 6% for the year, Crawford noted.
Sales of frozen novelties in c-stores also hiked up a significant 12.8% for the quarter and 12.9% for the year ending March 26, but units dropped 3.2% for the quarter and 2.6% over the past year, according to Circana.
“This is consistent with other dairy categories. However, unit sales are down as consumers’ budgets are stretched,” Crawford noted.
C-stores have taken more of a hit than non-c-store competitors, as ice cream/sherbet units are down only 3% over the past year in multi-outlets, which includes drug stores, supercenters, grocery stores and other retailers. Multi-outlet sales of frozen novelties rose 6.5% for the quarter and 9.6% for the year, while units dropped 6.3% for the quarter and 4.3% in the past year.
While there is no data available for sales of self-serve frozen yogurt and ice cream at c-stores, analysts point to many c-store operators’ successful programs that help set them apart from their c-store, grocery and foodservice competitors.
“While gasoline, cigarettes, soda and beer were the pillars of old for driving foot traffic, convenience stores have reinvented their food offering, and ice cream and other frozen novelties have become flagship offerings for many of them,” said Anne-Marie Roerink, principal at consulting firm 210 Analytics.
Roerink said she and her family drive by a stand-alone ice cream restaurant to visit RaceTrac’s Swirl World ice cream and frozen yogurt section because “they simply love the offering and getting to mix a wide variety of flavors and toppings themselves,” she said. At Wawa, Roerink adds a Dippin’ Dots ice cream snack or two to her family’s sandwich order. “It is sitting right there where you wait for your hoagies to be created,” she noted.
RaceTrac and Wawa’s programs are just two illustrations of how ice cream and other frozen novelties can “either anchor an entire foodservice offering or become that desired impulse item that drives incrementality to the trip,” Roerink said.
Innovative ice cream products abound
To appeal to millennials, Generation Z and households with kids, ice cream and novelty makers have debuted innovative flavors and formats, according to Crawford, but overall innovation has slowed since the pandemic.
Items like Ben & Jerry’s Topped, which is “an ice cream sundae in a pint” according to the ice cream maker, and Häagen-Dazs' Butter Cookie Cones, which the company says is a butter cookie made into a cone filled with ice cream, have performed well, along with Oreo ice cream sandwiches and cones, Crawford said.
Reese’s also entered the ice cream game earlier this year with seven new offerings via a partnership with Hershey and Unilever, the companies said in a statement. Products include ice cream tubs, bars, sandwiches and cones.
“Convenience stores have reinvented their food offering, and ice cream and other frozen novelties have become flagship offerings for many of them.”
principal at consulting firm 210 Analytics
Ice cream and novelties are sporting different formats and new formulations, as well. For example, NadaMoo! Touts dairy-free Frozen Snack Bites that feature a soft, plant-based outside with a coconut milk ice cream center. And My/Mochi is selling a Strawberry Banana flavor of mochi.
Many c-stores have added small freezers with mochi ice cream, including some that include small video screens on the units, Roerink said. “The popularity of mochi combined with the wide variety and ever-changing set of flavors, also drives unplanned and sustained engagement,” she noted.
C-store chains such as Grand Island, Nebraska-based Bosselman Energy, Baltimore-based Royal Farms and Savannah, Georgia-based Pump and Pantry have also added f’real milkshake and smoothie vending machines. Customers simply order a cup of frozen liquid from the machine, peel off the lid, and blend it.
“I’m seeing more of that,” said Jessica Williams, CEO of Food Forward Thinking, which helps c-store operators develop and elevate their foodservice offerings. “A fresh blend machine with smoothies and cold ice cream offers the best of both worlds.”
Vending machine benefits for operators include that they require less maintenance than full self-serve frozen yogurt and ice cream sections, they don’t take up much space and they provide a self-serve option for customers, Williams noted.
Improving merchandising and leaning into indulgence
Crawford notes that consumers are willing to indulge, even post-pandemic and during periods of high inflation. “Ice cream and frozen novelties play into that indulgent trend,” he said.
While sales of traditional ice cream and novelty products are increasing, c-store sales of novelties with low/no sugar claims are up “significantly,” surging 37.7% for the 52 weeks ending March 26, according to Crawford. Sales of ice cream with the same claims also rose 6.2% in the past year. Plus, both sub-categories are “bucking the trend in unit growth,” with novelties up 15.7% and ice cream up 0.9%, according to Crawford.
However, plant-based ice cream sales have been declining and trailing the total category in both ice cream/sherbet and novelties, Crawford noted.
Even during inflation, c-store operators can hike ice cream and novelty sales with better merchandising techniques.
One idea is to partner with novelties and ice cream manufacturers to create destination sections that spur impulse purchases — much like they do with Coke and Pepsi coolers, Crawford suggested.
“Currently, ice cream and frozen novelties are typically behind the glass doors and/or in a bunker-type display space,” he said. “While the bunkers do provide disruption and impulse purchases, the products in the bunker are not displayed well and are easily disheveled by consumers/stockers.”
Crawford said the same is true for any display where consumers are prone to rummaging around — for instance when looking for particular flavors. "Shelving systems keeping items in their slot would be an improvement,” he said.
To spur sales of frozen novelties, “it’s about informing the customer that you have it,” Williams advised. “Sometimes you have it in a hidden place and it doesn’t often get marketing materials.” Promoting novelties in customer emails and through loyalty apps are “great and inexpensive ways to inform your customers that you even have them,” Williams said.
Self-serve ice cream and fro-yo poses challenges
While many c-store chains offer frozen yogurt or ice cream service sections in their stores, they sport an inherent set of challenges, according to Williams. “It can have a really good margin if you can get the volume, but it’s not the easiest category to manage.”
The cleaning and upkeep of equipment is often the biggest barrier to success. “Often the soft serve machine itself is a pain to clean, and has a lot of moving parts,” she said. And repairing and upkeeping the machines are often the most difficult part.
“McDonald’s is notoriously out of soft-serve, because machines are broken or the team doesn’t want to deal with it,” Williams pointed out.
However, “if you have great equipment and a great service provider, it’s not that hard to order the mix and keep it fresh,” Williams said.
For operators that are doing well with frozen dispensed beverages but are not yet in the frozen yogurt or ice cream space, “it would be worth looking at,” according to Williams. However, she added “if the majority of your beverage is bottled and not very much fountain, I would not look into soft-serve. There is not a big likelihood they would stop in [for ice cream].”