A sweet proposition
While the big guns of quick service restaurants (QSR) fight it out to attract younger customers who have found it increasingly hard to stomach the big brands’ inflation-busting price rises over recent years, Generation Zs and millennials seem to have less aversion to splashing out on brightly-coloured drinks.
Blank Street Coffee has found itself the darling of the younger grouping who are more than happy to cram into its small units while they queue for its primed-for-camera matcha drinks at £4 to £5 a pop. Even these are relatively tame creations compared with what we have been seeing across the Atlantic, where sugar-loaded, bright concoctions are proving a massive draw at the US coffee brands.
They are accounting for an increasingly large percentage of sales and pushing coffee aside in many cases. Despite Starbucks peddling the narrative around its coffee credentials, the reality is that 60% of its sales are now derived from cold drinks. Many of these are shakes and other non-coffee creations that have helped propel Generation Z and millennials to account for 50% of its customer base. The after-school Starbucks visit by youngsters – armed with parent-funded prepaid gift cards – is a serious US phenomenon.
Arguably, the king of this growing market for soft drinks aimed at youngsters is Dutch Bros Coffee, which has built a chain of 1,100 sites in the US and has plans to grow to at least 2,000 by 2029. It has traditionally focused only on drive-thru sites, but in November last year, it opened its first drink-in location in Los Angeles, and it has been its top-performing store since opening its doors.
The range covers coffee-based drinks, energy drinks, tea, lemonade and smoothies, but the vast majority of the beverages it sells, including the coffee-based variety, are described as “flavour-forward and customised”. The names of its multi-coloured creations include Poppin’ Boba Fire Lizard Rebel, Cotton Candy Shake and Dinosaur Egg Rebel. And they are tooth-achingly sweet – you are lucky to get away with less than 100g of sugar in each of its offerings.
These drinks are not only appealing to sweet-toothed youngsters but are eye-catching and social media-friendly. They also come with equally sweet margins. Needless to say, this has not gone unnoticed by the QSR giants, who are not going to sit back and miss out on grabbing a piece of the action. Chris Kempczinski, chief executive of McDonald’s, has stated: “It’s a really large market opportunity. It’s growing, and it’s more profitable than food.”
This led to the trial run of nine beverage-led McDonald’s cafés, named CosMc’s, in late 2023 and although the plug was pulled on them after only 18 months, the company has been slowly rolling out its learnings into its core restaurants. This has seen an enhanced drinks offering being introduced into stores that cover the bases of iced and cold coffee, fruit juice, soft drink blends and energy drinks.
It is a similar story at KFC, where the company, in a world-first, opened a drinks-led brand called Kwench, with dedicated space on the first floor of its Liverpool city centre restaurant, in November. The range encompasses lemonade, bubble tea, milkshakes and various sparkling options. There are plenty of youth-friendly names in the mix, such as Chocolate Krunch Shake and Watermelon Poppin’ Refresher.
Some of these drinks found their way on to the menu boards at regular KFC outlets on a trial basis, and following strong uptake, a plan was put in place at the start of this year to roll-out 11 made-to-order beverages, selling at £1.99-upwards, across all KFC outlets during 2026.
There is a realisation across the major QSR brands that the soda fountain-type proposition encompassing just the big global soft drinks brands is no longer good enough. The coffee chains have shown what can be achieved from selling high-margin, sugar-heavy concoctions to the younger end of the market. Who knows – they might event stay for a Big Mac or some fried chicken while they are slurping down a Cherry Boba Refresher. Maybe the new secret sauce of QSR is drinks.
Glynn Davis, editor, Retail Insider
This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.