While branded and proprietary foodservice programs get a lot of attention at retail, hot and cold prepackaged sandwiches have quietly and profitably filled a valuable niche for retailers. Grab-and-go sandwiches offer consumers a quick, easy meal solution that is affordable and available in many varieties.
This year’s top performers in the fully-prepared sandwich category are all purveyors of upscale products. They are Deli Express, Pierre Foods and Landshire Inc. Honorable mentions were Lettieri’s and Made Rite/Goliath.
The 53 buyers to participate in the Brand Preference Study represented 7,950 stores and $63.6 million in category sales. One thing that stood out in prepared sandwiches was the dominance of a handful of companies. Consider that 72% of the buyers reported sales visits from one of two supplier companies in the past 60 days. Just 13% said they were called on by three or more companies in that time and 15 reported no sales visits at all.
The NACS State of the Industry Report, emphasized this category is good for business: While accounting for about 1% of overall industry sales, prepared sandwiches carried a gross margin contribution of 36.07%.
But maintaining these strong sales numbers requires a combination of great food and skilled marketing.
"Everyone has upscale products and a good location these days. The bar has been raised by the likes of Dunkin’ Donuts and Starbucks." said Warren Solochek, vice president of client development for NPD Foodworld, a division of The NPD Group, which has been tracking consumer behavior across many vertical markets for more than 35 years. "Consumer expectations are changing and if you don’t have that expanded offering, you’re not going to get that business."
Another area c-stores are vulnerable is the overall breakfast meal solution. As consumers have become more health conscious, doughnuts and pastries aren’t their top choice. That’s where prepared sandwiches can fill a vital need.
"When you look at how chains like McDonald’s and Dunkin’ Donuts are refining their morning offering centered on a gourmet coffee program, you’ll find that sandwiches have become the top-selling breakfast item," Solochek said. "This is a direct attempt to take business away from convenience stores. They saw what the industry was doing, and said, ‘We are going to do it better, faster and cheaper,’ and they are certainly having an impact."
Dunkin’ Donuts is planning an aggressive rollout in growing markets like Texas later this year. The new stores will have a fuller sandwich menu and will not be paired with sister chains like Togo’s Eateries or Baskin-Robbins ice cream parlors.
Interestingly, the company views Starbucks and McDonald’s, because of its breakfast business, as its primary competition. Convenience stores were not mentioned.
While price is a consideration in morning sales, NPD’s research found that despite the higher cost of goods at Starbucks, customers remain undeterred.
"There may be some price point where people will begin hesitating buying breakfast products and sandwiches at coffee houses. Clearly the products sold at Starbucks are much higher, but it’s not detracting from their sales," Solochek said. "It is my belief that the No. 1 reason people go to c-stores is the convenient location. Convenience will always be a driver especially in the morning when people are in a hurry to get from home to work, and that’s what they should build their program around."