Focusing on Foodservice

Burgers, brats and sausages continue to drive sales among core convenience store customers.

By John Lofstock, Editor.

While customers may say they want healthy and organic foods, a Technomic report found that 91% of consumers said they eat a burger at least once a month and 44% have a burger at least once a week. As a result, burgers, sausages and brats are forecasted to remain an integral part of any c-store food program.

In fact, even while adding other foodservice segments and upscaling their coffee programs, convenience retailers chains continue to push a very profitable roller grill program.

“There is so much more we can do with our roller grills and we already have strong sales with them throughout the day,” said Tom McCarthy, vice president of marketing for Tom Thumb Stores, which operates 16 stores in the Miami market. “The value of the roller grill is enhanced not only by the variety of items you can offer on it—hot dogs, brats, sausages, etc.—but by the cross-promotional opportunities. For example, we have soda coolers and frozen beverage machines by all of our roller grills. This drives sales in these categories as well.”

With customers starved for time and leading ever-busier lifestyles, increasing food sales is absolutely essential for c-store owners. Like all retailers, c-stores are emerging slowly from the recessionary conditions of the past three years. Fortunately, the characteristics that made c-stores popular for the last three decades remain the industry’s biggest advantages: convenient locations, fast service and low prices.

Focus on Fresh
But increased competition and changes in consumer behavior mean these factors may not be enough for c-stores to regain positive sales momentum. Higher gasoline prices cause consumers to drive less and the number of Americans who smoke steadily declines. With these traditional sales pillars diminishing, c-stores are looking to foodservice to provide same-store sales increases.

In spite of a still sluggish economy, things are looking up in the convenience store channel as traffic, sales, and average visits increased throughout 2010, according to The NPD Group, the Chicago-based market research company.

In addition to a traffic and sales boost, NPD’s Convenience Store Monitor, which tracks the consumer purchasing behavior of more than 49,000 convenience store shoppers in the U.S., reports that the average number of visits consumers made to a c-store in an average 30-day period grew to 6.4 in 2010 from 6.1 visits in 2009.

The edge the industry seems to maintain over other retail channels is its ability to convert fuel customers into in-store shoppers.

A recently released NPD report entitled “Food, Beverages, and C-Stores,” which combines the company’s prepared foods, beverage and packaged snack foods consumption research with Convenience Store Monitor data, points out that a “convenient location” and “in-and-out quickly” continue to be the top two reasons why consumers visit convenience stores. With these as the driving factors for c-store visits, store-only visits are increasing while pay-at-the-pump visits are steady, and dual visits, pay-at-the-pump plus store, are declining.

“Convenience and the need for grab-and-go will continue to be motivators for c-store visits, and after sharp visit declines in 2009, because of these continuing needs, we’re seeing visits rebound in 2010,” said David Portalatin, industry analyst for NPD’s convenience store research. “Less volatile gas prices are also helping the channel, although minimal growth in miles driven and competition from grab-and-go offerings from other retail channels still pose a threat to convenience stores.”

Influencing Purchases
NPD also studied consumer behavior patterns through past and current recessions and concluded that consumers’ economic concerns, and how these concerns influence their restaurant visit patterns, are shifting. Less focused on controlled spending and price, fewer consumers said that they were trading down in restaurant selection based on price, fewer were searching for good deals more often, and fewer reported sacrificing restaurant visits.

“It’s clear from our research and other indicators that consumers are feeling more positive about the economy,” said Bonnie Riggs, NPD’s restaurant industry analyst. “Our survey findings suggest a move toward recovery may be starting soon, if it is not already underway.”

Although there are positive indications that the industry is improving, Riggs cautioned that the industry isn’t out of the woods yet, with total restaurant industry traffic still down 33% for the year ending February, a duration of 14 consecutive months of declines. “Our forecasting model shows that the industry will remain weak for at least another seven months,” she added.

Convenience stores remain a growing competitor for foodservice dollars, especially as the breakfast daypart continues to emerge as a key growth area for the foodservice industry.

While the outlook is strong, there is still work to do. For example, a report by Mintel suggested there is a large gap in c-store foodservice programs, which has propelled top-quartile chains and hurt those with an undefined foodservice strategy. Furthermore, while foodservice is a destination at many c-store chains, Mintel research found that 33% of consumers who have never purchased food at a c-store haven’t done so because they believe the food is of low quality.

“When consumers think of convenience stores, food quality isn’t the first thing that comes to mind,” said Eric Giandelone, director of foodservice research at Mintel. “Improved quality—not just for products but for service, location and marketing communications—is needed to bring in or bring back consumers for whom c-stores aren’t top-of-mind choices.”

Of those who don’t purchase processed food at convenience stores, 64% said they never or rarely consider purchasing food from a c-store. Meanwhile, 32% said the food was not appealing to them and 26% cited high prices as a deterrent. Thirty-five percent reported that there were better food options nearby.

While c-stores are always going to face stiff competition from restaurants and fast-food establishments, the industry appears to have the upper hand.

“Luckily, convenience stores suffered less than restaurants did during the recession and we forecast this $22.8 million dollar industry to experience 4.1% growth in 2011,” Giandelone said.

css.php