A nationwide survey conducted by Convenience Store Decisions and Study Hall Research examines the impact the fuel offering is having on customers’ perceptions of convenience store foodservice programs.
By Joshua Tahan, Study Hall Research and John Lofstock, Convenience Store Decisions
Foodservice is a key area of opportunity for convenience stores. As revenues from gasoline and tobacco products fall, foodservice sales are increasingly becoming convenience stores’ most profitable category.
C-store foodservice is an $11 billion industry and the second largest retail channel for foodservice behind only supermarkets, according to Technomic Inc., a foodservice research firm based in Chicago. The c-store segment comprises about 29% of retail foodservice and almost 2% of the total foodservice industry. Technomic projects that c-store foodservice will grow by 2.5% over each of the next two years, which is solid growth in an economy still trying to gain traction and stability.
“Convenience stores have shifted their focus to provide a wider variety of fresh, high-quality food offerings to help gain a greater share of stomach and compete with restaurants,” said Technomic’s Director of Research and Consulting Services Tim Powell. “At the same time, there seems to be significant room for convenience-store operators to generate increased foodservice sales by translating existing traffic into purchases.”
C-store chains are looking to better position themselves for continued growth in foodservice. Some chains are upgrading their facilities by integrating technology to enhance their offerings and the consumer experience. Differentiating themselves from the c-store crowd could better position themselves to compete with limited-service restaurants.
The one area where convenience stores have continuously struggled with food is consumer perception. Despite the top quartile chains like Wawa, Sheetz, Rutter’s and Nice N Easy, whose foodservice sales growth outpaces most QSR chains, the industry has had to work twice as hard to convince customers to try its food and keep coming back for more.
To better understand what the customers’ perceptions are of convenience store foodservice programs nationally, Convenience Store Decisions and Study Hall Research teamed up in early November 2013 to survey more than 700 convenience store customers, 18 years old and older to understand the size of the convenience store they visit most often, their typical purchases and their perceptions of the food inside the store.
Surveys were sent to 7,440 potential respondents nationwide. In all, 705 surveys were completed. The business industry-accepted standard for precision in a 95% confidence interval is an error rate of less than plus or minus 5%. This survey achieves and surpasses the industry standard.
As overall food sales in convenience stores climb to record numbers, Study Hall surveyed respondents about the type of food they are looking for: hot prepared foods, grab-and-go items, microwaveable foods, prepared deli sandwiches and food from a co-branded QSR’s chain located inside a convenience store, such as a Subway or Hunt’s Bros. Pizza.
More than 67% of respondents identified their primary gas station as “small” (under 16 pumps). The remaining respondents (33%) identified their gas station as “large,” having 16 or more pumps (Chart 1).
Large gas station customers are more likely to have eaten hot, prepared foods at a gas station (50.4% of all respondents) than small gas station customers (29.6%).
Small gas station customers eat hot, prepared food for lunch on average of 7.3 times per month compared to large gas station patrons, 4.4 times per month. Both segments consume hot, prepared food most often for breakfast.
About 95% of large gas station customers are likely to agree that hot prepared food is perceived as “fresh” compared to only 53% for small stations. That is a significant disparity that indicates that convenience store customers equate freshness with overall size of the gas station.
When asked about all food in general, not just hot prepared food, nearly 83% of all large gas station consumers are likely to agree that food is perceived as “fresh” compared to 65% of small gas station respondents.
When it comes to large gas stations, customers purchase cold, prepared deli sandwiches for dinner most often while smaller gas station customers are more likely to buy these sandwiches as a midday snack.
Across both segments, a c-store customer of any size gas station is most likely to agree that cold deli sandwiches are of better quality than food from a fast-food restaurant, whereas large gas station customers are more likely to agree that all food, at a gas station, is of better quality than at a fast-food restaurant.
Smaller gas station customers who drive less than 30 miles round trip to work are more likely to eat cold, prepared deli sandwiches, whereas large gas station consumers are more likely to seek out a co-branded c-store.
Both segments agreed that the foodservice area, in their preferred gas station, is perceived to be clean. Both segments also agreed that parking lot cleanliness (Chart 2) impacts their decision to buy food from the convenience store.
Large gas station patrons are more likely to agree that they only buy food when buying gas. Both segments also agreed that they perceive the food they buy from a convenience store of any size as a good value for the price paid (Chart 3).
One of the more intriguing findings in the survey comes from customers reporting daily dining occasions (Chart 5). Small gas station customers ate lunch more frequently in the past 30 days (18.7 times) than large gas station customers (15.9 times). However, large station customers are more likely to have breakfast and dinner in the c-store than small gas station customers.
Additionally, small gas stations had an appreciably larger share of snack sales and store visits than large gas stations. In the past 30 days, survey respondents of small stores made 20.41 purchases versus 17.31 purchases by large store customers. Snacks are one area where store size could be working against the larger units. Customers indicate that the ability to get in and out quickly contributes to where they will shop when they are looking for a quick on-the-go snack.
Food for Thought
Today, more than half of U.S. consumers buy foodservice items from convenience stores, said Susan Viamari, editor of Information Resources Inc.’s (IRI) Times & Trends. Beverages have a huge role in spurring sales, with 19% of consumers purchasing foodservice items at convenience stores because of the outlet’s beverage selection.Last year, foodservice grabbed close to 16% of in-store sales at c-stores, according to the NACS State of the Industry. Sales of cold dispensed drinks jumped 11.3%. Coffee took around 13% of beverage sales in 2012.
“Instead of just focusing on packaged beverages, there’s a lot of focus on dispensed beverages, and coffee is one of the things that we are seeing tremendous growth in,” said Jackie Gray, director for Willard Bishop. “Certainly [convenience stores] have an opportunity to really present a good coffee offering at a reasonable price, and it is a great traffic driver for the morning beverage.”
Also driving sales are beverages in the health-and-wellness section. “More than two-thirds of consumers are trying to eat healthier, but generally c-stores index lower than the industry average on healthier options,” said Viamari.