CSD’s 2014 Foodservice Study

Retailers recognize that an effective foodservice program helps position them as a destination for on-the-go consumers. But new research shows that these programs are vital for creating competitive points of differentiation in today’s hyper-competitive environment.

By John Lofstock, Editor, and Joshua Tahan, Study Hall Research

The U.S. foodservice industry generated an estimated $660 billion in sales in 2013, according to the National Restaurant Association (NRA). Thanks to enhanced offerings, convenience stores are getting a bigger share of those dining dollars.

With customers starved for time and leading ever-busier lifestyles, increasing food sales is absolutely essential for convenience store owners. Like all retailers, c-stores are emerging slowly from the recessionary conditions of the past five 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.
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 continues to decline. With these traditional sales pillars diminishing, c-stores are looking to foodservice to provide same-store sales increases.

To learn more about what customers want from their local convenience stores, and which foodservice options they find most appealing, Convenience Store Decisions partnered with Study Hall Research to survey more than 400 active convenience store customers. The surveys, which were conducted from Jan. 14-26, polled customers 18 years and older about their perceptions of foodservice at convenience stores. Respondents were asked about frequency of food purchases at c-stores, perceptions of food quality and other foodservice related questions.
Study Hall Research learned that 48% of all adults that purchase food at a convenience store do so 1-3 times per month. Approximately 28% of all adults purchase food at c-stores 4-7 times per month and 11.2% of adults do so on average of 8-11 times per month.

The good news is that the industry earned very high marks in prepared foods and foods prepared on site. Slightly more than 84% of adults who purchase hot, prepared food from convenience stores agreed that they prefer purchasing food from any convenience store just as long as the food quality is high. The survey also revealed that 81.8% of adults who purchase hot, prepared food at a c-store prefer to do so at a trusted national or regional brand.

“Due to location and speed of service, c-stores are always going to be a dining option,” said Darren Tristano, executive vice president of Technomic Inc. “Recently, however, we’ve seen a concerted effort to improve the quality of food and service provided at these locations. If c-stores can continue enhancing these areas, they can look to drive traffic from restaurants.”

Customer Demographics
While c-stores are always going to face stiff competition from restaurants and fast-food establishments, the industry appears to have the upper hand with households reporting less than $100,000 in annual income.

Adults with a household income of $50,000-$100,000 that purchase food at a convenience store 8-11 times per month do so at the same frequency as adults with a household income of $20,000-$50,000.

Of the regular c-store foodservice customers, 85% of respondents with children under the age of 18 living in their household have purchased doughnuts or pastries at a c-store within the past 60 days compared to just 67% of adults with no children under the age of 18 in the household.

What Customers Want
chart 0It should come as no surprise that overall cleanliness of a convenience store ranks extremely high for adults who purchase food there. The survey revealed that adults who purchase food at a c-store agreed that clean restrooms (88.4%) and the cleanliness of the foodservice areas, such as roller grills and the coffee station (98.5%) are important factors in deciding whether or not they will buy food.

Similarly, 93.1% of all adults who purchase food from a convenience store are likely to agree that a store can improve foodservice programs by selling higher quality food, whereas 79.6% are likely to agree that lowering prices is a way for stores to improve foodservice. This means c-store customers are likely to agree that higher quality food can improve a foodservice program more so than simply just lowering prices.
While Study Hall’s research found that hot dogs/sausages and deli sandwiches are some of the most purchased items at a convenience store, and that they carry a high shopper intent to reorder in the future, pizza scored very well. The survey found that 43.3% of adults who regularly purchase food at a convenience store have purchased pizza at least once in the past 60 days, whereas 44.5% of regular food customers that have not purchased pizza at a c-store in the past 60 days said they are “open to the idea of purchasing pizza in the future.”
chart1Snacks and fill-in dayparts are a growing opportunity with 39.3% of respondents reporting that they are buying more snacks at convenience stores over the past two years.

Although there are positive indications that the industry is improving, Study Hall Research found there is still work to be done. For example, 55% of adults who purchase food at convenience stores said they have not changed the frequency in which they purchase lunch at said stores over the past two years. This shows that retailers need to communicate more with these customers to learn how they can get them to increase visits. Loyalty programs, couponing, text messaging and social media have all proven to be effective in driving traffic to the store and growing incremental sales.

Dinner presents another opportunity with only 26.6% of adults polled reporting that they are purchasing dinner less often at c-stores over the past two years.

The least amount of food purchases from a convenience store come from cold, microwaveable food products, with only 25.4% of all convenience store foodservice customers agreeing that they have purchased those items within the last 30 days.

Beyond Basics
Chart2While c-stores have offered fresh, prepared food for years, the industry continues to fight the stereotypical image of packaged sandwiches with a 30-day shelf life. Because tobacco sales continue to decline and gasoline prices remain volatile, convenience retailers are counting on foodservice to attract and retain time-crunched customers.

Most every convenience store offers the basics: hot, cold and frozen-dispensed beverages; roller grill products; sandwiches and/or pizza. But according to the National Association of Convenience Stores (NACS), more than 62% of all c-store foodservice sales for 2012 was prepared on site. Expanding a c-store foodservice program beyond the basics may seem daunting, but it can be done with thoughtfulness and careful planning.

“Know the commitment you’re prepared to make in foodservice,” said Wade Robinson, foodservice supervisor for Pump-N-Pantry, the 17-store chain based in Montrose, Pa. “It’s going to take money, time and people. The right people make all the difference in the world. Foodservice requires more than the one sales associate working the cash register. You’ll need dedicated employees in the foodservice area to make sure that the quality and the service are there.”

A c-store can’t evolve from serving grab-and-go products to providing made-to-order foods without creating a plan and tackling one area at a time. An ideal first step might involve beefing up the breakfast offering, said Jack Cushman, vice president of foodservice for Nice N Easy Grocery Shoppes, the 89-store chain headquartered in Canastota, N.Y. But you need to know what your customers want.

“The simple thing to do is to go around your area and see what people eat for breakfast,” he said. “Do they eat at McDonald’s or Burger King or go to a diner? Where are they going and what are they buying? You’re not going to really know the answer, but you can come up with a pretty good guess. Then you try to mimic those things.”

If local commuters are big on breakfast sandwiches, start there. Determine the bread you want to offer—biscuit or croissant—and then choose a protein. “Do you want sage in your sausage or Italian spice in your sausage or chorizo in your sausage?” said Cushman. “It all depends on what works in your area.”

Robinson agreed that shopping competitors is valuable. “I like to shop the competition, and not just in our channel,” he said. “Go see what local restaurants have and what flavors are popular at the grocery stores.”

Three Meals a Day
To get customers to see your store as a great place for fast meals, you must have a designated foodservice area. “You need at least six linear feet,” said Cushman. “You must have a sneeze guard and some sort of menu hanging up so customers can see that you’re in the business.”

chart-4When launching a new item, he suggested introducing it at a special price and offering free samples to encourage trial. “No one really knows why customers come in the store,” he said. “Maybe they came in to get gas and bought a sub or they came in to buy a sub and pumped gas.”
Don’t put out a plate of broken cookies or sandwich slices and let customers serve themselves. “You can’t control the quality of the product that way,” said Jerry Weiner, vice president of food service at Rutter’s Farm Stores, with 58 outlets across central Pennsylvania.

“You need someone walking around with a tray of samples, and in nice weather they can take samples to the gas pumps,” he said. “People at the gas pumps may not plan on coming inside, but if you hand out samples and a menu, you may run across someone who doesn’t know what you offer. That is an opportunity.”

Weiner advised sampling lunch products during the breakfast rush. “It might entice them to come back later,” he said.

Regional and Seasonal
A signature product can make your brand legendary. A good example is the made-to-order hoagie sandwich available from 600-plus Wawa stores throughout the East Coast. Regional tastes and seasonal offerings can become local favorites, making your store a destination.

At Nice N Easy, customers enjoy empanadas filled with taco meat and corn or Canadian bacon and egg. “You can make them regionalized,” said Cushman. “You just buy six-inch round shells and a crimper from any restaurant supply store. Fill them, crimp them, throw them in the oven for 45 minutes and serve them hot. And you’re not doing the same thing everyone else is doing.”

Because the Spanish word “empanada” is unfamiliar to most New Yorkers, Nice N Easy describes it as a “hand-held pot pie.” It is portable, easy to eat and has a good shelf life.

Chart5At Pump-N-Pantry, the most popular pizza is one few people have heard of—the spiedie. The term “spiedie” comes from an Italian word meaning spit, and the pizza is covered with cubes of meat that are marinated, cooked and served with a special sauce. “It’s a local product, but a favorite of everyone,” said Robinson, who believes the in-store aroma of baking bread and pizza dough sends a positive message. “If you walk into a store and smell fresh-baked bread, that automatically makes you think the store is a sub or pizza shop. It’s all about perception.”

Delectable smells and preparing food on site where customers can watch reinforces a reputation for freshness. “We do salads made to order,” he said. “If someone comes in for a sub, we make it in front of the customer. Folks can see that we’re using fresh ingredients, and they have complete control over their order. If they want more onions or extra pickles, we can do that. It’s made exactly how they want it.”

Chart6

Don’t Speed
Robinson knows that speeding into unknown territory can be risky. “I see lots of things and want to try them,” he said.  “But I have to ask, has the team in the field mastered what we already offer. Sometimes you can go overboard. It’s better to do three things great than 10 things average or poorly.”

This year, Robinson plans to take a couple of new items, ensure they pair with existing offerings and do those things well before introducing other products. He suggests retailers use their food brokers for locating and introducing new foods. “They’re a great source,” he said. “They come to the stores, help me do training, check up on how well the product is doing, provide signage and help with sampling. And they want us to be successful. The more successful we are, the more successful they are. So use those resources out there.”

The end goal it to ensure that customers perceive you as a foodservice store. “To our customers, we’re a pizza shop and a sub shop that sells gasoline,” Robinson said. “It’s appearance and execution of product and the entire environment.”

For more on Study Hall Research and its exclusive research to reach convenience store customers, visit www.studyhallresearch.com.

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