"We took those [increases] at a time when the customers were right in the middle of experiencing this economic downturn," said Bill Walljasper, executive vice president and CFO. "I think our customers are probably more price sensitive and looking for more value-conscious efforts from retailers."
Casey's reacted to that consumer demand in September by creating several combo meals [image-nocss] that stressed value. It has helped some.
"Since we undertook that initiative back in September, we have seen an upward trend in prepared-food sales," Walljasper said during Casey's second-quarter earnings conference call on Wednesday. "I think we're meeting the need of the customer in that regard."
Total foodservice sales in the second quarter, which ended Oct. 31, were up 13%, Walljasper said. Same-store sales in the quarter were up 7.2% with an average margin of 62.7%.
"This is primarily due to a lower cost of cheese and other products, as well as an increased contribution from the fountain area as we continue to expand our fountain coffee offerings," he said.
Meanwhile, Casey's--and other retailers--continue to feel pricing pressure as commodity prices increase.
"We are seeing pressures from commodities, cheese and coffee being the two larger ones. We're also seeing [increases in] anything corn-related," Walljasper said. "The cost of cups has gone up. So we are seeing pressure in that regard."
Still, Casey's hopes to hold the line on price increases for the sake of staying competitive.
"We do periodic competitive-pricing surveys," he said. "I wouldn't look for us to necessarily raise our prices in the prepared-food category unless there is some movement with our competition."
Casey's increased prices on several foodservice items in March "in response to cost pressures and changes in the competitive landscape," as previously reported in CSP Daily News.
At the time, Walljasper said he anticipated "the impact of these increases to be approximately 3% to 4% on total sales."
The increases included, among others: Adding 10 cents to the cost of a slice of pizza. Adding 10 cents to the cost of doughnuts and cookies. Adding 4 cents to the cost of refillable coffee.
Ankeny, Iowa-based Casey's General Stores owns and operates more than 1,500 convenience stores in nine states.
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