Breakfast: Over Easy

Are convenience stores giving up on breakfast?

Angel Abcede, Senior Editor/Tobacco, CSP

Abbey Lewis, Editor in Chief, CSProducts

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Still Walking

Comparing sandwiches from a QSR and a c-store initially paints a picture of the latter sitting back on its haunches. But it isn’t the reality.

And while breakfast leaders are apparent today, innovation can trump history. Oak Brook, Ill.-based McDonald’s introduced its Egg McMuffin in the early ’70s, but Canton, Mass.-based Dunkin’ Donuts barreled into the coffee game with a new marketing strategy and flavor profile in the mid-2000s. In recent years it has overtaken McDonald’s as the brand known for innovative, “fresh” breakfast offerings.

Earlier this year its parent, Dunkin’ Brands Group Inc., announced strong global expansion results for 2013 and plans to open as many as 400 new U.S. Dunkin’ Donuts in 2014, representing what company officials call “an ongoing strong demand for our brand.”

New players are flattening more than c-store breakfast sales. Breakfast stalwart McDonald’s saw same-store sales fall 1.4% in the fourth quarter of 2013, its profits more or less static. Disappointing earnings at McDonald’s has executives confessing in earnings calls that it has overcomplicated its menu and has some rethinking to do.

The war over breakfast is more likely one of catch-up vs. dominance. The real picture, at least where c-stores are concerned, may be less of lethargy and more a timid but promising adolescence.  Kevin Higar, a Dallas-based foodservice consultant and contributor to CSP magazine, says c-stores needed to evolve from fuel and cigarettes into true foodservice destinations.

In this crawl-walk-run scenario, many convenience operators find themselves at the stage in which they’ve reworked their coffee potential, developed a lunch offer and, with it, a foodservice mindset. They’re only now beginning to consider a breakfast offering that transcends roller grills and warmers.

“As c-stores see an opportunity and say, ‘Let’s put some energy into [breakfast],’ ” Higar says, “it’ll take a while to turn the battleship around.”

Eating Our Brunch

The big question is: Do c-stores really have a shot at the breakfast crowd, beyond coffee and perhaps a muffin or biscuit?

QSRs and so-called “fast casual,” or that middle tier between quick-service and formal restaurants, have the upper hand, say experts such as Wright of The Hartman Group. These channels have the public trust and historic capacity to “own” breakfast. They have the infrastructure, with kitchens, seating areas and drive-thrus. And, above all, they are clued into the foodservice language of waste control, food safety, flavor profiles and new-product development.

Yet with all those formidable barriers to entry, signs indicate a growing opportunity for c-stores, Wright says. Consider these three hot trends:

▶ Emerging market: Millennials, the coveted up-and-coming generation in their early 30s and younger, see less of a stigma with c-store food. They’re not only digitally minded, but they’re also the generation that is embracing a more globally sophisticated flavor palate.

▶ Foodservice development: Many regional chains are experimenting with flavors and broader taste profiles. While this is centered on lunch, there is no reason not to shift to breakfast.

▶ Convenience: Location, a quick and easy experience, and speed of service continue to be important to on-the-go consumers.

Overall, foodservice at c-stores has grown 27% from 2007 to 2012 to a market value of $25.5 billion, according to London-based Mintel Group Ltd., with consumers “forming an overall more favorable impression of c-stores as a viable place to have a meal.”

That said, the question of breakfast is an open-ended one.

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