Right Value, Right Time
The roller grill may be faring the recession nicely, but don’t call it a downtrade—at least not in front of Kirk Matthews.
“The best year I had for my roller-grill sales was actually the brunt of the recession,” says Matthews, senior category manager for TravelCenters of America (TA), Westlake, Ohio. “People migrated over—not down—to the roller grill because it was a value.”
Despite tough competition and deep discounting from QSRs—even within some of his stores—Matthews says roller-grill sales have stayed strong because the category was already perceived to be a good buy: “We look at ourselves as a value proposition.”
Value, indeed, is the clarion call that unites all voices. “If anything, rollergrill items have trickled up because in the down economy, many consumers were buying these items [instead of packaged sandwiches, etc.],” says Tim Powell, c-store program manager for Chicago-based consultancy Technomic Inc. “Also, roller grill items have gotten more creative.”
But still, sales today aren’t where Matthews wants them to be, so he’s trying more limited-time and specialty products. His standard roller-grill lineup includes Ball Park hot dogs, cheddarwurst and polish sausages; specialty items include beer brats, cracked black pepper sausages, Tornados from Ruiz Foods and breakfast items such as Denver omelet sausages.
For TA, the target customer is a “hot dog customer,” says Matthews, and at two hot dogs with toppings for $2.44, that customer is getting a good deal. Nonetheless, Matthews is feeling the pinch from QSRs’ value meals and dollar deals. But instead of engaging, he focuses on a different type of competition: himself.
“We still have to lose that stigma of c-store food,” he says. “That’s why we stay with name players.”
Sandwich Smackdown
While burgers and chicken sandwiches saw big lunchtime sales growth in the past year, sales of traditional sandwiches such as ham, turkey and tuna salad have been anticlimactic, according to research firm The NPD Group/CREST. That rings true for Quickway Food Stores, a 55-unit chain based in Binghamton, N.Y., whose customers are still feeling pinched.
“They aren’t going for lunch,” says Fred De Vita, director of foodservice. “They’re coming in the morning, grabbing a snack or two and either packing lunch or skipping that whole lunch daypart because they’re really not taking a break; they’re taking on more work.”
The price wars raging among sandwich chains and other QSRs have been a challenge for some c-stores and an opportunity for others. “I think c-stores can ride the $5 footlong craze and make more profit than their [limited-serve] peers,” says Tim Powell of Technomic. “[Giant Eagle] GetGo has modeled its sub program off Subway, and Subway effectively pays for its advertising.”
Recognizing pressure from QSRs, Quickway tested a combo program for about eight months, but the company ultimately pulled it. “We tried it,” says De Vita, “but I think what we did was trade those sales and that penny margin for a combo margin, which is a little bit less of a margin than what we would have gotten—and for no reason, other than we thought we had to.”
But he’s not just waiting out the storm, either: “You just need to have that quality, consistent offering that is a perceived value to the customer.” For him, that means swapping out shredded iceberg lettuce for Romaine and testing a hearty, ciabatta-like bread that has the added value of holding sauces and hot ingredients better. “Really, if the roll costs you 30 cents more, perception-wise, I think you can get a dollar more out of your sub, if it’s a better quality,” he says.
De Vita also focused on cross-utilizing products across the menu and paring down the menu to further streamline ingredients.
“Once the economy comes back and people start spending again, then we can go out there and play,” he says. “Right now, I call it the K.I.S.S. era— we’ve got to keep it simple.” When shoppers leave their bunkers, Quickway plans to beef up its foodservice marketing by investing in print and radio advertising.
Bonnie Riggs, restaurant industry analyst for The NPD Group, Port Washington, N.Y., concurs, but she also advises c-store operators against putting all their eggs in the lunch basket. “The thing of it is, their lunch business is growing, but it only accounts for about 16% of [all day-part] visits,” she says. “They’re going to have to have a lot of marketing initiatives and clout to go against the big guys when things start to turn around.
“If I had those marketing dollars available to me, I guess I would put them against my core day-parts, which are breakfast and snacks,” Riggs continues. “Right now I would think the bigger battle for them is going to be breakfast.”
Taking on the Local Pizzeria
For Bill Anello of Wilson Farms, crust is king. In the past he used a par-baked product for the chain’s pizza program, “which was good for its time, but the technology in pizza crusts has gotten so terrific,” he says. After much hunting, Anello now sources a self-rising crust that can go straight from freezer to make line to oven.
“Our market is flooded with great independent pizzerias. And whether it’s in any of our major cities that our stores are in, we’re up against some great operations,” says Anello, director of perishables/foodservice for the Williamsville, N.Y.-based chain, which sells pizza in about half of its 190 stores. “But it’s been a tremendous growth category for us, and we see a huge upside to this and hopefully some quick expansion with it.”
Pizza has been a downtrading destination for many recession-weary consumers, says Technomic Inc. But still, cost isn’t the key driver. According to a recent Technomic survey, 62% of 1,500 U.S. consumers polled said their most recent away-from-home pizza purchase was driven by a craving, followed most closely by convenience (25%). About one-fifth said price, coupons and promotions influenced the decision.
While Wilson Farms sells both whole, 16-inch pies ($8.99, or two for $12.99) and slices ($1.69, or two for $3), Anello has witnessed great growth potential in sales of whole pies, “and that’s really a new customer,” he says. “Part of trying to get that whole-pizza customer is getting the people who already shop with us to [stop] for pizza in the evening as well as maybe for coffee in the morning, or lunch in the afternoon.”
In fact, while slices drive sales during lunch, Anello is using the whole pizzas to attack the dinner day-part: “Over the years we continue to see very strong sales for breakfast and lunch. And we think we can attack dinner by getting those people who already like us to stop on the way home from work and pick up a pizza for dinner for their family.”
In addition to classic cheese and pepperoni varieties, Wilson Farms also runs specialty-pizza offers, including Buffalo chicken pizza and breakfast pizza. According to Technomic, differentiation through unique signature pies is a key to stealing share of market.
While commodity costs for cheese can be fickle, Anello thinks of it as an advantage over his restaurant competitors. “It does go up and down and it does affect us slightly—but it’s one ingredient on the pie, and it’s not my only business,” he explains. “There are times when you do make a little less margin, but I don’t have to react quite as quickly as an independent pizzeria would have to. And we need that. We have to be aggressive with retails just to be able to compete with these very strong independent pizzerias.”
Love Your Roller-Grill Customer
The typical c-store roller-grill consumer:
- Spends more than average, rates c-stores more highly, visits more often and is more concerned about the quality, visual appeal and temperature of the food than the average c-store foodservice consumer.
- Is more inclined to purchase items as part of a combo meal and is more likely to want to substitute or alternate items in a combo meal.
- Is more easily influenced at the point of purchase. The primary purchasing factors for rollergrill users are the temperature of the item, how the product is displayed and its description.
Sandwich Slump
According to The NPD Group/CREST, c-store lunch sales of traditional sandwiches— including turkey, tuna salad and ham varieties—didn’t do as well as other menu categories. The reason for the disparity, says Bonnie Riggs of The NPD Group, is most likely an increased focus on traditionally smaller categories: “It’s probably newproduct introductions, things that c-store operators don’t typically offer, that they’re doing more of and promoting.”
Watching the Competition
Limited-service chains are using digital innovations to stand out from the pack, including Papa John’s desktop widgets and Pizza Hut’s iHut smart-phone app, while rolling out menu extensions such as Pizza Hut’s Tuscani pasta and Domino’s oven-baked sandwiches.
Retail brands and restaurants such as Newman’s Own and Pizza Fusion are focusing on natural and organic ingredients.
Emerging chains are rolling out innovative specialty toppings, such as San Francisco-based Extreme Pizza’s Mr. Pestato Head with pesto sauce, potatoes, red onions, feta, basil, oregano and mozzarella.
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