Opinion: The Future of the C-Store Industry, Stage Left
At the 2017 NACS State of the Industry (SOI) Summit, I had the opportunity to jam on stage at the after-hours party with Tony Bartys, CST’s COO. As Tony weaved his guitar solo, we both caught a glimpse of the future.
Stage left, waiting to join the band, was a bright-eyed young drummer: Shaan, the 12-year-old son of retailer Dee Dhaliwal. This annual gathering always stimulates reflection about the good business, great friends and memorable moments that have come out of the c-store industry. It is remarkable evidence of how this industry looks the future squarely in the eye and takes action to shape our own destiny.
In 2006, I had the honor of being tapped as a supplier representative on the NACS Research Committee, which helps fuel the NACS SOI Summit data. Our committee’s goal was to derive actionable outcomes vs. a data dump. In looking at notes from these early meetings, there were several aha data points. Interestingly, the topics that were top of mind then are still relevant today.
According to 2006 SOI data, foodservice represented 13.4% of sales and 24.9% of store gross-profit dollars. This information was all but incomprehensible to Anheuser-Busch, where I worked at the time. Wasn’t the industry made up of gas stations with bad coffee and microwaveable burritos? That was certainly the general perception back then.
Even though we weren’t a foodservice company, the category became a rallying point for program support for our team. This was met with skepticism, but the data and direct retailer input worked to win over the doubters. The consistent validation via retailers’ strategic initiatives helped suppliers focus on supporting them. If you understood the pressures the retailer faced from credit-card fees, fuel volatility and a softening tobacco category, it was easier to understand the retailers’ need to pursue a foodservice strategy.
Suppliers that grasped this strategy were in a position to have their category and brands remain relevant to their retail customers.
Leverage the Beverage
Last year’s preliminary SOI data reveals that foodservice is fulfilling its potential, accounting for more than 22% of sales and more than 35% of total gross profit. Not surprisingly, foodservice success is the consistent factor when looking at top-quartile retail performers vs. bottom-quartile performers. The facts speak for themselves: The category is driving profits for the industry.
And yet there are more profits to be had—and our future will require it.
The argument has been made that the beverage category is the difference maker in driving foodservice at c-stores. When you eat something, you drink something, and c-stores have a whole lot more “somethings” to offer.
Quick-service restaurants (QSRs) have a limited beverage SKU selection, even when considering both packaged and dispensed beverages. C-stores, meanwhile, average 300 to 350 SKUs of nonalcohol, ready-to-drink packaged beverages alone, according to Nielsen numbers shared by The Coca-Cola Co. Add more than 100 SKUs of adult beverages and a bevy of dispensed beverages, and the significant advantage c-stores have over QSRs in beverage selection is obvious.
It is not clear that the “beverage leverage” has been realized. At CSP’s Outlook Leadership Conference last fall, Technomic shared a study on how c-stores can go head to head with QSRs. As expected, consumer perception of beverage variety between c-stores and QSRs reflect the c-store advantage, but this advantage was only marginal, with more than 45% of consumers believing that QSRs had better beverage variety. Even though c-stores easily have more than 10 times the variety, including adult beverages, 45% of consumers perceived no c-store advantage.
At iSee, our hypothesis is that products out of sight are out of mind. Creatively merchandising packaged beverages with foodservice can serve as a constant reminder to the customer of the many choices for satisfying their thirst. This requires commitment to valuable space and demands creativity from suppliers.
The thought of infusing new excitement to build upon what we already do well leads us back to the music. At the SOI Summit party, young Shaan sat himself down at the drum kit and brought the crowd to their feet, kicking out driving renditions of several classic rock tunes. When you get a glimpse of the future of our industry—even despite the daunting challenges—it is hard not to be excited about what comes next.
Joe Vonder Haar is CEO and founding partner of iSee Store Innovations LLC. Reach him at [email protected].