Snack-down In the battle for snacking occasions, c-stores must up their game
The call to arms has been clear, from research firms to publications such as this: Put your eggs in the snacking basket.
The afternoon and evening snack occasion has indeed been a bright spot in the foodservice landscape since before the recession, and QSRs such as McDonald’s and Dunkin’ Donuts have successfully driven this shift.
C-stores have, too. But the difference is, it’s your day-part to lose. Look at the numbers:
- Forty-one percent of c-store visits are snack-related, according to The NPD Group.
- For the doughnut QSR segment, 16% of visits are snack-related.
- For the hamburger segment, it’s 11%. The threat surfaces when you look at how much each of these segments has grown its snacking traffic: The burger retail segment has surged 17% over the past five years, and doughnut retailers have seen snack traffic up 13%. C-stores? They’re up just 4%.
“Away-from-home is a battlefield for snacking right now,” says Mike Murnane, director of c-store and growth channels for Northfield, Ill.-based Kraft Foods, whose business in both CPG and foodservice has the company closely watching the day-part. “C-stores lead the pack,” he says, “but the QSRs are innovating to develop more and more products that will try to fi t that afternoon snacking occasion.”
Don’t be deterred; you have not been led astray by the promise of snack sales growth. There are great gains to be had, but only if you’re armed and ready.
DeFiNiNG the DAy-PArt
Truth is, the exaltations about snacking have been a little misguided. It’s not the land of milk and honey—at least not since the recession began.
From 2006 to 2008, afternoon snack traffi c climbed a modest 2%, but then it stumbled, falling 4% between 2008 and 2011, according to The NPD Group.
While the snacking day-part has crumbled somewhat, it’s the three segments mentioned above—hamburger, doughnut and c-store, as well as specialty coffee— that are grabbing what gains there are.
“What they did was capitalize on the growth market at the time [before the recession] and they’ve just continued to grow,” says Bonnie Riggs, restaurant industry analyst for the Port Washington, N.Y.-based fi rm. “It’s just that the more traditional snack places—the frozensweets and recreation categories—are offsetting the growth of these four large snack-oriented categories.
“When you look at it this way, it’s still a growth opportunity.”
NPD data shows the afternoon snack occasion growing the most, and there are compelling reasons supporting the trend. Customers are trading down from lunch, saving time, looking for more portion and calorie control, and focusing on particular cravings. The decline in combo-meal orders further indicates a consumer desire to customize meals and save a little money.
Perhaps most surprising is what actually constitutes a snack today. Ten percent of all afternoon snack items are burgers, according to NPD data; fries account for 8%, and breaded chicken sandwiches and pizza are each 3%.
“We can confirm that as well,” says Murnane of Kraft. “We see the traditional items in the store bridging the day-parts,” particularly, in Kraft’s case, the roller grill.
Jerry Weiner would third that notion.
“If I was to look at a unit-by-hour report, every single hour of the day, all 24 hours would be up, in units over prior year,” says Weiner, vice president of foodservice for Rutter’s Farm Stores, York, Pa.
“This is one of the few segments as I break down foodservice that’s up on every single hour across the board,” he continues. “Of the next four items on my rollout list, three of them are snack foods. That’s where the growth is.”
The snacking spurt started for Rutter’s when Weiner rolled out fryers and, along with them, lots of appetizers: mozzarella sticks, onion rings, french fries, chicken wings and fried green beans. What Weiner found was that even during the traditional day-parts, people were forgoing a sandwich and creating their own combination of appetizers. Weiner is “constantly surprised” by what sells in his 56 locations. He’s added some unique items, such as fried pickles, just to create a conversation. They’re now a big seller, right up there with jalapeno poppers and mac-and-cheese bites. After fries, mozzarella sticks are the biggest seller—which Weiner attributes to the demand for a meal alternative. So he’s looking at more substantial, protein-oriented snacks, refl ecting NPD’s top sellers. Weiner has also seen a huge spike in sales in the post-midnight hours when taverns close. Particularly appetizing in the wee hours? Those fried pickles. “This is not a fad,” he says of snacking.
“This is generational, and I think it’s here to stay and probably grow.”
Fellow retailer Ryan White, director of foodservice for Blarney Castle Oil, has seen a similar increase in foodservice items suddenly categorized as snacks. “We are up in our snack areas with items such as eggrolls, jalapeno poppers and chicken fi ngers,” he says. Refl ecting the top snacking day-parts, he’s been busy between 1 and 3 p.m., and again from 7 to 9 p.m.
Blarney Castle runs 100 stores under the EZ Mart banner across Michigan, and White attributes at least some of the sales boost to summertime around the Great Lakes. “People are enjoying the outdoors and buying these snack items as an impulse,” he says. For example, White placed pizza warmers near the register and saw an increase in sales of $1.99 slices.
Of particular interest to him will be snack sales after Labor Day, when summer traffic drops off.
Whither Thou CPG
It’s difficult to celebrate the spike in foodservice snack sales without worrying about what it’s doing to traditional c-store snacks such as chips, candy and other sweet and salty packaged treats. Put another way, is your total foodservice occasion—whether it be traditional dayparts or snacking—really growing and, if so, what are the drivers?
“Some of it is cannibalization,” Weiner admits. “If I were to take the unit increases in the sides and expand that into a retail dollar and then look at my growth, there’s some cannibalization.” But the fact is, you’re now competing with McDonald’s, Dunkin’ and others who can offer fresh, hot snacks. (See sidebar on p. 210 to see what the leading QSRs are selling as snacks.) Further, when done successfully, the margins on foodservice snack items more than compensate for any cannibalization. What’s more, the price tag for the consumer can be lower on a foodservice item than a packaged snack. “Because we have so much margin to play with, we could become more snackoriented because we become a better price value,” Weiner says.
Winning Snacks
As competition strengthens, c-stores must get strategic about selling snacks.
First, remember your core competency: convenience that’s not dictated by day-parts.
“Even with all the innovations with QSRs … the other guys don’t have the traffic behavior. They’re trying to change behavior to get customers in the stores at different times of the day,” says Murnane of Kraft.
Also, take inspiration from a recurring theme in the industry today: customization. It’s one Weiner at Rutter’s puts a lot of stock in. Not only do customers want to personalize when they eat, but they also want control over exactly what they eat, too.
“Everybody wants to personalize their food as best they can. I think Burger King had it right—they were just 40 years ahead of their time,” he says. Rutter’s has an upper hand in customization due to its ordering kiosks. Customers place their orders using touch screens, and the entire process is completely customizable, all the way down to pickles or no pickles on your chicken sandwich.
The ability to make a meal from the bottom up translates to grab-and-go foods, too. Rutter’s stores feature 6-footby- 8-foot walk-around merchandisers at the front the store, each with a base shelf and two mezzanine shelves. Thirty-five percent to 40% of the case is filled with typical subs, wraps and salads. The rest is what Weiner calls “ancillary items”: desserts, packaged fresh-cut fruit, and cups of diced meat and cheese.
“I see many, many people walking out with two or three of these little ancillary products as opposed to the more traditional sub,” Weiner says. “They want variety and options.”
As Murnane points out, customers are already accustomed to coming into your store regardless of day-part. What you need to offer are fresh, substantial and appealing snack items, and do it all day long.
Snacking by the Numbers
22% Percent share of the snacking market c-stores control, compared to 19% for the burger category, 10% for supermarkets, 10% for gourmet coffee/ tea operators, and 4% for the doughnut category
4% Increase in c-store snacking traffi c over the past fi ve years, compared with 17% for burger brands and 13% for doughnut brands
41% Percent of all c-store visits that are snack-related. For burger brands, it’s 11%. It’s 16% for doughnut retailers.
10% Percent of all afternoon snack occasions that include a burger, indicating a shift from traditional candy or chip snacks to protein-based items, perhaps as a meal replacement
Snack Attack
A sampling of snacks from QSR menus across the industry:
- McDonald’s: Fruit and Walnut Salad, Angus Chipotle BBQ Bacon Snack Wrap, Chicken Ranch Snack Wrap, Fruit Smoothies
- Starbucks: Snack-Size Bistro Boxes, including Tuna Salad, Chicken & Hummus, Cheese & Fruit
- Dunkin’ Donuts: Hearty Snacks, including Stuffed Breadsticks, Warm Apple Pie and Bagel Twists
- Burger King: BK Burger Minis and Chicken Minis
- Dairy Queen: Mini Blizzards
- Jack in the Box: Pita Snacks, small wraps with a choice of protein and a smoky chipotle sauce
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