ROSEMONT, Ill. -- To beat quick-service restaurants at foodservice, convenience stores have to be fast, friendly and frictionless, said Alan Beach, senior vice president of merchandising for 7-Eleven Inc., Irving, Texas.
“We have to be a better choice for the consumer,” Beach said at the NACS State of the Industry Summit in Rosemont, Ill. “It’s not one piece of this; it’s the overall consumer experience that’s critical.”
Here's how c-stores can become better foodservice destinations ...
The economy is growing overall, but tha growth is not being evenly shared among consumers, Beach said. About 40% of American households earn less than $50,000, and their budgets are getting tighter and tighter. “The under-$50,000 demographic has lower income growth, and their expenses have shot up, so they have very little discretionary income. This is our c-store consumer,” he said.
On the other hand, households that bring home more than $100,000 a year have increased their income by about $46,000 since 2007 and have enjoyed 101% growth in their discretionary spending, according to a 2018 Deloitte report.
At both ends of the spectrum, low-income and high-income consumers have contributed to the growth of price-based and premier retailers. Revenue for upscale and value-driven retailers has grown by 81% and 31%, respectively, in the past five years. However, price-balanced retailers have had only about 2% growth. For instance, premium restaurants such as Cava, Roti and Sweetgreen are becoming anchor tenants in broader developments to pull in traffic, he said.
To win in this kind of climate, retailers need to offer quality products at a good price and have excellent service. “You’ve got to be good at two and the best at one of these,” he said.
Quick-service restaurants are encountering the same challenges and opportunities as c-stores, but they’re beating most segments, Beach said. “QSRs are focusing on value, and they’re winning,” he said. “They’re gaining trips, and we’re losing trips.” For instance, Beach pointed to McDonald’s tiered value menu, ranging from $1 to $3, and Sonic launching half-priced frozen drinks every day after 8 p.m. And since Taco Bell launched its $1 nacho fries, about 33% of the chain’s transactions have included the side, which debuted in late January, he said.
To step out of QSRs’ shadow, c-stores need to feature better value and premium offerings, he said. “We don’t want to set the trend, but we want to be a very close second,” he said. He recommends that the industry capture trends at the same time as specialty grocers, farmers markets and hotels, instead of jumping in when the items are ubiquitous.
With prepared food accounting for about 3.7% of c-stores’ year-over-year sales change, Beach recommended retailers jump on the better-for-you trend. Salads are hot, he said. “Consumers are telling us they want better-for-you, healthier options,” he said. “This is now 50% of all households. This is mainstream; we can do this.” Beach said a lot of restaurant concepts are succeeding and leading with salads.
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