CEDAR RAPIDS, Iowa -- With volatile fuel prices continuing to deliver thin profit margins, convenience store chains such as Casey's, Kum & Go, and Kwik Trip are expanding their prepared food and beverage menus, reported The Gazette.
Foodservice accounted for 16.9% of a record $195 billion of in-store sales at c-stores in 2011, according to the National Association of Convenience Stores.
"Food is the future of our industry," NACS spokesperson Jeff Lenard told the newspaper. "Our stores will become food stores that happen to sell gas rather than gas stations that happen to sell food, as they are perceived today. It will be a slow evolution, but it is happening for two important reasons: From the retail perspective, the product is there, the distribution is there, the competency is there, the revenue is there and, from the consumer side, the demand is there. People want fresh food on the go and they want food that has value."
Lenard said consumers are more likely to grab food on the run for breakfast or lunch than they would have 10 years ago. "You don't have the lunch hour anymore," he said. "You have the lunch 10 minutes. Attracting the consumer who is eating their breakfast or lunch in their car before they arrive at their destination is an important growth area for our industry."
Market research firm Technomic, Chicago, found in a survey for its 2011 Consumer C-Store Brand Metrics Shopper Insights Report that a significant number of quick-service restaurant (QSR) customers are starting to view c-stores in the same category as fast-food eateries; 82% of the more than 3,700 people surveyed said they buy prepared foods or beverages from c-stores once a month, and 52% do so once a week.
Kum & Go, West Des Moines, Iowa, is building as many as 11 new stores in the Cedar Rapids, Iowa, area, challenging the market dominance of Casey's, said the report. The Ankeny, Iowa-based Casey's chain dramatically expanded its Corridor presence in October 2006 when it acquired 33 HandiMart stores from Nordstrom Oil.
The new Kum & Go stores are designed to emphasize fresh food prepared on site. The chain, with more than 400 stores in 11 states, views foodservice as a major component in its quest for increasing sales and market share.
"We have some competitive advantages over the QSRs," Roman Stone, Kum & Go vice president of foodservice, told the Gazette. You get the breadth of food at QSRs, but you don't get the breadth of beverages. When you go into a QSR, you might get a soft drink fountain and bottles of juice or water, but with us you have the whole of our vault. We offer a variety of everything from energy drinks to flavored tea and water that you can't get in a QSR."
Casey's General Stores, which began offering pizza in 1984, has secured a spot among the top five pizza retailers in the nation. Doughnut sales also have played a major role in the chain's foodservice program for decades, the report said.
Casey's reported a 16.8% jump in same-store sales during the fourth quarter and 14.3% increase in the fiscal year for its prepared food and fountain line. Bill Walljasper, senior vice president and CFO, said prepared foods represents about 8% of the company's total revenue, but nearly 30% of its gross profit.
"Convenience is a very big factor in peoples' everyday lives," Walljasper told the paper. "If you can provide a quality product at a reasonable price, people will purchase those products."
Walljasper said Casey's, which began offering pizza delivery at a single store in 2010, has expanded the program to 125 stores. "We have another 50 slated to begin delivery in October, and 50 more will be converted over to delivery before the end of our fiscal year," he said. "We've really moving that forward. We've also had a great response to our made-to-order sub sandwich bar. We will continue to roll that out to more of our stores."
Walljasper said Casey's has a goal of increasing same-store prepared food and fountain sales by 11% in fiscal 2013 with an average margin of 61%.
La Crosse, Wis.-based Kwik Trip has a major commitment to offer fresh prepared food and coffee in its c-stores. Dave Ring, Kwik Trip community relations coordinator, said the family-owned company maintains total control over a variety of products by having its own bakery, food commissary, dairy, food safety laboratory, ice plant, LP gas facility and distribution center.
"By not relying on third-party suppliers, we can squeeze out costs and pass the savings along to our customers," he told the Gazette. "We also can maintain the quality that our guests expect when they visit our stores."
Kwik Trip purchases large volumes of bananas, baking potatoes and onions, enabling it to sell the produce at 38 cents a pound, according to Ring. That's typically lower than the prices at supermarkets in the communities where Kwik Trip (and its Kwik Star banner) operate stores.
"It's amazing to see what Kwik Star and Kwik Trip do with bananas," Lenard said. "They have six banana-ripening rooms in their headquarters. Their stores sell hundreds of pounds of bananas each day. When they are ready to be made into banana bread, you won't see them on the shelf."
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