C-Stores Increasingly Winning the Foodservice Battle

Higher prices, declining restaurant traffic open the door for convenience stores

CHICAGO -- Foodservice industry watchers have been buzzing about the recent downswing in restaurant traffic, particularly at lunch, and are pointing to signs that convenience stores are better positioned than ever to benefit.

Last month, a new Technomic consumer study on the lunch daypart reported that the frequency of lunchtime visits to restaurants is down by 5% since 2014. Research by Chicago-based The NPD Group reveals similar findings; in a company release, NPD reported that in the quarter ending June 2016, lunch visits dipped by 4% year over year. According to NPD, this downturn represents the biggest decline among all three dayparts.

Several outside forces are at play in affecting this downward trend. First, there has been a 24% increase within the past decade in people working from home, leading to more at-home lunch occasions, as well as an 8% increase in online shopping since 2015, according to NPD.

Also, the latest increase in menu prices have restaurants feeling the pinch; NPD reported that at some restaurant categories, lunch-menu prices have jumped by about 5% over the threshold that consumers identify as the sweet spot between “affordable to eat there” and “good value for the money.”

It appears that the sit-down segment is getting squeezed the most – and not only during lunch, but also throughout the day. Late last week, major casual-dining players such as Ruby Tuesday and Chili’s reported diminished sales for the fiscal year. Ruby Tuesday issued a forecast that its sales would decline even further in future quarters as it preps to close locations.

This is a sea change that is being heavily influenced by an evolving value equation, a consumer sensibility that, more than ever, is strongly weighing convenience and other attributes along with affordability. Darren Tristano, president of Technomic, indicated that overall food preferences and changing lifestyles – particularly among a younger consumer base – are guiding these shifts.

“They’re looking for convenience, quality, portability and healthfulness,” Tristano said to the Associated Press. Just about 10 years ago, Tristano said, sit-down, casual-dining restaurants represented 53% of the total restaurant industry. Today, quick-service restaurants (QSR) now claim that share of the space.

But what does all of this mean for convenience stores? According to Tristano, today’s c-stores are a major disruptor. Along with fresh prepared foods in supermarkets and meal delivery companies, c-stores have been steadily emerging as a foodservice option for lunch and other meal occasions, and are increasingly poised to snatch share away from traditional QSRs.

Technomic projects that, through 2020, c-store foodservice growth (3.2%) is expected to outpace total foodservice-industry growth (2.1%). And the operator outlook is positive, too: Eighty percent of convenience operators told Technomic that they expect their overall foodservice sales to increase, and only 1% predict that their sales will fall.

A prime opportunity appears to be in takeaway programs. Among operators offering grab-and-go platforms, 60% expect their grab-and-go foodservice to grow and expand, compared to 43% of operators who say the same for made-to-order foodservice, indicating the importance of c-stores promoting foodservice with a clear connection not simply to convenience, but portability as well.


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