Finding Your Place in Foodservice

Growth opportunities present themselves in industry data

[Editor's Note: This is the second in a series of articles addressing the state of foodservice in retail outlets. Click here to read the first part.]

OAK BROOK, Ill. -- At 15.8% sales contribution, foodservice continues to drive new revenue to the convenience store industry. Standouts in the category include frozen dispensed and cold dispensed beverages, and commissary items, according to preliminary data from the NACS State of the Industry (SOI) Report of 2012 Data.

Trends show gross profit dollars outpacing sales by about 4%, according to NACS CSX, numbers over the past three years. Foodservice as a whole maintained high margins, with prepared foods at 52.4%, frozen dispensed beverages at 52.5% and hot dispensed beverages at 60.5%. Average sales were $16,308 for prepared food, $899 for frozen dispensed and $5,869 for hot dispensed.

And yet disparities still exist. Top-quartile companies did almost triple that of second-quartile companies in prepared foods and almost double in hot dispensed beverages.

SOI numbers also indicated potential trends--some logical, some dubious. For instance, top performers made more on foodservice but less on cigarettes, possibly using cigarettes as a traffic driver. At the same time, bottom performers sold a lot of foodservice but barely made money at it.

So where do retailers place their stake? Bonnie Riggs, restaurant industry analyst for The NPD Group's foodservice division, points to the day-part that's been on the tip of everyone's tongue.

"Snacks, more than anything, is what's driving growth at the convenience stores," she told CSP Daily News.

Meanwhile, menu and consumer trends in the broader restaurant world are starting to trickle down to c-stores. But Mark DiDomenico, director of business development for Dataessential, said the movement is limited.

The opportunity for c-stores lies in translating larger restaurant trends for the c-store space. One example is the "locavore" movement.

"We're seeing it a little bit with some of the [convenience] chains," DiDomenico said. "They'll stress locally sourced for a certain number of products. What we're seeing more, though, is that they're getting a little bit more involved in the community and providing local support."

A similar halo effect comes in the realm of "fresh" food. While customers in a Technomic survey claim "freshness" as second only to "taste" in importance (84% vs. 85% said it was "important" or "very important"), actual purchasing habits tell a different story. The microwave and roller grill remain the most important pieces of equipment, and while 60% of c-store customers had purchased a doughnut in the last month, only 25% purchased fruit.

In other words, fresh options may be more of a marketing technique than an actual sales driver. The real strength lies where it always has--speed and convenience.

David Morris, managing consultant of Kaleidoscope Research Consulting and author of Packaged Facts' foodservice studies, said one of the strongest advantages c-stores have is that they don't live and die by their foodservice.

"Food is not the only reason someone goes to a c-store," Morris told CSP Daily News. "I think there's a real opportunity and a continued opportunity for c-stores to understand those purchases across their categories."

Click here to see the complete content of CSP's 2013 Foodservice at Retail Handbook.

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