ANKENY, Iowa-- In the many small, rural committees where it operates, Casey’s General Stores Inc. is the go-to restaurant--sometimes the only restaurant--in town. It has allowed the chain to develop a robust pizza program that rivals any traditional fast-food brand in scope, growth and innovation.
As Casey’s seeks to enter new markets and more deeply saturate existing ones, what role will its pizza program play? In short: a big one. The company’s latest earnings call revealed successes, hurdles and strategies for becoming an increasingly prominent pizza player. CSP Daily News sorts them out ...
1. First, the numbers
Same-store sales were up 8.2% in its fiscal fourth quarter, with prepared-food and fountain-drink category sales up 12.2%. For fiscal 2017, the company is targeting a same-store prepared-food and fountain-sales increase of 10.2%, with an average margin of 62.5%.
2. More delivery
Gross-profit dollars were up 18.1% for fiscal 2016, and executives attribute their optimism about future growth in part to the ongoing addition of pizza delivery at stores. In fiscal 2016, the company added 110 stores to its pizza delivery program, bringing the total to 420. It plans to convert about 100 more stores in fiscal 2017.
What’s the effect of delivery rollout to a store? A 20% to 30% increase in prepared-foods sales in the first 12 months.
3. Mobile soars
Casey's officials are pleased with the rollout of its new mobile app, which has exceeded 400,000 downloads since the January rollout. The chain is seeing low-double-digit increases in market-basket size in online orders vs. phone orders. Approximately 7% of all pizza orders are now done online, with expectations for more.
4. Getting the word out
As Casey’s seeks to enter new states and markets, brand recognition is a challenge, especially for prepared foods, CFO Bill Walljasper conceded during the company’s latest earnings call. But strategies are in place to overcome it, including the chain’s Pizza to Pump promotion, in which it offers cents off per gallon for buying a large pizza. That has been successful in newer states for Casey's such as Arkansas, Tennessee, Kentucky and Indiana, he said.
5. Smart pricing, favorable commodities
The company raised prices on pizza slices, among other items, in early May. The increase wasn’t due to commodity costs, which have been favorably low. Rather, Walljasper said, the increase was based on monthly pricing surveys that revealed an opportunity to raise prices to be more in line with that of competitors.
“We've not seen any elasticity from that price increase,” he said. “It's obviously early, but in my time, honestly, I've not seen any elasticity from any of the price increases we've taken. We're very calculated when we take those price increases to make sure that we are not out of the market.”