Convenience stores have managed to grow or maintain food sales in the last 12 months in large part due to prepared-food offerings that they’ve continually refreshed.
This insight comes from the inaugural C-Store Prepared-Foods Trends Report from the research and insights division of CSP. The division surveyed more than 80 c-store retailers about their current prepared-food offerings, plans to expand into new cuisines and menu categories and what they need from their partners and suppliers to adjust to changes in consumer demand.
C-store retailers are optimistic they can keep their momentum in the year ahead, and they remain open-minded to new ideas for their foodservice strategies, the report said.
“The flip side to menu innovation, however, is the renewed stress on retailers to ensure that their new offerings are profitable and can work within the convenience industry’s typical labor model,” according to the report. “Convenience industry thought leaders see the potential for differentiated prepared foods, whether they’re applying familiar flavors to portable formats or incorporating regional and global cuisines onto c-store menus for the first time. The consumer appeal is likely there, but how will these products play on the P&L [profit and loss]?”
C-stores maintain strong sales
C-stores have managed to increase sales in both prepared and packaged food items in the past 12 months despite the pressure their core customers have felt on their finances, according to the report.
According to the retailers who participated in CSP’s study, they were also more likely to maintain flat sales of food than to report decreases.
Of the 53% of respondents who reported a sales increase, 38% said sales were up slightly while 15% said sales were up significantly.
Nearly one in five respondents said their sales of prepared foods had fallen in the past 12 months, but only 4% described those losses as “significant.”
By comparison, retailers’ beverage business performed better in the past year, with three in five participants reporting an increase in sales of both ready-to-drink and prepared beverages and 29% reporting flat sales. No respondent reported significant decreases in drink sales, though one in 10 said their beverage business was down “slightly.”
Respondents also were enthusiastic about maintaining their sales momentum in the coming 12 months. About two in three respondents, 65%, expected their food sales to increase over the next year, while 72% said the same for beverage sales.
“Respondents interestingly saw the same potential for sales of both food and drinks to reach their highest-upside case. Nearly one in five (19%) expected 'significant' increases in both food and beverage revenues,” the report said.
Menu innovation appears to help
Retailers appeared to be rewarded “for keeping up their menu innovation and continually refining their assortment, while those who’ve struggled to grow sales in the past year admitted that they couldn’t overcome the persistent economic trouble that’s led to traffic declines for many in the past year,” the report continued.
Among retailers with rising food sales, 49% credited popular prepared-foods items they’d introduced for their performance. This was followed by more overall traffic at their stores overall, 47%.
“By comparison, only 33% of these respondents said new, popular CPG [consumer-packaged goods] items drove their sales increases,” the report said.
Menu introductions had a positive effect on retailers’ perceptions of their marketing program, though not necessarily on the value component of that strategy, according to the report. Slightly more than a third, 35%, of retailers with rising sales attributed that success to more effective marketing, but slightly fewer, 28%, said the same about an improved value proposition around the food they offered.
Conversely, retailers whose food sales decreased in the past year had several reasons to point to, “but the appeal of their offerings was not one of them,” according to the report. “Only 5% of this group said their disappointing performance in the past year was because they had removed some CPG or prepared-food items.”
Slightly more than a quarter of retailers, 26%, said less overall traffic to their stores caused their underperformance in food sales, while another 21% said they had lost market share in the past year to competitors.
“Beyond those big-picture factors, few strategic mistakes figured prominently in the struggles among retailers whose food sales had fallen,” the report said. “While 13% conceded that their value proposition for food items had deteriorated with their customers, only about one in 10 of these respondents could point to trouble with their marketing plans overall or the management of their supply chain.”
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