ROSEMONT, Ill.-- The takeaway is crystal clear: Foodservice is driving profits for the c-store industry. The category saw sales increase 5.6% last year to $35,474 per store per month, according to CSX data shared April 5 during the NACS State of the Industry Summit. Gross profit dollars increased 7% in 2016 to $19,258 per store per month.
Compare that to the total store, which saw a 3.2% increase in sales and a 4.8% increase in gross profit dollars.
The proverbial carrot of foodservice always has been the gleam of gross profit dollars: Foodservice may be No. 2 after tobacco for in-store sales, but it leaps to the top spot for share of gross profit dollars. The story was no different in 2016. The category accounted for 21.7% of in-store sales and 35.2% of gross profit dollars.
Of course, a look at the health of c-store foodservice sales isn’t complete without a breakdown of stores by quartile, which reveals a tale of two disparate industries. Top-quartile performers brought in three times more prepared-foods sales per store per month than those in the bottom quartile, and nearly seven times more hot dispensed beverage sales.
Hot dispensed margins are even more jarring: Top-quartile performers reported 67.55% gross margin on hot dispensed beverages, while the bottom quartile reported 42.81% gross margin.
Break down the foodservice category, and you’ll find some distinct winners:
- Prepared foods saw a 5.3% increase in gross profit dollars.
- Commissary-based foods declined 4.5%—likely due to the shift toward items made on site.
- Hot-dispensed beverages increased 3.2%.
- Cold dispensed also saw a nice 5.7% increase.
- Frozen dispensed saw a 3.7% decline in gross profit dollars.
“A few years ago, dispensed beverages carried the weight,” said SOI presenter Andy Jones, president and CEO of Sprint Food Stores, August, Ga. “Now, prepared foods is doing all the work.” Case in point: Prepared foods is well above the trend line for the total foodservice category.
Jones urged attendees consider the economic realities of the core c-store shopper, 70% of whom make less than the median household income. “We really need to keep this in mind when we’re building our menus,” he said.
The industry’s competitive advantage remains immediate consumption: Eighty-three percent of purchases are consumed within one hour, and 65% of that is consumed immediately.
During a breakout session on the Southeast region, Greg Parker, president and CEO of The Parker Cos., Savannah, Ga., warned retailers not to focus solely on sales numbers. “You can be doing high foodservice sales and losing money,” he said.
In the South Central region, meanwhile, retailers such as Kyle McKeen, president and CEO of Alon Brands Inc., Dallas, felt the effects of the fracking bust in their foodservice sales. “It was that consumer that left the market.”