A.M. Opportunities

Like an egg-and-cheese sandwich past its prime, this fact is hard to stomach: Convenience stores are losing their share of the morning meal.

Abbie Westra, Director, Editorial, CSP

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Like an egg-and-cheese sandwich past its prime, this fact is hard to stomach: Convenience stores are losing their share of the morning meal. According to data from The NPD Group (see chart, below), c-stores experienced a 2.5% drop in morning meal share from July 2001 to July 2009, while McDonald’s, Dunkin’ Donuts and Starbucks have all increased their share by significant amounts. In just one year, ending November 2008, c-stores experienced no change in share of morning traffic, while the QSR channel as a whole saw a 2% bump.

And there’s more movement to come from the QSR giants. McDonald’s began it in 2009 with the nationwide launch of a $1 breakfast menu and McCafé rollout. Meanwhile, Dunkin’ Donuts is testing a 99-cent breakfast menu; Taco Bell is partnering with Starbucks brand Seattle’s Best Coffee, Cinnabon and Jimmy Dean sausage; and Burger King and Subway are planning to expand on their own breakfast menus, both boasting Seattle’s Best Coffee.

One way convenience retailers can boost breakfast sales is by leveraging the powerful coffee category. According to retail/foodservice consultancy Willard Bishop, 96% of customers who buy coffee at convenience stores intend to do so before they walk in the door. This can be taken advantage of through bundling coffee with breakfast goods, strategic placement of breakfast items near the coffee station, and an ongoing commitment to coffee quality—especially important as QSRs enhance their own brews or partner with powerhouses such as Starbucks.

In the meantime, find ideas and inspiration from the following three retailers to boost your a.m. opportunities.

Michigan State University, East Lansing, Mich. LaGretta Riley, assistant retail manager

Breakfast strategy: Our strategy is to offer portability. We offer customers a variety of items that are easy to take along with them. Riverwalk Market at Owen Hall [a graduate residence hall] offers grab-and-go breakfast options and hot breakfast made to order.

Top-selling breakfast items: Bagels, doughnuts, whole fruit, orange juice, water and breakfast sandwiches. We also offer sandwiches that are designed for the lunch menu in the morning [because] students often eat their first meal of the day closer to the traditional lunch hour.

Price point: Our price points and margins range between 35% and 45%. Bagels, doughnuts and rolls have the greatest opportunity for margin, while the breakfast sandwiches are on the lower end. Breakfast juice options also have a lower margin than beverages offered later in the day.

Labor: One of our convenience stores has the capability of complete product preparation, beyond warming products that are already fully cooked. Riverwalk Market staff prepares salads, pudding cups, cookies and a few other items. Sparty’s convenience stores offer panini-grill services and in-house microwaves, but otherwise the products are grab and go.

Breakfast flops:We have not had any items that have “flopped.” We seem to be able to offer a range of products that satisfy a large group of our customers. We have found that the students see value as a strong point for determining their purchases. Brand-name products tend to do well, and the quality of our products is also highly valued by our customers.

Locali “conscious convenience” store, Los Angeles Greg Horos, CEO

Breakfast strategy: Originally, we just wanted to be a convenience store. We didn’t envision it being a deli or prep area because we simply didn’t have the space to be a restaurant. But then we thought we could do breakfast and lunch sandwiches. Lo and behold, a month and a half in, we realized our deli was the biggest part of our sales. It’s almost 75% of our business.

Top-selling breakfast items: [Team member] Michael created a sandwich called the Log Cabin croissant [$7.25] with smoked chicken, melted Swiss cheese, apple slices and maple syrup.We also sell a lot of breakfast burritos [$7.95; a multigrain tortilla with scrambled tofu, vegan cheese, black beans, bell peppers and red onion, topped with mesquite salsa, black olives, vegan sour cream and avocado].

Labor: Everything is made in-house in a very small kitchen consisting of a panini grill, a small salad/sandwich prep table, a convection oven and a small range top for soups. There are no open flames because we don’t have a hood.

Price point: The ingredients that we use are certainly more expensive than conventional ingredients, but at the same time we wanted to stay in step with the economy and make people feel like they are getting a value. And our sandwiches are pretty big. But our margins aren’t really all that high; we feel they are in line with conventional menu items anywhere.

The Grain Station, Newark Liberty International Airport, Newark, N.J. Stacy Moore, president

Breakfast strategy: Make everything quick and easy for the customers. People on those early flights can be a little testy because they typically had to get up so early to get to the airport. Because we focus on cereal, we try to surround that product offering with complementary items—coffee, fruit salad, yogurt and fresh fruit.

We also have some airport-specific solutions for those travelers getting on a cross-country flight in the morning who want to “pack a lunch” at breakfast time. We have salads and sandwiches available in the early hours, all with dressings and condiments on the side so they can be dressed closer to eating.

Top-selling breakfast items: Cereal is a big seller, both our [proprietary] blends and branded cups. This time of year we also sell a lot of oatmeal. Other big items are yogurt parfaits and muffins. One kind of interesting thing is that we serve a lot of Asian travelers who eat noodle soups for breakfast.

 Price point: Most people spend about $6 or $7 in the morning. Coffee and a muffin would be about $4.50. We have a few combo meals: cereal, milk and juice is $6.40; cereal, milk and yogurt or a smoothie is $6.95; and cereal, milk, coffee and juice is $7.90.

Labor: We have our cereal blends copacked for us. Our parfaits, bagels, sandwiches and salads are made for us by a local caterer, and the rest of the products we sell come from a variety of distributors.

Breakfast flops:Anything chocolate doesn’t sell, which I think is a bit strange. We have a variety of muffins, pound cakes, crumb cakes and croissants; the only time the chocolate versions sell is when everything else is gone. So now we tell our vendors to leave chocolate off our orders.   

Beyond ‘Breakfast’

The time is nigh to start or expand your breakfast program—and not just to boost morning traffic, but also to increase breakfast-item sales throughout the day.

A recent study from Chicago-based research firm Technomic Inc. found that 46% of consumers surveyed would like to see full-service operations offer breakfast throughout the day; 32% want all-day breakfast menus in limited-service restaurants. C-stores can fulfill this need in an on-the-go format.

 “Any retailer close to an industrial facility that serves several shifts will see customers coming in at all hours. Breakfast for them might be before they go to work at 8 p.m.,” says Jane Hartgrove, vice president of Passport Foods Co., Denver, whose Tres Picosos burrito line often sells beyond the breakfast hours. “Truckstops and college campuses would see [breakfast] people at all hours, too.”

  • Further findings from Technomic’s Dec. 2009 online survey of 1,500 U.S. consumers:
  • 63% of consumers expect their breakfast purchases at restaurants and convenience stores to remain about the same in the coming year.
  • 77% purchase breakfast sandwiches sometimes or often during weekdays, compared to 73% in 2007.
  • On weekends, that number increased from 61%two years ago to 70% today.
  • 34% prefer premium coffee, as compared to 29% of consumers surveyed in 2007.
  • Females are more likely to purchase breakfast items during lunch and dinner day-parts than males.  

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