Nearly 17% growth: That is the expectation of convenience-store operators of their foodservice sales for the coming year, according to a survey recently completed by CSP and Product Evaluations Inc. These high expectations come on the heels of c-store operators still enjoying an average reported growth of 15.4% last year. And with dynamic shifts across
the average convenience store, such growth couldn’t come at a better time.
“Traditional high-profit items like gas and tobacco aren’t as profitable due to high-efficiency vehicles and increases in tobacco taxes and push for health,” said a survey respondent from a regional c-store chain. “Everyone has to eat, so foodservice has become our new high-profit savior.”
The goal of the CSP-Product Evaluations Annual Trend Report is to track the evolution of c-store foodservice and help operators target their own growth trajectory. One hundred and fifty operators were interviewed nationwide regarding their foodservice programs, expectations for the future and strategies for the coming year.
Understanding the driving forces behind the growth of c-store foodservice and where opportunities lie requires an understanding of the total scope of the industry.
Unfortunately, there isn’t a simple, one-size-fits-all definition. Some operators limit their offering to coffee or fountain soda with a potential food item, likely from a roller grill, while others are running full-service, restaurant-quality cafés. The survey found that where an operator falls on the spectrum affects his or her growth expectations and strategies.
Considering the food items offered and equipment used, we identified three levels of commitment to foodservice in c-stores, with a growth trajectory from the simplest of programs to the most complex (see chart, below).
Operators with limited commitment to foodservice represent the smallest share of the c-store foodservice market, at 18%.
The offering in these operations tends to be confined to beverages with the occasional food item. They are aware of competition but haven’t yet developed plans for growth, possibly due to building constraints, lack of square footage or the fact that they are still in the early stages of foodservice and have yet to fully discover the growth potential, as seen by having the lowest growth expectations (8%) for the coming year.
As foodservice offerings expand, operators show moderate dedication to foodservice. They typically purchase additional cooking equipment such as a fryer or oven to accommodate preparation of broader product offerings. These operators tend to recognize the threat of competitors and the challenge of customer perceptions of c-store foodservice. Because they also recognize the value of foodservice, operators are actively planning ways to remain competitive and combat negative customer perceptions.
Representing about half of c-stores offering foodservice, moderate-commitment c-stores are optimistic about the coming year, with growth expectations of 16%.
Operators with a high commitment to foodservice—about one in three c-stores with foodservice—have fully embraced the growth potential of foodservice and have enjoyed the added value it brings to their bottom line. They expect that value will continue in the coming year, with sales growth expectations of 22.4%. These operators have typically solved for competitive and consumer-perception threats and are ready to focus their attention on customer satisfaction and loyalty, particularly through social media.
CONTINUED: Notable Menu Trends
Notable Menu Trends
Growth in c-store foodservice has been driven by a variety of factors, but one notable area is reflected on the menu. Operators expect to see growth in offerings such as pizza, chicken items, deli salads, appetizers and milkshakes, believing they are “the next big things” in c-store foodservice. These are the products that have yet to gain broad availability in c-stores and therefore provide an opportunity for operators to differentiate their program. High-commitment operators are most likely to be the early adopters for these items because they exhibit the most sophistication in their product offerings and higher willingness to take risks with items before they hit the mainstream.
Several common items, such as sandwiches, hot dogs and dispensed beverages, are also expected to bring growth to c-store foodservice. These are items already present in most c-stores, regardless of their level of commitment, and are the staple items of those with limited foodservice commitment.
Niche items such as fresh fruit and vegetables or individual desserts provide potential opportunity for operators with more dedication looking to find ways to gain a competitive advantage without bringing in additional equipment.
With the attention and commitment to c-store foodservice growing at a rapid pace, operator sentiments quickly turn to the consumer. “It takes three to five years to change perceptions of c-store foods, so you have to commit to it and continue to invest,” one respondent said. From another: “We have to win over each guest little by little to build trust and improve perceptions of c-store foodservice.”
With the baseline of c-store foodservice defined and menu growth opportunities explored, next month we will explore challenges facing the c-store operator, the competitive landscape and strategies for growth.
Kym Schoenfeld is research manager for Product Evaluations Inc. This research was conducted among participants of the C-Store Foodservice Council. To learn more about this research panel contact info@productevaluations.com.
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