Given that the morning daypart is such a high-growth segment, it should be no surprise that the industry’s leading retailers are focusing a lot of effort on solidifying their offerings.
By John Lofstock, Editor.
Americans are more amenable to buying meals at convenience stores, but won’t budge when it comes to quality, price or convenience factors like portability and packaging.
Of the three major daypart, breakfast appears to have the biggest upside, fueled by a combination of increased demand, new products and more competition for QSRs and fast-casual restaurants.
“Convenience stores have done a wonderful job of creating restaurant-like settings and credibility,” said Arlene Spiegel, president of Arlene Spiegel & Associates in New York City. “It’s all in the sensuality—see, smell, taste, touch, which provides credibility and proof of freshness and quality.”
While items like breakfast sandwiches provide portability and value for convenience stores, and most chains offer an upscale coffee program, Spiegel pointed out that convenience stores still struggle to overcome consumer perception.
“Operators need to continue their commitment to building a brand that is not only credible, but exceeds the customers’ expectations,” Spiegel said. “The foodservice industry is all about credibility, and then getting the message out to the consumer that they are in the food business and not just selling fuel or magazines.”
Follow the Leaders
As consumer demand for fresh foods has grown, so too has the number of foodservice establishments, making it difficult to stand out with a unique offering. C-store operators have embraced the numerous foodservice options available to them, ranging from developing a proprietary food program, partnering with a well-know national or regional brand or contracting with a local supplier for daily third-party distribution. Determining which option is best depends on a number factors ranging from demographics, market competition and, ultimately, each chain’s level of commitment to the category.
“Sheetz and Wawa have been the leaders in the breakfast category and foodservice in general with strong proprietary branded programs,” said Tim Powell, director of research and consulting for Chicago-based consultancy Technomic Inc. “7-Eleven last year started rolling out Turbo Chef convection ovens, which are really speed ovens, so they can have hot-food programs—hot sandwiches, breakfast foods, which give them more versatility.”
One of the strategies Technomic sees c-stores following is bundling combo meals. “That’s probably been even more in the news lately,” Powell said. “That’s a plus for a c-store operator. Typically convenience stores can get a lower check average for a meal. For instance, a $2.99 value bundle in 7-Eleven, where if you look at McDonald’s or nearly anyplace else you’re typically looking at $4.99. So the price points are typically better, and you have a lot of suppliers now, the Krafts and Pepsis of the world, who are really trying to push these bundled promotions. This is where we’re seeing some growth.”
Having the expertise to execute a foodservice breakfast program is vital. “This is one area that NACS has really been focusing on. Many convenience store operators still have a retailer mindset. It’s still difficult for them to figure out a way to be foodservice operators, particularly when you have no dedicated foodservice person,” Powell said. “You don’t have someone who’s exclusively manning the four roller grills or the prepared foods case because he’s usually handling the money and people are paying for gas.”
To help spur consumer confidence, operators must take steps to provide value to guests. Smart operators will look to build sales by marketing healthful menu items and responding to consumer demand for convenience and variety.
Focusing on Food
While some retailers are still finding their way with food, Nice N Easy Grocery Shoppes in Canastota, N.Y. is anything but typical when it comes to foodservice. Convenience Store Decisions’ 2009 Chain of the Year offers an extensive line of hot and cold sandwiches and entrees around the clock. Whether it’s breakfast, lunch or dinner, the food is always fresh, and so is the coffee.
“We don’t have a dedicated person, we have a dedicated staff,” said Dr. Jack Cushman, vice president of foodservice for the 86-store chain. “It comes down to economies of scale—volume cures a multitude of sins.”
And, at the end of the day, that’s what will determine whether a foodservice program is actually successful or just another short-lived idea born by suits in a boardroom.
“We are in the foodservice business to be great. We expect nothing less. Our customers know that and they reward us with their business,” Cushman said. “But that’s not something we just hope for. We work really hard at it every day. You can’t measure one unsatisfied customer in terms of one bad transaction. It has a ripple effect. So the goal is to never have an unsatisfied customer. You do that with great food, a great staff, listening to what your customers wants and exceeding their expectations. It’s not easy, but when you do it consistently, you’re rewarded with a stream of repeat business.”
Customers Express Confidence in Convenience
Research firm Technomic Inc. conducted an online consumer survey—”The Convenience Store Foodservice Consumer Trend Report”—with a nationally representative sample of more than 1,500 American consumers. Among its findings: coffee beverages are one of the main draws to convenience store beverage programs not only at breakfast, but throughout the day.
In fact, 31% of consumers who purchase coffee at convenience stores said they do so more often than once a week. Other highlights included:
• Convenience stores continue to develop coffee offerings, highlighting specialty preparations and a wider variety of flavors.
• Since many customers are purchasing coffee for everyday occasions, regular coffee is probably the option that most consumers choose because it is
inexpensive and quick.
• Consumers reported that they purchase hot specialty coffee, such as a latte or cappuccino that is dispensed from a machine, iced or cold brewed coffee, and retail coffee beverages, at least occasionally.
• Females are more likely to purchase specialty coffee and prefer flavored coffee blends.
• Many younger consumers are purchasing convenience store coffee more often than they did a year ago, likely as the result of trading down from other foodservice locations.
• Consumers who have cut back on coffee purchases are doing so due to a lack of disposable income and a negative outlook on the future of the economy.
• Two-thirds (66%) of consumers who visit c-stores for breakfast said they purchase some type of prepared coffee at least occasionally (or about once every 90 days) when they visit convenience stores for this meal.
• A strong coffee program can drive traffic. About one-fifth (18%) of consumers said they choose their favorite store based on their individual coffee preferences.
• Preferred coffee offerings resonate most strongly with so-called Super Heavy Users. More than one-third (37%) of Super Heavy Users (compared to just 18% all consumers) said they visit their preferred location because it offers the coffee they prefer to drink. This suggests that offering high-quality coffee is likely to drive repeat business and perhaps daily visits, Technomic reported.