Convenience stores vs. fast-casual restaurants. Convenience stores vs. quick-service restaurants. Convenience stores vs. grocery stores. Convenience stores vs. drugstores.
These are just a few of the skirmishes being waged on the battleground of foodservice in the United States. Consumers have never had more options for where to eat and drink and consequently, foodservice operators have never faced more intense competition.
?It?s become immensely competitive in the last year or so,? said Donna Hood Crecca, senior director of the Adult Beverage Resource Group and the Convenience Store Insights Group at Technomic Inc., a fact-based research and consulting firm based in Chicago that focuses solely on the foodservice food and beverage industry.
?There?s a slowing overall in the foodservice industry and that?s set us up for a take share environment. If you want to grow, you have to take share from someone else.?
Convenience stores are successfully taking business away from quick-service restaurants (QSRs) and coffee shops, according to new consumer data provided exclusively to Convenience Store News by Technomic. The firm compiled a special Convenience Store Insights Report for CSNews, providing the latest information on what?s important to consumers when purchasing convenience foodservice, which c-store chains are winning on the key attributes, and how the leading c-store chains fare against the leading QSR chains when pitted head to head.
The Convenience Store Insights Report combines data from Technomic?s Convenience Store Insights Group Marketbrief, which is based on overnight surveys of 500 c-store customers, and data from Technomic?s Convenience Store Consumer Brand Metrics, an online survey panel of 4,080 c-store shoppers who were asked to rate their experience at convenience stores they visited in the past two months. (See Methodology box for more information.)
More consumers are choosing c-store foodservice at the expense of restaurants. In a Marketbrief survey conducted by Technomic in November, 20 percent of consumers said they have been purchasing c-store foodservice more often in the past month. Of those, 57 percent of respondents said they were visiting fast-food restaurants less often due to their increasing purchases of foodservice at c-stores and 41 percent said the same thing about coffee/beverage shops. Only 38 percent said they are visiting fast-casual restaurants less often due to c-store visits, but that is an 8-percent increase from the previous year.
Freshness, quality, cleanliness and taste are the most important factors that influence a consumer?s decision to purchase a food or beverage item from a convenience store. Cleanliness is particularly important as 26 percent of respondents said store/foodservice area cleanliness is the most important factor in their decision.
Another important finding of the research is the strong role beverages play in a consumer?s decision about which c-store to visit to purchase foodservice items. More than six in 10 consumers said a retailer?s selection of foodservice beverages (dispensed) is either important or extremely important to them. Fifty-six percent said the same of retail beverages (packaged).
WINNING C-STORE CHAINS
Based on its Consumer Brand Metrics analysis, Technomic identified four convenience store chains that are ?winning? with consumers and beating the QSR competition. The ?winning? chains are Wawa Inc., the Mid-Atlantic and Florida chain; Sheetz Inc., which operates largely in Pennsylvania and North Carolina; QuikTrip, the Tulsa, Okla.-based retailer that operates in 11 states including several major markets such as Atlanta, Dallas and St. Louis; and Stripes, the Corpus Christi, Texas-based c-store chain operated by Susser Holdings Corp. and soon to be acquired by Energy Transfer Partners LP.
When pitted directly against five leading QSRs ? McDonald?s, Subway, Starbucks, Wendy?s and Burger King ? these four convenience store chains and some others fared surprisingly well.
Respondents to the Consumer Brand Metrics survey were asked to rate their last experience at a restaurant (within the past 30 days) or a convenience store (within the past two months). On the issue of food quality, Wawa tied with Subway for the top spot, both garnering ?good? or ?very good? ratings from 96 percent of respondents. Wendy?s was next at 91 percent, followed by QuikTrip at 90 percent and then RaceTrac/RaceWay, Sheetz, Stripes and Starbucks each at 88 percent. McDonald?s had the lowest rating in food quality at 81 percent.
In regards to the availability of healthy options, consumers gave Subway the strongest rating in this area, but c-stores still hold their own on the healthy meter. Subway led the way with 91 percent, followed by Wawa at 74 percent, Wendy?s at 73 percent, and Sheetz at 71 percent.
Wawa topped all c-store and restaurant chains on the craveability scale, with 78 percent of consumers agreeing that the Pennsylvania-based convenience store chain was good or very good for ?craveable items I can only get at this convenience store/restaurant.? QuikTrip tied Wendy?s for second place at 76 percent, followed by Starbucks and Sheetz at 75 percent.
And finally, on the ability to provide value through high-quality menu items, the champ this time was Subway at 87 percent, followed by Wawa at 85 percent, Wendy?s at 82 percent and Sheetz at 80 percent. Several c-store chains, including QuikTrip, Stripes, APlus Convenience, Kwik Trip and Casey?s General Stores, all did better than McDonald?s on this measure.
The common thread among ?winning? convenience store chains, according to Crecca, is that they think and act like a foodservice operator. From operations to sourcing to training to marketing, they put food first. They also have strong foodservice cultures within their organizations.
Each winning c-store chain, though, does have its own unique strengths, she noted.
- Sheetz ? is heavy on innovation around foodservice. The retailer is constantly bringing out items that hit on current flavor and ingredient trends. Its Cali Turkey Flatbread is just one recent example of this. Sheetz also is adept at delivering craveable items.
- Wawa ? is very strong in foodservice beverage innovation. The chain offers made-to-order beverages, which ramps up the quality perception. Wawa continuously comes out with new beverages; it recently introduced a Salted Caramel Macchiato.
- QuikTrip ? is incorporating more healthy items into its foodservice program, while not giving up its craveable items. The retailer came out with a veggie wrap in the first quarter and at the same time, introduced Orange Dreamsicle doughnut holes.
- Stripes ? creates very strong messaging of freshness and homemade around its Laredo Taco Co. foodservice concept, which features handmade tortillas. The tagline is: Just like Mom wishes she made. The chain also recently announced its sponsorship of a Learning Garden community program, reinforcing its freshness message.
CSNews spoke directly with two of the ?winning? c-store chains to learn more about their foodservice approaches, what they did to get to this point, and where they are headed in the future.
SHEETZ: A CONVENIENCE RESTAURANT
Sheetz Inc. didn?t originally intend to adopt the term ?convenience restaurant? as a category differentiator. Instead, CEO Joe Sheetz said it was meant to get company insiders to view the business going forward ?a little differently? from its traditional business.
?It seems to have taken on a life of its own in some circles,? the chief executive acknowledged.
The Altoona, Pa.-based chain has had quite a while to develop its foodservice program into what it is today. It took the first significant step in the late 1980s when it began offering Made to Order (MTO) food, eventually retrofitting all Sheetz locations in order to build the brand.
Along with the usual challenges of managing a foodservice program, such as employee training, quality assurance and handling perishable products, one of the company?s early struggles involved deciding between producing its own ?Sheetz food? and partnering with a QSR brand.
?Ultimately, we learned that we like to be in control and generally don?t play well with others, so we went our own way,? Joe Sheetz explained, noting that it became even more important to Sheetz Inc. to develop a distinctively foodservice-based company culture when sales of traditional convenience drivers such as tobacco and gasoline began to slip. ?We needed to be really good at something else if we wanted to remain relevant.?
Joe Sheetz credits former President and CEO Stan Sheetz for shifting the company?s focus toward foodservice by ?walking the talk? and ?investing in world-class research and development processes with corporate chefs; creating a quality assurance and food safety program second to none; constantly challenging everybody to sell more food and beverage; rewarding those who did sell more; and essentially stretching peoples? minds about just how high [the] quality [of] food could be in a c-store environment.?
Today, Sheetz stores offer a wide variety of options for hungry customers, from healthier fare such as salads, flatbread sandwiches and wraps, to snacks like jalapeño poppers and gourmet pretzels, to signature pizza slices or whole pies ? all customizable through a touchscreen ordering system. Customers can ask for an item with no changes or request a ?meatball sub on multigrain with extra cheddar cheese and a drizzle of habanero hot sauce,? a personal favorite of Dan Coffin, director of culinary development for Sheetz.
Although the retailer has had a long time to test and refine its menu, Coffin and his team work to develop unique ingredients and new products that keep customers engaged, striving to keep all ingredients and offerings up to date and flavorful. ?We?re constantly looking for ideas and products that complement the menu and keep our brand on trend,? he said.
In recent years, those developments have been based on updating many of Sheetz? existing products in order to give customers the flavors they crave. The company works with a cross-functional group to test and validate any changes and how they will impact the operation, while also keeping a close eye on customers and the marketplace.
Communicating change to consumers can be a challenge, Coffin noted, as the company can?t personally explain its reasoning to every customer. Creating successful messaging allows the company to make a smooth transition from one product to another.
Sheetz? abilities to offer a broad menu with a range of price points and keep things fresh thanks to its own bakery and commissary give it some distinct competitive advantages, but there are other ways to boost a c-store foodservice program to restaurant status. Seating and drive-thrus are other points of differentiation, according to Joe Sheetz, along with the sophistication of an operator?s quality assurance and food safety program.
?Is your food ?just good enough? to where people will eat it if they are hungry, or is it so good that you are in the same consideration set as the QSRs when people are deciding where to have that meal away from home?? the chief exec posed.
Of all the lessons he?s learned in foodservice, the CEO said the most important one is that ?it takes patience,? especially when going it alone rather than through a QSR franchise as there is a great deal to learn and a lot of infrastructure to build.
?You have to be realistic about how much time and money you want to invest and what your corporate core competencies are,? Joe Sheetz said. ?It is a journey that never ends, so you need to commit for the long haul.?
QUIKTRIP: THE PATIENT APPROACH
Time spent operating a foodservice program can teach many lessons, but one stands out as the most important for officials at QuikTrip: the ability to keep an open ear.
?You?ve got to be a great listener,? said Mike Thornbrugh, spokesman for the Oklahoma-based convenience chain. Foodservice operators have to listen carefully to what customers want and what their expectations are as they work to meet them, he explained. They must also be prepared to stumble a few times in the process. ?Not everything is going to be successful.?
As a company, QuikTrip has also learned the value of patience as it?s worked to improve and expand its foodservice program ? which today is the QT Kitchens concept.
?We?re really patient,? Thornbrugh said. ?We believe it takes time ? you?ve got to do due diligence before rolling it out, and even then there?s no guarantee it?ll be successful.?
Taking a patient approach has allowed QuikTrip to manage the risk as it built its program. Today, QT Kitchens counters feature fresh, made-to-order food including sandwiches, pizza, smoothies, specialty coffee drinks and more, offering a wide selection to suit customers? needs.
Thornbrugh noted that for both experienced and fledgling foodservice programs, how products are offered is just as important as what is offered. ?You must have strong customer service or you just are not going to be successful,? he said. ?That goes for all of us in the business.?
Strength in customer service can give an edge to stores even if they haven?t offered a full foodservice program before. Thornbrugh cited consumer trust in QuikTrip as a reason it has done well in foodservice, because those who had been shopping at the chain for a long time trusted it to do its research and offer a quality product. ?The trust factor is huge,? he remarked.
As QuikTrip works on bringing QT Kitchens counters to all of its nearly 700 locations, the company maintains a sharp focus on what customers say they want. Current popular items include multiple varieties of flatbread sandwiches, kolache pastries at breakfast, and both personal and by-the-slice pizzas, a segment that is doing ?very, very well? at QuikTrip.
In the future, QuikTrip will continue to evolve as it keeps its eye on long-term development. Although it?s come far, Thornburgh said it will still take a long time for the company to get where it wants to be as a foodservice operator.
?If every single store is equipped with kitchen material in the next year to year and a half, that would be a tremendous goal,? he said. ?And we believe we can do it.? Once it does, QuikTrip will be competing with fast-food outlets, quick-service restaurants and other retailers, not just other convenience stores. ?That model?s over,? Thornbrugh said. ?It?s convenience stores against everybody.?
FIGHTING ANOTHER DAY
The battleground of foodservice is expected to wage on. If convenience store retailers want to be triumphant, they must ?put the periscope up and see what is happening in [their] market outside the c-store segment,? according to Crecca of Technomic.
The data provided to CSNews by Technomic identified things c-store retailers could do to encourage more consumers to visit and purchase foodservice items at their stores. More than four in 10 consumers said they would visit convenience stores more often for foodservice items instead of restaurants if c-stores sold made-to-order foods or had more healthy offerings. Another 35 percent requested self-serve areas, such as make-your-own salad or sandwich bars.
Smart c-store retailers will go after family dining occasions more aggressively. When asked what c-stores could do to encourage them to purchase more meals for their children or family, consumers said c-stores should offer more healthy items (51 percent of moms, 47 percent of dads) and offer more kids? items (43 percent of moms, 42 percent of dads).
The Technomic data also shows that c-stores compete favorably with fast-food restaurants on key snack attributes, indicating the great potential for more snack time sales at c-stores. When asked to compare the snack items offered by fast-food restaurants with those offered by c-stores, consumers gave higher marks to c-stores for price, uniqueness, health, craveability and variety. C-stores also gained some traction for quality/freshness and taste/flavor, but still trailed fast feeders on those two measures.
Crecca laid out five things c-stores should be doing to gain more foodservice share:
- Think like a foodservice provider from the corporate level to the store level.
- Know your customers. What drives their decisions on where to eat? How do they currently perceive your foodservice offering and how does that compare to the other foodservice operators they buy from?
- Determine how you?re going to define yourself as a foodservice operator. What are you going to be known for? Winning companies ?own? something.
- Remain committed to speed. Find out what your customers? perception is around acceptable speed of service.
- Put cleanliness first. People will not buy food in an environment they do not perceive as clean.