C-stores Continue to Gain Share in Foodservice Wars

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C-stores Continue to Gain Share in Foodservice Wars

By Don Longo, Convenience Store News - 07/15/2011

NATIONAL REPORT -- Convenience stores and casual-dining restaurants have been the big winners in taking advantage of the uptick seen in consumers' dining out frequency over the past 12 months, as the national economy shows small signs of improvement.

According to the recently released North American Restaurant and Foodservice Review by AlixPartners, consumers are eating out more often now than they were a year ago. Over the last 12 months, 70 percent of consumers dined out at least weekly, a 43-percent increase over the first quarter of 2010, based on research conducted this June with a national sample of consumers over the age of 18.

Dining frequency at convenience stores was up 63 percent, from an average of 1.6 times a month to 2.6 times per month, according to the study conducted by AlixPartners, which also included a business review of more than 120 foodservice concepts from QSRs (quick-service restaurants) to fine dining to convenience stores.

Casual-dining restaurants, like the Cheesecake Factory, Applebee's and Olive Garden, also saw a significant increase in dining frequency over the past year -- from 2.4 to 3 times a month, a 2-percent gain. However, casual-dining establishments also suffered more than other foodservice types during the worst part of the recent recession, Adam Werner, AlixPartners' managing director, said in an interview with Convenience Store News. Fast-food and fast-casual restaurants achieved flat to 2-percent gains in dining frequency over the past year.

"We've seen a huge jump in the number of consumers going out for dining," said Werner, who added that the increase was across all demographics -- gender, income, geographic, etc.

Werner noted that according to his firm's research, the economic recovery is still "on the shaky side. Consumers are going out to eat more, but they are also very value conscious. They want to come back [to dining out], but they want to pay less."

When asked what they expect to pay per meal when dining out, consumers' expectations declined by 5 percent on average, from $14.10 to $13.40 per meal.

Other conclusions drawn from the consumer survey portion of the AlixPartners report were:

• Consumers realize that some restaurants will need to raise prices on "select items" to address rising commodity costs.

• Promotions appear to factor heavily into these expectations as discounting appears to be here to stay.

• Diners are frequenting restaurants' websites and social media outlets to find deals (a 15-percent increase since December) as digital marketing continues to gain prominence.

• Health and wellness continue to gain traction. Nearly half the people surveyed thought it was important for restaurants to have healthy menu options.

• Consumers are also noticing how their favorite restaurants focus on innovation. Higher food quality and better taste are far and away the most important aspects of innovation, but customer service and menu variety are also important.

The report predicts that QSRs will continue to gain strength as the economy improves, but that c-stores will keep making inroads on the fast-food business.

The rise in raw materials costs was the other major theme of the report. "Raw materials like proteins, fruits and vegetables are up 20 to 40 percent from a year ago," Werner pointed out, adding that competitive pressures prevent retailers from passing price increases on to consumers. Retailers will find absorbing commodity price increases even more difficult in the year ahead. Last year, most chains had locked in their commodity prices for the year."

AlixPartners is a global firm of senior business and consulting professionals that specializes in improving corporate financial and operational performance, executing corporate turnarounds and providing litigation consulting and forensic accounting services.