Generally speaking, the typical convenience store foodservice customer is thought to be male, blue collar and aged 30 or older. It’s a well-known fact that about 160 million customers visit convenience stores throughout the United States every day. It’s also a fact that foodservice accounts for 25 percent of all in-store (i.e., non-petroleum) gross dollar profits. That’s nearly double the margins of tobacco and packaged beverages.
“Today, and for the foreseeable future, foodservice — and especially fresh foodservice — represents the most important category in our business,” said How To Crew expert Maurice Minno, principal of MPM Consulting Group and former executive at Circle K and Wawa.
From Minno’s perspective, foodservice is the most important component in driving future sales inside convenience stores. He lists several reasons, including:
- Fresh foodservice is what today’s customers not only want, but crave. Customers seek out c-store retailers who are capable of satisfying customer foodservice cravings during each daypart (from morning to late night) — cravings for innovative, fresh, quality, good value-priced foods and beverages.
- It enables a c-store retailer to build a distinctive brand and operational model that can deliver truly unique experiences for consumers. Driving brand distinctiveness and delivering unique and memorable customer experiences is the key to retail success.
- A focus on fresh foodservice allows c-store retailers to evolve their image from offering simply traditional gas and “me-too” items (packaged foods, snacks, roller grill products, coffee and fountain beverages) to a Quick Service Restaurant Eatery (QSRE). Sheetz and Wawa are c-store retailers currently repositioning their businesses and creating QSREs that can effectively compete with any quick-service restaurant.
- Foodservice sales led the growth of total inside retail sales in 2014: 9.7 percent for foodservice vs. just 4.6-percent growth for all other inside-store sales.
- Gross profit dollar contribution from foodservice leads all other inside-store categories.
THE SHIFT TOWARD HEALTH-CONCIOUSNESS
With perception being a major factor in the design and execution of any business operation, c-store retailers should not overlook that approximately two-thirds of Americans (64 percent) think convenience stores are currently offering “healthier, nutritious products.” In by foodservice offerings.
This opens up a huge opportunity for c-store retailers to boost store sales by attracting two ancillary demographics to their foodservice operations: women and millennials, both of which are firmly invested in the “better-for-you” category.
“Women and millennials are two groups that are underserved by today’s convenience stores,” said How To Crew member Ed Burcher, president of Burcher Consulting, an Oakville, Ontario-based firm specializing in foodservice merchandising operations.
According to Burcher, many products sought by women and millennials — including foodservice offerings — are the same products that appeal to your store’s core demographic.
By specifically targeting women and millennials using various methods, such as in-store messaging, local advertising and social media, it is reasonable to expect increased store traffic and increased basket rings, resulting in a healthy boost in profits. Retailers should also remember that foodservice is the ideal category appealing to virtually every demographic entering your store.
MILLENNIALS: NEW-WAVE CONSUMERS
What do we know about the amorphous demographic commonly referred to as the millennial generation, or simply millennials? From an anecdotal perspective, we know that nine out of 10 millennials (consumers aged 18–34) prefer texting over talking on the phone. We also know this generation of Americans virtually grew up online and eschew traditional media, including print media (newspapers, magazines), television and radio. We also know they’re waiting longer — much longer — than their parents did to settle down, marry and start families.
And while it may be true that these “new-wave” consumers are coping with more educational debt than previous generations, evidence points to the unprecedented spending power of millennials. According to the Hartman Group, millennials accounted for approximately $1.3 trillion of all-channel consumer spending in 2014.
Convenience store operators would be well-advised to recognize the profit potential in courting what was previously just thought of as an “alternative” demo.
“Millennials are becoming an increasingly important target for c-store foodservice operators,” explained How To Crew member Mathew Mandeltort, vice president of foodservice strategy at convenience distributor Eby-Brown Co. Citing The NPD Group’s annual Eating Patterns in America study, he noted that convenience stores accounted for 11.1 percent of all millennial food and beverage stops in 2014, up from 7.7 percent in 2006. By comparison, fast-casual dining accounted for 6.1 percent in 2014 vs. 3.1 percent in 2006.
Indeed, millennials are projected to outnumber both baby boomers (aged 51–69) and generation X (aged 35–50) by 2028. “Given the group’s size and spending power, millennials are a force to be reckoned with now and in the foreseeable future,” Mandeltort surmised.
Convenience retailers adept at utilizing new media are far more likely to be successful in attracting millennials to their foodservice area — and growing total in-store sales and profits down the road. One such c-store retailer is York, Pa.-based Rutter’s Farm Stores.
“Our kiosks allow our customers to choose what they want and how they want it,” said new How To Crew panelist Ryan Krebs, director of foodservice at Rutter’s. “I am convinced we are way past the point of deciding what we believe the customer wants, so we allow them to build their food items to their own specifications and liking. Unlimited toppings, extra meats and cheeses, choice of breads, combos with a side and drink, grilled/toasted/Panini, multiple sauce choices. The list goes on and on. We give them all the options we can conceive and allow them to personalize to their heart’s content.”
Unlike their baby boomer predecessors who were primarily driven by cost and convenience, millennials are far more interested in the health and nutritional attributes of what they put in their collective bodies. C-store operators must be cognizant of this important fact when designing their foodservice repertoire.
“I won’t go into detail because the options are limitless,” continued Krebs. Nonetheless, he did offer some buzzwords to focus on:
- Gluten free
- Dairy alternatives (such as soy, almond and coconut)
- Prepared on-site
- Low sodium/fat/cholesterol
All of these terms should be carefully considered when designing a program to attract young adults to your foodservice operation. Essentially, when courting alternative customers, make sure you have alternative products to fill their need-states.
“Millennials typically are significantly less likely to purchase hot coffee, as they prefer to get their caffeine via energy drinks,” cited How To Crew expert David Bishop, managing partner of Barrington, Ill.-based Balvor LLC, a sales and marketing firm. They are more likely than older consumers to purchase fresh bakery items such as doughnuts, muffins and bagels.
Millennials should be factored into every convenience store retailer’s business plan, according to Bishop. “Millennials are very important, as they are the future drivers of the economy.”
Female consumers are an equally appealing segment to c-store operators. Historically, women have not been prime consumers of convenience foodservice offerings. And yet, they constitute 51 percent of the U.S. population and own approximately $7 billion of the nation’s purchasing power. This, combined with the influence they have as family dining decision-makers, should make women a prime target for growing your foodservice operation if they aren’t already.
Jennifer Vespole, director of foodservice at Whitehouse Station, N.J.-based convenience store chain QuickChek Corp., thinks it’s important for convenience retailers to stay on trend with what people are eating and drinking in their individual markets.
“High-quality ingredients, tasty recipes and the ability to customize are important,” noted Vespole, the lone female How To Crew board member. “We [QuickChek] offer our customers the ability to see nutritional information as they build their menu items.”
While this strategy has gained some traction at QuickChek, retailers need to find a healthy balance. A convenience store, after all, will never be thought of as a mini Whole Foods — nor should it. “Honestly, people still go for the items they love that taste good,” concedes Vespole.
And while presentation is an important factor in attracting women to foodservice, it is equally important to virtually all other demographic groups. “Don’t underestimate men,” she stated.
Of course, that means a cookie-cutter approach to foodservice is definitely not in a c-store operator’s best interest. “Presentation is important to almost everyone,” continued Vespole. “If you want to become a destination for salad, you need to be able to give your customers — all your customers — the ability to customize their orders.”
Mandeltort of Eby-Brown points to some societal norms generally associated with females as key to developing successful foodservice executions.
“Because they are typically caregivers, healthy eating is top-of-mind, both for themselves and for their family members,” he said.
According to Mandeltort, women are more likely to order:
- Turkey sandwiches or turkey clubs
- Ethnic (Chinese, Asian or Indian) food
- Salads and side salads
- Fresh fruit and non-fried vegetables
“However, simply having appealing food and beverage options for female consumers is not, in and of itself, enough to move the needle for every retailer,” he cautioned. Issues such as concern for food safety and store cleanliness are paramount for women consumers.
Millennials and women share many similarities in terms of in-store consumer behavior and that makes life easier for retailers to develop in-store executions to attract both demos and increase their overall consumer base. For instance, both groups tend to be more particular regarding what they put in their bodies than your blue-collar male consumer base.
“Healthier choices are much more important to these two groups than to the typical c-store consumer,” explained Bishop. “What items should you be offering to attract them?”
Many millennials are searching for healthy options at reasonable prices. “So having different types of meal deals or daily discounts could be a way to appeal to this segment as many were significantly impacted by the Great Recession,” he said.
Women are looking for a broader range of better-for-you options. “Items such as pre-cut packaged fruit or vegetables, yogurt and a limited range of fresh fruits may help with females,” Bishop continued. “And, for this to be effective, retailers need to excel at product rotation and presentation.”
In terms of marketing a healthy approach in your store to women and millennials, sometimes it’s not so much what you offer, but rather what you don’t offer.
“If you were to play a game of word association with retailers and say ‘healthy,’ many will respond ‘salad,’” explained Mandeltort. But salads are not the be-all and end-all of healthy offerings. “There are so many different ways to create a healthy halo without having to rely heavily on salads. Just having ‘fresh’ food gives you a leg-up.”
As Mandeltort cited, 87 percent of consumers believe fresh food is healthier and tastes better.
“You can offer wraps with carriers that have healthy halos such as spinach or tomato,” he said. “You can also offer fresh fruit — whole or cut — to achieve a better-for-you selection.”
While there will obviously be obstacles in developing and executing a foodservice plan that includes a wide variety of fresh, customizable offerings, it is imperative not to give up. The profit potential is just too strong, according to the How To Crew.