Ingredients of Success

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Ingredients of Success

By Mehgan Belanger, Barbara Grondin Francella & Linda Lisanti

Foodservice is more than slapping hot dogs on a roller grill and calling it a day.

Technology, spoilage, product selection, price and overall store appearance are just some of the elements attendees cited at Convenience Store News' Foodservice Roundtable, held in New York, as factors that can impact foodservice success.

Participating retailers represented varying-sized chains -- from four locations to more than 5,500 -- as well as a variety of fresh-food programs, from proprietary, made-to-order sandwiches, pizza and fried chicken to roller grills and branded fast food.

Despite their differences, though, all agreed that commitment to execution is the key to foodservice success.

"We're in the hot dog business, but we don't do it well," said Dean Dirks, vice president of marketing and category management for Denver-based Firsthand Management LLC, the retail division of Balmar Petroleum that operates 33 convenience stores. "We need to be committed to the 7-Eleven model: keeping the grills full and focusing on sales, not waste -- it's the only way to make it succeed."

He predicts that improved technology will help retailers better execute in the foodservice arena in the coming years.

Quick Chek Food Stores of Whitehouse Station, N.J., for example, is utilizing touch-screen ordering to improve its foodservice business, said Jerry Hayes, director of operations at the company. The chain, with 107 stores in New Jersey and more on the way this month as it enters New York State, added the touch screens a year ago, and has seen its upcharges, or add-on sales, increase from 16 percent of transactions to 35 percent.

"It's amazing what people add when no one's looking -- double meat, double cheese," Hayes said. "Healthy eating is not what's really happening at ordering time."

Ian Byrd, director of franchise sales for Chester's International, a fried chicken provider and one of the roundtable sponsors, agreed. "People talk healthy, but eat hearty," he said.

Village Pantry, the Indianapolis-based c-store chain that was recently spun loose from its longtime parent, Marsh Supermarkets, also has found its core convenience-store customer remains "Bubba," said Chad Prast, foodservice director for the company's 148 stores -- 140 offering store-made sandwiches and 50 offering fried chicken. "Bubba has said he wants salad for years, but he always goes for the hoagie."

Village Pantry has had success with its Two for $2, Two for $3 and Two for $5 sandwich promotions. These promos work because customers can see a real value in making the multiple purchase, when buying only one item would cost significantly more (i.e., $1.29, $2.29, or $3.29, respectively). Both units and dollars are up because customers view it as a bargain, Prast said.

Price, however, is becoming harder for convenience-store operators to control as the cost of fuel continues to push up the cost of goods, retailers noted. "Ethanol is messing everything up," said Prast, adding that corn and meat prices have risen as a result of the increased demand for the corn-based alternative fuel. "Most people on the street don't know corn is $4.50 a bushel," he said.

Christy Howell, a brand manager for Boyd Coffee Co., based in Portland, Ore., cautioned retailers to also expect price increases on the hot beverages side, as the cost of fluid milk and skim-milk powder has increased more than 60 percent this year. These milk products are used in cappuccino, cocoa, creamers and sugar.

"Our raw materials are going up, so your fixed costs are going to go up," Howell explained. "Industry analysts have stated milk prices worldwide are rising at the fastest rate ever and won't be falling anytime soon. Milk is the new oil."

To determine when a price increase is necessary, Nice N Easy Grocery Shoppes of Canastota, N.Y., examines its product margins. If margins fall, the company then looks at its retail prices and the local competition's prices before adjustments are made, said Glenn White, director of foodservice for the chain's more than 80 store locations.

Instead of sacrificing margins for additional sales, promotions can be a way to generate bigger rings. For example, Nice N Easy stores offer a constant promotion of two slices of pizza and a free 20-ounce soda "because people like it so much," according to White. The chain also has a sub deal every Tuesday and a wrap deal on Thursdays.

The retailers agreed that it can be even harder for smaller operators to incorporate and execute a fresh foodservice program, but the future may hold an answer.

"Sixty percent of U.S. c-stores are single-store owners and small chains," said Dirks of Firsthand. "Proprietary or branded foodservice is not really an option because of the investment and risk involved. The Krafts, Sara Lees and Pierres of the world will continue to offer better products, thus giving the smaller retailer a viable foodservice program."

Kraft Foods' Kathleen Byrd, director of c-store foodservice, noted she and her colleagues are currently developing new, healthier grab-and-go and heat-and-eat food products that retailers can use to attract breakfast, lunch and afternoon snack traffic. More details will be available in the third and fourth quarter of this year, she said.

Keeping Beverage Sales Hot

In the area of hot beverages, Quick Chek has had great success with its coffee program, averaging 600 hot beverage transactions per store, per day, with top stores selling 6,000 to 7,000 cups per week; and more than 70 percent of all customers buying coffee.

During one study of customer buying habits, Quick Chek found 80 to 90 percent of morning customers head directly to the coffee area. "Since then, we've put a warmer with breakfast sandwiches and other breakfast foods between the door and the coffee bar to increase sales and make the purchase more convenient for the customer," Hayes shared.

A designated coffee manager at each store tends to the hot beverage island in the morning, where 10 to 12 burners are in play, along with a large selection of gourmet coffees and five to eight heads of cappuccino and hot chocolate. These are complemented with a condiment bar full of flavored creams, sugar and other fixings. Some high-volume stores have two condiment bars that intersect each other to keep customers moving.

"Some customers want to get their coffee and go, while others want to take their time and 'make love' to [their coffee]," Hayes said.

At Quick Chek, coffee is sold in 12-, 16- and 20-ounce cups, and priced by zone. Cups were redesigned from dark brown to a lighter color to coordinate better with the chain's overall foodservice image.

On the other end of the hot beverages bar, 1,300-site Petro-Canada, based in Mississauga, Ontario, has had great success with hot tea, having recently added a nine-tea rack and specialty teas to its stores. Sales are up 86 percent over last year's figures.

"Many of our markets, such as Toronto, are multi-cultural cities," explained Timothy Doherty, category manager. "Many Middle-Eastern and Asian customers aren't coffee drinkers. They are looking for hot tea."

Retailers who want to jumpstart their coffee sales also may find a simple promotion and/or loyalty program will solve the problem, said Boyd's Howell.

A retailer in Idaho, for instance, tried selling every size of coffee for $1.29. "Both coffee and cappuccino sales increased," she recalled. "Marketing can save a program."