New Research Finds COVID-19 Interruptions Shrunk C-store Foodservice by 13% in 2020

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New Research Finds COVID-19 Interruptions Shrunk C-store Foodservice by 13% in 2020

01/06/2021

NATIONAL REPORT — The COVID-19 pandemic is still ongoing, but it isn't too soon to think about its long-term effects on convenience store foodservice in a post-pandemic world.

The channel will start out smaller, as COVID-related interruptions shrunk the prepared food segment by 13 percent in 2020, according to consulting and insights firm Foodservice IP. Hot dispensed beverages dropped 3.8 percent, cold dispensed beverages declined 4.3 percent, and frozen dispensed beverages dropped 3.9 percent. Overall, the foodservice category shrunk 8.6 percent during 2020.  

C-store customers have also exhibited recession behaviors such as a preference for private label products and single trips for multiple items.

However, the channel retains numerous advantages, such as one-stop shopping, potential to be a remote worker "break" destination, touchless technology and a younger, savvier user base. These factors will push it to exceed overall U.S. foodservice industry nominal growth through 2023, the market research firm stated.

To provide an up-to-date evaluation of convenience foodservice programs, Foodservice IP conducted a survey of 500 heavy-to-moderate foodservice users to assess their buying behavior, attitudes, perceptions and demographics and interviewed 150 operators, including major c-store chains and high-volume independent retailers.

The survey found that 55 percent of c-stores have dedicated foodservice employees, compared to 30 percent who said the same in 2018. This was likely boosted by their quick pivot away from self-service early in the pandemic. Dedicated foodservice employees offer retailers more control over food safety while allowing them to push their carryout and/or delivery offering to offset losses in prepared food sales.

Commissaries now account for 36 percent of prepared food sourcing for c-stores. This includes both third-party (29 percent) and company-owned (7 percent) commissaries. C-store distributors account for 19 percent and broadline foodservice distributors account for 14 percent.

The increase in the use of commissaries indicates that identifying and selling into central kitchens will become more important as the variety of prepared foods and c-store delivery expand, Foodservice IP noted.

When it comes to what time customers are buying food, c-stores have observed an increase in late morning through late afternoon traffic compared to pre-COVID, likely an effect of increased remote work. Conversely, the period of 4 p.m. to midnight saw traffic decline. If companies continue to allow flexibility in remote work after COVID, these traffic levels are likely to remain.

Customer interaction is also likely to face long-term change. C-store operators are concerned that the adoption of touchless and mobile technology will limit such interaction, but loyalty programs and increased hospitality training for both drive-thru and traditional retail areas should help stores maintain regular customer contact. This is likely to push training costs up.

Ultimately, the pandemic accelerated some trends that were already occurring and are likely to continue, while other changes, such as daypart traffic shifts, could return to their former state if workers return to their normal place of business. However, the pandemic will have a lasting effect on the c-store foodservice channel, particularly regarding labor and the need for broad-based restaurant training. Foodservice manufacturers can capitalize on these needs by focusing on innovative offerings that are easily prepared by store employees or dispensed as single servings. Suppliers can also drive value-added partnerships by sponsoring loyalty rewards programs, Foodservice IP offered.

A full infographic based on Foodservice IP's survey is available here.