Readying For Recovery

Convenience retailers are fine-tuning foodservice offerings, to be positioned for success when consumer spending picks up again

Coming off a year when consumers significantly scaled back on dining out, convenience retailers in 2010 are pressing full steam ahead to position their stores as the destination for fresh food and beverages as the nation's economy struggles to recover.

"Although customers are spending less and visiting less frequently, we have to invest now so we're ready when spending loosens up among consumers," Melina Hall, senior category manager of foodservice for Louisville, Ky.-based Thorntons Inc., said during Convenience Store News' 2010 Foodservice Roundtable, sponsored by Merisant Co.

The two-day event, held April 12-13, at CSNews headquarters in New York City, brought together a panel of best-in-class c-store retailers to share best practices, and discuss the many challenges and opportunities within the burgeoning foodservice category.

Guest speaker Tim Powell, director of convenience foodservice for consulting firm Technomic Inc., told attendees the convenience industry must do a better job of getting its foodservice offerings top-of-mind with consumers — because right now they aren't.

Citing Technomic research, Powell said only 8 percent of consumers think of c-stores for meals, and even more concerning is the fact that heavy c-store users say the foodservice at convenience stores is of poor quality compared to other fast-food restaurants.

To turn this around, Powell said c-stores must "become more relevant" by delivering consistently solid basics in food, service and appearance; having resonating points of differentiation; excelling at multiple attributes; and thinking and acting like a restaurant.

"How do you build a good foodservice program and sustain it? Good food," he stressed in his presentation. "Good food will keep people coming back again and again."

Every retailer at the roundtable said they are doing at least one thing to improve the quality and perception of their prepared food and dispensed beverage programs. Some are making minor tweaks, while others are in the middle of extensive revamps.

In the latter category, Thorntons recently commissioned a study to profile its coffee and fountain drinkers, and is making changes based on the results, said Hall. The company is in the process of expanding its dispensed beverages by offering customers a wider variety of options, including fresh-brewed tea, fountain equipment that can provide flavor shots, and the choice of cubed or crunchy ice. "We want our customers to have a choice of not only what kind of beverage they want, but also a choice of how to prepare their drink. They can customize their drink exactly the way they want," she said.

Thorntons is making changes to its prepared foods as well. The retailer recently redesigned most of the sandwiches, salads and side offerings under its QuickCafé brand, and is testing them regionally at higher price points from $3.49 to $3.99.

In addition, the retailer is looking into partnering with a third-party commissary to service the majority of its stores that now offer freeze-and-thaw sandwiches. At this time, Hall said the company has one commissary that serves only around one-quarter of its locations. The goal is to have all the company's stores offer the QuickCafé product line.

Providing a consistent offering was something echoed by several of the retailer attendees.

Wilson Farms' Vice President of Sales and Marketing Nick Gallegos said the greatest benefit to come out of the recent revamp of Wilson Farms' Fresh n' Ready Pizza program was consistency in execution. The reformulated program — now in roughly half of the retailer's 188 convenience stores — focuses on "creating a great product that can be baked fresh at the store and made to order," Gallegos said. The Williamsville, N.Y.-based retailer plans to continue rolling out the program to more of its locations.

Despite the typical perception of convenience store food, Technomic's Powell insisted that health and wellness can be a point of differentiation for c-stores, but most of the retailers at the table weren't buying it.

Bubba Kirkland, vice president of merchandising for Texarkana, Texas-based E-Z Mart Stores, said health and wellness success depends on the market, and his chain's markets aren't biting. "We put salads in some of our more upscale stores, and they just sat there and wilted," he said.

However, perhaps because it is a division of Pennsylvania-based grocer Giant Eagle, GetGo is having success positioning itself as a fresh-food destination. Liza Saleria, senior director of sales and merchandising, said the chain is trying to determine how to take the foodservice platform of its larger stores and adapt it for its smaller kiosk sites.

In the larger stores, Saleria said sushi does well, as does its cut fruit program. GetGo also put together a line of six healthy subs, piggybacking off of Subway's popular "Fresh Fit" menu. While Subway, McDonald's and other quick-service restaurants (QSRs) are certainly viewed as competition, Saleria said GetGo tries to capitalize on their trends.

GetGo offered 12-inch subs for $5 at the same time Subway was heavily promoting its $5 footlongs. And along the same lines, the retailer just launched its first Angus burger for $3.99. McDonald's rolled out a line of Angus burgers last year.

"As we exit the recession, we're creating the opportunity for a menu trade-up," Saleria said.

Powell of Technomic suggested all c-store retailers consider raising their price points to give their food a higher-quality perception. "Don't be too concerned about pricing yourself out," he said. "If you have a piece of pizza for 99 cents, consumers think how good could it be for that price. Everyone knows a Rolex for $50 isn't a Rolex."

Small changes can have a big impact too, according to Valero Retail Holdings' Senior Category Manager of Foodservice Geoff de Castro. For example, sales increase when products served warm are taken out of the packaging, he said. And wherever possible, Valero's Corner Stores position their ovens directly behind the sales counter, so customers can see the products coming out hot and fresh, and being placed in the warmer. In the area of cold dispensed beverages, de Castro said the newest trend Valero's Corner Stores have jumped on is pure cane sugar fountain drinks, popular with its Hispanic customers.

The retailers agreed it's important not to get hung up on the idea that people eat certain foods at certain times of the day. For instance, E-Z Mart has a breakfast biscuit program in 111 of its 297 c-stores, but also has seen success offering a corn dog during the morning daypart, and plans to add the product to more stores, noted Kirkland.

"What is breakfast? Lunch? Dinner? Due to shift workers and truck drivers, we're selling fried chicken at 7:30 in the morning," he said of the daypart blurring.

Food safety remains front and center on the minds of all the retailers. Foodservice consultant Dean Dirks reminded retailers that they must go back and check their procedures often, just like a restaurant would. "At Subway, if you fail its safety audit two times in a row, they'll revoke your franchise," he said.

Gallegos added food safety is "all about protecting your brand."

Pour Attention Into Coffee

Of course, foodservice goes beyond just prepared foods. Hot dispensed beverages, including coffee and cappuccino, remain a vital part of the category, and retailers are focusing on customization, variety and freshness to combat the increasing competition from fast-feeders such as McDonald's, and doughnut shops such as Tim Hortons.

GetGo, which features glass pots at its large sites and air pots at its small sites, is pouring a lot of attention into its condiment islands. "We're really focusing on customization," Saleria said, "because that's where we can distinguish ourselves from the QSRs."

While variety is important, Wilson Farms' Gallegos said the challenge is to not overload on flavors and varieties. To overcome this, the chain does a lot of limited-time offers and seasonal flavors as part of its brew-and-serve coffee program.

Valero's Corner Stores recently added a light roast blend after realizing its offering skewed too much toward medium and dark roasts. It also introduced a Triple Caffeinated variety, as well an organic blend it calls "Altura Dark Organic." To make customers aware of the new organic coffee, the retailer created story boards that hang above its coffee bars.

"We change up the messages," de Castro said. "This is a way to keep attention on the coffee category all year-round without having to go outside the stores to do it."

The Altura Dark Organic has quickly become 24 percent of the stores' coffee business, and de Castro also noted younger consumers are driving up cappuccino sales. He said 20 percent of the chain's coffee business used to be cappuccino, whereas now the segment accounts for more than 40 percent of its total coffee business.

No matter what beverage customers pour into their cups, the retailers at the roundtable said it must be fresh at all times. "Execution is still the biggest thing with coffee," said Kirkland of E-Z Mart. The chain sells its own proprietary brew, and has started moving coffee to isolated bars at the front of its stores.

Having an employee solely dedicated to the area helps ensure proper execution. TravelCenters of America (TA) saw a 10-percent to 12-percent increase in coffee sales since hiring hostesses to work its Café Express stations in the morning hours, said Kirk Matthews, senior category manager for the Westlake, Ohio-based operator of roughly 200 travel centers. An additional benefit is that shrink has been significantly lowered, he added.

Recalibrating the machines and replacing filters on a frequent basis can lead to a big improvement in coffee quality as well, according to Matthews. TA recently renewed its contract with S&D Coffee because the company agreed to service and recalibrate its machines, he explained. The chain is also on a filter-replacement program where new filters are sent directly to the stores every six months.

The retailers said more and more these days, they choose suppliers based on which is willing to provide the support services and backing to help grow their business.

"You should look for true coffee partners — a category manager to focus on each element of the coffee bar," said Sharon Porter, director of vendors and business development at Royal Buying Group, which represents 6,000 independent convenience operators.

"Don't look for someone to just get [coffee] in the door, but rather someone to grow it over time. You need to focus on execution and the in-store theater of coffee, and also consider inventive promotions and different blends, organics and iced coffee."

For comments, please contact Linda Lisanti, Senior Editor, at [email protected].

2010 Foodservice Roundtable

In April, Convenience Store News assembled its 2010 Foodservice Roundtable in New York City. Retailers and special guests analyzed the latest research data from CSNews, and discussed challenges and opportunities within the foodservice category.

RETAILER ATTENDEES

• Melanie Au Suncor Energy Inc.
• Geoff de Castro Valero Retail Holdings
• Nick Gallegos Wilson Farms
• Melina Hall Thorntons Inc.
• Bubba Kirkland E-Z Mart Stores Inc.
• Kirk Matthews TravelCenters of America
• Sharon Porter Royal Buying Group
• Liza Saleria GetGo/Giant Eagle

SPECIAL GUESTS

• Dean Dirks Dirks & Associates
• Tim Powell Technomic Inc.

SPONSOR

"As we exit the recession, we're creating the opportunity for a menu trade-up."

LIZA SALERIA, GIANT EAGLE, GETGO

These days, retailers said they more often choose suppliers based on which is willing to provide the support services and backing to grow their business.