Speeding Back Up

Putting an end to a three-year slowdown trend, the rate of foodservice growth at U.S. convenience stores last year shifted back into acceleration mode. Average per-store sales of foodservice — which includes prepared food and hot, cold and frozen dispensed beverages — rose by 6 percent during 2015, up from 4.6 percent in 2014. In fact, this marked the largest percentage increase since 2012, when per-store sales grew by 6.8 percent.

While sales of frozen beverages were flat, hot and cold dispensed beverages rebounded significantly year over year to contribute to the category’s accelerated growth. Prepared food also had another strong year, although its growth did slow a bit compared to 2014.

According to industry experts, likely factors behind the strong sales performance of foodservice in 2015 were more discretionary income, reduced unemployment and lower gas prices.

“Store sales were certainly helped by the c-store consumers feeling they had more money in their pocket after paying for fuel,” explained Steve Montgomery, president of b2b Solutions LLC. “The other strong driver is [that] the industry is getting better at foodservice. In most cases, the purchase of the foodservice items contributes to the basket total. It is not the case of the consumer buying a foodservice item rather than another item.”

By far, prepared food remains the top foodservice segment and increased in average sales per store by 6.5 percent, or $9,146 per store, last year. Within this segment, sandwiches make up more than a quarter of sales. Hot dogs and pizza round out the top three items.

For the most part, dispensed beverages had a banner year in 2015 compared to the prior year. Average sales per store of hot beverages increased 4.7 percent, compared to a decline of 0.6 percent the previous year. Cold dispensed beverages increased in average sales per store by 7.9 percent, a significant change in direction from 2014’s 0.7-percent decline.

Despite the acceleration on the sales side, the same could not be said for margins. The average gross margin percent for foodservice last year was 43.72 percent, down from 44.13 percent in 2014. This metric has actually declined in every one of the past five years.

“I think we’re seeing the evolution of foodservice in c-stores reaching the maturity stage. This may seem like a risky statement, but if you look at the concepts that dominate foodservice and dispensed beverage sales (Sheetz, Wawa, QuikTrip, QuickChek, Rutter’s), they have been doing it for years,” said Tim Powell, vice president of consultancy Q1 Productions.

Even so, Jon Bratta, vice president of marketing for distributor Core-Mark International Inc., pointed out that simply having a flat margin isn’t necessarily a bad thing.

“Margins in foodservice are comprised of many factors: retails, cost, operations, efficiencies, waste. The devil is always in the details, meaning that how we arrived at flat margins is a more important consideration than that one single fact,” he said.

“The devil is always in the details, meaning that how we arrived at flat margins is a more important consideration than that one single fact.”
— Jon Bratta, Core-Mark International Inc.