Convenience Store Foodservice: A Growth Opportunity
While higher gas prices are causing consumers wallet pain, convenience store operators are feeling deep profit pain, which is why so many are turning to foodservice to offset profit declines at the pump, according to a report by foodservice consultancy Technomic Inc.
With gross margins on fuel hovering at a meager average of 5 percent, many c-store operators are taking a fresh look at their foodservice programs, where margins are easily over 40 percent and exceed 60 percent at high-performing operations.
While as a percent of total c-store sales foodservice revenues remain small, higher gas prices may actually help operators grow foodservice sales, according to Chicago-based Technomic.
"Consumers are much more interested in reducing their driving. A trip to the gas station may be unavoidable, but now consumers are more likely to also pick up a quick meal or a snack at a c-store and avoid another stop," said Tim Powell, convenience store foodservice program director at Technomic.
The Technomic study found that when consumers are hungry for a meal, convenience stores typically fall behind restaurants and grocery stores as a top-of-mind destination. However, when asked about snacks, most consumers think of c-stores ahead of all other venues.
The study identified many opportunities for traditional foodservice suppliers to provide expertise to convenience stores, most of which operate much more like traditional retailers than foodservice/restaurant operators.
While the largest chains (1,000 units or more) hold most of the industry's foodservice share, mid-tier chains (10-1,000 units) account for 23 percent of all units and nearly a fifth of all c-store foodservice industry sales, according to Technomic.
"These [mid-tier] chains are often easier for suppliers to target and penetrate, particularly since there are fewer management levels and fewer competitors," said Powell. "Any food or beverage supplier that can help implement a branded solution, even if it's just for one product category, is likely to find success."
The Technomic study, titled “Target: C-Stores, A Growing Opportunity on the Foodservice Landscape,” provides foodservice suppliers with a road map for penetrating the c-store industry, including market size for specific c-store foodservice products, consumer attitudes and behavior towards c-store foodservice, recommended action steps and growth strategies.