Uncovering Foodservice Opportunities C-store foodservice to face strong growth, some significant challenges, in 2010
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PHOENIX -- "Who has felt culture shock in their company between the retail mindset and the foodservice mindset?" asked Abbie Westra, executive editor of Fare magazine. "Because it's a whole new world; it requires the proper metrics, math, technology, software and complete buy-in from the entire company—especially those at the store level—to make it work."
Westra led a workshop on "Interpreting Foodservice Sales Data, Uncovering Opportunity" at the 2010 Convenience Retailing University (CRU) conference, held by CSP Information Group this week in Phoenix.
She explored research that indicates 2010 will be another positive year for convenience store foodservice sales. In its Restaurant Industry Forecast, the National Restaurant Association expects improved sales for the entire industry, but "among all commercial industry segments, the strongest growth is expected in retail host restaurants—that's gas stations and drug and grocery stores," Westra said, citing the report, "with a 4.9% sales increase."
C-stores can expect greater competition from other channels, as restaurants and grocery stores focus on what "convenience" means to their own foodservice programs.
The workshop explored two contrasting opinions on the post-recessionary shopper. Some analysts and research firms anticipate that a "new conservative shopper" will emerge whose values are deeply engrained with a new sense of frugality. These consumers, not expected to fully emerge until the end of 2010, will shop around for the best deals, focus on the essentials and spend 3% to 10% less than in the past.
Meanwhile, a minority of researchers expect that once the recession softens, consumers will quickly and comfortably return to their old ways. What's more, The Hartman Group, a research firm leading this belief, found that this coupon clipping and penny pinching is really more emotional than economical, with zero net gain compared to overall household savings. What's more, "there is no significant correlation between those consumers engaged in thrifty behaviors and those who have been greatly affected by the recession."
Regardless of the long-term effects of the recession on shopper habits, Westra offered some tips on dealing with today's consumer:
Don't remind shoppers of the recession. "It only adds to their anxiety."
Become more than a commoditized source for products by connecting with the shopper. This happens by training store-level employees on the foodservice offer, then instituting sampling and upsell strategies.
Don't pursue an unusually aggressive pricing strategy, which encourages shoppers to cherry-pick your lowest-margin items before moving on to another store.
Consider creative, nondiscount-based promotional strategies. Giving away a featured product activates cultural norms of reciprocity, which compels the shopper to return the favor by returning to your store.
Westra also focused on the a.m. daypart. "Just as last year was about the Battle of the Brew and the Chicken Wars, I believe 2010 will be the year of the Breakfast Battles," she said, pointing to McDonald's recent breakfast $1 menu launch, Dunkin' Donuts 99-cent breakfast test, Taco Bell's partnerships with Seattle's Best Coffee, Cinnabon and Jimmy Dean Sausage and Subway's expected expansion of its breakfast test, also in partnership with Seattle's Best.
Unfortunately, c-stores have been losing their share of breakfast sales in recent years, and Westra urged attendees to leverage their coffee programs to boost more breakfast sales: "96% of customers who buy coffee at convenience stores intend to do so before they walk in the door," said Westra, adding that 47% of coffee buyers also buy two other categories, and the average in-store spend is $9.34 per trip.
But coffee is more than just a way to drive breakfast traffic. "It is proof that c-stores can dispel the myth that they do not deliver freshness and quality in prepared foods. If you can do to foodservice what you've done to coffee—freshness cues, branding and commitment to quality—you will succeed."
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C-stores can expect greater competition from other channels, as restaurants and grocery stores focus on what "convenience" means to their own foodservice programs.