Gourmet by the Gallon

Published in CSP Daily News

C-stores bulk up foodservice options

LARGO, Fla. -- The morning rush hour at Pinellas County, Fla.'s newest Rally Store is a revolving door of business suits, industrial crews, office workers and soccer moms with children in tow. In just five minutes, dozens of people head to and from their cars in search of the day's sustenance.

At this shop, that need translates into: seven tanks of gas, six packs of cigarettes, three breakfast sandwiches, four doughnuts, seven large cups of coffee, nine bottled drinks, six jumbo fountain colas, two candy bars, two Pop Tarts, two Red Bulls and a bag of [image-nocss] Fritos corn chips.

The selections reflect immediate needs for each customer. Like most convenience store customers, the customers give little thought beyond the one or two items they need before rushing off to and from work, according to a report from Tampa Bay Online (TBO).

Store owners know these shoppers don't match the stereotypes of men swinging by for beer, beef jerky and a pack of smokes after a day of hard labor. They're paying more attention to another segment: busy moms and their enormous purchasing power.

C-stores are refining the quantity and quality of items offered, and they are tailoring them to the needs of every worker, commuter and soccer mom driving up to the pumps and walking in the doors.

"The convenience store used to be Bubbaville," Mark Perreault, general manager of the 10 Rally Stores in Pinellas, told TBO. "We've brought the things out that make women with children comfortable in a convenience store environment."

This transformation taking place from interstate truck stops to neighborhood food marts isn't spurred only by new customers or a change in buying patterns. Dwindling profit margins for gas and tobacco products and increasing credit-card fees are forcing store operators and major chains to adapt and attract a broader demographic if they want to survive. A tank of gas may get customers to a store, but its less-than-10% profit margin is minimal compared with the 40% return on prepared foods, coffee and fountain drinks. It's smart business to focus more on the products that make more bucks.

They realized they needed to start paying attention to the center of the store," said Jim Mercer, CEO of National Executive Personnel, a Largo-based labor and marketing firm specializing in the c-store industry. Mercer, former owner of a c-store chain, said this trend has been happening for more than a decade but started booming in the past five years.

Tanks of gasoline and packs of cigarettes are the bread and butter of convenience stores, accounting for more than 75% of sales. In 2004, $2.4 million of the average $3.3 million in sales at each U.S. c-store was tied to gasoline sales, according to the National Association of Convenience Stores (NACS). Cigarettes were a distant but important second.

Despite the high sales, gas and tobacco make up less than half of stores' profits. The current average 7.2%-per-gallon profit margin for gasoline, which factors in store operator fees for popular credit-card payments, is at its lowest level in more than two decades, Jeff Lenard, communications director for NACS, told the online publication.

High-profit items such as foodservice are very attractive to convenience stores looking to increase their sales and profit. Prepared foods and drinks can have an estimated 40% profit margin on return. "We look at the gallons [of gas] as our attractor," Rally's Perreault said. "We try to give our customers a value" with food and other in-store merchandise.

Food is not the only area where c-stores are trying to increase their presence and profits. Mercer said another evolution is under way with check-cashing and bill-payment options. ATMs are standard in many stores, but chains such as 7-Eleven and Rally are offering more high-profile financial services akin to companies such as Amscot.

Lenard said there is little c-store operators can't try to do within their stores. He cites a Boca Raton store that has a gourmet deli, catering services and even wedding planning. The common thread to any store's success is convenience. "We sell time as much as anything. It doesn't matter if it's gas, a sandwich or a phone card," Lenard said. "The goal is to sell time."