Building A Better Foodservice Program

In CSD’s 2017 Foodservice Edition, we look at the latest trends and basic principles that convenience  retailers are following to ensure  quality offerings, modern menu
options and bigger profits.

By Erin Rigik Del Conte, Senior Editor

The foodservice landscape continues to shift. Customers want transparency, clean labels and better-for-you foods, but quality and variety are also top drivers in food purchases. What’s more, automation is poised to become an increasing player in the food arena.

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Chicago-based research firm Mintel International, recently pointed to four trends that are expected to impact foodservice in 2017:
1. Technological innovations are expected to add convenience but disrupt traditional service models amid rising labor costs. 2. Food waste is a growing issue and operators are finding new ways to repurpose existing foods, streamlining menus and offering simplified choices to reduce food waste and consumer decision fatigue. 3. As global cuisines emerge, so too are fundamental preparation techniques. Pickled and fermented items are popping up on menus as are fire-grilled or smoked items. 4. Americans want exciting experiences when it comes to food.

Q1 Consulting LLC’s recent study, “Capturing Opportunities in the Convenience Store Prepared Foods Channel, June 2016,” polled 250 retailers via phone and 1,000 customers online to determine the opportunities in foodservice.

The study found c-store foodservice sales were driven by prepared sandwiches (34%), in-store bakery (27%), roller grill (22%) and all other prepared foods (17%).

To compete in the foodservice arena, 48% of c-stores respondents hired dedicated foodservice employees. Of c-store respondents, 15% allowed customers to pre-order prepared foods or made-to-order items via an app, while 6% offered a kiosk option.

C-store respondents told Q1 that other c-stores are their biggest competition for foodservice dollars. But quick-service restaurants (QSR) and grocery stores were close behind.

From the customer standpoint, food variety and quality were the top concerns when deciding where to purchase a meal. When not visiting a c-store, 58% visited a QSR for a meal and 40% for snacks. Why? The QSRs were seen as offering broader food variety (45%) and better food quality (37%).

“C-stores are well poised to take on QSRs more aggressively in 2017. One of the major drivers of change will be the customer base,” said Tim Powell, vice president of consulting for Q1 Consulting LLC. The younger generation coming of age didn’t see c-stores in their foodservice infancy when they struggled with food quality, appeal, handling and atmosphere.

Moreover, QSRs will be challenged to compete with the variety of fresh items c-stores are offering from grab-and-go cases, Powell said.

Grab-and-go foods are in high demand and many c-stores today offer an array of fresh cold and hot prepared options.

Powell noted that a variety fresh foods and beverages customers can customize to their needs and still exit the store in three minutes signals quality to the customer.

“Traditional QSRs have fried foods and a limited menu. Only the fast casual channel has these (fresh) options, but customers pay a hefty price for the food,” Powell said. This gives c-stores a leg up on the grab-and-go competition. C-stores can further signal “quality” to customers through taste, appearance and packaging. One of the biggest things that can hurt quality perception is expired food.

“Convenience stores have gotten better at discarding food to improve their image and position, but the segment still has a way to go,” Powell said.

Savvy retailers know spoilage is a necessary part of the foodservice equation, and one to be included in P&L level plans.

Q1 found the heaviest users of c-stores, males aged 18-34 and groups earning $75,000-$99,000 annually, used prepared foods more in the first half of 2016 compared to 2015.

Some 23% of customer respondents visited a c-store for prepared foods and 16% for bakery items. Of grab-and-go/prepared food respondents, 61% knew what they planned to purchase before entering the store.

“The drivers of c-store patronage have long been tobacco, alcohol and fuel. It is very encouraging that prepared food (not just dispensed beverages) is becoming one of the major influences,” Powell said.

A trend toward local and sustainable foods, which has been more prominent on the both coasts, is expected to continue in 2017, migrating inward to middle America over the next few years.

“This social consciousness movement is not a fad,” said Powell. Cage-free eggs, real sugar, no processed ingredients, locally-sourced produce, clean labels, environmentally-friendly packaging and sustainable sourcing and transparency are all tied into this movement.

“This movement is in part due to the generational demands, but also driven by the quickness in which society can learn about ingredients and food production,” said Powell. “If we can take the ‘yellow’ out of Kraft Mac and Cheese—pure Americana—then I think it’s time to acknowledge that consumption patterns and needs have changed.”

The International Dairy Deli-Bakery Association’s “What’s in Store 2017,” report found 68% of consumers would like to see more healthy claims on menus; 76% of 18–34 year olds would eat more prepared meals if they were less processed.

Finding better-for-you (BFY) products at a c-store is important to 57% of customers, Q1’s study found. And finding BFY options was more important to males ages 18-34—the most frequent c-store patrons—than the average consumer.

But just what does BFY mean in 2017? According to the Q1 study, among males aged 18-24 who are regular c-store users, the top BFY features include low calorie (38%), low fat (33%), fresh (33%) high protein (33%), prepared fresh onsite (31%), clean label (31%) and all-natural (27%).

The Q1 study showed almost 30% of c-store customers visited between 5 a.m.-11 a.m.—prime breakfast time.

Customers aren’t only buying pastries and bagels with their morning coffee. Atlanta-based RaceTrac, which has more than 600 RaceTrac and RaceWay stores 12 southern states, recently revealed three out of five RaceTrac breakfast customers buy hot dogs over doughnuts in the morning.

Check out Convenience Store Decisions‘ February issue where c-store retailers and industry experts share their perspectives on healthy food options, on-the-go offerings, breakfast, profit and loss planning and local/sustainable ingredients—all of which are expected to play even bigger roles in the industry, going forward.