Foodservice evolution sits at the top of the docket for many convenience stores in 2023 as retailers brace against declining fuel volumes, volatile gas prices and a shift toward electric vehicle (EV) charging, all of which make foodservice crucial for driving traffic and creating new revenue streams.
Meanwhile, retailers and industry experts agree that inflation represents the top trend expected to impact c-store food programs in the year ahead, with labor shortages, the overall economy and supply chain issues close behind.
Research by Datassential concurred, revealing 87% of operators are worried about high prices and inflation in 2023, far more than any other concern.
“At the same time, consumers are at this unique moment where they want new food experiences again, and they want to see more innovation,” said Mike Kostyo, trendologist and associate director of content for Datassential.
That means c-store operators face the challenge of balancing inflationary concerns with a need for innovation to meet customer expectations for new, interesting menu items.
That’s no small feat, considering higher prices are known to impact customers’ disposable incomes.
As a result, Tim Powell, managing principal for Foodservice IP, warned that high prices from the fuel pump to the food counter could detrimentally impact in-store traffic at c-stores this year.
M. David May, director of foodservices at Kwik Stop convenience stores, is already feeling the effects of inflation. As costs have gone up, he’s had to increase menu prices. In 2023 he’ll be watching fuel’s trajectory to predict foodservice sales performance. As gas prices go down, foodservice sales go up at the chain’s 27 stores in Nebraska and Colorado. As gas prices rise, foodservice sales decline because customers have less discretionary money to spend on food after filling up their tanks.
“I want to tell all foodservice executives — this is at the top of my lungs — that you can have sales growth, but that doesn’t mean you’re really growing, especially at this point in time with inflationary pressures,” May said.
Through Dec. 5, 2022, units sold in the foodservice category at Kwik Stop were down 9%, but because prices have increased, dollar sales show 5% growth.
“So yes, my sales look like, ‘Oh, I’ve grown it,’ but I really haven’t because my item count that I’m actually selling is lower. We actually lost business because we’ve had to increase our prices (due to inflation) so much,” May said.
As c-stores look to combat inflation, innovation will be key because retailers will need to differentiate their offering from quick-service restaurants (QSRs), Powell noted. He expects c-stores to expand their breakfast programs and introduce more promotions via bundling and loyalty programs.
“We’re going to see a lot of innovative options and limited-time offers (LTOs) that utilize lower-cost ingredients, or cross-utilize options already on the menu,” predicted Kostyo, adding that foodservice operators will have to create these within pricing parameters.
As customers cope with rising prices, they’re looking to smaller-sized portions, allowing them to purchase innovative or even premium options at a lower price point.
“Small is big,” said Joy Almekies, senior director of food services, Global Partners LP, which operates 386 corporately owned c-stores in the Northeast and Mid-Atlantic regions under banners including Alltown, Alltown Fresh, Xtramart and Jiffy Mart. Almekies pointed to examples, such as finger-sized sandwiches from refrigerated merchandisers, slider options through heated merchandisers and decadent small-bite options of quality desserts.
Meanwhile, c-store customer demographics are also evolving. Dash In is focusing on the emergence of a new customer profile, mainly consisting of young millennials and Gen Z.
“This group shops differently and sees c-store foodservice in a whole new light, opening new opportunities for growth,” said Barbara Nova, senior director of food and beverage, The Wills Group, which operates 57 Dash In convenience stores in Maryland, Delaware and Virginia. “With this rise in this new customer profile, we’re also seeing new trends in foodservice technology usage, such as app usage, digital loyalty programs, third-party delivery partnerships, touchless payments, order ahead options, kiosks and even subscription services.”
A number of trends that saw hyper-growth during the peak of the COVID-19 pandemic, such as plant-based foods and ghost kitchens, are expected to begin leveling out, Kostyo said.
“These categories aren’t dead,” Kostyo said. “In fact, 40% of consumers plan to buy plant-based meats (in 2023). But the bad ideas, concepts and brands will slowly die off, and the good, useful ideas and companies will stick around.”
“More than ever, to stay relevant in food for convenience, the offering needs to be on trend and somewhat unexpected to gain traction within the consumers’ consideration set and then to retain them as a loyal customer in food,” said Jac Moskalik, vice president of food innovation for Kum & Go, which operates over 400 stores in 13 states.
To become a foodservice destination in 2023, Moskalik’s advice is to focus on fresh ingredients, local assortment and food theatre with a component of speed.
What’s On the Menu?
C-stores are focused on improving their menu offerings in 2023, adding new items to attract customer attention.
At Dash In’s Neighborhood Design stores, food is made to order (MTO) and prepared on-site in the chain’s full commercial kitchens, which are outfitted with a griddle, fryers and convection ovens. Dash-In’s proprietary menu features both hot and cold grab-and-go options, including a wide array of morning daypart items such as croissant sandwiches and breakfast burritos made with fresh cracked eggs.
“We also offer several flavors of signature wings, the Stackadilla, pizza, wraps and salads,” Nova said.
In 2023 Dash In is rolling out a “Bang Bang Shrimp Sandwich” for the Lenten period. “We also plan to begin baking biscuits and croissants for our sandwiches on-site and plan to introduce fresh baked cookies,” Nova said.
The chain is piloting a vector oven to allow stores to bake on-site and perform batch cooking as demand increases.
At Louisville, Ky.-based Thorntons, which operates 214 stores in six states, the foodservice offering includes grab-and-go products assembled on-site.
“This includes a variety of breakfast sandwiches, hand-rolled burritos and various lunch items in addition to a roller grill program accompanied with a fresh condiment offering,” said Greg Ekman, director of fresh food and proprietary beverage, Thorntons. Breakfast croissants — Sausage, Egg & Cheese and a Bacon, Egg & Cheese option — rank among customers’ favorite items. Another top seller is the chain’s Steak, Egg & Cheese breakfast burrito, which was introduced in May 2022, and features scrambled eggs, Philly steak, chipotle sauce, cheese and fried onions.
“We additionally have a fresh doughnut program supplied by a fully owned and operated bakery in Louisville,” said Ekman, which delivers doughnuts daily to a number of Thorntons’ sites.
This January Thorntons launched a new bone-in chicken wing platform, which includes an Oven Roasted Wing and Spicy Wing option.
In Q1, Thorntons plans to begin baking products fresh on-site. It’s launching a new breakfast sandwich program that includes fresh biscuits baked in-store paired with premium breakfast proteins. Ekman said the sandwich lineup will rival the quality of fast-food chains. Thorntons is also adding a fresh-baked cookie program.
Des Moines, Iowa-based Kum & Go attracts foodservice customers with fun, unique and fresh MTO products across dayparts, and all items are customizable. For example, customers ordering breakfast bowls can swap breakfast potatoes with wilted spinach, etc.
Kum & Go is passionate about offering healthier options for customers and highlights local brands when possible. The chain also features a selection of grab-and-go warm and cold food options, including burritos, sandwiches and salads.
“We are always in a constant state of innovation at Kum & Go,” Moskalik said. From December 2022 to January 2023, Kum & Go completed a staged rollout of a premium bakery offering.
“For 2023, our team will be focused on snacking and taking our pizza program to the next level to grow food sales in morning and afternoon dayparts,” Moskalik said.
Global Partners LP provides fresh food prepared on-site in full kitchens. “We have created a five-step program allowing growth to all our foodservice operations,” Almekies said.
Step 1 starts with a fresh bakery program that ranges from traditional bakery offerings to New York cheesecakes, apple empanadas, bread puddings and more.
“Our Step 2 facet is identified as ‘EXPRESS.’ These offerings are designed for a labor-challenged market that does not compromise on quality,” Almekies said. “We work closely with our key manufacturer partners to produce proprietary recipes and distribute to our sites.”
Global Partners also offers a freshly fried chicken program with a proprietary “secret sauce,” and sandwiches that are handcrafted on-site and available through the refrigerated grab-and-go section or customized as MTO options.
International food options are in demand. In Q1 Global Partners is introducing a Mexican-inspired offering, including LTOs, small-bite tacos, meals and on-the-go snack choices for the late afternoon and evening.
Headquartered in Topeka, Kan., Street Corner launched its new MTO menu in 2022 and is seeing competitors follow suit.
“They want to add a premium service inside the store versus the roller grill items or something in the warmer,” said Vikram Dhillon, CEO of Street Corner, a franchise-only model with 44 locations in the U.S. “A lot of locations, mostly in metropolitan areas, are focusing more on bringing healthier food options and MTO fresh items, similar to what you see in Whole Foods, where they display the fresh ingredients in a deli case, so people can see what they’re making versus just preparing food in the back and bringing it out ready-made.”
Popular menu items at Street Corner include its naan bread pizza, with varieties such as Chipotle Chicken Pizza and Chicken Alfredo Pizza.
“Then we also use the same naan bread, and we wrap it into a sandwich,” Dhillon said. Offerings include a Chicken Tikka Masala Sandwich, Steak Fajitas and a Banh Mi Chicken Sandwich.
“We want to become a hub for food versus just a convenience factor,” he said.
In 2023 Street Corner is focused on letting customers watch the food preparation process. The company’s chef designed the menu, of which 80% is the chain’s standard menu and 20% is dedicated to the local flair, so franchisees have the option to customize the menu. Kabob plates are among new local dishes launching in 2023.
All of Kwik Stop’s 27 locations feature grab-and-go foods. Twelve stores offer full-service delis with hot food. Six of those sites provide a Krispy Krunchy Chicken (KKC) program and four feature Kwik Stop’s Mexi Fresh program, which includes tacos, burritos and taco salads. Nine stores provide a Piccadilly Pizza program, while 12 stores offer the Kwik & Fresh program, which features nearly 50 items, including burgers, mozzarella sticks, jalapeño poppers and chicken sandwiches.
May minimizes overlap between programs. For example, in Kwik Stop stores with KKC and Kwik & Fresh, chicken sandwiches are only offered from KKC. When growing the menu, May said he maximizes SKUs by getting creative with ingredients the chain is already ordering.
In 2023, Kwik Stop’s Mexi Fresh stores are introducing a fried chicken burrito, which uses chicken tenders from KKC. The item did well as an LTO and earned a slot on the Mexi Fresh menu starting in January.
Also in January Kwik Stop used a Piccadilly product to create Breakfast Bites, which are rolled up pizza crusts stuffed with items such as bacon, egg, cheese and sausage gravy.
“There (are) four bites in one container, and I’ll be able to market those for about $3.59, which is great for a consumer that’s coming in to get a breakfast,” May said. Rolled up, the product is easy to eat on the road, which May noted is important to customers.
“We try to minimize the number of SKUs we’re bringing in as far as supplies go, and we’re trying to work with that, so we’re not expanding our order book. …” May said.
May observes other food operations to see what’s trending. When he saw some QSRs running a Buffalo, Pepperoni and Bacon Pizza, Kwik Stop worked on its own version in its test kitchen and rolled it out as an LTO at the end of 2022. May expects it to get a place on the regular menu sometime in 2023.
Integrating Foodservice Tech
Technology skyrocketed to the forefront of c-store foodservice operators’ plans during the COVID-19 pandemic, and the trend is continuing in 2023 across c-store chains. C-stores are in various stages of their technological journey, but all eyes are on how technology can provide efficiencies and boost foodservice revenue in 2023.
Across the board retailers are implementing or considering mobile ordering, drive-throughs, order ahead and delivery, as well as using data from loyalty programs to better identify guests’ patterns and interests.
Kwik Stop is introducing its first drive-through at its 28th store, set to open in North Platte, Neb., later this year. The store will also be the chain’s first ghost kitchen site.
“We’re not going to actually have stuff out in the store for people to grab and go,” May explained. “They’re only going to be able to call in, order by app, order delivery or come through the drive-through.”
The ghost kitchen is expected to help reduce waste at the site.
“As we continue through this type of economic environment that we’re currently in, a ghost kitchen made more sense than having something out and about,” May said, particularly with this location where summers will be strong but off-peak months might be slower.
Street Corner is also focused on drive-through. It currently has one drive-through and plans to include them at all new stores with fuel going forward. Dhillon said drive-throughs are key for attracting that 70% of customers that pump gas and leave without entering the store. The convenience and accessibility of drive-throughs can encourage more customers to order food.
“I think it’s crucial now to have a drive-through,” he said. “I think it’s a standard now, especially in major metropolitan areas.”
Street Corner customers can also order in-store, online or via the app, and last year the chain introduced ordering at the gas pump.
“You can order an entire menu at the pump while you’re pumping gas,” Dhillon said. Guests can receive the order via the drive-through, in-store or have it delivered to them at the pump.
On the delivery front, Street Corner is piloting a program with a company that acts as the middleman between Street Corner and third-party delivery platforms like Grubhub. Street Corner pays a flat monthly fee for the service and no longer has to calculate fee deductions from each order.
Predicting Sales Trends
Most retailers have seen foodservice traffic recover since the pandemic, with sales growth in 2022, and expect food sales to continue to rise in 2023.
In 2022, Kum & Go, for example, was trending 6-8% above 2021 in sales, depending on the week or time of year, Moskalik noted. The chain expects to see the same growth in 2023, if not more, given its focus on innovative product offerings that resonate with its target customers and meet shoppers’ daypart needs.
“Foodservice sales are leading our sales trends with double-digit growth since the pandemic started,” said Dash In’s Nova.
Dash In saw a 22% overall increase versus the previous year, including a 34% increase in breakfast in 2022. Nova expects to see foodservice sales continue to rise in 2023 as inflation grows and customers trade down from full-service or QSRs to c-store food. Meanwhile, Nova sees c-stores offering higher-quality food and increased innovation, which are giving c-store food the edge over competition.
Kwik Stop, which is located in rural areas, fared well during the pandemic with sales bouncing back after the first month. Dollar sales were up 13% for the chain in 2021 and units grew by 9%, but in 2022 inflation caused unit sales to decline. May expects same-store sales to be flat in 2023 due to supply chain issues, inflation and potential oil price volatility.
“We’re starting to see supply chain issues creep up on us again where we’re not always able to get all the product that we currently offer,” May said.
What Do Customers Want?
“Customers are demanding quality prepared food, made within an acceptable time frame, made accurately and at a fair value,” Nova said.
Customers also want hot and fresh food, a variety of options, foods they feel good about eating and the ability to customize their order, retailers agreed.
“The educated consumer is not necessarily seeking the least expensive item, however the item must be perceived as ‘worth the cost,’” Almekies said. “They are seeking variety, however, they want to depend on core offerings that are simple to handle and eat.”
While quality, value and convenience have always been important, the expectations around each have shifted, Ekman said.
“For us, freshness translates to reducing the time between food preparation and food consumption. Food quality in our channel is at its highest when you start with good ingredients, handle them with care, and minimize the time between when products are made and when they are enjoyed by our guests,”
Value can also mean different things to different guests, with some focused on price point and others looking at cost to quality ratios.
“A balanced approach to the offer where we can maintain some value options that are easy to execute while also highlighting premium offers allows us to reach more guests than picking a single focus,” Ekman said.
While convenience relies on having the right assortment in stock, c-stores today are challenged to make convenience even more convenient.
“That could entail leveraging digital capabilities through a loyalty app to allow for order ahead or even suggest favorites to our guests based on past purchase behavior,” Ekman said. “Assisting our guests in making decisions creates less friction and ultimately a more convenient offer.”
Some c-stores have seen dayparts shifting as customers, working from home, are waking up later.
“That morning rush is not there anymore,” Dhillon said. The 6 a.m. to 8 a.m. morning rush has been pushed to 8 a.m. to 10 a.m., and in many stores the rush doesn’t come until lunchtime, which has shifted from 11 a.m. to 1 p.m.
Customer demand for plant-based products, including plant-based milks at the coffee bar, is also a growing trend.
“People want more vegan options for their pizzas,” Dhillon said. “They want vegan cheeses. They want gluten-free bread. That is growing tremendously.”
He even sees these trends coming to smaller towns where people are increasingly health conscious.
Meanwhile, Kum & Go sees c-store grocery assortments offering c-stores the edge over the competition.
“We benefit in (the) convenience of having a full-scale assortment for anything a consumer might need to pick up while grabbing breakfast or lunch, such as staples like milk, eggs, bottled beverages, etc.,” Moskalik said. “For a consumer who is looking for a fast, quality meal, they’ll choose a convenience store over others because we are faster than (the) supermarket and have an assortment that rivals any QSR or fast-casual establishment.”
As 2023 pushes forward, c-stores have the programs, locations and speed-of-service to win the battle for foodservice dollars, but it’s the little things that will determine who wins the sales. Executing high-level, consistent service every day with great food at a fair price still goes a long way. Make sure they are not overlooked.
Sidebar: Foodservice Challenges and Opportunities
High prices due to inflation are expected to pose the biggest challenge for c-store foodservice programs in 2023, with labor shortages and costs, supply chain issues and recessionary fears among the top concerns for retailers.
“We’re still waiting to see if a true recession will take hold in 2023, but heading into 2023, high prices are far and away the top concern,” said Datassential’s Mike Kostyo. Key for 2023 will be creating “interesting yet comforting” foods at familiar price points, he said, noting that this plays to c-store strengths.
This year customers are expected to be regaining pre-pandemic habits, such as returning to the roads as they travel and visit loved ones. C-stores have an opportunity to be the destination for fill-in trips or meals, especially if customers cut back on grocery trips and restaurant visits due to inflationary pressures, Kostyo said.
“In a tough economic climate, a c-store is a great place for that affordable, creative, comforting indulgence,” he said. In fact, Datassential predicts growth for the c-store channel in the year ahead.
To meet the moment, superior systemwide execution is going to be key, noted Foodservice IP’s Tim Powell. C-stores should strive to be more consistent with concepts and when it comes to sustaining good food, good service and a clean, hospitable atmosphere all day, every day.
“Generating trial and retention on new concepts within convenience can be a bit tricky, but with solid operational execution and messaging, it’s a guaranteed home run,” said Kum & Go’s Jac Moskalik.
Staffing shortages and supply chain issues are likely to make execution particularly challenging this year.
“On a positive note, all the challenges with the supply chain have started to create space where old ideas can become new again,” Thorntons’ Greg Ekman said. “Once constrained items will likely have new availability which allows retailers to reintroduce familiar favorites that have a proven track record of success.”
“Staffing is the most challenging piece of execution,” said Global Partners’ Joy Almekies, but she pointed to education as an opportunity. Educating key stakeholders on the importance of food programs, including front-line employees, so they understand the data and reasoning informing decisions can bring results.
The increasing cost of labor is among the many things pushing up prices at c-stores. Kwik Stop’s May noted managing supply chains, cost and negotiating the best prices is taking more time and will be a focus in 2023. He’s concerned about how customers will respond as food prices continue to escalate.
“A customer comes in and something they were being charged around $5 for, not more than 18 months ago, now they’re being charged almost $10 for that exact same meal,” he pointed out. “When are the customers going to say, ‘You know what? I can’t afford to eat that anymore. I’ve got to go to the grocery store and cook my own food.’ When is that breaking point?”
Simplicity is going to be important in navigating food programs in 2023, Almekies noted. That includes identifying product mixes that drive business and using analytics to understand when to offer products, creating planograms by the hour to appeal to customers, she said.
In Street Corner’s market, Vikram Dhillon sees EV charging not only making foodservice more critical, but attracting high-end customers that are willing to pay for a premium product.
“When you talk about EV stations, that means the customer is sitting there for 15 to 30 minutes,” Dhillon said. “Your foodservice and your coffee program are going to be so crucial for those drivers (during that wait). If you have a solid food program, they’ll eat there and they’ll shop there.”
Dhillon is adamant about having premium foodservice at Street Corner because the chain aspires to be a leader in EV charging.
“People that drive EV cars, they have money to spend,” he said. “You have this high-end customer, they want a high-end product, and foodservice is where you’re going to make your money on that.”