By: Chuck Ulie | June 9, 2023
Consumer demand outside home is huge; retailers must stay up on challenges, dynamics and trends of overall industry.
Foodservice is poised for growth.
These words of hope were from Donna Hood Crecca, principal at CSP sister research firm Technomic, who spoke at the CSP C-Store Foodservice Forum on June 7 in Rosemont, Illinois.
“This category is unique in your stores,” Crecca said. “It satisfies different needs.”
As a whole, the foodservice industry has recovered from the pandemic, though inflationary factors are still a consideration. “There is momentum, and consumers are engaging with foodservice,” Crecca said. “The industry is on a good trajectory.”
Crecca said Techonmic projects that overall foodservice sales this year for the first time will top $1 trillion, of which convenience stores account for 3%. Despite this small share, c-stores are considered a growth channel for foodservice. And because c-store foodservice is part of a large industry, retailers must stay informed of the trends, dynamics and challenges.
“Consumer demand away from home is huge,” she said. “It’s a solution, part of their lifestyle, and they’re willing to spend. The industry is resilient.”
“Consumer demand away from home is huge.”
That resiliency was seen in 2022, when c-store foodservice category sales exceeded pre-pandemic levels and outperformed the growth rate of quick-service restaurants, which had “an advantage of a well-developed drive-through and delivery systems,” she said.
However, despite the growth, 79% of c-store foodservice operators agree that competition from other types of operators—fast food, fast casual coffee cafes and grocery store foodservice—is increasing.
To be victors in this battle, c-stores must develop a winning strategy, which Crecca said involves understanding consumers and being relevant to their needs, then meeting or exceeding their expectations with a differentiated, well-executed offering that drives value.
“It’s a tall order,” Crecca said.
Part of tackling this challenge is knowing who today’s c-store customer is. One stat she presented is that 53% of c-store customers buy prepared food offerings, with millennials buying the most. In addition, customers are increasingly diverse, with white (non-Hispanic/Latino) down from 56% in 2017 to 48% in second-quarter 2023. Meanwhile, Hispanic/Latino, Black/African American, and Asian all are buying more frequently.
In commuting, nearly seven in 10 are traveling to work at least a few days weekly, and six in 10 enter a c-store every or nearly every time they visit for fuel/charge.
“Food and beverages are the number-one thing they buy when they come in the store,” Crecca said. And when customers do enter a location, the top factor in whether they make a foodservice purchase is store cleanliness. “This is the only channel where cleanliness is number one. If bathrooms are not clean, you just cut in about half the likelihood they’ll buy foodservice.”
“Consumers are really looking for value.”
When customers do buy food c-store food, 61% say it’s primarily eaten in their car, which makes packaging crucial to winning the occasion, Crecca said; however, despite this popularity, don’t dismiss the importance of “fork and knife” items like mac and cheese, salads and bowls because the dinner daypart is growing.
Regarding inflation, 34% of c-store foodservice buyers in 2023’s second quarter were ordering less per visit, and 40% were seeking deals and promotions and/or using coupons more often. This second stat is up from 31% in fourth-quarter 2022.
“Consumers are really looking for value,” which can be delivered via combo meals, a fuel discount with a purchase, and receiving loyalty points with a purchase, Crecca said.
Another way to attract customers is by offering healthy foodservice items. Crecca said 33% of all consumers, and 42% of 18- to 34-year-olds, surveyed earlier this year said that in the past year their interest in buying healthy items from c-stores has grown.
“Showcasing ‘fresh’ is going to be most effective in heightening the health perception of foodservice items,” Crecca said, noting high protein, low or no sugar, unprocessed and high fiber as key attributes in foodservice, and no artificial ingredients, high protein, low/no sugar and immunity-boosting being key to beverages.
Elsewhere, Crecca said:
- 18% of consumers overall, and 28% of Gen Zers and 24% of millennials, have changed the types of restaurants they patronize due to higher menu prices. “Convenience is in a prime position to steal a share of stomach from QSRs,” Crecca said
- Quality coffee is the gateway to boosting foodservice sales. Among consumers who report increased engagement with c-store foodservice, nearly half are visiting coffee- or beverage-focused restaurants less often and are shifting those purchases to c-stores. This is a hike of 17 percentage points from 2019
- 58% of those surveyed said c-stores can compete with restaurants on freshness, quality and value to win the breakfast daypart, and 55% said c-store breakfast items are a better value than at restaurants
- 42% of c-store foodservice patrons say the availability of a drive-thru would increase their visitation, but only 15% of c-stores offer one
- 22% of all c-store consumers, and 30% of those 18 to 34, say frictionless payment options would increase patronage. “Our data finds 23% of c-store operators plan to install such systems in the next two years,” Crecca said
Consumer expectations of c-store foodservice offerings are elevated, but so are perceptions, Crecca said.
“Innovate menu items with fresh and better-for-you to resonate,” she said. “Optimize the menu. You need the right number of the right items, and that requires a lot of analysis of what the consumer is most likely to buy.”