By: Christine Lavelle | February 23, 2023
As COVID concerns fade, consumers are returning to some of their prepandemic behaviors, giving rise to breakfast coming back as the go-to daypart for convenience-store foodservice. But that doesn’t mean things are back to normal. Anything but!
Instead, c-stores are feeling the blows of inflation, as well as ongoing labor and supply shortages, as they plan daypart menu items to please customers and grow revenue in 2023.
“Labor is pretty much dictating any innovation that we have, and supply shortages are dictating what we can put on our menu,” said Michelle Weckstein, director of food and beverage brands for Southwest Georgia Oil Co. “So we have made a strategic effort to streamline our menu to our core items or the items that we call stars.”
Here’s a breakdown of where each major foodservice daypart stands today.
Technomic data shows the breakfast daypart hasn’t recovered to pre-pandemic levels, but momentum is growing as commuters make their way back to offices.
According to Technomic’s Fourth Quarter 2022 C-Store MarketBrief, 74% of c-store foodservice patrons are commuting either full time or a few days a week.
“The challenges at breakfast include increased costs on ingredients like eggs and breads, which compresses margins,” said Donna Hood Crecca, principal with Chicago-based Technomic, a sister company to CSP.
She also cites a new competitor for retailers: at-home preparation. “Many consumers got into the habit of preparing breakfast and coffee at home during the pandemic and continue to do so.”
Manufacturers that supply breakfast items to c-stores have also seen changes in the breakfast daypart. “Prior to COVID, the morning daypart was a significant source of consumer traffic,” said Sandie D. Ray, vice president, foodservice business unit marketing and data analysis, Ruiz Foods, Dinuba, Calif. Lunch and snacking dayparts are strongest now, she said.
Not all retailers are feeling the breakfast pain.
“As ugly as COVID was on the East Coast, here in the Midwest, we had about five months of ugliness, but after that, things started to bounce back,” said Paul Servais, foodservice zone leader for Kwik Trip. The family-owned chain based in La Crosse, Wis., operates 843 stores and serves customers in Wisconsin, Minnesota, Illinois and Iowa.
“We’re having record sales. Our food program has flourished. The breakfast daypart is still the best. That has not changed, and it continues to grow,” he said. “The only amazing thing to me is that you can have double-digit growth on your best daypart.”
Grab-and-go foods any time of day are still the preferred choice of customers, retailers agree. In the morning, that means breakfast sandwiches. “Sandwiches are huge,” Servais said. “Bakery is not far behind, a lot of doughnuts.”
At Tulsa, Okla.-based QuikTrip, “We’ve seen breakfast come back strong over the past year,” said Adam Fidanza, corporate sales manager. “Things shifted more to lunch during COVID, as people shifted their schedules. In the last six to eight months, we’ve really seen a shift back to breakfast.”
During the height of the pandemic, foodservice was all about being creative with available ingredients and seeking additional vendor partners as backups for supplies.
Nick Rech, area sales representative for Sheboygan Falls, Wis.-based Johnsonville, said versatile products can help with the daypart challenges.
“Sausage patties and sausage strips can be used in various menus across dayparts,” he said. “They not only add flavor, but they are incredibly versatile and can be used in breakfast sandwiches, burgers, salads and more.”
While those trends continued in 2022, there was some relief as retailers saw “more normal” times in foodservice. Depending on the geographic region of stores, daypart traffic remained stronger for lunch and snacking as consumers continued to work from home and avoid a morning commute.
Technomic data shows hot beverages, especially coffee, continue to be a traffic driver in the breakfast daypart, as do self-serve beverages throughout the day.
While coffee has rebounded, some chains note sales have not returned to pre-pandemic levels. “Coffee probably took the biggest hit within the category,” said Chad White, foodservice category manager for York, Pa.-based Rutter’s. “We certainly have seen it bounce back, but we’ve still got some work to do.”
Much of the lag is attributed to workers returning to offices. “Coffee correlates right along with that,” White said, adding that he works closely with his coffee supplier—S&D Coffee/Westrock—to keep his program vibrant and fresh for the customer.
“We allow a lot of customization, and we certainly want to continue down that road.” Quarterly limited-time offers (LTOs) of new flavors also help boost coffee sales, he said.
Weigel’s c-stores are seeing success across dayparts with credit to two key factors: customer service and new products that are fresh, non-GMO and humanely sourced, said Beth Hoffer, vice president of foodservice and manufacturing for the Powell, Tenn.-based chain.
She said food sales increased almost 30% in 2022. Good-quality food is part of the reason, she said, “but I think customer service is what’s driving our business right now more than anything.” She points to long wait times in fast-food drive-thru windows, as well as the c-store’s wide variety of products.
“You can be in and out of the store in less than five minutes. You’ve got your lunch, you’ve got everything else that you need, but it’s quicker to come here,” she said.
As for what’s trending, Hoffer said the chain’s stuffed biscuit of handmade dough with sausage, egg and cheese inside is the No. 1 seller. “It’s portable, and portable is a big deal,” she said. Pizza continues to be a top seller at lunch and dinner.
Hoffer has high hopes for a new item the chain was set to launch in January: fried chicken tenders. “These are fresh, never frozen, non-GMO, no antibiotics and humanely sourced fresh fried chicken tenders” from Springer Mountain Chicken of Georgia, Hoffer said. “Our big growth will be going from a frozen tender to a fresh one.” Hoffer said this change also addresses younger consumers who look for environmental and social responsibility when choosing companies to support.
Single-store owner Tammy Affolter, who with her husband Woody owns Woody’s Pump n Munch in Randolph, Minn., said her Hunt Brothers Pizza program is a key traffic driver at all times of the day. “Pizza is 95% of our [foodservice] business,” she said, with about 60% sold in slices from the warmer and 40% full pies. The store is in a town of about 800 people and serves an average of 350 pizzas a week, including breakfast, lunch and dinner. “We sell a ton of breakfast pizza,” Affolter said, noting the nearby K-12 school attracts students, teachers and staff.
The store was built in the 1950s and fully remodeled and expanded in 2021 to include a liquor store as well as the convenience store and gas station. “The remodel has increased our business substantially,” she said. In the year since the renovation, she estimates the store sells 100 more pizzas a week than it did previously. As for new food offerings in 2023, Affolter said she may consider adding a chicken program.
One of the main changes and biggest driver of menu adjustments at QuikTrip is expansion of QT Kitchens and their new equipment. “We upgraded our grab-and-go offer with new warmers. Almost everything off the warmer is now made fresh in house,” Fidanza said.
Equipment also has been a driver for Kwik Trip. “We introduced fryers to all of our stores,” Servais said. “Once you have a fryer, you have a whole other venue because you can do so much.”
The emphasis at Kwik Trip has been offering a wide selection of appetizers, including mozzarella sticks, French toast sticks, jalapeno poppers, bacon cheddar bites, mini-tacos and boneless wings. “We can’t make enough,” he said of the wings and tacos. Servais said he rotates menu items every six to eight weeks to keep the offer fresh.
“We have a lot of hot cases in our stores; we call them Hot Spot cases,” he said.
The cases serve items for every daypart but especially breakfast and lunch, Servais said. “Everything we do is grab and go,” except for mobile orders. “We make it fresh [for delivery or carryout] rather than taking something that’s been sitting in the case,” he said.
In addition to the slowdown in store traffic and distribution issues, inflation stands as the third element slowing retailers’ return to pre-pandemic sales.
But Fidanza said QuikTrip customers seem to be much more accepting of higher prices and other changes due to shortages.
“Before,” he said, “a retailer may be called out for price gouging. Now it’s just a blip because it’s just one more thing that costs more. I’ve had more price increases in the past six to eight months that I had in my previous seven and a half years.”
He adds, “Customers are much more accepting of rapidly changing supplies,” noting a recent shortage of lettuce. “Selling lettuce right now, you might as well be selling gold. We had to take it off our menu. Not one customer has said a thing. We’ve all just rolled with the punches.”
Topped with lettuce or not, sandwiches remain a staple of the lunch daypart, along with roller grill, chicken and pizza, as retailers emphasize traditional c-store foodservice items.
At Southwest Georgia Oil’s SunStop Markets and Eat’s Deli, Southern-style foods resonate. “We sell a lot of chicken, whether it’s chicken tenders or our eight-piece fried,” Weckstein said. “We were seeing people being a little more mindful of what they are eating, so we added a baked chicken option as an LTO.” The limited-time offer did so well that it will be a core menu item for the chain in 2023. “We’re still streamlining and keeping our menu as simple as possible.”
Biscuits are also a big seller in the South.
“We found a cornbread biscuit that has the texture of a biscuit with the sweetness of the cornbread, so we are going to be featuring that with our breakfast sandwiches,” Weckstein said.
Ray at Ruiz Foods said the manufacturer’s roller-grill Tornados and hot-case empanadas are top sellers. “We know consumers desire variety throughout the day,” she said. A recent launch of apple pie empanadas has been popular in the morning as an accompaniment to coffee, she said, as well as an all-day snack option.
The goal for most retailers is to transition as smoothly as possible from one daypart to the next. “During lunch, it’s a meat and one side. Then we include two sides and a roll for later in the afternoon,” Weckstein said.
At Kwik Trip, Servais said the dayparts have blurred. “We have breakfast items out all day now, and we have lunch items out 24 hours a day, too.” He said the biggest daypart adjustment at Kwik Trip stores happens later in the day. “As we roll into evening, we put more of an emphasis on our hot cases, whole [pizza] pies and eight-piece chicken to take home and eat.”
Consultant Jessica Williams, founder and CEO of Food Forward Thinking, said cold beverages fit nicely into these now-blurred dayparts. “Cold-brew coffee, cold espresso-based drinks, energy and fountain drinks will continue trending toward massive popularity in 2023,” she said. “As foodservice leaders, we will be wise to hop onboard that trend and offer food items that pair well with cold beverages in every daypart.”
While Kwik Trip has seen growth in all foodservice in the past year, dinner is the area of slowest growth, Servais said. Others echo that sentiment. “That’s been the piece we haven’t been able to unlock,” said Fidanza of QuikTrip.
The biggest challenge in the dinner daypart is offering meal solutions that are not found anywhere else, said Williams, former foodservice category manager at Thorntons.
“Cold grab-and-go snacks and roller grill might be the best options at dinner time,” she said.
Andrea Taylor, foodservice category manager for distributor McLane Co., said many consumers are no longer shopping according to daypart. “Pizza has become a top seller in the mornings, and breakfast items are now popular in the afternoons,” she said.
Temple, Texas-based McLane has noticed that consumers are interested in new and unique offerings, so stores are looking to stand out from their competition with healthier options, such as grain bowls with a protein and vegetables, Taylor said.
In 2023, McLane plans to offer more fresh salads and fruit, and improve its Javaperksprogram to help stores drive coffee sales and traffic, Taylor said.
Let’s Make a Deal
One strategy that seems to work across dayparts is embracing limited-time offers and promotions.
“LTOs have been very successful because they’re usually innovative flavors,” Fidanza said.
At QT, the offers typically run for three months and feature core items at reduced prices. Another strategy that has worked for QT is partnering with suppliers to feature new items and flavors. “They work with our chefs and develop unique flavors; a lot of them have been first-to-market,” Fidanza said.
The jalapeno bacon popper taquito, for example, has been “hugely successful,” he said.
Deals and promotions are increasingly important, said Ray at Ruiz Foods.
“Consumers love their go-to-favorites but also crave variety,” she said, noting limited-time offers are a way to satisfy existing consumers and attract new future loyalists.
White said LTOs are an important part of innovation at Rutter’s. “We’re expanding our LTOs and using that as a measure of whether the customer has interest in the product,” he said. Rutter’s plans to announce new LTOs in the second quarter of 2023.
As a supplier, Johnsonville is also keen on driving foodservice sales with promotions.
“We know that 42% of customers coming into the store purchase a beverage only. One of our goals is to drive those consumers from the beverage area to the roller grill, and creating a bundle promotion can help drive incremental foodservice sales and higher basket rings,” Rech said.
Meanwhile, continued distribution issues have slowed down innovation in foodservice and other products categories. “That’s the exciting part of my job, getting to roll out innovation,” Fidanza said. And that stopped in 2020 when COVID hit hard. “I’m going to have to retrain myself on how to do it,” he said, adding that one of the first innovations of 2023 will be the addition of hot sub sandwiches.
Snacking continues to be a key driver of c-store traffic throughout the day. A Technomic study shows that just over half of consumers purchase foodservice snacks from c-stores at least once a week; that rises to nearly 7 in 10 for consumers ages 18 to 34.
“Our recent research finds consumers are getting busier, so snacking is top of mind as they look to satisfy hunger quickly,” Crecca said. She adds that about a third said they’re purchasing snacks at c-stores more often now because value has improved, and mid-afternoon is prime time for snack purchases.
While packaged snacks and roller-grill items often top the list of foodservice snacks in c-stores, Paul Stippich, director of marketing for San Leandro, Calif.-based Otis Spunkmeyer, suggests retailers consider the advantage of fresh-baked snacks.
“Craveability and portability and that fresh-baked aroma” attract c-store shoppers, he said. Otis Spunkmeyer data shows 50% or more of consumers identify freshness at a No. 1 decision driver.
Citing Technomic data, Stippich said muffins are a top item in the mornings, and cookie consumption peaks at midday. While chocolate-chip cookies and blueberry muffins are the category leaders, he said some flavor innovation is coming in 2023. “It’s a balance of unique flavors and generating repeat purchases. We’ll be looking at flavors that are the perfect balance of that combination,” he said.
Across the dayparts, c-stores are expected to outpace fast-food chains in the next year, and specifically at breakfast and lunch, c-stores are winning, according to Technomic.
“Given recent menu price increases at fast-food restaurants, c-stores are seen as a less-expensive option,” Crecca said. She notes that about half of consumers rate c-stores being just as capable as restaurants in offering fresh, quality food and beverages.
“From a nominal sales growth perspective, c-stores are expected to outperform fast food in 2022 and again in 2023,” Crecca said.
That insight confirms what Hoffer of Weigel’s notes, that c-stores beat fast- food outlets by offering faster, better customer service and a broader range of products.
Foodservice consultant Ed Burcher of the Business Accelerator Team has traveled coast-to-coast by car twice in the past year. And like any longtime retailer, he stopped at many convenience stores across America along the way. A few observations on the state of c-store foodservice …
- The breakfast daypart lags pre-pandemic numbers. Why? Because fewer people are commuting for work. “So while it’s come back a bit, it certainly hasn’t returned to pre-COVID levels,” he said.
- Consumers are more money-conscious than usual. To that end, Burcher sees retailers turning to more bundles or price promotions and limited-time offers to drive foodservice sales. Inflation-related price increases are unavoidable, Burcher said, “but retailers are trying to emphasize value and quality.”
- Customer demographics are as important as ever. Younger customers, ages 28 to36, are more comfortable with technology, such as kiosk or mobile ordering, Burcher said. Those customers also lean toward cold beverages, whether it’s cold brew, energy drinks or fountain and frozen beverages. “I’m amazed at how much energy slushies I see being made to order,” Burcher said. He challenges retailers to understand what that age group wants and do more to satisfy them. The caveat, of course, is to avoid alienating other core customers.