Mirroring the vast changes affecting the world at large, every aspect of the food industry appears to be in a permanent state of flux. And nowhere is this more pronounced than in the convenience industry. Produce Business UK hears from Darren Tristano, president at food industry research specialist Technomic Inc on some lessons to be learned from the US
Whereas once price was the driver in the convenience and foodservice industries, that is no longer the case and quality has become the new currency in the convenience and foodservice industries. At least that’s the view of Darren Tristano. Even today those consumers on lower incomes will spend a bit more to acquire a better quality product, he suggests, and with the convenience industry in the US worth $696 billion (31% inside sales and 69% motor fuels) this raising of the bar in terms of quality and competitiveness is worth bearing in mind.
High margins
Foodservice delivers high gross margins for c-store food sales – consequently Tristano urges those in the convenience market to adopt a new business model when dealing with foodservice. Citing research undertaken by Technomic, foodservice is an efficient sales and traffic driver and freshness and quality are two of the factors pushing the sector forwards. In some areas this is a gradual evolution but as traction is gained, improvements will be seen.
Three models exist at present – basic, premium and super-premium. Basic foodservice operations offer traditional hot and cold beverages and a range of grab-and-go foods. These are complemented by some limited merchandising and signage. Premium stores have a broader selection – some speciality beverages, a more comprehensive selection of food, including some that is made-to-order. This includes prominent foodservice merchandising. Super-premium stores have a broad selection of speciality beverages; an extensive variety of food, a host of on-site preparation and made-to-order food and a reliance on fresh and quality ingredients. In this scenario foodservice becomes a focal point of store design.
Unsurprisingly, basic dominates in the US. Some 90% of convenience stores are in this category, with 7% premium and just 3% super-premium. However, while basic remains the foremost model, Tristano notes there is clear movement towards a fresh, restaurant-style offering. This will grow rapidly, he says.
And while the recent Technomic research is focused on the US, Tristano is quick to point out the age-old adage that whenever America sneezes the UK and Europe always catches a cold. He cited the recent craft beer, hot dog and BBQ revolutions as evidence that American trends are soon adopted on the other side of the Atlantic.
Millennials love convenience
The good news for convenience stores wanting in on the burgeoning foodservice market is that the market skews young. Of those visiting these stores at least once a week, Millennials come out top, with 85% of this lucrative sector spending their money in convenience stores at least once every seven days. Some 60% of Babyboomers are once-a-week spenders and those defined as Matures come bottom with just 47% of this milieu purchasing goods here once a week.
The factors given in making a purchase in these stores is also telling – taste and quality are prioritised, but other factors such as fresh, premium, natural, seasonal and sustainable are also starting to resonate. And while 56% of overall respondents agree that convenience stores are just as capable as restaurants of offering fresh foods and beverages, this figure rose to 67% when talking about the response of Millennials.
There is a changed and, crucially, changing perception of convenience stores – they are no longer seen just as somewhere to get petrol. The increase in quality is key. The addition of trusted brands also helps – they add credibility and give consumers something they can expect.
The evolution of convenience
Tristano highlights the evolution of convenience stores within foodservice. The first point is moving the stores to the centre of the plate – a space that competes with fast food chains and serves filling, complete meals. Marketing value meals is also key as it makes the stores attractive for all meal times and occasions and it enables the stores to offer a complete meal experience. In this sense the evening meal is becoming more of an option – not just breakfast or lunch.
The ethnic influence is also evident – global flavours are now apparent; the street food revolution is reflected in the adventurous food habits of the younger consumers. This plays out to their impulsive nature. There is also a quest for optimisation; giving consumers choice. And for balancing health and indulgence; consumers demand products that are better for them but they want the option to indulge in some guilty pleasures too. Transparency – a key driver in the food sector in recent years – is also playing a part in convenience stores. Open kitchens means employees can interact with customers but it also means that customers can trust what is going into their dishes.
Finally, ensuring that stores are welcoming is another important factor. Encouraging customers to stay – by offering Wi-Fi for instance and expanded seating areas – not only aligns with fresh food values, but gives consumers extra time to make additional purchases. This, Tristano believes, is evident in his case study of Sheetz stores. With a comfortable dining room – clearly influenced by the casual dining sector – stores resemble a restaurant more than a convenience store. They are more inviting.
Operators optimistic about foodservice
Tristano believes that the convenience store marriage with foodservice looks destined to be a happy one. And this optimism is mirrored among operators – 80% of those questioned for Technomic’s research felt sales would increase in the next two years. They anticipate growth in both made-to-order sales and grab-and-go.
Growth tactics include creating incremental growth opportunities across all three – basic, premium and super-premium – modes of store. Meaningful merchandising and promotions will help alongside notions of food safety.
As ever, those with their eyes on quality will see sales soar.
Darren Tristano delivered his Prospering in Foodservice presentation at NACS’s recent European Insight Convenience Summit in Hansom Hall at the opulent St Pancras Renaissance Hotel on June 8.
