While convenience stores have offered fresh, prepared foods for years, it is only over the last decade that the trend has accelerated. The reason is two-fold:
- More and more time-starved consumers want on-the-go meal solutions, and
- Retailers have found that foodservice can deliver new customers inside the store, and at a higher profit level than for items like gas, which has razor-thin profit margins.
The result is that convenience stores have continued to evolve from gas stations that happen to sell food to restaurants that happen to sell gas.
The overall foodservice category is broad and largely includes non-packaged consumables: food prepared on-site, commissary/packaged sandwiches, hot dispensed beverages, cold dispensed beverages and frozen dispensed beverages.
Many retailers have successfully turned their conveniences stores into popular destinations for both hot and cold foods prepared onsite, such as deli sandwiches, flat breads, hoagies, breakfast sandwiches, hamburgers, pizza, grilled chicken sandwiches, salads, soups and wraps.
A growing number of retailers including Sheetz, Wawa, Rutter’s and MAPCO Express use touch-screen ordering kiosks that allow customers to customize their selections, which streamlines speed of service and ensures the accuracy of orders.
Overall, food prepared on-site in 2007 was the third-largest product contributor by gross profit contribution, representing 6.6 percent of all in-store sales and a total inside gross profit of 11.35 percent. It is also the foodservice category leader, accounting for 47.27 percent of total foodservice sales.
Retailers such as 7-Eleven have a proprietary foodservice program where sandwiches, wraps and other fresh food items are prepared at a commissary.
At 7-Eleven’s Commissary and Combined Distribution Center (CDC) in Long Island, fresh foods are prepared and delivered to more than 670 7-Eleven stores in New York, New Jersey and Pennsylvania. Through sophisticated inventory and computerized ordering systems, 7-Eleven store operators place their orders by 10:00 a.m. each day for deliveries that begin the very same day. The computer system quickly consolidates these orders and transmits them to the CDCs, commissaries and bakeries that support 7-Eleven stores across the country.
Upon receipt of the stores' orders, 7-Eleven sandwiches, salads and baked goods are prepared fresh that same day. Fresh food products are immediately stamped with the time and date after they are made. Other perishable and time-sensitive products are delivered throughout the day, to be sorted for that night's delivery. Trucks are then dispatched to deliver each store's merchandise between 9:00 p.m. and 5:00 a.m. the next day. (To read more, click here.)
For Oklahoma-based QuikTrip, its QT Kitchens commissary program prepares and delivers thousands of sandwiches and baked goods daily to the convenience retailer’s network of more than 500 convenience stores.
Coffee is without a doubt the hot beverage of choice in convenience stores and the number one subcategory of the hot dispensed beverages category, generating nearly 78 percent of the category’s sales. This category typically delivers nearly three-quarters of its sales during morning service hours.
Coffee consumers are looking for coffee blends that focus on freshness, flavor and quality. Customers also like being able to personalize their beverage, with condiments such as flavored creamers, varieties of milk, flavor shots, whipped toppings and flavor sprinkles such as nutmeg and cinnamon. To generate excitement at the coffee bar, some convenience store retailers offer seasonal blends, such as pumpkin spice during the fall and gingerbread coffee in the winter.
In fact, competition for the coffee customer is fierce, as consumers have more locations than ever to choose from, including coffeehouse chains such as Starbucks, quick-service restaurants such as McDonald’s and the growing presence of Dunkin’ Donuts.
To capture loyalty among its customers, retailers such as New Jersey-based Quick Chek adhere to the “20-minute rule” to ensure the freshness of its coffee. The retailer prepares each pot of coffee using exacting standards, including triple-filtered water and consistent temperatures.
Also popular in this category are hot teas and cappuccino, which deliver high margins for retailers.
Nearly every convenience store (94 percent) carries cold dispensed (fountain) beverages, making this product a true convenience store classic. Margins are solid (45 percent) and represented about 12 percent of all convenience store foodservice sales in 2007, according to NACS data.
The trend in fountain drinks is shifting towards “better-for-you” options, with health-conscious consumers looking for more choices and natural ingredients. Examples of these beverages include flavored and diet iced teas such as green, black or white tea; diet lemonade; diet drinks such as Crystal Light; and fruit juices touting the antioxidant qualities of pomegranate or the acai berry.
Retailers also focus on the ice, which can make up to as much as 50 percent of fountain drinks, and most consumers enjoy chewing on the ice once the liquid is gone. As a result, retailers such as Flash Foods, Parker’s and Spinx offer a softer ice cube known as “nugget” or “chewy ice.”
This category got its start in 1965 when 7-Eleven introduced the Icee; the name was later changed to Slurpee.
About 75 percent of all convenience stores offer frozen dispensed beverages. Consumers typically enjoy frozen drinks as refreshing “snack” during the day. The popularity of these frozen drinks has also caught on with amusement parks, movie theaters, food courts and quick-service restaurants.
Nice N Easy Grocery Shoppes has rolled out a proprietary frozen drink program called “Chillville” which offers customers the choice of carbonated and noncarbonated flavors and an energy drink. And the Froster, a proprietary program offered by Mac’s more than 20 years ago, lures teens with it’s fun and “wacky” flavors, including the Atomic Wedgie.
Trends in this category, like cold dispensed beverages, are leaning towards more “better for you” products, such as green tea and pomegranate, which also helps attract female consumers. Bold flavors such as bubble gum and root beer float are popular with teens.
For an extra pick-me-up, retailers such as 7-Eleven have capitalized on frozen coffee, a nod to the popular Starbucks Frappuccino. In 2008, 7-Eleven introduced the Slurpuccino, which is available in hazelnut and café latté. And unlike a pricey coffeehouse frozen coffee, which can cost more than $4.00, convenience stores can sell a 12-ounce frozen coffee for half the price, or about $2.00.