NEW YORK - As more convenience store operators seek new profit centers, foodservice is finding it€™s way to more stores across the United States.
"Sandwiches are the new cigarettes, at least as far as 7-Eleven is concerned," writes Bloomberg BusinessWeek, noting that as a traditionally reliable profit source for convenience stores is starting to take a back seat to foodservice.
"Over the course of the next 10 to 20 years, we fully expect for cigarette sales to continue to decline," 7-Eleven spokesman Scott Drake wrote the news source in an e-mail. "We are planning for cigarettes to not be a part of our long-term business model."
The news source cites NACS State of the Industry data, which notes that cigarettes still make up about 38% of non-gasoline sales for convenience stores. However, gross margins dropped from 20.8% in 2002 to 14.6% in 2011, as consumers turned to lower-cost brands and sought out low- and no-tax purchasing locations, such as Indian reservations, putting an even tighter squeeze on prices and convenience store competition.
Government regulations regarding how tobacco products are displayed and sold have also made them less appealing to certain retailers. For example, cities such as Boston and San Francisco have banned cigarette sales in pharmacies, leading to lawsuits from Walgreen and Safeway.
So what€™s a convenience store operator to do when a lucrative profit center stays stagnant? For some, the answer is to offer more food.
Foodservice carries a gross margin of more than 55%, according to NACS data, and prepared foodservice and fountain sales now account for more 30% of profit (in-store only) at Ankeny, Iowa-based Casey€™s General Stores. The news source notes that in 2012, the c-store chain launched a remodeling program for its 1,700 stores to accommodate expanded foodservice features such as a coffee bar, seating and made-to-order sandwiches. Casey€™s also started a pizza delivery service in 2012 and sold tens of millions of pizzas in 2012.
At Cary, North Carolina-based The Pantry, its Southeast c-stores offer foodservice through its own private-label brand and include restaurants as Subway and Krystal, which now represent 10.4% of revenue, compared with 4.4% in 2008, the news source writes. Meanwhile, Dallas-based 7-Eleven plans to double sales of fresh food, including refrigerated and commissary, to 20% of its sales in the U.S. and Canada by 2015.
"Food is the future," said Jeff Lenard, NACS spokesman, adding that there isn€™t a one-size fits all approach to offering a successful foodservice program. Single-store operators, which account for more than half of all U.S. convenience stores, run into different challenges than the larger multi-unit operators.
"Even sticking out some bananas, you run into a problem with the distribution system," Lenard said, adding, "You might have to get them at the grocery store and sell them, which makes it hard to be competitive."
Find Your Foodservice Fit at NACS CAFÃ‰
The NACS Center for achieving Foodservice excellence (CAFÃ‰) doesn€™t give you myriad opinions about what type of foodservice program is best for your business model. Instead, answers come from understanding all aspects of what foodservice means to your operation.
"I am much more confident that I will be able to develop our foodservice offering into something unique and profitable," said Laura Filak, foodservice sales and marketing manager at Stop 'n Go Food. "The limited class size allowed for each student to receive individual attention and by the end of the class, we had a true sense that we were not facing our individual challenges alone."
Position your retail operation as a foodservice innovator; attend an upcoming NACS Center for achieving Foodservice excellence class:€¨
€¢ February 3-7
€¢ August 18-22
€¢ November 10-14
Register today a tnacsonline.com/nacscafe.