Food Focused | NACS Online – Magazine – Past Issues – 2015 – July 2015
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Food Focused

Fresh, fast, customizable and healthy describe today’s prepared foods in convenience stores.

​By Chris Blasinsky

In the 1983 cult classic movie “National Lampoon’s Vacation,” Clark Griswold took a swipe at convenience store food with the infamous line, “I’m so hungry I could eat a sandwich from a gas station.” Unknown to the disaster-prone patriarch, the family dog had also peed on the sandwich, but you get the point. Eating food from a gas station was gross.

Fast forward to today: Many convenience stores have evolved from fuel-only pit stops to food- and beverage-centric destinations for customers, all contributing to the 160 million daily transactions at nearly 153,000 convenience stores across the United States.

Even restaurants and quick-serve chains now realize that c-store foodservice offers are attractive options for today’s time-starved consumers. “These food-forward retailers have moved forward in terms of quality and variety,” NPD Group analyst Bonnie Riggs said in Nation’s Restaurant News about the convenience store industry. “They are a segment to watch…a retailer to take note of.”

The Numbers
Kevin Smartt, CEO of Austin, Texas-based Kwik Chek Food Stores, presented 2014 category data during the NACS State of the Industry (SOI) Summit in April, offering up an exclusive first look at convenience store foodservice growth. The data, now available in the newly released NACS State of the Industry Report of 2014 Data, cites foodservice as a roughly $32 billion industry contributing 19.2% to in-store sales, up 0.9 percentage points from 2013.

And as the U.S. c-store industry grows in store count, so do foodservice sales dollars — nearly tripling from 2004 to 2014, according to NACS SOI data. Foodservice is increasingly becoming the convenience store industry’s most profitable category, a business model shift and mindset that became necessary amid years of falling revenues from motor fuels and cigarette sales.

One of the shining stars of convenience store foodservice — prepared food — consists of sandwiches and wraps, pizza, fried chicken, hot dogs/roller grill products, soups and salads and ethnic fare. According to NACS SOI data, prepared food was the third-largest product contributor by gross-profit contribution, representing 10.3% of all in-store convenience sales in 2014 and a total inside gross profit of 18.3%, up from 17.0% in 2013. It is also the foodservice category leader, accounting for 65.7% of total foodservice sales.

Transparency Counts
There is a higher-minded approach occurring among all foodservice channels, as consumers are increasingly concerned about what’s in their food and the origins of what they’re eating and feeding their families.

QSRs such as McDonald’s, KFC and Chick-fil-A have responded to the call for ingredient transparency by changing their food sourcing policies, such as using chickens free from human antibiotics and cage-free eggs. In May, Yum! Brands’ Taco Bell and Pizza Hut chains announced the removal of artificial ingredients and colors from their menu items by the end of 2015.

Perhaps the most outspoken QSR is Chipotle Mexican Grill with its “Food With Integrity” approach. Chipotle touts that it became the first national restaurant company to disclose the genetically modified (GMO) ingredients in its food, and beginning this year the chain made the full switch to cooking with only non-GMO ingredients. Chipotle also says it locally sources its produce and purchases meat from farmers and ranchers who raise livestock without antibiotics and synthetic hormones. Now the company is working to remove dough conditioners and artificial ingredients from its tortillas, a process openly explained on its website.

Dan Coffin, director of R&D at Altoona, Pennsylvania-based Sheetz, agrees that menu transparency is becoming more important and believes consumers will challenge convenience retailers to change — and some Sheetz customers already are doing so.

More consumers are walking into convenience stores thinking healthy, and as more information about food ingredients becomes available, whether through menu labeling or company websites, the more consumers are going to seek to understand this information.

“Do consumers trust what you’re doing? Then you need to be transparent,” Coffin said. Sheetz provides nutritional information, including a nutritional calculator, and food ingredients of its prepared food items through the company’s website.

As a word of caution, Coffin suggested that promoting food sourcing or certain menu attributes should be consistent even when things go south. “You have to be true to your brand,” he said. One good example of that took place earlier this year in January, when Chipotle learned that a pork supplier was violating the fast-casual chain’s animal welfare standards. Chipotle dropped the supplier and even took pork off of the menu at hundreds of locations while the situation is being resolved.

The Kids Are Alright
Plenty has been said about the purchasing power and brand prowess of Millennials — good news for convenience retailers. A February USA Today article called these younger consumers fans of convenience store food, both for quality and price. (These 18- to 34-year-olds are probably too young to remember Clark Griswold biting into a pee-soaked gas station sandwich.)

Jeff Lenard, NACS vice president of strategic industry initiatives, told USA Today that Millennials are more likely to buy prepared food items at convenience stores than any other age group. “That’s why the future of convenience stores is food — not gas,” he said.

Dionysios Christou, vice president of marketing at Del Monte Fresh Produce, agrees that offering more fresh ingredients, as well as providing menu transparency, are key to the Millennial generation’s approach to eating. “It is creating a big change within the [c-store] industry, focusing on better/healthier options for their customers.” He also notes that governmental changes in school lunches and feeding programs to incorporate more fresh fruits and vegetables, which many Millennials have experienced firsthand, “are continuing to change the culture and how we eat.”

Ethnicity is also a factor to consider with this generation. According to Nielsen, most Hispanics
(58%) prepare food at home, whereas Millennial Hispanics are shifting toward ready-made prepared foods. Unlike their Baby Boomer counterparts, Hispanic Millennials index high for purchases of packaged and prepared foods and also purchase more deli-prepared breakfast foods and sushi.

This younger Hispanic cohort is also growing up with well-defined eating attitudes and behaviors, representing opportunities for food and beverage marketers and convenience retailers. To help build loyalty among this demographic, retailers should incorporate spicy flavor profiles and zesty condiment bar options into prepared food programs.

From Restaurant to C-Store
To elevate foodservice programs and add a higher level of sophistication to menus, many convenience store operators are hiring trained chefs. Rich Green, director of foodservice at North Salt Lake-based Maverik, believes that hiring a chef is a key element for not just his stores, but for any convenience retailer who wants to differentiate their food offering.

Unlike a fine-dining establishment, where chefs have a huge pantry and varieties of cooking methods available for menu creation, the inherent constraints of a convenience store kitchen require a great deal of creativity. “If you’re the right kind of chef, it’s a fun challenge to have. Think
Food Network’s ‘Chopped,’” said Green.

Trained restaurant chefs also bring a higher level of expertise and traditional food preparation knowledge to a c-store foodservice program, added Green. He notes that during a recent egg shortage, Maverik’s chef came up with a relatively simple solution within minutes — “probably not something we would have arrived at without him.”

So what’s next for convenience store foodservice? For one, consumers are placing a much higher level of importance on food ingredients, so convenience stores should prepare accordingly. It’s more clear than ever that convenience store foodservice programs are moving in the direction of fresh and made-to-order fare (Green noted that Maverik is planning to open six made-to-order locations this year). Consumers will expect convenience store food programs to be just as good, if not better, than those of QSRs and restaurants.

Fresh, fast, customizable, quality ingredients and healthy options are becoming more ubiquitous terms to describe c-store foodservice. It’s the fastest growing convenience store category, and the potential is enormous.

Chris Blasinsky is the NACS director of editorial projects. She can be reached at cblasinsky@nacsonline.com.