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C-store competition: fighting for the foodservice dollar.

C-store competition: Fighting for the foodservice dollar

In recent years, traditional lines separating retail segments have blurred. Supermarkets are selling prepared foods; fastfood operators are offering salad bars; and oil companies are pushing soft drinks and snacks. Convenience stores are doing all of the above. This makes them one of the most potentially dangerous competitors for supermarket foodservice operators.

Many convenience store operators feel they have the edge over supermarkets in the foodservice area. Says J. Lee Smith, director of marketing for deli, produce and prepared foods at Wawa Inc., Wawa, Pa., operator of 484 convenience stores, "Certain supermarkets have gotten better with foodservice and they have targeted quick service restaurants. Most of them would not even consider convenience stores competition, but we're open 24 hours a day and we're a lot closer to the parking lot."

C-stores' move into foodservice has been sparked, in large part, by the recognition that consumers are looking for quick, easy foods. In addition, a strong foodservice operation is seen as a way to attract a wider audience, namely female shoppers, consumers with higher incomes and older shoppers.

Appealing to a broader consumer base is considered critical to future survival. This means, of course, that convenience stores are likely to take some shoppers away from supermarkets.

To include broad foodservice operations, convenience companies are expanding stores. Many chains are running stores in the 5,000-square-foot range.

Labor problems

These stores face the same foodservice challenges that supermarkets do. Integrating foodservice into an already complex retailing environment is not easy. C-store clerks handle groceries, general merchandise, gasoline, lottery tickets and video rentals. "We're accustomed to working with packaged goods; foodservice demands constant attention in maintaining consistency and quality of product," says Coney Elliott, president of Solutions in San Angelo, Texas, a design and consulting company specializing in convenience stores.

Elliott points out that the biggest problem convenience store operators face with foodservice is the heavy concentration of labor. "The expectations of our employees are quite different than at other food retailers where employees usually have just one task," he says.

Despite these difficulties, a number of convenience store companies are having considerable success with foodservice. Wawa, for instance, offers a full-service deli, hot foods, post-mix soft drinks and custom-made sandwiches.

Foodservice at Wawa represents 25% of company sales. The average gross margin per location, after spoilage, is 55%. Wawa's biggest sales category and profit center is deli, mostly sliced meats and cheeses.

"I really believe that they [other convenience store retailers] have to make a firm commitment to foodservice," says Smith. "There is no room for a packaged goods mind-set when it comes to foodservice. You really have to sell the customer."

Wawa's strong foodservice operation is credited with helping to attract more female customers. Women currently represent 40% of the company's customer mix, but the margin is narrowing quickly to a 50% male-50% female split.

Wawa built its foodservice business around local favorites, such as hoagie sandwiches. Hundreds of made-to-order sandwiches are produced weekly at each location. "We sell a much higher quality product than many supermarket, particularly with our cold cuts. Also, many of our salads are custom-formulated," Smith says.

To cater to health-conscious consumers, Wawa sells a line of low-sodium deli meats and cheeses. The foodservice sections also include soup, pre-packaged salads, yogurt and juices.

The company recently introduced Fresh Buffet, a line of refrigerated entrees and desserts. Manufactured by a local supplier, the dinners are priced from $2.99 to $3.99 and are sold from a refrigerated case. The entrees include chicken Mornay, lasagna, beef teriyaki and chicken Oriental.

The Fresh Buffet concept is designed to appeal to working men and women who are health-conscious. In addition to the products' convenience, they are said to be low in sodium and to have no preservatives. A freshness indicator shows consumers how long a package has been in the case.

"Unlike TV dinners, the carrots taste like carrots," says Smith. "I think we're probably the first convenience store chain to roll out this kind of product. I don't know of any supermarkets doing it either."

Wawa's full-scale approach to foodservice is atypical. Most convenience store chains are testing various foodservice programs to find the right fit.

"I think the industry is still testing and experimenting," says Elliott. "Foodservice will experience a cycle just like anything else does. Some operators will learn how to properly manage and merchandise foodservice, while others will have to revert back to the basics, to selling prepackaged items - things that we were doing years ago."

Rutter's Farms' foodservice operation is typical of what many convenience chains are doing. The 52-store company, based in York, Pa., is gradually putting foodservice departments in its units.

Convenience store division president, Stew Hartman, feels foodservice is the only way to go, and that it helps the stores do battle with their primary competition - supermarkets. Rutter's experiments with a number of offerings in its 4,300-square-foot prototype store. Items being tested include pressure-fried chicken, hot entrees, soups, a salad bar and a full line of bakery items. Where the program is available, the foodservice department generates 25% of store sales.

Traditional convenience store companies are not the only operators expanding into foodservice. Gasoline marketers are also getting into the act. Major oil companies are opening convenience stores with sizable - and profitable - foodservice sections on prime locations to offset narrow gas margins.

Historically, there has been resistance to selling gasoline and food at the same location. But good site design is eliminating some of that concern. Los Angeles-based Atlantic Richfield's am/pm Mini Marts have created a marriage with inexpensive fast-food items - cheeseburgers, hot dogs, pizza, burritos, frozen yogurt and soft-serve ice cream - via strong marketing and advertising. To conserve on expensive labor, most of am/pm's foodservice is self-serve. Prices are kept low, in many cases below fast-food outlets.

Foodservice and a gasoline operation successfully co-exist at Convenient Petroleum's stores in the Hartford, Conn., area. Company officials believe that cleanliness and quality food make the concept work.

Early this year the firm opened a 2,200 square-foot Citgo prototype store - the only one in the country with an entire food-service program. The store sells hot and cold sandwiches, hot entrees, soups and a variety of salads, which are made in front of the customer. In addition, muffins, pastries, cookies and bread are baked in the store. During the grand opening, customer count ran 1,200 per day.

Table : Foodservice fuels c-store sales
Convenience store sales           Convenience store sales
 by product, 1989                  by product, 1989
Fountain                  25.4%   Hot dogs                  6.9%
Coffee                    21.8%   Chicken                   5.4%
Fresh sandwiches/salads   14.3%   Pizza                     2.8%
Packaged sandwiches        9.0%   Other products           14.4%

Source: Convenience Store News

Fountain drinks and coffee remain the top sellers in convenience stores, but newcomers such as fresh sandwiches and salads are gaining ground.

Table : Pop is popular
% of convenience            % of convenience
 stores selling              stores selling
Fountain drinks       92%   Sandwiches - fresh   29
Hot beverages         91    Frozen beverages     27
Hot dogs              74    Pizza                14
Sandwiches - frozen   72    On-premise bakery     6
Food cooked on-site   58    Fried chicken         3
Service deli          35

Source: National Association of Convenience Stores - 1990 State of the Convenience Store Industry Report

More convenience stores are trying to meet the needs of today's on-the-go consumers by offering a wide variety of food items, including fresh sandwiches, fried chicken and pizza - once the monopoly of supermarkets and fast-food restaurants.

PHOTO : Convenience stores such as Market Express in Price, Utah, are giving supermarkets stiff competition by offering takeout menus and other foodservice sections.

PHOTO : Foodservice represents 25% of company sales for Wawa, operator of 484 convenience stores. Wawa offers customers a full-service deli, hot foods and custom-made sandwiches. Its stores include refrigerated cases by the registers, which merchandise prepared food items.

PHOTO : Patrons at Convenient Petroleum's stores can fill their tanks and their stomachs. The foodservice program includes sandwiches, hot entrees, soups and freshly baked bread.

PHOTO : Some c-stores are building foodservice business by adding sit-down areas and salad bars. In Rutter's Farms stores with foodservice, it generates 25% of sales.

Anita Hussey is a writer and editor based in New York City.
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Title Annotation:includes related article on convenience store entered the foodservice business; convenience stores
Author:Hussey, Anita
Publication:Progressive Grocer
Date:Feb 1, 1991
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