C-stores registered 2% annual growth in foodservice customers between 2005 and 2008

Convenience stores are poised to garner a growing segment of the foodservice business, recording steady increases in customer traffic as opposed to traditional quick-service restaurants (QSRs), according to one industry researcher.

Presenting information before about 250 attendees at CSP's annual Convenience Retailing University conference, David Portalatin, director of industry analysis for The NPD Group, Houston, revealed statistics showing c-stores sustaining a 2% annual growth rate in foodservice customers since 2005 (with a dip to 1% last year), as opposed to 2% increase in 2005 to a decline of 2% in 2009 for QSRs.

Among the factors attributing to the steady increases was customers' age, he said, noting the emerging challenge of retaining Baby Boomers as they move from industrial parks to neighborhood lifestyles while still appealing to the 18 to 34 year-olds who seek healthy options and value.

"You've got to appeal to Baby Boomers as they transition their lives to other places without alienating the [18 to 30 year-olds] who are coming on board."

One of the elements needed to lure health-conscious customers was freshness, with that being defined in NPD studies in the following ways:

• I can see it being prepared, 43%.
• Made with fresh ingredients, 39%.
• Item has a "sell by" or expiration date, 8%.
• Aroma, 4%.

Items that also enhance the perception of value include fresh fruit, breakfast, salads, sandwiches and baked goods.

"There's an opportunity to move a lot of foot traffic if we can make it happen."

Today's economy is also playing role with regards to foodservice at c-stores, he said. Lower prices (58%), better quality (41%), variety (32%), promotions (32%), fresh-made foods (31%), healthier options (29%) and cleaner food-prep areas (29%) were all emerging demands, NPD studies revealed.

Offering value—and more importantly, the perception of value—is an area of great concern, as dollar-menus and broadly advertised specials present a challenge to the c-store channel. In particular, Portalatin (pictured) felt retailers were behind the curve with regards to advertising promotions in the general media. A show of hands confirmed his theory as only a small portion in the room said they did.

C-stores may be losing out on the value equation even when they currently hold an advantage, with Portalatin saying the average ring at a QSR is $5.29 as opposed to $3.18 at c-stores. He said c-stores still own the lower price point and must leverage it to their benefit.

"Convenience as a value will lose steam in a recession," he noted, but added that coming out of a similar recession in the 1990s, consumers did return to convenience-minded norms.

One of the last points Portalatin made emphasized the growing importance of grocery loyalty programs tied to fuel. He said that 76% of fuel bought at Pittsburgh-based Giant Eagle Inc. and 51% bought at Cincinnati-based Kroger Cos. were linked to in-store loyalty programs. More and more, the larger grocery chains are finding the lure of accumulating fuel rewards as a powerful incentive to drive traffic and sell more merchandise.

"I can't make an assessment of gross margins," he said. "But it will move more consumer foot traffic than what we've observed in 30 years. [Fuel rewards are] a powerful incentive."