The C-Store Foodservice Update...C-Store Foodservice: The Good •C-store foodservice is a $31.3...

The C-Store Foodservice Update

Abbie Westra — [email protected]

Convenience Stores 101

C-Stores of Today: Total Convenience

TRADITIONAL definition of a convenience store: 1. Building size of less than 5,000 square feet 2. Off-street parking and/or convenient pedestrian access 3. Extended hours of operation, with many open 24/7 4. Offer at least 500 stock keeping units (SKUs) 5. Product mix includes a significant selection of tobacco,

beverages, snacks, candy and grocery items

Source: NACS® State of the Industry Annual Report

Convenience Store Facts C-stores are bigger than ever before. • Average c-store size = 2,744 square feet • New stores are even bigger

Average size = 3,590 square feet Total in-store sales area = 2,582 sq ft

• C-stores have expanded their offerings over the last few years, with stores becoming part supermarket, restaurant, gas station and even a bank or drug store.

83.7% of convenience stores sell gasoline. • Of the 151,282 c-stores in the United States,

126,658 carry motor fuel.

It’s all about immediate consumption: • More than 80% of goods purchased at

convenience stores are consumed within an hour, and 60% are consumed immediately.

Source: NACS® State of the Industry Annual Report

Convenience Stores are Everywhere • There is one c-store per 2,100 people in the U.S. • C-stores account for more than 34% of retail outlets in the U.S. • The majority are independent operators.

Source: NACS® State of the Industry Survey of 2013 Data & CSX, LLC

Trade Channel 2012 2013 %

Change

Convenience Store 149,220 151,282 1.4%

Single Stores 93,819 95,056 1.3%

Category Killer 84,526 83,959 (0.7)%

Supermarket/Supercenter/Superette

50,078 50,645 1.1%

Liquor Store 45,665 46,266 1.3%

Drug 40,727 41,378 1.6%

Dollar 23,421 24,853 6.1%

Kiosk/Other 23,052 22,847 (0.9)%

Cigarette Outlet 10,374 10,956 5.6%

Mass Merchandiser 7,243 7,177 (0.9)%

Wholesale Club 1,261 1,286 2.0%

Total Retail 435,567 440,649 1.2%


C-Store Industry Near $700B

Snapshot 2012 2013 Change

Industry Stores 149,220 151,282 1.4%

Industry Sales $700.3B $695.5B (0.7)%

In-Store Sales $199.3B $204.0B 2.4%

Motor Fuel Sales $501.0B $491.5B (1.9)%

Fuel Margin (CPG) 18.1¢ 18.5¢ 2.3%

Source: The Nielsen Co./TDLink – 2012 Survey

Industry Store-Count Breakout

Store Breakout Number Percentage

1-10 Stores 99,603 67.2%

11-50 Stores 11,933 8.1%

51-200 Stores 8,485 5.7%

201-500 Stores 8,136 5.5%

Over 500 Stores 19,969 13.5%

Total 148,126 100%


Industry Totals—Same Firm Sales

Per Store/Per Month 2012 2013 Change

In-Store Sales $133,286 $136,265 2.5%

Merchandise Sales $111,700 $111,866 1.3%

Foodservice Sales $24,191 $24,726 2.4%

Fuel Gallons 130,845 132,029 0.9%

Fuel Sales $467,390 $457,754 (2.1)%

Average Selling Price $3.57 $3.47 (2.9)%

Total All Sales $497,962 $497,654 (0.1)%


Industry Totals—Gross Profit Dollars

Per Store/Per

Month

2012

2013

Change

In-Store $42,617 $44,514 4.5%

Merchandise $30,372 $31,606 2.8%

Foodservice $12,760 $13,081 2.5%

Fuel $23,845 $24,616 3.2%


2013 Top Ten In-Store Categories Share of Sales

37.00%

18.00%

15.50%

11.70%

8%

3.70% 3.10%

2.00% 1.10%

Tobacco

Foodservice

Packaged Beverages

All Other

Beer

Salty Snacks

Candy

Sweet Snacks

Alternative Snacks

Foodservice Deep Dive

C-Store Foodservice: The Good

• C-store foodservice is a $31.3 billion industry, contributing 18% to in-store sales and 29.1% to in store gross-profit dollars.

• Foodservice is picking up the slack from declining fuel/cigarette sales.

• Among the top five c-store categories ranked by gross margin percentages, foodservice items makes up four of the top five.


Foodservice in C-Stores: The Not-As-Good

• Retailers aren’t thinking like restaurateurs.

• Per-store profits barely touch that of QSRs.

• Top-quartile retailers are leaving others in the dust.

• Concern that momentum is flagging:

– 2013 foodservice gross-profit dollars: +2.5%

– 2012 foodservice gross-profit dollars: +8.7%

The Haves and Have-Nots

Top quartile Second quartile Third quartile Bottom quartile

Foodservice Sales*

$34,572 $17,640 $10,075 $9,712

Source: NACS State of the Industry Report of 2013 Data * Per store per month

Gross Profits* Top quartile Second quartile Third quartile Bottom quartile

Prepared Foods $14,260 $7,701 $4,448 $4,705

Hot Dispensed $4,756 $2,518 $993 $652

Cold Dispensed $2,507 $1,583 $912 $651

An Industry in Transition Bottom Line:

• Top-Performers Will Continue to Outpace the Industry.

• Those Who Commit Will Continue to Raise all Boats.

• The Challenge: Close the Gap Between C-stores and QSRs.

Category Sales Contribution

5.80%

63.90%

5.80%

9.50%

15.00% Commissary/Pkgd.Sandwiches (+1.2%)

Food prepared onsite (+2.8%)

Frozen dispensedbeverages (+3.1%)

Cold dispensedbeverages (-4.2)

Hot dispensedbeverages (+1.3%)


C-Store Foodservice Profit Margins

• 40% - 60% – Prepared sandwiches

– Chicken (non-sandwich)

– Fresh fruit

– Soup

• 60% - 70% – MTO sandwiches

– Hot dogs

– Corn dogs

– Pizza

– Breakfast sandwiches

• Greater than 70% – Cold dispensed beverages

– Hot dispensed beverages

– Frozen dispensed beverages

Source: Technomic

C-Store Traffic Growth

Year Ending Traffic PCYA*

Dec. 2010 +2%

Dec. 2011 +3%

Dec. 2012 +2%

Dec. 2013 +1%

Source: The NPD Group/CREST * Percent change from a year ago

Convenience stores continue to see nice gains in foodservice traffic year over year, especially compared with other foodservice-at-retail channels, which have been flat to negative.

C-Store Day-Part Distribution

6%

19%

33%

42% Supper

Lunch

Morning meals

P.M. snack

Source: The NPD Group/CREST

While c-stores saw nice growth during lunch (5%) and p.m. snack (3%) day-parts last year, breakfast and supper saw losses (-1% and -2%, respectively).

Trends by Category: Food Prepared on Site

• 9.1% of all In-Store Sales and Largest Contributor to Foodservice Sales.

• Third Largest C-store Profit Contributor by Gross-Profit Contribution.

• Menu Trends:

– Breakfast Items

– Proteins

– LTOs

– Deeper Retailer-Supplier Strategies

Source: NACS State of the Industry Report of 2013 Data

Trends by Category: Commissary/Packaged Sandwiches

• Total Category Sales Rose almost 13% in 2013, and Profits Grew 10%.

– Notable in Today’s Atmosphere.

• Sandwiches and Wraps Make up 64.5% of Category.

– Salads & Sides = 10.4%

– Thaw, Heat & Eat = 17.3%

– Ready-to-Eat Meals = 8.7%

Source: NACS State of the Industry Report of 2013 Data

What’s on the Menu?

Desserts

Soups

Chicken (non-sandwich)

Snack items

Cut Produce

Salads

Pizza

Baked Goods

Hot Dogs, Sausages, etc.

Breakfast Items

Sandwiches

37%

38%

40%

42%

44%

50%

66%

77%

85%

92%

96%

Source: FARE State of Foodservice, May 2014

Percent of Operators Offering

Menu Growth Opportunities

8%

13%

14%

16%

18%

23%

33%

33%

54%

54%

Soups

Cut produce

Salads

Chicken (non-sandwich/salad)

Roller grill items

Baked goods/pastry

Pizza (pie/slice)

Snack items

Breakfast items

Sandwiches

What two items do you believe have the highest sales growth potential?

Sandwiches are a low-hanging fruit, since 98% already offer them.


Day-Part Growth Opportunities

5%

2%

4%

7%

12%

34%

37%

None

Late-night snack

Mid-morning snack

Dinner

Late-afternoon snack

Breakfast

Lunch

Which day-part, if any, do you expect growth in the next year?


C-Store New Menu Development Category Q2 Rollouts

Non-breaded Protein 2

Oth. Potato 3

Other Sides/Condiments 12

Pasta/Noodles 3

Pizza 18

Pork Dish 9

Protein Side/Extra 4

Salad 11

Sandwich 111

Side 9

Soup 7

Topping 11

Wings 2

Category Q2 Rollouts

Baked Goods 15

Beef Dish 3

Breaded Other 4

Breaded Protein 6

Breads 25

Burgers 14

Chicken Dish 5

Combo Plates 6

Deli Salads 4

Fruit 11

Hot Dogs 26

Ice Cream 5

Mexican 15

Source: Technomic

What the Leaders are Doing

Rutter’s: From irreverence and fun to sophistication: mahi mahi bites, barbecue short ribs, cannolis, “pig tails,” mac and cheese bites.

Tedeschi: Better-for-you items (Cuban Black Bean, Edamame and Wheatberry), Indian HMR meals; Appletini Panini.

Quick Chek: Snacks: Santa Fe chicken egg rolls, jalapeno poppers, mozzarella bites.

Wawa: Baking breads fresh in-house for its hoagies.

RaceTrac: Frozen yogurt,

MTO smoothies.

http://qchek.com/fresh_food_lunch_dinner.asp

What the Leaders are Doing

Casey’s: Opened stand-alone pizza QSR, testing delivery.

7-Eleven: Snacks and mini-meals, exclusive offers.

QuikTrip: Rolling out MTO sandwich program company-wide.

Spinx: “Fresh on the Go” menu, with better-for-you items such as hummus, wraps, Greek yogurt, as well as MTO sandwiches, pizza and flatbreads.

http://qchek.com/fresh_food_lunch_dinner.asp

Global Trends Permeating C-Stores

• Spicy Flavors (sriracha, chipotle)

• Regional Barbecue

• Restaurant Appetizers Turned C-Store Snacks

• Breakfast Foods

• Comfort Foods Reimagined (Wawa’s Mac & Cheese Menu)

C-Stores and Wellness • Balance Is Key

• Success: Egg-white or whole-wheat options, vs. 100% “healthy” offering

• Verdict Still out: Tedeschi’s Salads

• Real Success Has Been in:

– 360-Degree, Open-Air Coolers

• Yogurt, Juices, Cheese Sticks

– Packaged Snacks

• Nuts, Trail Mixes

• “Craft Snacks”

Key C-Store Consumer Attributes

51%

50%

48%

45%

45%

43%

33%

42%

51%

38%

39%

35%

38%

40%

43%

43%

45%

56%

48%

39%

52%

52%

Comparable menu prices

Speed of visit

Good value thru low prices

Takeout quality

Beverage quality

Order accuracy

Clean kitchen/prep area

Convenience location

Service

Food quality

Food taste/flavor

Important

Very Important

Source: Technomic Consumer Brand Metrics Study

Operator Challenges

Greatest Pain Points* Percent Responding Labor pool 57%

Finding right products/programs 57% Labor costs 56%

Equipment costs 51% Quality control 49%

Food costs 48% Safety and sanitation 34%

Distribution chain 26%

Source: FARE State of Foodservice, May 2014 * Rated 5 or 6 on a 6-point scale where 6 is extremely challenging

The Supplier-Operator Partnership

22%

30%

32%

36%

47%

56%

62%

Employee training programs

Consumer insights and data

Products/equipment that require lesslabor

Total programs (product, training,marketing, equipment)

Sales and promotion programs

Improved products (taste, quality, shelflife)

New concepts/products


What are the three most important tools/information you need from your supplier partners?

Foodservice Sales Expectations Year to Come

23%

64%

12%

2%

Improve greatly

Improve somewhat

Remain the same

Decline somewhat


28 Trends, Issues and Retailers You

Should Know

Retailer Cheat Sheet 16 companies to track to stay in the know

• 7-Eleven (Dallas)

• Casey’s (Ankeny, IA)

• Cumberland Farms (Framingham, MA)

• Holiday Station Stores (Minneapolis, MN)

• Kwik Trip (LaCrosse, WI)

• Kum & Go (Des Moines, IA)

• Maverik (N. Salt Lake, UT)

• Nice N Easy (Canastota, NY)

• Quick Chek (Whitehouse Station, N.J.)

• QuikTrip (Tulsa, OK)

• RaceTrac (Atlanta)

• Rutter’s Farm Stores (York, PA)

• Sheetz (Altoona, PA)

• Spinx (Greenville, SC)

• Susser/Stripes (Corpus Christi, TX)

• Tedeschi Shoppes (Rockford, MA)

• Wawa (Wawa, PA)

9 Key C-Store Foodservice Themes

• The Leaders Have a Long Legacy – It takes a lot of patience to be true foodservice players.

• Surrounded on All Sides – They are competing w/ restaurants, grocery, drug and dollar.

• Top-Quartile Disparities – The top performers continue to pull away from the pack.

• Operational Execution – Follow-through at the store level is an ongoing hurdle.

• The Distribution Dilemma – The c-store supply chain was not built for fresh foods.

9 Key C-Store Foodservice Themes

• Culture is Critical – The leaders have succeeded through a cultural

commitment from the c-suite to the store floor.

• Top Differentiators: Customization & CPG – Overlap trends toward day-part blurring and snacking.

• Target: Females and Millennials – Savvy retailers are going after these discerning, demanding

segments to help change consumer perception.

• End Game: A Restaurant That Sells Gas – Leaders creating a whole new segment: “fast casual to go.”

C-Store Foodservice Update

Thank You! Abbie Westra — [email protected]

The C-Store Foodservice Update...C-Store Foodservice: The Good •C-store foodservice is a $31.3...

Documents

Transcript of The C-Store Foodservice Update...C-Store Foodservice: The Good •C-store foodservice is a $31.3...