Photo: Wawa
Better-for-you foods produce healthier results for convenience stores
Convenience store retailers are heading into 2020 looking for brighter times ahead following a solid 2019.
A survey of c-store owners by NACS found that 74 percent saw sales increase last year, with only seven percent reporting declines. Eighty-nine percent of those surveyed are looking for a strong first quarter in 2020, up four percentage points from last year and a record high, according to NACS.
The industry saw growth in-store with sales of better-for-you products such as health bars, nuts, produce and yogurt gaining in popularity among the channel’s customers.
“The convenience retailing industry is committed to providing better-for-you choices in stores, and the numbers show that consumers are supporting this effort,” said Jeff Lenard, NACS vice president of strategic industry initiatives. “Today, it’s almost expected that stores offer fresh and packaged better-for-you choices for customers, and our industry’s commitment to groups like a Partnership for a Healthier America (PHA) is one of the reasons why.”
The PHA is a non-profit organization created to bring public, private and non-profits together to develop strategies to battle childhood obesity and create a healthier present and future for the nation’s children. NACS was named the group’s partner of the year in 2019.
C-store operators, similar to their foodservice competitors, see breakfast as a key daypart for growing incremental sales. Forty-five percent of those surveyed by NACS see breakfast as their biggest opportunity in 2020. Twenty-six percent said lunch is the biggest opportunity and 23 percent said dinner.
Gasoline continues to be a strong driver of c-store visits with 62 percent of those surveyed reporting that sales at the pump increased in 2019. C-stores sell 80 percent of the fuel purchased in the U.S., according to NACS.
The quarterly NACS Retailer Sentiment Survey tracks members to gauge their views on their businesses, the industry and the economy. Sixty-eight member companies, representing 2,896 stores, participated in the December 2019 survey.
Discussion Questions
DISCUSSION QUESTIONS: Where do you see the convenience store business headed in 2020 and beyond? What role do you expect better-for-you products and foodservice to play in shaping convenience stores going forward?
Poll
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
Ken Morris
Managing Partner Cambridge Retail Advisors
I am heartened to learn that healthier food choices are driving c-store growth. C-stores play a big part in many people’s food day (especially breakfast and lunch) and offering healthy food is a great start to helping people make better choices. Maybe one day if we replace more of those scary hot dog rollers with colorful and vibrant salad bars, we will begin to change our food culture and improve both waistlines and bottom lines.
The noted “better for you” trend will continue. The days of burned coffee and over-grilled hot dogs are over. However, the brass ring for c-stores will be in their ability to provide a healthy and tasty dinner solution. Sandwiches, soups and salads can only go so far in providing center of plate nutrition. Rethinking of dinner, re-engineered meals and improved packaging are key to making significant breakthroughs in this currently underdeveloped day-part.
Foodservice is the future for c-stores. They need to think like a restaurant and act like a convenient, consumer problem-solving meal provider.
I see continued, but incremental, growth carrying forward for the “better-for-you” product set at c-stores.
Changes to the appearance of their own packaging is one area where I have seen a pronounced shift for c-store brands, allowing for a wider variety of product offerings which all play into the healthy choice vibe. That, along with more educated consumers, will pull the healthy food trend forward.
While “carnival food” will still exist at c-stores, it is great to see that low sodium, low sugar, better-for-you options are available more and more at c-stores and they are calling attention to them in store, through digital media, and through loyalty programs.
Years ago, when the laws changed regarding tobacco sales, c-stores took a significant hit and they were smart to bounce back by investing in food services. Now they’re continuing to get it right as many see that they have to offer healthy choices. That will continue to grow. I also see c-stores going forward to getting involved in the newest industry: cannabis products. It’s a natural progression. Moreover, as the word “convenience” implies, these stores will continue to experiment with items they feel will make the consumer’s life easy if they are able to purchase the items quickly. Lastly, I see the c-store size continuing to grow with more opportunities for customers to eat in-store and space to carry more products.
C-stores are long overdue for innovation. The price of convenience is significantly high, turning away customers from purchasing anything but the most urgent items that can’t wait until you can get to a proper grocery store. They have a great opportunity to increase the average ticket value with better and healthier breakfast/lunch offerings. Taking advantage of dark kitchens is one possible approach.
I saw the most fascinating analysis of the future of c-stores a couple years ago that built its predictions off the rise of electric vehicles, which take longer to charge than it does to fill a gas tank. So their theory was that c-stores will have to become more like cafes or third spaces, rather than the more transient stopping locations they are today. Attracting shoppers with healthier choices seems like a start to that trend. Now we just need to see if electric charging stations start popping up, alongside seating designed for those who need 10-20 minutes to wait, instead of 2-3…
C-stores have a brilliant opportunity in 2020 and beyond. The U.S. population is always on the go with less and less time for traditional sit down meals because of longer commutes, and activity laden lifestyles for children and adults that create a perfect storm for healthy food choices at the c-store.
I also think c-stores need to prepare for an electric future. Longer dwell times due to charging station wait times equal another opportunity to entertain their guests. Larger spaces will be required to handle a charging environment as currently you can get approximately 80 percent of a batteries capacity in 30 minutes which will require a big investment in infrastructure. The electric future is happening with new electric choices from Audi, BMW, Ford, Mercedes, Volvo, Porsche, VW and Byton hitting the market so it’s best to prepare now.
Better-for-you food choices have revolutionized c-stores in the eyes and stomachs of consumers. As c-stores become more and more like fast-casual restaurants that also happen to sell gas I see their positive sales momentum increasing steadily. Location will be more important than ever to the expansion of these brands as their ability to remain the most convenient choice for consumers is critical. For some, brand identity will be a factor as they need to present themselves in a way that speaks “healthy” to consumers so they choose these locations over other QSRs and fast-casuals. Old-style c-stores that just sell soft drinks, cigarettes, and candy bars are left to the pages of history going forward!
The health and wellness trend is here to stay, and it was high time that the convenience sector took notice to capitalize on this potentially high margin business opportunity. It’s a welcoming sight to see healthier snacks, fruits, and other offerings at gas stations, convenience stores and local bodegas in NYC, etc. The market has spoken, and it’s encouraging to see that there are guilt-free snack options available when you are on a road trip.
Its also a win-win for the convenience stores, as a healthier product line enables a much-needed product diversification approach, as well as a very profitable product line, which will resonate with more customers.
While many consumers are purportedly seeking healthy choices, convenience stores need to cater to these needs. Breakfast continues to be a growing category for both convenience stores and QSRs. Convenience is still the biggest driver and with less people cooking dinner at home, take-out and take-and-heat meal options are a big area of opportunity. Many convenience stores are partnering with brands that draw more traffic such as Subway and Krispy Krunchy Chicken.
I hadn’t thought about this before but, observationally, Duane Reade (Walgreens) here in the city has a myriad of better-for-you food products, including fresh fruit and veggies. Which leads me to my other thought. Are the chain drug guys doing a better c-store job than the c-stores?
Here is my caveat on my thoughts — I haven’t been to a c-store in years, and even then it was only to buy coffee while driving someplace.
I give big kudos to convenience stores with how they have cleaned-up their stores, offering more better-for-you products and moving big time into fresh products like produce and deli. I see these trends continuing into 2020 and I believe several of the regional c-store chains are poised to become the “local neighborhood store” for many communities. Their challenge will be to adopt better analytics and consumer shopping insights to be more on trend with their grocery offerings.
It is not surprising that c-stores are continuing to see good sales performance as customers who do more shopping online need smaller top-up shops and pure convenience. The shop at a fuel station is the utmost in convenience as you are there anyway. All food retailers are also seeing higher sales in better-for-you foods as the publicity surrounding weight and health issues grows. In a convenience store, it’s just more noticeable as the range is smaller and space is more valuable. This is the trick for operators – how to accommodate more of this new sector of foods while not losing out on the more traditional areas.
It’s so important for convenience stores to understand their customer profiles at a local level and get the right range and display to best fit their shopper. Better-for-you foods is not an all-store trend. Understanding your customers, their purchasing profile and merchandising your store is way more critical for convenience stores than for larger stores where the whole range can be stocked. Technology will be a big enabler in allowing c-stores to maximize the opportunity. NACS and other groups should bring independent or smaller groups of convenience retailers together to take advantage of these solutions and the opportunity which is very hard to afford as a standalone independent.
Convenience is a very powerful business concept. One reason why c-stores have done well for almost a century is because customers love convenience – now more than ever. Carrying better-for-you products is a popular move. If c-stores want their customers to shop with them, they have to have the items customers crave most. Updating with what’s hot and getting rid of what’s not is a solid retail strategy for any retailer, not just c-stores. Give the customer what they want – and make it easy and convenient!
Setting the trends, not just keeping up with them, is a key for C-stores today. There are too many choices for brick-and-mortar shoppers, and new categories and even services provided by c-stores are a way to make them destinations, rather than ad hoc, “only when I need it” stores.