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It may come as little surprise that convenience stores are increasingly relying on unique differentiators in a crowded market as options proliferate -- furthermore, when it comes to differentiators, food and snack items appear to be topping the list.
Per an April report issued by Restaurant Business, the outlet's Jonathan Maze highlighted that many restaurants -- from QSRs to casual -- were likely losing market share to c-stores on the food front.
"Where did the nation’s fast-food customers go last year when they opted against the drive-thru? One bet: They went to the gas station. Foodservice sales, most of which is prepared food, accounted for 28.7% of in-store sales at convenience stores last year, according to the National Association of Convenience Stores, or NACS," Maze wrote.
"They represent a bigger chunk of their profits: Foodservice sales accounted for nearly 40% of in-store gross margin dollars. Prepared food accounted for more than two-thirds of convenience stores’ foodservice sales last year," he added.
And now, with a new report from C-Store Dive's Amanda Baltazar, it appears that some major convenience store chains are expanding their supply chain operations to include commissaries -- enabling each company to control each aspect of production to ensure consistency and fresh delivery to every location.
"Commissaries are a boon to convenience store chains large enough to warrant them. They bring consistency and ensure quality. Food safety standards can be stringently enforced. The supply chain is consistent. Perhaps most important, they give convenience retailers the flexibility to update and evolve their food offerings," Baltazar stated, noting that Kwik Trip, Weigel's, and EG America had all invested in the commissary model.
Commissaries for C-Stores: Expensive, But Worth It?
It's almost certainly a major expense line to add a commissary, or several, to the balance sheet when considering a c-store chain's operations, but that expense appeared to be justified by representatives of the three aforementioned chains.
“We can buy in bulk because we’re making [items] for 85 stores out of one commissary,” said Beth Hoffer, vice president of foodservice for Weigel's. “This also means we can upgrade ingredients for better quality.” Weigel's opened its 110,000-square-foot facility in Loudon, Tennessee, earlier this year, in April.
Meanwhile, Kwik Trip has spent millions -- $151 million most recently -- expanding its La Crosse, Wisconsin, commissary facility to its current footprint measuring 140 acres. That commissary provides food production for Kwik Trip's more than 850 stores. On premises: a bakery, which is important as it "really supplements our foodservice program because pretty much everything is on one of our buns," per one exec; a beverage and ice cream section which also serves as a production hub for its own plastic bottles; a refrigerated kitchen playing host to production lines for pizza, fried chicken, sandwiches, and meat snacks; and a separate area charged with issuing forth a variety of sweet treats to stock its store shelves.
However, "Because Kwik Trip’s production is so high, a lot of its equipment is custom made," Baltazar underscored, also noting that blast freezers, ovens, refrigerated loading docks, conveyor belts, metal or foreign object-scanning machines, labor, and other expenses were common in the commissary business.
Concerning EG America's 43,000-square-foot commissary in Westborough, Massachusetts, Nathan Bartlett -- the company's director of culinary operations -- outlined the positives.
“This streamlines operations and gives us the opportunity to supervise large scale production in a very small space. One person can watch 100 people and everything is made with the same level of food safety, quality and consistency. We can reduce labor costs, bring in product in bulk and leverage some economies of scale," Bartlett said of the facility, which provides 105,000 food items to its stores. About 1,400 locations receive frozen items, while ~600 stores receive fresh items four times weekly.