Capturing Lunch and Dinner Customers

April 23, 2012

John Lofstock | Apr 06, 2012

When it comes to foodservice, convenience store operators must develop the expertise to make smart choices and deliver winning mealtime solutions.

 People need food, and convenience stores need people to like their food, which is why keeping lunch and dinner menus fresh, new and exciting is so important.

The food itself is the key point of differentiation for anyone in the foodservice business. Keeping menus fresh requires innovation and a keen eye for new products and emerging consumer trends.

“I think everybody likes variety, at lunch especially,” said Rick Yost, operations manager for Dead River Convenience Stores in Rockport, Maine. “You may get a guy two or three days a week for lunch and he’s not going to want to eat the same cheeseburger two or three times, so it’s important to have a variety.”

Dead River stores offer a standard, core food menu, but the company also gives store deli managers the latitude to add as many as five items on top of those that they feel will appeal to local tastes. There is, Yost pointed out, sufficient geographic diversity to make such flexibility critical to success.

“The optional five items rotate in and out,” Yost noted. “My stores are far apart and we have some coastal region locations that do a lot of lobsters rolls and things like that in the summertime. Then we also have some mountain-based stores where there are a lot of snowmobilers and skiers. They’ll do a lot of chili-type items in the wintertime, which aren’t necessarily big sellers in the stores along the beaches, but they’ll do well there. That’s where that kind of menu diversity is crucial.”

Tracking the Trends

Yost and his Dead River colleagues keep their fingers on the pulse of Americans’ ever-shifting food preferences by studying the retail market and interacting with consumers.

When it comes to identifying new products and food trends, suppliers are also a good source for information. “As long as it’s a two-way street where suppliers are feeding us accurate trending data and not trying to simply sell us something, we will always listen to what they have to offer,” Yost said.

Among the trends Dead River is seeing in its New England markets for the lunch daypart is a surge in Mexican foods, such as mini tacos and burritos. At dinner, customers are seeking value meals and more bundling.

“People are looking for more full meals,” Yost said. “It used to be our entire dinner menu consisted solely of pizza. Now we offer a Chester’s Chicken program in a lot of stores, with an eight-piece meal that comes with potatoes and other side dishes. It’s really a replacement meal, an alternative to the QSRs out there.”

The Dead River menu has expanded over the past two years to include several varieties of lasagna, spaghetti and chicken. “These are the alternative, full-service meals that are providing our strongest growth to date,” Yost said.

This coming summer, Dead River will once again be focusing on meal replacement items. As such, the company is placing a greater emphasis on desserts, such as smoothies and bakery items. “Customers like to end meals with an indulgence. We have found that when we have bundled these items together with a fresh meal, sales have been strong, so we will continue to focus on this growing demand.

Seeking Value

One trend that relates equally to the lunch and dinner dayparts is the move toward value offerings, including both dollar menus and combo meals, according to Kelly Weikel, consumer research manager for Chicago-based research and consulting firm Technomic Inc.

“I think that as more c-stores compete to take business from QSRs and fast-casual restaurants they will take a page from these locations and start offering more value menus—this will also be relevant to the snacking category—and pushing more combo meals that bundle an entrée, side and beverage at lunch,” Weikel said.

Additionally, as the quality perception of c-store foods increases, the industry will become a more viable choice for consumers at dinner. Since their positioning is centered on convenience, Weikel reasoned, and because other retailers are actively pushing them, this could mean more family-style bundles offered at dinner.

Indeed, in October 2011 a Technomic survey polled 500 c-store customers who purchase foodservice items at least every six months at a convenience store about value meals and dollar menus in a c-store setting. To ensure that consumers understood the difference between these two types of value offerings when responding, value meals and dollar menus were discussed separately and clearly defined.

Consumers not only agree that value offerings are appropriate at convenience stores, many have come to expect them and say such offerings influence them to visit c-stores instead of fast-food restaurants, Technomic found. Many customers reported they expect to see value meals (44%) and dollar menus (50%) at c-stores.

Despite the fact that value menus are a fast-food staple, Technomic research suggested more consumers (54%) expect fast-food restaurants to offer dollar menus. More importantly, most consumers said value meals (55%) and dollar menus (54%) can influence them to visit c-stores instead of fast-food restaurants, Technomic reported.

While both types of value offerings are about equally likely to drive traffic and help c-stores compete with fast-food restaurants, the data relating to consumer expectations indicated that consumers think value or dollar menus could be effective in a c-store setting.

Among the overall c-store trends Weikel identified are:

• A focus on stealing business from both quick-serve and fast-casual restaurant operators.

• Continued emphasis on quality,   freshness,  health and made-to-order foods.

• A growing need to cater to Hispanic consumers, especially with snacks and desserts.

• The expansion of private-label brands to offset a weak economy.

• C-store consumers will push for more adult beverages, specialty/high-quality coffees.

Boosting Meal Occasions

Technomic, which tracks and analyzes all retail segments that serve food and beverages, reported in January that over the past year, 40% of consumers have cut back on away-from-home dinner purchases, largely because they have less money to spend on dining out. This makes it more important than ever that c-stores combine quality with value. If they can deliver on these promises, the industry has a real opportunity to steal customers from other foodservice segments.

When weighing dine-out options, today’s consumers are more likely to choose restaurants based on the availability of frequent diner programs. As a result of consumers’ decrease in away-from-home dinner purchases, it is vital for operators and suppliers to stay on top of dinner and late-night trends, such as combo meals, smaller portions or shareable items, in order to more effectively identify opportunities of growth.

“It’s imperative for operators to recognize the importance of today’s value equation,” said Darren Tristano, Technomic’s executive vice president. “Drawing dinner and late-night traffic now means exploring new ways to underscore value beyond low prices. Operators may be able to boost dinner sales by strengthening their overall value with other pricing strategies, such as specials or combo meals.”

Technomic researchers have also found average unit volumes for c-stores offering prepared food and dispensed beverages jumped to more than $136,000 in 2011, up from $123,000 in 2007. The growth rates were based on approximately the same number of stores offering foodservice, indicating operators are becoming better at foodservice expansion and execution.

Overall, Technomic reported, c-store foodservice grew to $11.5 billion in 2011 (from $10.2 billion in 2007), based largely on the expansion of foodservice items, additional stores adding foodservice and more foodservice experience.


Why Going Green Can Mean Big Money for Fast-Food Chains

April 23, 2012

By Sonia van Gilder Cooke Monday, Apr. 09, 2012

In late 2008, a fast-food burger restaurant in Sweden received an odd complaint letter. It was from a mother of two, asking the chain to get rid of the boxes that its kids’ meals were packaged in. Her children only wanted the fries and toys, she said, and she was annoyed at having to throw the boxes straight into the recycling bin. It was an unusual request with an unusual outcome. Max Burgers — Sweden’s No. 1 burger chain — decided to do away with the kids’-meal boxes in all of its 75 restaurants, explaining to customers that it was reducing waste. No one complained. In fact, sales of kids’ meals rose. The company had turned sustainability into a selling point.

Max didn’t just get rid of its kids’-meal boxes, though. Since 2006, the chain has reassessed its entire enterprise, searching for ways to reduce its environmental footprint. It has installed energy-efficient grass roofs on 12 new restaurants and cut energy consumption by 20% company-wide. The chain buys only wind power and offsets all its carbon emissions by planting trees in Uganda. And in 2008, Max started putting CO2 labels on its menus, quantifying exactly how much carbon dioxide, from field to fryer, is emitted in making each dish. “One of the problems being a burger business is, of course, the beef,” says Max’s chief sustainability officer, Par Larshans, noting that the meat industry is responsible for about 18% of global greenhouse-gas emissions. By showing that its Grand de Luxe Cheese ‘n’ Bacon beef burger produced five times more carbon dioxide than its vegetarian burger and six times more than its fish sandwich, Max hoped to nudge customers toward a more sustainable choice.

It worked. Customers started eating more nonbeef burgers, causing sales of the low-carbon alternatives to jump by 16%. Meanwhile, Max began eating up the competition. From 2005 to ’11, the chain opened 45 new restaurants and more than doubled its market share in Sweden. In 2008 — the year it put its carbon labels on menus — Max became Sweden’s most popular burger chain, according to a survey of 250 brands carried out by the market-research firm ISI Wissing, trouncing McDonald’s despite the fact the American chain has three times as many restaurants in the country. With a 16% operating profit, Max has also become the most profitable burger franchise in Sweden. And after opening its first franchise in Norway last year, it’s eyeing expansion across Europe.

So how did the company do it? For one thing, the green initiatives seemed to boost customer loyalty, which increased by 27% from 2007 to ’09, according to a survey by the global media network Mindshare. But the real key was drawing in new customers. Vegetarians who might never have set foot in a fast-food restaurant now drop into Max for its veggie Greenburgare, bean salad and a Lyxshake Jordgubb (strawberry milk shake).

Max Burgers isn’t alone — fast-food chains elsewhere have also started burnishing their green credentials in recent years, with positive sales results. In the U.S., the Mexican-food chain Chipotle — which sources many of its ingredients locally and buys nearly half its beans from organic farms — has tripled its revenues since 2006 to $2 billion and now has more than 1,200 stores. Naked Pizza, which launched in 2009 in New Orleans and serves pies topped with hormone- and antibiotic-free meats, has plans to expand to 500 stores worldwide from its current 24. And in 2010, a vegetarian chain called Otarian launched in New York City and London with menus showing the amount of carbon dioxide emitted while making each food item (1.37 kg for a mushroom-quinoa burger) as well as the amount emitted by the typical fast-food equivalent (2.96 kg for a beef burger). Customers can store up the difference on a “Carbon Karma” card and redeem it for a free menu item of their choice.

Major companies have also experimented with measuring carbon emissions. Walkers (Britain’s biggest potato-chip manufacturer) and Coca-Cola have both begun monitoring the carbon footprint of their U.K. products with the help of the Carbon Trust, a British nonprofit group. For the companies, it not only improves their corporate image but can also save money. Walkers, for example, noticed it could cut costs by asking its farmers to water their potatoes less. “When you’re making [potato chips], you’re trying to get rid of most of the water,” explains John Kazer, a carbon-footprint-certification manager at the Carbon Trust. Drier potatoes take less energy to transport and bake to a crisp.

While carbon labeling and other environmental initiatives have caught on in some corners of the fast-food industry, however, they’re still not a huge selling point in the U.S. “Ultimately, with Chipotle, it’s a 1¼-lb. burrito,” says Darren Tristano, executive vice president of Technomic, a consultancy that monitors food-industry trends. “I think they’re going to win on portion and value more so than the environmental integrity.” In fact, the numbers show that diners interested in sustainable food are in the minority — only 27% of U.S. consumers feel it’s important that their restaurants be environmentally conscious, according to a 2010 Technomic survey.

This may change slowly, however, as the eco-minded Millennials — a third of whom report they want restaurants to be socially responsible and environmentally conscious — move through the workforce and begin earning higher salaries. “Every year, we are seeing more shift of the Millennial generation toward these concepts and spending their dollars there,” Tristano says. “Over time, it’s inevitable.”

For Max, pushing through new policies in recent years was a way of getting ahead of the curve. “When we introduced our carbon label in 2008, we were afraid that someone else would come in ahead of us,” Larshans says. Four year later, however, Max still hasn’t been joined by many others. “I don’t understand why more places aren’t doing this,” he says. “For us it’s a very good part of the business.”


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