Focusing on Fresh Foods

April 18, 2013

sandwichThe grab-and-go business is constantly evolving. Today’s customers not only want their foodservice fast, but they expect quality, consistency and healthy daypart options.

Convenience store operators are driving sales of healthy, portable foodservice offerings like packaged sandwiches, wraps, salads and some roller grill items. But, historically, the industry has seldom gotten the attention it deserves for its healthy food options. Changing that perception, and making consumers aware of the healthy items c-stores carry will take some effort.

T. W. MacDermott, president and principal of the Clarion Group in Kingston, N.H., pointed out that most c-stores have a high level of repeat business from their immediate surrounding area and commuters who stop for gas or coffee en route to work. Thus, it should be relatively easy to communicate any new initiative to them with minimal effort and expense.

“The trick is to make sure that the healthy foods being offered are really healthy, and especially fresh,” MacDermott said. “There can be no shortcutting on quality, or the store will sell its product only once.”

Ready-to-eat sandwiches, fresh fruit, packaged salads, fruit cups, yogurt cups and other foods that a customer may pick up to take for lunch at work are extremely popular. “The operator will need to either find a supplier of the fresh foods or maybe partner with a nearby restaurant or caterer whose label on the fresh products will be an assurance of quality to customers and a helpful ad for the provider,” MacDermott said.

Fresh Returns
Another major difference between jumping from retail to foodservice that could cause problems for inexperienced operators is handling products with a short shelf life.

“A whole different mindset is required when it comes to working with perishable products. This is an area that convenience stores need to understand and perfect to boost fresh grab-and-go sales,” MacDermott said. “It’s better to throw expired food out, or donate items nearing their spoilage date to a food bank. The loss will be more than offset by growing repeat sales if customers know that whatever they buy is fresh—no more than 36 hours old.”

Letting consumers know about the guaranteed freshness and food donations can also engender confidence, good will and additional repeat business.

To ensure the high turnover that healthy, fresh products require in order to be profitable, the products should be rotated at frequent intervals and kept in a separate, distinctive refrigerated display case, Mac Dermott suggested. If possible, it should also adjoin a display of non-refrigerated healthy products, such as granola bars and the like.
If possible, said Arlene Spiegel, president of Arlene Spiegel & Associates in New York City, “list ingredients, sources and method of preparation next to each item. Customer can never have too much information about the quality of the food they are eating.”

While retailers are naturally sensitive to pricing, convenience stores don’t necessarily have to worry about competing with supermarkets when it comes to fresh grab-and-go foods.

“Customers stop at convenience stores because they are convenient, not because they’re bargain hunting. That is a strategy they can use to their advantage,” MacDermott said.

Going to Market
As foodservice becomes more of a convenience store industry staple, effectively marketing quality and freshness will only enhance the offering.

“The industry needs to decide how it wants people to think about it,” said Ryan Mathews, founder and CEO of Detroit-based Black Monk Consulting. “One can make the claim of convenience, or, one can make the claim of health. But making compound claims—like healthy and convenient—is always tricky.”

Mathews posed the question: Is the industry willing to invest in a long-term mass-marketing reimaging campaign? “I doubt it,” he said, “and I really doubt it would be worth it. A better tactic is to promote healthy options in store and to convert the market one customer at a time.”

There is, as Mathews pointed out, a danger inherent in foodservice marketing, as well. “Every time a retailer pats himself on the back for offering ‘healthy’ solutions somebody is always anxious to challenge those claims—such as Arby’s current anti-Subway campaign—or to look deeper into the product portfolio to see if the health claims holds up across the store,” Mathews said. “The best plan is to continue to offer better-for-you choices, save the mass marketing dollars and do the absolute best job you can serving your customers.”

Defining Healthy
Customers are correct that there is a barrier to offering healthy foods in c-stores, according to Tim Powell, director of research and consulting services for Chicago-based Technomic Inc.

“The majority of regular consumers just stare at you incredulously when you ask them the importance of health and wellness when selecting prepared foods in the segment—especially when they are holding a double-sausage mini pizza in one hand and a bear claw in the other,” Powell said.

Despite that, Powell noted that there is still a need to offer healthy fare in the form of fresh-cut fruit, salads, grilled and fewer fried products. “Industry leaders in foodservice like Wawa, Sheetz and Rutter’s have developed a tolerance for waste and accepted that if you offer fresh foods consistently, eventually—as new customers walk through the doors, especially females—you will eliminate the perception that only old hot dogs and burnt coffee are awaiting them.”

The bottom line, Powell said, is that the convenience store chains that will be successful with their foodservice programs must evolve into offering healthier items. “Others will simply perpetuate the perception of a gas station with food if they don’t expand and rotate menus,” he said.

Defining exactly what “healthy” means to consumers was the subject of some recent Technomic research. While Americans have obviously become much more health-conscious, their perceptions of what is considered healthy eating at restaurants are continually changing. Contemporary definitions of health are strongly associated with local, natural, organic and sustainable ingredients. Consumers are also taking more of a balanced and personal approach to healthy eating, seeking out better-for-you foods, while enjoying occasional indulgences.

“More consumers than ever before tell us that eating healthy and paying attention to nutrition is important,” said Darren Tristano, vice president of Technomic. “However, there’s a shift happening in terms of what actually defines healthy for them. We’re seeing more consumers gravitate toward health-halo claims, such as local, natural and organic, as well as whole wheat.”

Sandra Matheson, president of Food Systems Consulting Inc., said that convenience store operators also need to identify that they have choices available throughout the store. “Not just junk food, but something for everyone. And they need to have deals on their healthier items to get people to try them,” she said.

Convenience retailers also need for their offerings to match their message. “If they say their food is healthy, it needs to be truly fresh and healthy,” Matheson said. “In my experience, I have visited sites that advertised healthy foods, but found their foods loaded with salt. Some weren’t even fresh. The more fresh fruits and vegetables you can get on the menu the better. Perception goes a long way when customers see these items near the food counter.”

But most importantly for c-stores to remember is that this can be regarded as the c-store industry’s golden age of foodservice. The time to build your business is right now.
“If c-stores don’t seize the opportunity in front of them, they are foolish,” said Karen Malody, the principal of Culinary Options, a foodservice consultancy in Seattle. “It’s hard work and they will likely need to engage some foodservice experts to help them think differently, but the opportunity to grow sales is enormous.”


Is the Cupcake Trend Over? Battle for “Share-of-Stomach” Heats Up!

April 18, 2013

Over the past decade, we have seen a shift in the frozen treat and snack category with many short-term category trends gaining steam and eventually showing unsustainable growth in the longer term.

Lessons from the past

krispy-kreme-donuts_150Krispy Kreme’s singularly focused menu of sweet, craveable doughnuts led to rapid expansion for the chain in the later ’90s. Peaking in 2005 with sales in excess of $1 billion, the company has since declined and settled down with annual U.S. sales today of $570 million. Although the chain’s growth over the past two years has been slow and steady, Krispy Kreme has shifted unit development globally by bringing products to international marketplaces; today Krispy Kreme has more than 500 locations outside the U.S. compared to just 239 domestically.

Cold_Stone_150.Cold Stone Creamery was at the heart of a premium ice-cream movement. Its rapid growth in units helped the chain achieve peak annual sales in 2007 of nearly $500 million in a frozen-dessert category of $7 billion. Then premium ice-cream players suffered from the recession as increased unemployment and declining disposable personal income—among other economic factors—prevented consumers from indulging in ice-cream purchases. Today, Cold Stone Creamery has broadened its offering with ice-cream cupcakes and shakes and continues to manage sales of $355 million.

Crumbs_150“Sex in the City” and Magnolia Bakery sparked a cupcake revolution and national craze that led to upstart brands like Crumbs Bake Shop, Sprinkles and Gigi’s Cupcakes adding locations. Independent cupcake shops have also popped up in most major cities in recent years, while supermarkets have expanded their cupcake offerings for in-store bakeries. Although Technomic estimates the retail cupcake shop segment to be in the range of $200 to $250 million annually, this segment appears to be maturing and flattening in the restaurant lifecycle curve as other desserts build greater momentum.

Pinkberry_150It is worth noting that frozen-yogurt brands like Yogurtland, Pinkberry, Menchie’s and Red Mango are still in the high-growth stage of their lifecycle.  Frozen-yogurt chains within the 2013 Technomic Top 500 Leading Chain Restaurant Report as a whole increased their sales by 20%, with net unit growth of over 25%. The high appeal of frozen yogurt’s broad flavors, customization options and “health halo” consumer perception has given other sweet-treat operators (like cupcakes, traditional ice cream and doughnuts) a run for their money. This trend will likely continue to grow in the short term based on the low cost of opening a store and the franchise brand availability and appeal.

So what’s next? 

We could see growth of numerous dessert trends such as chocolate-covered bacon shops, cream puffs, churros or perhaps macaroons.  One thing that isn’t changing is consumers’ interest in craveable sweet and savory snacks.  Health and lifestyle considerations will also remain a consideration but a balance with indulgence will likely provide ample opportunities for both healthful and decadent treats.

In today’s restaurant space, growth has become a battle for share:  as one category grows, another will fall victim.