C-Stores, Restaurants, and the Battle For Market Share
The Competition: Restaurants
As quick-service restaurants and convenience stores fight for foodservice dollars, fast-casual concepts hit all the right consumer notes There’s been some bad news for fast-food restaurants as of late. Formerly the king of the hill as far as breakfast is concerned, these operators are meeting increasingly fierce competition from c-stores.
“Those customers who are driven by convenience decided if they were stopping to get gas, why didn’t they get some coffee and something to eat too?” says Peter Romeo, director of digital content for Convenience Store Products’ sister magazine Restaurant Business, Oakbrook Terrace, Ill. And it’s not just about the morning commute: Even at lunch c-stores are stealing market share from quick-service restaurants (QSRs).
“The quality of what’s available from a convenience store today, whether it’s deli-made, freshly made or even preprepared, is so comparable to what you can get in many QSRs,” Romeo adds. A study from the NPD Group, “Eating Patterns in America,” backs this up, showing that c-stores are becoming a favored place for millennials to grab a meal.
They stop at c-stores almost twice as often as they go to fast-casual restaurants—11.1% of the time compared to 6.6% for fast-casual. But it’s not all a bed of roses for the convenience-store industry. Fast-casual restaurants have blossomed in the past decade, putting a premium on quality ingredients and freshly prepared food, with an emphasis on local and seasonal products.
“Fast-casual is pretty much trumping the convenience store business,” but c-stores do have an advantage of offering both foodservice and consumer packaged foods, Romeo says. The growth of fast-casual occurred in tandem with consumers’ expanded definition of value. “Consumers are not necessarily looking for the lowest price for their food,” says Bonnie Riggs, a restaurant industry analyst with market research company NPD Group, Chicago. “But restaurants and convenience stores have to understand what their customers’ needs are. They are willing to pay a little bit more but not a lot more.”
While QSR traffic is flat, according to the NPD Group (even McDonald’s announced a 2% drop in same-store sales at the end of its most recent quarter), c-store traffic is up 3%, which shows that convenience stores are starting to do a really good job with food, she says. Fast-casual traffic, meanwhile, is up 8%, and as QSRs try to compete with these operations through more complicated, time-intensive menu items, it leaves a gap in the market, Riggs says: “Convenience stores can fill that need for convenience.”
NPD Group’s 2013 study, “A Look Into the Future of Foodservice,” reports that the total restaurant industry—c-stores included—is forecast to grow less than 0.5% per year for the next 10 years—not even keeping pace with population growth. “It’s going to be a battle for market share,” says Riggs, “and the convenience stores are in with a chance.” Darren Tristano, executive vice president at Chicago research and consulting firm Technomic, doesn’t expect convenience stores will ever be able to fully compete with today’s fast-casual restaurants, because c-stores have a reputation of being retail environments and not foodservice environments—despite the improvements many stores have made in recent years.
“It’s too far outside what the consumer would give them permission to do, just like you couldn’t get permission for a filet mignon in McDonald’s.” There are, however, plenty of opportunities that c-stores aren’t yet taking with their food service. Because many of them are already doing well with their pizza business, why not add take-and-bake pizzas, Romeo wonders: “That’s booming in the restaurant business. ... It’s dirt cheap, and there’s no reason convenience stores can’t do it.” Another opportunity lies in catering, he says, which is currently a growing segment on the restaurant side.
“It’s such an easy thing: If the quality is decent and the pricing is not outrageous and the convenience is there, there’s no reason why people wouldn’t [buy] it. It’s nice predictable sales.” Source: CSPnet.com