Convenience stores show supermarkets that small is mighty
Retailers like Sheetz, Wawa and QuikTrip are leading the charge to sell quality products and redefine “gas station food” in the process.
Consumers have long associated convenience store foodservice with a few choice offerings — namely, slushed ices, stale coffee, microwaveable burritos and rows of hot dogs lazily rotating beneath a heat lamp.
But as more and more consumers have begun to demand high-quality meals and snacks on the go, c-stores have upped their game. Nowadays, it’s not uncommon to find fresh-cut fruit, soups, wraps, or even a salad bar inside the local convenience store. Road-weary travelers may be surprised to find they can now order a chicken curry platter or a steak dinner at the same place where they buy lotto tickets and fill up on gas.
For supermarkets, which have always competed with convenience stores in a limited number of grocery categories, this signals the rise of yet another competitor for shoppers’ wallets. More importantly, it presents a threat to their own foodservice ambitions.
“Convenience stores are more like grocery stores, but now they have more in common with that first aisle you encounter on the right – the fresh aisle,” Jeff Lenard, vice president of strategic industry initiatives with the National Association of Convenience Stores, told Food Dive.
Supermarkets need to defend their turf, and the way stores are responding to new and improved convenience offerings speaks to how they hope to appeal to shoppers well into the future.
Small size, big advantages
According to the Food Marketing Institute and other sources, shoppers increasingly prize efficiency and quality when it comes to prepared food offerings. This plays to convenience stores’ advantage given their limited size, reputation for speed and, with more than 154,000 locations nationwide, according to NACS, high density. NACS data shows the average time consumers spend inside convenience stores is three minutes, 33 seconds.
“The good news for us is, it [convenience] is in our name,” said Lenard. “The bad news is, everyone else wants a part of it.”
In addition to meeting consumer demand, convenience stores’ increasing focus on foodservice reflects some harsh realities for the retail space. Tobacco sales, which make up more than a third of c-stores’ revenue, are down, as are fuel sales, according to Lenard. C-stores also have a pretty poor reputation when it comes to the freshness and quality of their food offerings.
Little by little, that’s beginning to change as operators add items like made-to-order sandwiches and salads, cut fruit and a variety of coffees, teas and other beverages to their stores. Some are even incorporating sophisticated, on-trend ingredients like kale, quinoa and hummus.
Loop Neighborhood, which operates more than twenty locations in northern California and is owned by c-store company Vintners Distributors, Inc., offers everything from trendy handheld items like chili verde wraps, to traditional fare like bacon-wrapped hot dogs and chicken tenders. To cater to the breakfast crowd, stores have a café that sells coffee, donuts and premium breakfast bars. Lunch customers can order a sandwich from Loop’s deli. There’s even a small produce section that carries fresh lemons, limes, bananas and oranges.
“The good news for us is, it [convenience] is in our name. The bad news is, everyone else wants a part of it.”
Vice president of strategic industry initiatives, National Association of Convenience Stores
Rutter’s Farm Stores, a regional c-store chain with more than 60 locations throughout southeastern Pennsylvania, has transformed its stores into meal destinations over the past decade. Stores feature full kitchens where employees turn out everything from breakfast quesadillas to pulled pork sandwiches and Asian noodle bowls. Rutter’s also has a low-carb menu and has begun introducing more healthy and clean-label items, according to Ryan Krebs, the company’s foodservice director.
“For us it’s more about diversity,” Krebs told Food Dive. “We sell fresh fruit in our stores, but we also sell fried funnel cake. We quit deciding what the customer would want and decided to put out as much as we can, and as much diversity as we can, and you create your own experience.”
Krebs, who said Rutter’s considers itself a restaurant as well as a convenience store, credited key investments in technology and kitchen equipment with elevating the company’s foodservice offerings. Customers order their food at digital kiosks, while employees prepare dishes using high-speed ovens and state-of-the-art fryers, toasters and range stoves.
“Many of the really sophisticated convenience stores think of themselves as true foodservice operators right now,” Maria Steingoltz, managing director with L.E.K. Consulting, told Food Dive.
“As time goes on, it opens up not only being able to execute more food offerings but then also offering higher quality and more diversity on our menus,” Krebs said.
Companies like Sheetz, QuikTrip and Wawa, meanwhile, are reimagining their stores both to accommodate the growing emphasis on prepared foods and beverages, and to capture consumer fill-in shopping trips. These chains are doing away with fuel pumps, car washes and other vestiges of the traditional c-store format as they move into shopper-dense urban and suburban markets.
Sheetz recently began opening fuel-free “Sheetz Café” locations in college towns around the northeast, while QuickTrip opened a 3,500-square foot location last year at the base of an upscale condominium in Atlanta.
This sort of format evolution, sources say, represents a further blurring of channel lines as c-stores, supermarkets, and restaurants all pursue consumers’ foodservice dollars.
“They’re trying to capitalize on the fact that consumers want to have food options everywhere they go,” said Steingoltz.
Grocers think small
To counter convenience stores’ recent moves and cash in on the demand for quick, quality foodservice, supermarkets have ramped up their selection of grab-and-go items in their deli and prepared food sections. Some are also investing in their own sophisticated convenience store formats.
Supermarkets like Kroger, Meijer and H-E-B have long operated fuel centers and convenience stores. These are traditionally adjacent to their larger stores so the stations operate as an extension of the store, with retailers linking fuel savings to food spending in order to drive loyalty.
As supermarkets start to see more potential in smaller formats, however, they’re building locations that combine the grocery store with the convenience store model.
“What we’re starting to see is that [supermarkets] are recognizing that they can make that convenience outlet so much more, and potentially recapture trips that they are losing outside of the traditional channel,” Diana Sheehan, director of retail insights at Kantar Retail, told Food Dive.
Giant Eagle, which opened its first GetGo gas station in 2003, is in the process of converting many of those stations in Ohio and Pennsylvania to a larger, food-focused format that operates more like a miniatiure supermarket. The company opened its first GetGo Café + Market, as the new model is called, in 2015.
According to company officials, the new stores reflect changing consumer dynamics, including a less male-dominated convenience store clientele and the growing influence of millennial shoppers. A GetGo Café + Market that opened last year in Brunswick, OH displays a softening of many typical convenience store features. There are no curbs around the 6,000-square foot store, and fuel pumps appear behind the building rather than out in front. There’s a 65-car parking lot, along with two separate entrances. Inside, customers can pick up packaged salads and sandwiches and cut fruit and veggie cups. They can also make a customized order from a digital kiosk.
“[Supermarkets] are recognizing that they can make that convenience outlet so much more, and potentially recapture trips that they are losing outside of the traditional channel.”
Director of retail insights at Kantar Retail
“We like to say we’re taking the ‘con’ from ‘convenience,’ ” Polly Flinn, Giant Eagle senior vice president and general manager, told Cleveland.com during the store’s grand opening in September. “You don’t have to sacrifice time for quality. This is about saving people time. In the past you would have to compromise — that microwave sandwich.”
Martin’s Super Markets, which operates 22 stores in Indiana and Michigan, opened its first two convenience stores last year. Called Martin’s Express, these locations feature a large grab-and-go case with sandwiches, wraps and salads, as well as hot selections such as popcorn chicken, stuffed breadsticks and all-beef hot dogs. There’s also a branded coffee bar and a milkshake machine.
Representatives from Martin’s and Giant Eagle did not respond to Food Dive’s interview requests.
Aside from becoming fresh food destinations, convenience stores can also serve as pickup locations for online orders. This model, which is firmly established in Europe with retailers like Tesco and Sainsbury’s, has begun to emerge with U.S. retailers. Wal-Mart is currently piloting two Wal-Mart Pickup and Fuel locations — one in Alabama, the other in Colorado.
According to Sheehan, this convergence of two of the biggest growth streams in food retail — e-commerce and grab-and-go foodservice — could pay dividends, and perhaps signal a new model for retailers going forward.
“If you have an extraordinary foodservice offer paired with the ability to pick up online groceries, shoppers may never have to walk into that large format again,” she said.