The Supply Side: Convenience stores focus on foodservice growth

With rising menu prices from fast food to casual dining restaurants, convenience stores are doubling down on their quick-serve and made-to-order foods in an effort to attract more customers on the run.

This trend is not new as foodservice stood out for the convenience store sector in 2023 with prepared food sales rising 13.5% to reach $58.7 billion, according to a report from Convenience Store News (CSN).

The CSN report found foodservice sales comprised 20% of the total in-store sales for the first time in 2023 and are expected to top 28% this year. Nearly seven in 10 consumers reported buying prepared foods in the last month from a convenience store. This penetration level is up 14% from 2022. Made-to-order prepared food purchases surpassed grab-and-go items with 39% of shoppers preferring the fresh-made.

CSN reported pizza was the most purchased prepared food at convenience stores with one in three consumers doing so. Hog dogs, breakfast and deli sandwiches also are popular options. Fried chicken and hamburgers round out the most popular convenience store foods made to order.

Convenience store operators report that consumers seek deals and coupons as inflation has pushed food prices higher in the past two years. Casey’s reported on June 11 that prepared food sales of pizza, sandwiches and pastries rose 8.8% for the quarter and 6.8% over the past year. Casey execs said consumers are taking advantage of coupon offerings when ordering pizza online, and its rewards program totaled 7.9 million participants this past year. The company expects same-store sales to increase 5% this coming year with margins comparable to the last year.

CSN ranks Casey’s as the third largest convenience store chain with 2,639 locations and 154 new sites set to open this year. Only Circle K and 7-Eleven have more stores. El Dorado, Ark.-based Murphy USA ranks No. 4 with 1,733 convenience stores with the majority of stores located near Walmart Supercenters. Murphy USA said it will add 35 new locations this year, ahead of the 28 it opened in 2023. Foodservice will remain a key focus, according to Murphy President and CEO Andrew Clyde.

“Having seen the recently reported earnings for a number of QSRs [quick-service restaurants] where same-store sales results were mixed, we believe our prior decision to stay focused on value pricing amidst some of the increasing food cost inflation is paying off,” Clyde said in mid-May. “A recent brand survey further updates and reinforces our strong positioning with consumers. And with more innovative offers to come, alongside the enhancements from our digital initiatives, we believe we are very well positioned in the current environment.”

Walmart is not a convenience store but does operate some convenience stores connected to supercenter locations. The retail giant has said convenience foods are gaining share, even in its supercenters. The company has redesigned stores to offer fresh sandwiches, salads and heat-and-serve burritos at the front of the store. While Walmart does not break out convenience store sales, executives said during the company’s shareholder week in June that consumers are buying more fresh and quick-service type food items in its stores instead of eating in fast-food restaurants.

CSN reports that 44% of consumers cite price and value as the top priority when choosing food at convenience stores. Food quality is the top concern for 42% of consumers. Freshness is also important with 40% putting that as the top priority. Menu choice, taste and speed of service are less important to consumers, according to the report.

An industry report by NAG Convenience found that 66% of consumers want to see more made-to-order foods in their local convenience stores. Gen Z consumers (ages 18 to 26) are leading the charge with 72% wanting it.

A report from Vontier found that 61% of surveyed consumers have a favorite convenience store, and 80% are willing to drive out of their way to get there, especially when taking summer road trips. Almost half would be willing to delay a restroom break to ensure they could shop at their preferred store, and 43% said they would risk driving on empty to get to their preferred store.

Vontier also found when searching for meal options on their route, 62% said they have gone to a convenience store specifically for food, and one-third said they go to convenience stores for hot, fresh restaurant-style food. Nearly half of respondents (47%) said they have chosen convenience store food over other nearby options.

“The landscape of convenience stores is undergoing a significant transformation,” said Vontier President and CEO Mark Morelli. “Our research underscores the growing consumer demand for convenience and efficiency like mobile ordering in their day-to-day lives. New technologies and services are raising the bar on the convenience store experience, making it more than a stop on the journey but a destination in itself for everything from an amazing meal and a car wash to EV charging.”

Vontier reports that 62% of survey respondents said they value mobile ordering during the purchasing process, and 73% said they appreciate it when a convenience store offers additional services such as car washes. Nearly half of Americans wish there was at least one electric vehicle charging station at every convenience store.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.