Becoming Better Foodservice Operators

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Learning from the convenience store industry's top performers.

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Becoming Better Foodservice Operators

  1. 1. FrontEnd By David Bishop, Contributing Editor Becoming Better Foodservice Operators learning from the c-store industry's top performers. ONVENIENCE RETAILERS ARE FACING more compe- than 2009 with the strongest growth expected in cold C tition for their share of on-the-go foodservice sales at the same time consumer spending remains constrained.These two macro factors underscore the value of understanding how to grow the business and market share during these tough times. and hot dispensed beverages. 2010 DOLLAR SALES FORECAST (Percent Change IS 2009) To learn how to more effectively build the business today, Balvor, in collaboration with Convenience Store Decisions, fielded an online survey in May 201O.A total of 97 retailers responded representing nearly 22,000 stores and providing a good industry representation, as 69% of the respondents operated 10 stores or less. DIGGING INTO THE RESULTS Although the average monthly dollar sales per store source: CSD!80/vor Foodservice Survey, May 2070 across all respondents was $20,037 for food service, top- quartile retailers reported sales rates almost twice as high, But, comparing growth rates from a quartile perspec- while the bottom quartile was lessthan half that figure. tive reveals significantly different outlooks for the year. FOODSERVICE DOLLAR SALES 2010 DOLLAR SALES FORECAST (Average Per Store;Manth) (lopvs Battam Quartile) • Top Quarlile 6.1% • Bottom Quartile source: CSD!80/vor Foodservice Survey, May 2070 Source: CSDIBo/vor Foodservice SUivey, May 2070 FOR EXAMPlE . Top-quartile retailers are forecasting that foodservice Now,some may believe that the top quartile is reserved will grow approximately 5% in 2010, whereas the bot- mainly for retailers with many stores,which is not true at tom quartile anticipates that sales will decline by 1.3% all. Balvor research revealed that retailers operating 10 or across all categories. fewer stores are just as well represented in this segment • Top-quartile retailers believe the strongest relative as in the overall sample. growth will come from food prepared on-site,while the In terms of growth, retailers overall are forecasting that bottom quartile expects only marginal sales growth in food service sales will finish approximately 2.6% higher one category-hot dispensed beverages. 10 Convenience Store Decisions I August 2010 CSDecisionso
  2. 2. These differences become even more interesting when However, as with having a solid food program first,this considering that the strong growth rates related to the top focus is potentially premature for retailers currently working quartile are coming off of dramatically higher sales bases to strengthen their dispensed beverage offering as well. and that top-quartile retailers are most optimistic about the largest foodservice category. LEVERAGING NEW PRODUCTS Clearly, understanding what top-quartile retailers are New products are vital to keeping the foodservice offer- doing differently may help others become better foodser- ing fresh, but it goes beyond that if retailers want to truly vice operators. benefit from this activity. However, at the same time, retailers need to recognize In-store signage is an important step in highlighting the they're all at different stages of developing their own food- recent additions to the menu, but not necessary enough service program, making it important to put any insights to drive initial trial. into context. Top-quartile retailers seem to understand this as they With that said, what can retailers learn from top-per- are significantly more likely to build consumer trial by formers in foodservice? reducing the risk-for example, by offering free products or significant discounts. DRIVING INCREMENTAL TRIPS The success of promoting new products this way is to It'sessential to provide a compelling offer to the broader offer the deal when the consumer is away from the store, market in order to build the base business. Top-quartile so it drives more foot traffic into the store by offering lim- retailers do two things somewhat differently than others. ited-time-only (LTO) discounts. • They're twice as likely to leverage the Web site to pro- For example, Subway recently used an e-mail blast to mote foodservice offerings, and that's just to start. its fan base to promote its new breakfast sandwiches. The • They offer powerful incentives that motivate addi- one-day offer included a free breakfast with no purchase tional trips to the store. necessary. Now, while some c-store retailers would be Whether it's promoting "free iced coffee Fridays" like reluctant to execute this type of campaign, Subway real- Cumberland Farms or offering discounts, such as half- ized they'd likely get the consumer to buy a dispensed priced products during "happy hour" time periods like beverage and a side while trying a new item. Quick Chek, these activities motivate consumers to select these stores more often. KEYTAKEAWAYS Another important point is that this communication Retailers need to remember that consumers buy fresh extends typically into other social media vehicles, which foods with all their senses. While a fairly basic statement. it serve to drive further interest by having fans of the chain reinforces that the products need to look and taste good or act as a force multiplier, building more buzz as they share no amount of discounting will build the business profitably. with their friends. . What this also means is it's critical to have a well-executed program in place before attempting to leverage these types HIGHLIGHTING THE FOOD'OFFER of marketing and merchandising practices. Although many retailers promote foodservice at the Building a foodservice program, ultimately, is driven fuel pumps, top-quartile retailers focus more energy on by many factors, including a retailer's success in consis- highlighting food prepared on-site than most. tently providing quality products, having alignment and In fact, these retailers are twice as likely to post sig- commitment with internal and external stakeholders, and nage at the pump to promote special deals or products providing resources to support the program effectively. inside the store for this category as compared to the bot- This article simply focused on ways to accelerate growth tom quartile. via marketing support while acknowledging that other Obviously, the effectiveness of this tactic relies on having factors are critical to the long-term success as well. a solid supply of fresh-food items available first.Interestingly, Retailers interested in gaining additional insights this observation may help explain the dramatic differences and perspectives can do so by viewing Part 1 of CSD's between top- and bottom-quartile retailers. Foodservice Webcast Series, which is available free on- Driving growth via the food components of foodservice demand at www.csdecisions.com. is vital to longer-term success as it reinforces that the store is in the fresh-food business and enables it to provide a David Bishop specializes in convenienceretail and is the man- more competitive and compelling offer to the consumer aging partner at Balvor llC, a sales and marketing firm located on the go. in Barrington,III. He can be reachedat davidbishop@balvor.com. CSDecisianso August 2010I Convenience Store Decisions 11

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