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    The Dish on Foodservice

    CSNews takes a look at this dynamic category, from debunking c-store perception myths and fighting off cross-channel competition, to how one retailer is creating a new brand identity around fresh food.

    By Linda Lisanti

    Consumers looking for fresh, innovative food and beverages can find plenty of options in convenience stores today. It seems like every other day, Convenience Store News reports on another c-store retailer getting inventive with foodservice.

    Some of the highlights of our latest reports include:

    Rutter's Farm Stores unveiled a new foodservice menu that includes custom stir-frys and fajitas, freshly-tossed salads and seven varieties of fresh-baked bread. The chain is positioning to compete with restaurants, while retaining its speed of service.

    Alimentation Couche-Tard opened eight new c-stores in Canada's Quebec province dubbed "Couche-Tard Menu" -- a new self-service concept centered on prepared and ready-to-eat meals. The Menu stores' centerpiece is a stainless-steel fixture with chilled drinks and grab-and-go items normally found in high-end Canadian supermarkets.

    Wawa is testing a new drive-in prototype in Yorktown and Virginia Beach, Va., which features reserved parking spots for customers to pull in, view a complete Wawa menu, and place food and beverage orders through a speaker system. Like the drive-ins of the 1950s, Wawa employees deliver orders to their customers waiting in cars.

    Uppy's Convenience Stores, operated by Chester, Va.-based Southside Oil, and Dominic's of New York, a food franchise most often run out of kiosk carts in front of Lowe's home improvement stores, is rolling out a new format, Dominic's of New York Cafe Pronto. Uppy's leases out the space in its stores to Dominic's franchisees.

    There are countless other examples of foodservice ingenuity by c-stores, but too little space here to detail them all. In fact, it appears these days there are few operators in the industry who have yet to realize that cooking up a well executed foodservice strategy will bring increased sales, higher profits and market differentiation to the table.

    For the first time, foodservice has overtaken cigarettes as the top generator of gross margin dollars, and the category ranks second, just behind cigarettes, in in-store sales, according to Convenience Store News' 2008 Industry Report. Driven by gains in prepared foods and hot beverages, per-store sales of foodservice were up 10.1 percent in 2007, increasing its share to 12.34 percent, and gross margin increased to 21.6 percent.

    With so much cooking in foodservice, CSNews has devoted a special section of this issue to delve into this vibrant category. Read on for learnings from the recent CSNews Foodservice Best Practices Roundtable, including ways retailers are shaking the stigma of c-store foodservice and finding opportunities amidst the growing competition in hot beverages. Also, be sure to check out the data in CSNews' exclusive 2008 Foodservice Study.

    And lastly, this section would not be complete without showcasing one retailer on the leading edge of innovation in c-store foodservice: Quick Chek (see page 43).

    This innovative Whitehouse Station, N.J.-based chain created a new brand identity and store prototype, positioning itself as "the leader in fresh convenience."

    Shaking the Stigma
    For years, convenience retailers have been working hard to become known as foodservice destinations, investing millions of dollars to roll out new store concepts that emphasize fresh food and beverages, set up commissaries to deliver the freshest product possible, and secure the latest equipment and technology to ensure high quality.

    Despite this intense focus, the industry, from the smallest independent operator to the largest chain, still struggles to shake that dreaded "c-store stigma."

    During Convenience Store News' 2008 Foodservice Roundtable in May, a two-day event held in New York and sponsored by Boyd Coffee Co., best-in-class companies shared the strategies and techniques they are using to ditch the negative consumer perception around convenience store foodservice.

    "It's still a challenge chipping away at that stigma. We've made a vast improvement over the last 10 years, but there's still more work that needs to be done industrywide," said Tim Doherty, national foodservice category manager for Petro-Canada, based in Mississauga, Ontario. "The good operators are being impacted by the poor operators."

    Petro-Canada is addressing the image issue with Neighbours, a new store format that's a c-store, restaurant, coffee shop and gas station all in one. Food is the focus, with the layout designed to force traffic through the food area where workers dressed like chefs face customers from the kitchen. No actual cooking is done at the stores. Workers reheat and assemble "restaurant quality" sandwiches, grilled paninis and other dishes.

    The stores employ touch-screen video ordering terminals and a pour-your-own coffee program (a rarity in Canada). Other non-traditional c-store touches include a drive-thru window and outside patio for diners who want to stop and eat.

    There are currently 15 Neighbours in Ontario, and so far, the concept seems to be helping to shift perceptions of c-store foodservice. According to Doherty, Neighbours stores sell 10 times more coffee than Petro-Canada's network average.

    Royal Buying Group's director of vendors/business development, Sharon Porter, said the c-store industry has three levels of foodservice: No Touch, such as pre-packaged sandwiches; Little Touch, including soups and roller grill; and Full Touch, consisting of made-to-order subs or a proprietary fried chicken program.

    The goal is to match the appropriate foodservice preparation level to the retailer and his or her location, Porter said. But regardless the type of food offering a retailer has, program execution at the store level remains the biggest challenge, especially for the smaller retailers Royal Buying Group serves.

    To ensure quality and consistency across its 1,000-plus stores, Petro-Canada recently made new foodservice training videos using professional actors. The videos are broken up into sections by topic. But Doherty said getting employees to care is still tough. "How do you get that 'give a [damn]' factor?" he questioned.

    Some companies have found a bit of role reversal can go a long way. Wawa Inc., operator of more than 500 stores, relies on strategic partnerships between store operations and other functional departments, so corporate associates work a day in the stores for first-hand experience, said director of foodservice brands Michael Sherlock.

    Wawa also conducts audits for operating, and food safety and sanitation standards, the results of which are tied into its compensation structure for managers. This approach gives managers a more vested interest in executing the foodservice program well, he said.

    Similarly, to strengthen store-level commitment, NOCO Express, based in New York, requires its store managers to work at the chain's satellite commissary each quarter. This way, if a customer asks about a product, the manager can know exactly how it's made.

    In tandem with execution, the retailers and suppliers around the table said commitment is another necessary element of foodservice success. "At the end of the day, if you're going to be in foodservice, then you really have to be in foodservice," said Terry Messmer, merchandising manager for NOCO Express.

    Wawa is one operator in foodservice. The company started with a built-to-order sandwich program and from that, gained the credibility to offer pre-packaged sandwiches and bakery products through a centralized Fresh Channel network. Many companies are not committed to foodservice because of the impact on labor and spoilage expenses. To be successful in foodservice, though, these have to be viewed as investments to build credibility with customers, Sherlock told the group.

    Showing the commitment to consumers is the next step, and for this, retailers said it's important to have a "signature item," so that you're known for something. Wawa has its hoagie. At Petro-Canada's Neighbours, it's coffee and paninis. And for Village Pantry, based in Indianapolis, doughnuts are its claim to fame.

    Along with a signature item, fresh offerings keep customers buying. New products are just as important in foodservice as they are in other key categories, attendees said.

    "We're trying out a new sandwich every month," said NOCO Express' Messmer.

    Village Pantry, meanwhile, is adding its first Chester's fried chicken restaurant to capture nighttime business. Foodservice director Chad Prast said many of the chain's customers are trade workers who visit the stores for breakfast and lunch, but go home for dinner. "We hope this will help reach the dinner daypart," he said.

    For Wawa, the majority of its foodservice growth comes from new products, according to Sherlock, who noted the Product Development team works 18 to 24 months ahead of introduction on new items and takes potential new offerings out to consumers so launches are more successful.

    This spring, Wawa marked its first advertising campaign in the dinner daypart by launching a Dinner Deals program chainwide, featuring a variety of items from 4 p.m. to 8 p.m. that are offered at a reduced price of $3.99 each or three for $9.99.

    The items cater to a wide range of customers, Sherlock said, noting the salads are aimed at women, while chicken strips target children and soups are geared towards individuals and families. The move will hopefully distinguish the chain from QSRs and help to fill the "excess capacity" at Wawa stores during the dinner daypart.

    Wawa is also keeping its foodservice offer fresh by exploring new ways to provide greater convenience to customers. The chain recently began a test with mobile payment technology supplier, GoMobo, that enables customers to preorder and prepay online or via text messaging.

    "We have one customer who orders his coffee every morning through GoMobo," said Sherlock. "When he comes in, he's given a pre-paid cup, he fills it up and then walks out of the store."

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