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While convenience stores slowly embrace the meal-away-from-home concept, grocery stores have taken a commanding lead in home meal replacement — accounting for 82 percent of total retail dollar sales, according to Packaged Facts (a division of MarketResearch.com). Warehouse clubs rank second with 5 percent of sales, followed by convenience stores at 4 percent.
Chains like Wegmans Food Market and Whole Foods Market have set a daunting pace for the ready-made-meals industry, with full staffs of chefs and apprentices shelling out gourmet dishes by the droves. Many provide seating for dine-in customers and operate practically as a restaurant annex to the main store, pocketing a lucrative penny while doing it.
Because of space limitations, c-stores often have to rely on a narrower assortment of home meal solutions, focusing mainly on grab-and-go offerings such as prepared sandwiches, burritos and hamburgers, which are often sold as single items for immediate consumption. If executed right, however, home meal replacement not only offers convenience to consumers, it also offers a draw to make a chain's foodservice offering a destination and brand differentiator from the c-store — or supermarket — across the street.
With its full-line Easy Street Eatery concept, Nice N Easy Grocery Shoppes Inc., with 33 company-operated stores and a total network of 82 stores, isn't worried about its supermarket counterparts. The full foodservice area offers up fresh hot and cold foods prepared daily, including breakfast, lunch and dinner items, as well as a fresh produce department.
"We do home meal replacement, which is a big fancy word that just means something that you take home and eat that's enough food for more than one or two people," said Jack Cushman, vice president of foodservices for the Canastota, N.Y.-based chain. "We do that with pizza programs and sub programs, which a lot of the supermarkets are now getting into. It's what you call a marketplace concept, where you walk in and see a sub counter and a sushi bar and a pizza station."
About a dozen of Nice N Easy's locations are designed in a newer store format, which is centered around making the convenience store a destination for food. "We do volumes that rival many QSRs and are even sometimes above and beyond a lot of these guys that are out there," Cushman said.
In fact, he emphasized that the company's newest locations have seen their foodservice sales double and even triple compared to their older counterparts. "There's no comparison between our old models and new models — it's like night and day," he said. Rather than retrofitting a model that isn't really equipped to sell food, Nice N Easy opts to raze and rebuild stores more suited to their foodservice goals.
"Sometimes you're shoehorning something in there that is really not a good fit," Cushman said. "We'll bulldoze the store and rebuild it like we want it."
According to the 2004 Packaged Facts report "The U.S. Market for Ready Meals and Side Dishes," only 60.3 percent of all meals are prepared and eaten at home. That statistic could mean major potential for convenience store operators like Nice N Easy. With the number of single-parent households increasing, boomers aging by the day and Gen Xers and Yers never learning how to cook, the market for take-home meals is only expected to grow in the coming years.
Packaged Facts estimates that the market for ready meals and side dishes topped $19.6 billion in retail sales in 2003, with even higher estimates for 2004. The market grew 38.5 percent in the five-year period between 1999 and 2003, with projections that sales will grow at a 7.0 percent annual rate during the next few years, to more than $27.5 billion in 2008.
A C-Store Food Court
S&S Food Stores, a 44-unit convenience store chain operated by Lake City, Fla.-based Scaff's Inc., keeps a watchful eye on Wal-Mart and supermarkets like Publix and Winn-Dixie as well as local c-store competitors. The company checks its rivals for milk, cigarettes and beer pricing often and considers Publix Supermarket to have the best foodservice offering of the local supermarkets, according to Keith Brown, senior vice president of marketing.
A few years ago, S&S Food Stores changed its outlook on foodservice, realizing it couldn't operate a successful Taco Bell in every store. "We could not be successful because of food cost, labor shortages, shrink and workers' compensation costs," Brown pointed out. "These are the reasons we started to focus on the foodservice concepts, which feature easy-to-prepare items and self-service foods. Our Food Courts have shown positive sales growth and the profits have been comparable to restaurants."
S&S's Food Court items vary from store to store but consist generally of roller-grill products (including hot dogs, corndogs, egg rolls and sausage), Grill to Go pressed sandwiches, hot boiled peanuts, Phillipe's Pizza, soup, microwave dinners (Lean Cuisine, Hungry Man, etc.) and burritos. The chain also has an expanded line of sandwiches from various vendors like Dandee, Lettieri's, Sara Lee and Pierre, as well as a full line of fountain drinks, frozen beverages, coffee and cappuccino.
In addition, three S&S locations operate full-service delis called Anne's Kitchen that specialize in home meal replacement and food-to-go items. Anne's Kitchens serve daily meat-and-veggie entrée meals, fried chicken, made-to-order breakfast items, hamburgers, sandwiches and finger foods for customers to take on the go.
"Besides the traditional take-home meals and multi-piece chicken specials offered in our Anne's Kitchens, the home-meal-replacement offerings are mainly microwave items available in our frozen foods cases," Brown said. "This is a growing category in our stores. This is an area that manufacturers should target in convenience stores. Customers will prepare these items in the stores for immediate consumption."
According to Brown, both the company's Food Court offerings and Anne's Kitchen locations have led to positive customer response to the take-away food program. "Home meal replacement is definitely a growing category in our convenience stores and will only get better as more products are available," he said.
Part of the chain's foodservice success may lie in the fact that Scaff's background is in food. In addition to its c-store business, the company also owns and operates three Scaff's Market grocery locations in Florida with a variety of foodservice options.
"We have been able to incorporate many ideas from the supermarket operations to our c-stores and vice versa," Brown said. "We learn about new product successes quicker from our supermarket experiences than from the c-store arena. Manufacturers seem to test new products more often through supermarkets. Having a grocery wholesaler is also a benefit from a buying standpoint."
And like many c-store operators, Brown noted that attracting a new customer demographic through its foodservice operation is never a bad thing. "The foodservice customer is still mostly Bubba, but we have noticed more young people and females buying our foodservice items," he said. "I believe this trend will continue as long as we keep the areas clean and updated. We have to continue offering new items since, like other categories, this is where the increases are coming from."
A Healthy Choice
Unfortunately for some convenience store operators, implementing a successful home meal replacement foodservice offer takes a bit more trial and error than others. Because there is no one-size-fits-all answer to the right foodservice offering for each chain and each individual store, retailers often just have to stick their best effort out there and see what bites.
GB Express, the convenience store division of Elkin, N.C.-based G&B Energy, started out slowly in the foodservice business by adding a branded Subway in three of its eight convenience stores. Looking to add to the home-meal-replacement offer, the company also launched its own food brand in its East Bend, N.C., location called Aunt Betty's Chicken and Biscuits, hoping to grab some of the local consumers' home-meal-replacement dollars.
"We have a staff just for the chicken business," said Loretta Williams, retail coordinator for GB Express. "We have chicken, fried potato wedges, slaw, biscuits and breakfast biscuits. It was intended to draw the breakfast and lunch crowd."
The chicken offer drew a crowd at first but hasn't achieved nearly the sales dollars of the Subway shop in the same location. Part of the reason, Williams guessed, is customers' changing attitudes toward food choices.
"We thought it would be very popular in this area, and it isn't. We are actually in the process of possibly taking it out," she said, emphasizing that it was a big surprise to the company that the North Carolina customer base didn't take to the down-home fried chicken offer — a Southern tradition. "The Subway business has been great, though. The people are, I guess, more health-conscious, and they seem to keep choosing Subway over Aunt Betty's fried chicken and potato wedges. We're sort of up in the air right now as to what we're going to do with that space."
While GB Express continues trying to find the right balance for its foodservice offer, it's not the area supermarkets it's keeping tabs on, but a channel a little closer to home. "We really hold other c-stores as our competition," Williams said. "They're the ones you have to look out for."