KANSAS CITY —Maybe it’s those terrible morning traffic jams to purchase hot brews at drive-thrus or waiting for people who fumble to pay by cash at self-serve checkout lines that are taking their toll. A growing number of consumers, conditioned by the ease of online purchasing, don’t have as much patience as before when it comes to shopping at brick-and-mortar stores.
As people’s hectic lives and mobility return to pre-pandemic norms, convenience stores’ sales are rebounding and so is the optimism of operators in this retail channel.
“The outlook for the c-store business is very bright for next year,” observed Chuck Kronyak, retail category manager for United Dairy Farmers (UDF), a Cincinnati-based regional chain that operates a bakery supplying its c-stores with fresh donuts and other baked goods.
“People are always going to be heading somewhere from point A to point B, and more people are tired of being locked up in their houses,” he added. “We’re seeing more of a return to normal life with kids playing sports or folks getting back to their offices. We’re going to continue to see traffic growth in 2023, and we’re going to continue to see our customers finding that c-stores are a great place to find high-quality food and bakery products at an affordable price and great value. And c-stores can save time.”
The past three years haven’t been easy for the c-store industry, which has seen peaks and valleys as people went from lockdown to rebound and the price of gas fluctuated from around $2 a gallon to more than three times that amount. Now with rising costs, labor shortages and other economic issues testing their patience, c-store operators must go with the flow to succeed in these uncertain times.
“If we flex our assortment of products as the customers’ needs are changing and we continue to satisfy them with new ones that are on trend, we’re going to see more people come to our stores with increased frequency,” Mr. Kronyak said.
Overall, c-store shopping behavior has fundamentally shifted in several ways, noted Jeff Lenard, vice president, strategic industry initiatives, National Association of Convenience Stores (NACS). With about 20 million people working at home or with flexible schedules, he added, traffic patterns have changed with the early morning rush hour extending to mid-morning followed by another surge during mid-afternoon.
“Those are both excellent opportunities for bakery products,” Mr. Lenard said. “Both of those times are more suited for convenience stores because they sell speed. Most people are out of the store in 4 minutes or less. It’s about time and getting about your business.”
Meanwhile, soaring gas prices have more Americans stretching their precious dollars. While credit card users typically purchase by the gallon when they fill up, cash purchasers tend to pay by the dollar inside c-stores a couple of times a week. Mr. Lenard suggested targeting cash users, who account for 20% of gas sales, with value-added products and in-store promotions.
“We are feeling good about how consumers have returned, but they aren’t the same customers that they were in 2019,” Mr. Lenard said. “The big thing is to figure out, ‘Who are they now? Do they want more deliveries? Do they want to order via app? Is it a fundamental shift or a permanent shift?’ People expect more. They’re more impatient. There are some things that have changed.”
As a result, Mr. Kronyak said, c-stores must step up their game to lure more customers and to better compete against quick-service restaurants (QSR) with a wider array of breakfast, coffee, sandwich meals and other fresh and refrigerated food offerings.
“We need to be the fastest convenience store we can be,” he said. “While people are waiting in line at the drive-thru at a QSR, we can serve them much faster.”
A huge customer base
Any consumer behavioral shifts will have a dramatic impact on bakers and snack makers and how they supply the c-store channel. According to NACS, c-stores make 160 million transactions a day, of which 30 million occur at the pump and account for 80% of the nation’s gas purchases.
In 2021, total industry sales reached $705.7 billion, of which $427.8 billion came from fuel and $277.9 billion from merchandise inside the store. Mr. Lenard noted total merchandise rose 6.4% last year, with a portion of that increase coming from price hikes. Traditionally, he said, about 80% of food items are sold for immediate consumption within the hour and often within minutes. Since the pandemic, people are using c-stores more as a quick grocery stop as well with purchases of pantry items like milk, a loaf of bread or canned goods.
NACS also reported sales of salty snacks grew 11.3% in 2021, while packaged sweet snacks popped up 14.3% and healthy/alternative snacks jumped 23.3%.
Utz Brands participates in all these categories with its Utz, Zapp’s, Boulder Canyon and Good Health brands, as well as its portfolio of regional brands, said Jessica Reese, vice president, small format channels, for the Hanover, Pa.-based snack producer.
“It’s especially important to make sure we’re engaging our customers in a fun way to bring energy between flavors and packaging and leveraging retail floor placements to generate incremental impulse purchases,” she said.
Most recently, for instance, Utz introduced Zapp’s Sinfully-Seasoned Pretzel Stix for the c-store market.
“We have fun flavors and fun packaging,” Ms. Reese said. “We have the new Zapp’s Jazzy Honey Mustard flavor and our Voodoo flavored Pretzel Stix that consumers are really excited about.”
NACS also noted the highly profitable prepared foods segment climbed 18.3% over the previous year.
“That sounds incredibly rosy, but in general, trips were down,” Mr. Lenard said. “There were fewer people coming into c-stores compared to 2019. The good news is the market basket is up.”
However, the total number of units slipped 1.5% to 148,026 stores in 2021, down from its peak of 154,000 units in 2018. Still, that number is about the same as 2012, and considering the pandemic, Mr. Lenard said, “anything less than a minor loss is a major victory.”
Typically, he added, a c-store’s customer base reflects its geographic location.
“It’s much different on the highway. That’s everyone,” Mr. Lenard said. “In neighborhoods, you do see a higher percentage of workers and fewer commuters.”
Research by Lenexa, Kan.-based Hostess Brands has identified young males as the brand’s biggest c-store consumers.
“We know they’re looking for craveable, hearty, handheld sweet snacks, so we’re developing a strong multi-year pipeline of innovation to help deliver on their needs,” said Tina Lambert, vice president, Marketing Center of Excellence, Hostess Brands.
She noted Hostess is outpacing the baked sweet goods category with more than 20% in dollar sales growth in the c-store channel compared to a year ago.
One big change this fall has been schools returning in full for the first time in two years, said Nick Sayegh, managing director, International Delights, the Clifton, NJ-based supplier of prepackaged and bulk pastries and sweet goods to c-stores, foodservice and retail outlets throughout the New York metropolitan area. Moreover, travel surged this summer and fall with hotels operating at near-full capacity while offices are now opening steadily.
“Our traditional business came back with a vengeance during the last three months,” he explained. “It’s like nothing happened. Nobody hears anything anymore about the virus or the pandemic. Like many bakeries, we were forced to get creative and diversify into grocery and other retail channels after foodservice in hotels, offices, schools and colleges shut down for a couple of years. Now everything is open again.”
Ms. Lambert said the return of the morning rush, albeit different, has parents feeling frazzled again.
“Because of this, people are increasingly looking for portable, grab-and-go options that require little-to-no preparation, and no mess to start the day,” she said.
Hostess introduced several products over the past year for morning snacking and afternoon “pick-me-ups,” Ms. Lambert said. Those include portable Hostess Muff’n Stix, Hostess Devil’s Food Cake Jumbo Honey Buns and Hostess Boost Jumbo Donettes, which come in Chocolate Mocha and Caramel Macchiato and contain slightly less caffeine than one cup of coffee.
She said research has found nearly one in four consumers now eat snacks to begin the day, and this “morning sweet start” snacking occasion represents a $5.8 billion annual market opportunity that has been growing at 5.5% over the past three years.
“In total, we’ve identified 18 different consumer snacking occasions, and we offer snacks for every occasion, with some of the top occasions being a sweet start to the morning, in the lunch box, as an afternoon reward, immediate consumption and afternoon snacks for sharing,” Ms. Lambert said.
In November, single-serve packages of Hostess Bouncers began arriving in c-stores. The poppable, no-mess, mini-variations of some of its most iconic cakes include Glazed Chocolate Ding Dongs and Cinnamon Donettes. She said Hostess’ investment in innovation has paid off, contributing 27% of Hostess Brand’s growth and 12% to its category growth over the past year.
“So far, these products are performing very well in c-stores, and we believe we have the runway to continue innovating for this category,” Ms. Lambert said. “Research shows that during times of uncertainty and stress, consumers turn to brands they know and trust, while also seeking out little, inexpensive ways to treat themselves.”
For UDF, Mr. Kronyak pointed out fresh-from-its-bakery donuts, cookies, muffins, brownies and other baked goods provide a point of differentiation in the market. In fact, unit sales of donuts rose 18% over last year, led by suggestive-selling promotions and new product innovation. The company spearheaded a coffee program this fall with an expectation for sales to return to 2019 levels. Most recently, the chain added mini-cookies, marshmallow treats and seasonal treats such as apple fritters, orange cranberry muffins, Ohio Buckeye donuts and pumpkin cream cheese-filled muffins. UDF also offers an array of iced cookies and partners with the Columbus Crew and FC Cincinnati soccer teams as well as the Cincinnati Reds.
“Those items all have a cleaner ingredient label that consumers are looking for,” Mr. Kronyak said. “They’re fresher products with a shorter shelf life and no preservatives sold impulsively by the checkout counter or on a rack with other bakery items.”
Filling up with fresh food
Mr. Lenard now calls foodservice “the industry’s future” for c-stores. He admitted that the channel’s offerings have come a long way since actor Chevy Chase said, “I’m so hungry, I could eat a sandwich from a gas station” in “National Lampoon’s Vacation” in 1983.
“It’s taken at least 30 years for that joke not to be funny, and there are a lot of people who seek out food at gas stations now because there are exceptional chains and exceptional individual stores for food,” he said.
Mr. Sayegh believes consumers perceive some c-stores as more like restaurants in addition to a place to shop for staples, gas or cigarettes.
“They’re becoming a food destination in a lot of cases,” he observed. “We’re seeing a bigger interest in some c-stores actually wanting to bake products on-site, and not just the typical c-store products. Rather, some more innovative and newer ideas, including scones that we’re now making. We’re seeing a big jump in the individually wrapped and packaged snack items, but also better, healthier, fresh-baked items in the foodservice section of the c-stores.”
Muffin Town targets c-stores with its diverse selection of food-safe, individually wrapped snacks such as its Muffin Town branded cinnamon toast, whole grain fudgy brownie and muffin tops as well as its Smart Choice Bar Banana Chocolate Chunk. Roger Piffer, director of marketing for the Chelsea, Mass.-based company, said popular muffin tops and cornbread complement coffee service, lunch and snacking occasions. He noted the cornbread is sold as a part of its grab-and-go Snack’N Loaves line served with soup or chili. It’s also available in 4-lb bakeable trays with 30 squares for fresh, bulk foodservice.
“We’re the No. 1 best seller of cornbread in the country, and it’s easy to see why,” Mr. Piffer said. “You can have it with a main meal or on its own. You can have a cup of coffee and a cornbread slice, and it’s delicious. We’re seeing catering companies, supermarkets and more places asking for cornbread.”
Ms. Reese pointed out that Utz partners with c-store meal programs and even places videos on the gas pump’s screen to highlight a new item or pairing a bag of chips with a sandwich meal to encourage visiting the c-store vs. a QSR down the street.
“One of the challenges is getting people going from the pump and into the store,” she said. “That’s a behavior that we’re working with our retailers to capitalize on drivers’ awareness to entice consumers to walk into the store.”
Once inside, Ms. Reese said, the emphasis is on merchandising in high-traffic areas, placing incremental displays and adding new products with high-impact packaging.
“Everybody passes by your products at the register, and it’s the food and especially coffee that drives foodservice traffic,” she observes. “If we can leverage or somehow find an empty space, that’s what we’re really trying to capitalize on for incremental impulse purchases.”
Utz uses smaller case packs, clip strips, peg-holed packaging and other tools to fit in any empty space in the store. Recently, it began offering a smaller, 2.75-oz canister of its popular barrels of cheeseballs.
“We’re looking at even more capabilities to increase opportunities to place our products anywhere in the store,” Ms. Reese said. “With our focus on supporting operators, we work hard to bring solutions for placements. We are constantly working to remove obstacles so that we can get to win-win placements and not discussions about why certain spaces won’t work.”
Utz tailors its merchandising to the local region, whether it’s the core market serving its direct-store distribution system along the East Coast or in newer areas as it continues to expand nationally.
“We’re really trying to figure out, ‘How do we get our brand, whether it be a regional or core brand, in front of as many shoppers as possible?’ ’’ she said. “Typically, those single-serve and immediate-consumption packages are a great way to drive new product trials in emerging markets.”
When it comes to serving c-stores, it’s always a matter of convenience. Bakeries and snack producers need to use all the tools at their disposal to quickly grab the attention of increasingly mobile and often impatient consumers who are working at home or want to get on the road again as soon as possible.