Just as consumers’ expectations of coffee in the petrol and convenience (P&C) channel has changed in recent years, so too has their expectations of foodservice, with the category now a crucial component of the store offering.
In response to these changing consumer expectations, convenience retailers are upping the ante. These days, retailers are having to find new ways to capture, as well as satisfy their customers’ changing needs and improve the overall store experience.
More recently, retailers have invested in new store fitouts, introduced barista made coffee, formed strategic partnerships with quick service restaurants (QSRs) and meal delivery services, such as UberEats, and launched fresh, ready-made gourmet food solutions.
According to Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), store numbers eclipsed the 7,000 mark in 2020, with the channel passing $9 billion of in-store sales for the first time*.
“The agility of convenience retailers and suppliers during COVID has resulted in a 5.1 per cent growth in 2020*, despite reduced foot traffic and severely impacting fuel sales.
“Ten years ago, this impact would have resulted in a decline in store sales, however, the maturity of the channel offer and the investment over a number of years has seen an outstanding shop performance.”
Why fresh is best
According to Foukkare, the foodservice category grew at 8.6 per cent in 2020, which ended only slightly lower than growth of 2019 and added +$71 million in value*. Foodservice is now the third largest category in total sales, delivering $879 million in 2020 and delivering 9.5 per cent of total dollar share*.
Foukkare believes the channel will get close to delivering $1 billion in 2021.
“Although incremental growth was slightly down on 2019 ($73 million), the foodservice category has delivered more than $200 million incremental sales growth in the last three years*.”
Foukkare says bakery snacks was the only foodservice category to decline in 2020, impacted by the decline in mid-morning trade and the work from home situation, while traditional hot food such as pies and sausage rolls increased in penetration. Other hot food remained stable.
“Consumers are continuing to use the convenience channel more to buy a meal, whether it be something for now, in the office or at home – which is demonstrated by the growth in take-home meals.”
He says take-home food has also benefited from a greater exposure to services such as delivery and greater penetration in stores with a +29.1 per cent, growth rate adding $43 million in value*.
Joanna Graham, Senior Manager, Convenience Trading ANZ, bp, says P&C is now omnichannel and believes the channel will continue to see growth of home delivery of grocery top-up, snacking, and meal occasions.
“Our customers are asking for fresh food, they’re expecting quality, and the channel has room to grow in terms of evolving the food on the go and food for later offers both in-store and online.”
Skye Jackson, General Manager Merchandise at Ampol, says fresh food is one of Ampol’s strongest growth categories.
“Customers have long enjoyed our range of food for now products, such as sandwiches and pies, and what we are seeing now is an extension into food for later whereby customers are buying into convenient meal solutions for consumption later, (but not much later).
“An example being a ready meal, such as a My Muscle Chef meal picked up for dinner on the way home. This provides us an opportunity to provide solutions for our customers for shopping missions we’ve not previously serviced,” says Jackson.
She says the core range of sandwiches and pies will always be strong performers for Ampol, however, the company is seeing “great growth” in the ready meal category, where product quality has increased significantly in recent years. Jackson also notes the importance of having the right range in-store.
“Finding the right range is important, and the great thing about food is you learn very quickly if it’s resonating with your customers, or not. Keep a close eye on the results and adjust quickly when things aren’t working.”
Ampol has more than 300 stores available on UberEats, which Jackson says allows the chain to provide convenient meal solutions for consumers from the comfort of their home. It has also partnered with quick service restaurant chains, including Boost Juice.
“There is an abundance of easy meal solutions in the market now, from home delivered meal kits to subscription models for ready meals. These product offerings have grown exponentially in recent years and the quality of the products have also improved.
“We’ve been able to range these products to provide a convenient alternative for consumers who want to buy into this category at their own leisure as opposed to signing up to an online subscription.
“In the Australian market, partnering with established quick service restaurants and co-locating has been the more traditional approach to introducing food service into the P&C channel. We’ve done this with Boost, as an example, and have found it has attracted incremental customer segments.”
Store experience
Despite the challenges faced during 2020, leading retail food service buying group, New Sunrise, reported double-digit sales growth across all major suppliers, grew in-store count as a group, and were recognised and rated by suppliers as the number one independent national retailer in Australia through CMA Pulse survey.
Steve Cardinale, Retail Director at New Sunrise, says there is a not a one size fits all approach in the convenience channel when it comes to foodservice.
“Food and beverage is all about the experience. No one complains about price if the food or coffee is delicious and fresh.
“Getting food and coffee right builds customer loyalty, creates purchasing habits, and increases customer frequency.”
However, he says while food and hot beverages are an important part of the modern P&C store mix, on their own they are not enough to meet customers’ needs, with service and store experience just as important.
“The ‘Sunrise factor’ is all about offering good food and good coffee that makes people feel good inside – that is, food and coffee orders taken with a friendly face and delivered with a friendly smile.”
He says he is seeing a polarisation of foodservice offers in the channel, which are both relevant and successful, but play to two different markets.
“At one end, we have retailers that I regard as ‘high transactional, low experiential’. The store looks and feels like a traditional c-store and their offer is heavily price-based.
“They have great grab and go food offers such as fresh sandwiches, pastries and pies, as well as great apps and loyalty programs. However, they don’t provide a place for customers to sit and stay and have an experience.
“On the other hand, we have ‘high experiential, low transactional’ stores, whereby these stores look and feel like a cafe or bakery. They have barista made coffee, freshly prepared food made in-store, and have a place for customers to sit and recharge.”
Ampol’s Jackson agrees that in addition to serving quality food, customer service is one of the key ways retailers can differentiate themselves from the competition.
“The overall store experience is one of the key ways we can differentiate from competitors in our channel, with our team members being the familiar, friendly face that can make a difference to a customer’s day. The loyalty created through exceptional customer service is critical to success in our channel.”
Untapped potential
Foukkare says foodservice is the single biggest existing category opportunity that is ahead of the channel.
“Our members represent 7,000+ individual shopfronts, so think about that for a minute. Are we distribution hubs? Can we operate 2,000 dark kitchens and fight directly against the QSRs? Will consumers complete their top up grocery shop with us? Will our forecourts have drone charging pads, will they be pickup hubs for food delivery?
“The food story has a lot to go through its evolution. In short, as we continue to develop our food offer – food for now, food for later, food for someone in your family – this is the single biggest existing category opportunity that is ahead of the channel.”
Darryl Cotter, General Manager Operations, OTR, predicts the foodservice offering will further evolve because of more domestic travel post-pandemic.
“The convenience channel’s heartland products of bread, milk, chocolate, and chips are now moving more into carefully curated, occasion-based product offerings.
“We also see foodservice evolving to suit the road trip and domestic traveller, with overseas travel restricted for the year ahead. This has long been a focus of OTR, through our strong offer of quick service restaurants integrated within our convenience stores, to meet customer needs both now and into the future.”
Darren Park, CEO, UCB, says the convenience offering needs to move beyond the occasional shopping stop and capitalise on the new routines and behaviours now evident in the marketplace.
“The P&C channel can be as simple and complex as we make it,” he says.
“We just need to make sure whatever we do, we do it well. With the top five categories delivering nearly 85 per cent of shop sales, we need to ensure we execute these well ensuring shoppers keep returning to our stores.
“This being said, there is still a need to evolve our service model to align with the expanded role we play in our customers’ lives and the Australian retail landscape. We must become more than just an occasional shopping stop and capitalise on the new routines and behaviours now evident in the marketplace.
“Shoppers are coming to our stores for a wider range of products than before, so a retailer’s ability to meet their expectations, while surprising and delighting them with an appropriate selection of quality offers is essential.
“From increased, higher quality coffee, food on the go and meal solutions, to offering a wider range of convenience lines, it’s essential we continue to grow our understanding of the convenience shopper in order to guide our evolution with our trade partners.”
*Source: 2020 AACS State of the Industry Report
This article originally appeared in the August/September issue of Convenience & Impulse Retailing magazine.