Nearly eight in 10 convenience-store customers are struggling or just getting by, with 82% concerned about inflation, meaning retailers must up their game to grow sales.
This insight came from Donna Hood Crecca, principal at CSP sister research arm Technomic, Chicago, who spoke June 26 on Winning the Battle for Traffic at CSP’s 2024 C-Store Foodservice Forum in Schaumburg, Illinois.
Crecca was optimistic about c-stores winning this battle.
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“This particular segment is in the enviable position that you are just so well suited, particularly from quick-service restaurants,” she said, though cautioned, “There's a lot that we have to do in order to make that happen.”
Compounding the problem is that menu price inflation continues to outpace grocery, Crecca said, with food-away-from-home inflation at 4% in May 2024 and food-at-home inflation at 1%, according to U.S. Bureau of Labor statistics.
Turning to competition, Crecca showed a quote from McDonald’s CEO Chris Kempczinski: “The battleground is certainly with that low-income consumer.”
She noted, per Technomic data, that 53% of frequent c-store foodservice purchasers—once weekly or more—have household income below $50,000. This percentage is 43% for quick-service restaurants (QSRs).
“QSRs are aggressively pursuing lower-income consumers.”
These lower-income consumers, however, are more likely to notice higher menu prices at QSRs than at c-stores, 63% versus 59%—and this has resulted in more foodservice occasions shifting to c-stores, she said.
“The No. 1 reason for the shift: lower prices,” Crecca said.
Breaking it out, she said, all consumers using c-store foodservice once a week or more was 57% in 2023’s first quarter but jumped to 59% a year later; among those with a household income below $50,000, it grew from 55% to 58%.
In the same time frame, all consumers using a restaurant once a week or more dropped from 68% to 67%, while the low-income group fell from 59% to 58%.
Because of this, “The fast-food restaurants are going heavy into those value meal deals, she said.
But c-stores do have pricing advantages, and Crecca highlighted a few notable gaps:
- Chicken sandwich: $9.11 at a QSR, $4.90 at a c-store
- Cheese pizza: $13.11 versus $6.63
- Sausage breakfast sandwich: $5.77 versus $3.55
- Regular coffee: $2.58 versus $1.87
- Frozen blended coffee: $5.71 versus $3.84
“Consumers understand everything costs more today—so value is more important than ever,” she said.
Crecca said it was interesting to find that the importance of value is the same for all consumers and household incomes. “It’s universal,” she said. “Everybody’s after values. That’s what they’re looking for.”
Specifically, in 2023, 33% of all consumers, and 32% of lower-income households, said value was extremely important.
Increasing the perception of value “is really key to prompting that consumer to turn into your location instead of the fast-food restaurants,” she said.
Ways to boost this perception are, first, to leverage a c-store’s inherent advantage. “Seventy-five percent of c-store foodservice patrons prioritize the ability to multitask at the location,” she said, a stat that jumps to 86% among 18- to 34-year-olds.
“Consumers understand everything costs more today—so value is more important than ever.”
“Speed, ease and multitasking give c-stores the edge over QSRs,” Crecca said, showing a customer testimonial that read, “I can purchase other items like gas, retail items and household goods at the same time.”
Secondly, flaunt format options. The top three features that would increase value perception across all formats are combos/bundles, a fuel discount with a purchase, and loyalty/rewards program points/benefits, she said.
Third, excel at customer experience attributes that drive value in the c-store foodservice occasion, she said.
The top seven are:
- Quality of takeout packaging
- Speed of visit
- Portion size for the price paid
- Overall takeout capabilities
- Unique items a customer can get only at that retailer
- Availability of healthy options
- Overall atmosphere and ambiance
Fourth, have strategic price promotions, including:
- Buy-one, get-one offers
- Free beverage with food purchase
- Free food item with beverage purchase
- Half-off deals
- Discount with fuel purchase
- Happy hour deals
- Limited-time offers
Because of higher menu prices, the percentage of customers who said they are seeking out more foodservice specials and deals at fast-food restaurants is 49%, compared with 40% at c-stores. At the same time, Crecca said, 40% of customers said they are ordering less expensive items at fast-food restaurants, versus 33% at c-stores.
However, c-store menu price hikes are prompting some consumers to migrate away from c-stores.
Among c-store consumers buying foodservice items elsewhere due to increased prices at c-stores:
- 62% go to grocery store foodservice
- 60% to fast-food restaurants
- 42% to fast-casual restaurants
- 40% to coffee shops/snack shops
“Protect the core,” she said. “QSRs are aggressively pursuing lower-income consumers.”
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