Food and beverage retail dollar trends have improved year to date while foodservice sales away from home have weakened.
This insight comes from David Portalatin, senior vice president and food industry advisor at Chicago-based Circana, who spoke on the first day of CSP’s 2024 C-Store Foodservice Forum in Schaumburg, Illinois, running June 26-28.
Total U.S. food and beverage sales in 2023 were nearly $1.7 billion but decelerated as consumers continued to source a higher percentage of eating and drinking occasions from home, Portalatin said in his presentation, Is Your Foodservice Consumption Down in ’24?
“One of the things that I’m encouraging people to think about is that the rhythms of our day are forever changed.”
In 2016 through 2019, for example, 83% of eating and drinking occasions were sourced from home. That grew to 84% in 2020 and 87% in 2021—and has been 86% each year since then.
“Foodservice costs 4.3 times that of at-home occasions, with the absolute dollar gap widening,” Portalatin said.
Portalatin then presented a first-quarter foodservice summary for 2024, the results of which stress the importance of focusing on traffic growth as dollar growth slows.
He broke it down as follows:
Traffic challenged: The total industry was down 2% in the first quarter versus a year ago. Strong winter storms set traffic back in January and the industry struggled to recover after that. While dollar growth remains strong, brands are fighting to grow same-store traffic.
Value and price: In a high-inflation environment, consumers still seek value beyond price when eating out. This is reflected in the strong growth of non-commercial channels like recreation, which are all about experience, and fast casual, which places a greater emphasis on food quality.
Barbell strategy: All consumers have a tipping point and will cut back visits when prices become too high; however, there remains a split in consumers who are most concerned with value and prices, and consumers who crave a premium experience and higher-quality offerings that provide a good value for their money.
Deals, digital loyalty: Many brands are turning to discounting, increased app investments and new or improved loyalty programs to retain consumers and increase frequency. All three behaviors grew strongly in the first quarter versus a year ago.
Delivery: Traffic decreased at all dayparts in the first quarter and all service modes but the most expensive one, delivery. Growth of 6%, driven by cell phone app delivery, proves that convenience is vital and trade-down behavior is not as simple as consumers choosing the cheapest option.
Innovation: 88% of public food companies are talking about innovation as a strategy to win in this challenged environment. Adding a spicy menu item is no longer enough of a differentiator. Brands must look to new categories to gain extra visits. Beverages are one area of opportunity in 2024.
Data highlights Portalatin shared:
- Commercial foodservice is down 2.4% in April versus a year ago.
- Although all foodservice dayparts declined, morning snack enjoyed 2% growth.
“Those dayparts have been disrupted,” Portalatin said. “But a.m. snack is up 2%. It’s this idea of something that’s not quite breakfast, but it’s not quite lunch either.”
Although c-store traffic declined for the quarter, strong check growth drove dollar gains, he said. Traffic was down 5% in 2024’s first quarter (versus being up 1% a year earlier) but the average eater check was up 7% (versus up 5% a year earlier), a 2% growth in dollars (versus 6% versus a year earlier).
“I would invite you to think about the three P’s. Price points, portion sizes and portability.”
Midweek traffic is positive as c-stores gained momentum during the most popular days of the week for in-person work, an important segment for c-stores, Portalatin said. Specifically, c-store foodservice traffic was up 1% Tuesdays through Thursdays in March 2024 versus a year ago; this represents 44% of total traffic. Conversely, traffic on Fridays through Mondays saw a 9% decline; this represents 56% of total traffic.
“One of the things that I’m encouraging people to think about is that the rhythms of our day are forever changed,” he said. “They’re not the same as they used to be. Think about opportunities to give people flexibility around menu items to craft eating occasions that fit their needs in the moment.
“We don’t have to force them to call it breakfast, lunch or dinner. So I wouldn’t. I would invite you to think about the three P’s. Price points, portion sizes and portability. That gives consumers the flexibility to build something that fits them at the moment.”
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