As we recently completed our latest study on convenience store foodservice, some of the Foodservice IP team reflected on our early days in examining this market.

The Rise of Retail Restaurateurs

In the mid-2000s, retail prepared foods still felt like a bit of a secret in the broader foodservice industry. Sure, Whole Foods was recognized for offering an array of impressive offerings at its food bars and cases brimming with meals to go, but most other pioneering activities were under the radar in smaller chains with regional footprints.

In an industry presentation at the time that focused on the competitive threats retailers posed to restaurants, relatively few in the supplier audience were aware how many peers Whole Foods had in redefining what supermarket deli could be: Central Market in Texas, Lunds/Byerly’s in Minnesota, Bristol Farms in California to name just a few.

When the conversation moved to c-stores, some in the audience scoffed. But others nodded vigorously as concepts in their local markets were mentioned. Yes, Sheetz, Wawa, Rutter’s and others had passionate foodservice loyalists on the East Coast, in some midwestern towns, Casey’s was the go-to for pizza (and donuts) and if you wanted a breakfast taco from one of the Buc-ee’s operating in Texas and the southeast, it would be wise to go early because they often sell out.

Of course, retail foodservice is in no way under the radar now. The segment and associated growth opportunities have been closely watched and increasingly explored for several years now. And yet, just as in those early days in our team’s tracking, the current climate is such that it calls for taking a fresh look at the landscape.

Retail Foodservice is Advantageously Positioned – But Rebuilding Like the Rest of the Industry

For so long, it was easy to assume that grocers and c-stores were looking to expand and innovate, innovate, innovate with foodservice, continually seeking to raise the bar. Supermarket delis morphed into food courts populated with self-serve food bars where patrons could sample a host of different foods and themed stations offered multiple opportunities to have staff prepare customized creations.  Wegmans, H-E-B, Kroger and others took it even further, developing stand-alone restaurants entirely separate from their in-store prepared foods. (The Burger Bar, True Texas Barbecue and Kitchen 1883 Restaurant & Bar reflect diverse service models from casual to more upscale and all currently operate multiple units.)

C-stores also gained increasing attention for offerings designed to steal share not just from traditional Fast Food, but Fast Casual. They also built new locations that lacked gas pumps and introduced catering programs as they sought to bring these new offerings to a broader audience.

But where are we now? The pandemic made retail consumers’ primary destination for their meal needs and exposed new potential users to grocers’ and c-stores’ foodservice advances. But it also hindered some of those efforts as various offerings were paused for a time and the entire foodservice industry has grappled with multiple daunting challenges. As lockdowns and shutdowns move further into the rearview mirror, what is the state of retail foodservice?

  • The takeout opportunity that fueled the rise of retail foodservice remains red-hot, but also more competitive as even restaurants that were oriented toward on-premise have turned their attention to meal solutions patrons can enjoy at home.
  • After closing them during the height of the pandemic, retailers are also grappling with how best to proceed with self-serve models that gave the segment some of its distinctive appeal.
  • As labor shortages persist in in our industry, retailers need staff able to execute the higher-caliber foodservice that provides competitive differentiation, but they are competing with restaurants also struggling to attract these workers.
  • And they are still challenged with balancing their own rising costs against cost-conscious consumers who have been persistently pressured by inflation.

How Suppliers Should Approach

With that in mind, suppliers targeting these customers need to recognize that we are well beyond the phase of “Retailers want help with foodservice and we know foodservice.” Competition for these customers has been robust and it is critical to demonstrate more than general foodservice know-how. This includes:

  • Awareness of the Competitive Landscape: Reiterating our earlier point about true insight into contemporary retail foodservice being limited in the early days of this segment’s rise, winning approaches can be quite regional in nature and driven by a growing but select group of innovators. Know the local competitors and what they are doing.
  • Operator Understanding: All foodservice operators continue to operate in New Normals. Supplier partners that understand retailers’ current priorities and pain points relative to innovation and elevating quality, building traffic, enhancing profitability, managing costs, etc., will resonate more deeply.
  • Proof of Consumer Demand: Foodservice has been a strategic retailer focus for quite some time now and many have elevated their programs. In today’s climate, operators are looking for solutions with demonstrated patron appeal. Use consumer insights to build the case for your offerings.

Foodservice IP’s new c-store study has insight into all of these areas. 

Tim Powell is a Managing Principal of Foodservice IP. Tim serves as a trusted foodservice adviser to management at several food companies.

To learn more about FSIP’s Management Consulting Practice, click here.

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