There are two certainties in the convenience store industry: consumers are often hungry and usually in a hurry.

The foodservice category, which includes prepared and commissary foods and hot, cold and frozen dispensed beverages, saw 2022 sales increase 14.3% year over year to $56,491 per store, per month, according to the NACS State of the Industry Report® of 2022 Data. Gross profits increased 8.7% for a total of $29,174 per store monthly. (NACS reveals the latest SOI data at the SOI Summit in Chicago, April 3-5. Order your copy of the NACS State of the Industry Report® of 2023 Data at convenience.org/store.)

Except for hot dispensed beverages, all foodservice subcategories saw more sales in 2022 than in 2021. But prepared food was the superstar, generating 68.4% of foodservice sales with year-on-year sales growth of 13.8% and a 9.0% bump in gross profits.

“Commissary has not lost the steam it gained during the pandemic and continues to grow,” said Emma Tainter, research analyst at NACS. “But not at the same rate as prepared food.”

Unfortunately, hot dispensed beverages are not enjoying the same post-pandemic sales as prepared food. “Hot dispensed beverages have been on a downward trajectory and ended September with about the same level of sales in 2022,” said Tainter. “Coffee made up 72.2% of sales, a slight drop from 73.9% in 2021. Cappuccino and specialty coffee sales were up to 18.7% of th category, an increase over the 16.9% in the previous year.”

In August, Starbucks announced that its cold beverage business made up 75% of sales in the third quarter. “That’s where the market is going,” said Tony Sparks, head of customer wow for Curby’s stores. “The younger population wants a more fun caffeinated drink than traditional coffee. So, we’re concentrating on our blended and flavored coffees.”

Meanwhile, carbonated drinks made up 52.2% of the cold dispensed beverage category in 2022, down slightly from 2021 (54.5%). But gross margins were 55.08%, up from 49.58% the previous year.

There is one caveat to those 2022 sales figures. NACS generated an inflation model comparing merchandise and foodservice, which found that inflation alone accounted for 7.9% of merchandise growth and 9.7% of foodservice growth. When applied to merchandise sales, which saw an overall 5.8% sales increase, the model found that sales did not outpace the 7.9% impact of inflation. But foodservice was a winner. The 14.3% jump in foodservice sales exceeded the 9.7% attributed to price increases year over year.

Current Challenges

Inflation has impacted food prices and consumers’ willingness to part with their money. According to the Bureau of Labor Statistics, the cost of store-bought food increased 23.5% from February 2020 to May 2023, while the average hourly wage for private-sector workers rose 17.1%. The U.S. Department of Agriculture predicts food prices overall will increase 1.2% in 2024, with food-away-from-home prices climbing 4.9%.

Managing expenses is an ongoing challenge for all retailers. Analyzing trends and planning ahead are mandatory for making informed decisions in today’s market, according to Jimmy Crowder, director of food innovation at TXB.

“Negotiating prices, rebates and deviations is not just an annual routine for us; it’s a crucial part of our strategic process,” he said. “By engaging in these negotiations regularly, we ensure that we stay ahead of the curve, mitigating the impact of price fluctuations on our bottom line.”

Several operators say food prices have stabilized somewhat since pandemic days, but other expenses challenge their programs.

“Paper products are the bane of my existence,” said Bryan Davis, food service manager for Ozarks Travel Center and Hot Spot c-stores. “I save a lot if I order in advance, but I don’t have enough storage space to stock up. Consumers don’t understand why prices are the way they are. A single container for a slab of ribs costs me $1.50.”

There’s been a surge in takeaway orders, especially for comfort foods and easy-to-eat options.”

Uptick in Takeout

According to Hospitality Technology, an industry resource, approximately 60% of U.S. consumers order food for takeout or delivery once a week, with dinner being the most popular delivery meal. Recognizing the potential, many c-stores are focusing on customers who prefer at-home dining, minus the cooking.

“There’s been a surge in takeaway orders, especially for comfort foods and easy-to-eat options like sandwiches,” said Chad White, food service category manager for Rutter’s. “Customers are seeking familiar flavors that they can enjoy at home or on the road. Classics like burgers, pizza and ready-to-eat items remain popular.”

Expanding Menus

Non-traditional c-store proteins, such as brisket, pulled pork and fish, have become more common. “Besides our brisket quesadilla, we have our brisket sandwich, brisket taco and brisket egg taco, to name a few,” said Crowder. “Our guests really gravitate towards those offerings.”

TXB stores are a destination for Tex-Mex foods, but the demand for similar menu items is “exploding all throughout the country,” Crowder added. “The universal appeal of a well-crafted taco is undeniable. It’s not just about geography; it’s about delivering an exceptional dining experience.”  

At Kwik Trip, all take-home-meals are made at the chain’s La Crosse, Wisconsin, kitchen and transported to the stores daily, although fried chicken is cooked in-store. “We’ve rotated through countless LTO options to find out what our guests are interested in purchasing,” said Paul Servais, senior director of food service for Kwik Trip. The overall winner is “mac and cheese with proteins, such as chicken, bacon, brisket and pulled pork.”

Ozarks Travel Center has offered seafood options in the past, some of them pricey, with mixed results. Then, the retailer hit the jackpot when it began frying white fish in a cornmeal breading. “I buy fish by the trailer load and oil by the truck load,” said Davis. “It’s a big item.”

The freedom to choose from a diverse menu attracts hungry shoppers, and Pilot Flying J offers a year-round soup bar in more than 250 outlets.

“While we do see more guests enjoying soup when the weather is cold, our rotating menu provides them with fresh, new flavors to try throughout the year,” said Savannah Johnson, category-food manager at Pilot Travel Centers. “Some of our soup bar offerings are a hearty Italian beef lasagna, chicken pot pie, loaded potato, minestrone and everyone’s favorite, chili.”

Pilot has 350-plus locations featuring in-house hot delis and partners with 13 national QSR brands, including Chester’s Chicken, Pizza Hut and Wendy’s. “By providing a variety of food options, our guests can find familiar favorites and try new things while on the road,” Johnson said.

The Hy-Vee owned c-store chain Fast & Fresh offers to-go Asian dishes and nori sushi roll items. “They’re great meal options and continue to set us apart from the competition,” said Tina Potthoff, senior vice president of communications for Hy-Vee. “Our sushi is rolled fresh daily at multiple Hy-Vee locations, which delivers on our promise of fresh, delicious food.”

Three of the top five heat-and-eat meals sold by Fast & Fresh are Asian-inspired: general’s chicken, sesame chicken and orange chicken.

High Tech Convenience

As pick-up and delivery surge, new technologies provide improved ways for consumers to get the food they want. According to White, online ordering apps are a must. “There’s been a significant rise in our app-based orders,” he said. “The convenience of browsing menus, customizing orders and seamless transactions makes using apps a preferred choice for many customers. It’s a trend that aligns with the convenience-driven lifestyle.”

The National Restaurant Association predicts more foodservice providers will upgrade their drive-thrus in coming months, adding license-plate recognition technology for speed and personalize service. The technology can be synchronized with a c-store’s loyalty program and notify customers what rewards they have coming when they pull into the drive-thru.

The potential for drone delivery, which was highly publicized pre-pandemic, is back in the news, although technology consultants at Gartner believe large-scale autonomous drone flights won’t be feasible before 2025.

7-Eleven has experimented with drone deliveries in Florida and South Korea, and Chick-fil-A recently tested drones in one Florida neighborhood. Amazon offers drone delivery in College Station, Texas, and Lockeford, California, while Walmart has announced plans to offer drone delivery to 75% of the Dallas-Fort Worth area this year. Presently, Walmart’s drone-delivered packages are limited to six pounds or less, but future drones are expected to tote up to 15 pounds.

Approximately 60% of U.S. consumers order food for takeout or delivery once a week.

Investing in People

As always, employees play a key role in foodservice success. But employee turnover in the c-store industry was 130% in 2022, according to the NACS State of the Industry Compensation Report.

“It’s not that we can’t find people who want to work. Our issue is the cost of labor,” said Sparks. “Entry-level workers have more options now than they did a few years ago. They can go work at an Amazon warehouse for $22 an hour.”

“We’ve committed ourselves to paying competitively. We want to invest in the right people.”

Employee shortages can create in-store issues ranging from slow customer service and lost sales to unstocked shelves and increased shortage. In January, Rutter’s announced its eighth pay increase in four years. The chain now offers starting workers $18 per hour, and other retailers, ranging from Buc-ee’s to Ozarks Travel Center have boosted wages to stay competitive.

The cost of “labor has gone through the roof,” said Davis. “But we’ve committed ourselves to paying competitively. We want to invest in the right people.”