FrontEndBy David Bishop, Contributing Editor

Becoming BetterFoodservice Operatorslearning from the c-store industry's top performers.

CONVENIENCE RETAILERS ARE FACING more compe-tition for their share of on-the-go foodservice salesat the same time consumer spending remainsconstrained.These two macro factors underscore

the value of understanding how to grow the businessandmarket share during these tough times.

To learn how to more effectively build the businesstoday, Balvor, in collaboration with Convenience StoreDecisions, fielded an online survey in May 201O.A total of97 retailers responded representing nearly 22,000 storesand providing a good industry representation, as 69%ofthe respondents operated 10 storesor less.

DIGGING INTO THE RESULTSAlthough the average monthly dollar sales per store

across all respondents was $20,037 for food service, top-quartile retailers reported sales rates almost twice as high,while the bottom quartile was lessthan half that figure.

FOODSERVICE DOLLAR SALES(Average Per Store;Manth)

Source: CSDIBo/vor Foodservice SUivey, May 2070

Now,some may believe that the top quartile is reservedmainly for retailers with many stores,which is not true atall. Balvor research revealed that retailers operating 10orfewer stores are just as well represented in this segmentas in the overall sample.

In terms of growth, retailers overall are forecasting thatfood service sales will finish approximately 2.6% higher

than 2009 with the strongest growth expected in coldand hot dispensed beverages.

2010 DOLLAR SALES FORECAST(Percent Change IS 2009)

source: CSD!80/vor Foodservice Survey, May 2070

But,comparing growth rates from a quartile perspec-tive reveals significantly different outlooks for the year.

2010 DOLLAR SALES FORECAST(lopvs Battam Quartile)6.1%

• Top Quarlile

• Bottom Quartile

source: CSD!80/vor Foodservice Survey, May 2070

FOR EXAMPlE

. Top-quartile retailers are forecasting that foodservicewill grow approximately 5% in 2010,whereas the bot-tom quartile anticipates that saleswill decline by 1.3%across all categories.

• Top-quartile retailers believe the strongest relativegrowth will come from food prepared on-site,while thebottom quartile expects only marginal salesgrowth inone category-hot dispensed beverages.

10 Convenience Store Decisions I August 2010 CSDecisionso

These differences become even more interesting whenconsidering that the strong growth rates related to the topquartile are coming off of dramatically higher sales basesand that top-quartile retailers are most optimistic aboutthe largest foodservice category.

Clearly, understanding what top-quartile retailers aredoing differently may help others become better foodser-vice operators.

However, at the same time, retailers need to recognizethey're all at different stages of developing their own food-service program, making it important to put any insightsinto context.

With that said, what can retailers learn from top-per-formers in foodservice?

DRIVING INCREMENTAL TRIPSIt'sessential to provide a compelling offer to the broader

market in order to build the base business. Top-quartileretailers do two things somewhat differently than others.

• They're twice as likely to leverage the Web site to pro-mote foodservice offerings, and that's just to start.

• They offer powerful incentives that motivate addi-tional trips to the store.

Whether it's promoting "free iced coffee Fridays" likeCumberland Farms or offering discounts, such as half-priced products during "happy hour" time periods likeQuick Chek, these activities motivate consumers to selectthese stores more often.

Another important point is that this communicationextends typically into other social media vehicles, whichserve to drive further interest by having fans of the chainact as a force multiplier, building more buzz as they sharewith their friends. .

HIGHLIGHTING THE FOOD'OFFERAlthough many retailers promote foodservice at the

fuel pumps, top-quartile retailers focus more energy onhighlighting food prepared on-site than most.

In fact, these retailers are twice as likely to post sig-nage at the pump to promote special deals or productsinside the store for this category as compared to the bot-tom quartile.

Obviously, the effectiveness of this tactic relieson havinga solid supply of fresh-food items available first.Interestingly,this observation may help explain the dramatic differencesbetween top- and bottom-quartile retailers.

Driving growth via the food components of foodserviceisvital to longer-term success as it reinforces that the storeis in the fresh-food business and enables it to provide amore competitive and compelling offer to the consumeron the go.

However, as with having a solid food program first,thisfocus ispotentially premature for retailers currently workingto strengthen their dispensed beverage offering as well.

LEVERAGING NEW PRODUCTSNew products are vital to keeping the foodservice offer-

ing fresh, but it goes beyond that if retailers want to trulybenefit from this activity.

In-store signage isan important step in highlighting therecent additions to the menu, but not necessary enoughto drive initial trial.

Top-quartile retailers seem to understand this as theyare significantly more likely to build consumer trial byreducing the risk-for example, by offering free productsor significant discounts.

The success of promoting new products this way is tooffer the deal when the consumer is away from the store,so it drives more foot traffic into the store by offering lim-ited-time-only (LTO)discounts.

For example, Subway recently used an e-mail blast toits fan base to promote its new breakfast sandwiches. Theone-day offer included a free breakfast with no purchasenecessary. Now, while some c-store retailers would bereluctant to execute this type of campaign, Subway real-ized they'd likely get the consumer to buy a dispensedbeverage and a side while trying a new item.

KEY TAKEAWAYSRetailers need to remember that consumers buy fresh

foods with all their senses.While a fairly basic statement. itreinforces that the products need to look and taste good orno amount of discounting will build the business profitably.What this also means is it's critical to have a well-executedprogram in place before attempting to leverage these typesof marketing and merchandising practices.

Building a foodservice program, ultimately, is drivenby many factors, including a retailer's success in consis-tently providing quality products, having alignment andcommitment with internal and external stakeholders, andproviding resources to support the program effectively.This article simply focused on ways to accelerate growthvia marketing support while acknowledging that otherfactors are critical to the long-term success as well.

Retailers interested in gaining additional insightsand perspectives can do so by viewing Part 1 of CSD'sFoodservice Webcast Series, which is available free on-demand at www.csdecisions.com.

David Bishopspecializes in convenienceretail and is the man-aging partner at Balvor llC, a sales and marketing firm locatedin Barrington,III. Hecan be reachedat davidbishop@balvor.com.

CSDecisianso August 2010I Convenience Store Decisions 11