Consumers’ demand for value may be turning them away from fast-food restaurants and toward their local gas station.
That, at least, is based on data from Placer.ai, which expects convenience stores to be a big deal in 2023. For this, it cites data from one of the more notable convenience store chains, Wawa.
The Pennsylvania-based chain, considered the strongest foodservice provider among major convenience store concepts, has been outperforming the fast-food industry from a traffic standpoint for the past six months. That includes November, when visits to its locations rose 1.7% compared with a 2.6% decline for fast-food chains.
Convenience stores have spent much of the past decade upping their prepared food game with interesting results, as they’ve sought to replace lost profits from the sale of items like cigarettes with prepared food. As such, they’ve become a growing threat to fast-food chains that target a similar set of convenience-focused consumers. Foodservice sales at c-stores thrived between 2010 and 2020.
C-store foodservice sales were hit hard in 2020 when people stopped driving to work or going on vacations. According to data from NACS, a trade group representing convenience stores, foodservice sales declined 8.5% at c-stores in 2020.
Those sales rebounded in 2021 and were above pre-pandemic levels. Foodservice accounted for 22.5% of in-store sales at such retail shops, up from 16.8% in 2011. Foodservice represents more than a third of in-store convenience store profits.
It makes sense that convenience stores would quickly come back, much as the fast-food sector has, given consumers’ demand for takeout.
Wawa has been something of a poster child for c-stores’ push into foodservice. The company is the 10th largest convenience store chain in the U.S., according to Restaurant Business sister publication CSP Daily News.
The chain offers a wide variety of food options, including a dinner menu featuring a line of burgers launched in 2021. It is the “official hoagie” of the Baltimore Ravens NFL team and it is testing such QSR-centric ideas such as drive-thrus, including a drive-thru-only location. Consumers also give it strong marks for its customer service, according to CSP.
The company is also expanding rapidly, with plans to double its footprint by the end of the decade.
Value has been a big question mark for restaurants over the past year. Restaurant menu prices soared last year and remain well above where they were a year ago—limited-service prices were up 6.7% in November compared with a year earlier.
Those prices have been influencing industry traffic and have generated concern about the state of lower-income consumers.
Operators should pay close attention to these numbers and think twice about some of the aggressive price increases—particularly as the cost of some commodities, notably chicken, start coming down. Prices are already slowing at grocery stores.
If restaurants don’t slow menu price increases quickly, they could lose a lot more business than they expect to consumers’ other options for prepared food. And companies like Wawa will gladly give them what they want.