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Convenience Store Food Profits to Grow

CHICAGO—Foodservices are increasingly becoming convenience stores' most profitable category as gas and tobacco revenues fall, says foodservice researcher Technomic. The researcher projects that c-store foodservice will grow by 2.5 percent over each of the next two years. With $11 billion in foodservice sales through convenience stores, that places the segment just behind supermarkets in food retailing.

"Convenience stores have shifted their focus to provide a wider variety of fresh, high-quality food offerings to help gain a greater share of stomach and compete with restaurants," says Director of Research and Consulting Services Tim Powell. "At the same time, there seems to be significant room for convenience-store operators to generate increased foodservice sales by translating existing traffic into purchases."

Technomic observes convenience stores have an Achilles heel—food healthiness, which only receives satisfactory marks from 28 percent of those surveyed. That may be an opportunity as convenience store chains are looking to better position themselves for more growth by enhancing the customers' experience.

Alain Bouchard, president and chief executive officer of Alimentation Couche-Tard, holding company of the over 5,800 franchised and company-owned Circle K and Mac's convenience stores, thinks so. He writes on the company's web site that fresh food is a priority for the chain. "Recently, we have been adding considerably more strategic weight to making fresh food service a bigger, more viable and profitable core service across our network," says Bouchard. "We have formalized this as a priority undertaking. Food service is a category with excellent margins and strong traffic building. But it is also a very complex field and the need for first-class planning and execution leave no margin for error."

There are other low lying fruits of opportunity for convenience store operators, according to Technomic. For example, the research firm observes that more than half of today's consumers (52 percent) pick up snacks from prepared-food sections of convenience stores or mini-marts, compared to 37 percent in 2010. Snack purchases are clearly on the uptick.

Lunch may be another place for growth. Only one in five consumers surveyed indicated that they purchase lunch from retail foodservice locations such as grocery stores (20 percent) and convenience stores (17 percent), while 56 percent purchase lunch from a fast-food restaurant.

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