Grocery and convenience stores change the type of food they offer
Recently, convenience and grocery stores have made a switch from the traditional foods they have offered in the past, such as rotisserie chicken, deli meats, and cold prepared foods made to be reheated at home, to foods that more closely resemble what you may find in a quick service restaurant or a buffet.
Today’s grocery stores are increasingly offering hot and cold prepared foods. Grocers such as Whole Foods have offered cold and hot buffet style bars for a while now with many other grocery chains following suit.
Whole foods and some other chains now offer small quick service restaurants within the grocery store. For example, the Whole Foods located in the Lincoln Park neighborhood of Chicago offers a sushi restaurant, salad bar, wine bar, olive bar, sandwich bar, seafood bar, Parisian café, pizza joint, and a burger joint. With all of these locations in one place, it is becoming increasingly hard for nearby businesses to compete for lunch and dinner customers. Especially when many customers may already be shopping for groceries before or after dinner.
Convenience stores offer the same speed at a lower cost
Convenience stores that are stand alone or located within gas stations are also changing what they offer their customers. Many convenience store gas stations such as those within Thortons or Speedway now offer expanded breakfast items, coffee bars, fresh donuts, and lunch items to compete with the business that may otherwise go towards quick service restaurants. Some of these convenience stores also offer fresh fruit, salads, and other lighter lunch fare.
Unlike the grocery stores, convenience stores sell items for lower than what similar items may go for at quick service restaurants or even grocery stores. This is due to the low amount of labor needed to prepare these food items. Many items arrive to the stores frozen and are then simply heated up in warming cabinets, rollers, or defrosted as needed to put in a refrigeration cabinet.
These convenience stores also offer combination meals similar to those of quick service restaurants during peak times such as breakfast and lunch. Many of these gas station convenience stores offer combo meal with a breakfast sandwich and coffee, or roller grill items, chips, and a soft drink for lunch time.
Before, there was not a lot of data to help determine the market penetration for breakfast, lunch or dinner goers in relation to grocery and convenience stores. However, the Nation’s Restaurant News recently wrote an article detailing this very information.
Prepared food is generating more visits than Quick Service Restaurants
Recently, Consumer reports surveyed almost 63,000 of their subscribers. They found that more than half of those surveyed buy meals from a freshly prepared-food counter at grocery stores. Specific to grocery stores, prepared meals have become a $29 billion business with sales growing twice as fast as overall sales for grocery stores.
Consumer reports believes that this shift is due to a sustained desire for quick food with an enhanced desire for healthier and fresher meal items combined with customized choices. This is where grocery stores excel in comparison to the traditional quick service restaurants.
Retail outlets take away some market share form quick service restaurants
According to the NPD’s QSR Plus Retail Market Monitor, in the period between March 2015 and June 2015, the number of fast purchases made at retail outlets was over six visits higher compared to traditional Quick service restaurants (QSRs) in a normal 4-week period.
However, non-traditional quick service restaurants have managed to gain a significant amount of market share. Below is a graph detailing the market share of each daypart and a written description of the graph in case the image does not show up on your device.
Traditional Quick Service Restaurants have earned the following percentages of the quick service market share:
– 44% Breakfast/AM meal
– 61% Lunch
– 60% Dinner
– 30% of PM snacks
Grocery stores have been able to develop the following % of quick service market penetration:
– 12% Breakfast/AM meal
– 24% Lunch
– 29% Dinner
– 11% PM snack
Impact on traditional quick service restaurants
While these numbers do not show what market share has been earned by convenience stores, it is safe to say that the grocery stores, at least, represent a significant threat to the traditional Quick Service Restaurant environment.
Customers are increasingly asking for healthier choices, fresher foods, and more customizable menus. At the moment, Grocery and convenience stores seem to be doing a very good job of catering to these new customer demands. Quick service restaurants are also trying to respond to this trend, and will need to do so at a faster rate or risk losing some of their market share to grocery and convenience stores.