Convenience stores aim higher with food

‘Menu items’ like pizza, salads, yogurt join junk food in gas station aisles

Georgia has the fifth-highest number of convenience stores among states:

1. Texas - 15,434 stores

2. California - 11,403

3. Florida - 9,810

4. New York -8,247

5. Georgia - 6,766

6. North Carolina - 6,301

7. Ohio - 5,539

8. Michigan - 4,907

9. Illinois - 4,670

10. Pennsylvania -4,604

Source: National Association of Convenience Stores

Sales inside convenience stores, excluding payments for gas, rose 11.8 percent from 2009 to 2013:

2009: $182.4 billion

2010: $190.4 billion

2011: $195 billion

2012: $199.3 billion

2013: $204 billion

Source: National Association of Convenience Stores

About 35 percent of customers who visit a gas station convenience store go inside. The most popular reasons for going inside include:

1. Pay for gas at register

2. Buy a drink

3. Buy a snack

4. Buy cigarettes

5. Buy lottery tickets

Source: National Association of Convenience Stores

In a test kitchen in Cobb County, Bob Derian spent months sampling 25 varieties of dough, 30 different cheeses and dozens of pepperoni slices before arriving at what he thinks is the perfect pizza.

Now the challenge is convincing time-challenged RaceTrac customers to come inside and have a slice when they’re filling up at the pump.

“We did a lot of studies on food trends and pizza is No. 1 with customers,” said Derian, Atlanta-based RaceTrac’s executive chef, who promises a made-to-order slice in less than seven minutes.

“It’s a lot less of a risk than a barbecue concept,” he said. “I think people will be surprised by it.”

With sales from gas slipping because of more fuel efficient cars and convenience store staples such as cigarettes bringing in less revenue than they used to, gas station convenience chains like RaceTrac are looking to restaurant-ready menus to grow revenue.

Made-to-order pizzas, fresh salads and frozen yogurt bars with all the toppings, including Oreo bits and Maraschino cherries, are replacing space formerly held by frozen dinners, DVD rentals and magazine and newspaper racks.

Now’s the time to do it, experts say. With gas prices well more than $1 a gallon cheaper than a year ago, consumers are more willing to treat themselves with the savings at the pump.

Another factor: competition. QuickTrip, the Oklahoma-based chain with more than 130 metro Atlanta locations, has introduced QT Kitchen, featuring American bacon cheddar sandwiches on flatbread, kolaches, Parmesan pretzels, and fruit smoothies. Other chains such as Speedway and national convenience store leader 7-Eleven have grown their coffee line up to resemble the fancy offerings at Starbucks or added new yogurts, wings and craft beer.

The effort has proved successful, with sales inside convenience stores (excluding payment for gas) up 2.4 percent in 2013 to $204 billion, said Jeff Lenard, a spokesman for the National Association of Convenience Stores. In-store sales are up 11.8 percent in the last five years.

About 35 percent of customers who fuel up at the pump come in to stores, according to NACS, which counts about 150,000 locations nationwide. That is critical because gas stations only make a few pennies for every gallon of gas sold; most of the price goes to oil companies, taxes, refineries, marketing and credit card swipe fees.

Hot dogs, moonpies

The addition of salads and yogurt doesn’t mean that the old junk food staples — chips, moonpies, hot dogs and soda — are disappearing from convenience stores, industry leaders said. And they readily acknowledge that the majority of their “freshly-prepared” content is shipped to stores, not made on-site.

But broadening the range of offeriungs helps draw customers inside who might not have gone in before, they said.

One of the sharpest increases has been among the much sought-after millennial population, food retail analyst Harry Balzer of NPD Group said. He cited a recent study the New York-based consultancy conducted on the eating habits of millennials away from home.

While analysts have focused on millennial appetites for fast-casual restaurants such as Moe’s Southwest Grill and Chipotle Mexican Grill on the high-end, few have noticed that millennials — Americans roughly ages 18 to 34 — are increasingly turning to convenience stores on the other end of the spectrum.

“What I find fascinating is that (convenience stores) are becoming the low-cost food provider,” said Balzer.

He added that the move toward convenience store takeout is putting tremendous pressure on the fast-food industry, which is losing the battle for millennials, the largest generation since the baby boom of the 1950s, he said.

“The fast-food market is being squeezed from the top and the bottom,” said Balzer, adding that convenience stores have gained 3 percentage share points in the overall $1.5 trillion food market since 2006.

Convenience stores have continually evolved. A major milestone was the introduction of self-serve, pay-at-the-pump technology, which allowed consumers to gas up and go and reduced browsing inside.

More recently, grocery and drug store chains have upped the pressure by introducing gas pumps of their own to try to capture market share.

“The old lines that convenience stores only competed with each other are over,” said Mike Thornburgh, a spokesman for QuickTrip. “Everybody is cross-channeling.”

The pace, however, has accelerated in the past few years. Cars have become more fuel-efficient meaning fewer trips to fill up. Millennials have eschewed cars for public transportation. And revenue from cigarette sales — the fourth largest driver of in-store visits — has fallen because of a combination of high cigarette taxes and public education on the hazards of smoking.

‘I’m so hungry…’

“Fresh food sales in convenience stores is essentially a 30-year overnight success,” Lenard said. “It happened sometime between today and 1983 when Chevy Chase’s character in “National Lampoon’s Vacation” said, ‘I’m so hungry I could eat a sandwich from a gas station.’”

Efraim Levy, an analyst with S&P Capital IQ, said the challenge for convenience stores is growing foot traffic when the central lure — purchasing gas — is no longer the driving force.

“What they have to try to do if there is no car is make themselves a destination,” he said. That requires balancing the right food at the right price.

RaceTrac is doing just that. The 81-year-old company, which has 79 stores in metro Atlanta, rolled out a new 6,000-square-foot store in 2012 that included indoor seating, walk-in coolers for beer and wine, boiled peanuts, and an expanded coffee, milkshake and fresh sandwiches and fruit cups offering. Its pastel-colored in-store “Swirl World” frozen yogurt station is a cornucopia of flavors and toppings, including Gummy Bears, blueberries, chocolate and kiwi.

Derian, the company’s executive chef, began testing his new made-to-order pizzas — which are limited initially to cheese, pepperoni and meat lovers varieties — at the chain’s location at Knox Bridge in Canton.

The chain is busiest in the mornings, said Billy Milam, RaceTrac’s president, who describes the company’s coffee line up as “crazy good.” But the expanded design of the new stores and the company’s previous store upgrade — which grew square footage to 5,000-square-feet — have lured a lunch crowd who eat at tables or counter bars.

RaceTrac CEO Allison Bolch Moran, granddaughter of Racetrac founder Carl Bolch Sr., said the industry is simply following consumer demand for more and better food choices.

“If you want customers to come in and spend some time, you have to make people’s lives and the experience more enjoyable,” she said.

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