Food-borne Illness Equals Foodservice Disaster

January 19, 2010 – An estimated 87 million cases of food-borne illness occurred in the U.S. last year, including 371,000 hospitalizations and 5,700 deaths, according to an Associated Press calculation that used a formula devised by the Center for Disease Control (CDC) and current population estimates.

A food-borne illness outbreak is defined by the CDC as an “incident in which two or more persons experience a similar illness resulting from the ingestion of a common food.”

Every day restaurants, fast food and convenience store food services are operating in a very high-risk environment. A food-borne illness outbreak creates legal exposure and a public relaxations disaster. In the c-store business it will affect overall gas and inside sales as consumers avoid locations.

A new report by Virginia’s Hollins University found alarming levels of bacteria in convenience and fast-food soda fountains. Forty-eight percent of machine beverages tested contained coliform bacteria — which can originate in fecal matter. Everyone has procedures for cleaning fountain units, but is it getting done daily and more importantly, is it being executed correctly?

In my opinion all levels of foodservice management should be ServSafe certified by the National Restaurant Association. This certification will give management an extreme amount of information to avoid food-borne illness. More than anything else, it will create a high level of awareness of the risk they are working with daily and probably not taking seriously enough.

Best practices to avoid a food-borne illness:

– Avoid cross contamination storage. Keep raw meat, poultry, seafood, and their juices away from all ready-to-eat foods.
– Date all products upon delivery and utilize a first in first out procedure.
– Refrigerate foods promptly. If prepared food stands at room temperature for more than two hours, it may not be safe to eat.
– Reheat foods properly, to kill the harmful bacteria. Reheat cooked food to at least 165 degrees.
– Employees need to wash their hands properly. I see kitchens out of soap, sanitizers and towels. Even after employees wash their hands, they can be observed touching their hats, hair and dirty aprons.
– Wash utensils and surfaces before and after use with hot, soapy water followed by a sanitizer.
– Maintain hot cooked food at 140 degrees or higher.
– Divide large amounts of leftovers into small, shallow containers for quick cooling in the refrigerator.
– Continually talk about food safety, particularly at team meetings.
Ask what should you do if you experience a food-borne illness.
– Train employees to refer consumer calls to management.
– Train managers to collect information and commit to the consumer an investigation. Never take responsibility until the investigation is finalized, avoiding legal exposure starts at the store level in regards to how they handle the situation.
– Communicate to managers that a food-borne illness is a 911 issue. If a store gets more than two complaints, they should be called at home.
– Immediately contact the health department. Many companies try to do their own investigations but the health department will be more thorough. It is important to build a positive relationship with health departments.
– Senior management should be notified and should be prepared to create press releases.
– Discuss food safety at all employees meeting and incorporate it into newsletters.

Remember food is an integral part of your organization

This article was written for Convenience Store Decisions and can also be found here: http://www.csnews.com/csn/foodservice/article_display.jsp?vnu_content_id=1004060025

Future Convenience Food And Drinks: New Opportunities in a Developed Market

Notes from webinar I lead in October.

Business Intelligence for the Consumer Goods Industry

Business Insights’ portfolio of consumer goods management reports are designed to help you make well informed and timely business decisions. We understand the problems facing today’s consumer goods executives when trying to drive your business forward, and appreciate the importance of accurate, up-to-date, incisive product, market and company analysis. We help you to crystallize your business decisions.

The strength of our consumer goods research and analysis is derived from access to unparalleled databases and libraries of information and the use of proprietary analytic techniques. Business Insights reports are authored by independent experts and contain findings garnered from dedicated primary research. Our authors’ leading positions secure them access to interview key executives and to establish which issues will be of greatest strategic significance for the industry.

Our consumer goods portfolio of reports can be used across a wide range of business functions to assess market conditions and devise future strategies and cover the food and drinks, ingredients, packaging, health, toiletries and cosmetics categories and key consumer issues including eRetail and marketing.

Key issues examined by this report

• Ethical packaging. Green packaging is a primary concern for the food and drinks industry. Using less packaging will become a key focus over the next five years, and this is especially important for convenience products that rely heavily on packaging benefits such as multi-packs, compartment packaging and portioning.
• Health concerns. Health is an increasingly important driver of convenient products, and marketing is becoming multi-faceted with the evolution of food and drink offering more advanced health benefits such as weight control and other specific health concerns.
• Emerging markets. Growth in regions such as Asia-Pacific and Latin America is acting to boost overall sales of dried, instant and wet ambient convenient products. These have shown increasing signs of maturity in Western markets where demand has tended to move into fresher convenient products.
Convenience continues to be a key trend in food and drinks, with consumers increasingly looking for products that suit their lifestyle requirements. The extent of the development of convenient products is signaled by the notion that consumers are coming to view various convenience benefits as the norm. Adding value in terms of convenience is increasingly linked to providing further benefits, combining saving time and effort with additional aspects of food and drink marketing. These include providing health, freshness, taste, versatility and ethical benefits, and marketing products that suit particular consumer needs such as on-the-go convenience and products for children.

Future Convenience Food and Drinks is a new report published by Business Insights that provides insight into the direction of the convenient food and drinks market and how the sector will develop over the next five years. This report analyzes current and future trends that are set to impact significantly on the marketing, formulation and packaging of convenience food and drinks.

Discover future growth opportunities in the convenience food and drinks market with this new report

This new report will enable you to:
• Identify future growth opportunities in a developed sector, using this reports analysis of sales of convenience food and drinks in emerging markets to 2011.
• Gain insight into industry opinions on the convenience food and drinks market over the next 5 years through an exclusive survey of industry executives undertaken by Business Insights.
• Improve the targeting and effectiveness of your NPD strategies with this report’s analysis of convenience benefits, product categories and regional trends based on analysis of Productscan data of 35,000 convenient food and drinks products launched globally between 2005 and 2008.
• Predict future convenience food and drink market size and growth levels, using this report’s forecasts to 2011, including category specific analysis, in Europe and the US.

Your questions answered:
• How are different convenient food formats developing and which products will provide growth?
• What innovations are driving new opportunities in convenience food and drinks NPD?
• Which region will experience the most growth in convenience food and drinks to 2011?
• Who are the most innovative convenience food and drinks manufacturers?
• How does the industry expect the marketing of convenience food and drinks to change over the next 5 years?

Some key findings from this report:
• The convenience food and drinks market is worth $158bn in Asia-Pacific and is expected to grow at a CAGR of 3.9% to 2011. Latin America and the Middle East and Africa are set to grow at a faster rate, but these regions hold a collective share of less than 13% of global sales.
• A growing share of 40% of new convenient products launched globally in 2008 feature benefits relating to speed of preparation, compared to shares of 30% for single serving products and 15% for fresh convenience.
• Expenditure on convenient products peaks in Sweden at over $700 per capita, and is over $400 in the US. Per capita spend in all other regions is less than a quarter than that of the average for Western Europe and North America, but the gap is expected to narrow steadily.
• The number of dinners prepared from scratch at home is highest in France and Spain but is falling fast. The level of cooking from scratch is lowest in the US but the trend away from this appears to be slowing.

Social Responsibility

The convenience store industry raises a tremendous amount of money for various causes. Our industry has a large impact with its support of national and local charities.

Commitment to funding raising is admirable and makes our jobs rewarding. At the same time, it may be a business strategy not utilized enough. Most consumers’ lack of trust towards big businesses is at an all-time high. Banking and Wall Street heightened these feelings of distrust to a level not seen since the great depression. Cause marketing may bridge some of these feelings.

The next generation (22-30) is even more sensitive to cause marketing

• 83% will trust a company if it is socially/environmentally responsible
• 89% are likely to switch from one brand to another if the latter supports a cause
• 79% want to work for a company that cares about how it impacts society
• 74% listen to a company’s messages if they have a deep commitment to a cause

Cause marketing is a big opportunity for our industry. As the price of fuel goes over $3 again, fuel companies are viewed as the villains again. Consumers don’t understand how the average guy can’t afford to drive yet oil companies are posting strong profits. In a recent poll of 20 industries ranked on trust, fuel companies came out 19th. I am not promoting this thinking but trying to point out our industry has issues that we can turn into opportunities.

I would like to share a cause I have been involved in. 20 years ago. We felt our customers and employees didn’t see our company as an organization interested in anything other than generating profit.

We decided the charity must benefit kids and avoid high administrative costs.  After completing my due diligence we felt that getting involved with St. Jude Children’s Hospital was our best fit.

During the past three years, 84 cents of every dollar received has supported the research and treatment at St. Jude. Its mission is to find cures for children with cancer and other catastrophic diseases through research and treatment.

Children never pay for treatment not covered by insurance. No child is ever denied treatment because of the family’s inability to pay.

St. Jude Halloween Promotion sponsored by Coors

During October, employees at the participating establishments will ask patrons to make a $1 donation to St. Jude. The donors will have the opportunity to write their names on pumpkin-themed pinups which will be displayed in each location through Halloween.

Since its inception in 1992, the St. Jude Halloween Promotion has raised more than $41 million to help kids battling cancer at St. Jude.

Currently, the St. Jude Halloween Promotion has four national partners that are convenience stores: Casey’s General Stores, Hess Corporation, TravelCenters of America and Petro Stopping Centers.

Convenience stores can help by visiting www.stjude.org/halloween

Webinar: Trends in Eating and Drinking — High Touch, Some Touch or No Touch, Foodservice Is Key to Future of Convenience Retailing

Here is the link to the CSNews exclusive summary of the webinar I participated in “Trends in Eating and Drinking — High Touch, Some Touch or No Touch, Foodservice Is Key to Future of Convenience Retailing,” back in September.

http://www.csnews.com/csn/news/article_display.jsp?vnu_content_id=1004014330

Escaping the Discounting Trap

Most industry experts agree that it’s too late to end the foodservice discounting wars. There are two basic trains of thought with fast feeders in today’s economy: keep discounting deeper and deeper, or merchandise away from discounted menu items.

Here’s what’s happening with the deeper discount strategy. Quizno’s initially discounted selected subs to $5, then developed the $4 Torpedo and just introduced the $3 Bullet. Some Quizno’s franchisees indicated that the $4 Torpedo represented as much as 50 percent of their menu mix and the Bullet has driven down the average ticket even further. Quizno’s is betting on higher customer counts to increase revenue. Subway is countering by testing $4 subs in some markets.

The question franchisees in every sector are asking themselves is: where does it end? By the same token, what would have happened to franchisees had corporate marketing chose not to discount? The outcome would likely have been a further erosion of profits and even more unit closures. Fast feeders as well as convenience store retailers have been forced into pricing decisions they would have never made in a stable economy.

According to a 2009 study conducted by Dollars & Consumer Sense, branded concepts may be devaluing themselves due to discounting. When consumers were asked how they perceive a brand lowering prices, 70 percent of consumers responded, “The brand is normally overpriced.”

What does this mean to c-store retailers? Here are a few suggestions to merchandise away from the discount trap and increase margins.

– If you are going to discount an item, never consistently do so. Offer the item as a monthly promotion and run a different promotion the next month. The trap the sub market walked itself into was offering the $5 sub, month after month, until it wasn’t a promotion anymore, but a customer expectation.

– Don’t forget your brand’s strengths. A sub concept should promote the concept’s strength which is freshness and nutrition. For example, one of Arby’s goals in 2009 is to present itself as a roast beef company and not as a discounter. The fast feeder feels that it built its brand by having the dominate brand in the roast beef category with few competitors.

– Develop new menu items from existing inventory. For example, a pizza concept can develop a sub (for example, Domino’s) and a breakfast sandwich can be created from the basic ingredients on hand for lunch. New products can be priced correctly to achieve strong margins.

– Merchandise value at a price that will drive margins. Move customers up to a higher ticket with bigger portions. Carl’s Jr has achieved this with its higher end burger ($6 in some markets). McDonald’s is using this pricing strategy by introducing the Angus Burger.

– When introducing new items, only introduce them one at a time and promote that item heavily. McDonald’s takes more than a year to develop a new menu item, extensively test markets the item and then finally introduces it. While no one in our industry has the logistical problems that McDonald’s has, the full process should be followed.

– Cultivate price increases by adding value to existing menu items. Burger King is testing condiment bars to add value for better pricing. Bacon, mushrooms, bleu cheese can be used to develop a burger for a higher ring.

– Develop new revenue streams but price them correctly from the start. Use that old adage “you can always lower the price.” Home replacement items and breakfast items are good examples.

– Don’t forget customers are willing to pay premium prices for healthy items. Taco Del Mar has launched a burrito made with marinated chicken, pinto beans, long-grain rice and pico de gallo.

– Don’t alter the main product offering but utilize your existing equipment and skills to develop new lines of products. KFC went to a grilled product that is really doing well. Its sales and customer counts have increased and the company is now in the healthy category.

– Focus on demographics. Most experts agree that the Hispanic market is a huge opportunity. Higher margin pricing can be introduced with new products. It is easier to design a new item and price it correctly.

These are just a few strategies, but powerful ones. The lesson to be learned is to avoid boxing yourself into the discounting war and if you have already done so focus on merchandising your way out of the trap.

This article was written for Convenience Store Decisions and can also be found here: http://www.csnews.com/csn/foodservice/article_display.jsp?vnu_content_id=1003999747

Dirks Associates has partnered with Atlas Scinergy to offer a range of COST- SAVING SERVICES called the “Gold Standard Savings Program.”

Altas Scinergy provides FREE cost-saving analysis to convenience stores across the United States.

“Atlas Scinergy saves our clients money without charging any upfront fees orretainers,” remarked Dean Dirks, President of Dirks Associates, a leader in the Convenience store consulting market.

Atlas Scinergy simply reviews the clients’ costs and negotiates with suppliers on client’s behalf. Dirks Associates emphasize lowering of food and labor costs.

With Atlas Scinergy’s Gold Standard Savings Program, COSTS will REDUCE in the following areas:

• Credit card processing
• Electricity
• Natural Gas
• Telecommunications
• Shipping

“Many store owners unknowingly and unnecessarily overspend in areas like credit card processing, energy, and telecommunications,” Dirks said.

Atlas Scinergy has relationships and leverage with suppliers that a small operator doesn’t have. Let the Gold Standard Savings Program work for you.

The Fine Line Between Paranoia and Reality

There is always a fine line between paranoia and reality, with the recent swine flu outbreak being a classic example.

Pork producers lost millions of dollars because people believed eating pork would cause swine flu. Even though that is not possible, you couldn’t convince the public of it. It was hard to decide whether the swine flu epidemic was as bad as it seemed — or a product of sensationalized cable TV.

During that time, I was scheduled to go to Texas to work on a project for Church’s Fried Chicken, with most of the locations within 30 miles of the Mexican border. I was confronted with the paranoia vs. reality syndrome. I was leaning toward canceling the trip and probably losing the client, until my wife did some research. Last year, more people in the world were killed by coconuts than swine flu.

I am not downplaying the horrible swine flu epidemic, just trying to put it into perspective. At the end of the day, I realized I was going to make my decision purely based on fear rather than logic.

How does fear affect the foodservice industry?

If people were willing to quit eating pork because of uneducated fear, then those same consumers likely also convinced themselves to stay away from convenience store foodservice and fast feeders that gave them any perception of potential swine flu risk.

My concern is the long-term effects the swine flu may have on our industry. Some health departments have been talking about making fast feeders dispense soda lids, bulk condiments and other food items behind the counter rather than in the dining area. As painful as it may be, it makes sense.

As consumers were being told the best way to avoid swine flu is to constantly wash their hands, some people went so far as to not shake hands to avoid the risk of grabbing someone’s unwashed hand. Given such cautions, concern about other people touching your soda lid is understandable.

While fast feeders are not thrilled with the prospect of moving products behind the service counter, they are weighing this inconvenience vs. the high cost of lawsuits for not taking proper action. And more important is the potential loss of business from the perception of a lack of food safety.

The c-store industry has significantly higher exposure to possible changes in health department codes. Grilled hot dogs, nachos, condiment bars, soda cups, soda lids, coffee cups/lids, bulk coffee creamers and open coffee pots, to name a few, may be at risk. If the health codes are changed, labor will have to be increased and foodservice profitably will be at risk.

Retailers should therefore approach foodservice with the possibility of new health department codes. While it may never happen, a contingency plan is a good idea.

– Develop an action plan should these health codes come to fruition.

– Make strategic decisions based on the possibility of new health codes. For example, opening a salad bar at this time would be a poor long-term decision.

– Determine which products are exposed to the public and what your solution will be.

– Review foodservice items that will not comply with possible food safety codes.

– Address presentation to avoid the paranoia vs. reality syndrome. Give customers a better perception of food safety. For example, coffee pump pots give the customer a better perception than coffee pots exposed to the air and vulnerable to human contamination.

– More than anything else, educate and push employees for better presentation. Go into any fast feeder and you will see employees wiping their face, touching their nose, coughing into the air. It goes on and on. It is bad enough these practices happen, but now people are watching.

I was in a big-name chain recently and asked an employee how she was doing. She said, “I am a little sick, but not contagious.” I thought to myself that she shouldn’t be working and surely shouldn’t be telling people she was sick. Unfortunately, the swine flu fear is not going away and an action plan is critical — not necessarily because of reality, but because of paranoia.

This article was written for Convenience Store Decisions and can also be found here: http://www.csnews.com/csn/foodservice/article_display.jsp?vnu_content_id=1003981318

The Value of Foodservice

Recently quoted in this article by Linda Lisanti and Mehgan Belanger

Given the depressed state of the economy, and little improvement expected in the coming months, it was no surprise that value and price were among the most spoken words during the Convenience Store News 2009 Foodservice Roundtable.

“There is incredible pressure to lower prices,” said Gary Wildman, category manager for Petro-Canada’s Neighbors division, who joined several other best-in-class convenience retailers including Kwik Trip Inc., Quick Chek Food Stores, Tedeschi Food Shops and Thorntons Inc. for the two-day event, held March 16-17, 2009, in New York.

Attendees agreed c-store retailers who focus on offering cash-strapped consumers quality food and beverages at value prices will find foodservice to be a resilient — and growing — category in these shaky economic times.

In a new C-store Foodservice Pulse Study, presented by CSNews Editor-in-Chief and roundtable moderator Don Longo, 61 percent of the c-store companies responding said their 2008 foodservice sales increased over the year before.

The study, conducted in early March and aimed at revealing preliminary 2008 data on c-stores’ foodservice results, also found 51 percent of respondents saw their foodservice category outperform all other in-store categories in sales growth last year, and 49 percent said foodservice sales for the first half of 2009 are projected to beat their previous year’s by a mean average of 4.9 percent.

The study, fielded over three days, recorded the responses of 71 convenience store retailers with some type of foodservice program. More than one-third of respondents said they had full-touch (made-to-order) programs; 34 percent described their foodservice as some touch (assembled on-site, thaw and serve, roller grill, etc.); and 29 percent had just no-touch programs (grab and go, prepackaged items for sale).

Approximately 26 percent of respondents said consumers were purchasing more for take-home consumption — representing a potential area of untapped opportunity for c-stores.

Retailers at the Foodservice Roundtable shared several ways they’re trying to present greater value to customers to drive up their foodservice sales and market share.

Kwik Trip and Petro-Canada reengineered menu items to be able to offer lower price points. Kwik Trip now offers a smaller, thin-crust variety of its private label Cheese Mountain Pizza for $5.99. Its original pizza retails for $9.99 to $10.99, said Paul Servais, foodservice zone leader for the La Crosse, Wis.-based chain of more than 350 convenience stores.

Similarly, beginning this month, Petro-Canada’s Neighbours will roll out Grillers, a takeoff of the chain’s signature panini sandwiches, but with reduced ingredient portions, with pricing at two for $6, compared to the signature panini sandwiches ranging in price from $4.99 to $6.29 each.

“We’re focused on engineering menu items to get more penny profit,” Wildman explained. “With Grillers, we still get the same ring, but we can offer value to our customers.”

Other retailers such as Wilson Farms prefer to maintain their strict product specifications, while remaining competitively priced on comparable menu items. “We have a saying, ‘You change product, you change customers,’” said Nick Gallegos, vice president of sales and marketing for Wilson Farms, a chain of 200-plus neighborhood food stores. “This [approach] could lead to lower foodservice margins, which requires increased emphasis on other higher-margin items to ‘enrich’ the mix.”

Yet another approach is to put forward promotions and deals around foodservice, just as Quick Chek Food Stores and Kwik Trip are doing.

Quick Chek, based in Whitehouse Station, N.J., is presently advertising bundle deals in one of its districts. One “Value Meal,” which sells best at lunch, includes a $2.99 six-inch sub, a 75-cent bag of chips and a 99-cent, 32-ounce fountain drink — bundled for $4.73.

“This promotes both value and quality to our customers,” said Jerry Hayes, regional director of operations for the chain of more than l00 stores. “We just bundled some of our everyday value items together to show the customers the total value.”

Kwik Trip, meanwhile, is having success with Dollar Days, a promotion it’s been running once a week since December. Every Wednesday, the company’s stores offer one foodservice item — be it a cheeseburger, rib sandwich or Tornado (there are 12 items rotated) — for $1 each. The everyday price of these items ranges from $1.19 to $1.99.

“Managers at nearby QSRs (quick-service restaurants) are coming in and asking our store managers, ‘what did you do yesterday?’ because they were empty,” Servais said.

As consumers trade down from fine dining to casual, casual dining to fast casual, fast casual to QSRs and so on, convenience store operators stand to benefit in the chain if they focus their foodservice offerings on perceived value rather than discounting, said foodservice consultant and guest presenter Dean Dirks, of Dirks & Associates LLC.

“I’ve never been a believer in discounting. I am a believer in value or the perception of value,” he explained. “C-stores can’t compete with QSRs on discounting.”

Dirks offered roundtable attendees these tips for making the most of the trade-down trend:

– Experiment with QSR market products since these companies spend millions of dollars in research and development, and test marketing before rolling out a new item;

– Focus attention on the “fringe markets” of breakfast, snacks and late night;

– Offer home-meal replacement solutions since this is a growing segment;

– Create low-calorie items and market them, in advance of a possible nationwide mandate requiring foodservice providers to display calorie counts for every item; and,

– With so many people on unemployment, use this time to upgrade to better employees and increase check averages by pushing existing employees to up-sell. Set attainable goals for associates, run contests, offer bonuses, and be sure to post the results.

Executing Fresh Safely
Convenience retailers are balancing the need to be perceived as providing fresh foods with also offering a foodservice selection that is profitable, appetizing and safe. It’s a balancing act that only the best in class are capable of doing.

Panelists agreed a made-to-order (MTO) foodservice program, where food is made on demand in front of customers, conveys freshness. Yet, they also said the dedication and labor required of such an operation can put the concept out of reach for many convenience store operators.

Wildman from Petro-Canada noted, “The best-in-class operators want to control foodservice themselves,” as opposed to the alternative, which is having foodservice category management and replenishment handled by a direct-store delivery driver.

Another option for foodservice operators is to use a commissary where foods are prepared, packaged and then delivered to the stores. This option allows c-stores to own and control the products; however, creating the logistics and volume required to be successful can be challenging. On top of this, pre-packaged food does not have the same perception of freshness as made-to-order food does, the attendees said.

It is difficult for a customer to define a product as fresh when the packaging contains the phrases “enjoy before” or “best by,” Wildman noted.

“Commissaries have a difficult time overcoming the fresh factor,” added Brian Matlock, director of foodservice for Rockland, Mass.-based Tedeschi Food Shops, whose convenience stores include full-service fresh deli counters.

Thorntons, which operates a commissary offering daily delivery of fresh goods to a group of stores near its base, knows firsthand the logistical prowess needed to supply fresh foods to stores. Logistics of delivering to far-flung locations is the main reason the company has not expanded its commissary to serve additional stores, said Melina Hall, senior foodservice category manager for Thorntons Inc., based in Louisville, Ky.

If a commissary approach isn’t feasible, yet another foodservice option is to create a portfolio of products supplied through a wholesaler. “Fresh is a misnomer,” said Wildman. “In our fresh-food oriented Neighbours format, we offer fresh, prepared-with-care foods, but the ingredients used are a combination of fresh and frozen.”

The cheese, deli meats and vegetables are fresh, while the rest of the ingredients come fully cooked frozen. The company offers MTO and fresh-to-go foods packaged, labeled and UPC-coded on site. MTO sandwich breads arrive frozen/fully baked and are then toasted or grilled when a guest orders a sandwich to maintain consistency and quality. (There’s nothing worse than a sandwich on soggy bread, the retailers agreed.)

Foodservice of any type requires dedication, roundtable attendees agreed.

“If you want to get into foodservice and be successful, you need to clearly understand that you must make a strategic, long-term, company financial and cultural commitment,” Matlock concluded. “C-store operators who try to get into foodservice without the proper vision, knowledge and support infrastructure hurt us all.”

This article can also be found here: http://www.csnews.com/csn/search/article_display.jsp?vnu_content_id=1003961426

Calorie Count Laws Provide Marketing Opportunities

For years, the convenience store industry has tried to get a foothold in the healthy segment. With good product, merchandising and marketing, the industry — myself included — thought that the healthy segment could be developed.

For the most part, however, retailers found out that while customers talk about wanting healthy products, they just didn’t purchase them — at least not from convenience stores.

Unfortunately, our industry still has to overcome the “gas station stigma” with foodservice customers. In stores I supervised, we had a hard time convincing our customers that buying milk at a c-store was safe. Most of the time, we had longer shelf dates because we had one door and turned the door so quickly. Customers just don’t see our industry as being able to deliver a healthy product.

I think there’s a new opportunity for retailers on the horizon. More than 30 states, cities and counties have laws in place that require restaurants to list calories for any menu item. Last month, the LEAN Act was introduced in Congress, which would require restaurants and grocery store chains that serve prepared foods and have 20 or more locations to disclose calories for each menu item. Smaller restaurant chains and independents would be exempt and would not face the expense of testing their menu items to produce such information.

Early experiences with fine dining restaurateurs in states that require calorie listings show that these upscale establishments have lost customers after listing the amount of calories for each item on their menus. Some restaurants have been forced to modify their menus and others have eliminated items after customers realized how many calories those dishes contained.

It only makes sense that the same results will follow at fast feeders. I live in a county that now requires calorie listing. I usually go to the same quick-service restaurant (QSR) for breakfast each morning, but when I discovered my breakfast burrito has 720 calories, I switched my breakfast choice to Subway.

It’s interesting that one company that could succeed with healthy food, Starbuck’s, has failed at foodservice for the most part so far. The struggling coffeehouse chain is gambling its foodservice future on menu items it introduced in February, such as a reduced-fat turkey bacon breakfast sandwich, lighter options featuring reduced-fat turkey bacon, cholesterol-free egg and reduced-fat aged white cheddar on a multi-grain english muffin. This item’s calorie content stacked up against a QSR’s breakfast sandwich creates a huge menu board merchandising and marketing opportunity. This along with other Starbuck’s food items will grow frequency and customer counts. I think consumers will eventually see Starbuck’s as a place they can go with confidence to eat something healthy for breakfast.

At the end of the day, c-store retailers have the opportunity to compete with fast feeders by developing lower-calorie items, and then merchandising and marketing them aggressively. This will be easier and more effective than competing with organic products, sushi and other experiments that many have tried.

This article was written for Convenience Store News and can also be found here: http://www.csnews.com/csn/news/article_display.jsp?vnu_content_id=1003959824

Opportunities for a Challenging Economy

Here is an outline of the “Opportunities for a Challenging Economy” speech I gave today at the Convenience Store News Food Service Roundtable.

1. OPPORTUNITIES FOR A CHALLENGING ECONOMY
2. ECONOMIC CRYSTAL BALL
   Recession- 18 months
   Loss of jobs may make the recession longer.
   6-10% inflation by 2011
   $4 a gallon gasoline in the next year, which will further reduce disposable income.
   Savings rate is up 6%, which helps the banks but not spending.
3. MARKET TRENDS
   Trading down
   Fine dining trading down to Red Robin and TGIF
   Red Robin- TGIF down to Subway and Qdoba.
   Qdoba, Subway down to McDonalds’ and BK
   Starbuck’s trade-down to McDonald’s espresso
   “Go without” – Starbucks, Jomba Juice, etc
   1/3 consumers-eating  out less than a year ago
   Meal replacement
   Fringe day parts-breakfast-snack-late night
4. C-STORE QUALLENGES
   Lower customer counts
   Increased price of cigarettes driving sales else ware
   $4 a gallon gasoline- more pay at the pump
   C-stores are the “face” of big oil. PR problem to overcome when gas rises.
   “Go without” mentality on impulse purchases
   Rising labor costs-Washington State $8.55,
    Oregon$8.40, Vermont $8.06, 5 states @$8.00
   Increasing energy costs
5. QSR – CHALLENGES
   Cannibalization with new units
   Discounting strategy, intense competition.
   Subway $5 sub
   McDonald’s dollar menu
   Burger King – dollar menu
   Wendy’s – 99 cents price point
   Quizno’s -$5 sub
   Taco Bell -79 cents, 89 cents and 99 cents.
   Sonic’s Dollar Menu
6. QSR – BIG FEAR
   ELASTIC PRICING
   QSRs backed into a corner with discount menus
   Consumers expect to pay $1 for a value burger.
   A $5 Subway sub is now an expectation.
   QSRs assumed add ons, which has not happened
   Subway is countering with $1 add ons- discounting $1.59 soda to $1
   Franchisees are battling the mother corporations to raise prices because of low margins
   Law suits to lower royalties to offset value menu
7. BREAKFAST
   25 % consumers eat breakfast away from home
   QSR Sector is aggressively getting involved:
   McDonald’s chix-biscuit breakfast sandwich
   McDonald’s McSkillet Burritos,
   Burger King’s Cheesy Bacon BK Wrapper
   Hardee’s –Ham/ Three Cheese Burrito.
   Jack n box
   Breakfast  isn’t as price point determined as it is perceived value driven
8. NON PEAK SNACKS – UP 196% IN QSR
   McDonald’s Snack Wraps
   Chicken McNuggets
   KFC popcorn chicken
   KFC crispy chicken strip
   Wendy’s Go Wraps,
   KEYS- PORTABILITY, SMALLER PORTIONS, EATABILITY IN A CAR.
   PRICE POINT  1.49-$1.99
9. HEALTHY – POSTING CALORIES HAS LEGS
   Technomic found that 86 percent of consumers were surprised by calorie counts listed on menus.
   82% – calorie disclosure is changing their order
   60% percent is affecting where they visit.
10. BENEFIT
    Taco Del Mar has launched a 320-calorie burrito
    Subway has 9 subs with 6 grams of fat or less
    LOSE
    Hardees country breakfast burrito – 780 calories
    Jack in the box breakfast taco- 720 calories
11. QSR OUT OF THE BOX
    Menu engineering- smaller portions, different containers, lower price points
    B K- testing premium items, ribs & thicker burgers
    Burger King is testing a self serve condiment concept similar to a salad bar
    Hardees’s, Thickburgers
    Domino’s is delivering  oven baked sandwiches
    Pizza Hut is delivering baked pasta dishes
    Quizno’s recently started to offer home delivery
    Subway has drive thrus back in R&D
12. UNEMPLOYMENT CREATES OPPORTUNIES
    INCREASING THE AVERAGE CHECK
    Show associate money w/bonus & contests
    Set goals that are attainable and measurable
    Post results. Competitive, peer pressure
    Make check average a criteria for a raise.
    Terminate employees that don’t show average check growth.
13. MARKETING
    Loyalty cards rather than discounting.
    Emphasize the draw of your brand, not the deal.
    Subway is an example of this by selling discount rather than healthy. No longer a niche QSR but a discounter .
    Avoid discounting
    Focus on VALUE rather than discounted pricing
    Merchandise and market VALUE
    Fringe marketing (add on sales)
    Breakfast, snack, and late night
    ALWAYS HAVE AN EXIT STRATEGY ON PROMOTIONS
14. OPERATIONS
    Food costs-
    Ideal cost of sales based on recipes at cost
    Sales mix will generate an ideal food cost.
    New ideal food cost each week based on sales mix
    Food cost budgets-  variance to cost of sales.
    Labor-
    Remote electronic labor tracking based on sales per/labor hour or units per hour to control labor.
    Phone/blackberry alerts for OT
15. COST SAVING
    Re visit flow to decrease labor
    Decreasing energy costs
    Smaller kitchens and smaller dining area spaces
    Denny’s reduced their footprint 25%
    Equipment -Flat griddles with heat recovery
    Burgerville is trying to design a building that would operate on wind-energy credits  and solar power.
    HUGE MARKETING TOOL
16. OPPORTUNITIES
    C-store food service can benefit in the trade down chain.
    Products focused on value rather than compete with discount pricing.
    “Fringe markets” Breakfast, Snacks, Late Night
    Home meal replacement-grow in this economy
    Trade down coffee growth.
    Create low calorie items and market them.
    Portable ,eatable,snack items
    Market “GREEN”
17. CONCLUSION
    Leverage unemployment to get better employees and increased check averages
    Experiment with QSR market products, they spend millions in R&D and test marketing.
    The trade down creates a huge opportunity. Subway is up 7% and McDonald’s  best 4th quarter in 12 months.
    While food service has a huge upside potential many of the QSR companies “pros” are struggling to drop money to the bottom line.