FOOD SERVICE MAKES GAINS IN C-STORE PROFITS

ROBERT VOSBURGH

ALEXANDRIA, Va. -- Fresh-meals options like lunchtime heros and hot breakfast sandwiches helped the food-service category in convenience stores increase overall store sales, according to the latest annual poll by the National Association of Convenience Stores.

In 1998, total food-service sales topped $10.4 billion, a 19.5% increase from the previous year, when sales amounted to $8.5 billion. Put another way, food-service sales per store averaged $107,700, up 18.1% from the year before.

In terms of gross-margin dollars, the top in-store categories shifted slightly, with food service taking the lead at $5.73 billion, followed by cigarettes at $3.74 billion, according to the 1999 State of the Industry report.

Overall, the C-store industry enjoyed "record-breaking" sales and profits during 1998. Total sales jumped 5%, reaching a record $164 billion, the survey found.

The food-service category in C-stores includes food prepared on site, hot and cold dispensed beverages, packaged sandwiches and "other," which might include franchise kiosks or outsourced venues.

The poll noted that hot dispensed beverages were "the largest component of food-service sales in the convenience-store industry, accounting for 25.3% of all food-service sales."

This was followed by sales of cold dispensed beverages, at 22.7%. Packaged sandwiches -- which might be considered the closest direct competitor to supermarket deli offerings -- comprised 6.1% of C-store food-service sales.

However, this small number could be misleading, in that it might not reflect the variety of sourcing options available to C-store operators, the survey noted.

"In recent years, there was a push by convenience-store operators to implement or test out a food-service program. However, due to the many different contractual arrangements that are available for a food-service program, particularly with a branded program, it is possible that the survey is missing some part of the actual sales that are occurring in convenience-store venues," it stated.

Likewise, "the high labor costs associated with a food-service program may be outweighing the very attractive gross margins that are [found] with food-service offerings," the survey pointed out.