By Kathleen Furore

When Amazon decides to delve into a new category, it signals that category is ripe with opportunity. It also is a sign the category probably is primed for change.

“Any time Amazon looks at what might be a new opportunity it will disrupt the marketplace,” offers Jim Boylan, Director Special Accounts at Berks Packing Company, a Reading, Pa.-based meat processor that counts major c-stores among its clients. “When they set their sights on a new opportunity, it tends to change the playing field considerably, whether that be retail or convenience.”

That is just what’s happening in the c-store marketplace with Amazon’s recently announced plan to launch

Amazon Go, an 1,800-square-foot retail store in Seattle currently open to Amazon employees and set for its public debut in early 2017.

According to Amazon, their new store concept “is conveniently compact so busy customers can get in and out fast.” It offers staples including bread, milk, meats and artisan cheese; ready-to-eat breakfast, lunch, dinner, and snack options made fresh by on-site chefs and local kitchens and bakeries; and chef-designed Amazon Meal Kits “with all the ingredients you need to make a meal for two in about 30 minutes.”

The kicker: Customers can come in, grab items and walk out without going through a register as long as they have an Amazon account, a supported smartphone, and the free Amazon Go app.

“Four years ago we asked ourselves: ‘What if we could create a shopping experience with no lines and no checkout? Could we push the boundaries of computer vision and machine learning to create a store where customers could simply take what they want and go?’” information from Amazon’s website explains. “Our answer to those questions is Amazon Go and Just Walk Out Shopping.”

No one, of course, knows how Amazon’s tech-driven entry into c-stores will impact the overall convenience marketplace.

Jim Prevor, a respected food and grocery analyst, considers Amazon’s c-store entry “as more a market research effort than a plan for a major roll out,” according to an October story in USA Today. The article (which questioned whether what Amazon is planning “would fit into the American conception of a convenience store at all”) noted that ready-to-eat items account for about 20 percent of convenience store sales, a category not previously in Amazon’s purview.

“There is a trend toward more all-natural ingredients and toward greater food transparency—those are the overriding buzz words we’re hearing. But each c-store will need to make the decision as to what those terms mean—it isn’t a one-size-fits-all proposition,” Boylan says. “What may work for one customer may not work for another. So you have to take a look at how each customer views the category. How do they view these trends? What do those initiatives mean to them? It has to be unique to each customer.”

“There is a trend toward more all-natural ingredients and toward greater food
transparency."

– Jim Boylan, Director Special Accounts at Berks Packing Company

Foodservice is one area becoming vital to success in the c-store sector—and it is an area meat and cheese vendors are in a unique position to capitalize on with offerings like grab-and-go sandwiches, as well as ingredients for made-to-order meals.

“With the c-store market in transition, foodservice has become increasingly important,” according to “Navigating Foodservice Opportunities in C-Stores,” a presentation made during the July 2015 session of the International Foodservice Manufacturers Association’s (IFMA’s ) Foodservice 2020 Strategic Issues Series (SIS). “A forecasted decline in U.S. gas consumption paired with a decline in cigarette sales leave foodservice the top category for in-store gross profit dollars within c-stores.”

Information from Technomic, Inc. echoes that assertion.

The convenience channel is “evolving from a fragmented segment to a more focused, centralized industry seeking new routes to growth” and is “seeking to adopt a new business model—foodservice,” Darren Tristano, president of Technomic, Inc., stressed in his presentation titled “Prospering in Foodservice” at the National Association of Convenience Stores (NACS) Global Forum in November 2016.

That evolution is evidenced by the fact that

80 percent of operators expect their overall foodservice sales will increase over the next two years—43 percent in made-to-order sales and

61 percent in grab-and-go sales, Technomic

data shows.

That focus on foodservice makes sense, since it delivers higher gross margins than does in-store merchandise—57 percent vs. 27 percent, Tristano noted.

The Foodservice Component

TREND WATCH

What is clear is that Amazon sees promise in the category. Overall, that is a potentially positive sign for meat and cheese vendors because it signals there is profit to be made in convenience retailing. But there is one caveat: Vendors and the c-stores they serve must make a concerted effort to understand and then tap current trends.

2016 Technomic Inc., NACS Global Forum study

How to Compete

Because c-stores face what IFMA calls “heavy competition” from QSRs, fast casual restaurants, drug stores, supermarket foodservice outlets and mass merchandisers, they must work hard and smart to compete in the sector.

Manufacturers, experts say, can play a pivotal role.

“It’s important for processors beginning work with convenience stores to remember that foodservice is a relatively or entirely new offering for many of these operators,” information from the IFMA conference stressed. “Supply chain, food costs, and store-level execution are operationally challenging, and c-store foodservice profits barely touch those of traditional QSRs. C-stores must battle the negative perception associated with their segment’s foodservice capabilities.”

To grow in the foodservice arena, c-stores will need innovative, easy-to-execute products, space- and labor-saving equipment solutions, meaningful merchandising and promotion, and a priority on food safety—all executed with an eye towards supporting the c-store operator’s ability to enhance and evolve offerings, compete effectively, mine growth categories, Tritano said at the NACS forum.

Meat vendors like Berks, as well as cheese vendors, can partner with c-stores to help them pursue those kinds of growth initiatives.

“Stores are trying to get a share of this category and they might not view their c-store as a low-cost alternative,” Boylan says. “Some are trying to be more like fast causal restaurants, some are trying to be more upscale—it all has to be tailored to how each company sees itself.”

For Boylan, that means working with Berks’ customers—one-on-one—to find out how they view their individual businesses and ultimately to create products that help those stores meet their shoppers’ needs.

He compares that relationship to the one Berks has with Weber.

“Weber is the type of company that is always at the forefront of emerging technologies,” Boylan concludes. “Just as our customers look to us, we also look to Weber to help us meet challenges and create solutions for our mutual customers.”

New Administration, New Rules?

As the new year approaches, there are many as-yet-unanswered questions about what the incoming administration means for the food and beverage industry—something Jim Boylan, vice president of marketing for Berks Packing in Reading, Pa., discussed during a mid-December interview with Modern Deli Mobile.

“There is a new administration coming in and there will be a different role with respect to USDA guidelines than what is currently out there,” Boylan said. “Manufacturers are taking a wait and see approach, wondering ‘What is that going to mean to me? What will it mean to our individual customers?’ Nobody is sure what things will look like, but it is definitely going look different than it does now…what that means nobody knows!”

A Look at WAWA

During his presentation “The Leading C-Store Chain Perspective” during the International Foodservice Manufacturers Association (IFMA)’s July 2015 session of its Foodservice 2020 Strategic Issues Series (SIS), Mike Sherlock, vice president of Fresh Food and Beverage at Wawa, outlined several trends that will be important to new product development at Wawa. Among those most pertinent to meat and cheese vendors:

Clean it up. Foodservice operators are seeing a push toward minimally processed foods. These changes will result in a cosmic shift in the supply chain.

Tried and true vs. new products. There are two broad classes of foodservice operators— those who focus on tried and true menus executed at a very high level, and those with high volumes of new products or limited time offers. Wawa falls into the second category.

Introducing new offers without adding complexity. A major challenge is bringing newness to offers without adding complexity. This is an area where Wawa needs help from vendor partners.

Healthy eating. There are three different segments. The first is comprised of operators that offer some healthy products but it’s not a defined goal; the second purposely develops healthy products and offers both healthy and indulgent foods; and the third group focuses on healthy foods exclusively. Wawa is striving for a balanced approach between healthy and indulgent.

Translating the trend at the right time. Fine dining trends are usually four to five years ahead of c-store and QSR menus. Wawa is benchmarking and getting ahead of emerging flavor trends. Strong quality assurance teams at the store level and in the supplier network are essential.

—Excerpted from the Executive Summary of “The Leading C-Store Chain Perspective”; © International Foodservice Manufacturers Association (IFMA)