he foodservice industry is no stranger to feeling the effects of economic downturns or recessions. The COVID-19 pandemic brought an entirely new dynamic with concerns from government officials, lockdowns, and quarantine intended to slow the spread of the virus. This, unfortunately, resulted in tens of thousands of restaurants, c-stores, and other foodservice businesses closing their doors. According to the National Restaurant Association, foodservice sales have fallen by $255 billion in the year following the start of the pandemic.
The c-store industry has seen its own set of challenges. While the historical negative perception of c-store food products has improved in recent years, the pandemic has changed the types of products and the way that consumers make c-store purchases. This has forced businesses to rethink the way they do business and has created a flood of new approaches and innovations.
Prior to the pandemic, the c-store industry was viewed as one of the greatest opportunities for rapid growth. When the pandemic struck, many workers began working from home or significantly altered their daily routines. Since c-stores are designed around the convenience of the customer and fast visits, traffic from the commuting workforces slowed. That coupled with the increase of at-home delivery services from most restaurants and major grocery chains, the demand for c-store products fell.
A 2021 study by Convenience Store News found that one of the biggest impacts on c-store sales was the purchase of prepared food products. In 2020, about 80 percent of customers purchased prepared food. A year later, this number has fallen to 52 percent. Most of this is due to consumer fear of consuming food items that have been prepared by someone else or food that could have come in contact with the general public. For those who continued to purchase prepared food products, their purchase frequency decreased from 5 times per month to only 2.3 times per month. Of all the prepared food products, single meal, grab-and-go items saw the largest decrease.
Prepared foods weren’t the only type of product impacted. Many beverages also saw a decline in sales. Beverages that were dispensed saw the biggest impact. Cold dispensed beverages such as fountain drinks saw a decrease of nearly 26 percent and hot dispensed beverages such as coffee fell by nearly 31 percent. Packaged beverages fared better with products like bottled water, alcoholic beverages, and packaged sodas that saw only a slight decline or no change at all.
One thing to note is that not every region or demographic changed its purchasing habits during the pandemic. Some groups and areas were impacted more than others. For example, nearly two-thirds of millennials continued purchasing prepared food through the pandemic and made the highest number of monthly purchases (4.7 on average). From a gender perspective, men across all generations typically made more c-store purchases than women (on average, men made 3 purchases per month vs. 2.3 for women).
Geographically, areas of the country like the Northeast performed better where 62 percent of consumers continued purchasing products from c-stores. This is a stark contrast to areas like the South where less than half of the population provided local c-stores with business.
The c-store business has been forced to evolve in order to mitigate consumer concerns and changes in behavior due to the pandemic. While businesses serving different regions or demographics had to adapt to their local market, there are some common themes and strategies that have emerged.
“The industry was never made to stop for more than a day or two. The expenses are just too high. So just as you see creativity in restaurant menus and décor, we have now gotten to see the creativity manifest in ways we never dreamed.” ~Mat Schuster, chef and owner of Canela Bistro & Wine Bar
As the economy begins to reopen, conditions are expected to improve for c-stores. However, there is still caution with recent increases in cases, less than optimal vaccination rates, and new variants emerging each week. Despite this, there are several key figures that indicate that we are moving on a positive trajectory.
First, people are starting to return to work. The US Department of Labor confirmed that nearly 75 percent of all new jobs being added to the economy in 2021 are in the foodservice and drink subsector. This is a positive sign that things are starting to return to normal. One remaining challenge is the labor shortage due to employees who are refusing or unable to return to work. According to Time Magazine, employment in food and drink establishments is still 12 percent below pre-pandemic levels. This is forcing some businesses to operate on reduced staff or modified business hours.
Sales are another important metric to watch. The National Restaurant Association is expecting to see a 10.2 percent increase in foodservice sales in 2021. While this is a great start, this is still not enough to make up for the 19.2 percent of pandemic losses (2020 compared to the prior year). On a positive note, if this trend continues, a full recovery is expected by 2022.
One of the leading economic indicators may actually come outside of the foodservice industry. Bruce Grindy, a chief economist with the National Restaurant Association, stated that he expects the foodservice business to recover, but trail behind other types of businesses. C-store operators should pay attention to other sectors which could help predict what the future holds for the foodservice industry as the overall economy returns to normal.