Foodservice retail's next frontier

In a foodservice world that now finds restaurants testing drone deliveries, supermarkets developing meal kits and gas stations going gastronomic, a question arises: Who owns convenience today? The answer was long found in the fast-food drive-thru lane, but the borders between foodservice channels are blurring.

Convenience stores are homing in on a shift in consumer perception that has traditionally held the view that their locations can’t serve high-quality, fresh-tasting food. But today, 67% of millennials say c-stores are just as capable as restaurants in providing fresh food and beverages, according to Technomic’s Consumer Brand Metrics, powered by Ignite. And retailers that are listening and putting food first are reaping rewards; per Technomic’s 2016 industrywide sales data, c-stores saw sales grow by 3.9% in 2016, matching the pace of fast-food sales and outpacing growth at casual-dining full-serves.

That’s a big swing in a surprising direction, and a vote of confidence from a coveted consumer base. It’s also a desire for convenience that noncommercial operators can capitalize on in a big way—especially when used as a piece of their overall stories.

At the University of Massachusetts at Amherst, the campus’s 30-plus foodservice locations—including a half-dozen retail outlets—all accept UMass’ meal plans, Dining Dollars and UCard debit card, as well as cash and credit cards. This plethora of options is important to students, 82% to 83% of whom remain on a university meal plan for their entire undergraduate careers, says Ken Toong, executive director of auxiliary enterprises.

“Students want to use meal plans anyplace, anywhere, anytime. They want convenience,” he says.

That means providing options positioned around quality—from grass-fed beef to free-range chicken and sustainable seafood, for example—in a way that emphasizes ultra-fast service in a more upscale setting and experience. At Harvest Market, the campus’s newest retail concept, a hot bar with Indian, Ethiopian and traditional American dishes shares space with prepackaged takeaway foods, including grab-and-go salads, sandwiches, all-natural and organic snacks, made-to-order smoothies and a yogurt bar that caters to on-the-run customers.

Authentic, globally inspired snacks are a key focus at retail grab-and-go locations; genuine Asian snacks in particular are an ongoing trend on campus. “Why would you walk off campus for an ordinary snack when you can get something like that [right here]?” Toong says.

While Harvest’s retail unit provides a convenience-oriented foodservice option, the $5.75–$7.25 price range for a grab-and-go sandwich and $7.75 price point for a prepackaged salad likely puts the customer’s average spend above that of a typical convenience store. Nevertheless, price hasn’t been seen as a barrier for students; Toong says Harvest sees $4 million in annual sales. “It’s a myth that this younger generation is frugal. They’re just careful,” says Van Sullivan, Amherst’s director of retail. “If you can present them with a value proposition centered on quality, freshness and authenticity, they’re willing to spend to experience that. They don’t want to throw junk calories down their throat—they’ll pay for better-for-you indulgence.”

Traditional retail locations and c-stores still require humans to run cash registers, supervise customers and answer questions—and noncommercial operators certainly aren’t flush with manpower. Enter the next frontier of micromarkets: tech-forward, self-service c-store/vending hybrids. These cashless, mini c-stores come with numerous benefits to operators across categories looking to capture on-the-go dining dollars.

Sodexo has rolled out its On the Spot micromarket module to a wide variety of spaces. Targeting clinics, hospitals, corporate centers and campus locations, the market is promoted as a “swipe, shop, go” option for customers and a 24/7 automated destination for fresh food. Patrons swipe a credit or debit card to unlock the doors of the vending equipment. Once the doors are opened, customers can choose whatever they want, and smart technology automatically reads what is removed. Once the door is closed, the card is charged and the customer is on their way. 

One core advantage that companies are seeing with unstaffed micromarkets is how the message of ingredient transparency can be communicated compared to traditional vending. “I’m a big supporter of the micromarket format,” says Bernadette Ventura-Murphy, senior manager of food and conference services, corporate real estate, for Texas-based Health Care Services Corporation, licensee of Blue Cross Blue Shield in five states.

BCBS has found the micromarkets to be a more desirable—and profitable—choice over regular vending machines in several regions. “It’s a great alternative to vending machines, because customers can take the product in hand, and it gives the customer more control in terms of the ingredients they choose.”

Three micromarket models have been developed for BCBS’ range of needs. First, a basic cashless model replaces conventional vending and offers standard snacks and beverages. A second midrange cashless model is suitable for smaller, remote office sites serving between 200 and 500 people, and functions as a vehicle for fresh foods such as sandwiches and salads that are sourced from a commissary.

Finally, there’s what Ventura-Murphy described as a “true hybrid” micromarket, offering snacks and grab-and-go items along with freshly made soups, salads, sandwiches and hot entrees prepared in a compact on-site kitchen that measures approximately 300 square feet. This model has been installed in two corporate locations in Helena, Mont., and Abilene, Texas, and has received a big thumbs-up from employees, Ventura-Murphy says.

Whether the micromarket is developed as more of a vending solution or as a mini store layout, these types of retail venues are flexible enough to fit into just about any footprint. And in the workplace, human resource departments’ wellness programs can often fund employee accounts (or at least a portion of the account) that workers can use to pay for healthier, fresher food as part of a wellness mandate aimed at better-for-you eating.

Chris Moravec, general manager of convenience retail at Brigham Young University, cites startup cost, customer satisfaction and expanded selection as just a few of the reasons such micromarkets have become a central facet of the Provo, Utah, school’s vending operations.

Student acceptance of the format at BYU was swift, if not surprising. “Our first micromarket was in a residence hall complex with about 2,000 residents,” Moravec says. “This was a new facility with no previous vending operation. We had more than 500 students attend the open house—far exceeding our wildest expectations. Daily we have about 200 students shop at the market. In our end-of-school-year survey, out of the 25% of the students who responded, 95% had shopped at the market at least once and more than half shopped weekly.”

While some micromarket kiosks allow for payment by credit or debit card, BYU’s locations only accept dining services’ Cougar Cash card payment system. Regular inventory spot checks, secure card access and security cameras keep theft at less than 1%, Moravec says.