CSN Deep Dive Report Postgate

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Industrywide foodservice sales (including hot, cold and frozen dispensed beverages and prepared food) totaled $37.9 billion in 2018. The 2.4 percent increase fell below the previous year's 3.6 percent gain, and even further beneath the 6.6 percent and 7.1 percent gains of 2016 and 2015, respectively. Average sales per store rose 3 percent to $248,449.

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The C-store Foodservice Consumer

The Continuing Evolution of C-store Foodservice

The State of C-store Foodservice Sales

Total Merchandise & Foodservice Sales (in billions)

The prepared food segment led the foodservice category in both growth and actual dollar sales in 2018, with average sales per store increasing 5.4 percent to $172,967. Hot dispensed beverages are still the No. 2 moneymaker, at $47,957 in average sales per store in 2018, although this segment did decline by 3.4 percent. This indicates that despite coffee programs being a high-margin staple, c-store operators can do more to boost hot beverage purchases.

Foodservice now accounts for 16.5 percent of all in-store sales in the U.S. convenience channel, up from 16.38 percent a year ago. The category trails only cigarettes, which represented 28.5 percent of total in-store sales last year, dropping from 29.82 percent in 2017.

Looking at total industry foodservice sales over the past five years, the 2.4 percent growth seen in 2018 continued a slowdown from the 7.1 percent growth high that occurred in 2015. Margin percentage has remained steady, settling in the 43-44 percent range for all five years.

The most important factors for shoppers when purchasing prepared food at convenience stores are price and food quality, cited by 62 percent and 49 percent, respectively. Taste (cited by 42 percent), freshness (38 percent) and convenience/on-the-go (34 percent) round out the top five considerations. Additionally, women are more likely to rate sanitation as being highly important compared to men (32 percent vs. 22 percent).

The prepared food segment is a significant opportunity for c-store operators to grow basket size, as a whopping 94 percent of convenience store shoppers include at least one additional item with their prepared food purchase. Nearly one-third add on a fountain drink.

J&J Snack Foods Corp. (NASDAQ: JJSF) is a leader and innovator in the snack food industry, providing innovative, niche and affordable branded snack foods and beverages to foodservice and retail supermarket outlets. Manufactured and distributed nationwide, our principal products include SUPERPRETZEL, the #1 soft pretzel brand in the world, as well as internationally known ICEE and SLUSH PUPPIE frozen beverages, LUIGI’S Real Italian Ice, MINUTE MAID* frozen ices, WHOLE FRUIT sorbet and frozen fruit bars, SOUR PATCH KIDS** Flavored Ice Pops, Tio Pepe’s & CALIFORNIA CHURROS, and THE FUNNEL CAKE FACTORY funnel cakes and several bakery brands within DADDY RAY’S, COUNTRY HOME BAKERS and HILL & VALLEY. With nearly twenty manufacturing facilities, and more than $1 billion in annual revenue, J&J Snack Foods Corp. has continued to see steady growth as a company, reaching record sales for 47 consecutive years. The company consistently seeks out opportunities to expand its unique niche market product offering while bringing smiles to families worldwide. For more information, please visit http://www.jjsnack.com.

Produced By

Five-Year Trend: Foodservice

Most Important Factors When Purchasing Prepared Foods at Convenience Stores

Ratings for Convenience Store Shopped Most Often

Items Purchased With Prepared Foods

$229.4

1.6%

$191.5

$37.9

2.4%

1.4%

• Total • Merchandise • Foodservice

$225.9

$188.9

$37.0

2.1%

1.8%

3.6%

$225.9

$188.9

$37.0

2.1%

1.8%

3.6%

$185.5

$35.7

3.8%

6.6%

$221.2

2016

2017

2018

FOODSERVICE AS A PERCENT OF SALES

3.19%

11.15%

2018

2017

2018

2017

11.49%

Prepared food

(prepared on-site or off-site)

3.37%

2018

2017

1.29%

1.33%

2018

2017

0.53%

Frozen dispensed beverages

Cold dispensed beverages

Foodservice subtotal 2018 16.50% 2017 16.38%

TOTAL IN-STORE 2018 100.00% 2017 100.00%

Category Analysis: Foodservice

Hover over circles to compare previous years

Base: 1,029 U.S. c-store shoppers aged 18+ who purchased prepared foods in the past month Source: Convenience Store News 2019 Realities of the Aisle Study; EIQ Research Solutions

For most CPG product categories, shoppers say they primarily frequent grocery and mass retail outlets. However, the convenience channel holds the advantage when it comes to hot, cold and frozen dispensed beverages. Roughly a third of shoppers say if they buy a dispensed beverage, they do so exclusively at a convenience store.

Channels Where Shoppers Purchase in Typical Month

Highest MonthlyPurchase Incidence

Lowest MonthlyPurchase Incidence

Prepared food

Hot dispensed beverages

Cold/frozen dispensed beverages

Base: 1,499 U.S. shoppers aged 18+ who shop convenience stores at least once a month Source: Convenience Store News 2019 Realities of the Aisle Study; EIQ Research Solutions

Good

fair/poor

Good Speed of shopping trip 21% Friendliness of employees 25% Cleanliness of store 27% Organization of store 29% Helpfulness of employees 27% Variety of products offered 31% Loyalty program 30% Quality of prepared food 30% Fun to shop 30% Price of products 36%

Fair Speed of shopping trip 3% Friendliness of employees 11% Cleanliness of store 10% Organization of store 8% Helpfulness of employees 15% Variety of products offered 13% Loyalty program 19% Quality of prepared food 21% Fun to shop 30% Price of products 23%

Thinking about the convenience store they visit most often, nearly half of shoppers rate their store’s quality of prepared food as excellent/very good. Thirty percent give a rating of good, while 21 percent say their store’s quality of prepared food is only fair/poor. Hover over the Stars to reveal the topics

Excellent

Base: 1,499 U.S. shoppers aged 18+ who shop convenience stores at least once a month Source: Convenience Store News 2019 Realities of the Aisle Study; EIQ Research Solutions

Casual Dining

Fast Casual

Grocery/Deli

Fast Food

Prepared Food Comparison: Convenience vs. Other Channels

When comparing the convenience channel to other channels, 49 percent of shoppers perceive fast casual as being better than c-stores, and 53 percent say the same about casual dining. At the same time, 15 percent of shoppers describe prepared foods at casual-dining outlets as being worse than convenience food. Twelve percent of shoppers think both fast casual and fast food are worse than c-stores, and 7 percent think grocery/deli foods are worse.

Cold fountain/dispensed soda/drink

Hover over icons to reveal Percentages

32%

29%

Coffee/tea/other hot beverages

28%

Bottled water

27%

Bottled/canned soda

25%

Candy/gum

25%

Packaged salty snack

16%

Cigarettes

15%

Other bottled beverage

15%

Packaged sweet snack

15%

Milk

11%

Grocery item

11%

Ice Cream

Beer/malt beverage

Fresh product (fruits or vegetables)

Nothing else, only purchased prepared food

Newspaper or magazine

Base: 1,029 U.S. c-store shoppers aged 18+ who purchased prepared foods in the past month Source: Convenience Store News 2019 Realities of the Aisle Study; EIQ Research Solutions

nouria Store Location: Lewiston, Maine Highlights: The fresh food offering at Nouria Energy Corp.'s new retail brand, nouria, is designed around the principle of being a one-stop shopping experience where consumers can get both grab-and-go items and the essentials for making fresh take-home meals. While the store caters to on-the-go shoppers with its grab-and-go selection and a drive-thru, the nouria Café also invites them to stop and relax with full-service hot coffee, espresso drinks and iced coffee.

Hy-Vee Fast & Fresh Store Location: Davenport, Iowa and elsewhere Highlights: Grocer and c-store operator Hy-Vee Inc. combined its expertise in both channels to create Hy-Vee Fast & Fresh. The hybrid concept offers gas, grab-and-go items and other convenience products, but also serves as a small-scale grocery store that targets busy consumers in need of a more convenient grocery and meal experience while on the go. The retailer's Mealtime Kits line offers fresh ingredients and simple instructions, allowing customers to prepare fresh meals on their own timeline without dealing with the planning and prep work. For a quicker hot meal, Mia Pizza is a wood-fired pizza station that lets customers pick their own toppings and get a fresh pie in six minutes.

FriendShip Food Stores Store Location: Elyria, Ohio Highlights: In July 2018, the chain opened its first FriendShip Kitchen location, its largest store yet at 5,500 square feet. The goal of the prototype design is consistency. By standardizing its offer, the retailer said it can now provide a reliable experience that customers can count on and return to regularly. The FriendShip Kitchen store includes extra space to accommodate different workflow and preparation processes, as well as new investments in equipment. The food-focused store prepares fresh items on-site, including its featured Famous Chicken, which is prepared in small batches and offers selections for all dayparts.

Alltown Fresh

FriendShip Food Stores

Hy-Vee Fast & Fresh

nouria

Pilot Express

Shell Select

Alltown Fresh Store Location: Plymouth, Mass. Highlights: Alltown Fresh is a new convenience store concept from Global Partners LP that’s committed to "fresh convenience." Making its debut in January 2019, Alltown Fresh is designed to be a rush-free environment where neighbors can hang out with one another and enjoy a delicious coffee, snack or meal. The store offers healthy, fresh food choices; made-to-order meals including organic, natural, vegan, vegetarian, gluten-free and locally sourced alternatives; and classic are that reinvents what it means to shop and eat in a convenience store.

Pilot Express Store Location: Steubenville, Ohio and elsewhere Highlights: Pilot Express, the newest store banner of Pilot Flying J, serves as a way for the chain to enter areas where a major travel center doesn't fit, and spotlights the company's commitment to food and beverage innovation. Chief Merchant Brian Ferguson describes Pilot Express as "food first," offering a combination of homestyle meals, grab-and-go or made-to-order sandwiches and salads, weekly limited-time offers and a bean-to-cup coffee experience.

Shell Select Store Location: Louisville, Ky. Highlights: Shell Select, the first Shell-branded convenience store in the U.S., debuted in Louisville specifically due to the city's vibrant local culture and reputation for unique food and beverage offers. The store design and layout are intended to highlight a strong food and beverage presentation and direct customers' focus to the consumable offerings. The combination of modern architecture and upscale outdoor seating area, which is screened in by greenery and covered by an awning, signals to passersby that this is a more upscale destination for convenience food and drinks. Interior materials and lighting, as well as an open ceiling and layout, also help to create a warm, welcoming ambiance.

2018

2017

2016

Hot dispensed beverages

Excellent Speed of shopping trip 76% Friendliness of employees 64% Cleanliness of store 63% Organization of store 63% Helpfulness of employees 58% Variety of products offered 56% Loyalty program 52% Quality of prepared food 49% Fun to shop 40% Price of products 40%

2018

Click Company Name to view photo collage