FrontEndBy David Bishop, Contributing Editor

Keys to Growing FoodserviceProfitably The CSD/Balvor Foodservice Survey found that top-quartile

operators place a greater emphasis on creating value andexecuting a winning program.

WHY ARE SOME RETAILERS prospering whenothers are struggling? What are the keys togrowing the business-even during tougheconomic times? How are successful retailers

approaching the business differently than others?These are all questions that could be applicable to

any part of the retail business.However,the questions areextremelysalient to foodservice programs as many retailersare intenselyfocused on leveraging categories in thisareato drive competitive differentiation and profitable growth.

The recent CSD/Balvor Foodservice Survey revealedthat top-quartile retailers, ranked and categorized byaverage foodservice sales per store month, are morelikelyfocusing on improving in-storepractices, enhancingshopper value and increasing off-sitecommunications.

These top-line findings help to reveal some of theanswers. However, it's clear that the differences gobeyond what strategies they're pursuing to how they'reexecuted in-store.

Here are three lessons learned that you can apply togrowing foodservice more profitably.

LESSON 1: DON'T LOSETHAT SHOPPERWhen consumer spendinq is constrained like it is cur-

rently, retailers grow mainly by stealing market share.Therefore,don't give your current customers any reasonto spend their money elsewhere.

CHART 1: IMPROVING IN-STORE PRACTICES(Index = Responding 'Extremely Important" 10Achieving Objectives)

source: CSD/Boivor Foodserv!ce Survey, May 20 10

More top-quartile retailers are working to protecttheir base business than the rest. And, although they'reonly slightly more likely than the mid-quartile retailersto believe that improving in-store practices is extremelyimportant to achieving their business objectives, theyare 27% more likely to believe it when compared to bot-tom-quartile retailers. (See chart 1)

Having acceptable code dates on packaged foods,fresh coffee available, and well-maintained display casesare examples of basic operational practices that you canmonitor and manage every day. Beyond that, it's impor-tant to have clearly communicated policies that empowerthe storeteam to win back a shopper when a breakdownoccurs-as it will occasionally.

Consider the Sheetz coffee guarantee, "If we don'thave fresh coffee ready for you, we'll brew it and buy it."Thisexplicit customer promise provides clear direction tostaff as to how they should respond in that specific situ-ation. The guarantee also conveys a powerful sense ofhospitality that's prevalent with most food service opera-tors,but not all convenience stores.

A key factor why successful retailers are building thebusiness is because they're not losing their current cus-tomers to the competition.

LESSON 2: HOLD ONTO YOUR PENNIESMany retailers have learned that reducing retail prices,

CHART ?: INTRODUCING SMALLER COFFEE CUP SIZE(Index = Responding 'Yes' 10Adding in PoslYeor)

source: CSD/Boivor Foodserv!ce Survey, May 2010

CSDecisions.26 Convenience Store Decisions I October 201 0

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like on hot coffee, may help maintain competitivenessand even increase units sold, but it can also reduceprofitsmore than expected.

Price negotiation and better procurement are twoways to hold onto more penny profits while anotherinvolvesadjusting the product assortment.

Interestingly,only 35%of the retailers indicate that theyadded a smaller sizecup to the hot coffee offering withinthe past year. Top-quartile retailerson the other hand are29%more likelythan the average to have employed thistactic, and even much more as compared to the bottomquartile. (Seechart 2)

Thissubtle shift in assortment is an important tacticalmove to maintaining a strong opening price point whileprotecting the penny profits. This is especially true todayas more convenience retailers have migrated to a largercup assortment, making many retailers more vulnerableto foodservice operators.

Now if you're a retailerwho believes that sizedoes mat-ter,realizethat many coffee houses,doughnut shops andQSRsoffer cup sizesas small as 10 ounces or 12ounces.If this surprisesyou, it is likelydue to differences betweenhow convenience retailers and food service operatorstypically market their offering.

LESSON 3: COMPEL CONSUMERS TO SHOP YOUR STOREMotivating current customers to spend more or attract-

ing new ones to shop your stores is vital to growing thebusiness.Unfortunately,if you're experiencing above-aver-age sales declines, you're probably focused mainly onimproving current programs and operations.

This may explain why top-quartile retailers are 74%more likelyto believe that. it'sextremely important to investmore in off-sitecommunications in order to achieve theirobjectives today. (Seechart 3)

In other words, top-quartile retailers are focusing on

CHART 3: INVESTING MORE IN OFF-SITE COMMUNICATIONS(Index = Respondirg "Extremely Important' ta Achieving Objectives)

source: CSD/Balvor Foodservice Survey, May 20 10

building the business while bottom-quartiles are"simplytrying to save theirs.

While social media and other electronic marketingmethods are still in their infancy, top-quartile retailersappear to have a jump on integrating communicationacross these mediums. In fact, top-quartile retailers arethree times more likely to reach consumers using a com-bination of these methods versus the bottom quartile.(Seechart 4)

Although reaching more consumers is important, pro-viding them with a compelling reason to visit iseven morecritical. Limited-time-only deals, whether for a specificproduct or time period, are effective tactics to leverage.

PUTTING IT INTO PERSPECTIVETogrow foodservice profitably you need to do many

things right every day. Top-quartile retailers excel at thebasics and have built a solid foundation from which toexpand.

Retailers aspiring to become top-quartile perform-ers need to prioritize where they focus bosed on thecurrent state of their business.Imitating top-quartile retail-ers is no guarantee for success or creating competitivedifferentiation.

Theanswers to our questions are often far simpler thanwe realize. In foodservice, it often revolvesaround thingslikehaving a consistent offering,good service,value andgreat people.

Retailers interested in gaining additional insightsand perspectives on this topic can view Part 1 of CSO'sFoodservice Webcast Series,which is available free on-demand at www.csdecisions.com.

David Bishop specializes in convenience retail and is the man-aging partner at Balvor llC, a sales and marketing firm locatedin Barrington, III. He can be reached at davidbishop@balvor.com.

CHART 4: PREVALENCE OFWEB SITE, SOCIAL MEDIA, &TEXTING(% of Retailers Using All Three)

source: CSD/Balvor Foodservice Survey, Moy 20 10

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