The Changing Landscape of the Breakfast Day-Part

September 28, 2016

Brought to you by CSP and Prairie City Bakery

The competition for foodservice dollars continues to intensify as bakery-cafes, quick-service restaurants (QSRs) and convenience stores (c-stores) battle it out for business.

In fact, bakery-cafes saw a 6.7% growth in 2015, while QSRs—marked by McDonald’s launching all-day breakfast—saw a 5.4% year-over-year sales increase for the fourth quarter of 2015, according to research from Bloomberg.

Despite those growing formats, c-stores have seemingly prevailed as they have grabbed more market share for prepared foods and snacks compared to the industry as a whole. According to The NPD Group, the number of fast-food purchases made at retail outlets per customer from March through June 2015 is more than six visits higher than those made to QSRs in an average four-week period.

Further, c-stores are becoming a favored place for millennials to grab a meal, according to NPD’s study “Eating Patterns in America.” They stop at c-stores 11.1% of the time, which is almost twice as often as they go to fast-casual restaurants (6.6%). Traffic for c-stores in general is up 3%, which indicates their food has improved, NPD has reported.

And according to NPD, c-stores hold their highest shares in the coffee, breakfast food and snack categories which has greatly threatened QSRs. Breakfast has been a huge driver of growth and traffic in the foodservice channel recently as more people eat their morning meal away from home.

In fact, the breakfast daypart for c-stores has continued to grow at an increasing rate, with a projected 6.7% sales increase nearing $30 billion since 2012, according to Packaged Facts. And despite the fact that 9 out of 10 c-stores already offer breakfast, 43% still see it as a strong growth potential, as noted in the 2016 CSP Foodservice Handbook.

The Value Equation 
So why have c-store foodservice sales continued to increase during breakfast daypart?

One-third of consumers increased their away-from-home breakfast purchases in 2015, according to a recent Technomic survey detailed in CSP’s 2016 Foodservice Handbook. Convenience still remains the No. 1 factor, however, 53% of surveyed consumers simply state that they are on-the-go more often. That said, quality, variety and price equal greater value in the eyes of consumers, and younger consumers especially, when it comes to breakfast items at c-stores.

Despite the fact that breakfast continues to be the most skipped meal of the day, breakfast has been a bright spot in the c-store industry in recent years. So why might people visit c-stores for breakfast versus other formats like QSRs and bakery-cafes? Consumers’ increasingly fast-paced lifestyles as well as growing interest in a wider variety of morning fare offered at nontraditional times are both fueling the trend, Technomic reported.

C-stores don’t always get credit for the quality of their food. But when asked what attribute consumers value the most from these retailers’ foodservice offerings, for 90.5% of millennials, taste and flavor of the food nevertheless rise to the top, according to Technomic. This was followed by the food quality (89.5%), the location (88.7%), and the ability to provide good value at lower prices (88.4%).

Tips for Boosting Breakfast Sales

Armed with these consumer insights on breakfast decision and consumption, there are a variety of steps retailers can take to boost their sales of breakfast items, both during the morning daypart and even later in the day.

Offer Variety 
Because we know consumers want choices, operators should consider offering customization and variety to their product offering. Some operators have already begun doing this buy allowing customers to customize their coffee beverage with different flavors and additives, as well as create made-to-order breakfast sandwiches. And when it comes to variety, c-stores have noticed that the bakery case is a great place to expand selection in the breakfast daypart.

In fact, roughly 22.6% of foodservice sales at c-stores come from the bakery case. These sales are followed only closely by a made-to-order food section. Sales from other stations, including the roller grill (20%), refrigerated grab-n-go section (19.3%), self-serve stations (13.3%) and name-brand restaurants inside the c-store (7.1%) all lag behind the bakery case, likely influenced by the strength of the morning daypart.

And at c-stores specifically, doughnuts continue to have the most menu incidence, followed by muffins, pastries and bagels/English muffins, according to Technomic, so retailers should evaluate trends and flavor profiles to ensure that their bakery offering caters to their customers’ needs.

Cater to the Younger Generations 
Age has something to do with these preferences, too. More than half (55%) of consumers under 35 years of age purchase prepared foods for breakfast at c-stores, a nearly 10-point increase over the last 5 years, according to the CSP Foodservice Handbook. Seventy-four percent of Gen Z consumers, broadly defined as those born between 1993 and 2010, say they visit a c-store at least once a week or more. They like the convenience of hand-held items such as baked goods, according to Technomic. Just under half (48%) prefer doughnuts above all else, followed by 44% who enjoy desserts at breakfast in the form of snack-type cakes and cookies. Breakfast sandwiches, surprisingly, come after baked goods, at 42%.

Play Up the Combo Meal 

To play to the value and convenience that consumers seek, consider bundling, which seems to be the ticket to more sales, particularly among younger consumers. According to Technomic, more than half (57%) of consumers ages 18 to 24 years old say that breakfast combo meals, often featuring a coffee beverage, are important offers at different foodservice outlets and impact their decision to visit that shop or restaurant. Combo meals appeal most to the value-minded and those with see fuel-as-food sensibilities. As c-stores have upgraded their coffee programs, they should offer gourmet pastries to compete with the bakery-cafes and QSRs with similar premium offerings.

Sell Breakfast Round the Clock 
And, to continue breakfast sales throughout the day, c-store retailers should consider extending the hours breakfast is served well into the morning or even later in the day.  Keeping the bakery case and roller grills refreshed by cleaning and restocking can be a huge win. After all, we know more consumers are always on the go, and according to Technomic, 54% said they also enjoy eating breakfast food at nontraditional times, up from 48% in 2013.

Breakfast is has evolved into a highly profitable daypart for bakery-cafes, QSRs, and c-stores alike. With their convenient locations and wide array of products available at affordable prices, c-stores have the opportunity to become an everyday breakfast destination.


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