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CSD: Developing a Late Night Menu

July 22, 2009

By Howard Riell

Through a special arrangement, presented here for discussion is a summary of an article from Convenience Store Decisions magazine.

While late night has grown into an identifiable daypart on its own, too many retailers either haven't yet recognized it as such or simply don't have the traffic to warrant promoting it. But for those who do, the opportunities are real--and increasing.

Savvy food retailers "know there's money to be made by staying open late," said NPD analyst Bonnie Riggs. "The hours between 10 p.m. and 5 a.m. are turning into a lucrative daypart."

For years, NPD found, "convenience stores such as 7-Eleven have catered to the late-night customer by offering late operating hours or 24-hour service," Ms. Riggs said. "Now consumers have even more options, as an increasing number of quick-service chains expand their hours of operation by opening earlier or closing later."

Late-night customers are mostly young (males 18-49, females 18-34), and half of them are coming from home; another 25 percent are coming from work. More than 40 percent of the late-night business during NPD's study came between 10 p.m. and 11 p.m.

"The reason [late night] is growing simply is increased availability," Ms. Riggs said.

For the year ending March 2009, the trend has not been a pretty one for the restaurant industry. Between 9 p.m. and 4 a.m., NPD reported, visits are down two percent. At burger concepts they're down three percent. For c-stores, however, visits are up four percent. The industry currently holds a 20.9 percent share of the daypart, with about 368 million visits during these hours.

"C-stores have a smaller piece of the pie, but it's growing the most between 1 a.m. and 4 a.m.," Ms. Riggs said.

The most popular menu items purchased during the late-night period are pizza, burgers and French fries, followed by salty snacks, ice cream, chicken nuggets or strips, breaded chicken sandwiches, doughnuts, tacos and breakfast sandwiches, NPD found.

The top beverages are regular carbonated soft drinks, diet carbonated soft drinks and regular or decaffeinated coffee, followed by bottled water, noncarbonated soft drinks, specialty coffee, tap water, iced tea, juice and milk shakes.

Jerry Weiner, vice president of foodservice for Rutter's in Pennsylvania, believes the industry as a whole could do better from late afternoon through late night. "It has become a piece of the business that we generally, as a group, don't go after," he said. "There is not a lot of competition for good, fresh-baked food at that time of the night, so that puts you at the top of the list, and that's really what it's all about."

Discussion Questions: How can c-stores better take advantage of the opportunity in late night hours? How big an opportunity is it for retailers in the channel?

Developing a Late Night Menu - Convenience Store Decisions

Discussion Questions

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Comments:

Some late night spots are busy, some aren't. This is where local store marketing should come into play. If you get a late night crowd, change your retail space to accommodate them. If they are coming in for hot food at one location and cigarettes and gas at another, no sense in rolling out a campaign, especially one that will create waste because of shelf life. Independents and conglomerates need to scrutinize their late-night business before embarking on huge programs.

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Doron Levy, President, TheMortgageMachine.ca

C-stores are well positioned to take advantage of late night shoppers. First the majority of c-stores are open 24 hours. Second they already carry the majority of the items that the NPD research indicates these customers want.

The area the industry falls down is "fresh." Most c-stores do not continue to produce foods late into the evening (if they produce prepared on-site foods at all). Their rationale is simple--for most it simply is not economical. In some, if not most cases, it requires a second person with the skill sets and necessary certifications to do so. Trying to produce made-to-order foods with a single person who is also responsible for the rest of the store and the fueling operation is not practical.

The alternative is to have a selection of heat-and-eat foods to compliment all the other items people seek. There are programs that can provide many of the items on that basis. Will they be competitive in quality with what a QSR might offer? Probably not but many of the late night customers are coming to the c-store for items the QSRs don't carry. The question is, can the c-store create a more attractive bundle using drinks and other items as the driver and the meal component as the complement?

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Steve Montgomery, President, b2b Solutions, LLC

C-stores and restaurants can both start to address this problem by really digging into their transaction-level data. By filtering on different hours of the day (as well as different types of sites), food service companies can figure out what sells by daypart and what items late-night guests are most loyal to. That info is perfect for generating hypotheses to test--what if we expended the availability of certain items, what if some more difficult items weren't available late-night, what if we layer on media or grassroots promotion campaigns, etc. Through testing, leading c-stores and restaurants are finding the answers they seek.

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Jonathan Marek, Senior Vice President, Applied Predictive Technologies

I see a huge opportunity here for C-stores. See what's being bought during the late night hours on a local basis and then put out some special offers. If I'm working late with my buddies and someone says "Hey, the 7-Eleven has 2 for 1 specials on pizza slices tonight" then odds will increase that more than 1 person will show up. It shouldn't be difficult to identify the right products to promote.

Michael L. Howatt, Retail and Shopper Insights Consultant, Ascension Growth & Innovation Strategies

True to form, ever-innovative c-store merchants are finding new ways to serve new consumers. Developing an offering for late-night consumers sounds like a winning strategy. What will definitely help define that offering is deciphering the motivators behind store trips, and that's likely to differ according to region. This consumer's desire for prepared foods may be motivated by factors like late-night snacking, all-night studying, shift work, late dinner (working overtime) or partying. Regardless, uncovering those drivers will help determine what to offer, staffing, and where to reach these consumers with marketing messages.

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Tim Henderson, Independent Retail Consultant, Independent

This is not only an opportunity for C-stores, but also any store in a high-traffic, late-night area. I have even seen stores alter their pricing on the top 200 items between 10pm and 5am to reflect a higher, "convenience" pricing strategy. This is very easily done with electronic shelf labels.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

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