Americans’ appetite for fresh foods drives consolidation in convenience stores

In the US, consumer spending at convenience stores (c-stores) that offer fresh foods and beverages is increasing. These enhanced c-stores, often housed in upgraded and larger locations with dine-in options, now account for 58% of all spending at c-stores, up from 48% five years ago. Data indicates that c-stores offering a broader range of fresh food options have experienced higher traffic growth compared to traditional c-stores and even quick-service restaurants (QSRs).

The ongoing transition of c-stores from retail to foodservice operations is a strategic move led by larger players. These c-store chains hold a competitive advantage, allowing them to capitalize on more complex operations and marketing activities due to their access to capital, foodservice expertise, and potential economies of scale. This competitive edge is evident in recent expansion plans and acquisitions, suggesting that more consolidation is on the horizon. Larger chains are likely to further engage in geographical expansion, store retrofits, and M&A activity.

In the US, c-stores are closely associated with fueling needs, with approximately 80% of c-stores also selling gas. These stores account for an estimated 80% of all gas purchased in the country. This report will focus on the majority of c-stores that are adjacent to gas stations, excluding most street-facing stores and those located in malls and airports.

The rise of electric vehicles (EVs) and more fuel-efficient engines adds to the transformational moment the c-store industry is experiencing. This shift represents both a threat and an opportunity: Reduced gas-driven traffic requires additional incentives for consumers to stop, while the long EV battery-charging periods provide an opportunity for drivers to enjoy a coffee or a meal.

The impacts will be felt not only by independent players and smaller c-store chains but also by restaurants – primarily QSR and fast casual – and certain packaged food manufacturers that may find themselves competing with fresh offerings and private label in this significant retail channel.