Convenience Stores Capturing Fast Food's Breakfast Market

Fast-food chains are witnessing a shift of their breakfast patrons towards convenience stores.

Over the past three months ending in July, breakfast visits to fast-food outlets slightly increased by 1%, while food-centric convenience stores experienced a remarkable 9% rise, as reported by the market analysis company Circana.

"In the long term, convenience stores have been making strides, especially in breakfast offerings," David Portalatin from Circana highlighted to CNBC. This trend is notably pushed by what they identify as 'food-centric convenience stores.'

The Battle for Breakfast Customers Intensifies

Despite efforts by fast-food giants to draw consumers away with convenient breakfast options, 87% of morning meals are from home sources, creating potential for anyone aiming to capture more of the breakfast business.

Prior to the pandemic, convenience stores were starting to emerge as significant competitors for breakfast diners. Chains such as Wawa and other regional powerhouses expanded their food offerings, using strategies similar to those of fast-food brands.

Pandemic and Shifting Work Habits

During lockdowns and the advent of hybrid work arrangements, convenience stores temporarily lost ground. However, they are now regaining momentum in attracting breakfast customers according to Portalatin.

Circana distinguishes places like Sheetz and Buc-ee's as part of a unique segment within convenience stores, which could see more players joining this trend. Inspired by profits from its Japanese business, 7-Eleven is focusing more on ready-to-eat options in the U.S. Meanwhile, chain stores like RaceTrac are also expanding, suggesting shifts in strategy for further growth.

Fast Food Bows to Budget Consciousness

The last few years have seen an overall decline in morning traffic to fast-food outlets, with each quarter marking a drop. The most recent data from Revenue Management Solutions indicates an 8.7% fall in the second quarter alone.

Chris Kempczinski, McDonald's CEO, pointed out that breakfast is especially vulnerable as financially-strapped consumers often find it easiest to skip breakfast out or prepare it at home instead.

Response to Falling Breakfast Traffic

McDonald's has seen a decline in morning visit percentages over the years but has attempted to revive interest with promotions targeted at breakfast offerings.

Fast-food brands are now taking cues from convenience stores by refining their menu and ordering systems to attract morning buyers.

C-Stores Gain Ground with Fresh Offerings

Prepared foods have become critical for convenience stores, especially as other popular products like tobacco and lotteries face decline. The food service sector within these stores achieved $121 billion in sales by 2024.

C-stores are effectively capitalizing on the rhythm of consumers' daily commutes to promote breakfast and dinner options.

Consumer perception is shifting, with a growing number recognizing c-stores as viable alternatives to traditional fast-food outlets.

For instance, Wawa has increased its customer visits significantly while many fast-food entities have seen a decline.

Diversity in C-Store Offerings

With a wide variety of breakfast options, c-stores are appealing to consumers looking for more than just the classics offered by fast-food chains, offering everything from energy drinks to healthy snacks like yogurt and granola bars.

The quality of the food is often the deciding factor for customers, providing c-stores with an edge over their competition.

Unique Culinary Highlights

Specialty items such as Casey's General Store's breakfast pizza have achieved iconic status, much like cult favorites from fast-food menus.