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- RESEARCH & AWARDS
Store counts are up—approaching 150,000 U.S. units at the end of 2012, per NACS. And store formats are changing, often skewing in favor of larger footprints
and clean, modern redesigns. Advantageously placed kiosks beckon attention. Total SKUs continue to climb. Store-branded foodservice options have multiplied, seeking competition with QSRs and other restaurant segments in terms of innovation and quality.
Today’s convenience stores are a force to be reckoned with in an ever-competitive retail landscape.
According to IRI, when compared to drug stores and supermarkets, the only channel that posted dollar and sales growth during 2012 was convenience.
NACS and Nielsen report that single-store C-store operators grew by 0.7 percent last year, while companies with 500-plus stores grew by 8.9 percent.
Traffic is up. The NPD Group cites a 2 percent gain in C-store consumer traffic—and an increase of 6 percent in dollar sales—during the first quarter of 2013 compared to the first quarter of 2012. Visit frequency grew quarter-over-quarter to 6.1 visits in a 30-day period for the average conventional C-store shopper. Close to half the U.S. population reportedly visits a C-store at least once each month.
And today, convenience is much more than gas and cigarettes.
Dialing current C-store traffic down even further, Mathew Mandeltort, manager of R&C at Technomic, noted 36 percent of consumers say they specifically purchase food or beverages at C-stores at least once a month, and about half of Millennials (49 percent) purchase prepared foods from C-stores at least once a month.
Private label products accounted for just 2.4 percent of C-store sales during the 52-week period ending August 4, 2012, per Nielsen—a figure that has climbed from 1.5 percent in 2008, but has held steady for the last three years.
NACS and IRI note that foodservice—a portion of which is store-branded—accounts for about 17 percent of C-store sales.
Mintel valued C-store foodservice at $25.5 billion in 2012, predicting 28 percent growth by 2017.
But in the midst of this flurry of activity, private label is relatively quiet.
Private label products accounted for just 2.4 percent of C-store sales during the 52-week period ending August 4, 2012, per Nielsen—a figure that has climbed from 1.5 percent in 2008, but has held steady for the last three years. To put this into perspective, private label has accounted for anywhere from 18.4 to 19.1 percent of supermarket sales in each of the past three years, and 15.1 to 15.6 percent of drug store sales. Other channels tracked by Nielsen have ranged from about 14.1 to 15.2 percent.
Clearly, despite the healthy level of activity in the C-store channel, private label still has considerable room for growth.
Consumer preferences for certain C-store items have tended to skew toward brands vs. private label. Over the course of the research that went into the recent Datassential Keynote Report, “Opportunities in C-store Foodservice,” the firm asked consumers their preferences for either name-brand items or private label items by product category. “Consumers said they prefer brand-name items when it came to coffee, desserts, and soups,” said Brian Darr, managing director at Datassential. “Store brands do best with baked goods, hot breakfast items, and cold prepared items (sandwiches, salads, etc.).”
Darr noted that recent research has shown regular C-store shoppers are interested in a wider variety of beverage options, like smoothies and milkshakes. “On the food side, they want items that they can see being prepared fresh, like sandwiches and wraps,” he said. “They want the fresh/made-for-you experience they can get at a traditional QSR or fast-casual restaurant. We’re definitely seeing more stores offering a fresh/made-for-you options. The new Quick Trip stores really show off their new fresh, made-for-you options. Sheetz and Wawa continue to set the bar high for the made-for-you experience at C-stores.”
Darr went on to suggest that C-stores need to offer more healthier/better-for-you products if they want to attract a wider audience that includes more women, more health-conscious males, and Gen X and Baby Boomer customers.
7-Eleven has gone on record stating that they’re aspiring to grow their sale of fresh foods from the current level, 10 percent of sales, to 20 percent by 2015 in Canadian and U.S. stores. To prime the pump, they’ve added many new private label fresh items developed by 7-Eleven corporate culinary and food science staff. Think Cilantro Lime Chicken Flatbread and Apple Walnut Chicken Salad. Some of the new items are calorie-controlled and snack-sized. Regionally popular hot menu items are also sometimes carried, such as Cuban sandwiches in Miami stores.
However, C-store preferences and health-and-wellness don’t always see eye-to-eye. “In general, healthier/better-for-you, or diet, items sell at 30% of the volume that the full-calorie option sells at,” said Patrick Neuman, director of private label at Mapco Express. “Our long-term goal is to get into more of these items, but it is not the immediate need based on consumer demand.”
As is often the case in supermarkets and warehouse club stores, sampling—often in tandem with value pricing—can be a key pathway to encouraging new items. “Consumers told us the way to get them to try more foodservice items is to sample them and to offer more combo deals/special beverage and food item pricing deals,” said Darr. “If C-stores want to capture more of the away-from-home dollars, they need to market and operate more like their QSR and fast-casual competitors.”
While diversified snacking options throughout the day remains a leading edge, the A.M. stop can prove pivotal to C-store operators. “Breakfast is our largest opportunity area,” said Neuman. “We are expanding the options in this area, and lunch, as well.”
The goal is to eliminate the desire for on-the-go consumers to make more than one stop during their busy morning commute. “More consumers purchase breakfast at C-stores now than they did in the past,” said Mandeltort. “Almost one in four consumers (22 percent) occasionally have breakfast from a C-store during the week, vs. 12 percent in 2009. And 13 percent purchase breakfast from C-stores on weekends, vs. 7 percent in 2009.”
Mandeltort noted that this makes perfect sense once you realize that breakfast entrées have expanded considerably on C-store menus in recent years. “Today, the leading C-stores menu 152 total breakfast entrées, up 31 percent from 116 in the first half of 2011,” he said.
“New product launches and innovation in convenience continue to focus on creating reasons for customers to walk away from the pump and into the store to discover what’s inside,” said Christopher Durham, president & chief strategist, My Private Brand/Folio28. “Consequently, retailers across the country have introduced some exciting products over the last few years.” He shared some of his recent favorites:
• Single-origin fair trade coffee from Sheetz
• Bottled, iced green teas from Wawa
• 7-Select Hot Chocolate ice cream from 7-Eleven
• Nuclear Energy Drink from Kum & Go
Snacks are often on the mind of C-store shoppers, and snacking research conducted earlier this year by The NPD Group found that 28 million people in the United States eat a grab-and-go snack—accounting for 12 percent of all snack-oriented convenience foods—every day. Consumers often eat these snacks, the firm found, within an hour of purchase, and about half of the time while traveling in a car. Further, the research showed that these snacks are purchased five times more often at C-stores than grocery or discount stores. Note that these types of snacks are typically eaten between meals, not to replace a meal.
NPD also found that this “on-the-go” snacking behavior typically occurs in the morning or midday. Young adults, ages 18 to 24—a prime demographic for convenience—are the most inclined toward the instant gratification these types of snacks offer. Sweet snacks get the nod twice as often as salty, and 61 percent of these snacks also feature a beverage.
While going ethnic can be a gamble in some markets, building that ethnic note into a snack might help some consumers bridge the gap. Some C-store items these days have a decidedly ethnic accent—particularly Latin American.
7-Eleven has combined snack-sizing with Latin flair in a handful of items of late. In late 2012, the chain launched its Mini Tacos. Then earlier this year, Breakfast Empanada Bites, filled with eggs, cheese, bacon, smoked ham, and sausage, were released. The most-recent item to join this mix is the roller-grilled Chicken Chipotle Go-Go Taquitos, made with chicken and chipotle chiles, along with Monterey Jack, asaderoand mozzarella cheeses.
Of course, tortillas have gained such widespread acceptance that they’re no longer considered ethnic, and other foreign-originated sandwich carriers are following suit. As in other areas of foodservice, the pretzel roll—German Laugenbrötchen—is making inroads at C-stores, as seen on the Breakfast Pretzel Melt and various lunch sandwiches at Sheetz. And while the European-crafted waffle has been stateside in earnest since the 1960s, more waffle “breads” have just started to surface in QSR; look for them to factor into the next wave of sandwich carriers at C-stores, Mandeltort suggested.
C-store traffic is significantly impacted by external advertising, signage, and area traffic. However, C-store retailers cannot ignore their online presence—a prime opportunity for marketing store brands.
Wawa does a particularly solid job of putting its private labels front-and-center on the company website. Naturally, dairy is a central focus for Wawa (which entered the diary business in 1902), and its private label ice cream and milk are prominently featured on the site. Other promotions on the site over the summer included its line of bottled iced teas, as well as a significant presence for its “Hoagiefest,” with value-priced deals for the chain’s 10-inch hot and cold hoagie sandwiches.
In a move designed to pull competition from the likes of Little Caesars and Domino’s, more C-stores have added store-branded pizza to its foodservice lineup, often displayed under heat lamps, sometimes with an option for customers to order full pizza pies with custom toppings, baked to-order in the back of the house. More new-format 7-Eleven units now carry pizza in its expanded range of hot foods, with 14-inch pies cooked on-site by staff in combination ovens in 90 seconds; slices are available in a hot food display case.
Casey’s General Stores took this idea one step further and added pizza delivery to select stores in 2011. Now they’re trialing a standalone pizza-focused concept—plus self-service frozen yogurt bar, breadsticks, and wings—dubbed Casey’s Pizza Express, to capitalize on this foodservice aspect of their store branding.
Another perennially hot C-store item is energy drinks. Around half of all Millennials (current ages 21–36) regularly frequent C-stores. So it should be no surprise that C-store sales of energy drinks increased 56 percent from 2008 to 2012, per IRI.
Further, Mintel reports that consumers purchase 70 percent of all energy drinks from C-stores. And while national brands continue to dominate the energy drink market, the firm notes that private labels continue to make advances in the energy shot segment. Concentrated, liquid water enhancers—in the vein of the successful MiO from Kraft Foods—could be the next step for private label in the energy market.
The new, larger-format, updated-design stores common to the C-store channel these days provide fresh merchandising opportunities. Private label products find themselves promoted at the new larger-format Mapco Express prototype stores via astute highlighting in beverage coolers, as well as on endcaps. Recent private label launches by the chain include iced lattes, chips, beef jerky, and extra-strength energy shots, with proceeds of the latter item, according to Neuman, supporting local charity.
“Our strategy is to develop ‘tried-and-true’ items in our brand first, where we can agree on minimums with our suppliers,” said Neuman. “For leading-edge/risky projects, we will test in a supplier’s packer label prior to development in our own brand.”
These C-stores—particularly newer, larger-format concepts, like the new Mapco Express “mega store” prototype—are eager to capture more away-from-home dollars that might typically go to supermarkets or QSRs. But success in that regard will depend on maintaining just the right balance.
“I believe that in order to meet this need, there needs to be a combination of ready-to-eat fresh items, as well as take-home, or microwave in-store, items available in private label for our customers,” said Neuman. “This is what we are developing.”
Placing renewed emphasis on private label through item development and subsequent in-store merchandising could very well catalyze continued growth in the already-strong C-store channel.
“Retailers who aggressively manage their product mix, retail and private brands, may discover national brands play a diminishing role in their assortments,” said Durham. “The future may reveal a convenience store that looks more like Trader Joe’s, the new Walgreens concept stores, or even Dean & Deluca with gas. This could radically change the role of private brands in convenience.”