Featured Products / Retailer of the Year

King of Convenience

April 16, 2010
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7-Eleven, PL Buyer's 2010 Retailer of the Year, is adapting quite well to the many recent changes in the convenience store channel. Alongside the national brands, the retailer offers a wide variety of private label choices that appeal to more value-conscious - but still quality-hungry - consumers. 



When it comes to convenience stores, the reality of retailing always has been simple: Consumers would buy almost any product needed to slake a case of the late-night munchies, even if they had to lay out a little more dough than they would in a traditional supermarket.

However, today’s recession-weary consumers are holding back on unnecessary spending and looking for value. This situation is forcing major changes in the c-store channel.

But 7-Eleven, the world’s oldest and largest c-store chain, is adapting quite well. Alongside the national brands, the retailer offers a wide variety of private label choices that appeal to more value-conscious - but still quality-hungry - consumers. It’s because of this excellent private brand strategy that the editors of PL Buyer are proud to name the Dallas-based company as our 2010 Retailer of the Year.

True, 7-Eleven might not have the store size or product selection of a Kroger or a Walmart. But the retailer is a powerhouse in its own right, with many Americans - especially consumers between the ages of 16 and 44 (7-Eleven’s target demographic) - relying daily on its convenient offerings and services.

In fact, nearly six million people stop by a 7-Eleven store each day in the United States and Canada, the retailer reports on its Web site, and approximately 25 percent of the U.S. population lives within one mile of a 7-Eleven store.

And of all U.S. retailers, 7-Eleven sells the largest amount of cold beer, cold single-serve bottled water, fresh-grilled hot dogs and single-serve chips, the Web site notes. This stellar sales performance has given the chain some prime private label opportunities.



Where Loyalty Lies

7-Eleven certainly is no stranger to the private label game - its portfolio long has contained some of the most iconic brands in convenience retail (such as Slurpee frozen beverages, Big Gulp fountain soft drinks and Big Bite quarter-pound all-beef hot dogs). And that portfolio keeps expanding. Over the last couple of years, the retailer has added an impressive variety of private label packaged products - both on the food and non-food sides.

But even though the retailer boasts a glowing resumé of successful proprietary brands, it is careful not to downplay the national brands. Tom Gerrity, senior product director for private label/store brands, believes national brands and private labels must coexist on 7-Eleven’s shelves to attract and satisfy the needs of all forms of clientele.

“Doritos is a strong brand for Millennial consumers,” he emphasizes. “They want Doritos; they want Mountain Dew. But there’s a value customer who also wants or is willing to try 7-Select private label chips and soda.”

Gerrity has played a very large role in overseeing private brand development across all categories in the store. In fact, his work in developing private label packaged goods while supervising 7-Eleven’s snack, candy and grocery business was so critical that last November, he was given the newly created title of senior product director for private label/store brands.

“I’ve always been a proponent of trying to create a store brand for 7-Eleven,” Gerrity says.

Gerrity says he first began dipping his toe in the private label waters about five years ago, when he was promoted to product director for non-food categories. He started out by introducing private label products such as paper goods, batteries and stationery supplies. After moving over to the packaged food categories, Gerrity kicked things up a notch - in late 2008, he introduced the 7-Select brand, which boasts packaged food items such as cookies, candy, nuts, potato and corn chips, beef jerky and more.

“I guess a couple years ago is when we really got serious about it,” he notes. “When we realized where the consumer trends were heading and the need to offer value, we wanted   to create a point of difference for 7-Eleven versus other convenience stores.”

“Serious” is an appropriate descriptor; one needs only to look at some of 7-Eleven’s proprietary launches over the past year to understand how passionate the retailer is about its own brands. Notable debuts include:
  • Hot food menu items that include a four-cheese and pepperoni pizza (sold whole or by the slice), all-white-meat chicken tenders, three varieties of chicken wings (Barbecue, Spicy Breaded Wing Zings and Asian-style Dragon Wings), hash-brown potatoes and quesadillas containing breakfast sausage, egg and cheese. According to 7-Eleven, the menu items were introduced in October 2009 at approximately 115 stores in the Dallas/Fort Worth area. The program now is in more than 1,600 stores across the country, with more ramping up every week.

  • A line of 15 packaged bakery items under the 7-Select brand, including snack cakes and pies, mini-donuts, honey buns, iced Danishes and more. Introduced in approximately 5,700 stores last November, the line was preferred three-to-one over the national brands in blind taste tests, the retailer said.

  • Yosemite Road Chardonnay and Cabernet Sauvignon wines, created in partnership with The Wine Group, San Francisco. Gerrity says that in the course of one day last November, the wines were unveiled at roughly 18,000 7-Eleven stores in North America and Japan. This introduction is in addition to the successful 2008 launch of popular-priced Sonoma Crest and Thousand Oaks wines in 4,200 U.S. stores.

According to Gerrity, more products soon will be making their debut. This year, 7-Eleven plans to increase its private label packaged product SKU count to 300 - up from the 265 products the retailer reported having at the end of 2009. And by the end of May, Gerrity says 7-Eleven will launch about 120 store brand SKUs exclusively in the retailer’s 500 Canadian stores and with its licensee in Mexico (which operates 1,200 stores).

Gerrity is proud of how well 7-Eleven’s store brands - especially the 7-Select products - are performing. He notes that some locations currently sell as much as $400 worth of private label packaged goods per day, and the strong performance is expected to continue.

“In five years, I think it will grow to about 500 SKUs, about 20 to 25 percent of our assortment, and about $500 [in sales] per store day,” Gerrity predicts.

Gerrity adds that while it is common for private label packaged goods to make up 3 percent of the average c-store’s sales, such products actually make up a whopping 8 percent of 7-Eleven’s sales (excluding categories lacking private label opportunities, such as newspapers, magazines and lottery tickets).

“And I’m just talking about the center-of-the-store categories,” Gerrity emphasizes. “If you add all the fresh-food products, bakery [and] proprietary beverages today, about 24 percent of our sales are private label.”



An Impressive Feat

A private label penetration as high as 7-Eleven’s is impressive in the c-store channel, especially since retailers don’t have the deep pockets the national brands have when it comes to marketing.

“Quite frankly, we have a very limited marketing budget, and so we have to rely on in-store merchandising,” Gerrity says. “So for us, especially during [a product] launch, we feature front end caps with side wings of private label products, as well as floor display shippers.”

Gerrity notes that the retailer also displays side snacks such as chips on low-profile racks in front of fresh-food cases and roller grills. Compare-and-save signs also are beneficial in getting brand-loyal customers to make the switch to private label. In addition, products such as chips, cookies, crackers and nuts are pre-priced to better communicate their value versus the national brand.

And in categories with little brand loyalty, Gerrity plans to get rid of the national brands altogether.

“We think some items will be 100 percent private label because of customer acceptance,” he said.

7-Eleven also promotes its own brands at the grassroots level through community involvement. Gerrity points out that 7-Eleven often partners with Dallas charity events such as walks held by the Susan G. Komen for the Cure foundation.

“We provided about 3,000 [tubes of] nuts for the Kids Day at the zoo,” Gerrity adds, “and we’re handing out 2,000 bags of chips during the St. Patrick’s Day parade.”

Even with a limited marketing budget, 7-Eleven still manages to get pretty creative with its promotions.

For example, leading up to the Dec. 25, 2009, release of Warner Bros. Pictures’ “Sherlock Holmes,” the characters from the film - Sherlock Holmes and Dr. Watson (played by Robert Downey Jr. and Jude Law, respectively) - appeared in 7-Eleven stores on everything from point-of-purchase signage to window banners to promote both the movie and 7-Eleven’s proprietary products.

“Who would’ve thought that you could promote taquitos with Sherlock Holmes?” says Margaret Chabris, 7-Eleven’s public relations director. “I think our FreshWorks agency was very creative with the artwork, tying it in with [phrases such as] ‘Get a clue’ and ‘It’s no mystery’.”

The chain also markets itself in the social media realm. Gerrity says Twitter is very useful when it comes to learning what 7-Eleven fans think the retailer is doing right - and what it could be doing better. In fact, some of the retailer’s customers get very open and honest on Twitter.

“A really funny one is a young lady [who] said, ‘Hey, I just bought some 7-Select toilet paper at 7-Eleven - it’s quilted and soft. I’ll be back in five minutes and tell you how it is!’” Gerrity says. “That’s the kind of fun stuff I think that we have with private label.”



Partnering with the Best

7-Eleven also displayed the tech-savvy side of its marketing efforts last November when it began launching one of the nation’s largest in-store television networks. According to a press release, 7-Eleven TV - launched in partnership with Santa Monica, Calif.-based Digital Display Networks Inc. (DDN) - reaches an estimated 190 million monthly viewers in more than 6,200 stores across the United States and Canada with around-the-clock programming.

The network, especially geared toward marketing to 7-Eleven’s Millennial customers, features national and local entertainment, news and weather, and exclusive content fit for c-store shoppers, Chabris says. The network also shares information about 7-Eleven’s own brands and promotional campaigns. And as an additional source of revenue for the retailer, local businesses and national brands are allowed to buy commercial time on the network.

“We try to send messages out to our customers about things that are important to them,” adds Joe DePinto, president and CEO of 7-Eleven, “about our fresh food offerings and milk. Nobody does that!”

The network also explains how the chain manufactures and distributes its pastries and baked goods daily, DePinto notes. (7-Eleven’s baked goods and fresh foods are manufactured by 27 commissaries and bakeries across the country, each of which is located within a two-hours’ drive of the stores it serves.)

Chabris adds that the network’s programming schedule is divided into multiple parts designed to promote specific items at the time of day when they are most relevant to customers.

“There are opportunities for us to merchandise and market our products and services in about five different day parts,” she says. “So we can promote hot breakfast sandwiches and coffee in the morning, sandwiches at lunch, private label snacks in the afternoon, pizza for dinner and energy drinks for late night.”

7-Eleven’s relationship with DDN is just one of its many valuable partnerships. And Gerrity notes that he’s particularly proud of the retailer’s relationships with all of its vendors.

“A lot of suppliers that we do business with are already doing business with the best-in-class retailers,” he notes.

Of course, any retailer looking to carry the right array of products has to make sure it partners with the best. That’s why 7-Eleven employs several staffers from Daymon Worldwide, a Stamford, Conn.-based private label broker and consumer events firm. DePinto says 7-Eleven partnered with Daymon to develop approximately 90 percent of the private label products offered by the retailer.

And to make sure that on any given day 7-Eleven is merchandising only those private label items with strong sales potential, DePinto says the retailer undergoes a weekly SKU rationalization process.

“We have a world-class IT system that allows us to identify what products are selling and what products aren’t selling,” DePinto explains. “And we’ve got a merchandising system that backs that up with new items coming in constantly. So we narrow back and delete items that aren’t selling very rapidly, and make room for and expand top sellers and new items.”


More Than Differentiation

But does the right store brand assortment do anything more for 7-Eleven than give it a way to stand out from the competition? Gerrity believes so. He notes that private label offers franchisees a way to earn even more margin and gross profit dollars.

Private label also offers more flexibility with distribution, something DePinto says is not common in the c-store channel.

“Because we now have control of these products, we can send a lot of them through the combined distribution centers that support our stores, eliminating the cost of the DSD (direct store delivery) network,” DePinto says.

This control also allows franchisees to keep a regular supply of private brand products, Gerrity adds, helping to prevent out-of-stocks. In contrast, if a franchisee runs out of a national brand product, he or she might have to wait a day or two for the next shipment. 

To train its franchisees to be on the top of their game and consistent with one another, 7-Eleven holds the annual University of 7-Eleven (USE) event in Dallas. Chabris says the event gives franchisees, store managers and employees a chance to check out the latest products under consideration, as well as the recommended merchandising programs for seasonal and high-potential new products.

Gerrity notes that USE is pretty important to franchisees because each one of them has invested money into his or her store’s operations. He also adds that as the company grows, it will be crucial to retain its “best-in-class” status as attempts are made to attract new and potential franchisees. (In January, the company earned the No. 3 spot on Entrepreneur magazine’s 31st annual Franchise 500 list.)

“The major focus [of expansion] is in market areas where we currently have a concentration of stores,” he says.

7-Eleven certainly is in a prime position for growth. The retailer recently appointed a vice president of mergers and acquisitions to head expansion into new territories, and announced plans to open many more stores in the North Pacific region (Washington, Oregon and Northern California) and the New York borough of Manhattan. And Chabris says the retailer is getting ready to announce several more expansion plans.

Of course, private label will play an important role in all future expansions, Gerrity says.

“If you think about it, we’ve been in the private label business for more than 40 years,” he notes. “It will continue to be an important point of differentiation and an opportunity to create new and unique products that are only available at 7-Eleven, and really also to lower the cost of goods and leverage the size of the company.” PLB


Sidebar: 7-Eleven Snapshot

Headquarters: Dallas

Chief Executive: Joe DePinto, president and CEO

Banner: 7-Eleven

No. of Private Label SKUs: Approx. 265 in U.S. and Canadian stores

No. of Stores: 7,800 in North America; more than 36,000 worldwide (80 percent of 7-Eleven Inc.’s U.S. stores are franchised, with 100 percent expected to be franchised by end of 2011)

Private Label Brands: 7-Select, Big Bite, Big Gulp, Cafe Select, Fresh to Go, iGear, Inked, Slurpee, Sonoma Crest, Thousand Oaks, Yosemite Road and more



Sidebar: Important Dates in 7-Eleven's History

1927: The Southland Ice Co., Dallas, begins to sell milk, eggs and bread from its ice dock, giving birth to convenience retailing. That same year, the company opens the first Tote’m convenience stores.

1946: Tote’m name is changed to 7-Eleven, reflecting the stores’ hours of operation (7 a.m. to 11 p.m.).

 

1963: 7-Eleven purchases the Speedee Mart chain in California and enters into franchising. The retailer also introduces its first two 24-hour locations.

1966: Slurpee brand beverages introduced.
 

1969: First Canadian store opens.
 

1971: First stores in Europe (England and Scotland) and Mexico open.
 

1974: First store in Japan opens.

1988: Big Bite, a brand of quarter-pound hot dogs produced by Oscar Meyer exclusively for 7-Eleven, debuts.
 

1991: Deli Central (sandwiches) and World Ovens (baked goods) brands launched.
 

1993: 7-Eleven holds the 1993 Merchandising Expo, now known as the annual University of 7-Eleven event.
 

1997: 7-Eleven introduces Café Select brand coffees.
 

2004: New vendor/supplier application and new franchise agreement launched.
 

2005: Joe DePinto named president and CEO. Seven & i Holdings purchases outstanding shares of 7-Eleven, taking the retailer private and making it a wholly owned subsidiary of Seven-Eleven Japan Ltd.

2008: 7-Select brand introduced.
 

2009: Retailer holds the first-ever Private Label Summit and launches Yosemite Road proprietary wines in North American and Japanese stores.


Sidebar: Gather Ye Vendors While Ye May

Last October, Dallas-based 7-Eleven held its first-ever Private Label Summit - a two-day event in Dallas that provided the retailer’s private label suppliers with a forum where they could meet with category managers and product directors. According to 7-Eleven, 60 people representing 35 suppliers attended the conference.

“We had 100 percent participation from every supplier we invited,” Tom Gerrity, senior product director for private label/store brands at 7-Eleven, said in a written statement.

Gerrity added that many of the attending suppliers told him they’ve never had such a close business relationship with any of their other retailer partners - they felt like 7-Eleven desired a true partnership with them.

“They are committed to grow with us [and] assist in bringing more new and innovative products to the market and help us find ways to raise consumer awareness about the 7-Select brand,” he said. “Suppliers and 7-Eleven are focused on driving out costs to help franchisees maximize their gross profits.”

7-Eleven plans to meet more frequently with its private label suppliers as a group, Gerrity said. The retailer also will develop opportunities to engage franchisees, having them sample the latest store brand products and provide feedback on what works best for their stores.

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