Back to School
Full coverage of CSPs 2013 Convenience Retailing University.
Snag Foodservice Customers by Changing Perceptions
C-stores have an opportunity to become the top choice for consumers who altered their eating habits during the Great Recession, but the appeal has to be directed at patrons’ heads as much as their stomachs.
So agreed three trend-watchers who collaborated for a session on foodservice innovation. Retailers can increase both the number and size of ready-to-eat food transactions by countering low expectations with better, more strategic choices, they said.
Those menu additions, the three agreed, have to be acceptable both in terms of quality and consistency with the host site’s image. You could develop the best sushi nachos “known to man,” but you’re not likely to sell a lot of them to someone who just filled their tank outside, said Kevin Higar, director of research and consulting services for Chicago-based Technomic Inc.
That sense of appropriateness also extends to price. “If you charge too much for it, people don’t want to buy it,” said Keith Boston, director of foodservice for Framingham, Mass.-based Cumberland Farms. “If you charge too little, people don’t want to buy it because they think something’s the matter with it. It’s too cheap.”If the operation is targeting consumers hunting for a snack, that pricing sweet spot can’t exceed $4, said Higar, citing consumer research conducted by his company.
Bob Derian, corporate executive chef for Atlanta-based RaceTrac Petroleum, provided a case history of how his chain developed a new burrito. He described how the home office carefully considered cues to the customers such as how it was packaged (“We went with something that looked hand-wrapped.”) and how it was priced (at a level significantly above the burrito it replaced).
The effort could well be worth it, Higar said, because the Great Recession gave a lasting boon to snacking. People who survived corporate layoffs and cutbacks found themselves “trying to get 18 things into an hour, whereas before they did five things an hour,” he said.
“With the exception of the 55-plus[age] group, [consumers are] snacking more frequently,” he said. “What we saw in 2007, 2008, they’re still thinking in those terms.”
Mouse in the House: A Clever Food Safety Test
If c-store chains need proof they’re safeguarding customers from food contamination, they should try the rubber-mouse test.
That was one of the stranger tips offered by RaceTrac’s Justin Waldrep during his far-ranging review of food-safety practices. Waldrep, RaceTrac’s manager of food safety and quality assurance, covered everything from hand washing to little-known requirements for storing pet foods (you’re mandated to assume humans might eat them, too, he explained).
“I get very passionate about food safety because it’s something we can almost always fix,” said Waldrep.
“To beat viruses and parasites, it’s good personal hygiene. To beat bacteria, you need good temperature and time controls.”To beat pathogens of all types, he said, an operator has to focus on small details. “If we want to keep things safe in the store, you have to know your supply chain. You’ve gotto know your vendors,” Waldrep explained.“They should be your partners.”
Trust them, he advised, but verify constantly. Hence the mouse.
Bring a rubber mouse with you during plant and warehouse inspections and slip it into a rodent trap when no one’s looking, Waldrep recommended. If the vendor doesn’t let you know in short-order that the mouse was found, it’s time for a tough conversation.
Among other food-safety intelligence he offered:
“Keep your cold food cold, your hot food hot. If it’s a hot item, you can put it out on a table and leave it out for 4 hours. If it’s a cold item, you can put it on a table and leave it out for 6 hours.”
“Know your food code. In Georgia, you have two. In Florida, you have three. You have to know which apply to your business.”
“You kind of take it on faith that your packaging has been approved for food.” Get documentation that you’re correct.
Don’t use milk crates to meet the code requirement that food be stored 6 inches off the ground. Stacking food boxes on crates prevents you from cleaning underneath the cartons, and that’s the purpose of the 6-inch mandate.
Smoking out Misconceptions about OTP
“Eighty percent of smokers are looking for alternatives,” Lou Maiellano informed the tobacco retailers and manufacturers attending his “Satisfying Tobacco & OTP Shopper Needs” session. “They’re not always looking to quit, but they want alternatives.”
As a former tobacco buyer for Sunoco and current president of Sevierville, Tenn.-based TAZ Marketing & Consulting Group, Maiellano believes both retailers and manufacturers need to embrace the alternative and smoke-free tobacco products consumers are calling for.
“The big winners will be [manufacturers]that find socially acceptable ways to deliver the satisfaction of tobacco to those who desire that satisfaction,” Maiellano said, “and [retailers] that look at what products meet the consumer’s needs in the future and aggressively embrace the opportunities that change brings to their business.”
Electronic cigarettes seem to be a natural fit for the “socially acceptable” products described—and with TAZMarketing’s numbers showing the nascent segment netting $650 million to $700 million in sales during 2012, there is reason for growing excitement over the category. Still, with hundreds of electronic-cigarette companies selling in this country, Maiellano warned retailers to be cautious. “There’s a lot of misconceptions out there.”
One of those big misconceptions comes from companies saying they’re No. 1, claiming a majority of electronic cigarettesales: Maiellano joked that by his calculations, five e-cig companies accounted for 140% of sales last year.
That’s not to say electronic cigarettes won’t have a prominent place in the “no-smoke zones” and “ATP” (alternative tobacco product) sections Maiellano champions—just that retailers need to have patience with the evolving category.
“It’s very important to realize that more new products fail than succeed,” said Maiellano, pointing out that a mere 41.2% of new tobacco products succeed after six months. “But we need to give them a fair chance.
“Times are changing,” he continued.“Accept it and go with it. Managing this category will have many challenges; managing this category will have many rewards.”
Can Electronic Cigarettes ‘Obsolete’ Tradition Sticks?
“A year ago, I asked the question, ‘Are electronic cigarettes a fad’?”said NJOY’s Vito Maurici. “A year later, we’re asking the question, ‘Are electronic cigarettes a game changer’? I wonder what the question will be next year.”
During his “Growth in E-Cigarettes” session, Maurici, the Scottsdale, Ariz.-based company’s senior vice president of sales and distribution, went through an overview of the dynamic category, focusing on growth in the c-store channel; the history of electronic cigarettes; hot topics in potential state and federal regulations; and the “wild, wild west” of the current competitive landscape created by the more than 200 e-cigarette companies in the United States.
Even with so many hot-button issues, there are lots of reason for retailers to be excited: Dating back to 2010, electronic cigarettesales have doubled with each passing year and are on track to be a $billion business in 2013.
And there’s even more room for growth: “According to the CDC, four out of every 10 smokers are looking for an alternative,” said Maurici. “That makes almost 20 million people spending $38 billion a year on products they wish there was an alternative to.”
However, because electronic cigarettes are still in their infancy, many smokers have complained about a lack of consistency compared with traditional tobacco cigarettes. Maurici believes NJOY’s latest offering is the answer to such complaints.
“It’s impossible to discuss the category and ignore what’s happened with NJOY Kings,” he said, dubbing Kings “the next generation of electronic cigarettes.”
Profiled by Time magazine, NJOYKings addresses many issues consumers had with prior electronic cigarettes, he said. The new product features a soft filter, a lighter weight, a realistic ash tip, an improved flavor profile and innovative packaging. NJOY is supporting the product with ample marketing and promotion, including a TV commercial, which Maurici shared with the audience.
And despite the accolades for Kings, NJOY will continue to seek out new ways to grow the category. “NJOY’s mission is to obsolete cigarettes,” Maurici said. “It keeps us focused on exceeding the adult smoker’s needs every single day.”
No ‘Me-Too’ Program: Loyalty Needs a Unique Voice
As loyalty programs in the c-store space move ahead in fits and starts, retailers should avoid “me-too” programs, according to Chris Collier, solutions sales specialist for NCR Corp., Dayton, Ohio.
Although the industry has found success largely with programs tied to fuel discounts, many of the more successful programs reach levels of emotional engagement that transcend cents off per gallon.
“I don’t know of any c-store loyalty program that has achieved this emotional connection,” Collier told about 85 CRU attendees at a morning breakfast session.
Programs achieving emotional loyalty often develop personalized communications with patrons. These retailers, such as Apple and NASCAR, offer exclusive events and create affinity groups.
Collier also defined other forms of loyalty programs. C-stores often fit into what he called “transactional” programs that are based on the transaction or purchase. These types of programs drive increased transaction volumes and typically have a reward structure benefiting heavy users.
Other programs included “inertial” ones, or those that keep providing reasons for customers not to switch brands, such as barriers to changing cell phone carriers; and “functional” programs, which follow consumers through specific periods of their lives, as with expecting mothers.
On a side note, Collier said that more and more supermarkets are moving away from loyalty cards and key fobs. Cell phone numbers combined with personal identification numbers (PINs) can replace the need for that physical piece, he said, allowing the retailer to focus another aspects of their programs.
How to Unlock the Potential of HBC Products
Is 4 feet enough for 51% margin generators? That was the title question of the CRU course led by Advantage Sales & Marketing’s David Case. However, Case, business development manager for convenience HQ, quickly warned retailers that “you have to get that first 4 feet right before you even think of expanding.”
There are plenty of reasons retailers shy away from what Case dubbed “one of the most overlooked areas” in convenience stores. While a very small factor in overall c-store sales, the category faces a bevy of challenges, such as FDA and state regulations, reformations, a high rate of theft and a higher rate of recall than most any other segment.“You have to transform your thinking,” Case said of the segment. And despite all the obstacles, he said, HBC also offers many benefits to retailers. For example, an impressive 75% of all HBC purchases results in a secondary sale. The category is also growing, up 5.5% in 2011, with the No. 2 gross margin percentage (behind ice).So what to retailers need to do to create a successful HBC set?
“You have to give the section a ‘physical’ each year,” said Case. Many stores revamp their HBC set only every three to four years, or just put in Tylenol and call it a day. However, Case pointed out that it’s crucial to look at which subcategories are growing year to year: The top 11 subcategories drove 87% of HBC volume in 2011. While there were predictable power players, such as internal analgesics, there were also surprises: He described condoms as having a “great year” in c-stores, with an 11% share of the HBC volume and up 13.4% in dollar sales compared to the previous year.
Case also predicted emerging subcategories for retailers to watch in 2013: smoking cessation, foot care, calming and/or hangover relief, and healthy protein shots.
With more than 100 SKUs and 30 manufacturers, the HBC category is no easy task to manage. However, he strongly believes “a margin generator [of more than 50%] should be worth it.”