Bobby & Steve's Healthful Adventure

When first lady Michelle Obama called out the c-store industry a few years ago for its lack of healthful options in food deserts, many retailers reacted with anger or frustration. But for Bobby & Steve’s Auto World, the criticism served as a call to action.

“She painted a picture I believe to be inaccurate, that in these food deserts, c-stores serve only junk food,” says Jared Scheeler, director of retail operations for the seven-store, Eden Prairie, Minn.- based chain. “The standard product mix you see in the c-store technically carries a certain amount of nutritional value.

“Not everything is junk,” he says. “We certainly do have some good, healthy products. It’s just that to overcome that stereotype, we had to expand on it.”

So in 2011, Bobby & Steve’s began testing its Eat Well program, which aims to introduce a greater selection of health­ful, all-natural and gluten-free snack and beverage options to customers. The chain, which sells fuel, has an average of seven service bays per site and offers towing services and car washes, had built its business on everything automotive. But it also prides itself on being forward thinking and innovative inside the store.

“Because of the trends in health and a greater focus on health and fitness in this country, you’ve got to think that the typical c-store will carry a fair amount of healthier snacks in the future,” says Scheeler. “We said: Why don’t we do that right now? Why don’t we be the first ones to market, and create an identity as a healthy retailer in our market and build upon that?”

Bobby & Steve’s began working with United Natural Foods Inc. (UNFI), Provi­dence, R.I., a distributor specializing in natural, organic and specialty foods, after being referred by its main wholesaler, Naperville, Ill.-based Eby-Brown Co.

In building the offer, UNFI targeted the best-selling healthful, natural and gluten-free snack and beverage items in supermarkets, ultimately settling on a core of about 75 SKUs. “We’re able to zero in on what’s coming out of the warehouse that they’re pulling from, and what’s coming out of the channel that they are pulling from,” says Mary Jo Marks, retail training and education department manager for UNFI, which operates 13 warehouses across the country.

Bobby & Steve’s and UNFI took a cautious approach to product selection. The companies strived to build a great attraction for working moms, while not turning off the average c-store consumer. As Marks explains, long-term success is all about taking baby steps.

“One of the first things you look at,” Marks says, “is ‘Who is my customer?’ If they are asking for natural products, I want to bring in those baseline products where they won’t get sticker shock.” The next level is to add organic items in a “middle of the road” price range.

That said, Bobby & Steve’s believes consumers seeking these products will pay a little more for them. In its research before launching the Eat Well program, the retailer learned that the average ticket for a consumer of healthful snacks is $2 higher than that of an average c-store consumer—or about $11.20, according to research from The NPD Group.

“You’re typically going to see a higher price point on the healthier snacks just because the manufacturers have a lot more overhead than mainstream large distributors and manufacturers,” says Scheeler. “However, consumers looking for that product know they will have to pay a premium for a healthier, better product and are willing to do that.”

Putting It Together

As a retailer builds its offer, pricing becomes more favorable, Marks says. She suggests retailers track sales of certain “indicator” items to determine whether customers have the appetite for a more advanced offering. For example, she cites kombucha, a fermented tea beverage, as well as organic yogurt and kale chips, as products that indicate a deeper demand for healthful items. And while kombucha—a highly perishable, specialized product—is not a natural c-store fit, Bobby & Steve’s found great success with GT’s Synergy kombucha-juice blend from Millennium Products.

To make room for the healthful items, Bobby & Steve’s originally had planned to drop the bottom 20% of snack and beverage SKUs, but it has since decided to simply add to the current sets.

“Through some help with merchan­dising, we were able to keep most of the products we were currently carrying while adding our healthy product,” says Scheeler. “Going forward, as we carry this product into other stores, we are not afraid of eliminating that bottom 20% if needed.”

The decision not to cut low perform­ers was based partly on a desire to build upon the current customer base, rather than swap out demographics. “We felt if we could appeal to a new segment that really didn’t have a place in our store before without alienating our existing base that we could really help our busi­ness,” says Scheeler. “And the results have shown it.”

Bobby & Steve’s goal for the Eat Well products was a 4% lift in in-store sales. In fact, sales have grown by double digits over the past two years, which Scheeler attributes partly to the Eat Well program. “That’s growth we hadn’t seen at those stores ever in the 15 years’ existence of our program,” he says. Also, UNFI has risen to be Bobby & Steve’s fourth-largest dis­tributor, after Eby-Brown, Coca-Cola and PepsiCo—and ahead of the mainstream-snack DSD distributors.Packaged beverages has seen the high­est boost in sales, simply because the pre­vious healthful options were so slim. The other category that has benefited greatly is alternative snacks. The team was con­cerned about how healthful chips would perform alongside traditional varieties, but it has been pleasantly surprised by the popularity of items such as PopChips, as well as vegetable-based chips such as lentil and black bean.

“From our first full year with the Eat Well program, we saw a 20% increase in that category alone,” says Scheeler.

In a departure from many c-store retailers’ approach to healthful items— placing items in a dedicated section— Bobby & Steve’s decided to integrate the items inline with the main sets. It is an approach that reflects the retailer’s invest­ment in the business of healthful eating.

“Right now you typically see if a c-store carries a line of healthy prod­ucts, it’s either a 4-foot set in a gondola or endcap. To me, that communicates: We’re dabbling in this but we’re not really committed to it,” says Scheeler.

“Having the product scattered throughout the store communicates to our consumers that this is part of the fabric of who we are as a retailer,” he continues. “You don’t have to go to this section to find something that’s healthy. We’ve got a whole store and have it marked with specific icons on the shelf to indicate which products fall within certain health categories.”

To help customers easily find Eat Well items, Bobby & Steve’s developed three icons to identify products in three spe­cific health categories, beginning with “healthy,” which is any item that contains 200 or fewer calories per serving, has 10% or less of the recommended daily value (RDV) of fat, 10% or less of the RDV of saturated fat, and 5% or less of the RDV of cholesterol.

The next category is “all-natural,” which includes any items labeled by the manufacturer as such; and finally, “gluten-free.” Some items may qualify for more than one category. The retailer has placed the icons right next to the shelf tag of the Eat Well products, and it devel­oped store signage to explain the coding system. It plans to expand to outdoor signage as the program rolls out to the chain’s other five stores this month.

While Bobby & Steve’s has found success with new items, it also has real­ized how much of its traditional offering already met the program’s requirements.

“Packaged nuts, PowerBars, Clif bars, Slim-Fast bars, various beverages—things we already had in our stores. ... We were surprised by how much of it already fell within these categories, and we wanted to market it as well, in addition to bringing in the new products,” says Scheeler.

Bobby & Steve’s tested the program at two of its highest-volume, highest-traffic stores, one in downtown Minneapolis and another in Bloomington, Minn. While Scheeler acknowledges that demograph­ics partly played a role in the site selec­tion—choosing stores in more affluent neighborhoods where it would have the highest possibility of success—the goal is to make the program work in every loca­tion, regardless of the customer profile.

Sites with the highest demand will get the largest product mix and variety, while those with lower demand will have an edited mix. “However, the program will still be available in every store, and we are going to work hard to develop the repu­tation as a healthy convenience store,” Scheeler says.

Next Steps

Not every Eat Well offering has been a runaway success. For example, when the program first began, Bobby & Steve’s introduced take-home sizes of healthful snacks, which did not sell. It has since shifted to single-serve, grab-and-go packages.

Another area the retailer is still trying to crack: edible grocery and frozen meals. Madalena Ferreira, retail captain for Bobby & Steve’s, believes better market­ing may be one of the solutions. “When customers come into the store, they are directed to snacks and packaged bever­ages, and you only go to the grocery aisle if you really need something,” she says.

“So that’s going to need education on our part, to let consumers know we do offer products in those categories.”

Marks of UNFI says healthful frozen meals are a tricky sell in c-stores because they tend to be pricey, and supermarkets already carry such a large variety. A more viable offer could be frozen nondairy novelties such as soy ice-cream bars, or handheld burritos, which can be eaten on the go. To figure out the right healthful mix, retailers need to be willing to try and err, she says.

“It’s educating the consumer, and hav­ing the offerings like Bobby & Steve’s,” says Marks. “And they are working on it—‘If that didn’t work, let’s try this.’ They’re not giving up. Sometimes people put [health­ful] in a box. It’s not that it’s not working; you just haven’t hit on what works.”

Once Bobby & Steve’s rolls the pro­gram out to all locations, it will focus next on foodservice. The company already offers a variety of healthful food options—sandwiches, salads, wraps, fresh fruit, yogurt parfaits, veggie bowls and pasta salads—but has not yet high­lighted them with signage or labeling. This next leg will be somewhat more involved, requiring the retailer to formu­late nutritional values for all of its food­service items, in addition to new labeling.

Another next step: adding organic to the Eat Well program. While Bobby & Steve’s already sells several organic items, it does not call them out with signage. The company plans to formalize the offer slowly, partly because organic items tend to carry a premium price point. “We’ve had individual products that if they approach the $6 to $7 range, it doesn’t get a response from the consumer we need, and it’s something we certainly have to watch out for,” he says.

Bobby & Steve’s is hopeful that as the Eat Well program expands and matures, customers’ perception of healthful food offerings in the c-store channel will as well. “Consumers will ultimately drive what the standard c-store carries,” says Scheeler. “We have study after study indicating the average American is looking for healthier options. They are more likely to frequent stores with healthier options.

“As more companies like Bobby & Steve’s Auto World get ahead of the game and provide services like this to our customers, then going forward, I think the average consumer will demand this in a c-store.”