Green Spot Market is an anomaly. A Dallas convenience store, it offers an array of healthy foods that are not typical fare in this shopping channel, and its business is growing.
The store’s manager, Adam Velte, attributes its popularity to consumers’ growing interest in good-for-you products. Almost every item sold in the store, he points out, is healthy on some level, whether it has functional ingredients such as probiotics and whole grains or simply has no preservatives.
Green Spot is not alone, but it doesn’t have a lot of competition—yet. Despite a gradual shift by consumers to eat more healthfully, growing sales at retailers such as Whole Foods Market and Trader Joe’s, and a shopper base increasingly made up of women, most convenience stores continue to flourish on high sales of fat-, sugar- and sodium-laden items.
However, a rustling of change is occurring, starting with consumer habits and attitudes.
We’re eating more snacks than ever today. According to Chicago-based Technomic’s Snacking Occasion Consumer Trend report, published last year, about half of consumers polled (48%) say they snack at least twice a day, compared to just a quarter of respondents in 2010.
And, equally as important, two-fifths of consumers told Technomic that they are choosing healthier snacks now and plan to continue to do so: More than a third of consumers said they expect to eat healthier snacks over the next year.
Smart Selections
Snacks—and specifically healthy snacks—are a big opportunity for c-stores, yet many are not yet embracing them. One retailer that is, however, is 7-Eleven.
The retailer declined to speak to CSPfor this story, but according to a New York Times article in December, 7-Eleven by 2015 aims to have 20% of sales come from fresh foods in its U.S. and Canadian stores—up from about 10% now.
The move toward this increase is visible in its stores: Seven-grain sandwich wraps, yogurt cups and carrot sticks share shelf space with fruit and veggie cups, hummus and pita.
“We’re aspiring to be more of a food and beverage company, and that aligns with what the consumer now wants, which is more tasty, healthy, fresh food choices,” CEO Joe DePinto told the newspaper.
In April 2012, Dan Sanderman purchased a 30-year-old 7-Eleven on Lake Tahoe in Carnelian Bay, Calif., and in just a year has increased sales by 22%, much of which he attributes to his product mix, which has a heavy emphasis on healthy foods and snacks.
“It is smart business to incorporate [healthy] items into your store,” Sanderman says. “It is hard to change old habits, but we have to differentiate ourselves and open space for such products.”
Sanderman’s 7-Eleven does good business in healthy snacks, and in chips alone, healthy products constitute around 15% of his assortment. His most popular healthy foods include Clif Bar’s ZBar for kids, KIND Bars, GoRaw bars and vegetable chips from a small company in Idaho called It Takes a Village.
Nuts also do well, as do dairy items such as organic Greek yogurt and cheese sticks. He recently switched the latter over to the Horizon organic brand from Kraft. So “one product can meet the needs of both customer types. Opportunities to have crossover appeal without sacrificing price are rare, and we happen to be doing so with cheese sticks.”
The key to selling healthy snacks is making them visible, Sanderman says.
“Customers are always going to go for the Doritos and Cheetos, so we try to make healthy items more prominent, on the shelves at eye level,” he says.
He also carries brands customers recognize, which he says builds trust: “You cannot stray too far away from nationally recognized brands in a c-store environment. We are not a health-foods store, and customers expect to see names they also see in grocery chains. I prefer Newman’s Own, Horizon, Kashi, KIND Bar, and so on—major names that are organic or natural. There is always room to experiment with unique items; our It Takes a Village veggie chips are one such product.”
Natural Ingredients
Popular at Green Spot Market are baked goods from local company Empire Baking, such as croissants, muffins and pastries. These types of items are considered healthy by many people because they have natural, recognizable ingredients—butter, flour, sugar, and so on—with no preservatives, no chemical sweeteners or the like, says manager Velte. Shoppers looking for healthy foods are typically interested in locally made and locally grown items, too, he points out.
Also popular, he says: Pirate’s Booty, kale chips, Clif Bars, gluten-free (and genetically modified-ingredient-free) bars and sprouted foods. For kids: any kind of fruit snacks that are candyshaped—such as fruit leather or organic cookies by Late July— and Annie’s Cheddar Bunnies.
However, fresh produce is not faring as well. While some 7-Eleven franchisees may have success with fresh fruit and vegetable cups, many smaller retailers or single-store operators are not seeing the same.
“Cooler space for fresh produce is difficult, and spoilage is an issue,” says Velte. So Green Spot sticks with apples, bananas and oranges, though he hopes to see that change and would love to have a seasonally rotating produce display. Dried fruit, sold in individual bags, does really well.
And Sanderman, whose store is surrounded by farms with a bounty of fresh fruits, carries only those same basic fruits “because the problem is sourcing it,” he says. “I should have a case full of all these [local] fruits, but the distribution system is not set up for that. So we get the standard apples, oranges and bananas, and they come from far away.”
Boom or Bust?
Business in healthy snacks may be booming for some retailers, but for others the picture is a different one. Most retailers sell only the most limited of selections, despite what customers say they’ll buy.
“We don’t eat what we say we want to eat,” says Greg Parker, who owns 30 Parker’s stores in Georgia and South Carolina, and offers very limited choices in healthy snacking fare.
But the people who study this industry tell a different story. “Our meals are being displaced with snacks,” says Melissa Abbott, senior director of culinary insights for The Hartman Group, Bellevue, Wash. “We now believe that in order to be healthy you need to snack, and we’re putting much more emphasis on the nutritional profile of our snacks.”
And what are we snacking on? “People are seeking real food, identifiable ingredients. Snacks have to be something that makes people feel they’re not putting junk into their body,” she says. Fruits, cut-up vegetables and nuts all fit into this category, she explains, but there’s still a craving for popcorn and chips. Cereal’s also getting more play and is often the snack of choice at the end of the day.
Darren Seifer, food and beverage industry analyst for The NPD Group, Port Washington, N.Y., doesn’t attribute the rise in snack consumption to decreased consumption of meals, but to changes in the makeup of our population.
The numbers of children and seniors are growing, “and that’s where we see the biggest growth in snacking. When we are youngest and oldest is when we snack the most,” he says. “On the younger end of the spectrum, parents are keeping a watchful eye on what they give their kids, so they give them a lot of fruit and yogurt. And many seniors have more time on their hands, and food becomes a greater part of their life and lifestyle. They also take a lot of pills and might need to take them with food.”
The customers at Green Spot Market fit these demographics. “We have two schools nearby so we see mothers, kids after school, people who have made it a lifestyle choice to eat healthy and organic,” says Velte. “People will go out of their way to come here. Typically, these people don’t usually go to a gas station because it doesn’t fit their lifestyle choices.”
Sanderman says his store likely wouldn’t do as well if it were moved to another area.
“I’m fortunate—my demographics are people who have a third home in Lake Tahoe, they drive BMWs, and are not looking at prices,” he says. “It’s not a standard clientele for 7-Eleven.”
On the Whole
Wholesaler Core-Mark, South San Francisco, Calif., is seeing increased demand for healthy snacks across the country, in all markets.
“Healthy snacks are definitely on the rise,” says Carla Boyington, director of category management. “We put the healthysnack category in over four years ago and have had double-digit growth every year. What’s driving our snacking business is healthy snacks. Our growth on these brands is phenomenal and is continuing year over year. If anything, we’re looking to balance our sets with even more healthy snacking products.”
Best-selling snacks include fresh fruit (the No. 1 snack, according to Boyington), chips such as Food Should Taste Good, Special K Cracker Chips, Stacy’s Pita Chips, yogurt and bars from companies such as Clif Bar, Kashi and KIND. Even all-natural jerky is on the upswing.
Core-Mark has been slowly buildingthe number and the variety of snacks it carries, and in 2010 it launched a Good Health To Go Snack Rack. Now, 15% of the bars and 10% of the salty snacks the wholesaler carries are healthy, says Boyington. But it’s also important that these products are big name brands so the consumer can recognize them and associate with them, she says.
Core-Mark also makes sure it rotates products with regular new offerings to continue to grow the category. “To keep product fresh—in people’s minds—and to keep on top of trends, we want to have the right new items and the right brands,” Boyington says.
One of these brands is KIND, which saw sales of its bars in convenience stores double from June 2012 to June 2013; sales in this shopping channel are slightly ahead of others, says Cliff Wheeler, senior vice president of strategic channels.
In fact, he says, “This year, we will put a strong emphasis on marketing toward business travelers and students—two demographics who frequent convenience stores. Whether it’s near the airport, the gas stations or close to campus, these are people on the go, and they do not want to sacrifice health for convenience.”
People on the go are also highlighted in Technomic’s snacking report, which states that impulse purchases of snacks are up from two years ago. Sixty-two percent of the respondents to the survey stated that most of the snacks they purchase for away-from-home consumption were impulse purchases.
Healthy options were also a focus, and more than a third of consumers told Technomic that they expect to eat more healthful snacks in the coming year.
Carrying on-the-go meal replacements also can make c-stores a destination for better-for-you items. “The premium beverage category is growing at a pace of over 20% per year with great store margins, so they’re a perfect fit for retailer needs,” says Jim Whitaker, vice president of beverage sales for Bakersfield, Calif.-based Bolthouse Farms, which offers better-for-you beverages such as Strawberry Parfait Breakfast Smoothie and Protein Plus Chocolate.
Margin Calling
All of this is good news for retailers, because the profit margins on healthy foods tend to be a little higher than for mainstream products.
“Some [healthy] snacks might be a slightly higher cost so the retailer might be making a little more,” Boyington says. “We definitely haven’t had to sacrifice any profit margins—probably the opposite, if anything.”
“Our profit margins on these products are between 35% and 40%,” says Sanderman. “They are more expensive, so we can’t charge as much, but we make money on the healthy items because it’s a bigger ring-up, and I’d rather go for the bigger ring-ups.”
But with more expensive products, you have to entice customers to buy them, and to do that, it’s crucial to go beyond having the right products.
“It’s important to position items correctly in the store,” says Boyington. “For the early morning, put sweet snacks near the coffee; then put savory snacks near fountain and cooler beverages, because the consumers’ pathway changes throughout the day.”
Retailers should be aware, Boyington says, that the products that sell change through the day, with yogurts and bars the winners in the morning, and savory dominating through the afternoon and evening. However, salty snacks are the clear mainstay all day long, she says.
The NPD Group sees several snack times through the day. The morning has two peaks, says Seifer; one precedes breakfast, and one is between breakfast and lunch. After noon there’s a peak around 3 p.m., and there’s another between dinner and bed, or between 8 and 9 p.m.
“And what should be noted,” he adds, “is that the emphasis on health declines as the day progresses. We start off with good intentions and things deteriorate as the reality of our lives impedes on our day.”
But constantly putting healthy foods in front of consumers can help change their perception of convenience stores, says Boyington.
“It will be a slow change before people realize convenience stores are a destination for healthy foods. And to get to that point, it will come down to the store’s ability to present a good variety of quality fresh foods to change perceptions. It will take a full commitment to a full fresh-foods program to create the category into a destination.”
Sanderman believes the same thing: “These items aren’t going to fly off the shelves right away. But once consumers know we have it, they’ll come back rather than stand in line for 40 minutes at Safeway.”
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