The Pantry Launches Food Fight

Convenience chain aims to become "a destination for the on-the-go breakfast occasion"
CARY, N.C. -- This past week, The Pantry began remodeling the first of its convenience stores that will serve as a pilot for its Fresh Initiative, a capital project designed to "improve the breakfast, lunch and snack experiences with coffee as the anchor," according to CEO Terry Marks.

"We believe that on-the-go meals represent a critical strategic-growth [tactic] for our company, and we will pursue it in a disciplined fashion," Marks said on a second-quarter earnings call Tuesday.

Marks, who boldly outlined The Pantry's change of strategy to focus more on foodservice [image-nocss] during his first earnings call six months ago, said the company is launching the program in the Raleigh-Durham, N.C., market and will then move on to the Charlotte, N.C., market.

"Over 100 stores will be refreshed before the end of the calendar year, all highlighted by a repositioned and significantly improved Bean Street coffee program," he said. "In addition to improving the taste [of our coffee], we are replacing our glass-pot system with urn dispensers, while upgrading cups, lids and accessories. Importantly, we are increasing associate training to ensure our guests always receive a great-tasting cup of coffee."

On the food side, the chain's stores will offer a broader assortment of pastries, breakfast sandwiches and fresh fruit. "We believe we are taking important first steps toward becoming a destination for the on-the-go breakfast occasion," Marks said. "Further, new refrigeration cases will support our merchandising efforts and offer a wider variety of sandwiches, salads and fruit presented in a more appealing fashion."

Along with the changes specific to foodservice, The Pantry also is beginning a "refresh" program for the stores themselves.

"We recognize that winning in foodservice will require that some of our stores be brightened up, and we are addressing this with a new inside reimaging package that will be applied on an as-needed basis," Marks said. "As we apply the store refresh, we will be replacing our current Kangaroo Express logo with our new, contemporized version on the store exterior."

Even with the Fresh Initiative still in the pilot phase, Marks said the company will boldly and quickly roll the program out over the next year and a half.

"We will launch our product enhancements, new coffee and initial menu expansion across all stores in 2011," he said. "The full-store refresh, to include coffee and fresh-food fixturing upgrades, will be applied to over one-third of our existing [1,600-store] base by the end of 2011."

The capital investment will run $30,000 to $35,000 per store, and Marks anticipates a healthy return on that investment.

"We anticipate...a cash-on-cash return of 20%," he said. "To deliver [that] based upon an average investment level of $30,000 to $35,000 per store, we're looking at an average [sales] comp lift of 2% to 3%.... Based upon the work of our vendor partners who have been involved in these things in the past, we're very confident in our estimate. We go live in June."

Headquartered in Cary, N.C., The Pantry Inc. is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country. As of May 3, the company operated 1,647 stores in 11 states.


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