NEW YORK -- In the 11 years that The Pantry has been playing the acquisition game, the company has purchased 1,461 stores, seldom in groups of more than 100. That left the Sanford, N.C.-based company with a number of store brands and little brand equity. In our base market of Raleigh, if you say you work for The Pantry, most people won't know where that is because our stores don't bear that name, said president and CEO Peter Sodini.
That's why the company undertook a three-year rebranding initiative that is nearing completion and providing positive results. [image-nocss] Now we've unified that image, Sodini said yesterday during the Merrill Lynch Retailing Leaders Conference in New York. We have about 1170 stores with a consistent nameand we think from a merchandising standpoint and an advertising standpoint it's a much better baseline.
The Pantry began the rebranding in late 2003, opting for the Kangaroo Express name, in most cases, over the variety of others, including Lil Champ, Fast Lane and Golden Gallon. Some Pantry and Cowboys sites still remain. When you acquire stores, you end up with a lot of different names, Sodini said about the reason for the change. In our initial stages of buying chains, we figured we had local residents who were our customers so we thought why worry about [the name]. We'll just operate it. But as you continue to grow your business, it was obvious we were losing something by not having a common [brand name].
Similarly, The Pantry, which now has 1,450 stores, began rolling out a line of private-label products under the Celeste brand name in 2003. Available in most Pantry-run stores, the line of products is pushing 3% of merchandise sales and contributing about 5% to our gross profit merchandise growth, said Daniel Kelly, CFO of The Pantry. Most recently, the company added sports and energy drinks to the line.
Private label has been a blessing to us. It cuts across a number of categories, particularly beverage categories, Sodini said. If you look at how the margin compares [to national brands], this category enables us to do the same thing that many of the supermarkets do. You get an aggressive price point in front of the consumer, and you make, hopefully, more cents per unit than you do with a national brand.
One place The Pantry isn't streamlining names is in its gasoline offering. In the past few months, the company has contracted with Exxon and Chevron as new gasoline brands, in addition to BP and CITGO. The goal is to have several avenues of supply should another supply crisis, such as the one that occurred when Hurricane Katrina hit the Gulf Coast last year, happen. We learned a good lesson last fall when we had the hurricanes in the Southeast, Sodini said. The pipeline went down, and that created a tremendous crisis.
Oh yeah, and about those acquisitionsyes, you can expect some more this year, along with some long-missing new-builds. We continue to target acquisition as our primary vehicle to grow. Why? Because we think that's the safest and the most productive way to spend our capital, Sodini said. We have probably been remiss over the last few years in the new-store-development area. We've taken some steps recently to correct that by adding real-estate capability. We would estimate this year we'll open substantially more [new-build] stores than we did in the past five years, and we hope to maintain a sustained growth. We're looking at about 15 to 20 starting with fiscal 2007.
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