Some people say life is a series of learning experiences. And wasn’t that the truth at Convenience Retailing University (CRU) 2013? More than 500 retailers and suppliers convened in Glendale, Ariz., in late January for four days of opening their minds to new ideas, sharing their experiences with friends, and coming together in generosity to the CARRE Foundation’s featured charity, the Juvenile Diabetes Research Foundation (JDRF). Read on for our coverage of the event, and check out our CRU Photo Album for a recap of networking, bowling, partying and opening their hearts for a great cause.
Internal Harmony
Unifying marketing, operational efforts made food business sense for QuickChek
In describing QuickChek’s mission of how providing a great place to work leads to a great place to shop, which ultimately leads to a great place to invest, John Schaninger portrayed a perfect circle—something that perpetually rejuvenates itself.
But the process isn’t always so perfect. Speaking before about 75 attendees at a breakout session, Schaninger, vice president of sales and marketing for the 132-store, Whitehouse Station, N.J.-based chain, said communicating how store-level goals tie back to marketing strategies is an ongoing and pervasive task.
“We like meetings,” Schaninger said, explaining how periodic meetings involving cross-departmental teams help develop budgets, goals and tactics. “Communication is vital.”
He described a culture of open and honest communication, which leads to high levels of execution and then a point of celebration. The whole process, Schaninger said, started with budgets.
The chain’s budget process begins annually with meetings between vendor and his six-person (five category managers and a foodservice manager)marketing team. They work together to review supplier statistics and trends on a national and local level. Schaninger said he prefers local numbers over national, often encouraging vendor-accompanied trips to the company’s stores, competing c-stores and even cross-channel retailers.
For each category, QuickCheck designates a vendor as a category captain for the chain. That person works with the chain to help determine the potential opportunity for the entire category. Those results go to the company’s senior management.
After initial feedback, the marketing team revises numbers, then presents the new budgets to everyone from the senior team down to district leaders.
“You have to be ready for them,” he said. “Talk about being open and honest.”Sometimes numbers will be skewed because of a warm summer that extends vacation traffic, or a storm that might depress final sales figures. All those are taken into account. Budgets also circulate back, meaning that marketing initially works from budgets first developed at the store level. Store personnel meet with district managers to create budgets that flow back up to the top.“What’s accomplished is a level of buy-in from those who then have to execute,” he said.
When asked who gets the final say, Schaninger said, “It really is everyone together—operations, marketing and vendors. We’ve got to get to these numbers,” he says. “We’ve got to come to an agreement, so when you ask who owns it, we all own it.”
At the end of the day, they all have to report to a board of directors. “And it’s not fun to go to them not having hit that number,” he said.
C-Stores Set the Pace for New Products
“You guys are truly a great catalyst in bringing new products to market.”
This was the central theme of Larry Levin’s session, “Making Stars Shine Bright in C-Stores: The Channel’s Importance in New Product Launches.” Levin, SymphonyIRI Group Inc.’s executive general manager of consumer insights, would later dub the c-store industry a “rock star” for innovation.
SymphonyIRI Pacesetters report clearly shows the important role c-stores play in successful product launches. For 13 years, the Chicago-based market research company has tracked the most successful launches of new or extended brands—those with at least a 30% distribution and $7.5 million in first-year sales. During those 13 years, c-stores have accounted for approximately $2.5 billion of the Pacesetter new product sales, which is more than two-thirds of all Pacesetter dollars.
“C-stores are a great laboratory to breed successful launches, especially in alcohol, tobacco, sports and energy drinks,” Levin said. Not surprisingly, of the top 10 c-store product launches over the past 13 years (representing a whopping $1.4 billion in sales), all the products fell into those four segments. Perhaps more impressive is the fact that out of those products, four saw 99% or 100% of their sales dollars from the c-store channel:
- Monster Nitrous had $55 million in sales during its first year, 100% of which were in c-stores.
- Muscle Milk had $86 million year one sales, with 99% c-store.
- Camel Snus clocked in at $90.8 million, 99% c-store.
- The No. 1 first-year new c-store product was Camel Crush with $375 million in sales, and 100% from c-stores.
“As you think about these top 10 products, it really helps you see the importance that you folks play in gaining the trial, gaining the repeat and sustaining the distribution for these manufacturers as they release these important products,” said Levin.
And though SymphonyIRI had yet to release its 2012 Pacesetters report, it was another strong year for c-store staples, with new offerings from Rockstar Energy and Dr Pepper leading the pack, according to Levin.
Of course, new product successes are not just about what happens in the first year. Levin warned retailers that it is equally crucial to continue support in year two.
“Trial doesn’t only happen in year one,” Levin said. “The worst thing that can happen is if consumers want.
Self-Checkout Update
CRU attendees curious about QuickChek’s foray into self checkout stations got an update from John Schaninger, the chain’s vice president of sales and marketing.
In use at 18 stores for more than four years, self-checkout is most effective at high-volume locations. He’s seen sites that needed four cashiers at peak times fall to two. It didn’t cut labor because the company decided to put the extra cashiers out onto the sales floor to more directly serve customers.
As far as theft, he said a lot of shrink occurs through the back door vs. the front, meaning that internal theft and other suspicious activity happens where shoppers aren’t present.“Shrink goes down when we put in self-serve,” he said.“Eighty percent of it is a team member.
How to Cater to the Empowered Consumer
“Consumers are now in charge. They have more power today than ever.”
That statement, made by Michael Sansolo, president of Sansolo Solutions, gets to the heart of what retail is today.“Every day you have to give[your customers] a reason to come to you,” he said. Long gone are the days of simply putting up a store and watching customers walk through the doors. If you’re doing business the way you were in 2008, you’re not relevant any more, he said. “Now more than ever, consumers can beat a path awayfrom your door.”Sansolo, who spent 13 years as vice president of FMI and is a former editor of Progressive Grocer, urged retailer attendees of his general session to figure out who they are as retailers and what makes them special. “In looking at your competition, how do you blow them away? The more defined your niche is, and if that niche is properly served, the happier your customers are.”
Sansolo cited an example from overseas. Despite the company’s retail woes in the United States, Tesco has a strategy that works well in England: It builds different types of stores tailored to different areas. A store near a highway or touristy area looks much different from a Tesco supercenter.“They want to make sure they have the right store for you,” Sansolo said.
On the other side of the retail coin is Best Buy, a retailer with beautiful stores that is becoming merely a retail showroom, having fallen victim to the stark reality that consumers have more information than ever before at their fingertips. Consumers do their shopping for a new TV at a Best Buy, then go online and shop for the best price.
Another unfortunate example: Tata built a $2,300 vehicle for consumers in India, many of whom could not otherwise afford a car—but the vehicle was found to “occasionally” burst into flames. Competing auto companies are using that fact to market themselves as the best value for the money.
Superior Strategies
Metro Petro, U-Gas and Parker’s take home CSP’s Convenience Retailing Awards of Excellence
Innovative store design, unique branding and giving back to the community straight out of gasoline margin: These are the three attributes honored in CSP’s annual Convenience Retailing Awards of Excellence.
Meeting Community Needs
A 40-year-old c-store with three automobile service bays initially presented a challenge for Clay and Mia Lambert. With no experience in the c-store industry, the Lamberts bought the Minneapolis site in 2003—and quickly turned that challenge into an opportunity.
Loc a t e d on the outskirts of the University of Minnesota, the Lamberts’ site was profitable, but they knew they could do better, and a unique store design was the way to do it.
“Once we cleaned the place up … we started busting at the seams with new business,” co-owner Mia Lambert says.“So we knew that we had some opportunity that we weren’t capitalizing on in the old structure.”
The result is Metro Petro, a 3,500-square-foot store that’s designed to appeal to female customers with a unique color scheme and materials, and an overall focus on safety and security. The couple purposely chose a female architect and other consultants with little experience in the c-store industry to ensure that their two-story store stood out from the pack.
Since opening the rebuilt store in 2009, Clay and Mia have seen a marked improvement in sales and store traffic. And more boosts are expected when the University of Minnesota’s TCF Bank Stadium—located just down the street—becomes the home field for the Minnesota Vikings for at least a few years.
A Foodservice Destination
The U-Gas site in Barnhart, Mo., is part c-store and part upscale QSR, with an innovative use of dual names.
The 5,300-square-foot site opened in 2008. U-Gas created a second brand—Gigi’s—that set the restaurant apart from the well-known local c-store brand. The name comes from the “nickname for the maternal grandmother of the founder of the company,” says Perry Cheatham, COO of U-Gas. “So when we needed a name for this place, we decided to keep it in the family, and it gave it a folksy, homemade feel.”
Outside, Gigi’s Fresh Café stands out for its stone façade and classic restaurant color scheme. Inside, the café is set off from the main c-store by a short hallway, providing a separate atmosphere while remaining contiguous with the main store. The offering is a collection of comfort foods and down-home favorites, such as flatbread pizza, oven-baked sandwiches, fresh salads, Panini’s and more.
To date, only one of the 19 U-Gas locations includes a Gigi’s Fresh Café, but the separate branding has taken on a second life as Gig’s Fresh Express, the chain’s commissary-foodservice offering that brings packaged hoagies, salads, fresh fruit, chicken tenders, burgers and more to the c-stores.
Fueling the Community
The Parker Cos. is giving away its gasoline margins—well, some of it.
The Savannah, Ga.-based chain of 27 c-stores is in the second year of its Fueling the Community program, which, on the first Wednesday of every month, donates to local schools a penny for every gallon of gas pumped. CEO Greg Parker says the program lets the communities know that Parker’s is interested in their well-being.
“We live in an age of empathy; customers want to support companies that are giving back,” Parker says. “So we think it’s really important that we’re going back in a profound way to the communities that are supporting us.”
Launched in April 2011, Fueling the Community works in conjunction with Parker’s Pump Pal loyalty program, which drops the price of gasoline at the pump. While a donation is made for every gasoline customer, regardless of whether they’re a loyalty-card holder, only those with a Pump Pal card can log onto the Fueling the Community website and choose the school they’d like the funding to go to.
“We’re giving the power to the people. We’re letting the people decide how the money is allocated,” Parker said. “We don’t restrict anything with the schools; the schools can spend the money any way that they want.”
So far the program has raised about $50,000, donated to numerous school districts in Georgia and South Carolina.
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.”
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