"People have less money...so we have to work harder," said CEO Joe DePinto, who pointed out that the sale of budget beer, budget cigarettes and private-label products are all up in 7-Eleven stores. "It's very difficult [image-nocss] for our smaller competitors to do private label. There's a lot of equity in the 7-Eleven brand."
Since officially launching the 7-Select proprietary brand in November with 32 snack, food and beverage items, the product line has seen remarkable growth. "You guys have done a tremendous job with 7-Select," DePinto told the group of more than 200 franchisees. "In the one month since you took on 7-Select chips, they are now five of our top six ship SKUs in the store."
The fact that 7-Select was able to muscle out strong national and regional brands is perhaps the best evidence so far that the retaileralready synonymous with its Slurpee and Big Gulp brandshas many more opportunities to mine in private label. And the current economy has provided the window.
As of December 2008, there were 85 SKUs in the 7-Select line, accounting on average for $30 in sales per day, per store. Come this December, there will be 250 SKUs in the line, with executives estimating average sales of nearly $100 per day.
"Everyone hears a lot of need for value for consumers, and private label as an industry gets constant media attention, being a growing segment not only in convenience but across all retail channels," Tom Gerrity, senior director of process foods, told CSP Daily News in a separate interview. In developing 7-Selectwhich also includes paper goods, batteries and packaged beverages 7-Eleven examined private-label lines not only at other c-stores but also at leading retailers in the supermarket and discount channels, such as Safeway and Target, to examine what they're doing right with product selection and packaging.
The goal is to offer consumers that value alternative, while providing franchisees with an opportunity to garner greater sales and profits. And so far, 7-Eleven's more than 3,300 franchisees are seeing the potential.
"Almost 100% of our stores are showing not only good purchases and sales but also the support of private label," said Gerrity. "In the franchise environment, that has been critical to our success, convincing franchisees...how important this part of the business is to their total business."
The 7-Eleven team sets sales targets by category, but with a goal that private-label will ultimately supply 15% to 20% of in-store sales. The recently launched 7-Select snack and candy line currently supplies just under 5% of sales. "But when you factor in our other private-label productsprivate-label beverages, foodservice, wine, waterit's really closer to that 15% of our sales today," said Gerrity.
The retailer has no intention of trying to replace proven, well-loved brands, noted the exec, and respects the power of major brands in certain categories. For example, its 7-Select candy line will focus on products such as bagged, take-home and theater-style candy that already sell well in both branded and private-label versions.
That being said, "There are some categories and products, quite frankly, where customers are willing to change [brands] quicklypaper towels and trash-can bags, as an example," said Gerrity. "So some of those categories we're recommending to stores that they only carry private label. But with snacks and grocery-type items, we are doing side-by-side comparisons within the sections, and we're also featuring private label as independent, to create awareness, like on a front end-cap." Shelf-talkers chat up price comparisons between 7-Select and branded.
"Quite frankly, some brands will decline, and private label may be an alternative for customers," said Gerrity. "But when the total category grows for our stores and our franchisees, that's when we win. And so far, our success has been growing the total category from a sales and gross-profit perspective."
Of course, this whole-hearted embrace of private label also requires that 7-Eleven don the manufacturer hat, along with that of distributor and retailer.
"The No. 1 challenge is really just managing the supply chain from manufacturing all the way to the store," said Gerrity. For example, products with a shorter code life, such as chips, require a firm command not only of the supply chain but also store-level execution.
"We're now taking charge of the business and managing it, and with that comes some responsibility," said Gerrity. "And in terms of reallocating our resources to manage the supply chain, I think it's been the biggest learning we've had." Forecasting also becomes a key in managing sales peaks and valleys of the private-label product.
And 7-Eleven's private-label factory will keep on churning. This May and June will witness the introduction of 23 new snack items, including traditional potato chips, pretzels and tortilla chips. Take-home sizes of potato chips with $1.99 and $2.99 price points will join the single-serve mix. The assortment of salty snacks will again grow this June and July with more nut and trail-mix offerings.
In the cooler, bottled teas will join 7-Select juices this May, while enhanced water will debut in early June. The chain is also currently pilot testing 7-Select packaged sweet snacks, which it plans to roll out to all stores by mid-year.
Watch for Monday's CSP Daily News for more from the 7-Eleven Franchise Owners Association of Chicagoland Trade Show.
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