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    How to Select Commissaries or Third-Party Partners

    Finding the right foodservice supply partner is a matter of due diligence.

    As consumer demand for restaurant-quality food continues to increase and competition on all foodservice fronts mounts, convenience store operators are looking for high-quality, fresh and consistent foods to offer customers.

    Some operators are able to deliver most of the fresh food themselves with custom-made foods in-store. Others use a blend of in-house-made and commissary-delivered food, while some larger operators actually own and operate their own commissaries and service their own stores, and perhaps even a few other food merchants in their markets, daily.

    The bottom line is commissaries — or third-party partners — are playing a larger and more important role in the convenience store food supply chain than ever before. Total commissary foodservice purchases were $9.8 billion in 2010, with c-stores accounting for 6 percent of the business or approximately $588 million, according to a recent Technomic Inc. foodservice commissaries study.

    There were four main types of commissaries identified in the Technomic report:

    • Independents: Small bakeries, delis, processors and caterers such as Great Kitchens, Great American Marketing and Fresh One. Meal assembly, light processing and direct-store delivery are typically offered.
    • Store-owned: These are off-site and on-site central kitchens such as those operated by Kwik Trip Inc., Wawa Inc., and Tedeschi Food Shops. Meal assembly and equipment procurement is involved, and products are delivered to stores.
    • Perishable food processors: Corporate sandwich assemblers such as Deli Express, Landshire Farms and Lettieri's are food processors/manufacturers that do central production and deliver direct to stores.
    • Grocery and merchant wholesalers: These are wholesaler and distributor buying groups, such as Core-Mark, Eby-Brown and Golbon, which provide c-stores with turnkey foodservice solutions. Offered are turnkey branded concepts and equipment, store foodservice planograms and dedicated program personnel.

    Which commissary model c-store chains choose depends entirely on their needs, foodservice menu and program goals, and the investment they are willing to make. Some operators choose the commissary route because they don't want to or cannot afford a high foodservice labor investment, while others may need competencies and skilled talent that they do not have in-house. Food preparation consistency and food safety concerns about in-store execution may motivate others to scope out commissary solutions.

    Whatever the impetus, finding the right commissary/third-party partner is critical. It requires an operator to have a clear picture of what is needed and where his or her foodservice business is headed. A willingness to complete the due diligence is also necessary to eliminate low performers to partner with highly reputable commissaries.

    Without question, the use of commissaries is increasing in convenience stores, with the largest growth occurring in sandwiches, fresh-cut fruit and salads, and Mexican food items, according to Technomic. Currently, the top four commissary food categories in c-stores are cold deli sandwiches and wraps (25 percent), burritos (24 percent), pizza (17 percent) and bakery (14 percent).

    What Commissaries Do Best
    So, what type of c-store foodservice operator can benefit the most from commissaries?

    Foodservice consultant Maurice Minno, partner with MPM Group and a member of the Convenience Store News How To Crew, said commissaries are for those with "a vision and strategy for operating a network-wide, growth-oriented, perishable fresh foods program designed to deliver a high-quality, consistent, safe, customer-focused, customized range of distinctive and compelling products." In other words, operators must be committed from the top of the organization down to the store level, from developing to operating market-leading fresh food programs.

    And chain size does not necessarily matter because there are so many different types of commissaries, from local mom-and-pop specialty commissaries to large processors with broad geographic reach. In fact, one of the challenges for large chains with super-regional or near-national store distribution is to find one third-party partner that can service all stores because the commissary segment is highly fragmented, according to Technomic.

    Without a doubt, the quality of commissary-delivered foods has come a long way in the past decade, and can be a tremendous asset to operators who don't want to produce all or any food products in the store. "You no longer need to think of a packaged product as something that has a 30-day shelf life and doesn't appear fresh-made," said one CSNews How To Crew retailer. "Products can be made fresh through a commissary and delivered multiple times a week, and packaged in containers that resemble something that was produced in the store."

    Commissaries are ideal for perishable fresh foods with a shelf life of more than 24 hours, such as baked goods pre-preparation; chilled foods such as entrée salads, fruit salads and side salads; and pre-prepared ingredients such as cooked proteins that only need reheating or dough that only needs to be proofed or can go from freezer to oven — for in-store product assembly, Minno said.

    Critical Characteristics
    When searching for a commissary, it's important to know what to look for and the right questions to ask. Operators want to make sure the facility is clean, safe and fully insured. At a minimum, it should be compliant with all local, state and federal food safety standards. Call state and local health departments and inquire about inspection scores, and past incidents reported or investigated. You can also check the Better Business Bureau for a record of complaints.

    Be sure not to just look at certifications and inspection records, or simply take the commissary operator's word for it. Make sure to spend a good amount of time in the commissary during peak operating times to see how it handles and makes products, as well as how it receives and ships product. Experts also recommend showing up unannounced to see how the operation really performs.

    "The customer is going to think you are making this product," one retail expert said. "If that product ever hurts someone, you may never recover from that. If you see anything that would cause you concern, you should address it before moving forward."

    Inquire how long the commissary has been in business, the tenure of the clients it serves and don't only ask for references, but check them. Larry Miller of Miller Management & Consulting, a How To Crew member, recommends doing more than making phone calls.

    "Go to other places they service and sample the food as the end user; don't just sample food at their production facility. Also inquire if they will develop and manufacture proprietary products if that is in your future plans," Miller said, adding that operators should also ask if they would be allowed to use or invite manufacturers to use the commissary's test kitchen to review new products or test new equipment. "Having use of a test kitchen allows the retailer opportunities to pull components together to invent signature products and work with suppliers in a R&D capacity. This often leads to opportunities to be first to market with new products."

    The following is other due diligence information to gather when looking for a commissary partner, according to Minno of MPM Group:

    • Understand the commissary's business model and how this fits with your retail needs.
    • Do they have c-store channel knowledge and experience?
    • Do they have passion for the fresh food business?
    • Is the company financially healthy and the business stable?
    • How is their fresh food innovation record?
    • Ask for the commissaries' current client portfolio and overall current market share. Is it stable, growing or declining?
    • Make sure they have enough capacity to grow with your business.

    It's important, however, not to get distracted from the fundamentals, which are safe food handling, and proper temperature controls at the plant and during transport.

    Eyes Wide Open
    While commissaries can provide convenience store operators a tremendous service and help reduce labor costs, one downside is a lower profit margin on commissary-prepared foods. As Larry Miller of Miller Management & Consulting, a member of the Convenience Store News How To Crew, put it: "If you expect the commissary operator to take all the risk of the program by guaranteeing all the product, then he needs to take the bigger share of the profit."

    On the upside, the advantages of using good commissaries are clear — consistent quality and freshness, food-safe products, more in-stock products, and more efficient ordering and distribution logistics. Still, there are some pitfalls to avoid.

    "Make certain that both parties have a complete understanding of the entire arrangement, from pricing, to ingredients, to quality control, to packaging and labeling requirements including nutritional information," Miller said. "Be sure there is a defined commitment to a delivery schedule and to service, with extra deliveries as volume warrants, especially during the start-up period of the agreement."

    Partnership problems typically arise because the proper due diligence is not done prior to hiring a commissary, explained Maurice Minno of MPM Group, another CSNews How To Crew member. "Do your homework. Always conduct a rigorous, independent evaluation of third-party commissary trading partners under consideration."

    Operators that use commissaries also must honestly manage their expectations and results, according to several retailers. For example, operators should want some product customization, but it's not realistic to expect the commissary to customize their entire offering, unless it is retailer owned.

    "To truly customize the entire product mix can be costly and can be a drain on the profitability if you don't have the volume to support it," one retailer said. "By not customizing, you are selling products like everyone else and providing little or no differentiation." The challenge is riding that middle ground, allowing for some product differentiation while still maximizing profitability.

    Working with a commissary is no different than any other supplier arrangement — both partners have to make money. "Have realistic expectations," one retailer expert warned. "What you save in labor, you will probably give up in margin. Think about that so you make a good decision."


    Our How To Crew
    Jack W. Cushman,
    Nice N Easy Grocery Shoppes
    Eric Giandelone,
    Mintel Foodservice
    Kane Kulas,
    CSM Bakery Products
    Larry Miller,
    Miller Management
    & Consulting Services

    Paul Pierce,
    7-Eleven Inc.
    Chad Prast,
    VPS Convenience Store Group
    Dean Dirks,
    b2b Solutions
    Burke Hodge,
    The Coffee Consultants

    Michael Lawshe,
    Paragon Solutions
    Maurice Minno,
    MPM Group
    Tim Powell,
    Bonnie Riggs,
    The NPD Group

    Jennifer Vespole,
    Quick Chek Corp.
    Jerry Weiner,
    Rutter's Farm Stores
    Kim Westover,
    Maverik Inc.

    Convenience Store News' How To Do World-Class Foodservice report is researched and written by Maureen Azzato, a freelance content developer and editor with more than 20 years of business publishing experience, with a primary focus on foodservice and retailing. Previously she was the founding publisher and editorial director of On-the-Go Foodservice, a publication for cross-channel retail foodservice executives, and publisher and editorial director of CSNews, where she worked for 17 years.

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