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    The Pantry Starts Fresh Initiative

    Coffee program first on its list of improvements to food offer.

    CARY, N.C. -- The Pantry Inc., operator of 1,600 convenience stores in 11 states, kicked off its Fresh Initiative to improve its food offer with a new coffee program.

    Under CEO Terrance Marks, who joined the company from Coca-Cola Enterprises Inc. last September, the chain will renovate 100 stores this year and freshen up one-third of its base by the end of next year, according to a report by Jacksonville.com.

    The coffee initiative will lead the upgrade. A call requesting more information from The Pantry was not returned by press time.

    "Management stated that coffee is typically the first foodservice product tested by the consumer, so acceptance in the coffee category is critical in order to penetrate the meals-to-go category," BMO Capital Markets analyst, Karen Short, said in a research report last week. "Coffee also drives traffic and loyalty. [The] category generates 58 percent greater revenues than the next biggest [merchandise] category [hot dogs and/or pastry]."

    As reported by CSNews Online earlier this year, The Pantry's upgraded Bean Street coffee program will be an urn-based offer, featuring a new prep station and upgraded cups and accessories. More pastries and fresh fruit will be added to the a.m. menu.

    Most of chain's revenue now comes from low-margin gasoline sales. The retailer saw fuel revenue of $1.27 billion and merchandise revenue of $409.3 million in the second quarter ended March 25, 2010. However, gross profit from fuel was just $65.7 million, compared to a gross profit of $138.2 million from merchandise sales.

    "The company is clearly in the early stages of the turnaround, but with glimmers of hope in the Southeast, much easier comparisons and better execution at the store level, we see upside to [earnings] as well as to the stock," said Short, who maintains an "outperform" rating on the stock.

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