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    Product Churn Continues Despite Product Woes

    New products at lower price points drive sales and success at c-stores.

    By Debra Chanil, EnsembleIQ

    The candy/gum category led the c-store industry in the number of new products introduced in stores in 2009, replacing packaged beverages, which led in 2008, according to the latest Convenience Store News New Products Scorecard. This study features a total 241 convenience retailers weighing in on which new products worked, which didn't and why, as well as exclusive Scantrack Convenience data provided to CSNews by Nielsen.

    Additionally, while the total number of candy/gum items remained level at 10,793 in 2009, the percent of those items that were new jumped from 19.3 percent in 2008 to 23.7 percent in 2009, the highest rate of any category.

    Nielsen Scantrack data shows that all categories included in the study increased the number of new UPC-coded items added in 2009 compared to the previous year. The largest percentage growth in new products came from the other tobacco products category, which grew from 468 new products in 2009 to 690 in 2009, an increase of 47.4 percent.

    Candy/gum also led the pack in terms of the success rate of new products, measured by the percent of products reviewed by retailers that were still included in the store offering after six months. Last year's success-rate leader, health and beauty care, dropped back to second place at 46.6 percent, followed by beer/malt beverages at 42.5 percent.

    Gross profit dollars remains the top measure of success for new products, followed by sales volume, according to retailers surveyed. The less tangible metric of "buzz" or excitement created at the store level is cited by more than one-half of all respondents. Other measures mentioned by respondents include increased sales of adjacent or related products, customer demand, "additional customers looking for that product or service," and more subjectively, "if I want one."

    In total, a majority of respondents (54.4 percent) reported an increase in new products added to their stores in 2009 compared to 2008. Almost one-third (31.4 percent) reported a similar number of new products introductions in both years, while 14.2 percent noted a decline in new items at their stores.

    General signage replaced price promotions as the most-effective method to promote new products. Both these methods, along with suggestive selling by employees, were rated as most or very effective by at least three-quarters of respondents. Looking at media advertising, television is rated high in effectiveness by about one-third (34.7 percent), followed by print (24.4 percent), radio (21.7 percent) and digital (21.5 percent). Other methods mentioned by respondents included in-store samples and coupons.

    The biggest challenge in launching these new products continued to be the limited space available in convenience stores, according to three-quarters of respondents (76.2 percent). Creating customer awareness was cited by more than one-half (59.5 percent). Challenges concerning in-store execution and distribution issues were each cited by fewer respondents in the current study compared to last year. Other challenges mentioned by respondents included training employees and lack of knowledge about new products.

    So what was the single most-successful product introduced in c-stores in 2009? In verbatim comments, respondents cited the following products and reasons for their success:

    -- "5-Hour Energy shots. Customer demand, price per item."

    -- "99-cent Coke cans. Great price point."

    -- "Bud, Bud Light 30-packs. Provided value."

    -- "Bud Light Lime. Excellent manufacturer marketing support; aggressive product launch discounts to introduce the product at a low price."

    -- "Fresh cut fruit. Good quality and lack of anything else similar available anywhere else."

    -- "Cigarette papers, cigars, for their good price points."

    -- "Dolly Madison Donuts. Excellent display rack near cash register counter."

    -- "Energy shots. National advertising."

    -- "Energy drinks. Customer demand."

    -- "Four Loco Beer. Customers like beer with flavors."

    -- "Cascade Ice flavored water. It provided an alternative to soda and since it is carbonated, you feel like it's a soft drink."

    -- "Fresh-made breakfast sandwiches. Set a goal on sales you want to achieve, educate your employees and bring awareness to your customers with samples and suggestive selling."

    -- "Fresh-made, grab-n-go subs. Quick and easy for the customer."

    -- "Kool-Aid Burst, 6-ounce. A different choice for kids."

    -- "Krispy Kreme Doughnut Holes. They are bite-size and come in a cup with a lid that fits nicely in the car cup holder."

    -- "Monster [energy drink]. Popular brand at a decent promo price."

    -- "Pall Mall, thanks to RJRT support."

    -- "Roll your own cigarettes, due to the tax increase on cigarettes."

    -- "Roller Bites. Good quality product, easy to prepare at a competitive retail."

    -- "Single-serve, OTC drug items. Lower price on something that immediately helps our customer."

    -- "Simply Orange drinks. Good promotion execution and a well-made product."

    On the other hand, respondents were equally vocal about the new products that didn't work:

    -- "20-ounce beverages. Customer like the 16-ounce price point better."

    -- "Candy shippers. Blah! No support from manufacturers to encourage stores to sell -- they just set it up on floor and hope someone buys it."

    -- "Energy drinks with no advertisements and less taste."

    -- "Energy drinks with high [retail] prices."

    -- "Flavored beer. Too much of a fad."

    -- "New beverages in cold vault. Too many selections."

    -- "Premium ice cream. Poor wholesale support and price resistance."

    When asked to name trends that have been the most significant catalysts for the launch of new products in the past year, respondents most often cited lower price points, a reaction to the downturn in the economy and subsequent need to accommodate the tightening of customers' budgets. Several mentioned the growth of private label as a way to achieve these lower price points. Other trends mentioned by respondents included an emphasis on fresh foods and prepared food items, a continuation of the healthier eating trend and increased demand for energy products in a variety of formats, including shots, drinks and gum.

    A majority of respondents rely on wholesalers and distributors for new product information (73.7 percent), followed by manufacturer representatives (61.5 percent) and trade publications (60 percent).

    On average, two-thirds of respondents (66.3 percent) said they give new products two months or less to prove their worth in the store. Only 11.4 percent allow three to six months before deciding the fate of these new products. Signs of steady growth, customer demand and space available are most likely to affect how much time a product is given, according to comments from respondents.

    By Debra Chanil, EnsembleIQ
    • About Debra Chanil Debra Chanil is Director of Market Research of EnsembleIQ. She can be reached at [email protected]

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