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Convenience stores have developed a reputation for serving up fatty, sugary, calorie-laden snack products to satisfy the immediate consumption needs of consumers on the go. As the convenience industry evolves, however, healthier snack items have found their way into the product mix to satisfy the nutrition-conscious consumers of today's world.
The infamous low-carb diet, spearheaded by the Atkins and South Beach diets, has been the front runner of health crazes of late, although there are signs indicating the diet may have already passed its prime. Of the convenience operators who made low-carb snacks a notable addition to their product mix over the past year, many have cut back on new product introductions, and some have discontinued low-carb items all together.
In the first three months of 2004 alone, more than 600 new low-carb food and beverage products hit the market, up from 289 low-carb introductions in all of 2003, according to Mintel International's Global New Products Database. ACNielsen reported that sales of low-carb products increased by 127 percent in the quarter ending April 10 compared to the previous quarter. Sales were still up in the most recent quarter, but at a much slower pace of 20 percent compared to the previous quarter.
The boost in the number of varied low-carb offerings may, in fact, be the demise of the diet. "The problem is when people were on the [low-carb] diet and they only ate steak, cheese and eggs — there's only so much you can eat of that, so your calorie count goes down," said Ann Wilkes, vice president of communications for the Snack Food Association (SFA), Alexandria, Va. "With all these other choices and all these other products, you can eat a lot more and so you aren't losing weight. When people can't find the magic bullet, they lose interest."
The number of Americans who say they are trying to limit their carb intake has already
dropped from 32 percent in April to 21 percent in October, according to a recent study conducted for the Low Carb Manufacturers Alliance. The term "fad dieter" seems to be applied more and more every day when describing Atkins and South Beach devotees. "There was a Washington Post article that said three-quarters of the U.S. population had never been on a low-carb diet," Wilkes said. "You're talking about a small market that a lot of people are targeting."
Another problem with the staying power of low-carb is that the Food and Drug Administration (FDA) still has not provided a formal definition for what exactly constitutes "low-carb." Experts indicate that low-carb may be defined at 9 grams of carbs or less per serving, with no approved use of "net carb" or "impact carb" claims. When this does occur, consumers are going to be in for quite a surprise when they discover some of these products boasting a low net-carb count may not actually be low in carbs at all.
A Fading Giant
Many convenience operators were quick to jump on the low-carb bandwagon last year. Some saw great success and touted the validity of low-carb as a diet that is here to stay, while others did not fare so well. What may have worked even six months ago may be a completely different story today.
In March of this year, The Spinx Co. Inc., a 76-store convenience chain based in Greenville, S.C., added 3- and 4-foot health sections in about 20 of its stores, as well as additional low-carb and health products in the remainder of its stores. The company marketed the sections with eye-catching, full-colored static cling signage outside that read "Atkins-friendly products available here," as well as a large dangler sign hanging directly over the low-carb set.
Brad Eaton, category manager for The Spinx Co. Inc., said the sections had a big boom when they were first introduced, but that he has seen some fallout recently.
"We will continue with our low-carb sets next year, but we've really slowed down on new products," Eaton said, adding that the Atkins, Slim-Fast and EAS lines are his standard health brands that do the most business. "If you listen to the news and read articles in magazines and newspapers, Atkins may be having a small layoff. I think their product might not be selling as fast. There will probably be a boost in January again after New Year's, but I think that this year we will concentrate a little bit more on the stuff that's not good for you."
While other channels of retail may maintain that low-carb is as much in its prime as ever, the convenience channel may be one of the first to fall back because it's core customers aren't as "carb crazy" as others.
"I think low-carb is a factor where it never was before. If it's not quite peaking, it may be just past its peak," said Rick Zamarchi, retail category manager for San Antonio-based Tesoro Petroleum, which operates 200 convenience stores. "I don't think it's quite as big in convenience stores as it may be in supermarket outlets and health food stores."
Tesoro has added low-carb products to its Tesoro 2 Go stores in an effort to test out the convenience customer's affinity for health-conscious snacking. "I never created a low-carb section, but I did add low-carb items into the snack category," Zamarchi said. "I saw a boost in the healthier category, but I can't say it was entirely due to the low-carb additions to it. Quite honestly, I can look at the individual low-carb items, and they're not at the top of the rankings within that category. They do well and they hold their own within the space that they're allocated, but I kind of sense it might actually be dropping off a little bit."
Some retailers have already given up completely on the dwindling low-carb market, especially those who operate in more rural areas. "There's no weaning to it — it's dead," said Matt Vaughan, category manager for Urbana, Ill.-based Tri Star Marketing Inc., with 50 stores operating under the Super Pantry banner. "I've discontinued almost everything low-carb."
Vaughan said the company tried all the different Hershey low-carb candy products, low-carb snacks and even sandwiches, and just had no success whatsoever. "It was the wrong customer base for us in central Illinois. The dropoff was almost immediate," Vaughan said. "We tried a lot of different things and put signage up and POS next to the register, and even then nothing. I just don't think it's something that hit the c-stores too much."
While low-carb was ultimately a failure for Super Pantry, a few of the chain's stores have seen some success with other healthy products. "We do have a couple stores that are on the campus of the University of Illinois, and I do see more health-conscious shoppers there," Vaughan said. "The kids are buying more Balance bars and things like that, so we do have some success there. A lot of my stores are in smaller, rural towns with a lot of construction workers and blue-collar people. They're still looking for beef jerky, Marlboros and Mountain Dew."
But healthy snacks are not restricted to those that are low in carbs. "I think that there is more of an emphasis on healthy snacks than there ever has been, and we're certainly seeing the growth in our stores," Zamarchi said. "A lot of that is due to the fact that we've finally given it enough space."
There are several different health concerns to consider. According to the Food Marketing Institute (FMI), carbohydrates are now a concern of 20 percent of consumers, but close behind is sugar, cited by 18 percent, and calories, with 16 percent. In fact, consumer anxiety over sugar consumption has doubled in the United States since 1999.
The fallout of the low-fat craze in the1990s left many manufacturers and retailers in a lurch when their fat-free products stopped selling. While 48 percent of U.S. consumers still consider fat their top nutritional concern, according to FMI, low-fat products haven't had a boom in years because consumers learned that cutting out fat alone will not solve their dietary concerns.
Many snack manufacturers, already feeling the fallout effects of low-carb, have switched their focus to other health concerns in the snack industry, including trans-fats, sugar, calories and protein.
Energy bars and snack bars have emerged as top sellers among the snack category in c-stores. "We saw a tremendous increase in the energy bar category, which includes most of these low-carb entries," Zamarchi said. "The Protein Plus Power Bars, Pria Bars, Detour bars and MetRx are all doing well. It's almost across the board in the energy bars — everything I try seems to be doing well."
Taste becomes a factor as well when marketing healthy products. "In the snack bar market, the really strict, rigid, no-sugar, super-healthy ones didn't do so hot in sales at first," Wilkes said. "Then they started chocolate-coating them and things like that and they did better. People want to do what's right, but they don't want to make major changes. Life is busy and crazy and hectic enough."
Natural and organic snack items have also begun infiltrating the convenience sector, and those markets are expected to continue growing in the coming years. Natural trail mixes and granola products have done well in Eaton's stores, he said. The percentage of Americans who purchased organic foods at least occasionally increased from 37 percent in 2002 to 44 percent in 2004, according to Mintel International. In fact, the organic market grew 81 percent between 2001 and 2004 to reach more than $5.4 billion. "I think that market is growing," Wilkes said. "There is definitely interest in it."
C-Stores Will Be C-Stores
The bottom line is that convenience stores — even those seeing benefit from the healthy snack craze — are still selling just as many Krispy Kremes and Doritos as ever. Healthy snack additions might not necessarily bring new customers into the store, but they definitely might give those health-conscious consumers an additional option to purchase while there.
"There are going to be the consumers who are going to be healthy no matter what, and then there are others who are going to eat whatever they want and enjoy it — everyone else just falls somewhere in between," Wilkes said. "If you give them a good-tasting product that's more on the healthy side, they'll probably take it."
The key is monitoring consumer behavior at a store-by-store level to determine the demand for low-carb and healthy snacks within the local demographic. "Traditionally, you think of the typical convenience store guy being Bubba. He certainly didn't bite into the low-fat fad a few years ago and that went away as quick as it came," Zamarchi said. "With the low-carb, there seems to be a bit more staying power. I don't know which is driving the cart. I don't know if the products are bringing those customers in, or those customers are already in the store and we're finally finding out what they want."