Jan 06, 2010
CSNews Exclusive: Getting Fresh is Major Opportunity and Challenge for C-store Channel
NEW YORK -- The food industry is in a state of transition as consumers continue to look for convenient and healthy food choices, often a difficult combination to find, according to Sherry Frey, vice president of account services for the Perishables Group, a Chicago-based marketing and consulting firm in the fresh industry.
The grocery retail industry, quick-service restaurants (QSRs) and the convenience channel are all responding by providing more fresh and healthy meal solutions and snacks. This trend represents a great opportunity for the convenience channel to brand itself as a convenient food destination for health-conscious consumers, according to Frey.
While there isn't a crystal ball to outline future success, a good roadmap for the convenience channel would be to watch trends in the grocery channel, which currently represents roughly 96 percent household penetration for prepared foods. The convenience channel represents just under 10 percent, according to Nielsen's Homescan Panel.
Two key trends in the grocery channel that provide insight and opportunity for the convenience channel are on-the-go meal solutions and healthy snacking, said Frey.
On-the-Go Meal Solutions: Deli prepared foods represent roughly 60 percent of deli sales for the traditional grocery channel and continue to grow year over year. During the last 52 weeks, growth has been concentrated in deli prepared chicken (mostly driven by rotisserie chicken growth); deli sandwiches; deli dips, spreads and toppings (driven by hummus sales growth); sushi; and pizza (both pizza slice sales growth as well as whole pizzas as part of a take-and-bake program).
Convenience channel operators can capitalize on the fact that consumers are looking for both individual and family meal options. They're interested in unique foods, often ethnic, and they want to purchase meal components that they can combine easily at home.
Healthy Snacking: Many fresh food suppliers are making the transition to providing more healthy snacking options for perishables departments, offering products and programs specifically targeted to meet the needs of convenience store shoppers looking for snacks and meals on the go as well as unique needs of the convenience store distribution network.
"Chiquita, an industry leader in the grocery channel, successfully transitioned to the convenience channel," said Frey. "Understanding that c-store channel operators may have limited weekly deliveries yet must have fresh product on the shelves, Chiquita developed natural packaging technology, an exclusive Stay Fresh Pack, to extend shelf life -- keeping bananas ripe up to seven days longer and resulting in higher margins for the convenience channel." Another key element of the Chiquita To Go platform includes merchandising and handling training programs for c-store personnel.
Another example is Crunch Pak, a Washington state supplier of fresh sliced apples, which created packaging specifically targeted to in-the-car snacking. The company offers mini bags of sliced apples and "Grab 'n Go" fruit cups. Designed to fit into car cup holders and be eaten without a spoon, they provide healthy snacking options for kids and parents alike.
Frey also cites Ready Pac Foods Inc., which created a three-pronged platform for the convenience channel focused on fill-in/quick trip solutions, on-the-go meals and healthy snacking. Ready Pac creates convenience store and distributor partnerships to bring consumer-centric products to the convenience channel. "Whether it be their full meal-solution program, developed and delivered with a focus on product and culinary innovation as well as shelf-life extension expertise, or their healthy snacking line, which brings consumers both sweet and savory unique snacking options, Ready Pac provides their partners with a wide array of products that are ready to meet consumer demands for meals, health and convenience," said Frey.
While selling fresh food options is a great opportunity for the convenience channel, the reality of perishable products requires c-store operators to have their eyes wide open when it comes to understanding the challenges and nuances. Frey provided a few key insights from perishables suppliers who have made the transition to working with the convenience channel, which include:
-- Expect Product Shrink: Due to the seven- to 12-day shelf life of perishable foods, there will be product shrink at the store level. In general, 2 percent to 6 percent is good; 8 percent to 13 percent is average.
-- Price for Sales: Be aware of the price points of similar products in the grocery channel. It's OK to be a bit higher, but be reasonable. Expect lower gross margins to start -- margins will increase with the more active role the store manager/personnel put into their fresh foods case. Promotions, sampling and even meal bundling can increase sales.
-- Keep it Cool: C-store distributors are not typically used to handling perishable products. With maintaining 34 degrees to 40 degrees refrigeration optimum, it's important that there are "chill" capabilities along the distribution channel, from warehouses to trucks to the stores.
-- Increase Delivery Frequency: Due to the vast geographies, some distributors only deliver to stores weekly, often causing stores to run out of product. Ideal minimum delivery frequency is twice weekly for fresh code dates and to minimize shrink.
-- Engage Staff With Fresh: Work with partners willing to provide education/training to staff; reward staff for growing fresh sales.
-- Merchandise for Sales: Set up a schematic outlining all the "fresh food" offerings available by time of day. For example: breakfast equals fresh cut fruit/parfaits/whole fruit, while lunch equals fresh cut fruit/salads/snacking. This gears products specifically to the consumer who will consume products within one to three hours of purchase and improves food safety. Ensure staff monitor fresh product appearance, culling out-of-date and poor-looking product. When a consumer sees poor quality, rotting perishable products, it causes damage to a store's image, because it indicates there may be more than just the fresh foods that aren't being taken care of in the store.
"Consumers want fresh foods, and they're open to getting their foods from outlets other than the grocery channel if it means they will save time," concluded Frey. "This makes the convenience channel a logical solution for many consumers, but only if c-store manager know how to stock, merchandise and price fresh food options."
The Perishables Group (PG) is a Chicago-based independent consulting firm focused on creating innovation and value for clients in the fresh food industry. It offers a full spectrum of products and services geared toward complete market and category understanding, including research, analytics, marketing communications, category development, supply chain management and activity-based costing. Find out more at www.perishablesgroup.com, or follow PG on Twitter at PerishablesGrp.
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