C-stores Must Focus on Customer Segments and Getting Foodservice Right

ORLANDO, Fla. -- Audience members at this year’s Nielsen Consumer 360 conference were treated to exclusive Convenience Store News and Nielsen research in a session that also featured representatives from Kraft, Red Bull and Nice N Easy Grocery Shoppes.

CSNews Editor-in-Chief Don Longo kicked off the session, noting the topic of the day shifted over the past year from skyrocketing gas prices to a plummeting economy. Revealing new data from CSNews’ 2009 Industry Report, Longo pointed out how record high industry sales were mostly driven by the huge run-up in fuel prices at the pump last year. He noted in-store sales, where retailers make most of their profit, were up only 2.5 percent last year, marking a slowdown from previous growth rates of 3.7 percent in 2007, and more than 9 percent in each of the previous two years.

Longo also unveiled the results of an Internet survey of c-stores—conducted in February 2009, at the height of the recession—which found that despite the difficult economy, almost half the retailers surveyed expected their foodservice sales in the first half of 2009 to exceed their sales over the same period in 2008.

The CSNews editor also presented results from an exclusive Consumer Trigger survey conducted in conjunction with Nielsen’s Homescan. The survey’s results indicated consumers would purchase more prepared foods from c-stores as long as the food "looked fresh" and "smelled good."

Kristen Moore, director of Core Retail Measurement within Nielsen’s U.S. Product Leadership Group, also presented exclusive findings from a survey of Nielsen’s retail and manufacturer clients.

“Manufacturers are seeing a shift in assortment mix and pricing for the convenience channel," Moore noted. "This is mainly due to consumers trading down and shopping less frequently and it is even more important now for you to focus on getting the right price/value mix. Consumers are not as price conscious when shopping convenience stores as they are in other retail channels."

Kraft’s vice president for the convenience channel, Dave Hansen, noted how the supplier has segmented c-store consumers into four main groups: blue collar male, white collar male (or road warriors), women and Hispanics. Each group has its own hierarchy of needs, said Hansen. From general questions like "what does a c-store mean to you?" Kraft drills down to discover how to align products, packaging and marketing efforts appropriately. "For example, Lunchables at first seems like more of a kids’ item, but we found the packaging of the products makes it a really good fit with what a male consumer feels is important about the convenience channel."

Brian Kuz, director of insights for Red Bull, the energy drink that launched a new product category in which c-stores dominate market share, discussed the relationship between energy drinks and the industry’s newest hot product, energy shots.

Red Bull, which just test launched its own energy shot line, found the two energy products attract very different consumer segments and shopping occasions—shots are usually for later consumption and mainly consumed by males aged 45 to 54; drinks are for immediate consumption and attract users aged 17 to 36, mostly males, but some females.

"As more mainstream brands move into energy shots, we are seeing an incremental rise in sales," noted Kuz, who said Red Bull projects energy shots to hit $600 million in sales this year with 80 percent of those sales coming from c-stores.

Matt Paduano, vice president, information for Nice N Easy Grocery Shoppes, the innovative foodservice-oriented c-store chain based in upstate New York, pointed out that doing foodservice right was a 15-year journey for the retailer, with much trial and error along the way. "Our founder, John MacDougall realized the days of 30 percent margin on cigarettes and gas were numbered, so he pushed us in this direction," said Paduano.

Today, Nice N Easy is often described as a "restaurant with gas pumps out front" rather than a c-store, said Paduano in noting the evolution of the company.
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