C-stores Want Healthy Groceries on Shelves

JERSEY CITY, N.J. -- Potato chips, hot dogs and fountain drinks are staples in a c-store and will probably never go out of style, but in the somewhat-declining, not-so-easily-rotated category of edible http://www.csnews.com/search-grocery.html">grocery items, does it make sense to sprinkle in some healthy options, such as organic or gluten free?

Some chains are looking to do just that by offering customers more choice in grocery (which saw a drop in share of in-store sales from 5.74 in 2008 to 5.35 in 2009, according to Convenience Store News Industry Report, 2010). The problem, according to many, is the retailers need be taken more seriously by manufacturers and distributors. At the moment, getting some of the growing niche grocery items on c-store shelves is more of a hassle than trying to sell them, said some operators. Nevertheless, those with the right demographics believe having this kind of choice is worth fighting for.

That's why Tim Cote, vice president of marketing at 100-store Plaid Pantries Inc., based in Beaverton, Ore., is taking the initiative to hunt down more niche grocery items, including organic items, for his stores.

"It's a real struggle for us to get attention from established manufacturers in this category since we're not the 'approved trade class,'" he told Convenience Store News. "They read how c-stores are struggling with grocery items, and they don't even call on us. They think we're all about hot dogs and greasy potato chips. Now, don't get me wrong, I love selling potato chips, but we can sell some things that are good for you, too."

In fact, Plaid Pantries already carries an organic beer, Fish Tale Ale, from a Washington State microbrewery, as well as some organic snack bars, fruit bars and sesame seed bars that resonate well with its customers.

With the company's demographics, Plaid Pantries will do well with some of these choice SKUs in grocery, Cote said, explaining customers don't outright ask for them, but that's because they don't expect them. "We believe that long-term, it's the place we want to be."

By year's end, Cote expects to mix in organic and other "healthy" SKUs until they account for about 15 percent of the edible grocery category, which, in itself, is only about 2 percent of total in-store sales, he said. He believes these SKUs "would over-perform. In this part of the world, they would appeal to all types — men, women and kids," he noted.

The expected payback for Plaid Pantries will be in frozen food, which is presently showing 50- to 60-percent sales growth over the year prior in an overall grocery category that isn't showing much growth at all — "mostly because we're paying attention to it," Cote said. He intends to make it just as strong this year by adding in more healthy items.

"Frozen has been the biggest growth area in grocery and it will be again this year," he stated. "Part of that is driven by the manufacturers that dominate the category — they are traditional c-store manufacturers." This includes companies like ConAgra and Nestle. "We don't have to chase them down because they're already here selling us things like candy and sunflower seeds," Cote explained.

Operations manager and grocery buyer Phyllis Simpler is another Northwest c-store retailer on a "pro-healthier choice" mission for her customers at the 13-store chain Minute Market. The Medford, Ore.-based chain doesn't sell gas, so it carries many more items than the average c-store, she explained. "We have about 7,200 SKUs," which affords the ability to offer more grocery options — and Simpler does her research and follow-through to get them right.

"Over the years, we've realized that our general customer base, as well as the younger demographics — especially young mothers — are looking for alternatives when they come into a c-store today," Simpler told Convenience Store News. "I do make every effort to satisfy a customer request, but I mostly drive our business with good category management."

The chain just recently embarked on a four-store program with one of its distributors, Core-Mark, to put in "what we call healthy foods," said Simpler. This includes fresh sandwiches, salads, fruits, soups, eggs and even a "Kidzone" two-shelf refrigerated section of items that kids might want to grab such as 100-calorie nourishing drinks from Nesquick and Foodles — containers shaped like Mickey Mouse ears that feature sliced apples, grapes, cubed cheese and other fresh alternatives.

Sales have been so good, "it told us, 'wow, we've really been missing the boat here,'" Simpler said.

In addition to this four-store program with Core-Mark, Simpler, like Cote, is taking the initiative to stock her stores with "alternative" grocery items that she seeks out. Items like Healthy Choice Fresh Mixers (microwavable meals) and low-sodium Campbell's soup she saw and taste-tested at a recent trade show hosted by her main distributor, McLane. But she also finds items on her own, both on the Internet and in the news that she has to convince certain suppliers and distributors to sell to her, just as Cote mentioned.

"You have to always be on the lookout for new items that you think might work, and then you have to be aggressive at going after them," Simpler stated. "I am currently doing research on gluten-free items and frozen yogurt because I think the time is coming where customers are going to ask us specifically for those."

Simpler also utilizes a local distributor for fill-in items that the "larger guys" might not sell her. "I like to have back-up in this business," she said. "It's a little bit more work, but it pays to get creative and do your homework."

Admittedly, healthier grocery SKUs probably account for only 2 percent of Minute Market's total grocery sales currently, according to Simpler, but it's a trend she intends to follow into the future.

Another c-store chain moving along a similar path is E-Z Mart in Texarkana, Texas, which already offers consumers healthier snack choices with items such as sugar-free gums, nuts, seeds, cereal bars, protein bars, granola, trail mixes, Smart Foods popcorn, fresh fruit and Baked Lay's, to name a few. Now the chain is also testing some additional grocery items in a handful of stores, according to Danna Huskey, category manager for the 300-store chain.

In the select locations, E-Z Mart added some items to the grocery sets that the consumer would find 'healthier for you' such as Healthy Choice soups, packaged oatmeal, frozen vegetables and Lean Cuisine meals, Huskey told Convenience Store News. "We are watching the purchases of the added items to see if our customers are buying them; it's an ongoing study at this point," she stated.