The Combo Special

Grocers are ramping up their presence in the c-store industry

Is it a supermarket retailer or a convenience retailer?

These days, a company doesn't have to choose.

While retail channel blurring is nothing new, it seems the grocer/c-store operator combination is an increasingly attractive one.

Consider some of the recent headlines that have appeared in CSNews Online:

• ShopRite Steps Into Discount Fuel Pool
• United Supermarkets Grows Its C-store Footprint
• Giant Eagle Cuts Ribbon on Newest GetGo Store
• Hy-Vee Expands Its C-store Presence

The trend is twofold: supermarket retailers are opening more convenience stores as diversification hits a high and, at the same time, more grocers are linking fuel reward programs with c-store gas stations.

Overarching this trend is "the incredible blurring of all channels and an increased premium on convenience," Don Stuart, chief operating officer of Kantar Retail Americas Consulting in Wilton, Conn., told Convenience Store News. "I think we're going to continue to see a blurring whereby the convenience channel will expand."

Right now, the grocery and c-store link is a tight one for good reason. In this economy, Stuart said it makes perfect sense for this type of diversification to ramp up. Grocery retailers are encouraging a "codependent relationship focused on some of the basics of life," he noted. "There's a symbiotic relationship on the essentials of life — food and fuel. These are basics for Americans, and grocery retailers are thinking if they can help their customers save on fuel, more money can be spent on food."

For instance, Dahl's stores in Des Moines, Iowa, teamed up with QuikTrip Corp. to launch a fuel savings program whereby Dahl's customers earn gas savings at QuikTrip once their grocery bills exceed $50. Through the Dahl's My Ways to Save Club Card, $50 to $99 worth of grocery store merchandise earns a 9-cent-per-gallon discount at participating QuikTrip or Dahl's Fuel locations. Those customers who exceed $150 in grocery spending receive a 15-cent-per-gallon discount.

Similarly, Chevron Corp. and the Vons division of Safeway Inc. recently rolled out their joint loyalty program, Reward Points. As Chevron's first loyalty program in the United States, it awards Vons and Pavilions shoppers up to 20 cents off per gallon at participating Chevron- and Texaco-branded locations in southern and central California.

"Safeway listens to our shoppers, and we understand the importance of stretching their grocery dollars and savings at the pump," said Mir Aamir, Safeway's president of customer loyalty and digital technologies. "By teaming up with Chevron, we're able to thank our customers with an innovative rewards program that makes these two frequent and critical purchases even easier and more affordable."

Fellow Iowa-based retailers Casey's General Stores Inc. and Hy-Vee Inc. also launched an aggressive fuel savings program whereby customers can save $2 or more per gallon on fuel purchases each week depending on the number of Hy-Vee's weekly fuel saver items they purchase.

LAYING THEIR CLAIM

Taking the diversification a step further, a number of grocers who have maintained c-store operations over the years are now focused on expanding their c-store counts. United Supermarkets LLC, Hy-Vee and Giant Eagle Inc. are three chains that have more c-store locations popping up recently.

United Supermarkets, based in Lubbock, Texas, got its feet wet in the convenience store industry with its A Taste of Market Street stores, mini-versions of its full-size Market Street supermarkets focused on fresh and prepared foods.

More recently, the company began rolling out United Express, a more traditional c-store format. The retailer has broken ground on two locations that will be its sixth and seventh freestanding United Express locations, featuring full-service, drive-thru windows. It is also planning to convert its three A Taste of Market Street stores to the United Express banner this year, said Eddie Owens, director of communications and public relations for United Supermarkets.

"First and foremost, it's our delivery vehicle for our fuel line. Secondly, it's a complement to our full-sized grocery stores," Owens said of the United Express format. "We've been in the c-store business in a round-about way for a few years under our three existing A Taste of Market Street stores; so we have been on the periphery for awhile. But now it makes sense to rebrand them under United Express as we move forward with that."

Not surprising, the c-stores operated by grocers place an emphasis on fresh food. For example, GetGo, the c-store banner of Giant Eagle, offers a variety of fresh foods prepared on-site, including sandwiches, Angus burgers, breakfast sandwiches, salads, wraps and more. All can be enjoyed in a sit-down café inside the store.

One of The Kroger Co.'s c-store divisions, Turkey Hill Minit Markets, is continuing its c-store expansion with a totally new store format called Turkey Hill Market. Measuring 6,800 square feet — approximately 75 percent larger than the typical Turkey Hill c-store — the goal of this store is to be a hybrid offering a wider product selection, fresh produce and meat, but still with the grab-and-go staples of a convenience store.

"We began this journey with a traditional convenience/gas footprint with the addition of staple grocery products," said Van Tarver, vice president of Kroger's Convenience Stores and Petroleum Group. "From there, we slowly added additional take-home products and categories. Today, we have more grocery items than ever before."

As Stuart of Kantar Retail pointed out, supermarket retailers today own only about 51 percent of food sales, which is "way down" from a couple of decades ago. Because of this, the grocery channel will be under continued pressure and how they adapt, "whether it's through convenience formats, a [new] service or more competitive pricing, will dictate their success," he said.

Meanwhile, the blurring has been working in reverse, too, as c-stores continue to amplify their fresh food status. While c-stores have not been on the leading edge of fresh food the way grocers have, Stuart believes c-stores have the envy of all channels based on their very namesake — convenience.

"Mass, grocery, dollar and drug — all the channels are trying to emulate convenience stores with newer, smaller formats," Stuart explained. "C-stores are in a better place than grocers because they do deliver on one thing very well — convenience. There is no middle ground on that."

That's not to say there's no ground for improvement, especially in this blurring time where every channel is learning and getting stronger from one another. "C-stores could be a lot smarter with shopper insights. They could better serve their consumers with that information and they can start attracting new customers," Stuart advised, noting that fresh meal solutions is another area of immense opportunity.

"How can c-stores leverage the Internet or Amazon or a fresh food pick-up site?" Stuart posed. "There have been little steps in that direction, but there may be a role for a fresh provider that can use the brick and mortar of a c-store to deliver a true benefit for consumers. Providing the next step in fresh with a distribution link for some type of online purchases may make sense for c-stores."

One thing is for certain, though. The blurring among all retail food channels will continue.