Healthy Foods, Healthy Profits

“Road Trip: Healthy Convenience Store Foods.”

If you’ve been wondering about the profit potential healthy products have for your convenience store, the above headline from a recent article at Cookinglight.com should quell any doubts.

“While convenience stores still have their fair share of less-than-optimal eats, many now stock a surprising selection of fresh and healthy choices,” said the article, which listed whole-grain cereal cups, energy bars, peanuts in the shell, low-fat yogurt, fresh fruit cups, single-serve bags of baby carrots, bananas and part-skim string cheese sticks as healthy c-store options.

That the words “healthy” and “convenience store” made it into the same sentence — in a Cooking Light magazine story, no less — underscores the sea change occurring in the convenience store industry. And it shows that carrying products with healthy nutritional profiles can be worth the investment for c-store operators.

In fact, retailers that don’t increase their assortment of healthy items risk losing sales, industry data shows. For example, consumers are looking for snacks that offer a perceived health benefit, whether these snacks are salty, savory or sweet, or high-, low- or no-calorie, according to The NPD Group, a Port Washington, N.Y.-based research firm.

Protein, natural, and no or less sugar are the health callouts consumers look for the most when they eat a snack, which may occur in between meals, at meals or as a meal, NPD found.

The move toward snacks with a health benefit is driven by the younger generations: generation Z, ages 0–23; millennial, ages 24–37; and generation X, ages 38–48. These generations together make up the bulk of the population, and their positive attitudes about snacking, desire to eat more healthfully and need for convenience are factors behind the growth of snacks with a perceived health benefit. Additionally, a large number of baby boomers have health conditions and tend to watch for sodium and sugar content in snacks.

“Snacking today is a prevalent behavior and there is an opportunity in every snack category for manufacturers to call out the specific health benefits — from desirable ingredients to clean labeling,” said Darren Seifer, food and beverage industry analyst for NPD. “There is also a generational slant to take into account for each category when positioning and marketing snack foods.”

While better-for-you, savory and sweet are the three mega snack categories, consumption of better-for-you snacks, such as fresh fruit, breakfast/sports bars and yogurt, is up 14 percent since 2006 and forecast to grow the fastest out of these three categories, according to NPD’s The Future of Eating: Who’s Eating What in 2018? report.

WHAT TO OFFER

Better-for-you products with c-store profit potential range from lower-calorie items, to non-genetically enhanced and gluten-free products, to vegetables and fruits, to foods generally deemed more wholesome such as yogurt and whole-grain alternatives.

Low-calorie foods, in fact, are outpacing their higher-calorie counterparts throughout the food and beverage industry, according to a 2014 study conducted by The Hudson Institute, a Washington, D.C.-based think tank.

The study, Lower-Calorie Foods and Beverages Fuel Growth at Healthy Weight Commitment Foundation (HWCF) Companies, examined sales data from 16 major food and beverage companies that are members of HWCF, a CEO-led coalition of 275-plus businesses including retailers and consumer packaged goods companies.

Results showed 99 percent of the almost $500-million sales growth over a period of five years ended Dec. 31, 2012 came from lower-calorie foods, while only 1 percent came from higher-calorie items. On the supply side, there was a 96-percent increase in the availability of lower-calorie products, the study found.

“If you are not advancing and pushing these kind of products, you are not going to grow,” noted Hank Cardello, a senior fellow at The Hudson Institute.

FRESH FRUIT & VEGETABLES

Increased demand for fresh produce at c-stores, combined with advances in distribution and merchandising, has created new opportunities for produce providers, distributors and convenience store retailers, according to “Building the Business Case for Produce at Convenience Stores,” a publication jointly published by NACS, the Association for Convenience & Fuel Retailing, and the United Fresh Produce Association.

C-store sales of produce reached $328 million in 2013, an increase of 16.7 percent — more than double the overall 7.3-percent growth rate of produce in the United States, noted NACS.

“A recent NACS member survey reaffirms the importance of produce: 62 percent of members say produce is important to their business plans in 2015,” added NACS Chairman Steve Loehr, vice president of operations for La Crosse, Wis.-based Kwik Trip Inc.

Nielsen global snacks data, released in September 2014, also revealed that consumers want more produce. When asked which snack they would choose above all others, consumers worldwide overwhelming named fresh fruit, with chocolate a close second.

WHOM TO TARGET

Not everyone who walks into a c-store, of course, wants healthy food.

Cardello identified three types of c-store customers to consider as potential healthy food buyers:

• Those intensely focused on healthy eating options, such as organic, gluten-free and non-GMO items;
• Those who are neutral about nutritional profiles; and
• Shoppers in the middle of the spectrum, who represent the biggest opportunity for growing sales of healthy items.

“This [middle] group doesn’t want pure or perfect food. They just want something better,” Cardello explained. “They want a better lunch for their kids. They want a better snack. They want something a little better to drink that might not be as high in calories or loaded with sugar. They don’t necessarily need it to taste like tree bark. That to me is the quintessential group driving the growth here and that is where the opportunity lies for [c-store] operators.”

PRODUCT VISIBILITY IS KEY

Whatever c-stores decide to offer and whomever they decide to target, product visibility is key to increasing sales of yogurt, fresh fruit and other healthy products, according to Cardello.

“You need more visibility and more space in the stores for these kind of items — otherwise you are leaving sales on the table. Visibility drives sales,” he said. “Anecdotally, I’ve seen a lot of the c-stores where they’ve added, let’s say fruit, by the registers and that is really incremental business. That’s just space they weren’t using before and it’s working.”

If you bury better-for-you products someplace, however, “you’re burying profits.”

“You need more visibility and more space in the stores for these kind of items — otherwise you are leaving sales on the table. Visibility drives sales.”
— Hank Cardello, The Hudson Institute