Mapping Out A Private Label Strategy

MAPCO Express aims to have its own brands generate 10 percent of total merchandise sales

When MAPCO Express fully launched its private label program in late 2009, the convenience store retailer did so in the midst of a severe recession. Not surprisingly, the quality and affordability of those products resonated with cost-conscious, value-focused consumers.

In the two years that have followed since, however, shoppers have become more accustomed to high-quality private label products, and gone are the days when consumers would gravitate toward private label because of cost alone. Now, they want it all: convenience, quality and a fair price, said Russ Shrewsberry, MAPCO's first-ever director of private label.

Shrewsberry, who joined the Brentwood, Tenn.-based chain in 2009, is leading the charge to bring everyday value and convenience to MAPCO customers, while allowing the company to capture a gross profit margin higher than what's typically generated on a branded product sold in its stores.

MAPCO, a division of Delek U.S. Holdings Inc., sees private label as a win-win scenario that benefits the business and customers alike. During the three months that ended June 30, its same-store private label sales as a percent of total merchandise sales were 4.3 percent, vs. 2.5 percent in the prior-year period. Longer-term, the company is aiming for private label sales to comprise as much as 10 percent of that total.

"MAPCO Express is committed to developing high-quality, innovative private label products for its customers," Shrewsberry said. "By developing relationships with smaller vendor partners that have national-brand manufacturing experience, MAPCO has been able to offer customers private label products that meet — and sometimes exceed — the quality of national brands."

The publicly-traded operator of more than 500 convenience stores has been testing private label products since 2006. Currently, MAPCO sells more than 220 private label SKUs in its stores. These include spring and purified water, soft drinks, snacks, cold grab-and-go items, candy, cigarettes, dry grocery goods, children's drinks, teas, energy drinks, energy shots, refrigerated juice, vitamin-enhanced water, automotive supplies and other general merchandise.

All MAPCO locations generally carry the same categories, but the breadth of selection is not necessarily uniform, as the chain often seeks to tailor its product offerings to fit the unique tastes of each local community it serves. The breadth of product offering can also be a function of store size — the larger the store, the wider the product offering, the retailer noted.

With this in mind, MAPCO has publicly stated it intends to build 10 to 20 new, large-format stores each year over the next several years. While this plan will enable the company to "high-grade" a major portion of its store network, it will also mean new retail locations that have more square footage to accommo date a wider variety of products and services.

Along with carving out more space, MAPCO is trying to better comprehend the tastes and preferences of the time-starved, cost-conscious consumer. In recent years, the company has conducted a number of studies looking at the behaviors of its core customer demographic. Its research has included independent market surveys, competitive analyses, customer segmentation studies, as well as more anecdotal feedback from its employees and customers.

"From this research, we have gleaned valuable insights that equip us to make better-informed merchandising decisions that resonate with our customers," said Shrewsberry. MAPCO believes the early success of its private label program has benefited from this willingness to better understand the types of products its consumers want to purchase. Looking ahead, the retailer said it will build upon the existing success of the program by:

■ Continuing to develop innovative high-quality new products;

■ Penetrating categories where its brand can provide most or all of the assortment; and

■ Continuing to expand into private label fresh food.

"Consumers have widely adopted many of our offerings as the ‘go-to’ product in that category," Shrewsberry said. "Given that private label customers traditionally tend to be a very loyal demographic, we believe we may have just scratched the surface on what stands to be an important long-term initiative for MAPCO Express."