Striking Gold

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Striking Gold

By Don Longo

The introductory text spoken at the beginning of the iconic sci-fi television and movie series, "Star Trek," begins: "Space, the final frontier."

To c-store operators looking to cash in on the uplift in sales that usually accompanies vendors' new product introductions, space is often a frustrating barrier. A whopping 86 percent of c-store retailers blamed limited space as their single greatest challenge to launching new products in their stores, according to the exclusive Convenience Store News 2008 New Product Scorecard. The space challenge has intensified over the past four years, as space limitations was cited by only 75 percent of retailers in 2004, the last time this survey was conducted.

Other challenges cited this year by retailers include:

-- Creating customer awareness: 52.4 percent, up from 35 percent four years ago;
-- Lack of manufacturer support: 35.7 percent, an increase from only 8 percent in 2004;
-- In-store execution: 33.3 percent, up from 15 percent four years ago; and
-- Distribution issues: 31 percent, up from 8 percent in 2004.

Nevertheless, convenience store retailers responding to CSNews' survey are hitting the mark at a higher success rate than in the past. Last year, 42 percent of products reviewed by retailers in the survey were still selling after six months in the store, compared with only 30 percent four years ago.

On average, c-store retailers added 34 new products to their assortments last year. About a quarter of respondents said they introduced between 10 to 25 new products into their stores during this time, and slightly more than one in 10 introduced less than 10 new items in their stores last year. Sixty-three percent reported launching more than 25 new products in their stores last year.

Overall, across all retail channels, new items contributed more than $15.8 billion in U.S. retail sales in 2007, according to The Nielsen Co. -- a 16 percent increase over 2006. Slightly more than 85,000 new UPC-coded products were introduced in 2007, about 3 percent fewer than the prior year, so it appears that last year's lineup of new products generated higher sales than those in previous years. The Nielsen research also reveals that new items, despite their importance, generate a fairly modest proportion of many categories' sales -- just under 4 percent for the average category.

In the c-store channel, retailers said they reviewed almost 60 percent of the 222 new products they heard about last year. Of those 222, they tested 41 percent or 90 items, and found room in their planograms for 31 percent or 68 items. About a quarter (24.8 percent) of the new products heard about were still in the store after six months.

Retailers' awareness of new products was highest in the packaged beverages category. Respondents reviewed, on average, 53 new items in packaged beverages last year, but only 30 percent of those products were still on the shelf six months after introduction.

New product success rate was highest in the salty snacks category, where 44 percent of items reviewed by retailers were still on the shelf after six months. Candy/gum and beer each posted a 37 percent success rate.

As one would expect, respondents to the CSNews survey listed "sales volume" and "gross profit dollars" as the two most important criteria for judging the success of a new product. However, a significant percentage also said the "buzz or excitement created" by the product is an important criteria.

In verbatim remarks, retailers also gave extra points to new products that "fit with our business model," "receive favorable comments from customers," "don't cannibalize sales from other items," or simply, "I like it."

Price promotions and shippers/in and out displays were the two most effective methods of promoting new products, according to retailers surveyed. More than seven out of 10 respondents cited these two methods, while another six out of 10 also credited signage as effective in making new items visible to their customers. Utilizing a "costumed person carrying a sign" and giving out free samples were two other effective promotion techniques mentioned by retailers in the survey.

On average, retailers give a new product 2.9 months trial before deciding if it is a success and incorporating it into their standard store set. That's slightly less patience than they showed in 2004, when they typically gave new products 3.3 months to prove their worth.

Retailers said they learn about new products from three main sources: manufacturer representatives, their wholesaler/distributor and trade publications. Web sites are utilized by only about a quarter of retailers for new product news or information.

Products that featured healthier eating and "green" attributes drove many of the new products tested in c-stores last year. "Write 'healthy' and 'green' on a sign and people are more interested," said one c-store retailer. For the beer category, the product's parent brand was a driving factor behind retailer decisions to carry or not to carry. For candy and snacks, new packaging design was the catalyst behind many of the new introductions, and for drinks, it was size, content and flavor, according to another retailer.

Some of the specific new products cited by c-store retailers for their success were:

-- Energy: AMP, 16.9-ounce Red Bull, Hansen beverages, 5-Hour Energy and Chaser energy shots, and Supreme Protein Bar by ProSource;
-- Beer: Miller Chill, Bud Lite Lime, Tilt for Anheuser-Busch;
-- Candy/gum: Wrigley 5, Three Musketeer Mint;
-- Tobacco: Black & Mild Wine Cigar and Marlboro Menthol Smooth cigarette; and
-- Ice cream: Hershey's.

Part 2 of CSNews' exclusive New Product Scorecard research will appear in our Oct. 3, 2008 issue.