Time Is Ripe For Perishables

Produce makes its mark in the c-store channel

Consumer trends and packaging innovation have come together to open a door for perishable groceries in the c-store, as retailers are overcoming distribution and packaging issues.

With c-store sales in the perishable grocery category (fruits, vegetables, packaged deli, cheese) growing 12.4 percent on a per-store basis last year, following a 10.8-percent increase the year before and a 9.9-percent increase in 2007, forward-thinking operators are looking for more ways to tap into on-the-go customers' demand for fresh foods.

"The time is right for the c-store channel in terms of fresh options," according to Sherry Frey, vice president of account services for the Perishables Group, a Chicago-based marketing and consulting firm in the fresh industry. "Consumers are very comfortable getting food from a variety of sources now, and it's time for c-stores to offer more fresh and healthy options. Consumers are still on the go and still have hectic lifestyles, but they are paying attention to calories and sodium content. That puts great opportunities for healthy, fresh into the convenience store channel."

Operators who ignore the opportunity may find themselves losing ground to quick-service restaurants, which are "starting to do fresh really well," Frey said, listing fruit cups, yogurt cups, and baby carrots or apples as examples of french fry substitutes. "It's definitely the right timing for the evolution. Those double-digit growth numbers make a lot of sense."

C-store industry leaders such as Sheetz and Wawa have offered perishable groceries in to-go containers for years. Today, just steps from a case of fresh doughnuts at a typical Sheetz store, a reach-in refrigerated merchandiser holds a variety of single-serve perishable groceries, including cups of watermelon, grapes, strawberries, baby carrots/celery/dip and pepperoni/cheese cubes, as well as pre packaged products such as Disney Garden's apple/cheese cube/pretzel combinations; Oscar Mayer meat/cheese/cracker trays; Sabra hummus and pretzel crisps; hard boiled eggs; and string cheese. Meanwhile, Wawa customers will find year-round favorites and seasonal varieties of fresh fruit; veggies with ranch or peanut butter dip; apples with peanut butter or caramel dip; and pepperoni/cheese/cracker snacks. Wawa stores are supplied by a McLane Co. warehouse in New Jersey dedicated solely to the chain.

At c-stores operated by 7-Eleven Inc., which like Sheetz, operates its own fresh-food distribution system that allows for daily store deliveries, seasonal whole fresh fruit and fruit cups are selling briskly.

"I would say [the perishable grocery category] is a very robust business opportunity," Joe Hermes, 7-Eleven's senior fresh foods director for bakery, packaged bakery, cold snacks and salads, told Convenience Store News. "Sales have consistently grown by double digits year over year as consumers, especially our female shoppers, learn to trust the 7-Eleven quality promise."

The primary sales driver is the customer's desire for healthier alternatives to traditional c-store food, as well as convenience and value, he said.

To meet the consumer's quest for value, 7-Eleven stores offers small-size packages of cut fruit, positioned as snacks, plus larger take home, meal-sized containers.

Fresh food performance within the c-store industry has been gradually increasing and is highly correlated with an operator's location (college campus, neighborhood market or metro corner store), the season and climate, and merchandising, said Grant Demers, product director for fresh foods, McLane Co. Inc. of Temple, Texas.

"Introducing fresh fruit in spring/summer vs. fall/ winter tends to help establish a loyal consumer base for these products," Demers noted. "Also, dedicated, colorful, bright and well-merchandised open-air coolers tend to imply retail commitment, and are a great way to lure impulse trial and foster a loyal consumer base for fresh. Retailers who enter the fresh arena with both diligence and commitment are far more likely to realize growth and a sustainable competitive advantage."

At Quality Dairy Food Stores, based in Lansing, Mich., fresh fruits and vegetables play a very specific role: improving food options in an older neighborhood in the capital city's west side. Working with the Michigan State University Extension and the NorthWest Initiative, a nonprofit organization working to strengthen healthy communities, the chain has sold fresh, locally grown seasonal produce at reasonable prices in select stores for three years.

"The whole idea is to keep it local and keep it Michigan," said Tom Kolvachick, Quality Dairy's retailer operations manager, who credits District Supervisor John Christensen for spearheading the program.

The merchandise mix depends on what the chain's local farmer partner is harvesting at the time. "We've kept it small because the same need for produce isn't broadcast throughout the chain," Kolvachick said. 'But the idea has worked for all three sides — us, the community and the farmer."

Still, selling perishables presents significant challenges, including the distribution model used by most of the c-store industry and potential waste. "In general, c-store distributors are not used to handling perishables, and there is a much greater lead time required in the channel," Frey said.

From the time many perishable groceries, such as cut fruit, are prepared, they have nine to 12 days of salability, McLane's Demers noted. "The manufacturer must be able to deliver to a distributor within hours of production," he said. "In turn, the distributor must be able to expedite delivery to provide at least four to six days dating to retail."

Retailers with two or more deliveries per week are most likely to ensure fresh product is on their shelves. "The challenge is cultivating enough consumer demand to ensure enough retail demand in order to fuel enough distributor demand to justify multiple deliveries per week from the manufacturer," Demers said.

Beyond the issue of supply-chain dynamics, the strength of the corresponding cold — terms of safety, infrastructure and — critical to a successful fresh platform, he added.

Packaging innovation and merchandising choices, however, have lowered the hurdles. Crunch Pak LLC, based in Cashmere, Wash., offers individual-sized bags or clam shells of sliced apples rinsed in a blend of calcium and vitamin C to maintain flavor and color. The company also offers 5-ounce mini trays of apple slices, cheese and grapes. Ready Pac Produce Inc., based in Irwindale, Calif., makes ready-made salads or snacks, such as carrot sticks or celery packaged with peanut butter or ranch dips.

Now more than three years old, Chiquita To Go bananas, which are merchandised in a bag with a breathable patch that regulates aspiration, ripening the fruit, are now available in more than 20,000 c-stores, according to Ed Loyd, manager of corporate communications for the company, which also offers snack-sized packages of apples; apples and grapes; pineapple; pineapple and coco nut bites; and baby carrots.

"This is still a small amount [of c-store business] relative to the potential in the industry," Loyd said. "The interest in the channel for us, is knowing about 50 percent of produce dollars are being spent outside the traditional grocery channel. A huge pool of dollars is being spent as people want healthy snack choices."

Chiquita's challenge, Loyd said, has been tapping into c-store distribution. "It takes time to build that, but now we're working with traditional wholesalers, such as Sysco, and McLane and Core-Mark."

The team at 7-Eleven is investigating packaging alter natives to reduce the amount of plastic, while still having the characteristics the consumer demands: easy to open, non-leak and car friendly, Hermes noted.

"Packages that are self sealing and car friendly are definitely helping to advance sales of cut fruit in c-stores. Not having to put a heat band on the package saves time and labor at the processing facility, but more importantly, it makes it easier for the customer to open the package and not spill the contents," he said.

Also, many c-store operators are merchandising by day part so the perishables are consumed within one or two hours of purchase, which is helpful in cutting down on waste, Frey noted.

But he biggest caution Frey has for c-store operators is to ensure their stores are ready to offer perishable groceries. "If you don't have a well-lit environment and nice bathrooms, and if you haven't done the basic block and tackling, consumers don't have any interest in getting food there, let alone fresh food."

Assuming the store is well run, operators should team up with knowledgeable vendors that can help them offer the right selection, she said. "Vendor partners can help educate the staff and help retailers understand how to promote and merchandise perishables," she noted. "Retailers should dip their toe in, instead of going with an extensive launch."

Long term, the perishables category in the convenience store channel could move beyond healthy snacks into meal solutions, Frey said.

"I see the perishables evolving; down the road, there is no reason customers couldn't get more meal components in convenience stores," she said. "We are seeing some of that in the frozen and dairy categories, where there are more ingredients being bought. Perishable groceries hold huge potential for the shopper who doesn't want to run to the grocery store, but wouldn't mind buying a pound of ground beef, for instance. The c-store industry has the best locations and there is potential not just in produce, but in the entire grocery perimeter."

For comments, please contact Barbara Grondin Francella, Senior Editor, at [email protected].

"I see the perishables evolving; down the road, there is no reason customers couldn't get more meal components in c-stores."

SHERRY FREY, PERISHABLES GROUP

Bottom Line

• Perishable grocery sales have grown steadily in c-stores for the last few years.
• Distribution remains a challenge for the convenience store channel.
• Prepackaged fruits and vegtables are reducing operator waste.

"Introducing fresh fruit in spring/summer vs. fall/winter trends to help establish a loyal consumer base for these products."

GRANT DEMERS, MCLANE CO. INC.