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    FRESH FOOD: The convenience factor

    The c-store segment continues to improve its portable fresh food lineup -- and reputation -- and supermarkets can ill afford to ignore their cross-channel competitors' bid to boost business from the inside out.

    Given the media attention recently lavished on the new and emerging fresh food concepts now in place at several national and regional convenience store chains, one would be tempted to think these efforts represent a imminent threat to supermarket retailers.

    In reality, of course, c-stores have been steadily nibbling away at grocers' lunch and breakfast offerings for nearly a decade. And, by the looks of it, the most aggressive players are now poised to eat grocers' dinners, too.

    In today's intensely competitive climate, c-store operators are keenly aware that it's no longer sufficient simply to offer convenient stores in convenient locations with extended hours. Consequently, many of them are taking their fresh food commitments to new heights by offering a broad range of products -- from sweet goods to high-quality sandwiches, salads, and sushi -- that have heretofore been unavailable in traditional grocery stores, let alone c-stores.

    Moreover, in accordance with the old adage that convenience stores make only pennies at the pump vs. dollars inside the store, many leaders in the channel have been working diligently, and enjoying great success as a result, by capitalizing on the converging trends of health, indulgence, higher quality, and convenience that traditional retailers have been striving to exploit in recent years.

    As a result of a confluence of challenges presented by heightened competition, declining margins, and a heavy reliance on two core categories, gasoline and tobacco, the convenience store sector has been faced with difficulties on a number of fronts, says Sandy Skrovan, v.p. of Retail Forward, a Columbus, Ohio-based management consulting and market research firm specializing in retailing and consumer products marketing.

    Dynamic formats

    "C-store players increasingly are looking to the inside of the store and innovative technology to redefine the offer, differentiate from the competition, and enhance performance," says Skrovan, noting that the industry's leading operators are responding with a variety of strategies to address those concerns and position themselves to retain existing shoppers while attracting new ones -- particularly women.

    The dynamic formats and corresponding fresh food concepts developed by a handful of the industry's leaders, most notably Wawa, Inc. and Sheetz, Inc., "certainly represent good opportunities to help them increase their share of female customers by offering more salads and fresh foods," notes Michael Browne, executive editor of Convenience Store News, a sister publication of Progressive Grocer. As reported in CSN, nongas sales at convenience stores have grown faster in recent years than sales at any other category of retail outlets, especially between 1998 and 2002.

    C-store mecca

    The latest data released by the Alexandria, Va.-based National Association of Convenience Stores (NACS) also confirms a revitalized industry that has impressively rebounded from a three-year slump, with 2003 sales surging 16 percent over 2002 to reach a record $337 billion. Revenues, which jumped to $46.4 billion -- the largest one-year gain ever reported -- were driven by both strong increases for in-store sales and motor fuels sales, according to NACS, which found convenience store sales showing "real" growth in the 4 percent range, even after factoring in a higher store count and a higher consumer price index, especially with respect to wholesale cigarette and motor fuels prices.

    Pennsylvania has become a veritable mecca of c-store excellence as the home state of two of the industry's most widely acclaimed and gastronomically accomplished fresh food c-store stalwarts, Sheetz, which hails from the western part of the Keystone State, and Wawa, which rules in the east. Both led by offspring of their original founding patriarchs, the industry's two foremost pioneers have been parallel leaders of the c-store industry pack for the greater portion of the last two decades.

    Wawa has long been known for its hoagies, dairy products, and modern, clean, well-lit facilities, while Sheetz has earned applause for a well-designed multi-daypart foodservice bill that includes a renowned made-to-order sandwich program frequently hailed as an industry benchmark.

    Founded in Altoona, Pa. in 1952 by Bob Sheetz as a dairy and restaurant, Sheetz has branched into six states with some 300 stores while positioning itself for aggressive growth with a contemporary and ever-evolving store design, easy-to-navigate aisles, and a 24-hour open kitchen. The company boasts it was the first quick-service operator in the nation to use touchscreen monitors for ordering from a signature lineup featuring "sandwichez," "burgerz," "hot dogz," "saladz," "nachoz," and more.

    But don't let all the "zs" fool you: Sheetz has hardly been asleep at the wheel. In fact, the company's swift use of and considerable investment in technology, combined with upgraded back-room and front end software, are designed to give the chain a leg up on serving customers better and faster than the competition, which not only includes other c-stores, but also just about everybody else, except fine dining establishments.

    Sheetz offers branded Dot'z Bakery made-on-site baked goods, Fizz City carbonated beverage and Freezeway frozen beverage areas, and a centrally located Coffeez station, while also providing a selection of 100 percent guaranteed gasoline at highly competitive prices. Reportedly generating $2.4 billion in sales last year, Sheetz recently opened a $23 million distribution facility and now employs three registered chefs.

    Currently run by Stan Sheetz, president and son of the founder, and Steve Sheetz, Stan's uncle and the chairman, in addition to a handful of other equally talented family members, the company at presstime was preparing to unveil its first-ever "convenience restaurant," in its hometown. The 10,000-square-foot hybrid will have 50 seats indoors and 50 outdoors, with the gasoline canopy and pumps situated off to the side -- a conscious effort to downplay gas and heighten its foodservice offerings within. One of the company's newest stores, in suburban Pittsburgh, features its most recent concept, a Sheetz Bros. Coffee Bar that allows customers to order custom drinks using touchscreens.

    Meanwhile, out in eastern Pennsylvania, Wawa is keeping the wheels spinning with an exciting new format and a continued strong foodservice execution enabling the company to emerge as a market leader not only in its native Delaware Valley, but also across the country.

    Rice balls to go

    Beginning as a dairy business and named after the Lenape Indian word for Canada goose, Wawa, which now sells gas at 150 stores and offers surcharge-free ATMs across the board, continues to lay golden eggs to the tune of $2.8 billion in annual sales, which include a wide variety of fresh food offerings served in clean, functional facilities. In addition to Wawa's renowned custom-built hoagies, freshly brewed coffee, Sizzli breakfast sandwiches, and a complete line of branded dairy products, juices, and iced teas, all Wawa stores feature a broad selection of wraps, salads, fresh fruit, and produce.

    With roughly 550 locations in five states, Wawa has been an early advocate of the latest technology. Last month the company, based in the suburban Philadelphia town of the same name, signed a license agreement for Park City Group's Fresh Market Manager software to be installed at additional locations, to help bolster in-store foodservice with increased sales and reduced inventory and labor costs -- food retailing's two largest controllable expenses.

    The efforts of Wawa and Sheetz have hardly been lost on the nation's largest c-store player, 7-Eleven, which now operates 5,800 North American stores. As detailed in its 2003 annual report, the chain's top-line vision is currently focused on -- what else? -- promoting proprietary fresh foods while increasing sales via higher-quality sandwich and bakery lines, additional roller grill products, and new salads.

    During 2003 7-Eleven established a testing center in its Austin, Texas stores to gauge consumer tastes regarding fresh food products prior to a national rollout, and throughout much of this year the company's media budget and point-of-purchase displays will focus primarily on portable fresh foods that the company says will be a key contributor to its long-term growth.

    The efforts already appear to be bearing fruit, as shown by the company's April 2004 sales results of $988 million, an increase of 12.6 percent over the April 2003 sales of $877 million, while total merchandise (i.e., food) sales for April 2004 were $648 million, an increase of 8.7 percent over the same period last year.

    As recently reported in The Wall Street Journal, 7-Eleven and other large convenience store chains have begun opening new units that are roughly half the size of traditional 2,500-square-foot c-stores, to reach a wider audience in new venues like malls, universities, airports, offices, hospitals, and transportation stations. The Dallas-based company will reportedly open 100 such locations this year.

    On the heels of rolling out sushi in test markets in California and New York over the past two years, James Keyes, 7-Eleven's c.e.o., recently told Reuters he would like to bring one of the most popular fast-food items in Japan -- onigiri, or rice balls -- to the company's stateside stores. Enjoying the same popularity in Japan that sandwiches do here, onigiri, which are a little smaller than hamburgers, typically consist of rice wrapped in seaweed and stuffed with ingredients such as grilled salmon, pickled plums, or cod roe. "The movement toward the onigiri, or rice ball product, is certainly in development," Keyes told the press agency. "But we are probably two or three years away from being able to have the right quality and taste combinations" for U.S. consumers, he added.

    Canastota, N.Y.-based Nice N Easy Grocery Shoppes, a regional c-store operator, is also upping the ante with its foodservice and corporate branding initiatives, as evidenced by a new partnership with GroupRed, LLC, a retail design and consulting firm that will devise strategies and interior graphics to support a more consistent look and strengthen corporate brand identity for the 79-unit chain.

    Nice N Easy recently unveiled a new 4,600-square-foot store prototype in Tully, N.Y. Unlike the retailer's other units, which average 3,500 square feet in size, the new location offers freshly prepared foods, a coffee bar area, and spacious aisles.

    Supermarkets dive in

    As c-stores hasten their efforts to spit-shine their operations and elevate their fresh food concepts, supermarket competitors are also bringing their own versions of convenience shopping to time-starved consumers.

    Pittsburgh's dominant grocery chain, Giant Eagle, has begun making inroads with its GetGo concept, according to Rob Borella, director of communications. "At our GetGo convenience stores we focus on offering a healthy variety of fresh, high-quality, and convenient meal solutions," including premium salads, made-to-order wraps and sandwiches, signature pepperoni rolls, chicken tenders, and gourmet cookies, he says.

    "All of these items are prepared fresh daily, using only the finest ingredients," adds Borella, noting that the stores' four salad offerings are Garden Medley, Gourmet Chef, Grilled Chicken Caesar, and California Chicken Cobb.

    Florida's market leader, Lakeland-based Publix Super Markets, has also been slowly testing the market with its four-store Pix c-store/gas station concept. The chain opened its first such venture in the parking lot of a conventional Lakeland unit in October 2001 and followed with a second unit in Winter Haven. Both are 1,000-square-foot kiosk-style layouts in which gasoline dispensers flank each side of a small store. The two 4,000-square-foot Pix locations are in Poinciana and Deltona.

    The concept is expected to make its Tampa Bay-area debut later this year in Spring Hill, followed by a sixth location in Casselberry, reports the Tampa Tribune, which adds that the new locations will have 160-square-foot kiosk buildings with customer pay windows and four gasoline pumps, totaling eight fueling positions.

    Mainly developed to sell gas, Pix also carries customary c-store items like cigarettes, ice cream, candy, gum, and beverages, as well as a limited assortment of fresh products. In addition to Pix, Publix has also diversified with a liquor store business and is part owner of Crispers, a Florida restaurant chain.

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