You’ve Probably Never Heard of America’s New Largest Pizza Chain

March 30, 2015

Hunt Brothers rules rural pizza market from lowly gas stations

Associated Press
Business Around the Region
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ANDERSONVILLE, Tenn. –If you’re looking for pizza along the Andersonville Highway between the Museum of Appalachia and a mountain lake created by the Tennessee Valley Authority, your best bet may be the same place where you buy your bait and fill up your car.

Hunt Brothers Pizza is quietly winning over the rural South by slipping into places big-name pizza chains probably couldn’t survive. It has installed its pizza ovens at so many gas stations and convenience stores that it has more U.S. locations than either Domino’s or Pizza Hut.

Located across from a pasture, the Rightway Foodmart in Andersonville sits a little too far from the interstate to get the type of traffic that could support a free-standing fast-food outlet. But it draws plenty of customers who fish or boat on nearby Norris Lake to its pared-down pizzeria, which requires just a few feet of counter space. And the pizza inspires strong loyalty.
“It beats Pizza Hut and Domino’s,” said 23-year-old Brittany Bunch, who buys Hunt Brothers about once a week during breaks from her job at a water damage company. “It’s just got more flavor. It seems like, with the others, you’re getting cardboard.”

While Hunt Brothers may be unknown in many households, it runs television ads during NASCAR races and cable outdoors shows. For several years, it has sponsored Kevin Harvick, who won the 2014 NASCAR Sprint Cup.

On a recent morning at 10:40 a.m., Rightway owner Roy Bruce started sliding pizzas for the lunch rush into a conveyor-belt oven. Each pie starts out frozen, a crust with sauce and a layer of cheese. Employees can add fresh pepperoni, extra cheese and other toppings. The result after about 5 minutes in the 525-degree oven is a bubbling-hot pizza with browned toppings that tastes comparable to the big delivery chains’ pizzas.

In an hour, Bruce sold that first pizza and another one in two-slice $2.99 “hunks” from a countertop warming display near his cash register. Nearby, sits a display of fishing hooks, bobbers and jars of bait. Pizza customers included a UPS delivery driver, a woman on her way to lunch with her daughter and a guy in camouflage who confessed he was just coming from the liquor store.

In a typical Hunt Brothers arrangement, Bruce said he paid about $10,000 for his oven, freezer, display case and other equipment and now just pays the Nashville-based company for the pizza ingredients. Hunt Brothers doesn’t charge franchise fees or require a contract.

The privately owned company fine-tuned this approach starting in the early 1990s when four brothers who’d worked separately in the restaurant industry joined forces to sell pizzas to convenience stores. Hunt Brothers had 750 locations by 1994, said Keith Solsvig, its vice president for marketing.

“Convenience stores in rural areas were the hub,” Solsvig said in a phone interview. “A lot of people coming and going. And a lot of these smaller towns, they didn’t really have a lot of other restaurants or other places to eat.”

Hunt Brothers now has 7,300 locations in 28 states, with some sites the only dining options for miles. Alabama, Georgia, Tennessee and Texas each have more than 700 locations, Solsvig said. Not all locations are isolated, with Hunt Brothers also found at busy highway interchanges. And it’s moved into some urban areas, such as Memphis.

The convenience store model is different from a free-standing restaurant, and a Hunt Brothers outlet is likely to bring in far less than the more than $700,000 an average Domino’s makes a year, said Darren Tristano, a restaurant industry analyst with Technomic.

Tristano noted that 7-Eleven offers pizza in some of its 7,800 U.S. locations and that Little Caesars has also had success in rural areas.

While Hunt Brothers declined to discuss company finances, Bruce says he sells about 500 pizzas a month, much of it by the hunk. Combined with drinks and other convenience items, he estimates pizza customers spend more than $10,000 each month in his store.

Tristano says the simplicity of the setup has helped the company grow. Bruce agreed.

“In a convenience store, you’re doing the register, you’re doing gas. You’re doing so many different things,” Bruce said. “It’s hard to be able to do pizza from the ground up, making the dough and the whole thing.”

Fred England, a food vendor at a furniture factory about 30 miles east of Andersonville, added a Hunt Brothers to his lunch counter about a year ago to keep his customers from looking elsewhere for their pizza fix.

“The problem I had was all these other places were delivering pizza, so I had to come up with something,” he said while stopping at Rightway to chat with Bruce.

Angela Moles came in to get three hunks of pepperoni pizza and drinks to take to lunch with her daughter. The 35-year-old Andersonville resident said she buys Hunt Brothers about twice a week.

“I love it,” she said. “I usually don’t get other pizza.”


How Jonathan Smiga Crafted Barnie Coffee & Tea’s Turnaround

March 27, 2015

Anjali Fluker
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J onathan Smiga wasn’t sure quite what he was getting into when he took over the helm as president and CEO of the then-struggling Barnie’s Coffee & Tea Co. in 2010.

The Winter Park, Fla.-based firm’s board had just fired founder Barnie “Phil” Jones Jr. after falling from 120 cafes in 15 states during the early 2000s to about 50. Sales also had declined to $5 million-$6 million from a peak of $67.3 million in 2005.

But rather than trying to compete with coffee giant Starbucks by opening new cafes in every trendy city, Smiga instead pared down the store count to just two — the original store on Park Avenue in Winter Park and one in downtown Orlando’s CityArts Factory — and put a heavier focus on branding and expanding its high-quality products that target socially and environmentally responsible consumers. The idea was to put the new Barnie’s CoffeeKitchen into the movement known as the third wave of coffee, where coffee is looked at as an artisanal culinary specialty from production to brewed cup, rather than a commodity.

The result: The company’s products now are available in grocery stores, convenience stores and specialty stores in 22 states. And 2014 was a breakout year for the new-and-improved Barnie’s, where revenue doubled and earnings were up by $2 million year-over-year.

Today, Barnie’s is in its 35th year and expects to see sales back up to about $20 million this year, up 50-80 percent from 2014.

“We’re breaking out from being that regional coffee shop in town,” Smiga told Orlando Business Journal in an exclusive interview. “We bring the nimbleness of a third wave of coffee company — from production to our talent to our intellectual property — married with a mature company which allows for us to take our business to a national scale.”

No pain, no gain

The first year Smiga was top executive at Barnie’s wasn’t easy. Stores had to shutter, employees were let go and revenue dropped by one-third.

And things appeared bleak when stores started to close because of what had happened in Barnie’s history: The company in 2006 sold off 56 shops mostly in malls, cutting sales nearly in half.

But Smiga said the Barnie’s team hunkered down and focused on building its intellectual property, brand and figuring out the best way to shed its former reputation. Rather than being known as the local Starbucks competitor, the firm wanted a more global reach by making its products the first thing people think of when they hear Barnie’s.

“We stayed in that zone a couple of years, but we were not dormant,” Smiga said. “We were figuring out the puzzle pieces.”

It all paid off, as last year the firm achieved positive cash flow without venture funding.

Much of the growth came from signing deals to sell its packaged products in large retail chains. And last year, Barnie’s relaunched its website to capitalize on the growing e-commerce industry with online sales, which today represents about 10 percent of the company’s sales. It has been known to draw buyers fro m as far away as Germany.

Java culture

Along with bringing an analytical look at the coffee business, Smiga also brought a change to the culture at Barnie’s CoffeeKitchen, according to Senior Vice President of Sales and Marketing Sonya Hardy, who has worked for the company for more than 20 years.

Barnie’s originated as a company that celebrated the purity of international coffees, but got away from that as it ventured into growing its store count.

“Smiga really got us to refocus on the coffee and getting us into the third wave of coffee movement,” Hardy said. “Then we were able to work that into the guest experience.”

Reining in growth

Now that the company is back on a growth trajectory, the difficult part is not falling into that same trap of trying to grow by opening a slew of new stores, Smiga said.

Though Barnie’s is looking at potential new stores in strategic areas in the Southeast, Midwest and Texas, Smiga said the focus still will be on Barnie’s coffee and tea products. The firm will continue to create new Barnie’s-branded packaged products, including a new cold-brewed bottled drink expected to hit the market later this year.

“We’re next going to focus internally on strategy in the small business sense,” he said. “When you’re underwater, you only want to get to the surface. You’re focused on surviving. But once you get to the surface, you can start making executive decisions.”

However, there’s still room to add stores, according to Darren Tristano, executive vice president of food industry research firm Technomic Inc.

Making a mark in the highly competitive coffee house industry won’t be easy, but it is possible, he said. About 27,000 coffee houses in the U.S. generated $23.5 billion in sales last year, mostly dominated by mega-chain Starbucks and then Dunkin’ Donuts, Technomic reported. “Barnie’s focus has been more on retail, and they’ve been doing well with the restaurants or stores they currently have,” Tristano said. “They should have opportunities on the retail side as a smaller brand to continue to expand as profitability rises.”

Background: Grew up in the food business in Sarasota and Palm Beach; was co-director of education at the Culinary Institute of America in Hyde Park, N.Y.; recruited by Darden Restaurants Inc. to oversee a turnaround for Olive Garden in the mid-1990s; was general manager of a Robert Mondavi Winery-oriented attraction at the 55-acre Disney’s California Adventure theme park in Disneyland Resort

Education: MBA, New York University; master’s in hotel administration, Cornell University

Projected 2015 revenue: $20 million

Employees: 60

Contact: barniescoffeekitchen.com

Barnie’s CoffeeKitchen cafes are no longer the only place to get a cup of your favorite java or tea. Here’s where else you can find your favorite flavors and brews:

On the web: Order any of Barnie’s products on the company’s website at http://bizj.us/1bp5gd or search for coffee and related products on Amazon.com.

In stores: Barnie’s can be found on the shelves in supermarkets and retail locations, including Publix Super Markets, Winn-Dixie, Sweetbay, H-E-B Grocery, Food Lion, Hannaford Supermarkets and Harveys.

In cafes: Two full-service cafes still exist, 118 S. Park Ave. in Winter Park and 29 S. Orange Ave. in downtown Orlando’s CityArts Factory.

Dr. Phillips Center for the Performing Arts: Two Barnie’s coffee bars can be found in downtown Orlando’s arts center.

New products

Some original products created by Barnie’s CoffeeKitchen:

CupUp: A single-cup brewing machine compatible capsule that holds 30 percent more coffee than other leading brands. Features a patent-pending channel design to create a particular extraction of flavor and aroma. Available in several of Barnie’s most popular flavors.

Brewsticks: Single-serve liquid instant coffee that comes in portable packets. Features 100 percent cold-brewed Arabica coffee soluble in hot, iced or bottled water.

Publix Premium Ice Cream: Publix-branded ice cream in Barnie’s CoffeeKitchen flavors, including Barnie’s Coffee and Santa’s White Christmas

Publix Premium Espresso Chip Frozen Yogurt: Barnie’s Santa’s White Christmas coffee-flavored frozen yogurt with chocolate espresso chips

Publix Premium Indulgent Yogurt: Barnie’s Santa’s White Christmas coffee-flavored yogurt with mocha chips

Sources: Barnie’s CoffeeKitchen, Publix Super Markets Inc.

By the numbers

Stats on Barnie’s CoffeeKitchen:

120: Total U.S. stores at its peak

60: Employees

22: States where you can buy its products in convenience, grocery and specialty stores

4: Barnie’s ice cream flavors you can get at Publix supermarkets

2: Remaining stores under the firm’s new business strategy

Source: Barnie’s CoffeeKitchen


7-Eleven Launches New Doritos Loaded

July 18, 2014

By 10 a.m. Wednesday, the day of its launch, 7-Eleven’s brand new Doritos Loaded product had at least one Crystal Lake fan.

Karen Black-Vetter went into 7-Eleven, 1024 McHenry Ave., Crystal Lake, intending to leave with the usual snacks. But then, she saw the bold red signs advertising Doritos Loaded.

At $1.99 and 360 calories for a pack of four, Doritos Loaded are warm triangular pan-fried snacks, filled with melted cheese and encrusted with the signature nacho cheese flavor.

“We read that sign, and I said, ‘We have to try that,’” Black-Vetter said, sitting in the car with out-of-town friend Leslie Phiscator.

7-Eleven Inc. on Tuesday announced the launch of the new product, which can be found exclusively at 5,500 7-Eleven stores nationwide as of Wednesday, corporate spokeswoman Margaret Chabris said.

The snack food comes hand-in-hand with a new tropical Mountain Dew flavor called Solar Flare.

While its appeal is meant to hit all “on-the-go folks,” Chabris said Doritos Loaded is expected to be especially popular among younger Americans who prefer snacking to full meals – specifically, millennials.

“We have found that more and more people are not sitting down for three square meals a day, but they want something filling and affordable,” she said, adding the information stems from corporate studies. “It seems like, particularly, millennials snack throughout the day, so this is a perfect snack item for them.”

According to a 2012 report from the NDP Group, a market research company that tracks consumer trends, more than half of all Americans – 53 percent – snack two to three times a day.

Darren Tristano, executive vice president of food industry consulting company Technomics Inc., said annual studies done by Technomics also have found today’s America to be more snack-inclined than years prior.

“The snacking trend we’ve seen … is consumers are grazing more now, which means they’re having less to eat with greater frequency,” Tristano said. “Instead of three square meals, we’ve started to see more late-night snacking … and snacking late-morning and mid-afternoon.”

As far as snacks go, however, a dietitian at Centegra Hospital – Woodstock and McHenry said 7-Eleven’s newest product probably isn’t the best choice as it’s heavy in sodium, containing 1,070 mg.

“Anything that is providing half a day’s worth of sodium and it’s just a snack,” Susannah Baldock said, “that would be the first sign to look at something healthier.”

Those who indulge in Doritos Loaded could be swayed simply because of brand familiarity, though.

Tristano said food trends are pointing toward the use of big-name brands to increase revenue opportunities.

“One of the trends we’ve seen has been the opportunity for branded food services to take very leverageable brands like Doritos and other snacks, and build them into food service products in restaurants, and now we’re seeing it more out of the convenience stores.”

Based on previous new-product rollouts, however, Tristano said the buzz will likely quiet down in time.

“Most products that 7-Eleven introduces tend to be on a short-term basis,” he explained. “They’ll probably see how it registers with customers.”

At the Crystal Lake store, owner and franchisee Katen Patel was optimistic about the future of Doritos Loaded.

“I think it targets our target customer; I think kids are going to love it,” Patel said, sporting an official Doritos Loaded T-shirt. “If it does what Doritos does for our chips brand, I think it’ll do really, really well.”

It only took one bite each before Black-Vetter and her friend, Phiscator, were nodding in approval to one another in the car.

“Oh yeah,” Black-Vetter said. “I’ll get this again.”


Cold Fusion

January 9, 2014

2014-01-09_1101In an exercise that captured the attention of category managers attending CSP’s Cold Vault Summit, consultant and former retailer Casey McKenzie of Lexington, Ky.-based Impact 21 Group asked the retailers to consider where they would place products in a fictional convenience store.

While the specific results didn’t matter—“There is no right or wrong answer,” McKenzie said— the real message was in the variety of answers.

While one group placed beer in the back-corner cold-vault doors across from a beef-jerky endcap, another put dairy in the same corner doors with bread and other grocery basics nearby. “We imagined our store was in the Northeast, where c-stores really evolved out of the dairy business,” explained the team’s leader, Nancy Knott, category manager of alcohol for La Palma, Calif.-based BP ampm. In that region, she reasoned, consumers are still drawn by bread, milk and eggs.

“That’s it!” McKenzie said. “This exercise is not just about product placement and adjacencies; it’s about what your marketing objectives are. Much of it is driven by who your customers are and what you want to be. But it can’t all be pie-in-the-sky stuff; there has to be some science behind it.”

For three days, 35 retailers from across the country put on their proverbial lab coats to consider the science and the data driving beverage sales today. Their scientific method started with a big picture: the economy and,
perhaps more important, how consumers view it.

“I think the economy is in a lot better shape than [most] people do,” said analyst Nik Modi, who follows beverage and tobacco stocks for RBC Capital Markets. Modi said the housing market is improving, U.S. gross-domestic product is growing again and the job picture is showing some progress.

Despite that, 10 of 12 major beverage categories are slowing and the majority of food categories are declining, according to Modi.

This is a matter of psychology and how consumers think about their purchases. “The internal consumer is being squeezed,” forcing them to be more disciplined in their spending, meaning less discretionary spending
on things such as beverages and fast food, he said. “Consumers are making choices.”

Also, as spending on cars and housing have increased this year, retail sales have declined.

Calorie Concerns
Meanwhile, the continuing trend toward healthier eating also has taken a toll in more ways than one.

First, there’s the move away from products—full-calorie sodas and juices—viewed as adding to the obesity epidemic in the United States.

But the real surprise is that even diet drinks, particularly low-calorie carbonated soft drinks, are hurting, indicating the next phase in the continuing move away from the CSD category.

“It comes down to health and wellness,” Modi said. Consumers are hearing a lot of negative news about low-calorie sweeteners, particularly aspartame, that’s turning them away from the category.

“Just as consumer interest in aspartame peaked (in the first quarter of 2013), diet CSD trends began to worsen, while regular CSD trends remained,” he said. “There are a lot of companies out there chasing the lowcalorie trend. I’m not sure it’s as important today as it used to be.”

For c-stores, those more indulgent beverages are still an area of growth. “Seventy percent of what I sell in my stores have nothing to do with health and wellness,” said retailer Lundy Edwards of Forward Corp., Standish, Mich.

Still, Modi and others pointed out, the trend suggests these full-calorie categories are falling out of favor with the public.

Ivan Alvarado, director of category management for Plano, Texas-based Dr Pepper Snapple Group, acknowledged that in just the past year, the average CSD set has shrunk from 14 shelves to nine in c-stores, most of it claimed by energy drinks and bottled water. “Some of this is related to health and wellness, and some of it is self-infl icted,” he said, citing beverage makers’ hesitance to innovate, and that “CSDs have not been able to communicate with millennials. New tactics are needed to reach these consumers.”

Added Clinton McKinney, group director category advisory for Atlantabased Coca-Cola North America, “If you want to be known as one of the retailers who embraces innovation, you’ve got to go all the way and let the
consumer know that’s your play with signage and other messaging.”

“It’s all about interrupting that autopilot behavior that consumers have in the store,” Alvarado said.

One challenge for retailers is the latest generation—those 21 to 35—coming of age. These millennials are less trusting of big business, making a warning message about the industry’s oldest artifi cial sweetener resonate all the more.

“They have a very low level of trust for institution,” Modi said. Instead, millennial consumers rely on their friends for recommendations, whether it’s a co-worker they see every day or a distant but respected acquaintance they  communicate with only through Facebook.

“It’s when recommendations start coming in on social media that sales really begin to improve,” Modi said.

To that end, Alvarado encouraged retailers to call out soda makers to turn things around. “Challenge us,” he said. “Every time we walk in your stores, ask us: What are you doing to sell more in my store?”

Energy’s Boost
One of the most active beverage categories on social media is energy drinks. With sponsorships of extreme-sport athletes and unique events, such as Red Bull’s Flugtag competition and Monster’s sponsorship of skating, surfi ng and snow events, the suppliers are keeping their brands in front of their key demographics’ eyes.

“Think about all the things that Red Bull does that make someone think, ‘Oh, I’ve got to post that [on Facebook],’ ” Modi said.

Still, energy-drink sales trends are slowing. The young category overall is growing by about 5% today, compared to the double-digit (up to 20%) growth of past years. The category is maturing, and consumers have taken notice of the headlines surrounding energy drinks and the pending lawsuits that claim the drinks are dangerous. Still, Modi doesn’t think that has had much of an effect on sales.

Energy-drink sales grew 8.6% in c-stores for the 52-week period ending Aug. 10, 2013, according to Nielsen data presented by James Ford, head of category and shopper insights for Red Bull North America, Santa Monica, Calif.

“The convenience channel is driving energy-drink growth,” he said. “And energy drinks will continue to be the biggest growth contributor to the beverage category through 2017 and beyond.”

C-store retailers attending the Cold Vault Summit generally agreed that energy drinks are still a bright spot in the cooler, bringing a high-margin ring to the checkout as the major energydrink makers—Monster, Rockstar and Red Bull—maintain a busy newproduct introduction pace to keep the category fresh.

The Wonders of Water
Bottled water is also gaining space in the cold vault as the subcategory continues its march toward becoming the No. 1 beverage in the United States.

The growth comes as usage occasions expand and variety increases, said Chelsea Allen, senior manager, category and shopper solutions, for Nestle Waters North America, Stamford, Conn.

“Bottled water outsells sodas in 13 U.S. markets today,” she said. “It will be the No. 1 beverage in the country in 2016.”

The opportunity for retailers is to grab as much share as possible of the category while it’s still growing.

“Smartwater is the fastest-growing brand, and private-label [water] is growing on distribution gains,” Allen said. “But … we know that brands bring people into your stores. In fact, 44% of all bottled-water households will only buy branded bottled water.”

To improve water sales, Allen encouraged retailers to offer single-serve packaging for the three main water segments: premium, popular and value waters. She also urged retailers to stock 12- and 24-packs of water. “Nearly 6 million shoppers shop in convenience stores and buy case pack water,” she said. “But only 1% of households buy case water in c-stores. It’s a real opportunity.”

Favoring Flavor
Millennials are helping change another aspect of the beverage landscape: They’re more willing to experiment with new flavors. They join the growing Hispanic demographic in a desire to sample bolder flavors. When you add millennials’ $1.7 trillion in spending power to Hispanics’ $1.2 trillion, the result is a “structural change” to the country’s palate.

“It’s the blending of America,” Modi said. “The white consumer is taking culinary cues from Hispanic, Asian and African-American consumers.”

This led Modi to suggest beverage manufacturers should focus less on low-calorie products and more on new flavors that appeal to this new desire for stronger flavors.

“We’re at a point in the United States where companies are taking ingredients out of their products” to make them seem more natural, Modi said. “Instead, there’s not enough flavor.”

The most obvious and successful evidence of this trend is in the beer and wine categories. One reason: By 2018, 80 million millennials will be of legal drinking age, and 20% of millennials are also Hispanic, according to Darren Tristano, executive vice president of Chicago-based Technomic Inc.

For wine, the move has been toward mixing varietals to create new flavors and indulging the millennial consumers’ sweet tooth.

“The millennial doesn’t want to drink what their parents drink,” said George Ubing, national director of the convenience channel for E. & J. Gallo Winery, Modesto, Calif. For Gallo, the goal of turning wine into a more refreshing beverage has prompted innovation. Leading the way are Barefoot’s lighter, more thirst-quenching line extensions Refresh, Moscato and Bubbly; and a Liberty Creek wine packaged in a Tetra Pak to target on-the-go lifestyles.

Beer’s story has been told many times: The growth is in “better beers”—imports, crafts, higher-end brews from major brewers—as consumers seek more flavor and diversity, even at greater expense.

“There’s a definite shift away from domestic beers,” said Tristano. “Today, it’s craft beers, cider and imports that are growing. When they become too popular, that’s when millennials say, ‘Wait a minute. I want to try something different.’ ”

That, to Modi, is an opportunity. Their willingness to experiment and try new flavors gives retailers permission to “reduce the SKU capacity, but supply newness,” he said. That is, don’t feel the need to stock every variation on a subcategory; instead, stock the most popular and the newest to maintain the fastest-selling brands while providing customers the ability to experiment.

This theory is backed by research that shows a balanced beer portfolio is the most successful way to grow overall beer sales, as outlined by Dean Zurliene, St. Louis-based Anheuser-Busch’s senior director of category management.

“There’s a lot of shifting in the beer mix today,” Zurliene said. “When retailers manage it from a balanced approach—emphasizing both premium beers and crafts—they win 93% of the time.” One reason is the beer buyer’s likelihood to buy both craft and premium beers or spend money on both segments.

“More often than not, someone who drinks craft beer also drinks premium beer, also drinks value beer, and also drinks import beer,” he said. “The craftbeer shopper only spends 32% of their beer money on craft beer.”

This data falls in line with research on the millennial consumer, too. “Millennials are not the most brand-loyal consumers,” said Adrienne Nadeau, senior researcher for Technomic. “They crave variety.”

And providing that variety can be a long-term win for retailers, Tristano agreed. “It’s not loyalty to millennials; it’s frequency,” he said. “If you build the frequency, the habit with this generation, you can grow with them.”


C-stores Shape Up Their Health & Wellness Offerings

May 14, 2013

NATIONAL REPORT — It’s no secret that convenience stores have received a bad junk food wrap. Even First Lady Michelle Obama criticized the channel for not having anything healthy to offer. But that generalization is slowly changing as the health and wellness push moves further into the mainstream — impacting consumers all the way to the convenience retail sector.

“More consumers than ever before tell us that eating healthy and paying attention to nutrition is important,” said Darren Tristano, vice president of research at consulting firm Technomic Inc., which unveiled a new “Healthy Eating Consumer Trend Report” in January. This report showed that consumers’ perception of healthy food is changing as they become more health-conscious. The study also found that consumers strongly associate with contemporary definitions of health, but balance better-for-you food choices with occasional indulgences.

Tristano explained that more consumers are gravitating toward “health halo” claims, such as local, natural, organic, whole wheat and free range. For that reason, he advises retailers to “leverage the growing interest in the health halo by developing the kinds of menu offerings that can underscore health without detracting from taste perception.”

Recent research from Mintel also demonstrates the shift toward healthier eating. According to the market researcher, just over two-thirds of Americans are opting for healthier fare.

“Consumers are more aware than ever of their own nutritional deficits and what poor eating habits can do in terms of their long-term health,” said John Frank, Mintel’s category manager for CPG food and drink reports. “As a result, today’s consumers are seeking out healthy food with greater urgency. However, skeptical or confused consumers aren’t likely to pay a premium for healthier food.”

Smart convenience store retailers are monitoring these and other consumer health trends, with some taking a more proactive role and experimenting in-store where it makes sense. Among those making headlines recently:

  • 7-Eleven Inc. introduced a line of fresh foods and downsized some of its fare by creating portion-sized items. The goal is to have 20 percent of sales come from fresh foods in its U.S. and Canada stores, up from about 10 percent currently, according to a December New York Times report.

“We’re aspiring to be more of a food and beverage company, and that aligns with what the consumer now wants, which is more tasty, healthy, fresh food choices,” stated 7-Eleven President and CEO Joe DePinto. The c-store giant has reportedly put together a team of culinary and food science experts to study industry trends and develop new products.

  • More than a dozen convenience stores joined in a Kansas county’s efforts to reduce the community’s salt intake. Hy-Vee Convenience Store, Gas & Shop Convenience Store, Larry’s Shortstop and 10 local Kwik Shops in Shawnee County, Kan., agreed to display a standalone rack of healthy, low-sodium items (chosen and customized by a dietician) in a prominent spot in their stores. This health initiative was spearheaded by the commissioners in Shawnee County, which provided the racks, promotional signage, technical assistance and advertising.
  • C-store retailers in Brattleboro, Vt., joined the Healthy Retailers program, sponsored by the Brattleboro Area Prevention Coalition in collaboration with the Vermont Department of Health. In addition to discouraging tobacco and alcohol use among youth, the program resulted in vegetables, new fruit varieties, and ground beef and pork products from local farms being available for purchase at select convenience stores in the area.

Sonja Hubbard, former NACS chairwoman and CEO of Texarkana, Texas-based E-Z Mart Stores Inc., is one convenience industry leader who has been vocal about her belief that the opportunity exists to make c-stores a more nutritious place for consumers to shop.

In 2010, Hubbard told Convenience Store News she was initially offended by the First Lady’s remarks about the lack of healthy food in c-stores, but then felt empowered to make some changes at her own chain. Now, two years later, she shared with CSNews that she thinks “c-stores are improving on the way we are promoting existing health and nutrition options, plus we are continually adding more items and trying to grow sales in the category.”

Minute Market in Oregon is another c-store operator adding and testing better-for-you items like string cheese, low-sodium sunflower seeds, fresh fruit and “healthier” drinks for kids. “As the industry changes, we are getting more options to choose from and bring in as our main distributor picks up these healthier products,” said Phyllis Simpler, Minute Market’s operations manager. “Over the last year, especially, a lot more products have been made available to us.”


Focusing on Fresh Foods

April 18, 2013

sandwichThe grab-and-go business is constantly evolving. Today’s customers not only want their foodservice fast, but they expect quality, consistency and healthy daypart options.

Convenience store operators are driving sales of healthy, portable foodservice offerings like packaged sandwiches, wraps, salads and some roller grill items. But, historically, the industry has seldom gotten the attention it deserves for its healthy food options. Changing that perception, and making consumers aware of the healthy items c-stores carry will take some effort.

T. W. MacDermott, president and principal of the Clarion Group in Kingston, N.H., pointed out that most c-stores have a high level of repeat business from their immediate surrounding area and commuters who stop for gas or coffee en route to work. Thus, it should be relatively easy to communicate any new initiative to them with minimal effort and expense.

“The trick is to make sure that the healthy foods being offered are really healthy, and especially fresh,” MacDermott said. “There can be no shortcutting on quality, or the store will sell its product only once.”

Ready-to-eat sandwiches, fresh fruit, packaged salads, fruit cups, yogurt cups and other foods that a customer may pick up to take for lunch at work are extremely popular. “The operator will need to either find a supplier of the fresh foods or maybe partner with a nearby restaurant or caterer whose label on the fresh products will be an assurance of quality to customers and a helpful ad for the provider,” MacDermott said.

Fresh Returns
Another major difference between jumping from retail to foodservice that could cause problems for inexperienced operators is handling products with a short shelf life.

“A whole different mindset is required when it comes to working with perishable products. This is an area that convenience stores need to understand and perfect to boost fresh grab-and-go sales,” MacDermott said. “It’s better to throw expired food out, or donate items nearing their spoilage date to a food bank. The loss will be more than offset by growing repeat sales if customers know that whatever they buy is fresh—no more than 36 hours old.”

Letting consumers know about the guaranteed freshness and food donations can also engender confidence, good will and additional repeat business.

To ensure the high turnover that healthy, fresh products require in order to be profitable, the products should be rotated at frequent intervals and kept in a separate, distinctive refrigerated display case, Mac Dermott suggested. If possible, it should also adjoin a display of non-refrigerated healthy products, such as granola bars and the like.
If possible, said Arlene Spiegel, president of Arlene Spiegel & Associates in New York City, “list ingredients, sources and method of preparation next to each item. Customer can never have too much information about the quality of the food they are eating.”

While retailers are naturally sensitive to pricing, convenience stores don’t necessarily have to worry about competing with supermarkets when it comes to fresh grab-and-go foods.

“Customers stop at convenience stores because they are convenient, not because they’re bargain hunting. That is a strategy they can use to their advantage,” MacDermott said.

Going to Market
As foodservice becomes more of a convenience store industry staple, effectively marketing quality and freshness will only enhance the offering.

“The industry needs to decide how it wants people to think about it,” said Ryan Mathews, founder and CEO of Detroit-based Black Monk Consulting. “One can make the claim of convenience, or, one can make the claim of health. But making compound claims—like healthy and convenient—is always tricky.”

Mathews posed the question: Is the industry willing to invest in a long-term mass-marketing reimaging campaign? “I doubt it,” he said, “and I really doubt it would be worth it. A better tactic is to promote healthy options in store and to convert the market one customer at a time.”

There is, as Mathews pointed out, a danger inherent in foodservice marketing, as well. “Every time a retailer pats himself on the back for offering ‘healthy’ solutions somebody is always anxious to challenge those claims—such as Arby’s current anti-Subway campaign—or to look deeper into the product portfolio to see if the health claims holds up across the store,” Mathews said. “The best plan is to continue to offer better-for-you choices, save the mass marketing dollars and do the absolute best job you can serving your customers.”

Defining Healthy
Customers are correct that there is a barrier to offering healthy foods in c-stores, according to Tim Powell, director of research and consulting services for Chicago-based Technomic Inc.

“The majority of regular consumers just stare at you incredulously when you ask them the importance of health and wellness when selecting prepared foods in the segment—especially when they are holding a double-sausage mini pizza in one hand and a bear claw in the other,” Powell said.

Despite that, Powell noted that there is still a need to offer healthy fare in the form of fresh-cut fruit, salads, grilled and fewer fried products. “Industry leaders in foodservice like Wawa, Sheetz and Rutter’s have developed a tolerance for waste and accepted that if you offer fresh foods consistently, eventually—as new customers walk through the doors, especially females—you will eliminate the perception that only old hot dogs and burnt coffee are awaiting them.”

The bottom line, Powell said, is that the convenience store chains that will be successful with their foodservice programs must evolve into offering healthier items. “Others will simply perpetuate the perception of a gas station with food if they don’t expand and rotate menus,” he said.

Defining exactly what “healthy” means to consumers was the subject of some recent Technomic research. While Americans have obviously become much more health-conscious, their perceptions of what is considered healthy eating at restaurants are continually changing. Contemporary definitions of health are strongly associated with local, natural, organic and sustainable ingredients. Consumers are also taking more of a balanced and personal approach to healthy eating, seeking out better-for-you foods, while enjoying occasional indulgences.

“More consumers than ever before tell us that eating healthy and paying attention to nutrition is important,” said Darren Tristano, vice president of Technomic. “However, there’s a shift happening in terms of what actually defines healthy for them. We’re seeing more consumers gravitate toward health-halo claims, such as local, natural and organic, as well as whole wheat.”

Sandra Matheson, president of Food Systems Consulting Inc., said that convenience store operators also need to identify that they have choices available throughout the store. “Not just junk food, but something for everyone. And they need to have deals on their healthier items to get people to try them,” she said.

Convenience retailers also need for their offerings to match their message. “If they say their food is healthy, it needs to be truly fresh and healthy,” Matheson said. “In my experience, I have visited sites that advertised healthy foods, but found their foods loaded with salt. Some weren’t even fresh. The more fresh fruits and vegetables you can get on the menu the better. Perception goes a long way when customers see these items near the food counter.”

But most importantly for c-stores to remember is that this can be regarded as the c-store industry’s golden age of foodservice. The time to build your business is right now.
“If c-stores don’t seize the opportunity in front of them, they are foolish,” said Karen Malody, the principal of Culinary Options, a foodservice consultancy in Seattle. “It’s hard work and they will likely need to engage some foodservice experts to help them think differently, but the opportunity to grow sales is enormous.”


Retailers Need to Clearly Stand Out From Restaurants

February 28, 2013

CHICAGO — At the height of the economic downturn, many consumers flocked to convenience stores, supermarkets, mass merchandisers, warehouse clubs and other retailers looking for a deal on prepared food. Now that the economy is recovering from the recession, though, consumers are purchasing retailer meal solutions (RMS) less often than they did just two years ago.

New research from Chicago-based consulting firm Technomic Inc. found that 38 percent of today’s consumers say they purchase RMS from traditional supermarkets each week, down from 42 percent who said the same in 2010.

“These consumers may be reversing the patterns they set a couple of years ago by heading back to restaurants,” said Darren Tristano, vice president of Technomic. “For retailers to gain or maintain their share of foodservice dollars, they’ll need to clearly stand out from restaurants — especially since our data shows that consumers’ expectations are rising for the taste, quality, freshness and appearance of retailer prepared foods.”

To help foodservice executives understand the latest consumer behavior, preferences and attitudes regarding retailer foodservice, Technomic has developed the Retailer Meal Solutions Consumer Trend Report.

This report explores retailer foodservice trends at traditional, upscale or fresh-format supermarkets; warehouse clubs; convenience stores; mass merchandisers and specialty food stores.

Among the report’s findings are:

  • Some of the top RMS menu trends include signature fried snacks; more variety for vegetable sides; higher-quality pizzas; a distinct specialty focus for sandwiches and burgers; and a move toward ethnic flavors.
  • More than two-fifths of consumers who purchase RMS at least once a month (43 percent) say they do so four or more times per month, meaning they purchase RMS at least once a week.
  • More consumers today than those polled two years ago place a high importance on attributes such as value, price, convenience, taste, freshness and quality of prepared foods.
  • Opportunities exist for retailers to leverage their customization options to compete with restaurants; only 38 percent of consumers agree that retail prepared foods allow for more customization than food purchased from a restaurant.
  • At least four out of five consumers who visit each retail chain measured for prepared foods purchase RMS items at these locations at least once a month, reiterating the strong role routine and convenience plays in the RMS purchasing decision.
  • Although half of consumers think the quality of prepared foods has greatly improved since 2010, nearly two-fifths call for more name-brand foods that typically denote a higher quality perception.