Convenience Stores Looking to Fresh-cut

Convenience Stores Look to Fresh-cut
Jeff Lenard National Association of Convenience Stores
With slimmer profit margins on gasoline and cigarette sales, and both categories facing very uncertain futures, convenience stores are looking for new ways to boost revenue and differentiate themselves from competitors. One is the addition of fresh-cut fruit and vegetables to their foodservice menus.

Gasoline and cigarette sales comprise about 75 percent of convenience store sales, according to Jeff Lenard, Alexandria, Va., director of communications for the National Association of Convenience Stores. However, such sales are expected to level off, or even decline, as convenience stores battle against stiffening competition from Wal-Mart, Costco and others large commercial chains for gasoline sales. There also is competition from Internet retailers ignoring state tax laws for cigarette sales.

In the search for new sources of revenues, 7-Eleven and other convenience stores are exploring the use of fresh-cut fruit and vegetables. Fresh food is the buzz word in the industry today, Lenard points out, and many convenience stores hope to use pre-cut products to boost their bottom lines. Fresh-cut produce is perceived as healthier to eat, and, served up in cups and other packaging, also offers convenience.

Cup Holders Ideal

Today’s SUVs, minivans and other automobiles come well equipped with cup holders, ideal for serving pre-cut melon, cantaloupe, pineapple, grapes and other fruits, he said. People can stop in at a convenience store and, in minutes, be on their way while snacking on a healthy product instead of a Coke, Pepsi or other fountain drink.

“We have two kids and own a minivan,” Lenard smiles, explaining that he recently inventoried the number of cup holders in his vehicle and discovered 11. “Cup holders are not just for holding beverages anymore and haven’t been for the past couple of years. They work great for fresh fruit, vegetables and all kinds of snacks. There is even a new Kleenex box on the market that isn’t a box at all–it’s round and is designed to fit in a cup holder. These vehicles are designed for today’s on-the-go families, and with growing public desire to eat more healthily, the timing couldn’t be more right.”

The demand for more fresh fruits and vegetable is there, he said. That’s positive. Added to that is the fact that the public wants its food served fast but, also,
affordable. While providing a product that would meet all three categories would be ideal, meeting even two “would put you in great shape to compete.”

But adding a line of fresh-cut fruits and vegetables is not for every store pumping gas and selling cigarettes, Lenard warned. Such a move works better if it comes as an expansion to an already successful foodservice program.

“It makes perfect sense to add fresh-cut fruits and vegetables to your order if you already are receiving sandwiches, tomatoes, lettuce and other produce from a vendor,” he points out. “Such stores have needed foodservice equipment in place and can offer the new line as part of its overall package. Fresh-cut would not be seen as a category in and of itself but would be joined with what the company is already doing. It could become a powerful way to boost sales.

“You would be adding a perception of high-end products and attracting an expanded customer base,” Lenard said. “Adding fresh-cut fruits and vegetables to your offerings conveys the message that you are all about quality, about differentiating yourself from your competitors and achieving a competitive edge. It’s not about gutting your cigarette, candy or snack section to make room – these are needed sources of continuing revenue – it’s about working new entries into the mix.”

Differentiation

Most agree that one of the drivers behind the move to more fresh-cut fruit and vegetables is the ongoing struggle convenience stores face in their attempts to compete and differentiate themselves from Wal-Mart, drug stores and others, Lenard points out. Wal-Mart has taken away a huge chunk of the health and beauty product sales from drug store chains; that’s why it is common to see packaged foods, candy, beer, wine and non-drug-related merchandise in many drug stores today; drug stores have adapted and become, according to some in the industry, “convenience stores for women.”

Even niche marketers such as Best Buy and Pet Smart are marketing candy, gum and other items for additional revenue, he said. It is becoming difficult to categorize stores as many are expanding their product offerings, thus blurring the distinctions.

“The fact is, convenience stores, if they want to survive, have got to begin thinking about offering innovative lines, such as fresh-cut fruit and vegetables, if they are going to differentiate themselves,” Lenard said.

One caution, however, for 7-Eleven and others getting into fresh-cut fruits and vegetables: “Being successful will mean more than adding a cup of fresh-cut produce to your menu,” the NACS spokesman warns. Maintaining quality and consistency are all important.

“The foodservice business, of which you are a part – you are selling fresh-cut fruit and similar items – is much less
forgiving than retail when it comes to customers,” he cautions. “Should you grow careless and sell product not up to standards, you’ll do more than lose sales; you’ll lose customers.”

While fresh-cut processing companies such as Obim Fresh Cut Fruit Co. LLC, Fort Worth, Texas, are reporting huge sales increases of fresh-cut fruit products (a recent report noted a 50 percent increase in 2004) to the convenience store market, such sales remain only a small percentage of the overall total, Lenard acknowledges.

Will the future be a different story? Time will tell. 


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