Cashing in on Convenience

Convenience stores present a unique challenge for brand marketers. Simply put: Big sales potential, minimal display space.A truly unique retail environment, the average c-store footprint ranges from 1,200 to 5,500 square feet, in which hundreds or even thousands of product SKUs are merchandised. Typical customers spend only two to three minutes in a c-store, but many visit the same stores frequently -- sometimes seven days a week.The channel generated record sales of $234 billion in 1999, and rising tobacco and gasoline prices will likely prolong the growth spurt, according to Jeff Leonard, a spokesman for the National Association of Convenience Stores (NACS), Alexandria, Va. NACS estimates that nearly 200,000 c-stores were in operation in 2000.Major companies such as Anheuser-Busch Inc. and Frito-Lay Inc. count c-stores as one of their most important distribution channels. They credit the channel's brand-loyal customers who frequent the stores and are also interested in new products. In fact, convenience stores generate the largest volume of sales for A-B, which owns the lion's share of the channel's beer market. Even smaller players like South Beach Beverage Co. rank c-stores high on their list of priorities. After all, 65% of the company's sales occur in convenience outlets.Leading c-store categories include cigarettes, beer, packaged beverages, candy and salty snacks, according to NACS. In its study, "The Outlook for the Convenience Store Industry Through 2005, Beyond 2005," the association predicts future growth for fountain and packaged beverages, foodservice, snacks, candy, dairy products and beer.Making the Quick SaleEach c-store product category has its own dynamics that impact display opportunities and requirements. Marketers who come to the table with displays that are innovative both in presentation and in their use of space get the attention of c-store retailers. Ease of assembly is another important factor. What c-store retailers really want are displays that move product quickly."The issue is space, and basically, there is none," says Tom Graves, director of marketing services for Norwalk, Conn.-based South Beach Beverage Co., which was acquired by PepsiCo, Purchase, N.Y., late last year. "Getting displays up in c-stores is a very difficult task""Retailers are saying, 'If you want the space, show me how you're going to make it work and give me a reason to take your materials,' " says Neal Larkin, group director of promotions for Cadbury-Schweppes' Snapple Beverage Group, White Plains, N.Y."We have three criteria for accepting a display," says Matt Paduano, director of purchasing for the 77-store Nice-N-Easy chain based in Canastota, N.Y. "First, the product must have a proven track record as a good mover. Second, we expect to see some sort of incentive for accepting the display. Third, it has to be easy to assemble and have good graphics that will catch the customer's eye."Dallas-based c-store giant 7-Eleven is ready and willing to introduce promising new products into its 5,200 U.S. stores, providing marketers play by their rules. The company looks carefully at turn rates and margins, and display materials for all products must meet specifications for monthly promotion packages sent to the stores. The company outsources P-O-P creative work to an agency to ensure image and presentation consistency, and any preexisting vendor displays must meet 7-Eleven's dimensions and color specs, says Sandra Monroy, advertising project manager. "Materials used can be negotiated, depending on the element itself," she says.Beverage BonanzaIt's estimated that a thousand packaged beverage items were introduced to convenience store operators in 2000. Those new products lucky enough to be selected by a retailer then had to compete with existing brands for space in the cooler or on the floor. Direct-store-delivery (DSD) products like Coca-Cola and Anheuser-Busch brands enjoy a definite advantage in their ability to sell-in multi-brand programs to c-store operators. Nonetheless, smaller beverage companies with innovative products and strong track records can gain space if they are persistent and creative.In most convenience stores, cooler doors are already fully stocked with single-serve packages, so beverage marketers are increasingly looking for secondary placement on the sales floor, at the checkout and even at fuel pumps. Retailers demand that merchandising at the cooler and in these secondary locations be innovative in its use of space and consumer appeal.Because of the strength of its brands, Anheuser-Busch usually gets both cooler and floor display space, and the company works to link the two together. "Our research finds that the most effective P-O-P programs involve strong graphic communications that link shelf or cooler merchandising with floor displays," says Tom Burkemper, senior manager, retail marketing for A-B. The company typically develops thematic signage, display enhancers, stand-ups, cold vault decals, cooler stickers, c-poles and base wraps with common images and themes.This summer, A-B is offering materials with lifestyle images of fun, outdoor activities designed to appeal to consumers and c-store operators alike while tying in to the Memorial Day, Fourth of July and Labor Day holidays. "These materials encompass more than 7,200 instant-win prize packages and cross-merchandising elements to encourage multi-category, multi-package and single-serve sales," says Burkemper.Meanwhile, South Beach Beverage is enticing consumers with a free SoBe T-shirt offer when they collect caps bearing three SoBe sayings, according to Graves. "The word 'free' is extremely powerful," he says of the display, which features a 5-inch by 7-inch t-shirt-shaped cooler decal with take-one slips for the mail-in offer. "The strategy is that the consumer sees the T-shirt offer, the words 'SoBe' and 'free' and translates the visual cue into purchases."South Beach is also earning secondary placement for Adrenaline Rush, a lightly carbonated energy supplement beverage. Introduced in October 2000, the product made its debut in-store with a seven-case stacker. To drive trial, the company also created a 'dog dish' unit to hold 10 cans on ice at the checkout counter.One reason Adrenaline Rush garnered such display space is its margin. "C-store retailers are looking for turns and margin. Energy drinks are a growing category with the c-store shopper, and with a price of $1.99 for a 250 ml can, the margin is much higher than traditional soft drinks," Graves explains.Snapple Beverage Group is driving its c-store sales with a cooler and a barrel unit designed for placement near gas pumps. The SnapChiller cooler unit introduced last year drives impulse sales at the checkout or any other location around the store, according to Larkin. "The turns are incredible, and it's an easy piece for the consumer to access and the retailer to merchandise and stock," he says. "Our strategy is to create pieces that fit into under-utilized space, that are easy to get going and that enhance the store in some way. The SnapChiller achieves all that, and has been extremely well-received by the c-store operators."Another Snapple creation is an ice barrel shaped like a gas pump. Placed at the fueling island, it bears the brand's orange and yellow checkerboard graphic. According to Larkin, that pattern appears on all Snapple P-O-P materials, from coolers and headers on racks to shelf talkers, pole toppers and cooler decals. "We go for continuity. That way we make a very big statement even though we may occupy a small amount of display space," he says.Tobacco RoadBesides placing explicit restrictions on marketing cigarettes to minors, the 1998 Master Settlement Agreement (MSA) between tobacco manufacturers and 46 state attorneys general has also driven a trend toward the use of non-self-service displays for tobacco products sold at c-stores and other retail outlets. That doesn't mean tobacco P-O-P is on the decline. In fact, a 1999 study by the University of Illinois at Chicago suggested that in-store merchandising grew substantially in the wake of the agreement. Although the cigarettes themselves are generally kept behind checkout counters, branded countertop displays, permanent signage and locked merchandisers are still used in abundance. Major tobacco companies are also assisting their retail partners with transitioning to non-self-service cigarette merchandising fixtures.Tobacco marketers devote resources to the c-store channel for an obvious reason: C-stores are the dominant channel for cigarettes. Distribution giant McLane Co. estimates the channel generates more than 55% of total U.S. cigarette sales. Cigarettes comprise more than 34% of average convenience store merchandise sales, according to NACS, making it far and away the largest merchandise category. In addition, the availability of cigarettes drives foot traffic into the c-store."Retailers must let adult smokers know that they are in the cigarette business and that they have a good selection of brand styles available," says John Boehm, senior manager, trade marketing for R.J. Reynolds Tobacco Co., based in Winston-Salem, N.C. The company's merchandising program centers on ensuring the availability of the right brands for the customer base, effectively communicating the product's presence, and hosting appropriate promotions."We offer a number of merchandising options, from traditional shielded counter displays to non-self-service backbar configurations," says Boehm. "Each is developed to responsibly communicate that tobacco products are available for sale to adult smokers." R.J. Reynolds and Philip Morris, the top tobacco players, are currently working with c-store operators to develop fixtures that work with their store formats and consumer base.Sweet & SaltyThe other winners at the front-end are confection and salty snacks. Like their beverage counterparts, the leading companies are increasingly seeking secondary and even tertiary placement. Again, margin and turns are crucial factors in gaining display space."These are definite impulse items," says Nice-N-Easy's Paduano. "We devote floor space near the P-O-S, as well as counter space, but we don't like to see anything less than 99 cents up there. The higher-end mint and gum products are winners at the checkout because of the impulse nature and high margin." Nice-N-Easy accepts only two candy displays at a time, such as an M&M shipper display and a Hershey multi-product shipper.Although the confectionery category has been relatively flat in recent years, novelty items are faring well. M&M/Mars undertook a study last year and found 40% to 60% of candy purchases are on impulse. Simply adding candy to checkout counter offerings can increase category sales by 8%, according to the study. As a result, M&M/Mars seeks both in-aisle and checkout placement for product and display in c-stores.7-Eleven features an "item of the week" at the point-of-sale, according to Monroy. The program rotates between a newly introduced confection item and one of 7-Eleven's own products. "This can be anything from a new breath freshener like Myntz strips or our 52-ounce insulated X-treme Gulp mug," she says.Salty snack giant Frito-Lay is also working to drive its impulse sales. The Plano, Texas-based company uses a proprietary tool to measure the effectiveness of in-store promotions in convenience outlets on a real-time basis. The tool tracks a retailer's weekly sales, cross-references that data against the in-store promotions, and gives the retailer a scorecard to assess their weekly specials and the impact of various displays.In addition, Frito-Lay continues to roll out new products first to the c-store channel with single-serve packages and introductory displays. In the past year, the company has achieved success with its Lay's Bistro and Ruffles Flavor Rush products.Keep in TouchPrepaid calling cards and cellular phones are hot products for on-the-go customers, and c-store operators are cashing in on the trend. Some are realizing year-to-year sales growth that industry insiders peg at well over 100% for 2000. The telecommunications industry estimates that half of all prepaid calling card purchases occur in convenience stores.7-Eleven has an aggressive prepaid card and phone program, and other chains are enjoying increasing sales from these high-margin, impulse items as well. For prepaid calling cards, the move to card activation at the point-of-sale has opened up tremendous display opportunities."For a long time, prepaid cards were stuck behind the counter because they were 'live' and thus presented a huge theft problem," says Chuck Murdock, director, prepaid communications for Novo Networks, based in Jersey City, N.J. "As we've gone to activating the cards at the point-of-sale, we've been able to move them to the other side of the sales counter and get into merchandising all over the store."Novo looks for display space in various locations within convenience stores, the company's largest distribution channel. Merchandising strips at the cooler or near health and beauty products drive impulse sales, but the primary display area remains the checkout counter.Novo has inked deals with both MTV and the World Wrestling Federation (WWF) for promotional tie-ins to its Homeland card. This summer, freestanding cardboard floorstands featuring images of leading MTV artists and WWF celebrities appeared on the cards and were introduced to convenience stores. The displays are designed for placement near the checkout counter, according to Murdock.In-store merchandising is Novo's only point of communication with the consumer, says Murdock. "It's absolutely crucial. We don't do any other advertising or promotion," he says. All displays relate the competitive benefits of the Homeland card, such as rates and no connection fees for certain international calls, via starbursts and bullet point type. The addition of the MTV and WWF celebrities was designed to garner more customer attention.In addition to the floorstand, Novo offers convenience retailers a variety of display materials, such as ceiling danglers, countertop units and static clings. Like many marketers working in the c-store channel, the company understands its chances of getting display placement depend largely on their ability to offer various materials so the retailer can select what's best for their stores."There's no one-size-fits-all solution in convenience stores. Nothing works for everyone," says Snapple's Larkin. As a result, Snapple's "Flip Your Lid" summer promotional materials include a motion display, cooler decals, danglers, posters and pole toppers. Ultimately, Snapple hopes c-stores feature the motion display as a centerpiece and place the other items throughout the store -- particularly at the cooler -- to reinforce the promotion.To entice retailers to take the motion display, Snapple ensured it's also a flexible piece. It can be suspended from the ceiling, placed on a floor display base, or attached to a pole with a case stacking. The unit is battery-operated, so no power outlet is required.Special RequestGreater consolidation and larger chain sizes have resulted in more requests for custom P-O-P within the convenience store category. In addition to requiring P-O-P materials to meet its specifications, 7-Eleven also looks for "first and only" products, packaging and promotions from vendors in various categories, including tobacco.Anheuser-Busch creates both national P-O-P materials and provides customized programs. "We work with our retailers in the design, development and delivery of P-O-P materials that address their specific business and customer needs," says Burkemper. "[We've] implemented hundreds of custom programs during the past year, and continue to receive a growing number of [c-store] retailer requests for custom programs."They're not alone. South Beach Beverage created a special rack with suction cups to merchandise seven cans of its Adrenaline Rush product for Chevron when the brand debuted in the company's 700 stores. A custom static cling supported the introduction as well. Snapple billboard and bus ads included the logo for Wawa Food Markets, Wawa, Pa., in key markets last year. In turn, Snapple was allowed to place its in-store coolers at checkout in Wawa stores."Oftentimes, c-store chains are looking for broad custom programs, like 'Buy a Snapple and get a bag of chips free,' which we will also help promote," says Larkin. "Custom P-O-P is typically part of the package." Snapple is currently negotiating with Wawa, which operates 509 food markets, to place suction-cup instant coupon dispensers on cooler doors.7-Eleven developed a program with Frito-Lay that involved its Big Bite Hot Dog, a 16-ounce Gulp beverage and a Big Grab bag of Frito-Lay chips for $1.99. A special chip display was created to merchandise the Big Grab chips involved in the promotion. "We used our normal display materials, but the chip display helped tie the promotion together for customers," says Monroy.However, not all c-store operators are in a position to request custom materials. "The industry is consolidating, but there are still a lot of small regional players like us. They might do a banner or something, but for the most part the major vendors aren't going to stop their presses to do something special for our 77 stores," says Nice-N-Easy's Paduano.What's New?Regardless of their size, c-store operations provide an invaluable venue for launching new products. Anheuser-Busch put a big c-store push behind its 180 Energy Drink when it debuted earlier this year in 30 markets. The vitamin-fortified carbonated beverage is another contender in the growing "healthy beverage" trend. "In-store P-O-S materials for 180 were designed to maximize the space within the cooler to support the high turns of the energy drink segment," says A-B's Burkemper. "The edgy, brightly-colored materials and the tag line, 'Turn Your Energy Around...Do a 180,' communicate a different look at retail. Specific P-O-S elements include cooler stickers (English and Spanish versions), shelf wobblers, gravity-feed can dispensers, wire racks, singles coolers, cooler door dispensers and contravision posters."When Snapple debuted a new look for its Mistic brand earlier this year, convenience stores were an important launching point. "We reworked the entire look of the package to be more urban, hip and colorful," says Snapple's Larkin. "P-O-S merchandising materials are the number-one vehicle for communicating a new look or a new product, and we hit the c-store market hard. In-store is the frontline,"he says. "Most players in this channel view displays in c-stores as in-store advertising, not just merchandising or P-O-P. An integrated, consistent program and look is so important to build the brands. And inside a convenience store is such an important place to do that."

Cashing in on Convenience

P2PI MEMBERS

JOIN P2PI

Related Images

Business Topic

Company

Market Segment