Convenience store retailers have spent most of the last 20 years sitting and watching.
They’ve sat around as CPG makers focused first on grocery stores, then on the mass-merchandise channel (the latter beginning in the mid-1990s). And they watched as virtually every other retail format, from drug stores to warehouse clubs, expanded to include on-the-go merchandise to compete directly with them.
The competitive pressure has proven to be quite a motivator, and c-store operators are done watching and busy doing — standing up to protect a 120,000-store industry that generated revenues of $269.4 billion last year, up 15.1 percent from the year before, according to the National Association of Convenience Stores (NACS), Alexandria, VA.
New store prototypes are larger. Shelves are now lined with such non-traditional merchandise as diapers, dog food, and cosmetics. And fresh-food operations have been overhauled with new menus and better quality. “The industry is trying to get away from being known for egg salad sandwiches in Saran Wrap,” says Tammy Dunkley, advertising manager at 250-store chain Sheetz, Altoona, PA. “These days, c-stores need to stand out in a crowd.”
Standing out has become a two-part strategy split between heightened consumer marketing — the likes of which has never been seen in this industry — and increased programs with manufacturer partners.
Brands are paying more attention to c-stores these days, and with good reason. For one, there are often fewer headaches involved with striking a co-marketing deal with a convenience chain than with a retailer in the congested grocery and mass-merch sectors. For another, single-unit sales matter in a down economy. “Manufacturers may not see the huge bulk-sales lifts they see from grocery promotions,” says NACS executive vp Lindsay Hutter. “But they see results. C-stores offer an affordable scale for marketing dollars.”
Lastly, there are substantial branding opportunities associated with a store format that customers shop daily.
“Clients usually think it’s only young men going into c-stores for cigarettes and coffee. It’s not,” says Bill Sinnott, group president with Westport, CT-based Ryan Partnership, which is readying a holiday program for White Plains, NY-based Heineken that will launch in 7-Eleven stores next month. “We’re beginning to develop more promotions that are limited to the c-store footprint but are every bit as involved as what you see in grocery or mass.”
For example, Dallas-based 7-Eleven, which has 22,000 stores worldwide and 5,700 in the U.S., takes its promotional activity to a new level next month with a multi-partner holiday campaign. Customers who make a $5 purchase inside or buy eight gallons of gas at the pump receive a 24-page book containing $9 in manufacturer coupons. The offers include stocking stuffers and holiday-themed products from such brand partners as Coca-Cola, AT&T, and Tropicana. Each coupon book contains a “peel and reveal” instant-win gamepiece dangling such prizes as free phones, mini-TVs, and coffee. The Promotion Network, Dallas, handles.
“These types of campaigns are playing a critical role in how we’re building the brand,” says 7-Eleven vp-advertising Bob Merz. “We’re definitely looking to execute more national promotions.”
Time to Shine
Other chains have similar ideas. Phoenix, AZ-based Circle K (owned by U.K. giant Tosco Corp.) is in the midst of a Fantasy Stock Car Racing game that lets shoppers build their ideal pit crews after registering at circlek.com. Weekly winners score hats and Circle K gift cards. Season-long winners receive free gas for a year, gift certificates from America West Airlines, and other goodies.
Circle K executed a quartet of efforts last summer tied to all four California Major League Baseball teams: Anaheim Angels tickets came with $2 Circle K gas cards, while ticket purchases for the other three teams provided entry into a Pitch to Win sweeps serving a $76,000 grand prize along with gift certificates and gas cards.
The retailer is also distributing millions of voting ballots as part of Atlanta-based NASCAR’s fall campaign, which lets consumers vote for their favorite drivers (see “Campaign Trail”).
Smaller c-store operators are getting in on the action, too. Hudson, OH-based Dairy Mart, for example, just wrapped a chain-wide sweeps celebrating its 62nd anniversary by giving away Harley-Davidson motorcycles through its 547 units (in seven Midwest and Southeast states). Sheetz ran a game this fall giving away codes shoppers deciphered online to see if they’d won; the chain converted Web site traffic into subscribers for an e-mail newsletter that delivers coupons and promotion info. “Most brands have been doing this level of marketing for a lot longer than the retailers in this industry,” says Sheetz’s Dunkley. “But we’re catching up fast.”
Marketers seem to agree, since they’re beginning to address c-stores as a distinct channel rather than grocery’s red-headed stepchild. “In the old days, c-stores received whatever materials were left over,” says Sinnott. “Now, you have to start planning with them in mind.”
Some brands are tailoring campaigns to the overall channel, such as the sweeps Greenwich, CT-based Perrier USA ran last summer throughout the Southwest leveraging its Texas Rangers baseball sponsorship, or the cause marketing program Burlington, VT-based Ben & Jerry’s hosted in July that traded charitable donations for c-store ice cream sales.
San Francisco-based Mike’s Hard Lemonade spent the summer cruising c-stores in Chicago, Los Angeles, San Diego, Dallas, and Miami in branded sampling vehicles; a sweeps overlay dangled Mike’s Ultimate Party Wagon, an RV stuffed with cushy features and consumer electronics.
Manufacturers are also banding together for tag-team account-specific work: Purchase, NY-based PepsiCo and Glenview, IL-based Kraft Foods work together on meal deals pairing Pepsi drinks and Frito-Lay chips with Oscar Mayer hot dogs, while Mott’s, Inc.’s Clamato brand mixes with St. Louis-based Anheuser-Busch’s Budweiser in Circle K stores to offer “Red Beer.” Atlanta-based Coca-Cola and East Rutherford, NJ-based Nabisco last fall hooked up on a Halloween promotion that boasted dual-brand coupons, national and chain-specific sweeps, and extensive P-O-P activity.
“We were never that aggressive reaching out to vendors,” says 7-Eleven’s Merz. “We’re changing that.”
C-stores are also proving to be fertile ground for new product introductions and tests of new SKUs. Circle K, for instance, is currently helping Glendale, CA-based Nestlé USA introduce chilled Nesquick chocolate drink. Bottles have codes shoppers enter at circlek.com to see if they’ve won prizes such as a Ford Focus or a home entertainment package. “We are a laboratory that makes sense for marketers,” says NACS’ Hutter. “Someone will try a new 12-ounce beverage. But they won’t try two cases of it.”
Marketing now comes in a handy, single-serve variety.
A look into the c-store crystal ball.
Cool Growth: Competitive pressure will slow sales growth to 3.7 percent annually through 2005, compared with 5.4 percent over the last five years.
More Stores, Slowly: Store count growth is expected to slow to annual increases of 2.1 percent through 2005, compared with four-percent rises in the last five years.
Urge to Merge: The consolidation that swept the grocery and drug store sectors over the last two years is expected to hit the c-store segment.
Smoked Out: As smoking continues to decline, the cigarette business will need to be replaced. Expect niche categories and meals to fill the space.
Web-centric: Internet capabilities will keep the convenience in c-stores. Use of kiosks, wireless devices, and delivery programs should rise.