By Sarah Hamaker
Grocery staples — canned and dry soups, canned fruit and vegetables, breakfast cereal and condiments — likely aren’t the first things that come to mind when you think about profit makers in your stores, but edible grocery has proven to be a solid revenue source for many convenience stores.
Although edible grocery’s in-store sales dropped a tenth of a percentage point from 2006 (1.91 percent) to 2007 (1.81 percent), the category squeaked into the top 10 categories by gross profit contribution, coming in at number 10, according to NACS State of the Industry data for 2007. Average edible grocery sales for stores fell a mere 0.09 percent, but the category’s overall gross margin contribution increased the same amount (0.09 percent) from 2006 to 2007, NACS data shows.
“We’ve seen solid growth [in this category] through additional distribution,” said Stuart McAllister, director of marketing-foodservice for Dole Packaged Foods in Westlake Village, California.
“Growth for Hormel convenience meal products continues to be very strong with many of our best performing items, such as Hormel Compleats microwave meals, Dinty Moore Beef Stew and Hormel Chili, growing double digits over last year,” added Bob Pepper, group product manager for Hormel Foods in Austin, Minnesota.
Edible grocery has experienced shrinking shelf space over the past year, but the category continues to offer innovative products geared toward on-the-go consumers.
“Grocery sets are shrinking from traditional 12-foot and 8-foot sets to 4-foot sets, and convenience store setups have shifted from what was a scaled-down version of the traditional grocery offerings to a slim offering of basic pantry products and a much bigger assortment of foods to go,” said Jack Cloherty, vice president of the broker team for the Campbell Soup Company in Camden, New Jersey. “The focus in convenience stores has shifted from take-home products to heat-and-eat products. For Campbell, that shift has translated into a move toward convenience products, such as Soup at Hand and Campbell’s soups in microwavable bowls.”
Hormel’s Pepper agreed that consumers crave “products that offer quick and simple convenience, [which] continue to be of increasing interest to consumers…Consumers define convenience as more that just quick preparation; convenience [also] means quick prep, no planning required…and, very importantly, no clean up.”
To accommodate customers who want to munch on their edible grocery purchase right away, Quick Chek provides wrapped utensils, milk for cereal cups and hot water for instant soup cups or oatmeal cups. The Whitehouse Station, New Jersey-based chain will also heat products for customers in their kitchen microwaves upon request. In addition, many Quick Chek locations offer seating for those who want to consume their products on the premises, said Jennifer Vespole, senior category manager-foodservice for Quick Chek.
To stay competitive with these on the-go consumers, manufacturers look to new products to meet changing consumer tastes in edible grocery items. “We’ve found that as we launch new products with different formats, we are giving our users different reasons to enjoy ramen. That’s why we’ve been successful with our Souper Meal, a super-sized microwavable bowl that features a rich soup and more vegetables, and Chow Mein, a microwavable meal that comes in eight Asian flavors,” said Linda Chung, senior marketing manager for Nissin Foods in Gardena, California.
“Eating healthier is still the most predominant thing on people’s minds, but it’s taken a bit of a back seat to saving money,” Chung continued. “And the typical ramen user does not use health as a determining factor when buying from this category — it’s convenience and value.”
Traditionally, growth in edible grocery sales tends to be slow but steady.
“While unit sales in grocery have been flat, the ramen category has grown in dollar sales by about 12 percent versus a year ago,” said Chung. “Instant ramen category is more or less stable. … However, we have seen an increase in sales from the non-grocery class, especially in the dollar stores.”
Campbell views shelf space in convenience stores as a viable way to increase sales for its edible grocery products. “Shipments of Campbell’s microwavable soup products are up significantly in convenience stores since the start of fiscal 2009,” said
Cloherty. “This is due to increased points of distribution, as well as the introduction of secondary racks.”
Hormel also sees convenience stores as providing the right outlet for its products. “Our business in the convenience industry continues to grow year on year,” said Steve Bremner, director of sales for emerging channels at Hormel Foods.
Driving consumer interest to the edible grocery category via in-store marketing and promotional campaigns has a positive effect on sales. “Campbell utilizes on-shelf racks for microwavable bowls to attract consumers’ attention. In addition, coupons for Campbell products are featured on the backs of convenience store receipts, offering discounts on future purchases,” said Cloherty.
“We do a mix of displays, shipper units and demos to drive trial and awareness to our products,” said Nissin’s Chung. “What we offer depends on the retailer and if their promotion matches the product and the ramen consumer.”
Dole produces in-store display trays for fruit cups that go in the cooler. “We have produced cling stickers and posters in the past, but they end up not being used, [so we discontinued that],” said McAllister. Dole also partners with retailers on combo meal deals that feature a sandwich, beverage and a Dole edible grocery product, such as a fruit cup.
To reach consumers throughout the store, Hormel developed off-the-shelf displays to be placed in areas other than edible grocery. “Many of our items can be heated in the microwave and be ready to eat in as little as 90 seconds, so we have developed off-shelf display units that can be merchandised by the microwave to capture hungry consumers looking for hearty, homestyle meals,” said Bremner.
Campbell uses its affiliation with the National Football League (NFL) to draw attention to its products. “The NFL is a particularly strong equity with many convenience store customers, and Campbell has developed compelling point of purchase materials (racks, etc.) that feature the NFL logo,” said Cloherty.
With its strong contribution to a retailer’s profit margin, edible grocery will continue to occupy shelf space in convenience stores. “Consumers will continue to look for quick and easy solutions in edible grocery,” said Campbell’s Cloherty.
Hormel’s Pepper added, “In the near-term future, despite economic hardship, consumers will continue to be starved for time and in search of quick meal solutions. Delicious and ultra-convenient ready meals will continue to grow and become more and more important to the edible grocery products sections in convenience stores. Going forward, we expect [these types of meals] to be a key driver in delivering significant growth.”
Sarah Hamaker, a freelance writer in Fairfax, Virginia, has made many an emergency run to a convenience store in search of chicken noodle soup.