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RESEARCH perspectives BY BRYAN SILBERMANN, PRESIDENT • PRODUCE MARKETING ASSOCIATION Produce in C-Stores ow convenient: ebruary was a banner month for believ- Convenience also means being able to find the British are ers in the marriage of fresh produce fresh produce whenever and wherever the and convenience stores. First, the Unit- next eating occasion arises. coming! ed Kingdom’s largest retailer, Tesco, Conventional wisdom is that most Ameri- H announced its much-awaited entry to cans seldom speak of convenience stores and theF U.S. market would be through a conve- fresh foods in the same sentence. C-stores nience store format. Days later, Chiquita sales here are primarily about gasoline, ciga- announced it was introducing a specially rettes and beverages (soda and beer). At 11 packed single-serve banana as a test — its percent of inside sales, foodservice sales second in a decade — of the c-store channel. (sandwiches, pizza, hot dogs and other Before these recent developments, there foods) are dwarfed by the volume of gasoline had been signs that a few c-store operators and cigarettes sold. already understood the powerful combination But Tesco and Chiquita may be riding a Indeed, the biggest barriers preventing produce provides in bottom-line returns and wave of changing perceptions. Better yet, more consumers buying fresh produce from top-of-mind fresh image. Wawa and Sheetz their actions could speed that wave along. c-stores today are not in product offerings, spring to mind first from personal experience. Deciding to dig deeper into what Americans distribution constraints or building in con- Taken all together, could it be c-stores are are willing to buy at c-stores, PMA has con- venience. Rather, they lie more in the states finally following in the footsteps of conven- ducted two surveys of c-store shoppers of mind both of industry and consumers. tional supermarkets, super centers, clubs and through Opinion Dynamics Corporation. The Because the most powerful convenience fac- quick-serve restaurants in putting produce three most important reasons given by tors c-stores can offer to produce consumers closer to center stage? respondents for not buying produce in c- and marketers alike are their reach of For the past three decades, fresh produce stores were: all produce was bought at a neighborhood locations and the speed of has played a critical role in the growth pattern supermarket, cost in c-stores was higher and the shopping experience. That is what of American retail and foodservice channels. produce quality in c-stores was not up to makes convenience stores convenient. And Give consumers fresh fruits and vegetables expectations. a fresher range of food products is the cor- that consistently deliver on taste, convenience In April, among a sample of nearly 400 nerstone in transforming the tired image so and health, and they keep coming back for consumers who say they routinely purchase many Americans have of c-stores. more. One part image, one part health, one fresh produce at c-stores, bananas topped the Which is precisely why it may take an part profit and all parts consumer demand, list at 79 percent purchase frequency. Close English invasion to show most of the fruits and vegetables have moved into the behind were apples, with oranges third. American c-store sector how to really put spotlight in the evolving drama we call food The news for fresh-cut marketers was also convenience into c-stores. Tesco plans to marketing. encouraging. Single-serving vegetable salads focus its U.S. rollout on its highly successful Colorful retail bulk displays of the 1980s have been purchased by nearly 40 percent of Express concept stores. More than 800 rode what futurist John Naisbitt termed the the produce buyers, with 12 percent of this Express stores now operate in five countries High-Tech, High-Touch megatrend. Fresh-cut subset saying they buy them “a lot.” For sin- and serve 8 million shoppers each week. came along in the next decade and showed gle-serving fruit salads, these numbers are 30 And Tesco is a company whose insights technology and smart packaging could play a percent and 17 percent, respectively. into actual consumer buying behavior key role in delivering labor-saving conve- At Wawa, whose 550+ stores regularly through its Dunnhumby subsidiary are nience to consumers and foodservice opera- carry nearly 50 produce SKUs, it is the fresh- almost legendary and clearly relevant. It tors alike. And then along came super cen- cut fruit and vegetable salad bowls that also has plenty of experience entering new ters, driving supply chain efficiencies and the reportedly sell best. Not surprisingly, the markets overseas. convenience of one-stop shopping. store-level people who work at Wawa or The type of convenience store Tesco has Convenience, however, has many mean- Sheetz typically demonstrate an understand- in mind for the United States will surely be ings. Our industry often associates conve- ing of fresh foods that makes some other c- very different from the picture most of us nience immediately with fresh-cut produce. store food purchases seem like adventures here have of c-stores. For a growing num- That is unquestionably a big slice of the mar- one could do without. After all, caring for ber of consumers and produce marketers, ket. But convenience for consumers can mean fresh foods is an altogether different disci- that could be a highly desirable and fresh a lot more than opening a bag of washed pline than monitoring gasoline sales or dis- start. Who said the English couldn’t teach salad or not having to peel and cube a melon. pensing cigarettes. Americans something about food? pb

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COMMENTS & analysis BY JIM PREVOR, EDITOR-IN-CHIEF • PRODUCE BUSINESS

he British are Hard Nut To Crack welcome, but T getting produce he decision of Tesco to enter the U.S. difficulties that will shock them. into c-stores is our market with a convenience store for- The density of U.S. population is so much mat may tell us more about the prob- less than what Tesco Express stores experi- problem to solve. lematic position of conventional super- ence at home that the stores will strain to markets and the difficulty of compet- move the volume necessary to keep all those Ting with Wal-Mart and its super center con- prepared foods fresh and appealing. And stores that stock milk, eggs and butter, there cept than it does about the merits of c-stores. foodservice offerings are what make the pro- is a paucity of fresh produce. In many cases Certainly the City in London (the British duce offerings possible. If you look at a chain where produce is carried, the quality is so version of Wall Street) is restrained in its such as Wawa, you realize the core of the poor consumers can get turned off just look- enthusiasm. When Tesco announced that it produce rack is really the cooler for the sand- ing at the product. would spend $485 million dollars a year to wich program. It is the need to keep the sand- The industry lacks a distribution system open a U.S.-based chain modeled after its wich program booming that led Wawa to an for getting fresh produce to small outlets each Express format stores, its stock price dipped. alliance with Missa Bay, transforming a small day. Too large packaging often leads to infre- Despite a claim that the chain would break local wholesaler into a fresh foods distribu- quent delivery of excessive amounts of fruit. even in year two. tion powerhouse. Produce vendors are accustomed to working Perhaps the problem is that other brilliant The high density the Tesco Express stores with produce departments and dedicated pro- British retailers, such as Marks & Spencer require will necessitate urban locations, but duce personnel, so vendors are flummoxed (which tried its hand with Kings) and Sains- our British friends will be shocked when they when the guy in the convenience store that bury’s (which tried its hand with Shaw’s) learn what operating in urban America is finally added a fruit display doesn’t know and have found the U.S. market daunting. really like. doesn’t care about proper care and handling. Maybe Tesco won’t have the many advan- Wawa tried to open stores in New York Foodservice purveyors are probably more tages in the United States it has in the United but being advised to install bullet-proof glass suited for the job than anyone. They are used Kingdom. Tesco has no name recognition, no and surveillance cameras offended manage- to small deliveries, splitting cases and so forth logistics network and, unlike home where it ment’s sensibility. It was a noble experiment, — a very labor intensive solution — but retail owns outright 85 percent of its U.K. stores, but human nature didn’t rise to the trust margins can’t usually handle the costs blend- here Tesco will have to pay big bucks in rent placed in it, and Wawa shuttered its stores ed in at a white tablecloth restaurant. for the prime urban locations necessary if this when they were robbed blind. Tesco Express will probably have a great new format is to have a chance of success. And Tesco simply has no idea of how produce section. Why? First because they will The truth is that Express is not really a often it will get sued. There are three times as do a large foodservice business and prepare a convenience store. It is more like a small many lawyers per capita in the United States lot of things in store. This will provide a base upscale grocery store in Manhattan or San than in the United Kingdom. for frequent, cost-effective deliveries of fresh Francisco, something like a D’Agostinos or an Of course, they will learn all this, and if produce. Second, whereas the typical c-store Andronico’s. The focus is on high-margin they are truly committed, they will succeed. If customer is a blue-collar male, the Tesco prepared foods and big lunch traffic from they have to change the format or juggle the Express concept will likely skew to white col- local office workers. U.K. Expresses are locat- branding, they will. lar females who want salads and fresh pro- ed where foot traffic is heavy. Research provides a lot of insight, but duce, not 2-pound cheeseburgers. In a sense, it is a brilliant move. It is a experience is research as well, a type that Some of the produce business Tesco niche pretty insulated from competition with reveals things no study ever will. It is why Express wins will be new for the trade — a Wal-Mart and higher-margin than traditional school, for all its value, can never take the lady who wants a snack and runs in rather supermarkets. But one shouldn’t get too excit- place of experience. than going to Starbucks. But a Tesco Express ed. At the end of the 2004/2005 fiscal year, Convenience is an attribute not solely of is less likely to steal business from a 7-Eleven Tesco had 546 U.K. Tesco Express stores, an the product but also of the distribution and than from a Safeway Lifestyles store. impressive number. However, at 2,000 square services surrounding that product. This is The issue for the produce industry is how feet apiece, all 546 of them could fit into about why industry promotion efforts, so focused to appeal to the traditional c-store demograph- six Wal-Mart super centers. on marketing, are often so ineffective. You ic and how to distribute produce in small Tesco has been studying the U.S. market can’t sell more produce in general unless spe- quantities efficiently while making sure the for decades and is a minority partner with cific places sell more produce. quality of what is on display is always good. Safeway in the GroceryWorks Internet shop- In gas station mini-marts across America, The British are welcome, but getting produce ping service. Still, management will confront vending machines, fast food outlets and drug into c-stores is our problem to solve. pb

MAY 2006 • PRODUCE BUSINESS 11