Consumers Tea-ing Up

As a group, the c-store industry has done an excellent job of positioning coffee programs as high-quality alternatives to much-more-expensive coffee houses.  Few, though, have given the same thought to their hot tea offer.

But, according to a recent study by Packaged Facts, tea's image as an innovative - but accessible -- beverage that is good tasting, good for you, and budget friendly has kept  tea profitable, with 2-percent annual gains in 2008 and 2009, according to "Tea and Ready-to-Drink Tea in the U.S.: Retail, Foodservice and Consumer Trends," by market research publisher Packaged Facts. 

Over the next several years, the research firm predicts, tea sales will return to the double-digit gains experienced prior to the recession, particularly as additional research solidifies tea’s healthy and functional properties.

Packaged Facts estimates the U.S. market for tea sold through retail and foodservice channels will reach $9 billion this year and forecasts a 5-percent increase in 2010. Steadily rising annual percentage gains are projected through 2014, when growth will reach 10 percent and sales will exceed $12 billion.

Among the many new product introductions in the tea category: exotic flavored teas, tea and fruit infusions, and premium loose tea bags, which are at the forefront of innovations in both the retail and foodservice arenas.

"Tea’s healthfulness is still, of course, the beverage’s primary appeal, but in the current market environment consumers are increasingly recognizing good quality, customized tea as a comforting, affordable premium beverage splurge," notes Don Montuori, publisher of Packaged Facts.

Other factors driving the market, especially relevant to c-store operators: the greater involvement of the country's mega beverage companies; a greater emphasis on tea in the foodservice channel with the expansion of specialty brews; hybrid tea beverages crossing over into sparkling water, energy drinks and superfruit juices and the additional penetration of RTD teas in the c-store channel.

To someone who gets through the work day alternating Diet Pepsi with hot green tea, this study is spot-on.

 -- Barbara Grondin Francella

New York City Drug Store Institution Expands Convenience Store Lines

Duane Reade, the New York City-based drug store chain, consistently ranks among the top retailers in the drug store channel in sales per square foot. But, according to Supermarket Guru Phil Lempert, the retailer might be over-reaching with its new private label snack and beverage line, called DR Delish.
Lempert, writing on his food blog recently said, “No matter how ‘politically correct’ the packaging (suggestive of green and natural) or ‘health formulated’ the product (gluten-free, multigrain, etc.), it’s hard to imagine why the smart merchants at this chain think this line could succeed. Why would they expect fast-paced New Yorkers to spend time pondering a private label line of cookies, chips, trail mix and more—25 items at its launch—when their favorite snack brands that always satisfy are readily available?”

Millions of Manhattan residents and workers turn to Duane Reade because of its ubiquitous locations, not for innovation, according to Lempert. “Not even health, for that matter. And certainly not food leadership. At Duane Reade, convenience counts most,” wrote the NBC TV food editor and frequent contributor to both Convenience Store News and Progressive Grocer.
Lempert predicts DR Delish will fall short of expectations.

By contrast, Lempert points out that Walgreens, which enjoys a more robust image for healthcare excellence and complete one-stop shopping, including food for every daypart, is rolling out its new Customer Centric Retailing format stores to 400 more stores this year, after initial success with the first 35 test stores of this format.
As we've reported on CSNews Online, www.csnews.com, the new format includes the drug chain’s reintroduction of beer and wine to its shelves, a feature that will expand nationally (to about 70 percent of its 7,000 stores) over the next 12 to 18 months.
Lempert clearly prefers Walgreens’ approach to food and beverage because it more naturally suits its customers’ tendencies than the private label push by Duane Reade.

I can’t argue with Lempert’s analysis. However, I think Duane Reade will have better luck with the new line of Zabar’s sandwiches it has recently introduced in its stores. Zabar’s is a Manhattan institution known for its quality food in much the same way that Duane Reade is noted for its many locations. Either way, all this activity on the drug store front is a direct attack on some of the most important categories in a convenience store.
Duane Reade’s moves are obviously a very regional phenomenon. What are drug stores doing in your part of the country? Let us know? Reply here or email me at dlongo@csnews.com. I think competing successfully against the drug channel is going to become more critical than ever for the future of convenience store chains.
-- Don Longo, Editor-in-Chief, CSNews
 

Generation Why?

Generation Y, aka the Millennial Generation, aka Generation Next , aka Echo Boomers (with birthdates ranging roughly from 1980 to 2003) are probably the most important age cohort for your business.

These twentysomethings will be outspending baby boomers by 2015. As employees, they can attract and relate to Gen Y customers like no other employee.

During a presentation on Gen Y at the recent Network of Women Leadership Summit, Jayne O'Donnell, USA Today's retail reporter and coauthor of "Gen BuY: How Tweens, Teens and Twentysomethings are Revolutionizing Retail," told attendees these consumers feel greater love of and connection to shopping and brands than older shoppers do, haven't notched back spending as much as their parents have, and greatly influence what their parents and others buy.

They're a forgiving bunch too. In one study cited by O'Donnell, 45 percent of Gen Yers said they were bothered by untrained salespeople, while more than 60 percent of customers over 30 were.

As employees, they have traits that would benefit any c-store operator. According to O'Donnell, they become authentic marketers when they can claim some ownership in products, ideas and advertisements.

But, they hate looking like everyone else. Retailers may want to give them the chance to personalize their work attire, she suggested - -and make the store environment one that's fun to be in. Another suggestion: Empower them to connect with consumers on and off-line.

Even this Baby Boomer would be attracted to that type of retail experience.

 -- Barb Grondin Francella

Takes The Bag

Over the weekend, I made a quick stop at CVS/pharmacy and came out with six items (three unplanned purchases) and two plastic bags -- and left thinking about the bags lasting 100,000 years in a landfill and chastising myself for not bringing in one of the cloth bags I store in the car. I have this regret every time I stop at CVS -- because I continually forget to bring the bags in until I'm at the checkout.

We recycle our plastic bags at the local Stop N Shop -- where I often forget to use my cloth bags and have repeatedly suggested they install  "Don't forget your bags" signs in the parking lot.  Still, when I remember to use my cloth bags, I feel good about this easy way to make a significant impact on the plastic my family generates.

Now, CVS/pharmacy has unveiled a GreenBag Tag program. As of today, a consumer who buys a Green BagTag -- made of corn-based material and 100-percent silicone, packaged in 100 percent recycled paper -- for 99 cents and uses it with an ExtraCare rewards card will earn $1 in ExtraCare Bucks on every fourth scan. ExtraCare Bucks can be used to purchase nearly anything in the store.

CVS' ExtraBucks tie-in is a great idea -- keeps customers coming back to use those bucks-off coupons. I wish the customer could use any cloth bag though.

I'd love to see more c-stores offer cloth bags and recycle plastic bags -- a convenient service for gasoline customers who are cleaning out the car --  or simply ask, "Do you want a bag?" before stuffing two or three items in a plastic bag. Those are all easy-to-execute details that would appeal to the average consumer who wants to be a little greener.

Meanwhile, after the holidays, WalMart is expected to test a program in a few stores in California that would charge customers 15 cents for plastic bags. The program should go a long way to help the chain reduce plastic bag waste 33 percent in the next three years. However,  I have a feeling it will be interpreted by many customers as a fee, rather than an incentive, just as many motorists felt about dual gas prices for cash or credit.

 -- Barbara Grondin Francella

Niche and Novel: The Beverage Sweet Spot?

Long dominated by a handful of major brands, the U.S. beverage market is being transformed by niche drinks that target specific consumer needs, occasions and benefits, according to recent research by Packaged Facts.

According to  "Beverage Trends: Culinary Trend Mapping Report" recently released by the Center for Culinary Development (San Francisco) and Packaged Facts (Rockville, Md.), two forces are spurring sales in the beverage market: Better-for-you trends (the number-one driver in the new beverage landscape, including functional, nutrition boosting, and holistic-wellness drinks) and consumers' quest for quality, including organic, local, artisan-made, and retro/nostalgic beverages.

The potential for new beverages targeting these trends is significant, with diverse consumers, from Gen Y teens to Gen X parents and sporty Boomers, looking for new healthful and premium new drinks, the report concluded.

“Because of this diversity in consumer demographics and psychographics,” emphasizes Kimberly Egan, CEO of the Center for Culinary Development, “the beverage market is an arena with plenty of room for growth and innovation.”

But what does this mean for c-store operators, who often rely on the major soda companies and their bottlers to shape their cooler planograms? The major cola companies are slowly reshaping their product mixes along consumer trends, but their track record with alternative beverages is littered with failures.

It will be interesting to see how retailers balance limited space and attractive incentives with the potential of new, not-yet-mainstream, niche beverages that carry more risk, but also higher margins, and which may be more desirable to customers who are shunning sodas and have concerns about the ingredients in energy drinks.

 -- Barbara Grondin Francella

When Mom's Happy, Everyone's Happy

Last week, the Retail Advertising and Marketing Association released details of its new survey that revealed this stop-the-presses news: Moms like to talk.

Okay, not startling. But the stats behind it were eye-opening and could be very useful to convenience store operators who are trying to reach the busy female demographic.  According to survey, by BIGResearch, women with children at home are more likely to use Facebook (60.3 percent of them do), MySpace (42.4 percent) and Twitter (16.5 percent) than average adults (50.2 percent, 34.4 percent, 15 percent respectively.) An impressive  15.3 percent of moms maintain their own blog.

 "Retailers who aren’t engaging customers through social media could be missing the boat," Mike Gatti,  executive director for RAMA noted when the survey results were released.  “Twitter, Facebook and blogs are becoming increasingly popular with moms as they search for coupons or deals and keep in touch with loved ones. The web provides efficient, convenient ways for brands to stay in front of their most loyal shoppers and attract new ones.”

Another startling fact: Moms like free stuff. Okay, again, not so startling. Then why aren't c-store operators making more use of this knowledge? Given a scale of one to five, when asked what types of promotions most influence their purchases, moms ranked product samples in the store (3.8), product samples delivered to home (3.6), loyalty cards (3.5) and special displays (3.4) as their favorites.

Not surprisingly, women with children frequently share experiences and information, and say other peoples’ opinions influence their purchases. Nine out of 10 mothers surveyed said they regularly or occasionally seek the advice of others before buying a service or product. A whopping 97.2 percent said they give advice to others about the products or services they purchased.

In the last few weeks, I've been asked by other moms via email or Facebook for my non-work-related opinion or I've commented on:  a local tailor, birthday ideas, television shows, a Broadway show,  cookies, cold remedies, the car I drive,  lunch ideas, local restaurants, the local library, a cancer charity walk, eating leftovers, BBQ tips,  the local school system, local and federal politics, McDonald's, the power of chocolate, babysitters, flower deliveries, Costco deals, snacking, coffee houses,  SAT prep courses, Trader Joe's, apple picking --  you get the idea.      

 “Whether they’re having coffee with a friend or updating their Facebook status, these women are eager and willing to share shopping experiences, both good and bad," said Phil Rist,executive vice president, strategic initiatives, BIGresearch. 

Eager and willing? I'd use the word "compelled."

 -- Barbara Grondin Francella

What Shoppers Want

 

In a recent report by M/A/R/C Research, featuring a rolling monthly survey of 1,000 adults, some 16 percent of consumers polled in June said they did not seek out c-stores as a place to shop. Ouch.

In a market with increasingly blurred retail concepts all vying for the same dollar not being on the consumers' mental map is tough.

Unfortunately, one of the top reasons shoppers avoid c-stores is a characteristic that defines the concept:  limited selection of products, according to M/A/R/C. Nearly half the respondents cited this as one of their top three reasons for not shopping in a c-store.

 

Other reasons shoppers did not stop in a c-store also hit close to home -- perceptions the industry has been fighting to overcome in the more than 20 years I've covered the retail channel. These non-c-store-shopping adults had concerns about safety (30 percent of shoppers), poor-quality staff (29 percent) and an unwelcoming store environment (28 percent).

 

Reading these results, you'd think the industry hasn't' evolved in a quarter decade. But the list of c-store operators who have addressed all of these issues continues to grow. They're offering and expanding quality private label products and foodservice items; improving their recruiting, hiring, training and compensation programs and continuing to invest in store facilities, even as the industry suffers from recessionary customer counts.

 

Perhaps it's a matter of marketing and strong brand identity. Unfortunately, customer perceptions are slow to change and often the weakest operator defines an entire channel in a customer's mind.

 

-- Barbara Grondin Francella