Leaving the relatively stagnant supermarket sector in their wake, c-stores grew by 7.3 per cent in value to £23 billion last year, according to IGD.
Fresh produce is acknowledged by most as integral to their competitive edge but are the 54,000 UK stores making the most of their fresh fruit and vegetable offer? A sector overview suggests some, such as the Budgens chain, are excelling while many independents struggle to source quality produce and overcome fears of wastage.
Harris International Marketing (HIM) chief executive Mike Greene believes, “if you invest in fresh, you see the returns”. Specialising in the convenience sector, HIM tracks the 30 leading convenience suppliers and has surveyed 500,000 c-store shoppers over the last five to six years.
Contrary to national press reports sounding a death knell for smaller shops as superstores buy up chains across the country, the convenience sector is buoyant, he says.
HIM research, conducted throughout one week in February, found 1.4 million more shoppers visiting convenience stores, year-on-year, while supermarket visitor numbers fell by two million. “Top-up shopping is fitting better into contemporary life, particularly for the under 25s,” says Greene.
The average c-store attracts 1,000 shoppers per day, with six per cent of those buying fresh produce. More significantly, he continues, the average spend increases from an annual £985 per shopper to £1,469 for those also purchasing fresh fruit and vegetables.
A good fresh produce stock will often result in visitors upgrading from a snack stop to a top-up shop.
“It is in the interest of stores to expand their range,” says Greene, suggesting other c-stores would be well advised to follow the lead of Budgens - 11 per cent of the chain’s customers purchase fresh produce.
Pre-prepared products are key to driving fresh sales, he adds, moving beyond cut and bagged salad leaves to, for example, sliced potatoes, tossed in oil and presented in a ready to bake silver tray.
Greater market penetration is achieved, as well as better returns. “The more prepared you can make it for the consumer, the better.” And the government’s 5 A DAY recommendation has further boosted market opportunities for fresh fruit and vegetables.
For c-stores seeking to boost sales, more space should be allocated to chilled foods and an attractive front-of-shop fresh produce display will tackle old perceptions of corner shops as grotty and unwelcoming.
Ironically, the arrival of multiple retail chains in the convenience sector has in many ways aided their independent rivals, says Greene, forcing suppliers to look at the whole sector as an opportunity.
Danny Grover, fresh fruit and vegetables category manager for Budgens’ parent group MBL, says: “Many of our independent retailers tell us that it’s our fresh produce offer that makes them stand out and drives their business and their profits.”
Key to the chain’s success in the category is fresh produce delivery six days per week and close relationships with suppliers and growers. As a supporter of the Red Tractor British Farm Standard assurance scheme’s Promises campaign, Budgens is committed to sourcing UK fruit and vegetables, when in season, and conducts product benchmarking exercises based on appearance, price and quality.
“Budgens has also invested heavily in in-store training with the produce aisle being a key focus area,” says Grover. “This has been achieved with the launch of produce training manuals and the appointment of fresh food managers.”
Suppliers are invited to an annual Fresh Produce Conference, at which awards are distributed across a number of categories.
“Fresh produce is absolutely key in the convenience sector and retailers need to have a good all-round offer if they want to attract customers who would otherwise shop in the multiples,” he says. “The category is increasingly important and the growth is all consumer-driven as the population is increasingly diet-conscious and nutrition aware.
“C-stores have to have a good core range, such as bananas, apples and onions, and we’ve moved more towards prepared fruit and vegetables and pre-packed products as the convenience shopper is looking for products to pick up and go,” says Grover.
“Selling fresh produce has its challenges, of course - primarily its short shelf life. Retailers need to have a reasonable understanding of the product and be prepared to take a small risk of wastage.”
Nevertheless, he continues: “The rewards of selling fresh fruit and vegetables are huge, with good margins and the opportunity to attract additional customers to the ‘complete shop’.”
Spar is another convenience chain recognising the importance of the category. “We have set ourselves a timetable of revitalising the entire Spar brand range by the end of 2006,” says group trading director Peter Miller.
The chain prides itself on stocking the largest own brand range in the convenience sector - at 900 lines - and fresh foods, including fruit and vegetables, are regarded as a key category in the range.
Trading operations have been restructured at Spar’s Harrow headquarters, with specialists appointed in the different food categories.
“The ‘Brand of Choice’ development is guaranteed to produce greater loyalty from our customers, greater footfall and increased sales,” says Miller. “It will allow us to punch through the £400m a year sales mark on Spar brand with a brand that is unrivalled in the convenience market; one that gives retailers better margins and customers a range of quality products that they cannot get elsewhere.”
Spar’s fresh produce commitment includes delivery direct from Spar wholesalers or preferred suppliers, with a daily supply service available in limited areas, and smaller pack sizes offered to minimise wastage.
“One of the key product areas to get right if you are to compete in today’s aggressive retail market is fresh foods,” says a spokesman for the chain. “Our customers tell us that with the right range, they will visit our store more often and spend more money. A poor fresh food offer will drive customers back to the multiples.”
Along with controlling fresh produce wastage, Spar believes stores should make use of seasonal opportunities and promotions, ensure the range matches their customer profile and allocate space to maximise range and visibility.
Florette, one of the few privately branded fresh produce suppliers in the retail market, is also recognising c-store growth and opportunities, with both smaller pack and family-sized meal solution developments.
About 10 per cent of its salads, in pre-packed bags, bowls and trays, go to the sector, with the supermarket chains taking the lion’s share and a small volume going into foodservice.
“We see a big opportunity in convenience stores,” says Florette commercial director Sandy Sewell. “Prepared salads fit very nicely.”
With the bagged salad market fairly flat this year, the supplier has invested in new product development from mini-salad bags for one to two people to family-sized bowls, which shoppers can pick up on the way home and serve with chicken or pasta.
This month will also see the launch of a new rocket salad with Parmesan or warm bacon, addressing demand for meal kits and complete meal solutions.
While people are eating out more, a trend of ‘dining out at home’ is also emerging, says Sewell. “We are becoming aware of the opportunity in convenience,” he says. “The big opportunity for retailers is the fresh side and Florette is a brand retailers can stock with confidence.”
For Nigel Jenney, chief executive of the Fresh Produce Consortium, rapid consolidation within the sector in recent years has improved the availability of quality fruit and vegetables.
With Tesco, the Co-op, Sainsbury’s and Somerfield buying up convenience stores, and convenience chains such as MBL (Musgrave Budgens Londis), Mace, Spar and Costcutter growing in size, professional buying routes have been established and consistency of quality has improved,” he says.
Of total c-store numbers, 52 per cent are independent; 20 per cent symbol stores; 20 per cent forecourt; four per cent supermarket affiliates; and four per cent co-operatives.
While the larger chains use regional or national buying positions, smaller operators are continuing to buy through wholesale networks.
“It’s important to have a good fresh produce stock to encourage sales,” says Jenney. “The larger groups are putting effort into in-store training and better displays, which take competence to achieve.”
Key to success is a more focused range of products for top-up shopping, pre-packed rather than loose goods, and smaller portion sizes.
A pilot study conducted by the Scottish Executive suggests c-stores can easily boost their fresh produce sales with minimal effort. A health department initiative aimed at improving the Scottish diet, the study was completed over April to October 2004 and specifically targeted c-store sales.
One store involved in the project noted a 400 per cent increase in fresh fruit and vegetable sales by increasing the space allocation to the category and moving it from back to front of shop. Another store reported sales up 36 per cent in the first week and ongoing increases of 62 per cent from simply moving the stock to the front.
And displaying fruit, rather than confectionery, at checkouts led to sales of the former outstripping the latter.
C-store operators David Sands, Aberness Foods (now Somerfield), Morning Noon and Night (now Scotmid), Botterrills Convenience Stores and CJ Lang & Sons, as well as the Scottish Grocers’ Federation, were all partners in the project.
“We decided to be part of this pilot after conducting a survey which showed that two thirds of our customers wanted us to sell more healthy foods,” says managing director of David Sands, David Sands. “Since introducing a wider range of healthier food and drink options, even we have been surprised by their popularity and we are rolling out these products to all our stores.”
A second 12-month phase is underway with 300 stores participating. Scotland is home to about 5,000 c-stores with IGD reporting a 9.4 per cent growth in their retail market share in 2004.
However, offering a more sceptical view of fresh produce’s growth in the convenience sector is James Loman of the Association of Convenience Stores (ACS).
While the latest analysis indicates fresh produce is vital to the sector, in reality it is not growing in line with forecasts, says Loman.
The opportunities are evident, with wholesalers delivering more frequently, but smaller operators can encounter problems with securing the right supply chain and find it difficult to overcome their fear of wastage, he says.
C-stores are not always regarded as the first point of sale for fresh produce, although “if quality improves, perception will improve.”
Convincing store-owners that wastage is not a loss but an investment is one challenge. “It’s not an overnight thing; stores need time to build their reputation,” he says.
Putting it into context, on its website, www.thelocalshop.com, the ACS lists fresh produce as just one of 15 categories central to the offering of a convenience store.
Despite this however, the sector currently holds a retail market share of about 20 per cent, and is tipped to reach £29bn in value by 2009, according to IGD forecasts. Whatever your views, fresh produce offering has got to play a key role in that growth.
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