An Exclusive Offer
At Nouria Energy Stores in New England, sales of a product line introduced just four years ago are already outpacing center-store branded items. According to Kristine Modugno, director of category management at the 170-unit convenience store chain, year-over-year sales of the company’s private-label My Nouria line are growing at a double-digit rate, driven by new flavors, enhanced packaging and customer demand for quality items at a value price. While My Nouria offerings cross a variety of categories, snack items like the All-Dressed rippled potato chips, blueberry-covered pretzels and chocolate bars are among the products which customers particularly crave.
In Texas, meanwhile, sales of TXB-branded products reached more than $1 million last year, Benjamin Hoffmeyer, vice president, marketing and merchandising, TXB, reported. And with new private-label items scheduled to launch this year, sales could double in 2022, he said. “Many of our products are growing at a 50% to 60% rate thanks to their value proposition,” he noted. “Their quality is equal or better to that of national brands, while the price per ounce to the consumer is better than national labels.” And for TXB, with about 50 stores in Texas and Oklahoma, penny profits on its own-label products are improved versus that of leading brands.
TXB and Nouria are among a small but growing number of c-stores committed to advancing offerings and overall sales of private-label products. While largely the signature of grocery, drug and big-box stores, exclusive labels are emerging in the c-store channel despite some of the unique hurdles they bring to small footprint and fragmented operations. Convenience retailers already marketing private-label brands, along with vendors and channel advisers, see continued potential for the products, as well as the opportunity for the exclusive labels to help build c-stores’ reputation for fair prices.
Private-label sales in c-stores; however, are dramatically underdeveloped compared to other outlets. According to Jason Zelinski, client director, convenience and growth accounts at NielsenIQ, private-label products make up only 2.4% of total sales in c-stores. But the good news is that sales in the convenience channel are growing at a fast clip—up 19% last year, Zelinski said—easily outpacing trends in other channels. Todd Maute, partner at CBX, which helps retailers develop private-label portfolios and counts Wawa among its clients, explained that the fragmented nature of c-stores is a big reason that the channel lags others when it comes to store brands. “With more than half of all c-stores independently owned, it’s difficult for those stores to meet the minimum volume requirement from manufacturers for private-label products,” he said. The absence of private labels at so many c-stores is unfortunate, Maute continued. “They’ve become expected in high-volume categories and help drive loyalty to stores.”
The pandemic, supply chain pressures and rising inflation have all helped increase demand for private-label merchandise. But they’ve also increased constraints on the manufacturing and distribution of store brands. Most recently, “the manufacturing community has been limiting the amount of private labels they’re producing,” Maute noted. “Some aren’t doing private labels at all.” Indeed, both Modugno and Hoffmeyer reported that their stores experienced shortages from private-label vendors earlier this year, but those constraints have eased in recent months.
One of the biggest benefits of private-label products for c-stores is the customer loyalty they help develop. “When a c-store converts a customer to its private label, it forms an exclusive impression on the customer that the only place to get the item is their store, which can result in repeat trips and larger basket rings,” Zelinski said. Maute agreed, pointing to the reputation Wawa has earned for its exclusive coffee, which has made the retailer a destination for many consumers. Moreover, he sees “significant opportunity for c-stores to own categories like salty snacks if their private labels are sourced properly and quality exceeds expectations. Those types of products provide the opportunity to drive loyalty.”
Enhanced margins are another asset for retailers. “Private-label brands eliminate layers of cost that national brands build into their price model for marketing and other expenses,” noted Teresa Voelter, private label director at McLane Co., whose Consumer Value Products subsidiary offers numerous nonexclusive CVP-branded private-label products to retailers. So not only do they provide savings for consumers, but “they offer a way for retailers to increase their profits and secure consumer loyalty,” she said. Hoffmeyer added that store brands can aid retailers in inventory control, particularly when out-of-stocks impact national brands, and also “help build your brand awareness and strengthen the connection with your consumers.”
Despite the advantages, private-label programs come with a host of challenges for c-stores. Minimum volume requirements from suppliers can make the offerings untenable for some retailers. “For small retailers, it can be difficult to hit the minimum order when working under a large contract,” said Mike Fogarty, founder and CEO of Choice Markets, an upscale c-store concept with three locations in Denver and another three on the way. “Sourcing and design can be difficult, too,” said the retailer, whose stores offer a full line of Choice-branded prepared foods and snacks. “They may not know how to find a manufacturer.” McLane’s Voelter noted that for c-stores not large enough to create their own brand, the CVP products can fill in. “They give retailers a strong offering that increases profit margins,” she said. Maute recommended that small c-store chains form co-ops for better buying power or work with local manufacturers on private-label products.
Space constraints are another hurdle. “Space in a c-store is the tightest of any channel, so each spot must be justified,” noted Zelinski. Nouria’s Modugno concurred. “With c-stores’ limited SKU environment and the important role that the national brands play, you need to have a solid strategy with your total assortment and the role of private brands in each category,” she said. With no national marketing support to rely on, Hoffmeyer added that c-stores need to ensure they can fund marketing efforts for their own brands.
Nouria and TXB are looking to leverage those opportunities, as the New England chain recently expanded the My Nouria portfolio into packaged baked goods, while the Texas operator could add chips in the next year or two, Hoffmeyer said. TXB-branded packaged beverages, meanwhile, have been profitable for the company, he reported.
“We have better control upstream on cost of goods,” as compared to national brands, “and since TXB products are made in Texas, we save a ton on freight, which is key with heavy beverage cases,” the retailer noted. Mineral water, sports drinks and iced coffee drinks are also on the chain’s radar, he added.
At Choice Markets, prepared foods are produced at a commissary kitchen to the company’s specifications, while private-label nuts come from national suppliers, Fogarty said.
Deli salads and prepared meals are among the Choice brand’s most popular items, the retailer said, as “our customers trust our brand. They know it for its quality and that there’s thought behind the sourcing.” Fogarty added that more Choice-branded products are in the works and could include pastas, dressings, chips and dips.
The increased availability of quality private-label merchandise can only help to build the reputation of c-stores for offering fair prices. “Private label adds a low-priced option to convenience store shelves,” remarked Zelinski. “This plays a role in shifting consumer perception, as shoppers often believe they’re paying a higher price for convenience.” Special promotions and features on private-label merchandise propel the shift even more, Modugno said. “When guests are in our store, we’re their frame of reference for pricing, so promotions are key,” she remarked.
Research and planning are also core components of a successful private-label program. “Be sure to do your research to offer high quality products in great packaging, with attributes that appeal to your consumer,” Voelter advised. “Private label isn’t just a value product at a cheap price anymore. The goal is to source and offer products that meet or exceed consumers’ expectations, tell a story and even make them proud to purchase.”
C-store operators already active with private labels have no plans to look back. “Private label not only provides our channel a means to give consumers a better value proposition but also a means to further strengthen our brands’ connections with consumers,” said Hoffmeyer. “It also allows our channel to offer differentiated products to our customers and an opportunity to drive new traffic. Private label will be a necessity for c-stores to compete with other channels who have had a head start on the private-label journey.”
Like any other in-store merchandise, private-label products require marketing and merchandising support. Due to their high-margin opportunity, that support is critical.
“It’s a different retail environment than in the past,” said Todd Maute, partner at CBX. “Don’t put them on the bottom shelf.”
At Choice Markets, own-brand items are merchandised just inside the front door on “prominent fixtures,” to maximize exposure, said Mike Fogarty, founder and CEO of Choice Markets. At Nouria Energy stores, “we dedicate primary and endcap space in our stores for the Nouria brand,” Kristine Modugno, director of category management, reported, “and we run monthly promotions, as well as every day twofer deals to drive trial.”
TXB pulls out all the stops when it comes to promoting its own brands. In addition to digital support, such as coupons, loyalty and app tie-ins, the Texas chain leverages floor displays and beverage vault merchandising, Benjamin Hoffmeyer, vice president, marketing and merchandising, TXB, noted. “We also offer everyday multibuys to boost trial of different flavors and to build volume, which helps reduce production costs,” he said. Looking ahead, TXB plans to take support of its private-label brands full circle by partnering them with national brands, Hoffmeyer revealed, such as TXB water with Snickers and Red Bull promotions.
CATERING TO TRUCKERS
While consumable products are among the most common private-label offerings in c-stores, Love’s Travel Stops makes a targeted effort to provide its own line of products for its large pool of professional drivers.
“We like to say that ‘Love’s Mobile to Go’ zone is like the Apple Store or Best Buy of the highway, and it shows by how popular those items are among all customers,” said Casey Creegan, manager of merchandising at the 600-location travel stop network. Merchandise ranges from items that appeal to casual drivers, such as phone chargers and headphones, to those of interest to truck drivers, like GPS devices and headsets. Additional products offered as part of the “Mobile to Go” set include the Portage line of travel bags and clothing and the Love’s-branded auto fluids line.
Love’s-branded snacks and drinks—such as bottled water, beef jerky and candy—are also popular with guests, noted Creegan, and products like sweet and salty snacks and juices show potential. But she added, “We see a lot of opportunity on the nonconsumable side for items that help get professional drivers and four-wheel customers back on the road quickly and safely.”
Source: NACS Online