suppliers reflect on industry evolution

CSD survey finds marketing, communications and wireless technology are keys to unlocking future growth.

By most accounts, 10 years really isn’t all that significant a span of time. But to suppliers of convenience stores, a decadeparticularly this past decadehas been monumental in the ongoing evolution of the c-store industry and the customers it serves.

During the past few weeks, Convenience Store Decisions surveyed more than a dozen suppliers, asking them to reflect on the technology and trends of the past 10 years and to gaze into the c-store crystal ball and make some forecasts for the decade to come. Most respondents agreed increased access to data and tracking consumers’ shopping patterns was key to the maturation of the c-store industry. Price, others said, has gradually become less of a factor, surmounted by how products benefit consumers and their desire to live a healthier lifestyle.

Participants also talked about marketing trends and how ethnic diversity requires them to consider new merchandising tactics to meet the needs of multicultural customers. And don’t forget the proliferation of the Internet. Ten years ago, the dialup connection was all the rage. These days, the wireless information superhighway is a large part of c-store management and all the suppliers agreed that the role of wireless is continuing to develop.

Ten years. It’s really not that long ago. But, according to this survey, thenext 10 years promise to be even more exciting and, without a doubt, more convenient.

What technology has been the greatest benefit to your category managementefforts over the past 10 years?
Vonder Haar: Perhaps the biggest changewe’ve seen in the past 10 years is the speed of information we have availableto make good recommendations about product assortment and brand preference.We now have access to more data than ever. This enables us to keep a close watchon inventories and ensure we don’t have excess product sitting on the shelvesin the warehouse or the store.

Lupo: Visibility has increased tremendously in the past 10 years due to the increase in scanning from only 16% of cstores in 1990 to 85% in 2000, enabling customers to better manage inventories and manufacturers to better track their business in the c-store channel.

Wright: Without a doubt, the proliferation of online communication such as email and instant messaging. In 1999, probably 90% of the quick communication was performed via fax machine. Today, using a fax to communicate is virtually nonexistent.

What technology will have the greatest benefit to your category managementefforts over the next 10 years?
Seager: Better insight into whereevery case is shipped in the channel through new technologies, such as radiochips potentially placed on every product to track the movement from the warehouseto the consumer.

Lupo: We see huge opportunities to capture lost sales in cstores with interactive merchandising tools at the pump. We believe there are better ways to engage gas consumers with targeted advertising that will actually get them to venture away form the pump, and shop inside the store.

Grogman: “Clustering” stores by demographics or other characteristicslike lifestyle will provide the most efficient use of category management informationand allow the alignment of products with a demand index that identifies thepotential purchase velocity of the category or product.

What consumer trends have had the greatest impact on your product or categoryover the past 10 years?
Robinson: The never-ending quest for moreconvenience to simplify a hectic lifestyle has been a key factor driving carwashutilization at c-stores. You’re there in your vehicle to fill up on gas or pickup a snack, and if the carwash line isn’t too long, taking 5-10 minutes to washyour car seems like a better deal than driving to a standalone carwash.

Seager: Massive migration away from other beverages to healthy bottled water. Bottled water also meets consumer needs for portability, convenience, safety and quality.

Haley: For us, the consumer trends created our category: calorie-burning colas. Consumers are more focused on healthy types of products, healthy movement. The next trend the awareness of how what they put in their bodies will impact their health.

What trends will have the greatest impact on your product or category overthe next 10 years?
Vonder Haar: Consumer demands for choices in packagingand product differentiation have had great influence on how we go to market.We constantly work to address the changing marketplace with new products andmarketing approaches that will serve both the aging market and this new consumermindset. A growing understanding of how and why the consumer purchases a particularproduct and where they purchase it will determine where resources are allocatedin the future.

Onorato: Some trends that we are seeing include: portable consumableproducts to meet the needs of busy consumers; multicultural marketing and productsthat provide a benefit when consumed, such as antioxidants.

Finney: In the next 10 years, we’ll have to address the needs of baby boomers as well as the continued growth of the Latino consumer.

What trends in convenience retailing have had the greatest impact on yourbusiness over the past 10 years?
Onorato: Eroding margins outsidethe store have made margins inside the store more critical; nontraditional fueloutlets like hypermarkets; and corporate franchising.

Gulley: The emergence of blue collar adults as the primary c-store shopper. The popularity of pay-at-the-pump has decreased in-store traffic and put pressure on merchandise sales.

Robinson: Interest in adding new profit centers has been and will continue to be the driving force behind carwash growth in the c-store segment. Carwashes have been creating incremental, high-margin revenue streams for decades, but not all retailers have embraced them.

What trends in convenience retailing will have the greatest impact on yourbusiness over the next 10 years?
Loesch: Consumers concern for healthand wellness increasing there-fore products that are vegetable-and fruitbasedwill continue to drive the juice drink category.

Gulley: Vending will become a significant merchandising strategy for many c-store retailers. I also believe the industry is ripe for consolidation.

Vonder Haar: We expect to see a greater use of loyalty programs to better understand shopper behavior and purchases. We also expect to see more decisions made at the store level.

Caldwell: The job of store manager is becoming increasingly complex.Store managers and associates are the ultimate multi-taskers. Chains that utilizeproven, customized tools to streamline store-level tasks are giving time backto managers and reducing their stress. This allows managers to get out of theoffice and onto the sales floor to perform valuable customer service and merchandisingtasks.

Name three ways your company has changed the way it goes to market in thec-store channel over the past 10 years in order to serve the changing needsof retailers?
Ryker: We have simplified our operating procedures;because of simpler operating procedures we have been able to lower the investmentnecessary for equipment and fixtures; and we have expanded our menu beyond pizzato cover all dayparts.

Gulley: Coca-Cola has dramatically increased the number of SKUs we market through the channel. Ten years ago, the typical c-store was carrying 8-10 of our brands in 3-4 packages or somewhere in the 25-40 SKU range. Today, that number has more than doubled. We’ve changed our sales, service and delivery s
ystem to a pre-sell routine that has increased order accuracy and diminished out-of-stock issues. We’ve also introduced night delivery to deliver products when store traffic is least congested.

Name three ways you believe the supplier community must change in orderto better serve the needs of retailers over the next 10 years?
Grogman:Significant investments in technology to provide information for businessdecisions; speed of execution and ease of doing business; and flexibility toalign with customers’ needs.

Ryker: The supplier community will need to create simpler solutions so cstores can execute foodservice better; be more creative with flavor profiles; and create better packaging that improves freshness.

Loesch: More engagement of retailers in new product development; fresher,faster efficient supply chain programs that are aligned with our distributionpartners and be more responsive to changes in the demographic landscape.

Supplier survey participants:

James Caldwell, Business Development Director, The Manager’s RedbookJack Finney, VP of Marketing, Retalix Roger Grogman, VPof Marketing, McLane Co.

Jim Gulley, Director of Small Store Channels, Coca-Cola Co. SteveHaley, President, Elite FX George Loesch, VP National Sales& C-Stores, Campbell’s Soup Co. Larry Lupo, VP of Sales, SnackChannels, Masterfoods David Onorato, Global VP of C-Stores &Specialty Retailers, The Hershey Co.

Steve Robinson, Director of Marketing & Communications, MarkVII Jerry Ryker, Executive VP of Business Development, PiccadillyCircus Pizza Steve Seager, Senior Retail Marketing Manager, NestleWaters Joe Vonder Haar, VP of C-Store Channel, National RetailSales, Anheuser Busch Inc.

Brian Wright, Managing Partner, Executive Leadership Solutions

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