Commissary Sales Gaining Momentum

While commissary products are growing in popularity at c-stores, not all retailers are at the same level. Luckily, options abound in ways to integrate commissary products for all quartiles.

By Erin Rigik, Associate Editor

Commissaries and a centralized distribution system are becoming more popular across all foodservice segments in both convenience stores and supermarkets as operators look to grow their foodservice sales and meet consumer demand for fresh, prepared foods.

That was the key message delivered by Technomic Inc.’s new “Selling to Foodservice Commissaries Serving Supermarkets and C-Stores” study, which revealed that commissary growth over the next three years will exceed both c-store and supermarket growth. Cold deli sandwiches, burritos and pizza, the study found, will account for the largest shipments from commissaries to convenience stores.

“Commissaries are a great option for c-stores and supermarkets largely because they can outsource the food preparation function to someone else,” said Tim Powell, director of research and consulting at Technomic. “As these channels have explored new avenues of growth, foodservice has shown that margins can sometimes be three times as high as other in-store categories.”

Commissary Confirmation
The fourth annual Convenience Store Decisions/Balvor 2011 Foodservice Outlook Survey, released earlier this year, confirmed that c-store chains are bullish on the centralized distribution model commissaries offer.

“Commissary programs appeal to c-stores because of the ability to gain more frequent deliveries and better control shrinkage, but the retailers that are most optimistic and focused on growing that area tend to be retailers that already have well-established foodservice programs,” said David Bishop, managing partner of Balvor. “These retailers have demonstrated their capabilities and commitment to consumers and that has given them a license to move into other segments that are not as well represented in a traditional c-store format like commissary driven products.”

When broken out by quartile, top quartile retailers were much more likely to have proprietary or self branded product in commissary packaging as opposed to bottom quartile marketers, the CSD/Balvor study found.

Other notable trends include:

• Top quartile retailers tend to have a strong heritage in fresh food and some even have their own commissary kitchens that allow them to self distribute those products to their own stores. They have the volume at the store to justify that investment.

• Bottom quartile retailers, on the other hand, tend to be predominately driven by manufacturer-branded commissary programs. They may partner with a recognized regional or national-branded manufacturer, and deliver via a third party commissary.

• A third model is fresh food programs marketed as a wholesale control brand, such as those offered by McLane and Core-Mark. “It’s not a national brand in terms of the way consumers see it, but it’s a brand that may afford the retailer a little more margin just not as much consumer recognition,” Bishop said. “But these brands offer strong opportunities to grow that business in a way that smaller retailers can manage it effectively.”

The CSD/Balvor study noted that among top quartile performers who sold sandwiches—the largest segment of the commissary category—83% had proprietary or self branded products with the same name as the store or a proprietary name associated with the c-store. On average 60% of retailers had a self-branded or proprietary strategy, one-third had a manufacturer brand, and the balance used the wholesale model. In the bottom quartile, less than 40% would have a proprietary or self branded program, and about 40% would have manufacturer branded product.

Many avenues of success in commissary products exist, but it’s important for operators to set their sights on a solution that fits their level of current operation. “I think it’s fair to say that foodservice will continue to grow in importance and having that range of options is critical for the industry overall to raise the bar so consumers can come to expect quality and execution regardless of foodservice model employed,” Bishop said.

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