Convenient option for fresh foods

THE chain that is home of the Slurpee, Big Gulp and self-serve nachos with chilli and cheese is betting consumers will stop in for yoghurt parfaits, crudite and lean turkey on wholewheat bread.

THE chain that is home of the Slurpee, Big Gulp and self-serve nachos with chilli and cheese is betting consumers will stop in for yoghurt parfaits, crudite and lean turkey on wholewheat bread.

The 7-Eleven convenience store chain is restocking its shelves with an eye towards health. Over the past year, the retailer has introduced a line of fresh foods and trimmed down its more indulgent fare by creating portion-size items.

The change is as much about consumers' expanding waistlines as the company's bottom line. By 2015, the retailer aims to have 20 per cent of sales coming from fresh foods in its US and Canadian stores, up from about 10 per cent, according to a company spokesman.

"We're aspiring to be more of a food and beverage company, and that aligns with what the consumer now wants, which is more tasty, healthy, fresh-food choices," said Joseph DePinto, the chief executive of 7-Eleven, a subsidiary of Japanese company Seven & i Holdings.

Convenience stores have typically been among the most nimble of retailers. In the 1980s, they added Pac-Man arcade games as a way to keep customers in stores longer and to buy more merchandise. They installed ATMs a decade later, taking a slice of the transaction fees. More recently, they built refrigerated dairy cases, with milk, eggs, cheese and other staples.

But just as they have taken business from traditional supermarkets, convenience stores have faced increased competition from the likes of Dunkin' Donuts and Starbucks, which offer a basic menu of fresh foods for people on the go. At the same time, a big profit driver for convenience stores — cigarettes — has been in steady decline over the past decade as the rate of smoking has dropped in the US.

Fresh foods can help offset some of those losses. The mark-up on such merchandise can be significant, bolstering a store's overall profit. It is also a fast-growing category.

"If you can figure out how to deliver consistent quality and the products consumers want, fresh food is attractive because margins are higher, and it addresses some of the competitive issues you're facing," said Richard Meyer, a

longtime consultant for the convenience store industry. "But it's not easy to do."

7-Eleven has been selling fresh food since the late 1990s. But much of its innovation has been limited to the variety of hot dogs spinning on the roller grill or the breakfast sandwiches languishing beneath a heating lamp.

As 7-Eleven refocuses its line-up, the retail chain has assembled a team of culinary and food science experts to study industry trends and develop new products. Such groups have been around for a while at fast-food restaurants such as McDonald's and packaged-goods manufacturers such as Kraft. But it's a relatively new concept for players such as 7-Eleven, which have typically relied on their suppliers to provide product innovation.

"We're working to create a portfolio of fresh foods," said Anne Readhimer, senior director of fresh food innovation, who joined the company in May from Yum! Brands, where she had worked on the KFC and Pizza Hut brands. "Some will be for snacking, some for a quick meal, but we hope everything we offer our guests is convenient and tasty."

The company is also taking existing products and retooling them for single portions. For example, customers can now buy jelly doughnuts and tacos in mini sizes.

Norman Jemal, a franchisee, said sales of the new products were growing steadily in the three 7-Eleven stores he owns in Manhattan. "At first, people are surprised when they come in here and see a bag of carrots and celery," Mr Jemal said. "They say, 'I came in here for a bag of chips — I can't believe you have fruit cups or yoghurt cups'."

He said the Yoplait Parfait, a cup of vanilla yoghurt topped with fresh strawberries or blueberries and granola, was his best-selling fresh-food item, while the 7 Smart turkey sandwich is his top sandwich.

The fresh food is supplied from a system of 29 commissaries and bakeries that fulfil orders from 7-Eleven. They tailor menu items for specific markets. In the Miami area, they produce a hot Cuban sandwich with ham, cheese, pickles and mustard.

Each store has a data system that allows it to see exactly what is selling, which helps manage waste. Stores can track consumers' purchase habits over a month, and adjust their orders based on those behaviours. "In this 28-day cycle, I know I sold 3563 bananas to customers in this store," said Tom Ferguson, who owns five 7-Eleven locations in Las Vegas.

He has owned 7-Eleven franchises since 1986, and he said the variety of fresh-food options in the stores was far better than before.

"We used to be a place for people to buy beer, wine, cigarettes, candy and chips, and people would occasionally ask where they could go to get something to eat," he said. "We're no longer getting that question because now you can get something to eat right here."

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles