The fu­ture of con­ve­nience stores: Fewer smokes; more healthy food, up­scale jerky

Sunday Star - - BUSINESS -

CHICAGO (TNS) — Long known as late-night out­posts of roller hot dogs and greasy pizza, con­ve­nience stores now also want to sell you health­ier food, prefer­ably lots of it.

This shift in the $550 bil­lion in­dus­try was on dis­play at the Na­tional As­so­ci­a­tion of Con­ve­nience Stores trade show in Chicago this month, a mas­sive and labyrinthine con­ven­tion of grab-and-go com­merce. What be­gan as a few ba­nanas by the cash reg­is­ter is now a full-blown move­ment aimed at sell­ing health­ier fare to con­sumers and mil­len­ni­als, in par­tic­u­lar.

There are prac­ti­cal rea­sons for this change: Sales of pop, cig­a­rettes and fuel — long­time pil­lars of the con­ve­nience store busi­ness — are in de­cline. And the rise of e-com­merce threat­ens all bricks-and-mor­tar retail.

“It is a con­stant evo­lu­tion. If you think to­day’s model is go­ing to work, you’re done,” said Jeff Le­nard, vice pres­i­dent of strate­gic in­dus­try ini­tia­tives for the Na­tional As­so­ci­a­tion of Con­ve­nience Stores.

The ad­di­tion of health­ier of­fer­ings means more choices for con­sumers. The salad cus­tom-made by a ro­bot — yes, that’s a thing that ex­ists — won’t re­place the roller dogs but might serve as an al­ter­na­tive. More high­pro­tein pack­aged prod­ucts like up­scale jerky and plant­based protein bars might also be ac­com­pa­nied with more made-to-or­der food that’s mar­keted as fresh.

The in­dus­try shift also means big op­por­tu­ni­ties for rel­a­tively small com­pa­nies like New York-based Ter­ra­fina, which pro­duces nuts, dried fruit and trail mixes. Just last year, the 12-yearold com­pany be­gan sell­ing its prod­ucts to con­ve­nience stores in small plas­tic tubs that fit into cup hold­ers and dis­cov­ered a rel­a­tive gold­mine.

“C-stores are look­ing for al­ter­na­tives to to­bacco and soda and gas,” said Paul Miller, Ter­ra­fina’s vice pres­i­dent of sales.

“And even al­ter­na­tives to your reg­u­lar peanuts,” in­ter­jected James Locke, CEO of the com­pany.

“And even your pro­cessed food prod­ucts from the 1990s,” Miller said. “C-stores are def­i­nitely more of a growth op­por­tu­nity than gro­cery stores.”

At the trade show, protein seemed to be ev­ery­where, mar­keted in all forms pos­si­ble. Sam­ples of Soy­lent, Sil­i­con Val­ley’s dar­ling meal-re­place­ment drink, were doled out just a few booths down from Pow­er­ful Yo­gurt’s protein drinks.

“Protein is the new en­ergy,” Le­nard quipped.

And the mar­ket for more up­scale jerky prod­ucts with mod­ern at­tributes — cage­free, grass-fed and so on — in con­ve­nience stores is boom­ing, said Brian Levin, founder of the Coloradobased Perky Jerky.

Levin showed off pack­ages of his top-sell­ing Tur­key Perky Jerky and ru­mi­nated on the busi­ness.

“I call it a jerky ji­had. It’s about as com­pet­i­tive as it gets . ... And Big Food is run­ning scared,” Levin said.

Big Food is get­ting in the game, too, though. Chicago-based Con­a­gra Brands — par­ent com­pany of Slim Jim — re­cently ac­quired the maker of Duke’s meat snacks and Bigs Seeds. Kraft Heinz has in­vested in its P3 Por­ta­ble Protein Packs of meat, cheese and nuts.

And at the trade show, Chicago-based Hill­shire Brands in­tro­duced its Small Plates with con­tents such as ap­ple chardon­nay fla­vored pork and gouda cheese.

Some con­ve­nience stores are tak­ing the foodie move­ment be­yond pack­aged foods. The Pride Stores, with 12 lo­ca­tions in the Chicago area, has in re­cent years hired a cor­po­rate chef and in­cor­po­rated dif­fer­ent res­tau­rant con­cepts, like Ur­ban Counter and Taco Ur­bano, into some of its stores, where shop­pers can sit down and eat or carry out their or­ders, said Mario Spina, owner of the chain.

Pride also ex­panded its se­lec­tion of craft beer and wine, Spina said. Times have changed, he said, from when his father, Peter, ran the busi­ness.

“Last year, we went three months where we lost money on fuel. You can’t rely on that. We have to have other

av­enues where we can make de­cent rev­enue and de­cent profit mar­gins,” Spina said.

Last year, the con­ve­nience store in­dus­try saw fuel sales tank 9.2 per­cent — from $349 bil­lion in 2015 to $316.8 bil­lion in 2016, ac­cord­ing to data from the Na­tional As­so­ci­a­tion of Con­ve­nience Stores. Mean­while, in­sidestore sales in­creased 3.2 per­cent, from $225.8 bil­lion to $233 bil­lion, with strong growth in health­ier food and bev­er­ages, ac­cord­ing to the trade group.

“Our in­dus­try is not with­out chal­lenges . ... How do you keep peo­ple go­ing to your stores if they’re not buy­ing gas from you?” said Le­nard, the in­dus­try spokesman.

The sim­ple an­swer is to give peo­ple ex­actly what they want, when they want it. And while the health­ier fare will get more shelf space, the more in­dul­gent items will con­tinue to have their place for Amer­i­can con­sumers on the go.

“If you had roller dogs and they were suc­cess­ful, you keep on do­ing it. It’s a great food to eat on the run. You can’t eat a quinoa salad nec­es­sar­ily on the run,” Le­nard said. “Or you shouldn’t be do­ing it while driv­ing.”

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