C-STORE ODYSSEY

KELLY GATES

HOUSTON -- The boundaries defining the food universe are becoming more blurred every day. Food service is growing faster than the retail food segment, and convenience stores are encroaching on retailer profits with new formats and expanded fresh-food selections once found exclusively in supermarkets.

The latest evidence of this trend surfaced here recently when Equiva, the business group formed by the alliance of oil conglomerates Shell and Texaco, opened a new prototype c-store named Select.

The unique concept was developed to showcase a wider selection, and greater quality, of offerings than the traditional convenience store, said Equiva officials. While Select still provides the quick-stop shopping of a standard c-store, including gas pumps, its focus is decidedly more supermarket-oriented, with mini-shopping carts and baskets, a bakery, prepared foods section and even a floral and wine department.

Only several months after its single-store grand opening, the 5,000-square-foot Select store has already fared better than expected, pulling in an impressive number of convenience-seeking consumers, officials told SN. Consequently, the company is already making plans to expand into several pilot markets and, ultimately, a national rollout.

According to Chris Suess, project manager for Equiva's C-Store Select group, the concept for Shell's new and improved format was developed as a result of a newly recognized competitor.

"When we looked at renewing our convenience store concept, we found that we were now competing with grocery stores which were starting to offer our main service -- gas," noted Suess. "To compete with these retailers, we needed to position ourselves more like the express lane in supermarkets, providing more variety than our previous c-stores while preserving the convenience factor for our consumers."

Other oil companies have tried their hand at operating ultra-convenience stores, offering more than just sundry items like milk, bread and cigarettes. 7-Eleven, a division of Dallas-based Southland Corp., last year unveiled a number of initiatives promoting its fresh-foods menu under the guidance of Jim Richter, formerly vice president of produce at Randall's Food Markets, Houston. Richter has overseen the introduction of to-go salads, baked stuffed potatoes and the addition of produce items in his new role as the c-store chain's vice president of fresh foods [see "Produce Growing at 7-Eleven Stores," SN, Oct. 30, 2000].

Similarly, Chevron, San Francisco, tested a fresh-meals concept several years back called Foodini's Fresh Meals Market, but decided customer support wasn't strong enough to support the tremendous capital investment required for expansion [see "Chevron Hits Brakes on Drive for Meals Chain," SN, Jan. 10, 2000].

Aware of the past, but intrigued by current trends, Equiva conducted a great deal of consumer research before embarking on a store design, said Suess. Through this research, the company realized that its targeted consumers are overwhelmingly time-starved, yet unwilling to sacrifice quality for convenience.

The findings went a long way to determining what the prototype store would carry. Included are staple fill-in items like milk, eggs and butter, but now they are treated more like loss leaders than a profit center. Suess said the change is part of the company's belief that the Select concept's true competitors are not other c-stores, but supermarkets. As such, these basic items -- traditionally higher-priced at c-stores -- have been marked down to better compete with retailers.

This operating philosophy has already gained credence with consumers, he added. One of the first major changes in the store came about after the Houston Select unit opened. As shoppers flooded the new store, Suess said many asked for additional produce items, prompting an expansion of the section. And, as new stores are introduced throughout the country, each will also contain a fresh produce section that is larger than originally designed.

"We started out with the basics like apples and oranges, but we found that since people were purchasing the main dish at our store, they wanted something to make themselves, like salads and other side dishes," said Suess. "So, we added head lettuce, bagged salads, onions, potatoes and other items -- something we never expected to do in a c-store."

The inaugural unit uses a freestanding refrigerated case to merchandise these products. The original planogram allotted about six feet to produce, but the footprint has increased to 15 feet since the opening. The number of produce items has grown from four to about 15, added Suess.

To construct the unit, Shell contracted two design firms to take the results of its consumer research and design a c-store that would enable shoppers to quickly and conveniently purchase the quality items of their choice.

One of the firms, Merchandising By Design Inc., a Pittsford, N.Y.-based design company that specializes in retail store planning and design, drew up a blueprint based on the core design elements found in today's supermarkets. Terry Roberts, president of Merchandising By Design, said that everything from the location and placement of fresh foods and coolers, to the diagonal arrangement of aisles, the spacing of aisles and the presence of shopping carts, was considered in order to create more of an upscale warehouse environment, a format copied by many of today's progressive grocery and mass-merchant retail chains.

"We set out to develop a new, contemporary style of store that is more responsive to today's consumer while attracting a mix of people including both men and women as well as older and younger shopper alike," she said. "By design it's a much different environment than traditional convenience store formats, which are typically stark, sterile and low end. Select is what I like to call a 'warehouse hip' environment that makes it easy to shop for quick-picks or fill-in items, but also fresh foods and meal solutions."

The new Select store features high, open ceilings with exposed structural elements, warehouse-type lighting fixtures and open-wire shelves on casters. But, similar to a supermarket, the store also includes fresh produce and an array of prepared foods.

In designing a menu of items for the c-store's fresh-meals sections, Shell worked with consultants, screened potential vendors, tasted hundreds of products and created an operations manual for food storage and preparation. Mark Garcia, a chef/consultant contracted by Merchandising By Design, was one of the contributors who worked with the oil company to develop the menu items. According to Garcia, whose retail experience includes H.E. Butt Grocery, San Antonio, Texas, and Wegmans Food Markets, Rochester, N.Y., Shell was determined to raise the standard of food items offered in the convenience-store setting.

"Instead of the standard cardboard pizza and stale food most people think of when they hear the word convenience store, we chose items like a gourmet, deep-dish pizza that could definitely compete with any pizza-serving restaurant. We chose prepared foods like chicken fried steak, seafood, pasta and other high-quality items that are catered by a local company and would be considered restaurant-style meals," he said. "We also decided that these meal items should be rotated daily to provide variety for consumers."

The team also devised a menu of prepared, ready-to-heat and ready-to-eat items that include clam chowder, grilled panini sandwiches, fresh pizza and bread, all prepared in an on-site kitchen facility. An in-store bakery enables the store to also serve daily fresh-baked goods, including muffins, artisan breads, cookies and brownies. Select's deli section features tacos, salads, soups and sandwiches delivered fresh daily by local catering companies which have been hand-selected by Shell.

While some of Select's items, like artisan breads and muffins, are baked off in-store, Roberts said. Shell chose to outsource other items to ensure quality and to eliminate the need to purchase inefficient and costly cooking equipment.

"We needed to design a store that's universally appealing and that has quality that's higher than that of traditional c-stores, but it also had to be operationally efficient, too," she said. "We couldn't employ white-jacket chefs at every location or afford all of the equipment necessary to make every item, so we concluded that some of the items would have to be outsourced from regional suppliers."

Roberts noted the planning and on-going management strategy for the Select stores is very similar to that of supermarket chains, where highlighting a selection of regionally popular food items is paired with strong supplierpartnerships.

Under this scenario, Equiva is preparing to open Select stores in Atlanta and Seattle in 2001.