CPGs, Small-Format Retailers Cite Food Opportunity

JOHN KAROLEFSKI

BOSTON — Operators of drug stores and other small-box formats can grow food sales by stimulating impulse purchases and offering assortments for fill-in grocery shopping.

That was the consensus of a panel of drug store retailers and CPG manufacturers at the 2011 Marketplace trade show hosted by the National Association of Chain Drug Stores here last week.

“Food and beverage have a lot of growth potential in small-box stores. When you think of buying cheese for lasagna, a drug store and dollar store are not the first places that come to mind. So we've got some work to do,” said Diane Tielbur, senior director, shopper insights, Kraft Foods.

“We see food as a big opportunity for us,” said Bill Renz, vice president, consumables, Rite Aid Corp. “We want our consumers to think about our products as being fresh.”

Other panelists included Jose Alvarez, vice president, merchandising, Navarro Discount Pharmacies; Scott Cole, vice president, strategic sales, Hershey Co.; and Karlis Nollendorfs, senior consumer insights director, Health and Wellness Division, General Mills.

To offer Rite Aid shoppers value and more food choices, the chain last fall opened 10 co-branded stores with Supervalu's Save-A-Lot in South Carolina.

“We take a test-and-learn approach when we do these new business strategies. For Save-a-Lot in the value channel, we are gratified by the early results. So far, so good,” said Renz, who pointed out that the chain sent its grocery category manager to the Marketplace show to meet with food exhibitors.

In a conference call with analysts last month, Rite Aid said the company was taking a cautious approach to the Save-A-Lot test, noting that it still had a “big learning curve” ahead in terms of merchandising perishables successfully.

Navarro is taking a practical and focused approach to food in its stores, according to Alvarez. Chef Pepin, a TV personality and cookbook author, is the company's celebrity spokesman. He conducts in-store demos to educate parents and children about good eating habits, what foods to eat and what foods to avoid.

“We'll work with our suppliers to help us offer products that will provide healthful meals to our shoppers. We'll cook right in the store using products right off the shelf. We also try to teach them about portion control,” said Alvarez, whose Miami-based company of 29 stores is the largest Hispanic-owned pharmacy chain in the U.S.

In the short term, Tielbur of Kraft said there's a lot of opportunity to build the basket by intercepting the consumer along the shopping path and creating an impulse purchase.

“It's really understanding how consumers shop today and connecting with them on the journey,” she said. “Wouldn't it be great if these formats could be associated with ‘instant consumables’ where you buy something that you're going to eat in the next 30 minutes? These formats are best. They are located on the best corners, and are easy to get in and easy to get out.

“In the long term, there's an opportunity to drive trips,” she continued. “With the right assortment, small-box formats could be a quick trip for grocery fill in. The top draw for quick trip and fill in are dairy, fresh meat and fresh produce. Not that you have to provide all of those offerings. From a meat standpoint, one pound of ground meat or a pack of chicken breasts are enough for a family to go in there as an option for that quick trip.”

Cole of Hershey said the opportunity in small-format stores hinges on driving trips, building baskets and creating value. Most importantly, it continues to build on that loyalty to the retailer's brand by the store's most valuable shoppers.

“It's not easy to buy a parcel of land [in urban areas] to build a big box,” he said. “So bringing dairy, fresh and frozen to small formats in those areas gives people alternatives to QSR restaurants. It's about unlocking those trip missions. So if it's convenience for a snack, or it's ‘what's for dinner?’ or it's that quick fill in, there are a lot of new ways to talk with shoppers and bring them into these formats.”

General Mills is exploring one of those ways by looking to develop a “grab and go” snack business in small box stores, according to Nollendorfs. “We think there's a great opportunity to bring items like single-serve yogurt to small-box stores. That's not something that's currently available in your typical drug store, but there's an opportunity there,” he said.