7-ELEVEN TAKES A BIG GULP, OPENS MANHATTAN STORE

Lynne Miller

Three summers ago, a team from 7-Eleven came to New York to celebrate the chain's 75th anniversary.

Officials on the fresh-food side of the business used the opportunity to tout the chain's new and improved line of sandwiches. It was part of an ongoing campaign to elevate 7-Eleven's food-service offering. To their credit, officials acknowledged then that they had a tough job ahead of them.

"We've sold vending-machine-type products that were disgusting," a 7-Eleven vice president of fresh foods told SN in July 2002. "It'll take some time to overcome perceptions."

The 7-Eleven crowd came back to New York last week to celebrate a new beginning. Company officials threw a party to mark the opening of the chain's first store in Manhattan since 1982. The 1,500-square-foot store, in the city's Gramercy Park neighborhood, is one of several smaller-footprint stores 7-Eleven has opened recently in big cities.

The stores look different from their counterparts in the small towns and suburbs of America. In a bright, clean, compact setting, the retailer showcases fruits and vegetables, salads, sandwiches, baked goods, hot dogs and other cooked items hot off the roller grill, with just a sprinkling of groceries and non-food convenience items.

Normally rushed New York office workers slowed down long enough to wait in line for Slurpees and sub sandwich slices that were given away on opening day. (Read more about 7-Eleven's new store on Page 21.)

7-Eleven is throwing a lot of money and attention into the food-service side of the business. It's a logical thing to do for an industry player that's seen sales from cigarettes dwindle and gasoline profits all but dry up.

Industrywide, food-service purchases represent nearly 12% of all in-store sales dollars, with total food-service sales reaching $15.7 billion in 2004, according to new figures from the National Association of Convenience Stores. The gross profit margin for food service in convenience stores ranks second among all in-store items, representing almost $8 billion in 2004. Sales of dispensed beverages alone are big business. The average c-store store rang up more than $65,000 in sales of hot, cold and frozen drinks last year, according to NACS.

New York is very different from many retail markets. Small mom-and-pop type food stores are prolific here. Many of them do brisk business selling fresh foods. Yet as keen as the competition is, 7-Eleven has at least a couple of big advantages -- consistency and unique products.

One industry observer went so far as to compare 7-Eleven to another big, successful retailer.

"Like Starbucks, they have signature products, the Big Gulp and Slurpee," said Jeff Lenard, director of communications for NACS, based in Alexandria, Va. "You can't get that at a bodega or other convenience store. If you're going to go in for a Slurpee or Big Gulp, convenience dictates you'll also get a hot dog rather than go to a hot dog vendor. Hot dog vendors don't sell prepaid phone cards or candy bars.

"No one wants convenience more than New Yorkers," Lenard said. "Office workers like Slurpees as much as anyone. They'll do great this summer with Slurpee sales alone."