A NEW COMPETITIVE FORCE ON THE MARCH

David Merrefield

Are convenience stores growing competition for supermarkets, or are supermarkets growing competition for C-stores?

As usual, the answer depends on your point of view. But it's probably objectively true that convenience stores are making changes that, in time, will make them more competitive to supermarkets.

That's one of the reasons recent issues of SN have paid more attention to what's going on in the C-store industry, such as the Page 1 feature profile of 7-Eleven of last month.

And, in this week's issue you'll find a Page 1 news article about an extensive study of the business practices of C-stores, a trade channel that's increasingly aware it can ill afford to remain a high-cost, high-price-point provider if it wants to be on the competitive map at all. Here's what the study's author, Bill Bishop, had to say about C-stores should they find ways to become more price competitive on high-velocity products: "Convenience stores are continuing to gobble up the 'fill-in' business. If these operators can figure out how to consistently be the destination for eggs, bread and milk, there could be trouble. Why would you go to a big supermarket and deal with the lines when you have comparably priced convenience stores?"

Good question. So let's take a look at a couple of the ways identified in the study that C-stores are reducing costs and aiming at becoming more competitive and profitable:

DISTRIBUTION: C-stores have a lot of work to do when it comes to distribution. Some operators are developing networks of distribution centers that are used to better consolidate product, while others are taking a look at self-distribution. Frequency of deliveries, especially by DSD vendors, is also a problem that many are addressing.

CATEGORY MANAGEMENT: Many C-stores carry far too many stockkeeping units, only a few of which contribute much real profit. Some are eying up to half the profit mix for possible elimination. Indeed, the study found that just 18% of SKUs in the typical C-store contribute 80% of profits.

In sum, C-stores have much to do to become more price competitive since they deal with relatively small product quantities, sold in low-ticket batches. But it's not impossible that the industry could become competitive with supermarkets in key categories. After all, C-stores could probably run prices 8% percent or so above those of supermarkets' and be seen as competitive.

AWARDS

I had another experience last week with awards, this time concerning the "Category Masters" awards at the ACNielsen Category Masters conference in Boca Raton, Fla. Tim Callahan, president, ACNielsen U.S., and I presented awards to Publix Super Markets, Coca-Cola North America and Acosta Sales & Marketing.

The objective of the award is to recognize companies that have made a difference in sales and profitability through their category-management efforts. Winners were selected by means of a poll of portions of the readership of SN and Brand Marketing.

Accepting awards were Dave Bornmann, Publix; Dave Campbell, Coca-Cola; and Paul Price, Acosta.

For more about the awards, see the article on Page 6. There will also be fuller news-feature treatment on each of the awards in the Sept. 17 issues of SN and Brand Marketing.