SUPERMARKETS ARE ADDING C-STORES TO FUEL-CENTER LOCATIONS

Mark Hamstra

PITTSBURGH -- Supermarkets are evolving their approach to the convenience store business as more operators consider offering a wider selection of groceries in satellite outlets alongside their fuel centers.

Regional stalwart Giant Eagle here, which has 15 fuel centers located in its supermarket parking lots and last year established a joint venture with a small c-store chain, is preparing to unveil its new approach to c-store merchandising in about a month, a spokesman for the supermarket company told SN last week.

"What we have [now] is an employee-manned kiosk, where we carry traditional gas station-type items, and the idea is to take that small, non-accessible kiosk and grow it into a larger-format convenience store," said Rob Borella, spokesman, Giant Eagle.

Like many supermarket operators that have added fuel pumps to their parking lots, Giant Eagle currently offers a very limited assortment -- primarily cigarettes, candy and beverages -- in the kiosks adjacent to its fuel centers.

"The idea is to expand that so that our customers can get what they are accustomed to at other larger convenience store chains, and get it at Giant Eagle and use their Giant Eagle Advantage Card," Borella said. "If someone is on the way home and just wants to get a few items and some fuel, we can provide the opportunity for them to get a couple of the Giant Eagle items they are accustomed to and still be able to fuel up."

In July of last year, Giant Eagle formed a joint venture with Guttman Enterprises, Belle Vernon, Pa., Crossroads Convenience LLC, to operate the 27 existing Crossroads stores and develop additional locations throughout Pennsylvania, Ohio, West Virginia and Maryland.

Borella declined to discuss details about the company's plans, saying only that Giant Eagle was preparing to unveil a new branding strategy and overall concept that would be rolled out to both freestanding c-stores and existing Giant Eagle fuel-center locations.

While some supermarket companies operate c-store chains under independent divisions -- Kroger Co., Ahold USA and Marsh are examples -- until recently few have ventured to place full c-stores alongside the fuel pumps that they have been placing on their supermarket sites with increasing frequency.

Publix Super Markets, Lakeland, Fla., which debuted its proprietary "pix" c-store brand in 2001, and Boise, Idaho-based Albertsons, which operates full convenience stores alongside many of its gas pumps, are two of the companies that have begun offering a wider selection of groceries for customers on the go. Publix last year said it would expand the pix concept in Nashville, Tenn., where it acquired a c-store along with a group of seven Albertsons stores that are being converted to Publix.

Among the newest players toying with the supermarket/c-store tandem is Raley's, West Sacramento, Calif., which is considering opening a full c-store with a fuel pump at a site that is in the early stages of development in Woodland, Calif., a spokeswoman for the company told SN last week. She said it was too early in the planning process to discuss details about the c-store project, which would share the site with an outlet of Raley's Bel Air supermarket banner. According to local reports, the proposed 3,500-square-foot store would feature an upscale design and would not offer typical c-store fare.

Raley's is planning to open its first on-site fuel center this summer at a supermarket in Galt, Calif., but that site will house only a kiosk offering a very limited assortment.

"I think [supermarket companies] have been tempted to look at having some merchandise available to the consumer who's there mainly to buy gasoline," said Chuck Cerankosky, analyst, McDonald Investments, Cleveland. He said the sites could provide opportunities for supermarkets to merchandise their prepared-food offerings, much as traditional c-store companies have done by adding fast-food concepts.

"I think we will see more of that going on in the future," said Sandy Skrovan, vice president, Retail Forward, Columbus, Ohio. "It's a means to provide convenience for the shopper. Instead of having to go into the supermarket and walk all the way to the back of the store for a carton of milk, they can get it from a smaller store. I think it's a way to possibly intercept some of those visits that are going elsewhere."

Bill Bishop, president, Willard Bishop Consulting, Barrington, Ill., said he thinks c-stores could be an avenue of growth for supermarkets, although they have to be wary about the changes under way in that industry.

"The traditional c-store model is somewhat broken," he said, noting that such companies' strong reliance on gasoline and tobacco products have squeezed their margins. "The more progressive ones are trying to move toward food service; that's definitely the pattern you see with companies that are well-known like Wawa and Sheetz. If supermarkets move into the old business, it's sort of like going to where the puck was."

For regional chains with strong brands like Giant Eagle, he said it would make sense to transfer that strength into the c-store segment, much like J. Sainsbury and Tesco have done in the United Kingdom. There, both companies operate hypermarkets, supermarkets, mid-sized "superettes" and c-stores under the same banner.

"Some people feel that's the model we're going to go to in the future," he said. "There's no reason that well-established supermarket brands couldn't have convenience stores."

The trend toward offering convenience could be seen as the antithesis to the one-stop shopping that is a driving philosophy of large supermarkets and supercenters, Skrovan pointed out.

"It's the backlash to the big-box supercenters," she said.