Health Check

Strong margins, loyal customers go hand in hand with healthful snacks.

By
Amanda Baltazar, Freelance writer

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Green Spot Market (pictured above) is an anomaly. A Dallas convenience store, it offers an array of healthy foods that are not typical fare in this shopping channel, and its business is growing.

The store’s manager, Adam Velte, attributes its popularity to consumers’ growing interest in good-for-you products. Almost every item sold in the store, he points out, is healthy on some level, whether it has functional ingredients such as probiotics and whole grains or simply has no preservatives.

Green Spot is not alone, but it doesn’t have a lot of competition—yet. Despite a gradual shift by consumers to eat more healthfully, growing sales at retailers such as Whole Foods Market and Trader Joe’s, and a shopper base increasingly made up of women, most convenience stores continue to flourish on high sales of fat-, sugar- and sodium-laden items.

However, a rustling of change is occurring, starting with consumer habits and attitudes.

We’re eating more snacks than ever today. According to Chicago-based Technomic’s Snacking Occasion Consumer Trend report, published last year, about half of consumers polled (48%) say they snack at least twice a day, compared to just a quarter of respondents in 2010.

And, equally as important, two-fifths of consumers told Technomic that they are choosing healthier snacks now and plan to continue to do so: More than a third of consumers said they expect to eat healthier snacks over the next year.

Smart Selections

Snacks—and specifically healthy snacks—are a big opportunity for c-stores, yet many are not yet embracing them. One retailer that is, however, is 7-Eleven.

The retailer declined to speak to CSPfor this story, but according to a New York Times article in December, 7-Eleven by 2015 aims to have 20% of sales come from fresh foods in its U.S. and Canadian stores—up from about 10% now.

The move toward this increase is visible in its stores: Seven-grain sandwich wraps, yogurt cups and carrot sticks share shelf space with fruit and veggie cups, hummus and pita.

“We’re aspiring to be more of a food and beverage company, and that aligns with what the consumer now wants, which is more tasty, healthy, fresh food choices,” CEO Joe DePinto told the newspaper.

In April 2012, Dan Sanderman purchased a 30-year-old 7-Eleven on Lake Tahoe in Carnelian Bay, Calif., and in just a year has increased sales by 22%, much of which he attributes to his product mix, which has a heavy emphasis on healthy foods and snacks.

“It is smart business to incorporate [healthy] items into your store,” Sanderman says. “It is hard to change old habits, but we have to differentiate ourselves and open space for such products.”

Sanderman’s 7-Eleven does good business in healthy snacks, and in chips alone, healthy products constitute around 15% of his assortment. His most popular healthy foods include Clif Bar’s ZBar for kids, KIND Bars, GoRaw bars and vegetable chips from a small company in Idaho called It Takes a Village.

Nuts also do well, as do dairy items such as organic Greek yogurt and cheese sticks. He recently switched the latter over to the Horizon organic brand from Kraft. So “one product can meet the needs of both customer types. Opportunities to have crossover appeal without sacrificing price are rare, and we happen to be doing so with cheese sticks.”

The key to selling healthy snacks is making them visible, Sanderman says.

“Customers are always going to go for the Doritos and Cheetos, so we try to make healthy items more prominent, on the shelves at eye level,” he says.

He also carries brands customers recognize, which he says builds trust: “You cannot stray too far away from nationally recognized brands in a c-store environment. We are not a health-foods store, and customers expect to see names they also see in grocery chains. I prefer Newman’s Own, Horizon, Kashi, KIND Bar, and so on—major names that are organic or natural. There is always room to experiment with unique items; our It Takes a Village veggie chips are one such product.”

Natural Ingredients

Popular at Green Spot Market are baked goods from local company Empire Baking, such as croissants, muffins and pastries. These types of items are considered healthy by many people because they have natural, recognizable ingredients—butter, flour, sugar, and so on—with no preservatives, no chemical sweeteners or the like, says manager Velte. Shoppers looking for healthy foods are typically interested in locally made and locally grown items, too, he points out.

Also popular, he says: Pirate’s Booty, kale chips, Clif Bars, gluten-free (and genetically modified-ingredient-free) bars and sprouted foods. For kids: any kind of fruit snacks that are candyshaped—such as fruit leather or organic cookies by Late July— and Annie’s Cheddar Bunnies.

However, fresh produce is not faring as well. While some 7-Eleven franchisees may have success with fresh fruit and vegetable cups, many smaller retailers or single-store operators are not seeing the same.

“Cooler space for fresh produce is difficult, and spoilage is an issue,” says Velte. So Green Spot sticks with apples, bananas and oranges, though he hopes to see that change and would love to have a seasonally rotating produce display. Dried fruit, sold in individual bags, does really well.

And Sanderman, whose store is surrounded by farms with a bounty of fresh fruits, carries only those same basic fruits “because the problem is sourcing it,” he says. “I should have a case full of all these [local] fruits, but the distribution system is not set up for that. So we get the standard apples, oranges and bananas, and they come from far away.”

Boom or Bust?

Business in healthy snacks may be booming for some retailers, but for others the picture is a different one. Most retailers sell only the most limited of selections, despite what customers say they’ll buy.

“We don’t eat what we say we want to eat,” says Greg Parker, who owns 30 Parker’s stores in Georgia and South Carolina, and offers very limited choices in healthy snacking fare.

But the people who study this industry tell a different story. “Our meals are being displaced with snacks,” says Melissa Abbott, senior director of culinary insights for The Hartman Group, Bellevue, Wash. “We now believe that in order to be healthy you need to snack, and we’re putting much more emphasis on the nutritional profile of our snacks.”

And what are we snacking on? “People are seeking real food, identifiable ingredients. Snacks have to be something that makes people feel they’re not putting junk into their body,” she says. Fruits, cut-up vegetables and nuts all fit into this category, she explains, but there’s still a craving for popcorn and chips. Cereal’s also getting more play and is often the snack of choice at the end of the day.

Darren Seifer, food and beverage industry analyst for The NPD Group, Port Washington, N.Y., doesn’t attribute the rise in snack consumption to decreased consumption of meals, but to changes in the makeup of our population.

The numbers of children and seniors are growing, “and that’s where we see the biggest growth in snacking. When we are youngest and oldest is when we snack the most,” he says. “On the younger end of the spectrum, parents are keeping a watchful eye on what they give their kids, so they give them a lot of fruit and yogurt. And many seniors have more time on their hands, and food becomes a greater part of their life and lifestyle. They also take a lot of pills and might need to take them with food.”

The customers at Green Spot Market fit these demographics. “We have two schools nearby so we see mothers, kids after school, people who have made it a lifestyle choice to eat healthy and organic,” says Velte. “People will go out of their way to come here. Typically, these people don’t usually go to a gas station because it doesn’t fit their lifestyle choices.”

Sanderman says his store likely wouldn’t do as well if it were moved to another area.

“I’m fortunate—my demographics are people who have a third home in Lake Tahoe, they drive BMWs, and are not looking at prices,” he says. “It’s not a standard clientele for 7-Eleven.”

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