At Tetco's Communal Table

Finding the right partners is key for new-product development.

By
Abbie Westra, Editor-in-Chief, Convenience Store Products

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In spring 2009, Brent Taylor was struggling to come up with a solution to c-store foodservice. The prepackaged sandwich program at San Antonio- based Tetco, where Taylor is director of marketing and merchandising, wasn’t moving much product. He was in talks with a retail distributor about its foodservice program but didn’t see it differentiating Tetco’s offer from others. Then he had a vision.

“How do we offer a fresh-food alternative that is far superior to any other sandwich program out there that is laborfree and doesn’t require a lot of overhead?” Taylor asked himself at the time. “I quickly realized that there’s an opportunity to team up with someone who’s in the food business, who understands the food business and can do the scale.”

But who would be the partner and what would be the conditions?

The search resulted in local companies, distributor Ben E. Keith Co. and caterer The RK Group. Together, the three set up a cold chain, procuring ingredients, developing products and building a brand. In a year’s time, the proprietary Mesquite River Market brand hit approximately 150 of Tetco’s 719 stores.

Since then, sandwich sales in those stores are up 166% over the sandwich program, with net margins—factoring in labor and waste—nearing 22% per $3.99 sandwich.

CREATING THE COLD CHAIN

“Brent’s making this sound like it was fun,” jokes Raymond Gibson, during an interview in Taylor’s presence.

Gibson is Ben E. Keith’s marketing/business development manager, and he’s eager to share his side of the story of toil. As Gibson recalls, he was in south Texas, 400 miles away from San Antonio, when he received a call from Taylor to meet him the next morning. At 8 a.m. the next day, Taylor shared his vision and gave Gibson one week to come up with a concept.

In truth, Taylor had laid much of the groundwork and was tasking Gibson with handling distribution and procurement. Gibson’s challenge was to find a way to deliver high-quality foodservice products to a c-store. That’s when he turned to high-end, high-volume caterer The RK Group and its senior vice president Jeffrey Magatagan, with whom Ben E. Keith Co. already had a good relationship. The RK chefs created a line of 40 sandwiches with product procured through Ben E. Keith— “We’re talking with these CIA-trained, James Beard [award-winning] chefs, so you can imagine what some of these sandwiches looked like,” Gibson says— and the Tetco team whittled the selection down to 10 varieties. Those 10 sandwiches were rolled out to 22 test stores in May, about two months after Taylor made that first call to Gibson.

The sandwich offer includes crowdpleasing smoked turkey and Cheddar wraps and chicken-salad sandwiches, as well as signature varieties such as peanut butter and jelly with roasted granola and roast beef on jalapeño corn bread. Sandwiches are rotated out for new items quarterly.

While the next few months were spent tweaking the product mix and ordering procedure, the cold chain was created: The RK Group chefs place orders for product through Ben E. Keith. The sandwiches are made and distributed to Tetco stores via Ben E. Keith. When the stores place their orders, sandwiches are made the next day and in stores within 24 hours. “For us to be able to sell them the ingredients that ultimately are coming back to us, and then going to Tetco, that’s something that a lot of people wish for every day,” says Gibson.

Next, the team spent four months looking at how the sandwiches were moving. “The first month we learned very quickly what product lines we wanted to carry, get rid of and add to,” says Taylor. The second month they focused on pack sizes, followed by a close look at waste, build-tos and pars. At the same time, Taylor was working on the branding and packaging— including the Mesquite River Market logo and cellophane wrappers. Further, the Mesquite River Market brand was rolled out for Tetco’s entire foodservice category, including roller grill.

For the first 90 days, the stores weren’t held accountable for any waste; the goal was to induce trial. Employees cut sandwiches for sampling during high-traffic times. “One out of every three people who tasted a sandwich bought one,” says Gibson.

DEVELOPING THE PRODUCT

An important aspect of Taylor’s vision was for the product to appeal to women. Upon hearing that, Gibson asked his wife, “ ‘What would it take for you to eat at a great convenience store?’ And she said, ‘It’d have to be fresh, healthy and the place would have to be clean.’

“So I went over to [Texan grocer] H-E-B’s Central Market, where they have chef-made sandwiches. I sat there, and I saw 75 sandwiches sold in 32 minutes. And every single customer was female. There was not one single man. … And I said, ‘Well, Brent’s onto something here.’ ”

So far, the sandwiches have indeed attracted female shoppers—specifically, moms looking for easy lunches for their kids. A bag of chips and one of the peanut butter, jelly and granola sandwiches have reportedly become regular sightings in many Texas lunchrooms.

Since the rollout, the RK Group has adjusted the product lineup. Salads were originally on the menu, but they were dropped due to little customer interest. Tuna and chicken-salad sandwiches were later additions, replacing more expensive sandwiches that were served on hoagie buns (the right price point is key, says Taylor). Further, every quarter the chefs present five new varieties; one recent tasting included a turkey sandwich with stuffing and cranberry mayonnaise.

And the Mesquite River Market brand has also been extended to other proprietary items, including four varieties of whole-muscle beef jerky, chips and kolacky. When the existing chip offer was rebranded, the stores experienced a five-time increase in sales.

FINANCIAL RESULTS

Necessity breeds innovation, and at the core of Taylor’s vision was a need—one for a program that was financially sustainable for Tetco. Calling on partner companies with experience in foodservice helped solve that need. “We didn’t want to put in a $20-million commissary,” Taylor says. “You go backwards doing it that way. The economy just doesn’t fit.”

Partnering with foodservice companies also allowed Tetco to get better pricing from vendors. Before rebates, the initial 22 test stores average a 20% to 22% net margin (factoring in labor and waste); the rebates bump it closer to 25% to 30%. Also, Taylor now saves 23 cents per hot dog for the roller-grill program. “So that gave us the ability to do two-for-$1.49 and still make 46% margin on it,” he says.

What’s more, the entire Mesquite River Market system allows for the program to grow beyond the test stores and even beyond Tetco, Ben E. Keith Co. and The RK Group—an opportunity the group is in fact pondering. “Brent has a whole slew of programs that are being rebated directly to them,” explains Gibson. “As the concept grows across the United States, we may not be there, but one of our partners may be there. We have a spec book that is very detailed so that when you walk into a c-store in Wisconsin, you’re ready to go.”

STAYING INNOVATIVE

Such flexibility is crucial as Mesquite River Market expands to its stores outside of Texas (the Utah stores are the next target to get the program). But beyond the preliminary vision, the culinary creativity and the focus on financial sustainability, the success of Mesquite River Market is the sense of ownership each partner company has in the brand. “Not only does RK show us new items,” says Gibson, “they have their own task force that goes out to Tetco, buys sandwiches and does quality assurance every day.”

“I have no shortage of people giving me feedback on a daily basis,” Gibson says with a laugh. “Everyone is vested in this, because we feel it’s an opportunity to do something … that no one is really executing like we are now.”

Central to new-product development is innovation. And from the vested ownership of each partner to the chefs presenting five new sandwiches every quarter to the unique branding, innovation is built into the Mesquite River Market program.

 “I don’t ever want to be stagnant. The minute you become stagnant is the minute you get lapped,” says Taylor. “That’s what I like about this program: It’s always in flux and it’s always changing. It’s good for everybody; it keeps us on our toes.” 


The Mesquite River Market

Timeline

March 2009…

Tetco’s Brent Taylor approaches Raymond Gibson of Ben E. Keith Co. about creating a proprietary sandwich program.

Two weeks later… Key players at Ben E. Keith sample 40 sandwiches created by caterer The RK Group, while looking at open-air coolers and any other equipment needs. Taylor begins work on the Mesquite River Market branding.

April 2009… Pricing and rebates are calculated.

May to August 2009… Mesquite River Market rolled out to the first 22 test stores. Team determines what items to drop or add. Waste, build-tos and pars are calculated.

March 2010… Seventy-two stores in South Texas carry Mesquite River Market.

July 2010 All 149 Tetco stores in Texas have the program, with the Utah stores the next target. Team is beginning work on branded home meal replacement and pie lines.


Tips to Grow On

  • While new product development is about creativity and innovation, you also must follow a system to ensure those innovations come to fruition. Have a plan—one that includes due diligence and proper follow-through.
  • Look to partner with companies—distributors, caterers, manufacturers—whose strengths are your weaknesses. Ensure partners take ownership and have a vested interest in the project.
  • Collaborating with partners in the foodservice business can result in better pricing and rebate programs.
  • A crucial way to break the trial barrier is with a unique, intriguing and, eventually, familiar brand. A brand should send a cue to the consumer of what they can expect from your product or company

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