Category Freeze-Out

rozen food is sometimes touted as the original home meal replacement — which might indicate why many typical supermarket frozen items often do not fare well in convenience stores. C-stores frequently serve the immediate needs of customers, who buy food to eat now, or as soon as they get behind the wheel of their car. It's true that c-stores often function as fill-in grocery destinations, but apparently that role doesn't extend very deeply into the frozen food section.

Short Stop Convenience Stores, operated by Jolley Associates, based in St. Albans, Vt., sell very few frozen meals, mostly entrees such as lasagna or classic TV dinners. The one home-meal-replacement item with real movement is frozen pizza, according to Shawn Bartlett, operations manager at the 23-store chain. Two-for-the-price-of-one Tony's brand pizzas satisfy Short Stop's customers who are parents stopping in for a quick and easy solution for dinner with the kids. Two family-size pizzas are priced at $5.75, while they are normally marked $3.19 each. "The price is reasonable, Bartlett said. "It's nice to have a few staples. People know we have them. Our prices are better than supermarkets' prices; certainly our 'two-fors' are better than supermarkets."

A handful of stores see moderate success with frozen macaroni and cheese or lasagna, Bartlett said, but at least half the frozen category's sales come from ice cream, with Ben & Jerry's leading the way as star performer. Of the remainder, 70 percent of sales are in frozen pizzas.

The chain earns a margin of approximately 28 percent on frozen pizzas, and the same for its Ben & Jerry's pints. Single-serve frozen novelties bring in a 40-percent margin, he said. The entire frozen category, including ice cream, represents only 1 percent of sales.

If c-stores are going to play a role in home meal replacement, it will be through foodservice, not the frozen section, according to Bartlett. Short Stop is moving deeper into foodservice, developing a take-home pizza program that is already in five stores, he said. "I watch customers come in and order pizzas, pick up a 2-liter soda and gallon of milk and go home," he said.

Space Problems

C. N. Brown Co.'s The Big Apple Food Stores are positioned as fill-in shops for supermarkets, said Mike Doucette, sales manager for the 86-store chain based in South Paris, Maine. He added, "We do very well in some of the rural areas where the commute to the grocery store is farther."

Doucette raised an issue repeated by several retailers and suppliers: the lack of space in c-stores for merchandising frozen food. Many of C. N. Brown's stores are converted service stations. As a result, a very small percentage carry frozen foods, he said — perhaps 10 to 15 percent. However, he added, in newer stores, which at 4,000 square feet are about twice as large as the company's older stores, an entire freezer door is devoted to frozen food. Typically, the stores feature three additional freezer doors, behind which are packaged ice creams and novelties, and a few pastries and desserts. A half-door is devoted to bagged ice.

The frozen food section includes entrees, vegetables and desserts. Despite the growing popularity of Mexican food, the stores carry no frozen Mexican entrees. Like Short Stop's stores, The Big Apple Food Stores offer family-sized pizzas, and a family pack of frozen fried chicken, Doucette said.

The frozen category offers few headaches for managers or store associates, he said. "Most product has good shelf life, good turns. We go through our wholesaler, Pine State Trading Co. in Augusta, Maine. Frozen food is a good-margin item for us. Our biggest problem is not having enough space. And we do have some merchandising problems with the doors." He said it would be easier to merchandise the product in coffin-type freezers, but they take up too much space and present problems in terms of placement in the stores.

While frozen sales soar at supermarkets, many c-stores are decreasing freezer space to make room for coolers and the very lucrative packaged-beverage category, according to Valerie Buchholz, marketing manager for c-stores at Omaha, Neb.-based ConAgra Inc., supplier of numerous frozen food brands, including Banquet, Healthy Choice, Marie Callender's, La Choy and others.

The space crunch notwithstanding, Eby-Brown Co. LP's Ron Coppel believes frozen foods still can present profitable opportunities for c-store operators, as long as the items fit into the realm of "dashboard dining." In other words, can you eat it while behind the wheel of a moving automobile?

"Manufacturers tried to expand on fast food in convenience stores, but it's just not taking off. People aren't picking up their family-style frozen dinners at a c-store. It's difficult to eat a frozen lasagna and still drive," said Coppel, vice president of business development at the Naperville, Ill.-based distributor. "Items that are popular are hot pockets, individual-serving pizzas, and burritos. Items you can eat while you're driving."

Coppel pointed out that "most consumable products bought at a c-store are consumed within five minutes of leaving the door. You can't steer with a loaf of garlic bread in your hand."

Growing Elsewhere

In general, the frozen food category has grown recently, according to Leslie G. Sarasin, president and CEO of the American Frozen Food Institute. The frozen dinner and entrée category grew 12.2 percent in the year ended October 10, 1999, she said in an address at the National Grocers Association annual convention early this year. New product introductions and line extensions helped boost the sales increase.

No doubt contributing to that boost in sales was H.J. Heinz Co.'s introduction last year of Boston Market Home Style Meals. William R. Johnson, president and CEO of Heinz said at the time of the rollout that the company positioned the Boston Market frozen foods as "an exciting new product line to respond to one of the hottest trends in the food industry — home meal replacement" — again, a concept yet to come to full fruition in c-stores. However, other powerhouse brands see potential in expanding frozen food to meet home-meal-replacement demand, and they see no reason why c-stores should not participate fully.

Nestlé USA, for example, developed a program that presents freezer doors as "meal centers," said Phil Voelkel, national account manager for the convenience channel. "The question we ask c-store operators is, 'Are you getting your fair share of the home-meal-replacement business?'" He added, "When you walk in most convenience stores, there's no direction in frozen food. That can be solved with simple things like a planogram."

Rolling out Nestlé products such as Stouffer's Red Box and Lean Cuisine at companies such as Crystal Flash Petroleum in Indianapolis; GasAmerica Services Inc., Shirley, Ind.; Kocolene Oil Corp. Seymour, Ind.; and Lincoln Land Oil Co., Springfield, Ill., Nestle is "getting an extraordinary number of customers coming in the morning getting frozen meals for lunch at the office," he said.

Mexican foods have gained tremendous popularity in recent years. A number of retailers and suppliers cited burritos as a favorite frozen entrée item. Neil Kelley, national accounts manager at Ruiz Food Products Inc., based in Dinuba, Calif., believes c-store operators might be overlooking frozen Mexican foods as a profitable opportunity to fill a real customer need. "More consumers are looking for an easier way to get products without having to stand in long lines [at supermarkets]. You see in c-stores a hodgepodge of ice cream and other products in the freezer, but nobody is paying attention to what is really doing well." Ruiz's product lines include frozen gorditas, chimichangas, tamales and others in several varieties and flavors.

Ric Alvarez, president and CEO of Ruiz Food Products, added that convenience stores have, in fact, changed in recent years and are ready to position themselves as a destination for meal items. "The c-store industry has dramatically reengineered itself in design and other ways. Operators should say to themselves, 'Now that I'm attracting a much bigger piece of the population, I want to offer them more opportunity to buy frozen foods.'"

Not only have c-stores evolved, but the quality of frozen food in general has improved tremendously in the last decade, according to Kelley. Last year, the category in general grew 10 percent, Alvarez said. Ruiz products grew 40 percent in the same 52-week period last year. Growth was not attributable solely to supermarkets, still the frozen category leader — Ruiz products saw double-digit growth in c-stores, thanks to increased exposure in several key c-store chains.

If c-stores are ripe to exploit frozen foods' growth, particularly in Mexican flavors, what stands in the way? Alvarez said freezers, like coolers, suffer from more SKUs than they can possibly hold. In addition, slotting dollars decide what products go on freezer shelves, not customer preferences, he said. However, "some retailers have woken up and said, 'I am going to use real category management. I am going to look at IRI and Nielsen data to make my decisions.'" END

PULLQUOTES:

"We do very well in some of the rural areas where the commute to the grocery store is farther."

Mike Doucette, C. N. Brown Co.

"The question we ask c-store operators is, 'Are you getting your fair share of the home meal replacement business?'"

Phil Voelkel, Nestle USA



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