This article published December 2017. For latest news THIS MONTH'S ISSUE
In the final edition of Global C-Store Focus of 2017, Insight has pinpointed seven top trends that have permeated and shaped convenience and forecourt retailing this year on a global stage. The seven trends are poised to accelerate in 2018 and should be part of your business strategy and focus. They are:
• Health and wellness
• Forecourt transformations
• Greener energy and electrification
• New digital technologies
• A focus on Millennials
The consumer trend towards health and wellness in markets around the world means providing a healthy food offering of fresh produce and freshly prepared items is now table stakes in convenience and forecourt retailing.
Throughout 2017, we’ve seen retailers up their game when it comes to delivering a fresh foods proposition, which ticks both the healthy eating and ‘better for you’ boxes.
In March we reported on Metro, Woolworths’ small store format, which has become a trailblazer for fresh foods in Australia’s convenience market.
Fresh is Metro’s point of difference and is at the heart of the offer. “We are not dissimilar to Tesco Metro,” says Lachlan Drummond, business development manager for the format. “Our focus is on fresh foods, fresh ready meals and hot soups and we have a strong coffee offer too, which is self serve or a barista model.”
Metro does cater for the top-up shop, with everyday essentials, but the emphasis is on really good, fresh produce and a protein range that’s heavily weighted to meal occasions, Drummond says.
In January we interviewed the new healthy soft drinks brand, TG Green Teas. It was born to challenge the obesity freight train and respond to the move among Millennials for more natural products and those that are telling stories about the product’s benefits.
“It’s about adding green tea to the daily routine,” explains co-founder Sophia Nadur.
As a 4,000 year-old herb, green tea certainly has heritage but it has traditionally been used in Asia as a medicine and not so much in western diets due to its taste.
TG Green Teas and the health trend are pulling down that taste barrier; as Nadur observes: “Green tea is becoming more and more part of people’s lifestyles. It is sustainable and familiar, more versatile than black tea and good for carrying flavours.”
Freshii, the Canadian restaurant brand, is the Zara of healthy, fast foods, according to its founder and CEO Matthew Corrin. Interviewed by Ashley Dalziel, Freshii’s chief people officer, at CSE 2017, Corrin compared Freshii’s menu innovation - no one category makes up more than 18% of sales - with the global fashion giant.
Corrin credits Freshii’s success and appeal to sitting at the intersection of three global trends: health and wellness; millennials, who are early adopters; and ownership, since its a franchise business model.
“It’s that intersection that’s fueling our growth,” he says. Growth, which will also see the brand open its first UK outlets in London later this year.
The importance of a fresh and healthier product range was also underscored by the Swiss online supermarket LeShop.ch, which revealed that fresh produce has a 96% penetration in online orders and is key in building customer satisfaction and image versus packaged groceries, for instance.
Hand in hand with the trend to healthier eating is the growth in food to go/food for now in convenience and forecourt retailing. Insight has coined the term ‘foodvenience’ to sum up this blurring between foodservice and convenience retail. Whatever you term it, food for now is, literally, now!
Back at Metro in Australia the trend to foodservice and ‘foodvenience’ is already apparent with a surge in pre-packed meals, Drummond reports.
Metro is building on the trend in its larger stores, which feature more service departments including a fresh sushi kiosk or barista versus self serve coffee. All stores, meanwhile, have a bakery department and aim for a 50:50 split in fresh foods versus longlife [the current ratio is 40:60].
ENOC, the Emirates National Oil Company (featured in our April edition), has eyed the trend for healthier foods and organic products and the uptake in its business has been good, Zaid Alqufaidi, managing director of ENOC Retail reports. The business has also spotted the move to ‘foodvenience’, driven by leading US c-store operators like Wawa, Sheetz and QuikTrip.
It’s encouraged ENOC’s acquisition of food and beverage franchises in the UAE and the launch of ‘made to order sandwiches’ under the Pronto brand for a more personalised approach.
Ricker Oil Company, the family-owned Indiana convenience and forecourt chain, has a revitalized product offer too. It includes a full foodservice programme, touch screen ordering, top end coffee, a seating area, a large drinks fountain and strong beverage offer, ATMs, plus improved restrooms.
The food programme was introduced to stores two and a half years ago but on the back of an extremely innovative trial.
Ricker’s literally ‘test drove’ its fledgling food offer in a food truck, which was driven all around Indiana. “We found a vehicle and built a food truck from scratch that was a mobile lab and a billboard for our new foodservice programme,” Quinn Ricker, president and CEO, says. “We knew we need to get into foodservice and testing with live customers was the best way,” he adds.
The offer is Tex Mex in style incorporating burritos, tacos, salads and burrito balls. “The idea is that the food is portable,” explains Ricker. “You can eat it while you are driving down the road.” There are healthy and low carb options too, for those customers who prefer to make healthier choices, he adds.
Ricker’s tested the concept via the food truck for one year, taste testing and winning customer feedback before piloting in-store and tweaking before roll out. Today it is available in 23 locations with more to follow. According to Ricker, the offer has been well received. “The numbers are strong,” he says. Crucially, the food offer has created a halo effect around the rest of the store, Ricker adds.
In terms of format development and new concepts, some of the most ground breaking transformations have happened on the forecourt in 2017.
In June we reported on how the traditional convenience store channel in Germany - the forecourt - is being transformed in an interview with Christian Warning , the NACS Insight representative for German-speaking markets. According to Warning, the sector has lagged behind other convenience channels, where dedicated convenience store formats such as Rewe To Go, have emerged at high street and railway locations and at airports.
But, big change is afoot. Rewe has partnered with Aral, BP’s brand in Germany and the leader in the German service station market with a network of 2,345 sites, to introduce Rewe To Go stores on forecourt locations.
Warning reports there are plans for 1,000 stores in the next four years. The move capitalises on BP’s global brand strength and entry into convenience, already seen in the oil major’s partnership with Marks & Spencer in the UK and Ahold in the Netherlands.
It’s provided a much-needed wake up call to the forecourt market and is backed by global trends, Warning says.
Now the focus of new format development is providing extra consumer convenience and to offer coffee and higher margin, foodservice products.
“It’s designed to improve the customer experience and make the gas station more attractive,” says Warning.
Shell, the number two forecourt retailer, with 1,957 highway stations and 55 Autobahn service stations, is piloting the Albert Heijn To Go format on forecourts in Germany and has teamed up with Subway to offer the brand’s signature sandwiches at its sites. The Anglo Dutch oil giant is also investing heavily in its own Deli to go Select format, Warning reports.
Orlen, the Polish forecourt chain, has also introduced a new c-store format to Germany; while Jet, which accounts for a fuels volume market share of 10.5% from only a 5.7% market share in terms of site numbers, equivalent to 805 sites, has recently won the German Oil Station of the Year Award for its one-of-a-kind petrol station format.
In our October newsletter, meanwhile, we showed how the wholesaler Lekkerland is disrupting the German forecourt sector with a new store concept.
Lekkerland’s Frischwerk format is changing consumer perceptions on the forecourt with a cutting edge store design and is delivering a great customer convenience experience.
In the same month we profiled Maxol and its repositioned brand and offer, which is designed to appeal to today’s modern consumer.
“We are trying to create destinations, not just for fuel but for food and convenience,” says CEO Brian Donaldson.
Over in Argentina, a similar strategy is afoot at YPF with its new Full format, featured in June. The new stores are now destination sites with an expanded fresh food and coffee offer and a contemporary new look.
“We wanted to change the perception from providing a convenience store to a destination store,” explains German Balestrieri, the manager for convenience within YPF’s petrol station business. “We did not want the customer to feel that they were in a gas station c-store.”
And last month, we showcased how Shell has transitioned its business from a ‘Fuels Plus’ to ‘Plus Fuels’ model.
Changing energy usage, driven by increased fuel efficiency and new fuels, is one of the big drivers of the current forecourt transformations. Station operators recognise that their customers visit sites less often to refuel but do demand a wide range of ‘on the move’ products and services, which they are ideally placed to deliver. Moving forward, e-charging will also require that they reconfigure their forecourts and provide the right offer to attract and retain drivers while they recharge their vehicles.
Electrification is clearly on the cards, witness the arrival of the ground-breaking Tesla Model S and the stances and subsidies for Electric Vehicles (EVs) taken by both Norway and the Netherlands, two countries that are aiming to phase out all fossil fuel-powered automobiles by 2025. Plus, there’s been the more recent announcement from the UK government, which is aiming to phase out petrol and diesel cars by 2040.
From a global perspective, however, mass adoption of electric is still a long way off, which opens doors to operations like GreenPrint that provide an opportunity for environmentally-aware consumers to neutralize their emissions, generated by conventional fueling, through certified carbon offset projects and planting trees.
“We like to think of ourselves as a bridge to the future - no one knows what that will hold,” says GreenPrint CEO and founder Pete Davis. “We don’t think we are going to replace whatever fuel or vehicle there will be in future, we are just going to be the bridge to get there.”
While it’s hard to predict the future, change is on the cards; although Michael O’Loughlin for one, is doubtful the UK government can really deliver on its targets.
“They said we’d have super fast broadband coverage to 95% of UK homes by the end of 2017 and they are not even close - they can’t get that right.”
According to O’Loughlin, the targets are political rhetoric. “It’s sticking a finger in the air and keeping everyone happy. Governments are sick of the oil countries holding them to ransom and the public are sick of the revolving pump prices saga, so there is momentum for change but not at the speed they promise. Also, the National Grid is not developed enough and there’s insufficient infrastructure to carry it,” he says.
The move to lithium batteries would also put a severe drain on the world’s lithium supply. “The UK alone would use up 15% of the world’s lithium - where is it going to come from? The technology has to change,” he says.
“But there will be more electric advancement and it may catch the smaller operators out; so it’s something we will all need to keep a close eye on.”
Technology and digital solutions in particular are transforming the shopping experience and making consumers’ lives ever more convenient. Joe Bona, president at Bona Design Lab, acknowledged this trend at CSE 2017. “Technology and online shopping are affecting how the consumer shops,” he said.
LeShop.ch, Switzerland’s largest online supermarket, is already leveraging its early mover advantage and expertise in online grocery and is recording strong growth as it expands its delivery services and meets shoppers’ growing mobile needs.
In addition to the core online business, LeShop.ch is piloting a drive format, popular in France and now reportedly on Amazon's radar for the US market too. There are two DRIVE collection sites, located in Berna and Aargau, which are reported to be contributing to a double digit to growth.
The third ‘delivery’ option in the LeShop.ch armoury is PickMup collection points, which were facilitated when Migros acquired the business in 2006.
When Migros bought the pure player, its own online operation, migros-shop.ch, was integrated into LeShop.ch and run entirely by the LeShop.ch online grocer. In 2015, LeShop.ch began to use the Migros store estate - there are 2,000+ existing shops within Switzerland - as pick up points for online orders.
To date, there are about 20 PickMup points but more than a hundred will open over the next few months, Locher reports.
Crucially, the three delivery options enable customers to choose when and how they wish to shop: in-store, for home delivery, pick up by car or pick up on their way home at a Migros company shop and to combine with another shop. The different B&M and online formats are complimentary and fit into the customers’ shopping habits based on their times and needs.
In-store, Lekkerland is pushing the envelope with new digital technologies - signage and pricing. Again, technology is an enabler and promotes added convenience.
Digital signage means Frischwerk can communicate and promote relevant offers, depending on the time of day ie breakfast, lunch and dinner; rather than rely on static printed materials. “It drives food to go and we see it in the numbers,” CEO Patrick Steppe says.
Dynamic pricing has also been well received by customers, he adds. “It does not bother the customer because prices are better balanced - the customer understands that during expensive hours, after 10pm for example, they pay a little more for convenience.” The technology also means employees can focus their attention on serving customers, rather than be occupied with fiddly and time consuming price changes.
YPF is trialling touch screen technology at one store, enabling customers to select and pay for their food order in order to speed up the process. According to Balestrieri, this technology is ideal for the high volume stores located on highways. The provision of in-store charging stations and wireless technology is another facet in keeping customers moving and connected on the go, he says.
Of course, the biggest users of these new technologies are Millennials - so-called digital natives or the ‘one-swipe’ generation. Convenience and forecourt retailers appreciate - or should - the importance of this group to growing sales and future business.
UK convenience retailer entrepreneur, Jonathan James, highlighted the importance of keeping ahead of the game in our March interview. “It’s an incredibly crowded market and has changed at a rapid rate of knots,” he says. “There are new kids on the block like Deliveroo and the way people are buying food is changing so dramatically, that it is hard for c-store operators to keep up with the technology. Kids have it at their fingertips but our generation and the generation coming up are totally different shoppers and we need to keep on top of that.”
For Michael O’Loughlin, the Millennium generation is nearly becoming old news. “The next group is the iPhone generation, which will ultimately require everything at their fingertips,” he says. However, keeping pace with Millennials and their likes will be key for success. Wi-Fi is incredibly important to this group, he says; but suggests social media such as Facebook, WhatsApp and Twitter are ‘old hat’ for this generation. “They find them laughable. You have got to keep up with them or else you won’t be able to communicate.
“This generation is the most complicated that we have seen so far but few are thinking about their future needs. They will form their habits early, so for those who make the early connection, the future will be prosperous,” he maintains.
Maxol is looking to the next generation too. Donaldson reports the company has teamed up with local colleges to offer bursaries to students in their marketing departments for students who can suggest ways the business could be using technology more effectively.
“It’s tapping into that next generation because those are the people we need to appeal to,” he says.
Elsewhere, TG Green Teas has found Millennials are a key demographic for its cold brew teas.
“Ready to drink ice tea is a nascent category in UK but there’s now an incredible amount of interest in cold brew tea from Millennials,” says Nadur.
Our final top trend for 2017 is ‘frictionless’ payments. It’s being driven by new technologies - mobile and apps - and will appeal to Millennials and ‘always on’ consumers who expect instant gratification and automatic payments.
In Dubai the government is targeting a move to a cashless society by 2020 and ENOC is developing a raft of payment modes to help transform the business from cash to cashless. These are designed to speed customer journeys and deliver increased convenience.
“There’s more open direction by government towards cashless and adoption is happening,” reports Zaid. “We are moving very aggressively on that.”
In 2014 ENOC launched RFID technology for fleet customers under the VIP brand, providing a postpaid wallet so that customers can quickly ‘fill and go’. In April 2016, the service was extended to personal use.
“It automates the payment transaction and helps to reduce congestion on the forecourt,” says Zaid, who reports 30% of ENOC’s customers now use this technology.
In addition, the company has teamed up with Beam Wallet - an established digital wallet in the UAE - and is the only fuel retail partner. This month also sees the launch of the ENOC pay app, which enables motorists to pay for fuel from within their car or via the app for in-store purchases; and the inclusion of ENOC Retail services in a new government app, Dubai Now, to facilitate mobile payments for government-related services.
“We will be the first retailer to go into this wallet,” says Zaid. “We are empowering the customer - enabling them to use whichever payment method is the most suitable for them, and not just for use at ENOC - we are keeping everything open.”
Eslewhere, Simply Fresh, has launched a new app, a digital platform to engage and provide instant gratification. According to the company, it acts as loyalty card and can be used for digital couponing. A payment app to reduce queues and enable cashless payments is also in development.
Shell reckons new payment technologies could be a big differentiator for convenience and forecourt retailing too.
Klaas Mantel, Shell GM Global Convenience Retail, reports the trend to mobile payment is taking off at a remarkable pace in China with Alipay etc; while the cash recall in India gave a tremendous boost to electronic payments. “The next five years will probably be the most exciting in CR with much faster checkout. It could be a game changer and will make our stores really convenient - liberating the task of the cashier - and will be a true area of innovation since the negative impact of a queue on store sales is enormous,” he says.
In collaboration with Jaguar Landrover, Shell has already initiated in-car payment of fuel with an app. With a few clicks, customers can pay for fuel and then enjoy the other facilities at the site at their leisure - it’s de-stressing the whole fueling experience, Mantel says.
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