November 26, 2008
7-Eleven Expands Store Brand Presence
The 7-Eleven
convenience store chain is adding a new line of 32 food items including
candy, cookies, salty snacks and beef jerky under its 7-Select private
label brand.
"When
we began to develop products under the 7-Select name, our first and foremost
requirement was to create high-quality products that were equal to or better
than the national brands," said Kevin Elliott, 7-Eleven senior vice
president for merchandising and logistics, in a press release. "Focus
groups verified that we exceeded that goal by scoring taste, texture and
flavor profiles higher than the name brand equivalent in every case."
The
chain tested the new 7-Select items in a 1,500-store pilot in Florida and
the Mid-Atlantic states in May. The items, which sell between 10 and 20
percent below their national brand equivalents, were supported by in-store
displays and point-of-purchase signage.
"The
7-Select name builds on the strength of the 7-Eleven brand and will help
define who we are as a retailer, much as our Slurpee and Big Gulp beverages have over the past 40 years," Mr.
Elliott said. "7-Eleven is known for its unique brands and assortment
of quality products. 7-Select snacks will certainly strengthen our position
as the preferred convenience store for value, quality and convenience."
Discussion Questions:
What will the new 7-Select items do for 7-Eleven’s business? Is the price
differential between branded and private label as important in convenience
stores as in other classes of trade? Will we see a rapid expansion of
private label in c-stores going forward?
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Now, more than ever, price will pay a key role in consumer choices, especially in Convenience Stores, where we are all paying an arm and a leg for gas.
7-Eleven has a great brand which it is smart to leverage. Bubba is looking for quality at a good price as much as my Jewish Bubbe used to, whether he’s shopping for beer, cigarettes or beef jerky.
C-Store customers expect to pay a higher price for convenience, but if they can get something good for cheaper, all the better.
All things considered, it’s a smart move.
Private label brands at c-store are not new. Many have private labeled a variety of products ranging from fresh (milk, ice cream and other dairy products) to items such as chips and soda. What determines their success is not limited to the actual product itself but whether or not the retailer can provide all the support that a “brand” can provide. 7-Eleven has demonstrated its willingness to make this investment as evidenced by several of its current private label items.
Few other c-store retailers have the size and resources to create successful private label brands. Several well known regional chains have tried and not been successful, so while there have been and will continue to be successful private label launches in the channel, it is not likely to be a trend that will become widespread.
While I don’t expect that the new 7-Eleven private label items will have any significant impact on sales within the categories, they will likely enhance the gross margins for the franchisees. That has been the role of private label products regardless of the channel.
Private label is nothing new to 7-Eleven–they even have their own proprietary line of wine called Sonoma Crest Cellars. 7-Eleven CEO Joe DePinto told Convenience Store News last summer that as c-stores continue to evolve, consumers will accept new products–especially in the area of fresh food. The retailer also recently unveiled new packaging for all its private label fresh food–it’s an updated, fresher look that shows off the product. 7-Eleven also cited consumers’ budget tightening in the face of a weak economy as reasons to further its involvement in the money-saving private label arena. The convenience chain also cited a recent survey by The Nielsen Co.–parent of CSNews Online–which found nearly three out of four American consumers believe store brands are good alternatives to national brands, and more than 60 percent consider them to be just as good. See the report here.
Convenience stores have never been a place for brands. They have always been a place for convenience. Selections are limited. Other than a Coke or Pepsi, people would pick-up some milk or bread or ice cream, which was not dependent on brand but availability. Even if it was a branded category like breakfast cereal, they would pick up what was available, not necessarily their preferred brand. Further, much of C-stores business is already unbranded or “private label.” Big Gulps and Slurpees. Donuts and hot dogs. A cup of coffee and a really big cup of coffee.
Therefore, it makes ultimate sense to further build store branded products, particularly if the quality is good. While it might not make much of an impact on Coke or Pepsi, it surely will on those paper products, or juices, or almost any other category that people look for in the C-store.
7-Eleven, like any retailer, needs to “think like a brand and act like a retailer.” In this regard it needs to consider those offerings that will allow it to differentiate itself from the competitive array. Some of their efforts in the food service area using their commissary have provided such a point of differentiation.
However, developing own label for candy, snacks, etc. runs the risk of diluting the 7-Eleven brand. In addition, since these items are impulse and relatively low price and involvement, what will motivate consumers to switch from successful national brands to the 7-Eleven offerings? Brands are more than items on the shelf and more than margin generators. I question whether customers will change C-Store preferences based on the availability of own label candy and snacks.
Price differentiation at C-stores for private label vs. national brands is not as important as it usually is in most traditional supermarkets. Quality, packaging, and design need to be carefully executed and products need to be thoughtfully planned so that they do not look generic in nature.
I’m with Doron here; this has more legs than the video game initiative. 7-Eleven is already a good brand in its own right, and while I don’t expect it will necessarily draw more business (a la Costco’s or Trader Joe’s private labels), it will likely give them some efficiencies and stronger margins, assuming they play it right and I have no reason to suspect that they won’t. I don’t see a stampede into PL by C-stores, but there’s certainly room for growth and I think the channel is increasingly realizing that there’s opportunity there.
The C-store is like a refrigerator for many consumers, especially younger males. My sense is that as jobs become scarcer and younger people have less disposable income, they may readily try private label snack options, given a decent price break. But they’ll only stay if taste is acceptable.
Happy Thanksgiving to All!
I must say, this is more the direction I would expect from a C-store than the video games initiative from a few days ago. I haven’t seen any prototypes yet but private label has opportunity in any category. 7-Eleven has the buying power to make a real dent with PL. Obviously their product would have to offer a better value proposition than the name brand or regional favorite.
I definitely think of C-stores as being private-label friendly since the primary premise is, after all, “convenience” (not necessarily brand) and this is also one area where high gas prices might actually be a boon to business. Fill up the car with an “ouch” and get relief just inside the store when items are less expensive than expected! Context is everything.
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Now, more than ever, price will pay a key role in consumer choices, especially in Convenience Stores, where we are all paying an arm and a leg for gas.
7-Eleven has a great brand which it is smart to leverage. Bubba is looking for quality at a good price as much as my Jewish Bubbe used to, whether he’s shopping for beer, cigarettes or beef jerky.
C-Store customers expect to pay a higher price for convenience, but if they can get something good for cheaper, all the better.
All things considered, it’s a smart move.
Private label brands at c-store are not new. Many have private labeled a variety of products ranging from fresh (milk, ice cream and other dairy products) to items such as chips and soda. What determines their success is not limited to the actual product itself but whether or not the retailer can provide all the support that a “brand” can provide. 7-Eleven has demonstrated its willingness to make this investment as evidenced by several of its current private label items.
Few other c-store retailers have the size and resources to create successful private label brands. Several well known regional chains have tried and not been successful, so while there have been and will continue to be successful private label launches in the channel, it is not likely to be a trend that will become widespread.
While I don’t expect that the new 7-Eleven private label items will have any significant impact on sales within the categories, they will likely enhance the gross margins for the franchisees. That has been the role of private label products regardless of the channel.
Private label is nothing new to 7-Eleven–they even have their own proprietary line of wine called Sonoma Crest Cellars. 7-Eleven CEO Joe DePinto told Convenience Store News last summer that as c-stores continue to evolve, consumers will accept new products–especially in the area of fresh food. The retailer also recently unveiled new packaging for all its private label fresh food–it’s an updated, fresher look that shows off the product. 7-Eleven also cited consumers’ budget tightening in the face of a weak economy as reasons to further its involvement in the money-saving private label arena. The convenience chain also cited a recent survey by The Nielsen Co.–parent of CSNews Online–which found nearly three out of four American consumers believe store brands are good alternatives to national brands, and more than 60 percent consider them to be just as good. See the report here.
Convenience stores have never been a place for brands. They have always been a place for convenience. Selections are limited. Other than a Coke or Pepsi, people would pick-up some milk or bread or ice cream, which was not dependent on brand but availability. Even if it was a branded category like breakfast cereal, they would pick up what was available, not necessarily their preferred brand. Further, much of C-stores business is already unbranded or “private label.” Big Gulps and Slurpees. Donuts and hot dogs. A cup of coffee and a really big cup of coffee.
Therefore, it makes ultimate sense to further build store branded products, particularly if the quality is good. While it might not make much of an impact on Coke or Pepsi, it surely will on those paper products, or juices, or almost any other category that people look for in the C-store.
7-Eleven, like any retailer, needs to “think like a brand and act like a retailer.” In this regard it needs to consider those offerings that will allow it to differentiate itself from the competitive array. Some of their efforts in the food service area using their commissary have provided such a point of differentiation.
However, developing own label for candy, snacks, etc. runs the risk of diluting the 7-Eleven brand. In addition, since these items are impulse and relatively low price and involvement, what will motivate consumers to switch from successful national brands to the 7-Eleven offerings? Brands are more than items on the shelf and more than margin generators. I question whether customers will change C-Store preferences based on the availability of own label candy and snacks.
Price differentiation at C-stores for private label vs. national brands is not as important as it usually is in most traditional supermarkets. Quality, packaging, and design need to be carefully executed and products need to be thoughtfully planned so that they do not look generic in nature.
I’m with Doron here; this has more legs than the video game initiative. 7-Eleven is already a good brand in its own right, and while I don’t expect it will necessarily draw more business (a la Costco’s or Trader Joe’s private labels), it will likely give them some efficiencies and stronger margins, assuming they play it right and I have no reason to suspect that they won’t. I don’t see a stampede into PL by C-stores, but there’s certainly room for growth and I think the channel is increasingly realizing that there’s opportunity there.
The C-store is like a refrigerator for many consumers, especially younger males. My sense is that as jobs become scarcer and younger people have less disposable income, they may readily try private label snack options, given a decent price break. But they’ll only stay if taste is acceptable.
Happy Thanksgiving to All!
I must say, this is more the direction I would expect from a C-store than the video games initiative from a few days ago. I haven’t seen any prototypes yet but private label has opportunity in any category. 7-Eleven has the buying power to make a real dent with PL. Obviously their product would have to offer a better value proposition than the name brand or regional favorite.
I definitely think of C-stores as being private-label friendly since the primary premise is, after all, “convenience” (not necessarily brand) and this is also one area where high gas prices might actually be a boon to business. Fill up the car with an “ouch” and get relief just inside the store when items are less expensive than expected! Context is everything.