The Discovery Trifecta
Location: Coolidge, Ariz.
Location: Casa Grande, Ariz.
Location: Arizona City, Ariz.
It comes to him like a jolt of java to the cranium: Never mess with the customer’s coffee.
On the threshold of a three-store launch in southern Arizona, residential and commercial developer Mike Mennenga is recalling a past foray he made into the realm of convenience retailing and some of the lessons he gleaned from the adventure.
It was 2002. Mike and his father, Morris Mennenga, had just walked into a world of $1.35-per-gallon gas when they opened their first convenience store outside Phoenix. It was a move that led to the opening of two more stores within two years.
In a breakneck cluster of events from 2002 to 2005, the Mennengas steadied the trio of stores, grew them to profitability, then sold them in a frenzied market. They took away a handsome sum, not to mention a few important lessons.
Among the lessons was this: “When you put a quality product out there for a fair price, people love it,” Mennenga said. “When you take it way, I’m surprised how many people take it personally.”
Mennenga said he made a decision in 2004 to pull Boyds Coffee from the stores and replace the brand with a lesser-known knockoff, mostly to save a few dollars and still offer what he figured was a decent cup of joe. “From my standpoint, it was cheaper,” he said. “I thought I was doing the right thing.”
Customers thought otherwise. “We learned a valuable lesson,” the younger Mennenga said. “The customers were mad, people were yelling. Within about two to three weeks, I switched back to (Boyds).”
Fast forward to 2008. Mike and his father still co-own Discovery Homes, the residential and commercial construction company they started in 1983, but a dull housing market has inspired them to once again revisit their affinity for the convenience channel.
This time, they’re starting from the ground up—no acquisitions or carryovers from existing sites, just a fresh slate on which to create their own convenience concept. It’s a brand of upscale stores they’re calling Discovery Markets.
“What’s exciting about building the new stores is it gives you a chance to do what you want,” Mennenga said. “It’s new and exciting; you can put everything where you want it.”
The Discovery Markets concept was born two years ago, just after Mike and his father sold their old c-stores. The three new stores will be in high-traffic areas ripe for convenience concepts.
In Coolidge, Ariz., a one-acre lot has the potential to serve a small town where a smattering of underperforming c-stores are leaving a gaping hole in the market, while an Arizona City site shows similar opportunity. Most promising is a site adjacent a highway in Casa Grande, Ariz., where thousands of shoppers visit the only mall within 40 miles.
“To me, it’s the right thing to do because people are looking for something new, larger lots, larger fountain choices, larger coffee programs,” Mennenga said. “It’s offering something bigger and better, which no one else is doing.”
Until now. The Mennengas are launching the Discovery Markets concept next month with the first of three openings near Phoenix. The other two stores are slated to open in 2009.
The chain’s brand was an obvious extension of the Discovery Homes identity. “We’re building on that Discovery name that we’ve had here for 25 to 30 years,” Mennenga said.
Familiarity isn’t a one-way street in Arizona. While consumers are familiar with the Discovery brand, the Mennengas themselves have a keen understanding of the area’s micro-markets: the Hispanic population, the local demographics, tastes and trends.
“We’re trying to do things that a lot of those Hispanic buyers would want,” Mennenga said, adding that Fanta sodas and certain pastries will be hand-picked for these local preferences.
Mennenga is floating plans to add a made-to-order foodservice program like a breakfast burrito bar to at least one site. “For us, the more exciting thing getting back into (c-stores) was the foodservice,” he said. “You have to do well on it. The whole key is finding the right mix or the right vendor that people want.”
A beer cave will add to the mix while on-site foodservice franchises—Little Caesars and Quiznos—will lease space and serve as an in-store draw.
Offsetting the Challenges
To differentiate from competitors, Discovery Markets will feature alternative fuels like E85 and biodiesel purchased from Pinal Energy, an ethanol production facility that opened in Maricopa County in July 2007. “E85 is hopefully here to stay,” Mennenga said. “It’s also a 75- to 80-cent difference in price, so it’s attractive from a sheer price standpoint.
“The biggest challenge we’ll face going back into this is the gas prices and credit card fees,” he said. “We’ll feel it from day one, how much those credit card fees will affect us.”
Better prices and better margins from alternative fuels could offer a win-win for price-savvy customers and the retailer, and while two of the sites will stick to unbranded fuel, the Casa Grande location will fly the Chevron banner to draw highway travelers looking for familiarity.