With foodservice taking on a greater role in the industry, retailers find themselves with a tough decision: invest in a commissary, partner with a third party or build an in-house brand of their own.

By Marilyn Odesser-Torpey, Associate Editor.

Bob Goodwin pulls no punches when he says he wants to make sure everyone in Tedeschi Food Shops’ market areas in Massachusetts, New Hampshire and Rhode Island knows who makes the “Best Sandwich in Town.”

It is an integral part of the overall goal to make Tedeschi the No. 1 choice for fresh foods, said the Rockland, Ma.-based company’s director of (what else?) fresh foods.

“Just look at the trends today and you’ll find strong evidence that the humble sandwich is suddenly more popular and more delightfully varied, than ever before,” Goodwin said. “The retail industry has seen double-digit growth in fresh-baked breads, premium luncheon meats, flavored meats and gourmet cheeses.

All this translates to what our customers want from us…fresh, exciting alternatives.”

For Tedeschi’s, Convenience Store Decisions’ 2012 Convenience Store Chain of the Year, delivering those alternatives to its customers means making the sandwiches for most of its close to 195 units in the 2,800 square-foot commissary it purchased in January of 2011. (Twenty-three of the units have full in-store delis where they prepare both their grab-and-go and made-to-order sandwiches.) By the middle of next year, the company hopes to expand its commissary space more than three-fold to just under 10,000 square feet.
“We have really changed our ‘go to market’ strategy over the past few years. We fully realize that fresh foods needs to mitigate category erosion in both tobacco and lottery, and having our own commissary is a key ingredient in the successful launch of our overall ‘Fresh Forward Strategy’,” Goodwin said.

Meeting Customer Demands
The customer value proposition is no longer just about price. “It is,” Goodwin explained, “much more complex as customers evaluate alternatives from convenience stores, supermarkets and specialty retailers to quick-service restaurants like Subway’s, Panera Bread and D’Angelos. It is simply not enough to offer basic sub sandwiches, with everyday ingredients for an everyday low price. We’ve created great new ‘WOW’ sandwiches, using premium quality ingredients, piled high on fresh-baked breads for a great value.”

It is important to Tedeschi that its sandwiches look homemade instead of manufactured, Goodwin said. “We want our sandwiches to have substance; our sandwiches are stuffed with tuna salad and overflowing with roast beef.”

In addition to giving the company total control over the quality of its sandwiches, the commissary also makes it possible to be innovative and bring to market quickly new signature combinations that will add excitement to the category. Goodwin cited a sausage sub that the chain made in partnership with the Boston Red Sox to commemorate the baseball team’s 100th anniversary, and said he expects much of the stores’ fresh food growth to come from offering more trendy, healthful and ethnic options to appeal to women and Millennials.

“Sandwiches are a core piece of our business, and we have to get the core piece right,” Goodwin said. He emphasized that it is important to Tedeschi to own the entire process from product development and packaging and labeling to delivery and merchandising.

Sandwich wedges and subs account for 70% of Tedeschi’s commissary business. Under its TD’s Deli brand, the commissary produces 22 varieties of wedges, 13 subs and two wraps.

The company delivers fresh product to its stores three times a week (before 11 a.m. whenever possible). To be successful, the commitment to fresh must be continued after the products reach the stores.

Fresh Focus
As part of what Tedeschi calls its ‘Fresh Case Initiative,’ the company provides planograms that showcase the proprietary branded sandwiches in suggestive selling combinations with fresh fruits, desserts and upscale beverages. According to Goodwin, living up to the “fresh case promise” also requires retailers to remove product on the morning it reaches the “sell-by” date on the package, and to “touch, block and freshen up” the case every hour.

Mathew Mandeltort, managing consultant with Chicago-based market research firm Technomic, advised retailers who plan to outsource their sandwiches to do some serious homework before partnering with a manufacturer. “Make sure the company has strong relationships with leading suppliers you already trust; for example, if you want to use Boar’s Head meats, make sure that’s what you’ll be getting,” he said.

Also check up on the commissary’s production, food handling and storage practices and procedures; its distribution capabilities (e.g. are the delivery trucks refrigerated and are there enough of them to get product to you on a timely schedule?) and business track record. “You don’t want to place an order on Friday and find out on Monday that the supplier has gone out of business,” Mandeltort said.

As a franchisee of Blimpie at his St. Leon, Ind., BP-branded c-stores for the past 16 years, Dave Deddens has built his sandwich category on fresh product and name recognition provided by the national quick-service brand.

Being part of a bigger brand also offers other major perks, including buying power and marketing support, he said. But Deddens noted he also values the control he has to cut his own meat in store and add items to his menu.

“I just added a locally-made pulled pork product that is a favorite in this area,” Deddens said. “Blimpie gives me the opportunity to grow my business the way I want to.”

Excluding gas, the sandwiches account for between 20-25% of the store’s total sales. “I make more money on Blimpie than I do on gas,” Deddens said. “And the concept has allowed me to expand into catering.”
For Bob Brandi, owner of five Blimpie units in his South Carolina Pitt Stop c-stores, having a reliable source for getting pre-sliced meats was one of the brand’s strong selling points. “Under federal law, employees have to be a certain age to run the slicer; this way we don’t have to worry about that or any safety issues,” Brandi said.

Brandi also noted that the Blimpie name grabs the attention of customers stopping for gas, so that more of them come into the store to purchase, not only a sandwich, but other incremental items.

“These are customers who might never have even thought of coming into the store,” Brandi said. “And people who see us running a special promotional price or coupon on the sandwiches already understand the value when they see the Blimpie name.”

Tedeschi’s Goodwin readily admits that running a commissary has a unique set of challenges. The biggest one is that manufacturing is not the company’s core business. “We’re retailers, so these aren’t competencies that are in our comfort zone and that can be scary.” He pointed to such details as the government’s requirement of U.S.D.A. certification for wrap sandwiches and two separate Hazard Analysis & Critical Control Points (HACCP) plans for the commissary’s tuna and seafood wraps.

“The most important thing was for us to find the right people with the right skill sets to handle everything from production and food safety to trucking and other logistics,” Goodwin said.

For Tedeschi, he said, the rewards make the investment well worthwhile. “We regard our fresh products categories as more than just profit centers; they’re our points of differentiation. For us, it