With the success of smaller brands, the need for c-stores to manage their product portfolios has become a multi-level talent.
By Gary Stibel
Not too long ago, some industry gurus were predicting that the consumer packaged goods (CPG) business would become increasingly concentrated with no more than two brands and one private label in every category.
Coke, Pepsi and a private label, for example. Crest, Colgate and a private label.
Today the pendulum has swung back in the other direction. Like an individual whose far and near visions begin to weaken, making it harder to focus clearly on close objects—a condition known as presbyopia—retailers are faced with the fact that smaller, successful brands are winning where larger legacy brands aren’t.
For instance, Budweiser and Miller are declining while craft beers grow. Ditto, Yoplait and Dannon, vis à vis Chobani, Noosa and Siggi’s.
This shifting CPG paradigm can be blinding at times. Call it portfolio presbyopia.
Years ago, researchers projected that if you give consumers too many flavors of jams and jellies to choose from, it makes their decisions more difficult, and most consumers simply pass.
So, what happens when the consumer realizes that the pendulum has actually swung too far, and they are now spending way too much time in retail aisles or on the internet trying to decide among too many brands, flavors, scents, sizes and prices.
The original convenience stores were driven by location, location and location. Having a convenience store strategically located for the purchase of fill-in items like milk, eggs, cigarettes and grab-go-sandwiches was the order of the day.
That was then. Today, c-store market leaders have evolved into destinations for great coffee, fresh food and a range of snacks and beverages in addition to supplying all a family’s needs, both household and personal.
And while the breadth of product line is important to ensure that consumers can find what they want and need, it is beginning to approach complexity syndrome that could discourage sales and return visits because of the vast array of choices and options on the sales floor.
What can c-store operators do to control this portfolio presbyopia?
First, focus on your own label and be sure that it’s as good as, or better than national brands.
Second, stock at least one national brand, but it doesn’t have to be the market leader.
For example, Heinz and private label are more than enough ketchup options; however, Hunt’s and Del Monte are both recognized national brands.
If either brand wants to generate trial versus the market leader (Heinz), what better way than to share exclusive distribution with private label in a quality c-store chain.
And what better way to encourage all three national brands to compete more aggressively for your business than to give one national brand exclusive distribution.
Third, be very stingy when adding more than two or three brands to your portfolio. It’s surprisingly unnecessary in the majority of categories you stock, but absolutely necessary in categories like beverages and snacks.
Finally, reallocate space gained by limiting assortment in unnecessary categories to build equity for your brand.
For instance, bananas, apples and other fresh fruits are relatively inexpensive and signal to the consumer that your c-store has fresh foods as well as shelf stables. The scent of freshly-brewed coffee or fresh food also contributes to a positive shopping experience and has been proven to increase sales.
Also consider leaving room for local and insist that local adds value. Local merchandise is on trend and in demand even/particularly at premium price points.
Moreover, local entrepreneurs appreciate retail distribution more than national brands and will usually go out of their way to support retailers who give them that opportunity. Therefore, insist upon in-store signage and promotion that will benefit your brand as much as it will your local supplier.
While portfolio presbyopia is becoming more common among mass retailers and in electronic commerce, there is a large opportunity for convenience store chains/operators to create the equivalent of multi-focal lenses and make their convenience store a truly convenient and better experience for all.
Gary Stibel is the founder & CEO of the New England Consulting Group. His career spans more 30 years of line management and management consulting.