When thinking about the stereotypical image of a c-store, it probably includes some coolers with dueling displays of Coke and Pepsi products, a rack full of Hershey’s candy bars and maybe a beer cave with a dozen national brands vying for attention.
But it should also include Casey’s pretzels, 7-Eleven chocolate squares and TBX teas, as more convenience retailers venture into the world of store brands.
Sales of private label products in convenience stores were up 7% in the first quarter of 2023, according to market research company Circana. That trailed grocery store private label sales, which grew by 11% during the same period.
That means private label could be a viable opportunity for retailers. In fact, 80% of consumers plan to buy private label brands more in the next six months, reported Circana.
“In economically challenging times, private label thrives,” said Todd Maute, partner at CBX, a brand strategy agency in New York City.
Convenience stores are changing, with more focus on getting customers to step beyond the pump and come inside the store.
“As stores and companies do that, they are going to want distinct items to attract customers,” said Michael Sansolo, a retail specialist and president of Sansolo Solutions in Potomac, Maryland.
TXB Stores is seeing huge success with its private label program, with sales of those products up 40%, said Ben Hoffmeyer, vice president of marketing and merchandising for the Spicewood, Texas-based convenience retailer.
Other convenience store retailers are also investing in this trend. This spring, Circle K debuted a private label wine line; and in June, Casey’s General Stores announced that in the next year it plans to add more than 40 products to its private label lineup that already includes more than 300 items.
Getting started: Evaluate categories for success.
Getting finished: Think about whether you’re offering value or premium/innovative brands.
Making sure it's successful: Market and promote the program in store and to loyalty members.
Size matters when developing a private label, Maute said. Adding self-branded products makes sense for national and regional retailers, he said. But if chains have fewer than 50 stores, it is unlikely to be worth their while “because they probably don’t have enough volume to get a manufacturer to commit to making private label for them.”
Small chains also don’t usually have enough resources to support private label internally, said Scott Love, senior vice president, retail client solutions for Circana. Stores have to be able to treat private label as a brand, including creating the branding and packaging.
“You can create the best brand in the world but if you don't put support behind it, it’s going to fail,” Love said.
For regional chains, however, “when thought of properly, private label is a very strategic marketing tool,” Love said. “If you develop a good product offering and a solid brand and a consumer recognizes they can only get it at your store, it builds loyalty at that store.”
The size of stores also needs to be factored in when considering a private label line. Space is always a challenge in convenience stores “so if you add a private label, something’s got to go,” Maute said.
On the flip side, convenience store operators have the opportunity to own an entire category, such as nuts, he added.
Due to this lack of space, the best categories to focus on are those that are “more ubiquitous with decent breadth with low brand loyalty,” said Chelsey Capps, director of thought leadership with private label consulting company Daymon.
Make it desirable
Private label products in convenience stores should offer one of two things: value or a premium, innovative product.
Offering value, Maute said, makes these products “traffic drivers, designed to bring customers into the store.”
But a mistake retailers make is focusing solely on value, he added.
“People are buying it because they have to, not because they want to,” Maute said. “The opportunity is to get consumers to buy it because they want to, which is when you’re acting as a brand not a brand alternative.”
And unlike grocery stores, convenience retailers don’t have the space or depth of products within a category to offer various tiers of a private label program, Maute said. However, a c-store retailer could offer value in one category, like salty snacks, and a premium, differentiated product in another, such as coffee, because “consumers behave differently in different categories,” he added.
This is the tactic taken by Oklahoma City-based Love’s Travel Stops and Country Stores, which has a tiered approach “based on the category and need state of the customer,” said Casey Creegan, manager of merchandising for the retailer.
TXB also offers tiers. In the water category it has spring water for the value customer and TXB PH Hydration Water, “which targets a higher-end customer,” Hoffmeyer said.
“Our value proposition centers around total value, not just price points,” Hoffmeyer pointed out, which means better quality and unique products can make up part of the value.
For success with premium products, “it’s best to imitate the best-selling product in the category,” Love said. “If you can find a hot flavor and bring it in, you have an opportunity.”
And with impulse sales being strong in the c-store channel, he added, unique products have the opportunity to grab attention and sales.
Whether a store is starting a new private label line or expanding an existing offering, it should consider categories that also have volume and visibility, Maute said. These include snacks, dairy and beverages. Private label water, he said, “is a no brainer,” but brand loyalty is so high with some products, like carbonated soft drinks and energy drinks, that it can be much harder to capture market share.
At Love’s, water and diesel exhaust fluid are the best selling private label products, but the company recently started offering more snacks, like trail mixes, beef jerky, chips and candy, which are doing well, Creegan said.
At TXB, “packaged beverage and general merchandise are the biggest categories,” Hoffmeyer said, “and in 2024 that will expand into salty snacks, craft soda, enhanced and sparkling water, energy drinks and candy.”
The Spicewood, Texas-based retailer, which has more than 50 stores, has grown its private label line over time, and has built relationships with vendors, which have led to new supplier leads, Hoffmeyer said.
First, TXB looks for quality, then uniqueness in flavors, Hoffmeyer explained. “We also look at unique packaging like resealable packaging or unique sizes or better value proposition as differentiators.”
When it comes to expanding a private label line, retailers may want to just shift to adjacent categories, Love said. “If I’m doing well with vitamin-enhanced drinks, it might make sense to move into a vitamin water,” he pointed out.
Selling private label
The biggest challenge with private label products, Love said, is simply getting consumers to try them. The most effective method, he said, is special offers like 50 cents off. And the best way to do that is through a loyalty program, because those people are already customers and already shopping in the stores.
But signage in stores should also be used to draw attention to these products.
“The biggest mistake retailers can make is not supporting the private label — putting it on a shelf and not targeting shoppers, not communicating value, not marketing them, not maintaining the price gap, just expecting them to perform,” Love said. “Retailers that do well with these products are supporting them like a brand manager for a national brand.”