7-Eleven sees private label opportunity in downturn, range to be extended

Posted by Daniel Palmer on 27th November 2008

7-Eleven, Inc., the world’s largest convenience store chain, has launched a new line of private-label products in the US this month under the brand, 7-Select. With the rollout of the 32 new items, 7-Eleven has greatly enhanced the presence of store-brand packaged foods, a business that it reports has increased dramatically over the last year and promises strong future growth, especially in light of consumer budget-tightening while the US economy deteriorates.

The announcement comes soon after the release of a report by Nielsen which discovered great potential for private label goods in the convenience sector. Nielsen’s research discovered that sales of private label products escalated by nearly 20 per cent over the last year to $826 million in American convenience stores, well above the 10 per cent in supermarkets. Overall, private label share remained significantly lower in convenience stores – only 1.5 per cent – compared to an 18 per cent share of US supermarkets’ dollar sales.

“Convenience stores’ ‘bread-and-butter’ items – snacks and beverages – remain a relatively untouched category for private label and present tremendous opportunities for growth, especially in a lean economy when consumers have a heightened awareness of the cost of goods and are actively seeking out ways to stretch their dollars,” Kevin Elliott, 7-Eleven senior vice president for merchandising and logistics, said.

New items for 7-Eleven’s range include cookies, candy, nuts, potato chips, beef jerky, trail mix, chocolate-covered pretzels, coffee espresso beans, raisins and peanuts. The products, which mark a major extension for the store brand that launched in 2004, will retail at prices 10 to 20 per cent below the national brand equivalent.

“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,” Mr Elliott claimed. Focus groups reportedly ranked them higher than national brand equivalents.

In May, 7-Eleven began a pilot program to offer the new private-label products in 1,500 stores in Florida and the Mid-Atlantic area. Supported by in-store displays and point-of-purchase signs, 7-Eleven customers showed immediate interest in the new value-priced items, according to the world’s largest convenience store operator.

Sales have continued to climb steadily, and many items are already outselling the name brand.

Mr Elliott indicated that, because of 7-Eleven stores’ volume of snack sales and store traffic (the company serves some 6 million customers each day), the company can work with manufacturers and packaging companies that already provide product for name-brand labels to offer consumers an attractive price for popular snacks.

“We have selected only top suppliers to develop and produce 7-Select snacks, and many also manufacture similar products for the recognized national brands and other top private-label retailers,” Mr Elliott advised. “New 7-Select items are already in the pipeline, and we plan to widen our assortment in early 2009.”

7-Eleven first offered private-label paper goods, batteries and stationery supplies with the 7-Select brand in 2004. Its private-label bottled water is sold under the name of Quality Classic Selection, which will soon convert to the 7-Select brand. By the end of the first quarter 2009, 7-Eleven expects to have more than 180 private-label items available for its franchisees to offer their customers.

“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 believes.

Mr Elliot said 7-Eleven plans to expand its 7-Select-branded snacks to its Canadian stores in the first quarter of 2009, but did not elaborate on further international expansion of their private label range.