C-Stores Make Pizza Time

ore than a century ago, Italian peddlers would walk up and down the cobblestones street of New York, Chicago and Philadelphia selling pizza from metal drums they carried on their backs. Then pizzerias started opening in and around major cities in the 1900s. Eventually chain pizza deliveries like Little Caesars, Pizza Hut and Domino’s began to dominate the market.

Now pizza is firmly encrusted in the convenience store industry as well. But instead of copper drums filled with coal or cardboard boxes to keep pizza warm, the industry has brightly colored, stay warm display cases that lure customers to one of the U.S.’s favorite foods.

The variety of pizza options available to retailers includes a long list of established providers. From Noble Romans, to Giorgio Foods, Piccadilly Pizza, Hunt Brothers, to Hot Stuff Foods, the list is seemingly endless.

Retailers of course rely on cost-effectiveness to select from the myriad of pizza options available. But often times, it is the intangible that leads a retailer to selecting the right pizza.

"Pizza is a product that we all enjoy," said Mike Guisinger of Lightfoods Inc. which currently has two stores in southern Utah near the Arizona border and plans to open three more units by 2009. "It is easy to serve and easy to eat. The most important thing with pizza is that it is fresh and fun to eat. Far too many pizza offerings out there taste like cardboard. When a high quality pizza is offered at a fair price people will buy it over and over again."

Pizza also compliments other products in the store helping to build incremental foodservice sales. "Most people will also purchase pop or beer to go with their pizza," Guisinger added.

 

Reputation, Maintaining Variety Crucial

K-Stores, a division of the Kulger Co., of McCook, Neb., previously operated its own, in-house program called Mama K’s Pizza. Two of K-Stores’ four locations, however, were using one of the top programs in the industry, Hot Stuff Foods. Eventually, competitive reasons led all K-Stores to drop the Mama K’s brand for Hot Stuff, said Dan Unger, division manager for the Kulger Co.

"That decision had a lot to do with name recognition," Unger said. "Hot Stuff was a more recognized name. Quality has to figure into it too. You don’t want a crummy product. If the quality is there and you are able to get draw people through the name recognition, you are probably going to do really well."

Another Hot Stuff client, Lightfoots Inc., with two Chevron branded stores in Utah about five miles from the Arizona border, took "a great deal of time searching out a foodservice brand that would compliment our stores, but not overpower the store," Guisinger said.

While other brands were decent, many created restrictions on what other items should be sold in the store. According to Unger, the only restriction Hot Stuff has is that its warmers should only be used for Hot Stuff products. Guisinger said that Hot Stuff requirements were certainly less restrictive than other companies and, since he has many years of foodservice experience, that was something he was looking for. Retailers just starting out in the foodservice business may benefit from the rigid structure other brands provide.

"Several of the brands we looked at were far to restrictive on allowing us to sell other items in the stores not related to their brand," Guisinger said. "Cost was another factor and definitely important, but it was down the list in the criteria we were looking for. We wanted more than just a pizza program. People don’t want pizza every day so we also wanted a great deli sandwich and breakfast products."

Maintaining variety within the stores was an important factor retailers cited when asked why they selected a certain brand over another. For many retailers, the distribution agreement is not so much about what one company can do for another; it is about how one company should partner with another without setting too many restrictions.

"We also offer a wide variety of deep fried and baked foods," Guisinger said. "Quality of the product, and variety were extremely important in that each person that walks through our doors must be able to find a good variety of food at a reasonable price, when this happens they will be back."

Mama K’s maintains variety as well, but has invested in separate displays to complement Hot Stuff. "Within their warmers, you can only market their product, but other than that, we can do other items on our own," Unger said. "We do also serve some other deli items that are not Hot Stuff branded, and have separate warmers for the regular convenience variety of corndogs and chicken strips."

 

Self-Branded Options

Pizza is also a hot proprietary option for c-stores. Manley’s Mighty Mart LLC, based in Binghamton, N.Y. and the operator of 23 stores with both Exxon and Valero gas, runs several company-owned foodservice brands including Big Al’s, Big Al’s Express, Lydia’s Gourmet, and Ready-2-Go. The company’s Big Al’s and Big Al’s Express provide it with its own pizza.

"We purchased an existing c-store with the proprietary Big Al’s brand and decided to grow it," said Jack Brayton, company president.

Like other convenience retailers, Manley’s overall sales grew enormously upon adding pizza to its stores. "We added about $ 1 million in sales with the pizza option," Brayton said.

There are, however, elements to running pizza programs that may deter some retailers. One of the most important factors is how labor intensive it is to ready the products. Typical c-stores typically only have two employees—one working the cashier and one behind the deli. Even if products are delivered par baked, it takes a good amount of time to prepare them for customers.

Two years ago, Piccadilly Circus Pizza, which is partnered with more than 800 retailers, began shipping its pizza prepackaged with toppings so that the only employees would have to do is heat them pizza and then put it in a box. The company also offers an express freezer-to-oven option, which has a low entry cost and is less labor intensive, without sacrificing quality, says Jerry Ryker, Piccadilly’s executive vice president of business development.

Unger said that Hot Stuff’s program is also "fairly efficient."

"There are some things about it that are labor-intensive," he said. "We usually have a clerk at the register and a deli-person and that deli person can divide their time a little bit, but it’s not overwhelming or a deterrent."

 

Pizza by the Numbers

Pizza items cost anywhere from $2.50 to $3.19 for personal pan pizzas and up to $13 for a large pie at K-Stores. "Pie on the Fly Wednesdays" specials at Manley’s offer pizza pies for between $5.99 and $8.99.

"We feel that our retail price structure is quite competitive for the great quality product they are receiving," Guisinger said. "We offer breakfast burritos, and sandwiches priced from $1.89 and up. We also have a great breakfast pizza that can be made as a personal size to a large. In all of our print marketing we offer discount coupons, which are very popular. More emphasis put on quality of product rather than just price. I have never heard a complaint from a customer about the quality, quantity, or value of our offering."

K-Stores and Lightfoot do not pay Hot Stuff royalty fees, but they do pay a per quarter, per brand marketing fee of $250. The fee covers ongoing point of sale material and special promotions, Guisinger said. Hot Stuff also sends marketing representatives to Lightfoots once month to help with marketing, training or special promotions.

Like contracts with other pizza providers, the typical contract with Hot Stuff lasts between five and seven years.

While no one provided specific numbers regarding how much it costs to enter into a pizza option, Guisinger said his company was looking at options that were priced for less than $10,000. "However we invested far more than that in our location because we wanted much more than just pizza. We are building a brand in our market."

Although Lightfoot is happy to continue working their current pizza option, Unger said one industry trend he has noticed just might put a damper in the c-store pizza party. He said more and more retailers are now beginning to offer healthier fare like salads.

"I see more and more of them going into healthy choices too, not so much fried food," Unger said. "More so in heavily populated areas, going towards more the salads, and fruits. We’re considering going towards the health foods area. We’re mainly in small towns so we would have to test the market, possibly by April of this year."

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