Products that will attract new shoppers and drive incremental growth, and innovation that can ‘reinvent’ mature categories, says Chris Harkness, VP of business development.
“Go into Whole Foods and look at the ready to drink coffee," said Harkness, who was speaking to FoodNavigator-USA ahead of the convenience retailer’s second annual ‘Brands with Heart’ emerging brands showcase event in Irving, Texas, on October 22-23.
"You'll have 12 feet of however many brands and you’re trying to stand out among 50 different items. You’ll probably get into a handful of stores and if you’re really lucky you’ll get into all 450 or so stores nationwide and you’ll sell one or two a day.
“With us you’ll compete against a narrower set and your opportunity to stand out and be discovered by the consumer is much higher, and then we’re taking about 9,000 stores just in the US and globally 69,000 stores.
“We’re also pretty easy to work with, we don’t charge slotting fees, and early stage companies can find themselves in a profitable partnership with us.”
We’re pretty easy to work with, and we don’t charge slotting fees
At last year’s Brands with Heart event, 7-Eleven invited about 70 companies to attend (from a far larger pool of applicants) and selected about 30 to provide products for a test running in 125 stores in Los Angeles, said Harkness.
"We ran that test for over 90 days before we started making decisions on what to amplify and what to pare back.”
The profile of the brands selected for the trial varied from larger private equity-backed products to “bootstrapped brands with three or four people on the team” with no real bricks and mortar presence, he said.
“The question was will the product resonate with our current customer or a customer we’re trying to get? Plus it was a test for us about how to present these products in a way that resonates with our customers, to concentrate them into an area and draw attention to them. So we created two sets – an ambient endcap with about 55 items, and then we set aside a part of our open air cold case with about 45 items.
“And there were a couple of really surprising things that came out of it. One of our top-selling items in the ambient set was salmon jerky from a brand called fishpeople, which is a relatively expensive item for a 7-Eleven, but it shows that there is demand for these kinds of products.
“In our cold case, we also sold a lot of fresh pressed shots from a brand called KOR."
‘If I can get young moms into our stores who feel good about our assortment that is going to be very beneficial for our business’
So what is 7-Eleven looking for?
“There’s no hard and fast criteria for emerging brands,” said Harkness, who noted the 7-Eleven adds around 50 new items to its catalog every week, and conducts more traditional category reviews “at least annually.”
“We’re looking for new and innovative products that reinvent categories, with cleaner labels and innovative new ingredients, and the other criteria is how does it help us attract customers that may not be shopping at 7-Eleven today?
“The consumer we’re trying to go after primarily with this is a little bit younger and probably skews more female. If I can get young moms into our stores who feel good about our assortment, that is going to be very beneficial for our business."
As for the health profile of the products 7-Eleven is looking for, he said: “We’re not trying to become a health food store, but we have a lot of healthier options, and one of the fastest growing segments in our stores is fresh foods, cut fruit and fresh made salads, but we’re also seeing a lot of indulgent products with cleaner labels.
“We believe customers want convenient, better-for-you healthier options in their day-to-day lives, especially for immediate consumption, and we want to be the place where they can discover them.”
‘We can start in something as small as one store’
So in order to get on 7-Eleven’s radar, what evidence of market validation is the company looking for from emerging brands, and how does it enable smaller brands to test the waters?
He added: “We can start in something as small as one store, and there are multiple ways to approach us. The easiest way is to sell directly into your local 7-Elevens, and then as you start to develop some success we have regional merchandising leaders, so there are 10 operating zones that each have merchandising teams you can reach out to. And then there’s our central team in Dallas.
“We’re also active users of RangeMe [an online platform enabling smaller brands to showcase their wares to retailers], which has been incredibly helpful for our team. For our forthcoming event we’re accepting 65 brands and we had over 750 apply in two weeks, so we needed a way to sort through these brands. Also, do you have venture capital backing or private equity? Often those investment networks are good ways to get in contact with us.
“We also created a team dedicated to finding emerging brands a little over two and half years ago. Category managers and merchants are bombarded and they’re thinking about the big national brands, so we had to think about how to identify these weaker signals and feed them into the core of our business.”
7-Ventures can provide capital to help emerging brands scale up
Asked what kind of support 7-Eleven can give small brands, he added: “First there’s data on how and where things are moving. The local and centralized merchandising teams can provide data on how your products are performing relative to the competition. Then there’s supply chain support, we help them navigate our demand chain, all the way down to the store level.
“Plus we also have our own internal venture fund 7-Ventures, where we may take an investment stake with some of these companies to provide the capital to help them scale up.”
Founders vs operators
So what kinds of challenges do small brands face when dealing with a retailer the size of 7-Eleven?
“Some of the questions they need to ask themselves are do you have the right plan to match the pace of growth you might see as you scale up?” said Harkness. “Is your supply chain shored up? We can start in something as small as two stores, 20 stores, and then scale up 100 stores at a time, and if you have the scale of distribution we can take you to 10,000 stores.
“The other question is do you have the right team in place to scale up? Founders often have a different skillset than the people [operators] that can take you to the next level. Do you have a localized sales force in place that can keep your product front and center in front of a franchisee and make sure that product is being ordered and is on the right place on the shelves?"
‘We understand that product discovery takes time’
So how long do emerging brands have to prove themselves in 7-Eleven stores before they’re kicked out?
“Our typical store has around 2,500 unique items and we service about 8m customers a day across our system, so a store will service about 1,000 customers a day,” said Harkness.
“If you’re going to make it into our cold vault, the turns expectations will be higher than they are for a single serve snack, so the length of time we’ll give a product depends on the category and what it’s up against, and the resources you are willing to put behind it, but also how much we’re willing to do, because we understand that product discovery takes time.”
Watch a video about the 2018 Brands with Heart event: