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Fresh niche for convenience stores

Convenience-store operators view hot snacks and fresh food as a major cash cow, though they're trying to carefully market these items to maintain their bottomline, industry pundits said yesterday.

"Sales of ready-made food have reported the most significant growth among all products and services offered in convenience stores," said Vivian Chen (陳怡如), a retail industry analyst at Grand Cathay Securities Co (大華證券).

For example, President Chain Store Corp (統一超商), the nation's largest convenience-store chain, saw 14 percent of its sales coming from hot snacks and fresh food, a slight increase from the 12 percent in 2001, Chen said.

Another market watcher agreed that ready-made food is a sector that convenience-store operators' simply cannot overlook.

"Convenience-store operators are facing a growing pressure to find new niches to lift their bottomline," said Raymond Yang (楊晴華), a researcher at KGI Securities Corp (中信證券).

The dining-out sector is worth an estimated NT$200 billion a year and the market is growing, according to statistics provided by the government-funded Food Industry Research and Development Institute.

The nation's convenience stores are likely to profit from the expanding dining-out market, Yang said.

Hot snacks and ready-made food are used as a tool to boost traffic.

"Convenience-store companies' high-profile marketing of ready-made food can easily catch consumers' attention and draw them to stores," Yang said.

However, this is not an easy task, because it takes a lot of effort and money to attract the public.

"To keep the product selection new, we launch new flavors [of ready-made food] every two weeks on average," said Lillian Lin (林立莉), marketing manager of President Chain Store.

Low prices also help lure customers, she said.

On Monday, the retail giant announced it would start selling four flavors of hamburgers, priced between NT$19 and NT$39 apiece.

There is no word yet on how the new products are faring, but after President cut the prices of its spicy-chicken lunch boxes from NT$70 to NT$40 last year it reporting a six-fold jump in lunch-box sales.

However, marketing campaigns and price wars cut into profits, another chain-store operator said.

"In order to gain customers from competitors, we spent a lot on advertisements," said Liu Tei-chien (劉德謙), a deputy manager of Hi-Life International Co (萊爾富).

"Profit margins of fresh food are getting slim," he said.

The profit margin is down to around 15 percent from a peak of 30 percent two years ago, he said.

The growth rate in this sector has dropped from a peak of 25.38 percent in 1999 to 9.45 percent last year, according to a report released last week by the Fair Trade Commission.

As of the end of last year, there were 6,913 convenience stores nationwide, with President leading the market for 3,187 stores, according to the commission report.

FamilyMart Co (全家便利商店) is in second place with 1,303 outlets while Hi-Life has 782 branches, the report said.
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