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03/10/2021

Casey’s makes way for private brands in-store

During Q3 call, retailer updated a significant reset underway at its more than 2,200 locations to make room for its expanded store brand set and improve traffic flow.

Casey's General Stores launched a reset initiative across its convenience store network, freeing up space to expand its private label assortment.

During the first half of Casey's fiscal 2021 third quarter, the company performed a significant reset at more than 2,200 locations. The reset involved moving interior shelving to improve traffic flow, and adding shelf space vertically to expand selling space. 

"Not only will this enable us to more effectively roll out our private label program, [but also] we believe this will optimize category flow and adjacencies with existing SKUs, and has allowed us to add more variety within existing categories," President and CEO Darren Rebelez explained during Casey's third-quarter earnings call on March 9.

According to the chief executive, the first rule of the reset was to get "the right products in the right place within the store" to drive impulse buys. "We've seen improvement in our add-on purchases and conversion rates as a result of that," he noted.

At the same time, Casey's raised the height of its gondolas by about 12 inches, allowing for the addition of roughly 250 items to its assortment — or about a 10% increase in SKUs. The reset even allowed the retailer to refresh its entire assortment.

"We were able to get more new products into the assortment and get rid of some of those stale items that had been there for a while and just weren't selling," Rebelez said.

The Ankeny, Iowa-based Casey's began the six-week reset initiative in November 2020 and finished the rollout of the new assortment in January.

Initial results from the reset are encouraging, according to the chief executive, who noted that the retailer saw its grocery and other merchandise sales improve throughout the quarter following the reset.

"Our private label program continues to outperform initial expectations. After the first month of the reset, the Casey's brand was the most popular non-tobacco brand sold throughout the chain," he said.

"Thrilled" by the customer response so far, Rebelez shared that the retailer plans to add products to the program as long as they meet three requirements:

  1. The product must have a lower retail price compared to the competing national brand.
  2. The penny profit for each item must be higher than the competing national brand.
  3. The quality of the product must be in line or higher than the competing national brand.

"Adhering to these criteria is proving to be very effective thus far. Private label sales were 2.5 percent of grocery and other merchandise sales throughout the third quarter, and by the end of the quarter were in excess of 3 percent," he said.

"The Casey's brand has already grown to be the No. 1 guest choice in bagged jerky, packaged bakery, and nuts and seeds — an amazing accomplishment in such a short amount of time, and [this] shows the power our brand holds beyond our traditional prepared food program," the CEO added.

The convenience store chain has learned a lot from the early stages of its private label rollout, according to Rebelez. "The level of adoption that we've received from the guests on our products has really exceeded our expectations," he said, pointing specifically to three areas of Casey's private label strategy — a lower retail price, higher penny profit, and higher quality — as drivers behind the success and customer adoption.

"Having that combination is really powerful and the guests have received it well, but what I think we didn't fully appreciate as much was [that] the strength of our brand with respect to prepared foods gave us credibility with other categories," he explained.

"When we introduced packaged bakery or meat snacks or nuts and seeds, there is an expectation of high-quality products at a reasonable price from us and our brand," Rebelez said. "People immediately gravitated to those."

Casey's private brands team is now working on a pipeline of new products to introduce into the chain's convenience stores over the next few months.

Casey's operates 2,229 convenience stores in 16 states. Its pending $580-million acquisition of Omaha, Neb.-based Buchanan Energy, owner of Bucky's Convenience Stores, is currently undergoing Federal Trade Commission review.