McLane’s ‘Fresh on the Go’ Program Gains Traction.

by Bob Gatty

Key Takeaways
•    McLane’s new fresh program has seen tremendous acceptance among retail customers.
•    The program is flexible, allowing for product mix changes.
•    Smaller distributors can also develop a similar program, but with some alternations, such as crossdocking inventory rather than using warehouse slots.

Last January, after nearly two year’s preparation, McLane Company, Inc. launched a new “Fresh on the Go” program for convenience store retailers, offering them an opportunity to take advantage of high-margin products that meet the needs of time-pressed and health-conscious consumers.

    In a press release announcing the move, McLane said it was providing retailers “the ability to offer their customers the widest variety of fresh products – such as yogurts, fruits, cheeses and ready-to-eat salads – at the most competitive prices possible.” The company stated products would be available in small case packs and “single sell solutions.”

    “Our customers are excited about the ability to offer the types of fresh products that better match today’s consumer tastes and healthy lifestyles,” Tony Frankenberger, vice president of merchandising at McLane said then. “With Fresh on the Go, retailers can now easily offer a wide range of fresh products at the lowest possible cost without being tied to fixed-order quantities and inflexible product selection. It’s a win-win.”
  
    McLane said “Fresh on the Go” required more than $1 billion in infrastructure improvements, including development of a custom cold chain solution. The improvements, the company explained, addressed “product freshness, food safety and proper temperature storage, and transport throughout the delivery cycle.”

    A solution to help customers obtain the necessary equipment, such as freezers, coolers, and cold display units, had to be developed. There were negotiations with a network of suppliers and product providers. Marketing plans and materials were needed. There was an intensive vetting process to determine which retailers could succeed with such a program, and then a comprehensive education program to help prepare them for that success.

    So how is it going? Is the process applicable to smaller distributors? Are there opportunities for them? The short answers to those questions are: slow but sure, yes, and absolutely yes, according to Grant Demers, product director for perishables and foodservice at McLane.

    “The rollout has been methodical,” he says. “It is truly designed to be a flexible, complete turnkey approach to fresh foods in the convenience channel. It’s up to us to work with our accounts in each region to build a base of demand that will support the (volume) requirements of our suppliers.”

    He points out that fruits and salads must be received multiple times per week to assure freshness, so demand from customers must be sufficient. “It’s incumbent upon us to develop that on the front end,” he explains.

    McLane recognized opportunities involving fresh food products on two fronts – existing customers who wanted to implement a fresh offering in their stores and needed a reliable supplier, and customers, and potential customers, who could benefit from such an offering but had not yet acted.

    “If the competition had a fresh offering or something that has an element of appeal to the retailer, we wanted to be able to supply that and to meet that preexisting demand,” he says. “And there are new business opportunities that have been a key discussion point with a lot of retailers who have recognized a need to have fresh products within their stores. This project certainly helps meet that need.”

    Much of the demand, Demers says, has been driven by marketing. “In some markets, the phones rang off the hook with many independent and smaller companies calling to ask how they could get into the fresh business.”

Retailer prep
    For those customers, McLane helped them determine if there really was a sound business case to take such a step.

    “Unless the retailer is already selling fresh products, we strongly suggest they spend time evaluating the environment that will support their fresh concept,” he explains. “Rather than simply resetting a few shelves in the cooler door, creating an exclusive destination helps assure the consumer that your store is committed to fresh products.”

    According to Demers, McLane works with those smaller independents to review market demographics to be as certain as possible that the customer base will support such an initiative. Moreover, the retailer must assess what elements they need to address prior to program launch.

    “A lot of weight is given to the analysis,” Demers says. “This is not for every store. We want to make sure they will be successful.” McLane uses such resources as its proprietary database of sales information for its more than 60,000 customers and third-party demographic data from such sources as Nielsen Spectra to help customers determine if their stores can succeed with fresh products, and if so, which items would work best.

    The program, however, is flexible, and if changes in product mix need to be made along the way, Demers says McLane is there to help.

    Another key was finding an equipment solution that could make such a transition possible. Thus, the company negotiated group pricing rates, just for McLane customers, with an equipment supplier on five different freestanding cooler footprints.  McLane also created proprietary graphics for each, Demers explains, adding that the equipment can be either purchased or leased.

    “Part of the analysis at the front end involves where the product will be placed,” he says. “Some coolers have a small footprint; some can even fit on a countertop. Some customers are working with our manufacturer partners to obtain help in subsidizing the cost of coolers,” he adds, but that is something McLane decided not to do. “We didn’t want to make it so easy that they (the customer) would make a strategic mistake. Some sweat equity needs to be involved.”

    McLane spent about 18 months developing its system to manage such products as cut fruits and salads as just-in-time inventory. “It allows us to insure that our customers receive the freshest product possible,” Demers says.

    During that process, the company developed its partnership with suppliers “to make sure this program could be successfully executed.” In addition, each division hosted events for retailers during which suppliers explained how products should be managed and merchandised.

    Was it worth the effort?

    “Absolutely it was,” Demers says. “I think the availability of fresh program from the wholesaler’s perspective is nothing short of a requirement at this stage of the game. In today’s environment, with the changes that are taking place, it is absolutely essential for the distributor in many markets from a strategic standpoint.”

For smaller distributors?
    But McLane is a huge company with many resources. Is this something smaller local or regional distributors could do?

    The answer, says Demers and industry consultant Deborah L. Holand, of b2b Solutions, LLC, is yes.

    “McLane is large, but we work with the same suppliers as everyone else in this business, and they are very good at what they do. They are innovative, and if they see you are engaged in being successful, they will do all they can to make your program work.”

    Demers acknowledges that McLane made a substantial investment in its program, and other distributors would need to prepare in advance as well.

    “But those costs are myopic compared to the broader appeal and potential of a fresh program,” he says, noting that there are hundreds of items that are available for such a program, such as sandwiches, never frozen, that carry a 30-day shelf life or fruit cups in natural juices with a nine-month shelf life.

    “Technology is getting better by the month,” says Holand. “These products are high margin and offer a great opportunity.”

    But she urges distributors to carefully develop their business case, and then once a fresh program is decided upon, to develop the appropriate marketing and point-of-sales material needed to make it succeed.

    “They’ve got to be committed,” she says.     

    From an operations perspective, Holand advises distributors to crossdock much of their fresh inventory, bypassing warehouse slots, especially until sales success has been demonstrated.

    She also advises distributors to take advantage of case-ready, heat-and-eat refrigerated products. “Walk before you run,” she says. “Case ready is the way to go. Partner with the manufacturers, but don’t miss out.”

    Holand advises distributors to work closely with their retailer customers. “Get inside their heads,” she says. “Figure out what the most cost-effective way is to enter the market. There are good quality products that have high appeal and high profit. But keep it simple. Focus on the product itself. When the distributor works with both the retailer and the manufacturer, everybody wins.”

Note: Deborah Holand will be a presenter at the Foodservice at Retail Expo conference August 17-19 in Schaumburg, IL.    
    
Bob Gatty is a contributing editor and writer to Distribution Channels, and founder of G-Net Strategic Communications.