Key Lessons learned from Sunnyside Gas and Grocery: The case of a store, a cabbage and a potato


Posted: February 5, 2015

Members of the Distribution Team are conducting case studies to understand some of the factors affecting the ability of stores to serve their consumers in low-income neighborhoods. The team has conducted detailed interviews with each of our collaborating retailers, most but not all of whom are independent store operators. The information collected includes factors affecting their ability to sell healthy foods and regionally sourced foods as well as factors that influence their ability to stay in business. The team then collects information on two market basket foods per store, so that all eight foods in our market basket are represented randomly in the case studies. In this article, team member Kristen Park shares some of the lessons learned from one of these stores and its procurement of cabbage and potatoes.
Potato Supply Chain for Sunnyside Gas and Groceries. Shaded boxes represent supply chain members located in the Northeast Region. Numbers in boxes represent the percent of the next member’s supply. Source: Author's calculations based on case interviews.

Potato Supply Chain for Sunnyside Gas and Groceries. Shaded boxes represent supply chain members located in the Northeast Region. Numbers in boxes represent the percent of the next member’s supply. Source: Author's calculations based on case interviews.

Sunnyside is a gas station with a large convenience store that belongs to a convenience store chain. Although all of the other stores participating in the project are supermarkets, we chose to include this store because it provides a unique food solution to a community with limited access to a supermarket. The company considers this store as the model for their future stores. It offers a hot food preparation counter as well as freshly prepared cold foods, such as sandwiches and fresh-cut, grab-and-go fruits and vegetables, and expanded grocery selections beyond what is normally found in a convenience store. In addition, the store has some perishables departments for produce, fresh meat, and frozen foods.

The store is interested in serving its community well. When asked what factors limit its ability to sell healthy foods to consumers, the management indicated that suppliers and availability of products were most limiting factors. Managers also stated that procuring regionally produced foods was not difficult.

The owner of the Sunnyside chain is an active supporter of bringing healthy foods to his communities. With more than 80 corporately owned and licensed gas stations and convenience stores, his company enjoys some economies of scale and centralized buying power. When compared to the scale of a grocery store, however, convenience store volumes are very, very small. And small stores often buy at higher prices because their supply chains are more fragmented and because it costs more to buy, store, and transport product to many small stores than to one large store.

Sunnyside’s produce, and in particular its potatoes and cabbage, is supplied by a produce wholesaler who delivers twice per week to the store. In turn, this wholesaler purchases its potatoes and cabbage from within the state as well as from regional and national suppliers. The wholesaler is used because, although large potato and cabbage producers in the state grow their products competitively, those growers do not sell directly to small customers like Sunnyside. Sunnyside also benefits from using a wholesaler who can deliver a wide variety of produce at once. This cuts down on management ordering time, number of trucks in the parking lot, multiple invoices, and other overhead costs.

A produce department in a New York State convenience store. Photo Credit: Kristen Park, Cornell University.

Since these particular cabbage and potato producers do not deliver to small customers like Sunnyside, they also appear to benefit from using this wholesaler, which provides an additional marketing channel for their produce. In the case of Sunnyside, the in-state producers receive the highest share of the retail price as opposed to producers from outside the state. This is because prices are related to transportation costs; shipping produce from these farms uses less fuel per hundredweight than shipping from producers outside the state.

As stated earlier, New York has large producers who can grow cabbage and potatoes competitively. Cabbage and potatoes can also be stored for at least eight to nine months after harvest. Therefore, the wholesaler only has to source cabbage and potatoes from outside the region a few months of the year. Buying from national producers outside of the Northeast can cost more once transportation is included and since the wholesaler may not be able to raise prices enough to fully cover the higher off-season costs, buying from outside the state can eat into the wholesaler’s own margin.

An opportunity may exist for members of produce supply chains to work collaboratively to harness the power of regional and local. For example, Sunnyside sells round white potatoes at a premium price over russet potatoes. It receives a margin of 31 percent of the retail price from the round whites from New York the wholesaler receives 34 percent and the farmer 36 percent margin. By promoting the round whites with prominent labels and signage, there may be opportunity to sell more regional and local potatoes at better margins and volumes over the russets, which are all grown in the west.

A potato display in a New York store. Photo credit: Kristen Park, Cornell University.

Sunnyside only sells about three cabbage heads a week, not surprising as it is a convenience store rather than a full-size supermarket. Peak sales occur during certain holidays, such as St. Patrick’s Day. Yet, Sunnyside also uses cabbage in its deli section, so reserves a bit of shelf space for consumers to purchase.

The ability of the convenience store to purchase potatoes and cabbages produced in the state is greatly enhanced by having a dedicated produce department. Expanded produce offerings beyond what is normally found in a convenience store enable it to have enough volume to work with a produce wholesaler. The produce wholesaler finds suppliers close to home to balance out cost, transportation, and logistics against supplies from outside the state or region.

Working together to find solutions to communicate where the retailer’s potatoes and cabbages are coming from is one of the keys to being able to leverage consumer interest in local or regional foods.

Kristen Park is a researcher at Cornell University's Food Industry Management Program and a member of the EFSNE Distribution Team. She conducts research on a variety of food marketing issues, with current research interests in the fresh produce distribution system in the retail food industry.

More information about the Distribution Team is available here.