Ubiquitous convenience stores seek higher margins, healthier appeals through robust food offerings.
Eighty percent of success is showing up, observed comedian Woody Allen.
Convenience stores are the retail proof. They’re up to 149,200 locations across America in 2012, up from 140,655 in 2005, according to Nielsen. This is the largest absolute growth of any channel during this period, outpacing dollar stores that benefited from the recession and expands to 24,075 from 18,579. (Pros and cons for dollar stores in 2013)
Moreover, while food, drug, and multi-outlet channels posted unit sales declines in CPG during the 52 weeks ended Sept. 9, 2012, convenience stores rang up a 2.6% unit sales gain, said a SymphonyIRI Group report. It attributed this largely to “assortments well-suited to quick and easy on-the-go meal, snack and beverage options.”
Yet c-stores aren’t everyone’s darling. Because they’ve often been unable to attract women customers, they’re vulnerable to food initiatives by drug chains, most notably Walgreens and its Duane Reade banner, which offer many convenient prepared, chilled and packaged items. Drug stores typically promote food heavily, and The Lempert Report has reported often on their food inroads. C-store and supermarket executives recently confirmed to TLR the impact Walgreens has been having on their food sales.
C-stores face other headwinds too: Less driving due to high gasoline prices, which means fewer trips. And anticipated declines in tobacco profits, due to people buying on tax-free Native American reservations and the recent decision by more dollar stores to sell cigarettes. The National Association of Convenience Stores told Bloomberg Businessweek recently that “even with the generous rebates offered by tobacco companies, gross margins have dropped from 20.8% in 2002 to 14.6% in 2011,” and cigarettes still account for 38% of non-gasoline c-store sales.
For many c-stores, fresh food will be the competitive differentiator of choice. For example, 7-Eleven, which has more than 10,000 stores in North America, runs daily fresh-food deliveries to 4,700 of them. The chain’s proprietary retail information system allows each store to customize orders for neighborhood demand. The goal is to compete with quick-serve restaurants as well as food retailers. Among its offerings are: new premium sandwiches, baked goods, dairy, fresh salads, sushi, produce and fresh-squeezed juices.
Technomic research says c-stores comprise 29% of retail foodservice and almost 2% of the total foodservice industry, and this segment should “grow nominally” by 2.5% in 2013 and again in 2014. “There seems to be significant room for convenience-store operators to generate increased foodservice sales by translating existing traffic into purchases.”
Their data further show that: