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Measuring the Growth Drivers

E-cigarettes, foodservice, frozen food ripe for higher sales, says MSA analyst

C-store retailers have a pretty good idea of which categories are performing well. But do they have enough data to act on this idea?

Don Burke, senior vice president of Management Science Associates Inc. (MSA), Pittsburgh, told retailers they have a chance to “put a stake in the ground” by focusing on categories where they have a competitive advantage, and by better understanding their customers’ needs. To this end, Burke shared exclusive research from MSA that highlights these opportunities.

The firm crunched two years’ worth of shipment data from distributor McLane Co. and POS and transactional data from QuickChek Corp., Tedeschi Food Stores and Martin & Bayley’s Huck’s chain. In the process, it underlined some known assumptions— foodservice truly does elevate a store’s earning potential, for example—while uncovering hidden sales gems.

MSA began by segmenting the nearly 500 sites represented by the three chains and McLane’s extensive customer network by their customer demographics:

  • Blue-collar tobacco stops, with a sub-rural, middle-income customer base.
  • Affluent suburbia, patronized by higher-income, mostly white and Asian customers.
  • Heavy-basket Hispanic, where customers shop the store like a small grocery.
  • Cool urban diversity, with low-income, mostly African-American customers.
  • Main Street USA, with older, mostly white, rural customers.

According to MSA’s analysis, four of these five segments that saw sales declines in 2012 posted growth in 2013. Only one segment, blue-collar tobacco, saw a second year of declines. Its biggest growth drivers were fountain beverages, e-cigarettes, foodservice, smokeless tobacco and discount cigarettes.

The biggest sales increase in 2013 took place at heavy-basket Hispanic stores, where e-cigarettes, frozen food, discount cigarettes, packaged tea and candy drove growth.

MSA also cited growth category opportunities, first highlighting the biggest by dollar sales: cigarettes, packaged beverages, foodservice, hot dispensed beverages and other tobacco products. Among the fastest-growing categories, e-cigarettes took the lead, followed by general merchandise (driven by strong propane exchange sales), wine, edible grocery (bananas, apples and bagels the top-selling items) and other tobacco products.

E-cigarettes’ growth came off of a small base; less than 1% of transactions included e-cigarettes in 2013, compared to 30% for cigarettes. But they also pack a big punch when it comes to basket ring, averaging $18.13. At the same time, e-cigarettes are having negligible to no effect on sales of cigarettes or OTP—at least for now, according to MSA.

Data shows that e-cigarette sales peak between 5 and 7 p.m. “Staff the store correctly and have the products [customers] want,” said Burke.

Meanwhile, one category that has not gotten much attention or space from the c-store channel but kept re-emerging as a sales winner: frozen foods. MSA figures revealed that baskets including frozen food were the most likely to include five or more items. The most popular frozen purchases? Frozen pepperoni pizza and frozen sausage pizza. --Samantha Oller

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