Cover Story: State of the Industry 2014

Stats show strides amid struggling customer base, big-box threat, ebbing foodservice momentum

By  Angel Abcede, Senior Editor/Content Development Coordinator

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Identifying Problems

Further discussing outlying factors behind the numbers, Plumby said the industry’s core consumer, the young, blue-collar worker, also affectionately called “Bubba,” is struggling financially. Unemployment figures for 16- to 19-year-old males in 2007 was 17.6%. In 2013, that number was 28.1%. Among 20- to 24-year-olds, the disparity is 8.9% vs. 18.9%.

From 2007 to 2013, the unemployment among those groups has gone up 80%. On top of that, income bifurcation goes by the 80-20 rule, Plumby said: “Bubba is in the bottom 80% … He is our core customer, and yet his share of income is down 15%, while the other 20% is up 80%.”

He called the issue something the industry must focus on. “Are we looking at the right consumer?” Plumby asked. “They’re fighting for employment and have less disposable income. [It gives us] more perspective on how we look at our customer base.”

With the core c-store customer in trouble, the competition for new demographics heightens. The Woonsocket, R.I.- based drug store chain CVS is “our biggest competition—because they have the female market,” Plumby said.

Competition from cross-channel retailers is only going to heat up, Plumby said. C-store throughput was up 1.4%, but drug stores are up 1.6% and dollar stores are up 6.1%. He also made note of one of his slides showing a dollar-store chain adding gasoline.

Big-box merchants are also becoming more competitive—by getting smaller. Plumby said Minneapolis-based Target is in its third-generation store and Bentonville, Ark.-based Wal-Mart Stores is in its fifth. Both are taking smaller-format approaches, with Wal-Mart even testing a c-store in its headquarters town.

Finally, Plumby pointed to the threat of online retailers. “Amazon—it’s the gorilla in the room from a sales standpoint,” he said. “Not only are they contemplating using drones to deliver goods, the problem is, they’re going to send in those goods before you want to buy them.”

The retailer is using online tracking to “look at what you’re surfing and before you know it, it will show up at the front door,” he said.

Ultimately, retailers have to consider two key issues, Plumby said, both of which are tied to foodservice. First is market share. The industry has to gain more control of the foodservice category, he said: “We have to drive market share and be premier foodservice operators to be successful.”

A second aspect is working with c-store formats that can go the distance. In that context, he said acquisitions, consolidation and rationalization of the industry’s assets is important. “We have to make sure what we’re putting in front of the consumer will elevate our industry to compete effectively in the food arena,” he said.

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