Midyear Category Data Report 2012
Top categories hold steady as retailers seek to innovate.
Mild winter, hot summer: Typically a formula for sizzling business at the fountain and coolers, but for John West, sometimes it’s too hot.
“When it’s too hot, people don’t come out,” he says.
But West, vice president of marketing for Odessa, Texas-based Alon Brands Retail, says the first half of 2012 proved productive, not just for the staples, but also for untapped areas such as general merchandise. For example, the chain has enjoyed several weeks of successfully testing unique, value-priced toys. (See p. 74.)
“The landscape changes,” West says. “Now dollar stores seem to be trying to get our business, so we’re trying to get after theirs.”
Business at the company’s 300 locations is up 4% overall through midyear, and general merchandise is up 23%. It’s the kind of innovation that’s necessary when, according to an exclusive midyear report compiled by CSP, many core categories are essentially flat.
That’s not to say there’s no good news. “Retailers are going back to the basics,” says Matt McCourt, director of convenience and spirits for Chicago-based SymphonyIRI. “Retailers and suppliers are creating synergies so there’s promotional dollars. That’s what’s driving growth in dollar sales.”
Standing out to date are beer at 9% growth since the beginning of the year (through June 10, according to SymphonyIRI), smokeless tobacco at 8% and energy drinks at a stellar 20%. The percentages get more significant when considering all three categories rake in a good portion of c-store revenue.
A category such as beer, for example, is up 9% on sales of $7.3 billion, translating into a $600 million increase. A loss of 22% in cough syrup, a category that takes in only $2.7 million in this time period, means losing out on $600,000. Not a trifle, but paling in comparison to the gains from beer.
“Tobacco is a big category … where a couple of percentage points makes a big difference,” says Tom Robinson, president of Robinson Oil Co., Santa Clara, Calif. “So far, it’s not been stellar.”
Some of the surprise performers include the wine category, not only showing double-digit increases, but also accounting for a formidable percentage of overall sales. Other tobacco products (OTP) is also stepping up, as are energy shots.
What’s most important is the increasing flow of information, according to retailers such as West, who has uncovered new revenue streams by increasing up audit frequency in several categories. For this second annual, exclusive Midyear Category Data Report, we have once again worked with data specialists SymphonyIRI Group, which pulls information from about 16,000 sample c-stores in the United States. The company points out that for its data, branded statistics refer to individual SKUs vs. a brand grouping.
We’ve also worked with the industry’s largest wholesaler, Temple, Texas-based McLane Co., whose numbers are based on units purchased, which reflects sell units or cartons. The company combines c-store and travel-business numbers, totaling 20,965 locations, with the “carton pull” counts going from Jan. 1 to June 30, 2012. The numbers are net of returns.
The report from our third data partner, Chicago-based Technomic Inc., comes from its study “Outlook and Opportunities in C-Store Foodservice,” issued in February 2012.
As a refresher of CSP’s Category Management Handbook, this update offers retailers sales highlights for the industry’s major categories, at a time when a few tweaks in store sets may tip the scales for 2012.
Promotions Tied to Improved Dollar Sales
Parallel to the idea that retailers are “going back to their roots” and milking core categories to increase both dollar and unit sales is the tie to a bump up in promotional dollars.
A review of SymphonyIRI numbers going back 52 weeks from July 15, 2012, reveals an undeniable link between increased supplier promotional support and improvement in dollar sales, according to McCourt of SymphonyIRI.
While not all categories saw this kind of activity, categories such as sports drinks, energy drinks, salty snacks and chocolate saw significant increases in promotional-dollar support, resulting in significant increases in dollar sales.
“Suppliers and retailers are getting a bang for their buck,” McCourt says. “There’s obviously some synergy going on where people have figured out the promotional opportunity that will drive business.”
On the other end of the spectrum, promotional dollars for cigarettes have dropped dramatically by 25%, leaving retailers coping with a 0.1% decrease in dollar sales over the 52-week period.
McCourt also believes promotions keep many tried-and-true subcategories and brands among the industry’s top sellers.
Arguably, the cold vault of the convenience-store industry was built on the back of three beverage categories: milk, carbonated soft drinks (CSDs) and beer. Today, that core is in a remarkable state of flux.
During the first half of 2012, milk volume sales in convenience stores shrank 5%; CSDs, following on a couple of slow years, have seen a welcome 3% increase; and beer, well, thank goodness for beer. It’s growing at 5% in volume even as price increases boost sales dollars over the 9% mark, according to year-to-date Convenience AllScan data from SymphonyIRI Group through June 10, 2012.
Based on those basics, it’d be easy to assume the beverage category was pretty flat for the first half of the year. Look closer, and a wonderland of consumer curiosity comes into focus: Six of the top 10 beverage subcategories—energy drinks, bottled water, sports drinks, ready-to-drink teas and coffees, juices and juice drinks, and high-ticket wine—actually saw double-digit growth.
“This year, energy and sports drinks are driving growth [in my stores], which I think is what the industry is seeing as a whole,” says Mike Adams, senior category manager for BP/ ampm stores, La Palma, Calif. “It’s mostly on the noncarbonated side vs. CSD that we’re seeing growth. Not that CSD is negative; but if you look at the overall growth rate, it’s a lot higher on the noncarb side.”
Certainly, weather has a lot to do with it: A mild winter and hot spring/summer is just the ticket to draw customers into the store from the gas pump or just for a refreshing treat, retailers say.
Also helping are more consistent messages put out by retailers to let customers know there’s value—“not the hottest price on the street, but a good price”—to be had inside the stores.