By Steve Holtz, Winsight
CHICAGO – The largest product categories in convenience stores didn’t change much in 2016. But even as the industry achieved a third year in a row of record in-store sales, changes within each category illustrated plenty of reasons c-store retailers need to stay on their toes.
Take tobacco. While it maintains the largest share of in-store sales at 36%, tobacco products accounted for only 18.2% of gross profit dollars, while other tobacco products (OTP) achieved double-digit growth in both sales and gross profit dollars. The shift by consumers is measurable.
Meanwhile foodservice, a category that once traded most heavily on dispensed beverages, is seeing a demonstrable move toward prepared foods. “Foodservice is really driving profits for us, with prepared foods leading the way in both sales and gross-profit dollars,” said Andy Jones, president and CEO of Sprint Food Stores, who unveiled the 2016 c-store category data during the NACS State of the Industry Summit in Rosemont, Ill., this week.
Other winning categories included packaged beverages, beer, salty snacks and general merchandise.
The top 10 merchandise categories were:
Meanwhile convenience stores, which sell more than 80% of the fuel purchased in the country, reported a 9.2% decline in fuel sales.
This was driven by another year of low gas prices, which averaged $2.17 for the year compared with $2.44 in 2015, according to NACS data. Fuel sales volume was up 2.6%, riding the wave of continued economic recovery. Meanwhile, fuel margins in 2016 dropped to 23.1 cents compared with 23.4 cents in 2015, but due to increased sales volume overall fuel gross profit increased 1.6% per store per month.
While excited about the record numbers reported this week, presenter Billy Milam, president of RaceTrac Petroleum Inc., Atlanta, encouraged retailers to remain cautious and vigilant in protecting their turf.
“Yes, we did have a third consecutive year of record profits,” he said, “but can we stay on that incline? … Is this giving us a false sense of security, or is this the new normal? Have we figured this thing [convenience retailing] out?”