Inflation: What Happened This Year?

2023 NACS SOI data will reveal how inflation has impacted the convenience retail industry.

December 12, 2023

Looking at topline industry performance in 2022, inflation was a key issue for the convenience retail industry. NACS created a Convenience Consumer Price Index model to estimate the impact of inflation in the channel by aggregating the categories that account for over 85% of in-store merchandise sales. The goal: help retailers benchmark their inside sales to determine actual inflation adjusted performance.

NACS State of the Industry data for 2022 found that inflation reached 9.1% for merchandise. “If you grew your merchandise sales at a rate less than 9%, then you were probably losing against inflation,” said Chris Rapanick, managing director of NACS research, during a NACS Show education session.

Same thought process for 2023: For the first half of the year versus 2022, inflation’s impact on merchandise sales lessened to 5.9%, per the convenience CPI model. “If your merchandise sales are less than 5.9% up through the first half of the year, then you're probably losing to inflation. Likely you're showing negative units or maybe even a poor mix,” he said.

For foodservice, inflation moved at a much faster clip in 2022 than merchandise. The average foodservice CPI was about 13%. “There is some improvement for foodservice, about 10.5% for the first half of 2023, so better than it was for 2022,” said Rapanick, adding, “If your foodservice sales have grown less than 10.5%, then you're probably losing to inflation.”

“We’ll see to what extent merchandise and foodservice could be losing to inflation in the  NACS State of the Industry data for 2023, which retailers and suppliers will see first at the 2024 NACS State of the Industry Summit in Chicago,” said Rapanick.

Earlier this year Rapanick spoke about the impact inflation has had on the industry during a Convenience Matters podcast. “It’s been about 70 years since we've seen inflation at this level,” he said, noting that inflation “was a concern for everyone” attending the 2023 NACS State of the Industry Summit.

“Inflation is getting a little bit better but remains a concern and probably will remain a concern throughout 2023. … Now I think it comes down to where does the elasticity [become] inelastic, and will people decide that they don't want to shop in any retail establishment, but specifically convenience stores as pricing maybe continues to increase?” Rapanick continued.

What Does the Fed Say?

The Wall Street Journal noted that “most of Wall Street thinks inflation has been conquered” and asks whether inflation “has been licked.”

Inflation peaked at 9.1% in June 2022. Inflation was unchanged in October 2023 at 3.2%, after increasing 0.4% in September, according to the U.S. Bureau of Labor Statistics.

Jerome Powell, chairman of the Federal Reserve, told the Senate Banking Committee in March that the process to get inflation back down to 2% “has a long way to go and is likely to be bumpy.” Earlier this month, Powell said that consumer prices, excluding food and energy costs, rose at just a 2.5% annual rate in the past six months, which isn’t far from the 2% target inflation rate.

“Inflation will certainly continue to impact sales in the convenience channel throughout 2024. The question remains, ‘When will consumers’ discretionary income become too scarce to spend in their local convenience store?’” said Rapanick. “Join us in Chicago, April 3-5 at the NACS SOI Summit, and get the latest update on inflation and other macroeconomic trends that will impact the channel in 2024 and beyond.”

Editor’s note: Early bird registration ends this week for next year’s SOI Summit—take advantage today by registering before COB on December 15.)