John Zikias (pictured), vice president of marketing at Louisville, Ky.-based Thorntons Inc. revealed the convenience industry's 2010 in-store category and [image-nocss] subcategory performance earlier this weekat the NACS State of the Industry Summit in Chicago.In terms of in-store sales contribution, health and beauty care (HBC) got a big lift in 2010 thanks to re-assigning energy shots to the category, which were previously categorized under alternative beverages. Salty snacks and packaged sweet snacks, however, were the underperformers of 2010, with per store/per month margins of $2,109 and $888, respectively.
Cigarettes, meanwhile, after three years of being the second-most profitable category, returned to the top spot among the categories, with the most growth coming from sub-generic and private-label brands. Other tobacco products (OTP) continued its robust performance, largely due to new products, promotions and retail price increase. Among the OTP subcategories, there was very little change within the mix, as smokeless continues to dominate with nearly 58% of the category's sales, according to Nielsen syndicated data.
Then there is the sweet success of candy--a category that came alive at the beginning of 2010 and kept going. The data showed a great opportunity for c-stores to capitalize on novelties and seasonal products, which showed a very strong 9% sales growth across the channel in 2010, according to Nielsen syndicated data.
Salty snacks showed good performance in 2010 in terms of gross profit dollars, but started to slow during the back half of the year, and not much change occurred in the subcategories. The biggest mover, however, was potato chips, while tortilla/corn chips took a bit of a dive.
Going back to foodservice, the falling star is commissary/packaged sandwiches. In fact, Zikias suggested that it's hard to find something positive to say about the subcategory over the past three years, noting that it's really struggling.
Also struggling is coffee, and 2011 is expected to be challenging. Outside of the obvious competition from other channels, like McDonald's and its McCafe program, the cost of coffee is at a 12-year high: $1.25 per pound two years ago versus over $2 per pound today.
In looking at overall 2010 category sales, the top quartile performers are dominators of cigarettes, packaged beverages, OTP, salty snacks and candy, but they really pull away from the pack when it comes down to foodservice--a category these retailers are clearly passionate about.
So what should retailers do now that they're armed with this data? First, compare these top10 category trends to their stores. Second, don't settle for being average. As Zikias, noted, "How many of us wake up every morning and say, 'I think I'm just going to be average today'"?
As the top quartile continues to separate itself from the rest of the pack, Zikias concluded that all of the top performers had one thing in common, and it wasn't necessarily a specific product or category but a business philosophy: "They are all famous for something."
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.