NEW YORK -- Tobacco, packaged beverages and snacks, along with increased foodservice expertise, helped petroleum retail and convenience store operators maintain inside sales despite significant price leaps at the pump that observers expected to knife into c-store profits.
A report by benchmarking specialists CSX LLC, released exclusively last Thursday at a CSP CyberConference, showed that despite dramatic increases in pump prices and credit card fees, for CSX's same-firms sample of operating results, inside sales surged 7% to $97,600 per store per month [image-nocss] for the first six months of 2006 compared to $91,200 for the same time period in 2005. Gross profit dollars per store per month spiked 6.1% to $28,000 for this year, up from $26,400 for the first half of 2005. [For an OnDemand rebroadcast of CSX's How's Business: Mid-Year Report, click here. Look for a complete report of the CyberConference in the November issue of CSP magazine.]
The program was sponsored by Radiant Systems and McLane Co., and it featured presentations by David Nelson, a partner and founder of Columbia, Mo.-based CSX; Gary Arnold, CFO of FKG Oil CO., Belleville, Ill.; Roger Grogman, Temple, Texas-based McLane's vice president of marketing; and Douglas Henderson, global product marketing at Radiant Systems, Alpharetta, Ga.
The CSX study, which analyzed data from 75 c-store firms representing 3,410 locations, also showed the number of fuel gallons sold climbed 2.1% to 108,000 per store per month in 2006 from 105,800 in the first half of 2005.
Unfortunatelycredit card fees more than ate up these increases, said Nelson, adding that credit card fees represented $3,600 per store per month in the first half of 2006 compared to $2,700 for 2005, an increase of 30.8%.
And yet, even with higher credit card costs and gasoline running more than 50 cents a gallon higher than the year-ago period, c-stores as a channel appeared to escape the harsh retail repercussions recently cited by Wal-Mart, Costco and BJ's in their quarterly returns.
My take on it is thatcups of coffee, cigarettes, beer, these are small items within [consumers] total budgets, Nelson said, noting that in times of higher gasoline prices and overall financial hardship, people will postpone big-ticket purchases like new cars or home appliances rather than change their day-to-day driving and spending habits.
Bringing further insight to the CSX numbers, Grogman revealed wholesale distribution figures broken down by category for the first half of the year. Comparatively speaking, cigarettes and other tobacco products (OTP) showed 5% and 13% increases in wholesale-level sales, respectively, compared to the same year-ago period, while packaged beverages grew 13.6% and cold, dispensed beverages were up 11% in the same time periods.
We've seen significant consumption with bottled water, sports beverages and juice products, he said. And we've seen increases in multi-pack purchases.
Grogman noted the rise in packaged and fountain beverages seems to have given a lift to the snack and candy categories. The snack category has been accelerating, he said. And as beverages rise, it seems to pull snacks up.
Other noteworthy tidbits Grogman offered up included:
Gum and mints showed significant growth. Food prepared on site and commissary sales were up 21% and other packaged foods were up 33%, representing the highest category increases in Grogman's study, albeit the starting volumes were lower than other categories. Frozen foods decline continued with a $3 reduction from 2005. Cigarettes and OTP accounted for 66% of overall growth in this time period compared to last year.Arnold said that through data provided by CSX and other sources, he's able to assess his company's performance, identifying areas where FKG may be falling below industry averages. But just because we're underperforming [in a category or operational area] doesn't meant we'll jump out to make the investment, he said. We have to ask what the cost is? What is the return on assets? But [having the data] makes sure we're thinking of these things and having a discussion rather than avoiding it.
Arnold said through CSX benchmark data and other sources, he's better able to assess his company's performance, identifying areas where FKG may be falling below industry averages.
But just because we're underperforming [in a category or operational area] doesn't mean we'll jump out to make the investment, he said. We have to ask what the cost is? What is the return on assets? But [having the data] makes sure we're thinking of these things and having a discussion rather than avoiding it.
Henderson talked about the importance of increasing security to prevent credit card fraud, noting that average consumer losses via credit card fraud can range from $500 to $4,500.
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.