CHICAGO -- Convenience stores need to clean out a lot of their products—and not just in dust-gathering categories but even in the stalwarts. That was one of the bracing messages from Thom Blischok in his presentation during Thursday's CSPNetwork CyberConference "How's Business: Finding New Growth." [Click here to view an OnDemand rebroadcast of the CyberConference (free to retailers/wholesalers; $49 others).]
The president of consulting and innovation for Information Resources Inc. (IRI), Chicago, told [image-nocss] the audience of the Mars Snackfood-sponsored event that five categories of the c-store industry need a fresh look. Sports drinks, salty snacks, chocolate candy, ready-to-drink tea and coffee and energy drinks each boast a lot of dead weight, Blischok said, citing info gathered by IRI's AllScan feature., which tracks point-of-sale (POS)-scanned transactions at more than 11,000 c-stores across the country.
While those categories make up much of the core of c-stores, near half the items in these five areas contributed less than 10% of category dollar sales on average, across 15 leading c-store retailers in the week of Feb. 24, 2008. The figure was more than half for energy drinks, RTD (ready-to-drink) tea/coffee and salty snacks, and 49.2% for chocolate candy.
"Do you really need them?" Blischok asked of the lagging portion of those categories.This specific question tied to Blischok's broader theme—based on all the current data across retail channels, c-stores must adopt a transformational attitude that shifts their stores from "convenience" to "convenient," and which meets consumers' true wants in a quick, express delivery.
In his exhaustive, information-rich presentation, slide after slide showed an industry under duress. For example, IRI Consumer Network Panel numbers show that for trips in which five or fewer items are bought, supercenters and dollar stores are capturing share from c-stores in snacks, personal care and healthcare goods over the past 13 months. Also, of the percent of all shopping trips, 65% are for five items or less. Blischok said c-stores are getting 6% of that.
"With gas prices being so high, consumers are selecting where they shop," he said.Blischok showed that as gas prices rose from $2.25 to $2.95, dollar sales of select desserts, snacks and beverages fell from 15% of total store sales to 3.5%. In the same period, those numbers rose from 0.7% to 4% in food, drug and mass merchandising channels.
The report however, was hardly just doom and gloom. Blischok suggested five ways retailers can win in a recession:
Define consumer segments, and base those segments on trip purpose Make product assortments useful. Embrace new product innovation—"green" products, portion control and packaging innovation are key. Improve business planning, scorecarding and category planning. The first four suggestions are not events, said Blischok, they are a continuum.The futurist in Blischok shared these nuggets: by 2010, consumers would each have eight different shopping locations; there will be 301,000 convenience-shopping options in the United States by 2010; the express format, such as Tesco's Fresh and Easy, will become a "disruptive force"; in the next 10 years there will be $125 billion in business available for c-stores from baby boomers, Hispanics, young families and low-income families.
"The new innovation benchmark," said Blischok, "is, 'best of market trumps first to market'."
Speaking on the opportunities for premium chocolate sales, Mars Snackfood director of strategic insights Christian Thompson said that the demographics of premium chocolate buyers and c-store customers are parallel—they both skew toward households with older heads of household and two household members.
Because premium-chocolate buyers increased their spending in c-stores 46% in 2007—but still amassed a lower overall basket than other channels—Thompson suggested secondary placements and cross-promotion of premium chocolates with higher-affinity categories. He said IRI data showed that premium chocolate buyers in quick trip scenarios (five items or less) tend to buy dairy or snack foods, suggesting that those areas would be good for secondary placements.
David Elkins, category development manager for McLane Co., showed that compared to 2006, overall wholesale movement of carton cigarettes was up 5.16% in the convenience channel in 2007 based on McLane's c-store database, versus an industry decline of 4.2%; smokeless and cigars account for 94% of the OTP category; multipack water is increasing its role in the bottled water subcategory, with c-stores beginning to try bulk water; sports drinks should rebound with a warmer summer; perishable categories lead all categories in growth percentage as retailers turn to foodservice as a profit center.
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