NEW ORLEANS -- Fortified with updated numbers on the industry's financial performance, more than 400 attendees at the 2007 NACS State of the Industry Summit in partnership with CSP received a clear picture of the channel's progressand a directive for growth.
In the opening general session, Sam Turner, NACS chairman and president of Calfee Co. of Dalton Inc., proclaimed the huge role the convenience channel continues to play in the U.S. retail space, noting that one out of every $26 that goes to goods and services comes from this industry. We wait on [image-nocss] America every 1.7 days, which proves the fact that we are where America shops, he said.
To clarify the industry's dimensions, NACS presented results from its 2007 SOI Survey, which is based on data from more than 22,000 stores, weighted toward large chains. In addition, this and upcoming summits have the benefit of benchmarking data reflecting the performance of smaller chains, thanks to a new NACS acquisition.
As the largest and core piece of NACS' plans to expand its data reach globally, Hank Armour, NACS president and CEO, announced the association's acquisition of benchmarking firm CSX LLC. He said the addition of the proprietary CSX database, which weighs more heavily toward smaller chains, will strengthen NACS' industry firm-level data by 50% and store-level data by 25%. The four founding members of CSX will remain on the firm's board, and its operating management team will remain.
From there, Greg Parker, NACS vice chairman of research and technology, and president of The Parker Cos., launched into the overall industry numbers. Although growth has slowed from the previous two years, convenience in-store sales grew by 8.3% in 2006, according to the U.S. Department of Commerce, seconded only by warehouse clubs and superstores. As an industry, we're quite strong and continue to grow, said Parker.
Industry sales grew 15% or $74.1 billiona record yearly increaseto reach $569.4 billion, according to NACS SOI survey data. This was thanks to strong motor-fuel sales, or $405.8 billion. Parker also pointed out that, according to SOI survey data, 2006 in-store sales were more than double those in 1997, reaching $163.6 billion, while motor-fuel sales reached $405.8 billion. The industry sold 83.4% of all motor fuels sold, he noted.
Examining pretax profits, the industry generated $4.8 billion in 2006, or 0.8% as a percent of sales. Put another way, selling $100 worth of goods and services delivers only 80 cents to the bottom line.
With total direct operating costs up 8.4% between 2005 and 2006, it's no wonder we had a diminishment in profitability, said Parker. This nearly 24% decrease from the year prior was mainly attributed to slumping fuels margin and the expanding credit-card fees.
I'm mad as hell, Parker said while reviewing credit-card costs to the industry, which have doubled in the past four years, and for the first time trumped industry pretax profit to reach $6.6 billion in 2006. The only way to get those numbers reduced is if we have active involvement from you guys here, he told retailer attendees, and encouraged greater and continued support in the industry's fight against transaction fees.
For a more in-depth look at the state of affairs inside the c-store, Fran Duskiewicz, 2007 NACS SOI Summit chair and senior executive vice president with Nice N Easy Grocery Shoppes, presented the top 10 in-store categories, which include:
Cigarettes (34.4% of in-store sales) Packaged beverages (13.8%) Beer (12.2%) Foodservice (12.1%) Other tobacco (3.8%) Candy (3.7%) Salty snacks (3.2%) General merchandise (2.0%) Fluid milk products (1.9%) Packaged sweet snacks (1.5%)The lineup has changed little from 2006, with cigarettes continuing to generate more than one-third of in-store sales. Although cigarettes' gross-margin percentage dropped to 18%, the category grew its gross-margin dollars by $1 billion between 2005 and 2006; and best of all, this growth came with no additional labor, said Duskiewicz.
Although foodservice nearly met cigarettes in generating gross-margin dollars, it was packaged beverages that drew the most accolades among the top 10 categories for its performance and opportunity. The category, which Duskiewicz referred to as the winner of the year, saw its gross-margin dollar performance rise more than 21% in 2006. Its in in-store sales growth was driven largely by alternative beveragesincluding energy drinks, fortified water and specialty juiceswhich rose more than 5 percentage points in share of category sales.
[Pictured: Sam Turner (center), Fran Duskiewicz (top left), Greg Parker (top right), Hank Armour (bottom left); for additional SOI coverage, see "It's Not Just About Location" in this issue of CSP Daily News].
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