The Top 10 merchandise categories in convenience stores changed very little in the past year, according to preliminary NACS State of the Industry data unveiled during th SOI Summit in April.
Cigarettes, packaged beverages and beer led the way in terms of sales dollars, followed by other tobacco products, salty snacks, candy, milk, general merchandise, packaged sweet snacks and alternative snacks.
Not all product categories are created equal, however, as presenter Andy Jones, president and CEO of Sprint Food Stores, Augusta, Ga., highlighted a handful of “shining stars” that were driving traffic and profits.
Here's a look at each "shining" category ...
The packaged-beverage category brought in the most per-store gross-profit dollars among the biggest in-store categories, or $10,272 per month, according to NACS data. C-store unit sales grew nearly every month of 2016, per Nielsen figures, with warm summer weather providing some lift. Meanwhile, a strong beverage assortment and variety in the industry’s cold vaults gave c-stores an advantage over their quick-service-restaurant (QSR) competition.
This sales growth continues even as the category shifts from its traditional core of carbonated soft drinks (CSDs). “In 2016, for the first time ever, bottled water overtook carbonated soft drinks in total gallons consumed per capita,” Jones said. Within the past six years, alternative energy beverages have swelled from providing only half of CSDs’ dollar sales to 84%.
Other tobacco products (OTP)
“OTP, OTP, OTP, my, have you been good to me,” said Jones, pointing to the category’s double-digit gains in sales and gross-profit dollars in 2016, according to NACS. C-store OTP (other tobacco products) unit sales rose every month of 2016, driven by smokeless tobacco, cigars and alternatives such as e-cigarettes, per Nielsen figures.
For both packaged beverages and OTP, however, there are regulatory headwinds on the local and state level—whether it’s a sugary-beverage tax in Philadelphia, or a tobacco flavor ban such as those adopted by 80 cities and states.
C-store unit sales of beer rose 3.2% in 2016, according to Nielsen, driven by imports and craft. Import unit sales rose nearly 16% thanks in large part to the popularity of Mexican labels, while craft—or “micro”—grew unit sales more than 14%.
“Watch the overall size of imports,” Jones said of this second-largest beer segment, which now supplies 15.3% of category sales. “With the size it has grown to, double-digit growth is very impactful to growth overall.”
On a per-store, per-month basis, sales grew 4.8% in 2016, according to NACS, as gross-profit dollars rose 3.8%.
Unit sales of salty snacks grew 0.9% in 2016, according to Nielsen, with chips, puffed cheese and ready-to-eat popcorn providing momentum. Alternative snacks, which include meat snacks and nutrition bars, saw gains in sales and gross-profit dollars, according to NACS data.
Jones credited the buying power of millennials—“the snacking generation”—for this category’s success.
While the strongest sales growth as a percentage came from smaller segments such as granola bars, “remember that meat snacks and health bars make up more than 85% of the category when making space allocation decisions,” Jones said.
Even in candy, where c-store unit sales fell more than 2% in 2016, there were a few bright spots. One is bagged candy, which grew unit sales 3.1%, according to Nielsen.
“Consumers love the flexibility of snacking and portion control from stand-up bags and resealable packaging,” Jones said.
Another is novelty and seasonal candy, where dollar sales rose 8%. “Fifth season” occasions—Mother’s Day and the Super Bowl, to name a few—are helping grow the seasonal segment.
Meanwhile, in another positive sign for candy, gross-profit dollars grew faster than sales in 2016: up 4.3% and 3.1%, respectively, according to NACS data.