Make new friends but keep the old, one is silver and the other’s gold.” This ditty from my Girl Scout days is stuck in my head as I ponder the landscape of the c-store channel.
The market retailers are dealing with has never been broader: CSP’s recent survey with Technomic Inc. found that younger shoppers represent “a potential gold mine” for the channel, with 50% of surveyed millennials qualifying as “super-heavy users” that shop c-stores at least four times a week. Convenience has established itself as a power player in the world of foodservice, with companies such as 7-Eleven and Nice N Easy challenging fast casuals such as Chipotle by bringing on professional chefs. Kwik Trip and Sheetz took reinvention a step further, signing on with the Partnership for a Healthy America.
It’s no longer your father’s (or grandfather’s) c-store. And perhaps nowhere is this shift more apparent than in the core categories of tobacco and beer.
Consider the annual tobacco retailer panel at CRU. Last year, it featured two females (Anne Flint of Cumberland Farms and Martha Flint of Landmark Industries) and one male (Frank White of Tri-State Petroleum); in 2015, it was women only (with Ruth Ann Lilly of Sunoco and Andrea Myers of Kocolene speaking and yours truly moderating). This wasn’t intentional. Rather, it’s representative of the fact that tobacco is no longer just a man’s game.
It’s not only the demographics of who’s selling, managing or consuming tobacco and beer that’s changing—but also what products are being sold, managed or consumed.
RBC Capital Markets analyst Nik Modi has said consumers may be smoking fewer cigarettes but are actually consuming more nicotine across the board, thanks to continued growth in OTP and alternatives such as e-cigs and vape. The same is true in beer: Premium sales may be stagnant, but craft, import and cider sales are soaring (with wine and spirit sales also on the rise).
Vapor and craft beer are also attracting new consumers to the channel. Millennials, women, young professionals and city dwellers are a far cry from the stereotypical c-store shopper, and all are strong consumers of vape and craft.
These markets clearly represent the future. Michelle Barry, president and CEO of Centric Brand Anthropology, estimates stereotypical c-store shoppers—the “Bubbas”—represent only 25% of the market (and tend not to be the highest spenders). And a national study from the Private Label Manufacturers Association (PLMA) found millennials already account for $1.3 trillion in direct annual spending and are poised to outspend the baby-boomer generation, becoming the most economically powerful generation ever.
Growing Pains
But is there such a thing as too much too fast?
Sure, these shiny new segments are growing, but premium cigarettes and beer brands still represent the vast majority of sales, just as the vast majority of current c-store customers are not millennials or women.
And something tells me that the average c-store construction worker picking up a sixer of Bud and a pack of cigs will be less than thrilled if he walks into his corner store and is instead bombarded with organic e-liquids, $100 vaporizers and (as a recent Budweiser ad mocked) “peach pumpkin ales.”
I’ve heard of retailers who have gone “all-in” on craft, dedicating more than 75% of their cooler space to craft and high-end imports.
Guess what? Sales didn’t do so well—and I bet any operator who dedicated 75% of a backbar to vape would suffer a similar fate.
Make new friends, but keep the old. We need our core consumers today but must attract new consumers to ensure long-term success. As a channel, how can we appeal to emerging demographics without isolating Bubba in the process?
This is why events such as The NATO Show are so important. It provides an opportunity to interact with other retailers and see how they’re striking a balance between new and old, micro and macro; to talk with suppliers about how they can better retailers in this balancing act; and to see what tobacco stores and vape shops are doing, and consider what strategies of theirs might work in your stores.
There are no clear-cut answers in this brave new world. The one certainty is the market will evolve and (we hope) expand. New opportunities will continue to present themselves—just look at what’s going on in Colorado and Washington (or flip to p. 17 for Bob Phillips’ story on pot’s potential).
Though c-store operators aren’t yet in the marijuana business, with Time predicting 18 states will legalize recreational use by 2020, many suspect it’s only a matter of time before the backbar becomes the tobacco, nicotine and THC section. Which means Bubba might be hobnobbing with millennial vapers and mustachioed craft-beer enthusiasts—and Deadheads as well.
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.