Independent convenience retailers and small chains are seeing the effects of lingering inflation in lower foot traffic, with higher prices accounting for most of the revenue increases, according to a report from Skupos.
While weekly in-store revenue rose 2.6% in first-quarter 2023 from the year-ago quarter, in-store transactions and foot traffic fell by the same percentage. Average revenue per store was $27,500 as of March 19, said Skupos, a San Francisco-based retail tech company offering a distribution platform connecting brands with independent convenience-store operators. The company announced in March it received $23 million in venture debt to expand.
The information in Skupos report is from its network of 15,000 independent and small chain retailers, which represents over 10% of the c-store market in the United States, said Christine Shriver, Skupos’ chief revenue officer.
“With less discretionary income, consumers are perhaps cutting back on their daily morning cup of coffee or snacks during a stop to fill up their gas tank,” Shriver told CSP Daily News.
Gas prices rose during the first quarter, with the average per-gallon price of regular gasoline at $3.44 at the end of March, up 7% from $3.21 in January, according to the Skupos report. “Fuel prices rose in January, softened a bit in February, then resumed climbing in March,” the report said, while per-gallon diesel prices declined 8% to $3.99 at the end of March from $4.30 in January. Diesel prices at the end of the quarter were 7.1% lower than a year ago, Skupos said.
Prime Sports Drink
About 6,537 stores in Skupos’ network sell Prime Hydration, a sports drink with coconut milk launched in 2022. That’s up from 3,079 stores carrying the new beverage in fourth-quarter 2022. With average Prime sales per store of 316 units, representing a 65% increase in unit volume, dollar sales per store climbed 69% to $837 from $495 in fourth-quarter 2022, according to the report.
Boxers Logan Paul and KSI collaborated on the product launch of Prime. Sales slowly grew last year but have taken off in 2023, according to Skupos data. The brand appeared in Super Bowl commercials this year and is featured in YouTube videos with Paul. Men’s Health magazine also featured the brand in its Feb. 13 issue. The sports drink is the official beverage of the L.A. Dodgers, according to its website. The beverages were developed “to fill the void where great taste meets function,” Prime's website says. The beverages feature bold flavors in a sports drink with electrolytes and an energy drink containing caffeine.
“Having a ‘celebrity’ endorsement seems to have made an impact here. The energy drink consumer tends to be younger, so internet celebrities, influencers, music artists resonate with them,” Shriver said.
Higher Alcohol Sales
Skupos’ network retailers saw unit sales of wine and liquor increase 1.8% and beer rise 1%, while unit sales of many food and beverage items declined. The growth in alcohol sales stems changes in consumer behavior and the industry’s response, Shriver said.
“The pandemic created shifts in how people consume alcohol, with more people drinking at home than prior to the pandemic,” she said. Higher drink prices at restaurants also have played a role in the shift. “With new RTD (ready-to-drink) cocktails, seltzers and craft offerings, more convenience stores are offering more options for their customers.”
Inflationary pressures have resulted in lower revenue for many restaurants and major food brands, and encouraged Burger King to add more value items, such as a $5 combo meal, to its menus, The Wall Street Journal said. At grocery, Kraft Heinz said its double-digit price increases resulted in lower first-quarter sales volumes.
Smaller Basket Sizes
The trend also was noticeable in Skupos’ network, as sales of salty snacks dipped 0.8%, sweet snacks fell 7.0%, packaged beverage dropped 0.4% and tobacco unit sales declined 8.1% in the first quarter from a year earlier.
The average number of items in shoppers’ baskets fell 0.7%, while the average price of baskets increased 4.8% from first-quarter 2022, Skupos said.
“While unit sales are down, with higher prices, revenue is still up year over year,” Shriver said. “As always, retailers need to remain competitive, staying up to date with technology that creates loyalty with their shoppers, making sure they are offering competitive pricing on top selling products, and carrying new innovative products that their customers are asking for,” such as ready-to-drink cocktails and the latest energy drink, she said.
Skupos provides data to help its convenience-store partners make decisions about products, inventory, marketing and promotions. Jake Bolling, co-founder and chief executive of Skupos, explained ways to use data in a previous CSP Daily News post.
New Product Excitement
Generating excitement in the first quarter were Gatorade Fast Twitch Energy Drinks and Monster Java Caffe Latte. Starry, the new name for Pepsi’s Sierra Mist, found a spot in half of the network’s stores, Skupos said.
In snacks, introductions included a Tangy Chili Fusion flavor of Frito Lay’s Cheetos Flamin’ Hot line, and Doritos’ Sweet, Tangy BBQ flavor, a Nacho Cheese flavor of Mars’ Combos brand, and a Mexican Street Corn flavor of Hormel’s Corn Nuts.
In the candy aisle, Mars launched M&M’s Purple in plain and peanut varieties as a limited-edition product promoting women’s empowerment. Trolli launched half-sweet, half-sour Duo Crawlers.
Promotional efforts will continue to be important, Shriver said. “Within our own promotional programs, we've found that stores that place their promotional signage are 3x more likely to run successful promotions versus those that don't,” she said.
“What will be of interest is how consumers' behavior evolves, as some economists project that the current rise in inflation is more of a correction versus a transitory increase.”
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