2016 C-store Sales Positive in Eight of the 10 Top In-Store Categories

CHICAGO — Convenience stores posted positive sales in eight of the top 10 in-store categories in 2016, according to NACS, the Association for Convenience & Fuel Retailing, State of the Industry data.

Last year, c-stores experienced record in-store sales of $233 billion — the third straight year of $10 billion-plus in pretax profits.

The top 10 in-store categories ranked by sales dollars represent 80 percent of all in-store sales. In 2016, eight of the top 10 in-store categories saw positive sales, including cigarettes, and nine had positive gross profit dollar growth. Contributing factors included low fuel prices, job growth, and more discretionary income to spend.

The breakdown of in-store sales in 2016 was:

• Tobacco, including cigarettes and other tobacco products (OTP): 36 percent
• Foodservice, including prepared and commissary food, and hot, cold and dispensed beverages: 21.7 percent
• Packaged beverages, including carbonated soft drinks, energy drinks, sports drinks, water, juices and teas: 15 percent
• Center of store, including salty, candy, packaged sweet snacks and alternative snacks: 9.8 percent
• Beer: 6.7 percent and 12.2 percent of stores selling beer
• Other: 10.8 percent

Although tobacco products, including cigarettes, were 36 percent of in-store sales dollars, they accounted for only 18.2 percent of gross profit dollars. OTP achieved double-digit growth in both sales and gross profit dollars. According to NACS, product innovation and consumers moving from combustible tobacco products to other forms of tobacco are driving the OTP category.

Foodservice continues to be a key area for growth in the convenience store channel. In 2016, foodservice contributed 21.7 percent of in-store sales and accounted for 35.2 percent of gross profit dollars, with prepared food and cold dispensed beverages driving the category’s growth. Last year c-stores experienced growth in every foodservice subcategory except for commissary and frozen dispensed beverages.

Packaged beverages (non-alcohol) accounted for 18.5 percent of gross profit dollars in 2016. Within the category, increases occurred with enhanced water (12.3 percent), sports drinks (4.5 percent) and bottled water (3.9 percent) led sales growth from the cooler as consumers move toward healthier and/or functional beverage options.

Snacking categories, encompassing salty, candy and alternative snacks, all experienced strong growth as consumers — especially millennials — move toward snacking and away from traditional meals. For the second consecutive year, alternative snacks reached the top 10 in-store merchandise categories, signaling a desire by consumers for immediate/healthier snacking options.

AT THE PUMPS

Selling 80 percent of the fuel purchased in the country, c-stores reported a 9.2-percent decline in fuel sales in 2016. This was driven by another year of low gas prices, which averaged $2.17 compared with $2.44 in 2015.

Fuel sales volume was up 2.6 percent, riding the wave of continued economy recovery. Fuel margins dropped in 2016 to 23.1 cents vs. 23.4 cents in 2015. However, because of overall fuel gross profit increased 1.6 percent per store per month.

OPERATIONS

Despite record in-store sales, direct store operating expenses (DSOE), including wages, payroll taxes, health-care insurance, card fees, utilities, repairs/maintenance and supplies, as well as several other categories including franchise fees and property taxes, outpaced inside gross profit dollars for the second consecutive year. This trend is creating challenges for convenience retailers as they look to grow their businesses, NACS stated.

The convenience and fuel retailing industry employed 2.5 million people in 2016, wages were up 8.1 percent and the average wage for a store associate is $9.99 per hour. Turnover for store associates was 133 percent, up from 95 percent in 2015, according to the recently released NACS Compensation Report of 2016 Data. The rise is primarily due to tighter labor markets resulting from being in the seventh year of economic recovery.

In the c-store industry, NACS found a dichotomy between the top-quartile performers and bottom-quartile performers, with nearly a 10-fold difference in store operating profit between the two quartiles. When it comes to foodservice, the top quartile is excelling at hot dispensed beverages, with 6.6 times the coffee sales vs. to the bottom quartile and more than three times in prepared food sales.

The industry’s 2016 metrics are based on the NACS State of the Industry survey powered by its wholly owned subsidiary CSX LLC, the industry’s largest online database of financial and operating data.