ALEXANDRIA, Va. — As the convenience channel faces the ongoing effects of the COVID-19 pandemic, category managers are being tasked more than ever with following the trends and adapting to changes.
As the number of coronavirus cases grows, shoppers are feeling like they need to take precautions, and these take different forms and levels of execution, NACS Director of Research Leroy Kelsey explained during the "Strategies for Category Management Superstars" session as part of the NACS Crack the Code Experience.
Not surprisingly, sales inside the store are being impacted by shoppers' changing behaviors. While year-over-year merchandise sales were up roughly 2.9 percent in the first quarter of 2020 and up 6.9 percent in the second quarter, foodservice category sales were down 9.9 percent in the second quarter instead of the "healthy 5 to 8 percent sales growth we are used to seeing year over year," Kelsey noted. "The second quarter really cratered once people started to shelter in place and restrict their personal travel."
The industry lost about one out of five transactions in the second quarter. "Folks are doing a lot of stocking up — we are seeing larger basket sizes — but a lot less travel then we are used to seeing," he explained.
"When we think about the overall impact, and the meaningfulness of the inside and foodservice, we really depend on those merchandise categories to fill that vacuum that self-service dispensed beverages and self-service foodservice have left," he added.
Those key categories, according to Kelsey, include tobacco, packaged beverages, candy and snacks, which in total make up about 65 percent of inside sales.
"When we look at tobacco, a lot of people say, 'What's the point, tobacco is dying isn't it?' No, that's incorrect," said Kraig Knudsen, tobacco category manager for Circle K's Heartland Division. "We all know tobacco should have died years ago, but it's hanging on."
If the industry has learned anything over the past six months, he said, it's that the tobacco consumer is extremely resilient. "No matter what is going on in their lives, they are going to continue to consume the products that they like and, at the same time, frequent the retail establishments that they have grown accustomed to," he explained.
Total tobacco still contributes, on average, 34 to 44 cents of every non-gas dollar that goes through the convenience channel's registers, Knudsen cited.
Not all is good, however, as the category faces some headwinds: federal regulations, politics, taxation, personal interest groups, and COVID-19 driven industry shortages.
Still, even in the face of these headwinds, Knudsen said c-store operators can overcome the challenges by listening to the consumer and following the trends — including innovation in vapor, modern oral nicotine products, and CBD products.
"Don’t try to be everything. I know this is the temptation," he said. "When we grab everything, we just get customer confusion; we get confusion with our cashiers."
At Pilot Co., the retailer has been using its Pilot Flying J mobile app to connect with guests digitally, which has proven especially effective this year as safety and wellness is top of mind for consumers, noted Kimberly Billings, director of category management.
In the past year, the company has partnered with manufacturers and its loyalty team to leverage new item launches and promotions.
"Our goal is to create a digital-to-counter experience that encourages our guests to try new products, and drives them to come inside the store and build incremental sales," she explained.
The chain makes daily, weekly, monthly and special-occasion offers available through the Pilot Flying J app. For example, it celebrated National Truck Driver Appreciation Week with exclusive offers for professional drivers through the app. Every day in September, there was a new free drink offer from key brands. And going a step further, the retailer promoted the in-app offer by using in-store displays to feature the beverage of the day.
"We found that having a consistent experience and product exposure from the app to the pump to inside the store has made the most of innovation product launches within the [beverages] category," Billings said.
Candy & Snacks
At MAPCO, the key to survival this year has been adapting, according to Kelley Gutierrez, the chain's category manager for candy and snacks.
This has included adapting its digital platform. For example, MAPCO tailored its homepage to include pickup and delivery options. The retailer also communicates its current promotions, and offers a mobile pay option, through its MAPCO app.
While offering the contactless options that consumers have called for this year, MAPCO is staying sensitive to its consumers' wallets as well, Gutierrez said.
"Regardless of your job situation or your economic situation, everyone is a little more sensitive to how they are spending their money," she observed. "Utilizing promotions that encourage savings while shopping are a great way to get people to continue shopping and feel as if there is an added value to their purchase."
Talking specifically about candy and snacks, the category manager said MAPCO makes sure its promotions are communicated clearly in its app.
The impulse business has suffered due to the lack of c-store trips in recent months. In response, MAPCO "is taking a good look at what people need at this time," Gutierrez said, pointing out that consumers are buying a lot more of the bigger package sizes at c-stores that they used buy at the grocery store.
MAPCO also has seen a jump in add-on items in the baskets; for example, adding larger sizes of snacks and candy to their beverage or tobacco purchases. Consumers are adding larger items to their delivery orders for future consumption, too.
The NACS Crack the Code Experience is a five-week digital event that is bringing together convenience store industry retailers and suppliers virtually in lieu of an in-person NACS Show this year. It continues through Dec. 4.