Convenience Industry Hit High Notes in 2011

CHICAGO -- Unemployment still hovers above the 8-percent mark and a new crop of housing foreclosures wait in the pipeline. However, the economy added more than 200,000 jobs in both December and January and with that comes increased consumer confidence and the signal of good news for the convenience channel.

As reported at the 2012 State of the Industry Summit held this week by NACS, the Association of Convenience & Fuels Retailing, the economic recovery (though slow) resulted in a record 2011 for the industry.

To that point, the number of c-stores hit a record 148,126 stores with those operated by single-store owners reaching a new high of 93,206. Other records were broken as well. Inside sales rang up a record $1.95 billion and that figure combined with motor fuel sales reached $681.9 billion -- another record.

These numbers help prove the convenience channel is recession resistant. But that does not mean everything is coming up rosy. Challenges still exist in the industry and retailers need to be aware of the risks looming on the horizon, according to NACS insiders.

Notably, c-store retailers need to watch out for gasoline consumption and retail gas price trends -- both of which are not in the industry's favor. In addition, operators need to watch out for soft cigarette volume (from a dollar standpoint) and cigarette margins. Also not to be overlooked are the impact of credit and debit card fees on direct store operating expenses and the increasing breakeven cents per gallon.

Drilling down even further, individual categories face their own issues. Specifically, cigarettes, grocery, premium beer and candy have been experiencing declines. One category bright spot in 2011 was foodservice. In the good news column, industry insiders said foodservice growth was actually driven by food last year.

Overall, the 2012 State of the Industry Summit did pinpoint the high spots of 2011, with inside sales, fuel margins, pretax profits, foodservice and top-quartile performance standing among those highs. Last year's numbers did highlight a lot of concerns as well, including decreasing fuel consumption, increasing fuel prices, rising credit card fees and a struggling cigarette category.

As one leading convenience executive put it: the numbers really are a good story.