Convenience Wholesalers Reach New Highs

But fuel volatility and its impact on transportation costs continues to be a major challenge

Sales reached a new high of $55.7 billion during the last fiscal year among the top 25 convenience wholesalers, according to the latest study conducted by Convenience Store News. However, this 4.4-percent increase over last year's total of $53.9 billion represents relatively small growth compared to gains of 7.4 percent in 2010 and 5.2 percent in 2009.

Wholesalers and retailers in the industry faced their share of challenges during the past year. In particular, executives cited the impact of fuel volatility on transportation costs and government regulations affecting the all-important cigarette category, which accounts for about three-quarters of sales among these top wholesalers.

The top five wholesalers continue to maintain a firm grip on their rankings. McLane Co. continues to sit comfortably at the top with sales of $27.3 billion, a 2.6-percent increase. Core-Mark Holdings Co. achieved sales growth of 11.3 percent to reach sales of $7.3 billion, making it one of only five companies in the top 25 to post double-digit percent sales increases. Some of Core-Mark's growth can be attributed to its acquisition of Forrest City Grocery Co., of Forrest City, Ark. — last year's 10th-ranked convenience wholesaler. This followed last year's acquisition by Core-Mark of Finkle Distributors of Johnstown, N.Y.

Third-ranked Eby-Brown hit $4.5 billion in sales, up 2.3 percent. Holding on at fourth and fifth place, respectively, are H.T. Hackney Co. at $3.6 billion and GSC Enterprises at $1.2 billion.

Amcon Distributing Co. posted the largest sales growth, at 34.3 percent, moving from ninth place last year to sixth place in the current study with $1.2 billion in sales. Again, an acquisition played a role in this success, as Amcon bought L.P. Shanks Co., of Crossville, Tenn. Also, this represents Amcon's second acquisition in as many years, following last year's deal to obtain Discount Distributors, Springdale, Ark.

Harold Levinson Associates Inc. increased sales by 10.5 percent to reach $1.1 billion in sales. Even so, the company dropped one place to rank seventh this year. Meanwhile, strong growth of 20.4 percent propelled Consumer Products Distributors Inc. from 13th to 10th place, with sales of $884 million in the company's last fiscal year.

Overall, the top 10 companies combined for sales of $48.9 billion, mirroring the 4.4-percent increase of the top 25 players. These top 10 companies accounted for 87.8 percent of the total top 25, a slight increase from the 87 percent recorded in 2010 and 86.9 percent in 2009.

Further down the list, Cooper-Booth Wholesale joined the double-digit growth club, posting 11.6 percent growth in sales for a total of $510 million.

Finally, the acquisition of Forrest City Grocery Co. opened the list to a new member: Allen Brothers Wholesale Distributors Inc. joins in the 25th spot with sales of $202 million.

All the top 25 wholesale companies clearly faced challenges during the past year. Here are some of the most pressing issues cited by company executives:

■ Cigarette tax increases;

■ Cigarette carton declines;

■ Competition from Native Americans regarding private label cigarettes;

■ Consolidation within the manufacturing sector;

■ Continuing economic woes;

■ Educating customers on how to grow their business and increase their profits despite the difficult economy and the many challenges the industry faces;

■ Fuel costs and volatility;

■ Government intervention with business;

■ Government regulations and legislation;

■ Increased operating costs;

■ Margin pressure;

■ Tobacco taxes and decreasing tobacco consumption; and

■ Transportation costs.

Even as single stores comprise the majority of the convenience industry's store count, at 62 percent, the majority of sales among the top 25 wholesalers continue to come from chains. In 2011, share of wholesalers' sales from chains reached 54 percent, up from 52.6 percent in 2010. Share of sales from single stores dropped from 47.4 percent in 2010 to 46 percent in 2011.

Three-quarters of the top 25 companies indicated they have expanded their product offering over the past year. Fresh foodservice products led the list of additions, from fresh-cut fruits and salads, to sandwiches and bakery products, to flowers. Other expansions included salty snacks, beverages, milk, ice cream and bread. Meanwhile, only one company among the top 25 reported reducing their product offering during this time.

METHODOLOGY

Rankings for the Top 25 Convenience Wholesalers are based on sales from the last full fiscal year for each company. Data for this report was gathered through a survey conducted among the largest wholesalers primarily servicing c-stores that derive a majority of their annual sales from tobacco and candy products. Additional data was obtained through company reports and other public sources of financial data. In some cases, estimates have been made by Convenience Store News based on historical data and current industry trends.