Latest Industry Forecast: Recession Will Last Until 2010

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Latest Industry Forecast: Recession Will Last Until 2010

NEW YORK -- The national economy is in a recession that will be deeper and longer than the last two business downturns. This recession will have a dramatic impact on a convenience store industry that will also be stymied by flat store growth and reduced consumer spending, according to preliminary results of Convenience Store News’ 2009 Forecast Study, unveiled here yesterday.

"The recession will last at least into the first quarter of 2010," said Maureen Maguire, president of ThinkResearch and CSNews’ research partner on the Forecast Study for the past three years. According to Maguire, the new administration has its work cut out for it—trying to stimulate the economy and at the same time not create a "moral hazard" by bailing out undeserving firms. "With the Big Three U.S. car makers now getting in line for government aid, where do you draw the line?" she asked.

Last summer, Maguire was one of the first economists to predict a U.S. recession (see CSNews’ 2008 Midterm Forecast Study, Aug. 18, 2008).

Maguire presented the 2009 Forecast to a group of retailers who will help refine and explain the final results that will appear in the January issue of CSNews. This year’s Forecast Council retailers are:

-- Kim James, director of marketing, Circle K;
-- Paul Casadont, merchandising manager, Americas, Chevron Corp.;
-- Sonja Hubbard, CEO, E-Z Mart Stores;
-- Steve Loehr, vice president of operations support, Kwik Trip;
-- Paul Rankin, vice president, retail marketing, Country Fair/United Refining Co.;
-- Mike Zielinski, CEO, Royal Buying Group;
-- Matthew Paduano, vice president of information, Nice N Easy Grocery Shoppes; and,
-- Pat Fitzpatrick, supply chain leader/senior category manager, Valero Retail Holdings.

Among Maguire’s macroeconomic conclusions:

-- The global economy is weakening and "real" U.S. interest rate levels are zero.
-- Market fears continue to stoke the bears and keep the bulls at bay for the foreseeable future.
-- Consumers are reacting by driving fewer miles, buying less gasoline, stopping luxury spending and focusing on necessary items.

The total number of c-stores in the industry declined by almost 700 stores from its 145,872 total since the beginning of the year, according to CSNews research partner, TDLinx. As a result, the 2009 Forecast predicts per-store unit volume declines in the candy/gum/mints and cigarettes categories, less than 1 percent unit volume increases in malt beverages and salty snacks, and modest growth in packaged beverages and Other Tobacco Products (OTP).

Foodservice sales are expected to again become the focus of c-store retailers’ efforts to recoup lost sales and profit in gasoline and cigarettes, but panelists worried increasing commodity costs, other foodservice-related expenses and competition from outside the c-store industry would reduce margins in the category next year.

Nevertheless, Maguire also predicted the industry would fare better than most other retail channels because it sells products that are necessary, and not deemed luxury or discretionary by consumers.

Kristen Moore, director, RMS Leadership for CSNews’ parent company, The Nielsen Co., also made a presentation on U.S. Retailing and Consumer Trends that highlighted the value-oriented retail concepts.

The 2009 Industry Forecast Council was sponsored by Boyd Coffee Co., General Mills, McLane Co. and Ruiz Foods.

Complete coverage of the Forecast Council will appear in the Jan. 26, 2009, issue of CSNews.