New Era Brings New Opportunities

The convenience store industry is no stranger to challenges. Increased competition, shifts in consumer preferences and keeping up with ? and finding space for ? new products are just a few of the obstacles c-store retailers face on a daily basis.

With the right tools in their toolbox, however, every player in the industry can find success and according to Scott Ramminger, president and CEO of the American Wholesale Marketers Association (AWMA), data is one of the most important tools needed in every toolbox.

Capturing the data and knowing what to do with it were the driving forces behind the 2014 AWMA C-Metrics Convenience Industry Outlook Forum, which took place June 24 at the DoubleTree Hotel Chicago O?Hare in Rosemont, Ill.

?In the convenience industry, there are new challenges and opportunities every day,? Ramminger said. ?We have to pay attention to the doors that are before us.?

Recognizing these doors, though, can be a challenge itself, he added.

The convenience channel is ?seeing change like never before,? Viv Penninti, president and CEO of InfoRhythm Inc. and C-Metrics, told Outlook Forum attendees. InfoRhythm partners with AWMA to present the annual forum and InfoRhythm?s C-Metrics, developed for AWMA, is a database capturing warehouse-delivered products to 28,000 convenience stores.

For 30 years, the convenience channel maintained the status quo. Cigarettes were growing and ?everything was hunky dory,? Penninti said. But today, the channel faces ?a tremendously changing environment? where understanding the data and metrics is the key to success.

According to Penninti, warehouse-delivered convenience retail sales year to date were projected to hit $33.5 billion as of May 17. That figure was flat vs. a year ago ? the first time in the past 15 years that c-store sales have been flat.

Still, even with flat sales, opportunities do exist.

?This channel is really embracing a new era of growth and sophistication,? stated Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC. Herzog was the keynote speaker at the Outlook Forum.

C-stores are benefiting from consolidation, favorable demographics, time-sensitive consumers and a shift to higher-margin foodservice. The industry is also poised to take advantage of the population shift to warmer climates, where convenience stores take up a large footprint.

Another area where some industry insiders see opportunity is in the growing popularity of vapor products. As Penninti pointed out, 9.3 percent of the adult population is visiting vape shops these days.

The emerging vapor market, which encompasses e-liquids and vapor/tanks/mods (VTMs), is beginning to impact disposable electronic cigarettes and combustible cigarettes ? both key segments in the convenience channel.

?Vaping and vape shops could be [a] fad, but we don?t know,? Penninti told Outlook Forum attendees. ?What we know right now is that they are pretty hot.?

Vape shops present a looming threat for the convenience channel, as they have been popping up in cities across the United States, while vaping lounges are likely to double to 5,000 locations by 2015, according to Penninti?s estimates.

Herzog agrees that vape shops are a growing trend to watch and she remains bullish that vapor consumption could surpass consumption of combustible cigarettes within the next 10 years.

The U.S. vapor market today totals $2.5 billion, with e-cigarettes accounting for $1.4 billion and VTMs generating the remaining $1.1 billion. She also predicts vapor products will further penetrate convenience stores during the next six months.

Offering a more cautious perspective, Nik Modi, managing director of RBC Capital Markets, advised all convenience channel partners to be careful and look at the whole picture before jumping in to any emerging trend.

?I think there is a problem in this industry with ?group think? and it is costing people dollars and cents,? he said. Pointing to what he calls the ?consensus vortex,? Modi said the industry is getting ?pelted with information.?

He agreed with the other Outlook Forum presenters that data is important, but said retailers and their partners need to understand the ?why? behind the data.

For example, e-cigarettes are still making headlines even though the numbers show the segment?s growth is declining. He cautioned the same could happen with vapor products.

?It is important to look at the big picture before making capital expenditure decisions,? he remarked.