Convenience in-store sales grew by 3.7 per cent over the course of 2015 while fuel volume increased 1.8 per cent, according to figures compiled by the Australasian Association of Convenience Stores (AACS).
AACS CEO Jeff Rogut said the convenience channel’s performance was highly credible against the backdrop of tough retail conditions.
“Our operators and their many employees have every reason to have confidence in convenience as the industry’s focus on innovation in recent times pays dividends in terms of sales performance and customer service outcomes,” Rogut said.
“The drive to innovate continues to gather momentum, underlined by the performance of emerging categories like coffee and On the Go Food, and the need for operators to maintain a focus on the customer and optimise the performance of key categories has never been greater,” he said.
Legal tobacco still on the grow
The ineffectiveness of policies such as plain packaging and excise increases have been reinforced with the strong performance of legal tobacco. Though down slightly on the 2014 result, value growth for tobacco was still in positive territory at 5.2 per cent with the category contributing around $3 billion in sales in convenience stores in 2015.
Tobacco accounted for well over a third (37.6 per cent ) of overall value sales over the course of the year and, across all merchandise, remained by far the largest contributor to value growth. The $154 million growth that tobacco generated was $19 million higher than growth contributed by the Total Food category.
As was the case in 2014, price increases from excise tax was the main driver, despite shoppers continuing to trade down to value offers. Yet while the shift to cheaper tobacco products continues, convenience stores continue to be a major player in this category.
Fuel volumes topped up
Fuel sales volumes grew in 2015 against a backdrop of fluctuating prices. According to the AACS State of the Industry report, volumes were up 1.8 per cent for the year as convenience stores continue to be the primary destination for fuel purchases. Fuel remains a leading sales generator unique to the channel.
However more significant growth was apparent in the average litres per transaction figure (+7.9 per cent ), following a decline of 12.5 per cent in the average price per litre in 2015.
Fuel theft remains a major concern for the industry as the AACS continues to present its case to police and government to take this crime more seriously. The estimated cost of fuel theft, based on the latest figures, is approximately $55 million annually.
Lower price points for fuel and increased vigilance by retailers are having an impact.
Convenience counts on caffeine fix
Beverages are a consistent strong performer for convenience stores and 2015 was no different, with the industry increasingly tapping into Australians’ love of coffee.
The solid 7.9 per cent growth in Dedicated Iced Coffee and outstanding 26 per cent growth in Hot Drinks offset declines in Energy Drinks, Cola, Sports, Water and Frozen Carbonated Beverages sales to ensure continued strong performance in the Ready to Drink category.
“The double-digit volume and value growth for Hot Drinks demonstrates that convenience stores are a credible option for affordable coffee in a broader market that is expanding, but is fiercely competitive,” Rogut said.
In growth terms, Take Home Beverages like milk and energy drink multi-packs outperformed the Ready to Drink category, yet these account for a comparatively small share (20 per cent ) of the combined market for beverages.
Healthy numbers for On the Go Food
The emerging focus and subsequent growth in the On the Go Food category, encompassing products such as sandwiches and cakes, is a significant win-win outcome for the convenience industry, Rogut said.
“The continued growth in On the Go Food suggests that, as convenience stores evolve their model to reflect consumer preferences for fresh food offerings, as well as healthier options, shoppers become more comfortable buying food in stores, which is a great outcome,” Rogut said.
On the Go Food’s accelerating 13 per cent growth in 2015 was led by three core categories: fresh cakes (28.0 per cent), hot pastry (39.8 per cent) and sandwiches (21.5 per cent). Sandwich sales grew 9.2 per cent in 2015, up from a marginal gain of just 0.1 per cent a year prior.
“The growth our operators have experienced in sandwich sales is evidence that this format is establishing its rightful place in the convenience channel. By investing in a more enticing fresh sandwich offering, with fresh daily deliveries in some cases, retailers can ensure that grabbing a sandwich extends beyond restaurants, cafes, and fast food outlets,” Rogut said.
Confident in convenience
Rogut said the industry’s strong 2015 performance as detailed in the AACS State of the Industry report reinforces the value proposition of the convenience channel and the investment leading operators have made in innovation.
“By maintaining a firm focus on customer needs and the customer experience, the retailers and suppliers in the industry continue to evolve and innovate their offer for a bright future,” Rogut said.
“Looking ahead, there is an ongoing need to further develop a culture of compliance within the industry for store owners, franchisees, staff and customers, and the AACS will sharpen its focus on education, training and development for members.