Small Increase in Inside Sales Is Still a Record Convenience stores’ inside sales were essentially responsible for the industry’s record-breaking year of 2016, offsetting fuel sales’ poor performance. 2017, however, was quite the opposite, as inside sales only increased 1.7% while fuels increased 14.9%. Nonetheless, inside sales’ 2017 total of $237.0 billion was an all-time record and the 2.5% increase from 2016 gross- margin dollars, or $55,985 per store per month, was a definite bright spot. All tobacco products continued to be the leader in share of in-store sales, at 34.1%, but the cigarette category’s share has declined from 37% for 2011 to 28.6% for 2017. Foodservice was second in in-store sales share, at 22.5%.

Striking a Balance of Value and Premium Merchandise As noted in the companion Profiler, Convenience Stores 2019: The Customer, the wages of lower-income consumers, who have always been the core c-stores customers, haven’t increased, resulting in less discretionary income, to spend at c-stores. Some industry analysts suggest c-stores must initiate strategies to appeal to the value and premium shoppers and avoid the mistake of retailers, such as Toys R Us, that try to appeal to middle-of-the road shoppers, which was the key to their demise. Although customer service continues to be an important element of c-store success, each store must understand its immediate geographic market better and offer the right variety of products to increase inside sales: fast, friendly and frictionless.

Other Tobacco Products (OTP) Deliver Larger Gross Margins Although cigarettes generated the largest sales dollars per c-store per month during 2017, unit sales decreased 3.5% while other tobacco products (OTP) delivered an 8.5% increase in unit sales for 2017. Only the cigarette subcategory, sub-generic/private label, increased unit sales from 2016, or 8.8%; however, it only accounted for 3.3% of all dollar sales. Premium brands accounted for 80.9% of all dollar sales, but they only increased +0.8% from 2016. E-cigarettes and cigars increased dollar sales in the OTP category by 51.1% and 14.1%, respectively, from 2016. Smokeless, which has the largest share, or 57.1%, increased 4.8% in dollar sales.

Foodservice Boosts Inside Sales Foodservice is only second to cigarettes in 2017 in-store sales contribution, or 22.5% and 34.1%, respectively, but had the largest percent increase from 2016 in sales, or +3.2%, and gross-margin dollars, or +4.5%, per store per month. Within the foodservice category, prepared food had the largest increase in 2017 sales, +3.7%, while sales of hot- dispensed and cold-dispensed beverages, other foodservice subcategories, only increased 0.7% and 0.3%, respectively. Prepared food, hot-dispensed and cold-dispensed beverages boosted foodservice sales for the top 25% of all c-stores, at 3.6, 5.2 and 2.0 times, respectively, more the bottom 25% of all c-stores.

Changing Consumer Beverage Choices Depress Some Categories Packaged beverages did not perform well at c-stores during 2017, with average monthly sales per store decreasing 0.4%. Carbonated soft drinks, -3.4%, sports drinks, -3.8% and juice/juice drinks, -4.5%, were the sub- category culprits. Although 2017 beer sales increased 1.1%, premium brands and malt liquor both decreased 4.5%; budget brands, -3.3%; and popular brands, -1.7%. The beer sub-categories’ heroes were super premium, increasing a huge 23.1%; followed by imports, +10.4%; microbrews, +3.8%; flavored malt, +3.6%; and non- alcohol, +2.5%.

Salty Snacks Are Customer Pleasers 2017 c-store candy sales decreased 2.2%, but bagged or re- packaged peg candy, the subcategory with the largest share, or 38.0%, increased 5.7%; however, chocolate bars/packs, the second largest subcategory by share, or 24.4%, decreased 6.4%.   C-store customers were big fans of salty snacks, as total sales for the category increased 5.6% during 2017, with puffed cheese generating the largest dollar-sale increase, or 9.3%, and potato chips, +6.0%. Unit sales in all subcategories decreased. Except for meat snacks, +4.0% in dollar sales, alternative snacks decreased 2.0% overall, with granola/fruit bars, - 8.6%; other alternative snacks, -2.8%; and health/energy/protein bars, -1.8%.

Advertising Strategies To maximize sales to the two ends of the consumer spectrum, c-stores may find it advantageous to create food and beverage displays based on their value- and premium-product identification, instead of mixing them. Understanding the significant changes in consumers’ food and beverage choices is one of c-stores’ biggest challenges. Now is the time for stores to distinguish themselves from the past by occasionally introducing the latest consumer favorites. Although salty snacks are still the favorite snack choice among c-store customers, stores may be able to improve the sale of alternative snacks, such as health/energy/protein bars, by promoting a limited-time bundle of a salty and alternative snack at a discounted price.

New Media Strategies C-stores may be able to improve customers’ trust in the safety and quality of the stores’ prepared foods by providing nutritional information online and/or details about how foods are prepared and the protocols in place to ensure their safety. Although the TrendSource survey seemed to indicate less-than-an-enthusiastic interest in better food options, individual stores may find it valuable to conduct social media polls/surveys to measure their specific customers’ interest and stock the store, accordingly. With super-premium, imports and microbrews driving beer sales, use social media to invite customers to explain in short videos why they buy brands in these categories and possibly conduct a survey to determine what other brands to offer to increase sales even more.