Maybe it’s those terrible morning traffic jams to buy hot beers at the drive-thru or waiting for people to grope cash in the drive-thru lines that are taking their toll. A growing number of consumers, conditioned by the ease of online shopping, do not have as much patience as before when buying in physical stores.
As people’s hectic lives and mobility return to pre-pandemic norms, convenience store sales are picking up and so is operator optimism in this retail channel.
“The outlook for the convenience store business is very bright for the coming year,” said Chuck Kronyak, retail category manager for United Dairy Farmers (UDF), a Cincinnati-based regional chain that operates a bakery that caters to your convenience stores with fresh donuts. and other baked goods.
“People will always be going somewhere from point A to point B, and more people are tired of being cooped up at home,” he added. “We are seeing more of a return to normal life with children playing sports or people going back to their offices. We’ll continue to see traffic growth in 2023, and we’ll continue to see our customers discover that convenience stores are a great place to find high-quality groceries and baked goods at an affordable price and great value. And convenience stores can save time.”
The last three years have not been easy for the convenience store industry, which has seen peaks and troughs as people transitioned from lockdown to recovery and the price of gasoline fluctuated from around $2 a gallon to more than three times that amount. With rising costs, labor shortages and other economic woes testing their patience, convenience store operators must play along to succeed in these uncertain times.
“If we adapt our assortment of products as customer needs change and continue to satisfy them with new ones that are on-trend, we will see more people coming into our stores more often,” Mr. Kronyak said. .
Overall, shopping behavior at convenience stores has fundamentally changed in a number of ways, noted Jeff Lenard, vice president of strategic industry initiatives, National Association of Convenience Stores (NACS). With around 20 million people working at home or working flexible hours, he added, traffic patterns have changed, with the morning rush hour stretching into mid-morning, followed by another spike in the mid-afternoon.
“Both are great opportunities for baked goods,” Lenard said. “Both times are more suitable for convenience stores because they sell fast. Most people are out of the store in 4 minutes or less. It was time to take care of your business.”
Meanwhile, high gas prices have more Americans stretching their precious dollars. While credit card users typically buy by the gallon when they fill up, cash shoppers tend to pay by the dollar inside convenience stores a couple of times a week. Mr. Lenard suggested targeting cash users, who account for 20% of gasoline sales, with value-added products and in-store promotions.
“We feel good about how consumers have come back, but they are not the same customers that they were in 2019,” Lenard said. “The most important thing is to find out, ‘Who are they now? Do you want more deliveries? Want to order through the app? Is it a fundamental change or a permanent change? People expect more. They are more impatient. There are some things that have changed.”
As a result, Kronyak said, convenience stores need to step up their game to attract more customers and better compete against quick-service restaurants (QSRs) with a wider variety of breakfast, coffee, sandwiches and other fresh and refrigerated foods. Offerings
“We need to be the fastest convenience store that we can be,” he said. “While people are lining up at a self-service QSR, we can serve them much faster.”
Any change in consumer behavior will have a dramatic impact on bakers and snack manufacturers and the way they supply the convenience store channel. According to NACS, convenience stores carry out 160 million transactions a day, of which 30 million occur at the pump and represent 80% of the country’s gas purchases.
In 2021, total industry sales reached $705.7 billion, of which $427.8 billion came from fuel and $277.9 billion from in-store merchandise. Mr. Lenard noted that total merchandise increased 6.4% last year, with a portion of that increase coming from price increases. Traditionally, he said, about 80% of food is sold for immediate consumption within an hour, and often within minutes. Since the pandemic, people are using convenience stores more as a quick stop for groceries, as well as for pantry items like milk, a loaf of bread, or canned goods.
NACS also reported that sales of salty snacks increased 11.3% in 2021, while packaged sweet snacks increased 14.3% and healthy/alternative snacks increased 23.3%.
Utz Brands participates in all of these categories with its Utz, Zapp’s, Boulder Canyon and Good Health brands, as well as its portfolio of regional brands, said Jessica Reese, vice president of small-format channels for the Hanover, Pennsylvania-based snack food maker. .
“It’s especially important to make sure we engage our customers in a fun way to build power between flavors and packaging and leverage retail floor placements to drive incremental impulse purchases,” he said.
More recently, for example, Utz introduced Zapp’s Sinfully-Seasoned Pretzel Stix to the convenience store market.
“We have fun flavors and fun packaging,” said Ms. Reese. “We have the new Zapp’s Jazzy Honey Mustard flavor and our Voodoo flavored Pretzel Stix that consumers are very excited about.”
NACS also noted that the highly profitable convenience food segment increased 18.3% over the prior year.
“That sounds incredibly optimistic, but overall, travel is down,” Lenard said. “There were fewer people walking into convenience stores compared to 2019. The good news is that the market basket has gone up.”
However, the total number of units fell 1.5% to 148,026 stores in 2021, down from its peak of 154,000 units in 2018.
Still, that number is about the same as it was in 2012 and, considering the pandemic, Lenard said, “anything less than a minor loss is a big win.”
This article is excerpted from the November 2022 issue of Baking & Snack. To read the full article on convenience stores, click here.