US convenience stores experienced record in-store sales of $233 billion in 2016 and the third straight year of $10 billion-plus in pre-tax profits, according to NACS State of the Industry data.
Convenience stores, which sell more than 80 per cent of the fuel bought in the country, reported a 9.2 per cent decline in fuel sales. This was driven by another year of low gas prices, which averaged $2.17 for the year compared with $2.44 in 2015. Fuel-sales volume was up 2.6 per cent, riding the wave of continued economic recovery. Meanwhile, fuel margins in 2016 dropped to 23.1 cents compared with 23.4 cents in 2015, but due to increased sales, volume overall fuel gross profit increased 1.6 per cent per store per month.
The top-10 in-store categories ranked by sales dollars represent about 80 per cent of all in-store sales. In 2016, eight of the 10 top in-store categories saw positive sales, including cigarettes, and nine had positive gross profit dollar growth. Factors such as low fuel prices, job growth and more discretionary income in consumers’ wallets drove spending in-store.
While tobacco products, including cigarettes, were 36 per cent of in-store sales dollars, they accounted for only 18.2 per cent of gross profit dollars. Other tobacco products are a bright spot, achieving double-digit growth in both sales and gross profit dollars.
Foodservice, a broad category that includes prepared and commissary foods, hot dispensed beverages (coffee) and cold (fountain) and frozen dispensed (‘slushee’) drinks, continues to be a key focus for growth in the US convenience store channel. Foodservice contributed 21.7 per cent of in-store sales in 2016 and accounted for 35.2 per cent of gross profit dollars, with prepared food and cold dispensed beverages driving the category’s growth.
Packaged beverages accounted for 18.5 per cent of gross profit dollars. Within the category, enhanced water (12.3 per cent increase in sales), sports drinks (4.5 per cent) and bottled water (3.9 per cent) led sales growth from the cooler in 2016, signalling a move by consumers toward healthier and/or functional beverage options.
Snacking categories, including salty, candy and alternative snacks, all had strong growth as some consumers, especially millennials, moved towards snacking and away from traditional meals. For the second consecutive year, alternative snacks, a category driven by protein- and energy-rich items, reached the top 10 in-store merchandise categories, also signalling a desire among consumers for immediate/healthier snacking options.