Outlook Forum Provides Insight to Help Companies Grow
More than 100 distributors, retailers and manufacturers received a first-hand look at the most up-to-date, comprehensive sales data for the convenience industry in four key categories as well as insight into major trends affecting their businesses during the inaugural AWMA C-Metricstm Convenience Industry Outlook Forum held last week in Chicago.
Categories covered and analyzed by industry experts were candy, cigarettes, OTP and salty/alternative snacks.
AWMA President & CEO Scott Ramminger addresses conference attendees.
The conference was sponsored by AWMA and InfoRhythm, Pittsburgh, PA, which developed the AWMA InfoMetrics program, through which the data is provided. Presented and analyzed were actual 2012 sales by convenience industry distributors to 28,000 c-stores nationwide, and then projected to the full universe of 146,000 stores -- the most complete and current look at convenience industry business activity for this year, with projections through the end of 2012.
The InfoMetrics database is the single largest database of c-store shipments covering all SKUs except direct-store-delivery (DSD) products and beverages. Currently, 58 distributors with 92 warehouses shipping to 90,000 stores each week submit their detailed sales data to InfoRhythm, where it is compiled and analyzed.
"This was a very informative program," commented Sherwin Herring, chief executive officer, Southco Distributing Co., Goldsboro, NC. "We received a lot of good numbers. It was a terrific beginning, and for the future it would be great if we could cover even more categories. It certainly was well worth our investment of time and money to participate." Joining Herring at the conference was April Garver, executive vice president, who said she found the information provided to be of real value, supplementing data provided in the company's recently concluded mid-year meetings with vendors.
A number of distributors invited retailer customers, and Jeff Williams, chief operating officer at Western Oil-Petro Mart, Earth City, MO, said the data revealed at the Forum and through the AWMA InfoMetrics and C-Metrics programs is an important tool in helping his company effectively manage product mix and inventory.
"Having this data and leveraging it will make us a better retailer, and that will make our wholesaler a better wholesaler. It is a win-win for both of us," said Butch Egan, the company's chief marketing officer who accompanied Williams to the Forum.
Attendees listen to the keynote speaker at the opening general session.
Some of the suppliers participating in the Forum included Altria Group Distribution Company, Cheyenne International, Commonwealth-Altadis, Inc., General Mills, Inc., Kellogg Company, Kraft Foods, NJOY, Perfetti Van Melle, Procter & Gamble Distributing, R.J. Reynolds Tobacco Company and Wrigley, a subsidiary of Mars, Inc.
"We are delighted with the results of our first-ever Convenience Industry Outlook Forum," said AWMA President & CEO Scott Ramminger as the conference concluded. "We think our attendees received invaluable information that will help make them stronger and a real insight into the value of our InfoMetrics program."
Ramminger said the Outlook Forum will be an annual event, and that next year's conference details will be announced as soon as they are finalized.
Macro Trends Analyzed at Forum; Huge Gains Possible
As convenience retailers look to a future with smaller stores and a rapidly changing consumer, challenges and opportunities abound, said Renee Sang, senior director, Global Customer Innovation Network, Accenture, in the Outlook Forum's opening session Wednesday morning.
"Retailers are saying their store footprints are going to get smaller," she said, noting the challenges this portends for operators as they manage product assortment to maximize profit from those small store spaces. At the same time, she said, consumers are increasingly becoming tech savvy and using apps on their smartphones to make buying decisions, both through price and product comparisons and by following recommendations of friends in their social network that can be accessed simply by using the phone to scan a barcode.
Today's consumer, she said, is always online, so it is possible to leverage that trend to engage them to take advantage of the opportunities that this provides. "Influence is the new loyalty." she added.
It is possible, Sang said, for convenience distributors and retailers to take advantage of the "streaming environment," noting that Walmart currently uses an app that allows customers to vote online as to what products they want to see in the store.
Products can even be tailored to customers in real time, she said, noting that at www.uflavor.com, it is possible for individuals to make their own beverages, with their own customized label, and have them sold in vending machines or to support promotions, celebrations, teams, and other special occasions.
She reviewed many more apps and Websites that provide opportunities for retailers to draw customers into their stores "based on what is relative to them at the time," such as a site that allows consumers to scan a QR code to find locations that allow smoking, or another that provides recipes, ideas for using a product and a video that can be shared with social networks just by scanning a product label.
"Do we know what our customers are missing and what is missing from their experience?" she asked. "Are we ready? Do we have the information and insight and structure to do tactical promotions? For people who bought cigarettes in the last three months, what else have they bought? What can I do with that information? It's real, it's here. Customers are taking us down this route, and we need to be ready."
InfoRhythm president and CEO Viv Penninti said the "information tsunami" is affecting the convenience industry and he explained that C-Metricstm is based on wholesaler sales to 28,000 convenience stores, including 15,000 independents. "It is a true representation of what is going on in the industry," he said.
"All our distributor partners have access to this data set," Penninti explained. "What you can do with it is quite powerful. What drives your business is assortment, and out-of-stock is a massive issue. This can help you control that."
Overall, Penninti estimated some $20 billion could be gained for the c-store industry through the intelligent use of the data provided through the InfoMetrics and C-Metricstm programs. "We have a singular passion in the belief that we can help this industry," he declared.
Cigarette Category Highlights
With an 18% contribution to margin for distributors, cigarettes remain a vital product category even though margins have dropped by some 5% since 2011, according to David Bishop, managing partner, Balvor, LLC.
"Cigarettes are still a large contributor from an economic standpoint, and it is important to understand their strategic value if you want to protect and grow your business," he said, noting that tobacco sales help drive traffic and build the overall ring with the growth of ancillary products, such as coffee and snacks.
He pointed out that today's economic climate, with continuing high unemployment, has hurt cigarette sales and shifted smokers to other, less costly forms of tobacco use. More than 46% of adult smokers earn less than $35,000 per year, and they comprise 36% of the U.S. population. Of course, smoking restrictions and increasing taxes have also had a significant influence, Bishop added.
According to C-Metricstm numbers released at the Outlook Forum, for the first six months of 2012, cigarette volume declined by 1.8%, although dollar sales increased 1.7% due to higher prices of 3.5%. The outlook for 2012 calls for a 0.7% increase in dollar sales over 2011.
Premium is growing in part due to new manufacturer programs, pricing activity, and menthol-related products, with a projected increase of 1.6 percent for the year. Branded discount smokes are projected to increase 4.2 percent, largely due to growth in the two top brands, Pall Mall and L&M.
Sub-generic/private label brands are projected to surge 8.6% as retailers and consumers search for greater value and lower price points, while fourth tier products and imports are expected to decline, each by 5.7%.
Bishop urged distributors to be cognizant of the increased entry of dollar stores into tobacco retailing and said that could have a significant impact on market share among retailers in close proximity. He said category-level margins are likely to contract further due to category dynamics, manufacturer programs, and increasing pricing pressures.
Other Tobacco Products (OTP) Category Highlights
The sixth largest c-store category is OTP, said Don Longo, editor-in-chief at Convenience Store News, in presenting the OTP category highlights at the Outlook Forum. He noted that smokeless product sales increased by 6.3 percent in 2011 vs. 2010, but said that the entire category "is on the way up." According to C-Metricstm projections, smokeless sales are expected to increase by 6% in 2012.
Electronic cigarettes are leading the charge in the OTP category, said Longo, noting that e-cigs year-to-date dollar sales increased by 221% over last year and are projected to grow by 138.7% for 2012. Overall sales could exceed $1 billion by 2015, he said. According to the CSNews Industry Report, 2011 average sales per store for e-cigs were up 535%.
"Increased availability, longer duration on shelves and, to a lesser extent, addition of more brands per store are driving e-cigs sales," said Longo. "Most of the top e-cig brands have seen astronomical growth, led by NJOY and Logic Technologies."
Some OTP highlights reported at the Forum:
• Total OTP category gross retail dollar sales for YTD ending 6/30/12 were $3.2 billion, up 2.5% from the same period last year.
• According to a CSNews Industry Report, OTP sales in 2011 increased by 2.5% vs. the previous year.
• The dollar share of the category for the first six months of the year were: Smokeless - 69%; Cigars -- 24%, trending downward; Pipe/Cigarette Tobacco -- 3%; E-cigarettes -- 2%; Papers -- 2%.
• 71% of retailers increased space for smokeless products.
• ACV distribution for smokeless products averaged about 36.3%; highest distribution percentage was Black & Mild at 58.8%.
Longo predicted that OTP growth will continue, fueled by moist products and new innovations, such as snus and e-cigarettes. Retailers, he said, will continue to focus on driving value, putting pricing pressures in the category.
Candy Category Highlights
In presenting highlights of the candy category, Steven J. Montgomery, president, b2b Solutions, LLC, pointed out that candy category retail dollar sales for year-to-date ending 6/30/12 were $2.04 billion, growing at 3.3% versus a year ago.
"Candy is a $32 billion industry that employs 700,000 people," said Montgomery. "The top candy trends for 2012 are sweets for sharing; sweet and salty combinations; mango mania that includes pairing mango with pineapple, orange, coconut and strawberries; and candy as a healthy snack, such as sugarless and dark chocolate."
Candy fits today's on-the-go lifestyle, Montgomery added. As a result, confectionery retail sales have grown steadily since 2007, increasing from $27.4 billion to $32.1 billion in 2011.
Total warehouse-delivered convenience store gross retail candy sales dollars for year-to-date ending June 30, 2012 are projected by C-Metricstm at $34 billion and growing 3 percent as compared to a year ago.
The Center Store category accounted for $4.96 billion in warehouse-delivered c-store sales, with strong growth in the snack category. Candy comprised 41.2% of year-to-date dollar sales in the Center Store category. Looking at total candy category performance, growth was 3.3% versus a year ago, with sales at $2.04 billion year-to-date June 30, 2012.
The gum category has shown a decline in dollar sales versus the last fiscal year, after several years of continuous growth due to line extensions and innovations. Changemakers and penny candy continue to shrink. A trend projection of weekly sales indicates a 6.4% growth in 2012 versus 2011.
Of the top 25 items for ACV distribution in the last 13 weeks, only Snickers exceeded a 90% ACV. The top 10 SKUs average 84% and the top 25 average 77.3%. Sixteen of the top 25 SKUs had an ACV below 80%. Gross retail dollar sales of chocolate bars and packs show this is the largest candy subcategory, representing 45% of candy category sales.
Year-to-date dollar sales growth versus a year ago for chocolate bars and packs is 4.9%. A trend projection of weekly sales indicates 9.6% growth in 2012 versus 2011. This exceeds the overall candy category growth of 6.4%.
Salty/Alternative Snack Category Highlights
The $20 billion in retail sales in the snack category is moving from food/mass to c-stores. In 2011, c-store growth percentages almost doubled those of other channels, said Greg Jones, consulting partner, b2b Solutions, LLC.
The top salty/alternative snack trends include grazing occasions replacing dayparts; new products combining salty and sweet flavors; healthy snacking; and bifurcation or the splitting of shopper spending, he said.
There were a total of 2,597 new product introductions in 2011, including 287 crackers; 461 nuts and seeds; 382 potato chips; 357 cereal bars; 114 popcorn products; and 998 other items. The most popular snack time is 2 p.m., and there is an opportunity for related sales with grazing. New salty snack profiles feature more international flavor profiles, Jones noted.
Total c-store salty snack sales increased 24% over the last five years. Margins have grown 35%. GP dollars were up 9%, yet overall growth was held down by DSD.
Alternative snacks have increased 20% over the last five years, with dollar margins increasing by 25%. This category generated the fifth highest gross profit.
According to C-Metricstm, warehouse-delivered convenience store gross retail sales dollars for year-to-date are projected at $34 billion. The Center Store category sales totaled $4.96 billion year-to-date for warehouse-delivered c-store sales. There is high growth happening, but stores need more space or more productive inventory, Jones said.
In looking at category performance for salty snacks, sales were up 10%, totaling $524 million. All subcategories were growing. Nuts, seeds and crackers represent 44% of salty snack category warehouse- delivered snack growth, which exceeds total industry snack growth. Potato chips are the second highest salty snack category, growing 6%, with expected growth of 8.7% in 2012 versus 2011. This category contributes 11% of total growth dollars.
To see more photos of the Forum, click here: http://www.flickr.com/photos/awmaphotos