Rising Stars of the Pandemic
The impact the COVID-19 pandemic has had on the convenience store channel—both favorable and damaging—has been widely discussed for months. Store traffic, particularly during key dayparts such as the morning, has been diminished, while fuel demand has slipped as Americans scaled back on trips and hunkered down at home. The pantry-loading and planned-purchases boom for groceries, meanwhile, resulted in fewer impulse trips to outlets like convenience stores. But on the flip side, in some cases c-stores have reported an uptick in visits by consumers who have shunned big-box stores in favor of those with a smaller footprint, all in an effort to limit exposure to possible infection. And of course, the essential business designation of c-stores has put a spotlight on the value the channel provides to consumers.
A number of in-store categories also have benefited from the health crisis, and now, nearly a year since the outbreak first began, convenience retailers are putting in place best-practice initiatives to sustain and build upon those trends.
According to IRI, the Chicago-based market research firm, among the products to dramatically outperform total store sales trends between May and August last year were alcoholic beverages, sports drinks, cigars and smokeless tobacco. Cigarettes and milk, meanwhile, were among the categories that transformed pre-COVID-19 declines into sales gains during the period.
Category consumers have more demands on them, whether they are on the front line of health care and delivery or juggling the multiple hats of work from home, school from home, everything from home.
“Beer, liquor and tobacco are the departments with the largest percentage increase,” said Sean Bumgarner, vice president at Scrivener Oil’s Signal Foods c-store chain in Missouri. He attributed the strong performances to customer ease “in coming into a smaller store to grab the items they need, instead of walking around a large superstore,” as well as the chain’s adherence to its regular operating hours and an effort to remain in stock on high-demand items.
Smokes and Drinks
According to IRI, dollar and volume trends for cigarettes in c-stores have improved during the pandemic, outperforming other trade channels. “That’s a category that has been in decline for over a decade, and it’s now booming,” said Jayme Gough, NACS research manager. She surmised that with so many consumers now working from home, smokers face fewer restrictions on lighting up.
Vince Segura, retail manager at Fuel City, with seven locations in the Dallas area, remarked that he’s also seen an uptick in tobacco sales. “People are nervous about the virus,” he commented, “and for smokers, when they’re nervous, they smoke.”
Among packaged beverages, sports drinks have fared well. Maurice Bell, senior director of sales strategy/brand director—Gatorade, at PepsiCo, remarked, “Once state restrictions loosened, traffic returned to c-stores, and sports drinks saw some volume gains.” And while consumers have been forced to refine their athletic activities to better practice social distancing, “We found many athletes were still working out and seeking out sports drinks,” Bell added.
What products/services did you put more of an emphasis on in your stores in 2020? (select all that apply.)
Elsewhere in the cold box, energy drinks have continued to post growth, according to IRI, albeit at a slower rate than pre-pandemic. “The need for energy is higher than ever right now,” explained Laura-Lynn Freck, director, shopper insights, at Red Bull North America. “Category consumers have more demands on them, whether they are on the front line of healthcare and delivery or juggling the multiple hats of work from home, school from home, everything from home. We hear from consumers that they’re increasing their purchases and consumption of energy drinks in order to meet the new work and life demands.”
Alcoholic beverages have experienced robust gains in grocery stores and c-stores during the pandemic, while sales in bars and restaurants have been hobbled due to closures and capacity constraints. According to IRI, beer sales in c-stores shot up 17% between May and August, while liquor sales skyrocketed 43%.
“The beer category has always been a trip driver for c-stores, and we continue to see this today with beer averaging 8.7 trips per buyer May through August, outpacing total edible trips by more than three trips per buyer,” remarked Sara Hillstrom, senior director, category development, at Anheuser-Busch. “Beer is the purpose for the trip, and that’s become even more prevalent with the closures on-premise.”
Segura agreed, noting that Fuel City has benefited from consumers opting to stay home for meals and drinks, rather than “waiting to be seated at a restaurant with limited capacity.” Gough added, however, that the strong gains for beer in the channel of late might not be all pandemic related. “There’s been a lot of innovation in beer lately,” she said, pointing to high-flying segments like hard seltzers and craft brews.
For the items you placed more emphasis on in 2020, please select which items you anticipate increasing emphasis on in 2021. (select all that apply.)
At-Home Entertaining Lift
Chris Peckat, director of purchasing at the PRIDE Stores in the Chicago area, reported, “We’ve seen great growth on beer, wine and liquor,” with 2020 sales through early December up 25%. In fact, the company has been able to expand liquor sales to more locations during the pandemic as municipalities have worked to support local businesses, the retailer said.
Tony Spinelli, vice president, national accounts at Diageo, said the surge in liquor sales in c-stores is actually an acceleration of pre-COVID-19 trends. Among the top 20 categories in the channel prior to the outbreak, “spirits was already the fastest growing, outpacing store growth by a factor of five times,” he remarked. In recent months, the number has jumped to more than 10 times total store growth. “The shutdown and restriction of bars and restaurants resulted in a significant increase in at-home activities, including entertaining at home,” Spinelli noted.
Convenience retailers also reported an uptick in frozen foods. Peckat said frozen food sales at the PRIDE Stores were up about 15% last year. “People are coming in to grab something that they can heat up later,” he remarked. But while in the past it was single-serves that drove the frozen section, “We’re now selling more family-size items,” he said. At High’s convenience stores in the Mid-Atlantic, sales of the chain’s proprietary ice cream have been strong. “It seems that customers want to go to something they know and have enjoyed in the past, possibly as a form of comfort,” explained John Phelps Jr., vice president, marketing.
Not surprisingly, personal protective equipment such as face masks and gloves, as well as cleaning products and hand sanitizers, emerged as rising stars at c-stores during the pandemic. Marc Segal, CEO of Big Ideas Marketing, said c-store demand for the company’s COVID-19 products “went from 0 to 100.” But strong demand and supply shortages for masks and hand sanitizer in the early months of the pandemic were followed by abundant supply later in the year. “It was a constant challenge to meet the demands of customers where they wanted it,” Segal said.
Gough added that c-stores “have done a great job” stocking the items, despite supply challenges, and that they should continue to feature them. “People will be more aware of infectious diseases and may expect retailers to carry these items,” she said.
Which of the following do you anticipate offering or expanding upon in 2021? (Select all that apply.)
Beyond individual categories, some overall trends have emerged in the wake of the pandemic. Retailers and suppliers reported a shift toward larger and multipack sizes. “People are looking to reduce the time they go out in general, so instead of buying a bag of single-serve chips a couple of times a week, they’d rather grab a larger bag to consume over a longer period of time,” said Brad Chivington, senior vice president and general manager at High’s. Indeed, Bumgarner noted that Signal Foods is selling more cigarette two-fors and cartons than before the pandemic, as well as larger beer packages.
Ramona Giderof, vice president, small format, at Anheuser-Busch, confirmed, “during the pandemic, we’ve seen a shift toward larger multipacks. While singles still show strong growth, multipacks are capturing more of the dollars.” And according to Diageo’s Spinelli, customers are trading up in liquor bottle sizes, too. “This is driven by a shift in occasions from immediate consumption to fill-in, and even stock-up trips,” he said.
Daypart traffic has also been disrupted. Executives at Fuel City, High’s and Signal Foods all report reduced morning traffic. “Since many people are still working from home, and some schools are out or only going every other day, the morning and evening drivetime customers are lower than before the pandemic,” Bumgarner said. “We’ve had to lower the amount of breakfast and deli items we make so our waste is manageable.”
Convenience retailers are certainly focusing on sustaining the growth of categories aided by the pandemic into the future. “The most important thing is to be flexible and able to react quickly,” said Chivington. “We’ve seen demand for products like hand sanitizer have real demand peaks and then pretty sharp declines.” As a result, High’s has “set up ways and relationships to be able to quickly source items,” he noted, as well as different distribution channels to get the products to the stores. In an effort to maximize strong beer trends, Fuel City, meanwhile, has added beer promotions and endcaps of multipacks, Segura said.
The shutdown and restriction of bars and restaurants resulted in a significant increase in at-home activities, including entertaining at home.”
2021 and Beyond
To hang on to any successful sales bumps retailers experienced in 2020, suppliers encouraged retailers to:
- Pay close attention to offerings;
- Avoid out-of-stocks;
- Merchandise effectively;
- Explore emerging sales channels.
Noting that c-stores are still the channel of choice for energy drink consumers, Freck advised retailers to “focus on cold availability and efficient assortment.” Big Ideas’ Segal suggested that for at least the first half of 2021, c-stores should devote a special section to COVID-19-related merchandise, while alcoholic beverage marketers stressed the opportunity to promote packages for home-entertaining occasions via in-store merchandising. Both Anheuser-Busch’s Giderof and Diageo’s Spinelli pointed to the surge in e-commerce shopping during the pandemic and said c-stores should look to participate. “Operators must embrace this revolution or be left behind as the retail landscape adjusts,” Spinelli said.
Convenience retailers expect that many of the in-store trends born of the pandemic will continue, at least for the immediate future. “In the short term, customers will still be wary of visiting locations as often as they did before the pandemic,” said Bumgarner. “The further removed from the pandemic, things will slowly revert back to the way they were,” he continued, “but trends like delivery and increased cleanliness and disinfection will remain.”
PRIDE Stores’ Peckat added that one of the positive things that has emerged from the pandemic is support for local businesses, and that assistance will bolster a quick recovery for c-stores. “There will always be a need for convenience,” he said. “Traffic will come back. We’ll do just fine.”