DISCUSSION
Will Convenience Stores Follow 2022’s Record Year With a Bang or a Bust?
Written by George Anderson
Photo: Kum & Go
Convenience stores achieved a new record for in-store dollar sales in 2022, according to the NACS State of the Industry report. Whether they can build on that performance is a question facing the industry more than a quarter of the way through 2023.
C-store sales reached $906.1 billion last year and in-store purchases accounted for just over one-third of the total at $302.8 billion. In-store sales grew nine percent during the year.
Several factors contributed to the retail vertical’s strong performance.
Store count was up 1.5 percent to 150,174 stores as the industry reversed four years of declining numbers. NACS said that much of the growth was due to an increase in single-store operators, which grew 1,087 to 90,423. Single-store operators account for 60.2 percent of all convenience locations.
Inflation also drove dollar sales up as merchandise prices were 7.9 percent higher in 2022 and foodservice was up 9.7 percent.
Foodservice was a growth engine, representing 25.6 percent of monthly in-store sales and 36.1 percent of in-store gross margin. Prepared foods represented 67.3 percent of all foodservice sales. Hot dispensed beverages (9.2 percent), cold dispensed beverages (eight percent) and frozen dispensed (six percent) also made contributions.
Consumer packaged goods also contributed to c-store performance with packaged beverages, salty snacks, candy and packaged sweet snacks all posting double-digit sales growth for the year. The average basket for in-store purchases increased by 4.9 percent to $7.52.
A worrying sign for c-stores is that dollar sales growth slowed in the fourth quarter (3.3 percent) compared to the third quarter (4.3 percent), according to IRI (now part of Circana).
Customers by the end of the year, according to a Fortune report, were purchasing 10.3 percent fewer items when they visited a c-store.
Inflation is a crucial factor in a slowdown in c-store purchases as consumers are more reluctant to buy on impulse when prices exceed a certain point. Candy and salty snack prices in c-stores have risen 16.7 percent and 14.4 percent, more than double the current inflation rate. C-stores have been forced to reduce promotions to protect margins, which further pressures unit growth.
Scott Love, senior vice president of retail client solutions at Circana, told Fortune that price increases in c-stores are a bigger deal than in other channels because convenience prices are typically higher from the start.