According to Nielson surveys, at 4:00 p.m. each weekday, 80% of U.S. consumers don’t know what they are going to serve for that evening’s dinner. Given today’s heavily scheduled and mobile environment, prepared and quick-preparation offerings are increasingly becoming a market differentiator for large grocery chains and grocery super stores, but the traditional convenience store (c-store) channel is also grabbing a share of wallet in food sales.
The number of c-stores opening in the U.S. has been on a steady rise over the last twenty years, with only a small retrenchment in store count in 20181. According to the National Association of Convenience Stores (NACS), as of December 31, 2018, there were 153,237 c-stores in the U.S., accounting for $650 billion in total sales. Traditional grocery store openings occurred at a slower rate during this same period.2 Based on these metrics, it appears that convenience attracts consumers even during economic downturns when finances are tighter.
Not your grandpa’s convenience store
The changing face of offerings in c-stores is also driving an increase in store traffic. Long gone are the days when c-stores mostly sold tobacco, candy, junk food, and fountain beverages. Beyond these items, today’s modern c-stores offer a variety of fresh and healthy snack foods. In fact, in 2019, NACS was named “Partner of the Year” by the nonprofit Partnership for a Healthier America partly because U.S. convenience stores sell approximately $250 million of fruit and over $ 4 billion dollars of water annually.3 Fruit snacks, eggs, snack packs, and prepared foods were the top categories for sales growth in c-stores, following tobacco in 2018. Healthier offerings are clearly speaking to the millennial and Generation Z demographic, but also to the aging baby boomer who may be managing a variety of health issues.
The Ibis World 2019 C-store Industry Report also cites changing consumption patterns as a reason that the popularity of c-stores is rising. Consumer trends show that U.S. consumers are moving away from the traditional three meal-a-day eating patterns, and instead opting for smaller meals consumed five to six times a day.4 This change in consumption patterns aligns well with the c-store strategy of increased offerings for healthy snacking.
Food manufacturers are finding a new niche in convenience
Some manufacturers of snack foods are now zeroing in on the c-store distribution channel. I recently spoke with several companies that manufacturer healthier snacks including trail mix, nuts, and cheese, all of which have typically utilized large grocery chains and grocery super stores as their primary channels of distribution, and typically have packaged their offerings in bulk.
As the conversations turned to strategic planning and future sales opportunities, these companies indicated they had long studied consumer consumption and demand patterns, and were zeroing in on the c-store consumer as an untapped segment. However, this meant strategizing how they could make their products easier to access and consume on the go, particularly while driving. Bottom line, each company believes that alternate packaging of their products in single-serving, driver-friendly containers with distribution through c-stores has the potential to create an entirely new revenue stream. Packaging may become a product differentiator as commodities traditionally sold in bulk find new niches when the same product is packaged in smaller containers.
Beverages also move to convenience packaging and distribution
Snack food manufacturers are not the only ones that have zeroed in on consumers favoring convenience, and demonstrated willingness to create packaging variations in effort to positively impact revenues. Through my coverage of wineries and vineyards, I took notice, roughly five years ago, of the move by a number of wineries to package wine in cans. At that time, the question was whether canned wine would be accepted by the consumer, and would the cans create a lesser perception of the quality of these wines.
At present, the demand for canned wine continues to accelerate. In 2018, canned wine sales jumped 69% to more than $69 million, up from just $2 million in sales in 2012,5 and packaging in cans is now spilling over into the spirits world.6 Today, you can find a nice canned Chardonnay or a Moscow Mule next to your favorite beer in most c-stores and grocery chains. Despite original resistance in the industry, savvy producers have listened to their consumers and created alternative packaging to enable wider accessibility for their offerings. And, convenience and portability is speaking to today’s consumer.
Conclusion
When thinking about future growth opportunities, it’s prudent for a variety of food and beverage manufacturers to question whether their product packaging and distribution channels are broad enough to reach consumers where they are. Demographics and preferences suggest that the generations with the most buying power will likely continue to favor fast, convenient, and healthy offerings, so producers and manufacturers should be ready to respond to with packaging, distribution channels, and promotion. Those that have gotten an advance start by creating alternate packaging for convenience will surely realize financial benefit.
- Nielsen AOC Incl Conv
- Nielsen AOC Incl Conv
- National Association of Convenience Stores website
- Ibis World 2019 C-store Industry Report
- Nielsen AOC Incl Conv, Wine Spectator, Canned Wine Comes of Age, May 22, 2019.
- The Atlantic (https://www.theatlantic.com/health/archive/2019/07/millennials-love-canned-cocktails/594901/)