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Industry’s mid-year report

The Australasian Association of Convenience Stores (AACS) has released its State of the Industry report mid-year synopsis for 2016 to date and further growth is again evident, on the back of new innovations and the evolving trend to fresh, healthier on-the-go food options.

AACS CEO, Jeff Rogut, said the strong performance in key categories that have been the focus of recent innovations, especially food, gives the industry cause for continued confidence.

“The investment in innovation is having a pronounced impact and given convenience stores a new, modern relevance. While our industry’s value proposition remains clear – we’re open around the clock to serve local communities – convenience stores are also attracting a new breed of customer looking for fresh, healthy, quality food and beverage options,” Mr Rogut said.

“This evolving perception combined with the year-on-year growth of the channel gives us plenty of reason for optimism,” he said.

A strong appetite for food

Comparatively stronger first half growth coming from food (6.2 per cent) compared to non-food (3.1 per cent) reinforces recent trends as retailers expand and innovate in the areas of on-the-go food (value growth of 16.2 per cent) and snackfoods, the AACS figures suggest.

By share of value growth in the on-the-go segment, sandwiches (22.8 per cent), fresh cakes (19 per cent) and hot pastry (10.2 per cent) are in many ways driving the evolution of convenience stores, fuelling the growing perception that convenience stores are a viable alternative for healthy, fresh food options.

“Innovative operators have recognised the potential for fresh sandwiches and other on-the-go Food offerings to contribute to profitability and these figures vindicate their efforts in this space,” Mr Rogut said.

“With continued emphasis on fresh deliveries and healthy recipes, convenience stores are more and more likely to be visited by consumers looking for a quick but healthy bite to eat.”

Drink up

Ready-to-drink beverages have demonstrated solid growth (4.6 per cent) this year to date, with hot drinks (26.2 per cent growth) remaining the key driver, and soft drinks and water playing key roles.

In the take-home beverage category, sports drinks and water multipacks are an important contributor as consumers increasingly choose multipack options as opposed to single serves.

“Like the fresh food performance, the focus by some operators on fresh quality coffee is paying dividends and paving the way for convenience stores to be increasingly perceived as a viable alternative for a caffeine fix,” Mr Rogut said.

Tobacco growth lays policy flaws bare

AACS figures show that growth in the year to date in the tobacco segment (5.1 per cent) is down on the FY 2015 result, accounting for the overall slowdown in P&C growth, although sub-value tobacco offerings continue to outperform as consumers react to additional excise increases simply by shifting to cheaper products.

The sub-value cigarette category has shown an extremely strong 23.8 per cent increase in 2016 while roll-your-own is up 16.6 per cent for the half, highlighting – again – the inadequacy and ineffectiveness of government policy on tobacco, Mr Rogut said.

“The tobacco example continues to highlight the lack of a clear link between increased taxes on certain products and improved health outcomes,” Mr Rogut said.

“As excise is raised time and again on legal tobacco, more and more consumers are switching to cheaper alternatives, placing additional burdens on small businesses. Meanwhile the illegal tobacco market continues to flourish, with major health and safety consequences for the community.

“Instead of dedicated educational resources and a commitment to providing consumers greater alternatives to help them quit smoking, like making e-cigarettes, patches and gums more readily available, instead we get the same tired and ineffective approach over and over again: more tax. It’s not working,” he said.

Set up for a strong second half

Mr Rogut said the channel’s first half performance sets up another strong full year performance.

For the past four years, growth in the convenience channel has outpaced the growth of the major grocery chains.

“The convenience industry in Australia continues to re-invent its offering to respond and reflect changes in consumer preferences and behaviours. The principle is relatively simple: by putting customers first better performance naturally follows.

“These half yearly figures set the scene for another full year of promising growth for the industry’s retailers, suppliers and other associated entities. We have every reason to maintain our confidence in convenience,” he said.

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