As inflation continues to put a higher burden on consumers’ wallets, the National Association of Conveniences Stores (NACS) predicted that private label CPG products could continue to play a larger role in total in-store sales, according to the industry group’s 2021 State of the Industry report, released this month.
According to the report, as the quality of private label products has increased over the past decade, many consumers are no longer viewing them as inferior to their branded counterparts. In particular, many consumers got used to purchasing them during 2020’s “panic buying” period and have continued to buy them as out of stocks have left many brands unavailable.
“The quality and consistency of private-brand offerings has been steadily on the rise,” the report stated. “For many consumers, the pandemic shift toward private brands will remain as they look for opportunities to stretch their budgets.… [R]etailers will be further challenged to consider the role these items can play in their assortment.”
The nearly 250-page report, which was compiled primarily from data provided by convenience retailers between December 2021 and March 2022, showed significant recovery for the convenience channel, which was among the hardest hit during the pandemic lockdowns of 2020. However, while dollar sales were high, volume sales still fell short of 2019 levels as the total number of U.S. stores declined 1.5% to 148,025 at the beginning of 2022, roughly on par with the size of the industry in 2011.
Last year marked the fourth straight year of store closings and total store count has fallen by 0.8% since 2012. Large chains with over 200 locations, however, primarily increased their market share, adding over 1,100 new doors nationwide, driven by M&A activity that coincided with a share decline for smaller chains.
Total in-store convenience channel sales grew 8.7% to $277.9 billion last year, while sales including fuel were finalized at $705.7 billion, up 28.7%.
In-store convenience sales outpaced all other food retail channels aside from the club channel, which reported dollar sales up 9.1% in 2021. Comparatively, the drug channel was up 7.1%, dollar stores grew 5.9% and grocery sales increased 3.1%. Meanwhile, restaurants (which fell 13.5% in 2020) grew 32.8% as consumer movement returned to pre-pandemic levels.
Among in-store sales, merchandise rose 6.4% year-over-year to $146,989 per store while food service sales per store were up 18.2% to $35,998 in 2021. The average basket size grew 6.3% to $7.59 and is up 22.4% on a two-year stack basis.
Direct store operating expenses rose 14.3% last year, with wages and benefits rising 10.7% to $71.7 billion. Card fees, meanwhile, rose 25.6% to $13.5 billion. Staff turnover was 150%, the highest since 2012, with full-time employee turnover at 119% and part-time turnover at 182%.
According to the report, while sales may have improved in 2021, the way consumers approach retail shopping has been radically altered by the pandemic. The rise in ecommerce sales and a slow return to office for consumers working from home helped keep foot traffic below 2019 levels, making it “imperative that the basket continues to grow” for the channel to continue driving sales growth.
“Progressive retailers might establish a goal of meeting pre-pandemic transaction counts in 2022 and beyond, but that goal would be a lofty one, even with the understanding that 2021 was not a fully normal year,” the report stated. “The industry was still resetting and some geographies did so much later in the year.”
Looking ahead, the report urged retailers to embrace new technologies and focus on operational efficiency to draw in shoppers and reduce expenses. In particular, as food service sales benefited from higher mobility, retailers were advised to repurpose excess ingredients in creative ways, such as using pizza dough “as a handheld breakfast sandwich” or “a smoothie that debuts as a morning breakfast bowl with added ingredients” while also expanding the amount of offerings made with fresh ingredients throughout the day.
Among foodservice sales, prepared food made up 66.7% of sales, while hot dispensed beverages (13.2%), cold dispensed beverages (7.85), commissary (6.6%) and frozen dispensed beverages (5.8%) rounded out the category.
“Getting foodservice right also means exploring ways to think cross-category about promotions,” the report noted. “In today’s inflationary times, operators who can use promotional offers that create affinities between fuel and foodservice purchases or through bundling strategies across merchandise categories can enable the shopper to stretch their available food dollar and increasingly win trips leaking elsewhere.”