POWERING THE FUTURE OF CONVENIENCE RETAIL...2020/10/20 · Source: IRI POS data Convenience channel for edible scan products. Includes archived data. Moody’s Aug 2020 baseline Includes

Part October

2020

POWERING THE FUTURE OF CONVENIENCE RETAIL

COVID-19

The Changing Shape of the CPG Demand Curve 20

© 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2

EXECUTIVE SUMMARYDuring the COVID-19 pandemic, the convenience channel has been negatively impacted: consumers are opting to shop large format stores and the employed are working from home more, resulting in fewer commutes. Representing $166B of IRI’s $1.1T total tracked sales,convenience represents a valuable channel in CPG retail. For many manufacturers, this channel represents meaningful growth year-over-year. This report provides insight into recovery of the convenience channel and strategies for manufacturers and operators to reinvent and connect with shoppers seeking convenience for success in a post-pandemic world.

Road to Recovery for Convenience & Gas

• Convenience channel growth is cyclical and tied to macro-economic trends, including gas prices and housing starts. Today, it’s also dependent on pandemic recovery and full consumer mobility.

• Some high-growth categories pre-COVID-19 (e.g., salty snacks, pastry/doughnuts) have decelerated as on-the-go occasions eroded.• Beverage alcohol sales have increased dramatically as on-premise consumption remains constricted.

Implications for Manufacturers• As the channel bounces back, re-evaluate

assortments (e.g., larger packs, multi-serve packs).

• Partner with convenience retailers to bring excitement

to your categories; support cross-promotion with

products associated with trip drivers.

• Growth of suburban/rural units and loss in urban

markets indicates an opportunity to review assortment

and reframe for changing needs of shoppers; for

urban markets especially, promote convenience of

purchasing meal solutions with essential products.

• Offer products that fit both cash-strapped consumers

and premium products for those not impacted by

unemployment or financial constraints.

• Boost assortment of healthy options that support both

pandemic and flu season.

Implications for Retailers• Adapt and communicate the key value proposition of the channel:

convenience. Invest in omnichannel technology for pre-ordering,

curbside pickup and home delivery. Expand assortment for curbside

pickup and home delivery as consumers shop for more in-home

consumption occasions, especially with foodservice offerings and

other meal and snack solutions. Encourage pairing with essentials

like milk and paper products.

• Tailor assortment and pack sizes to drive additional growth in

categories such as beverage alcohol, non-alcohol drinks, and others.

• Leverage “trip driver” categories such as beverage alcohol to

promote complementary items, such as snacks, refrigerated entrées,

and foodservice items.

• Urban markets are suffering with de-densification; operators should

shift support to later dayparts such as mid-day, late night vs.

morning.


The U.S. Economy

Is Following the

Global Trend

of Shrinking

Economies in the

Third Quarter 2020

Source: U.S. Census Bureau

-4.3%Economic Growth

Q3 2020

1.3%Inflation

September 2020

330.4MMPopulation

October 2020

0.6% Annual Growth

$2.18Average Price

per Gallon of Gas

September 2020

7.9%Unemployment Rate

12.4% Underemployed

September 2020 1.0%Retail Sales

September 2020

In the U.S., modest

employment gains

result from easing of

pandemic restrictions.


Macro Drivers % Change vs. YA

Convenience Channel Growth Occurs in Cycles, Often Linked to Macro

Trends, Including Disposable Income, Gas Prices and Housing Starts

Convenience Channel Edible Sales % Change vs. YA

3 34

-1-2

34

3 3 3

6

9

12

10

6

2

0

1

44

34

56

88

6

33 3

21 1

3

23 3 4 3 3

5

4

23 3

Q3 2

009

Q2 2

019

Q3 2

012

Q2 2

009

-3

Q1 2

018

Q4 2

017

Q3 2

010

Q3 2

008

Q2 2

016

Q3 2

014

Q4 2

008

Q3 2

015

Q4 2

010

Q1 2

010

Q1 2

009

Q2 2

011

Q4 2

009

Q3 2

020

Q1 2

011

Q3 2

019

Q3 2

017

Q3 2

011

-3

Q4 2

011

Q3 2

016

Q1 2

012

Q2 2

012

Q4 2

012

Q1 2

017

Q1 2

013

Q1 2

016

Q2 2

013

-1

Q1 2

020

Q4 2

013

Q3 2

013

Q1 2

014

Q2 2

014

Q4 2

014

Q2 2

010

Q1 2

015

Q4 2

015

Q2 2

015

Q4 2

016

Q2 2

017

Q3 2

018

Q4 2

019

Q4 2

018

Q1 2

019

Q2 2

020

-2

Q2 2

018

Dollars Volume

4 2 0 -1 -1 1 3 3 4 5 6 5 5 4 5 5 4 7 0 0 1 -1 4 5 6 6 6 5 4 3 3 3 3 3 4 5 5 5 6 6 6 6 5 4 3 3 3 12 10

34 -22 -39 -38 -33 14 42 20 6 10 19 34 34 17 10 -1 0 4 0 -3 -2 -6 -4 2 -2 -12 -32 -27 -25 -23 -16 -15 -14 2 23 7 9 13 10 17 15 3 -9 -2 -6 -1 2 -29 -13

-33 -43 -50 -47 -32 -15 17 13 -1 -4 -6 -5 6 23 21 28 26 36 35 18 13 11 -2 14 17 4 4 17 13 7 17 1 -1 10 8 1 2 1 7 8 5 -6 -8 -1 4 22 24 -17 -11

Disp. Income

Gas Prices

Housing Starts

Great

Recession

COVID-19

Note: Macro indicators are Total U.S. disposable personal income per BEA, all grades retail gas prices per EIA, and housing starts per U.S. Census.

Source: IRI POS data Convenience channel for edible scan products. Includes archived data. Moody’s Aug 2020 baseline


C&G’s 2020 Sales Dipped Dramatically with Mobility and Gas Prices in April-May;

Even in Late Sept., Restricted Mobility Continues to Hold Convenience Sales Back

C&G Total Store Weekly $ % Change vs. YA

Weekly U.S. All Grades All Formulations Retail Gasoline Prices (Dollars per Gallon) % Change vs. YA

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

05-31-20

01-12-20

01-05-20

09-27-20

08-23-20

01-19-20

02-02-20

01-26-20

05-17-20

02-09-20

02-16-20

02-23-20

03-01-20

03-29-20

03-08-20

07-05-20

03-15-20

03-22-20

09-06-20

04-05-20

04-12-20

04-19-20

04-26-20

05-03-20

05-10-20

05-24-20

06-07-20

06-14-20

08-30-20

06-21-20

06-28-20

07-12-20

09-20-20

07-19-20

07-26-20

08-02-20

08-09-20

08-16-20

09-13-20

Mobility % Chg

$ % Chg

Gas Prices % Chg vs YA

Source: IRI TSV; https://www.cspdailynews.com/technologyservices/signs-c-store-foot-traffic-rebound; Gas Price Source: U.S. Energy Information Administration; Note: Mobility - Google Mobility Report, based on Retail and Recreation % Chg from pre-COVID-19 baseline (Jan 3-Feb 6, 2020); https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=W

Gas Buddy reports a rebound of gas

station visits in third-quarter 2020,

back in line with pre-COVID-19

levels and up 17% from the previous

quarterly footfall index report.


UNIT SALES

ESTIMATED

VOLUME SALES

PRICE / MIX*

DOLLAR SALES

3.0

-0.2

4.3

1.13.8

-3.0

4.92.02.2 2.8 3.6

0.2

After Rebounding in Summer, Late September Reflects Increased Incidence of

COVID-19, Resulting in Lower Volume and Flat Sales in the Convenience Channel

Sales and Price / Mix Trends: Total Store / Edibles / Nonedibles

% Change vs. YA, C&G

Pre-COVID 52 Weeks

3/3/19 to 2/23/20

March – April 2020*

3/1/20 to 4/26/20

May – August 2020

5/3/20 to 9/1/20

Latest 4 Weeks

Ending 9/27/20

3.6 3.24.3 4.9

3.12.0

4.3 4.84.2 4.5 4.2 5.0

-0.6

-3.3 -3.6

0.6

-4.9

0.5

-2.7-1.9 -1.6

-0.6

-4.5

0.0

EdiblesTotal Store Nonedibles

-1.0

-9.1

-3.0-5.8

-0.6

-12.3

-4.4-6.4

-1.9 -1.2

0.7

-4.1

Source: IRI TSA; * Mar – April 2020: Excluded from remaining slides; *Dollar sales-weighted price per volume and volume change across categories


UNIT SALES

ESTIMATED

VOLUME SALES

PRICE / MIX*

DOLLAR SALES

Pre-COVID 52 Weeks

3/3/19 to 2/23/20

March – April 2020*

3/1/20 to 4/26/20

May – August 2020

5/3/20 to 9/1/20

Latest 4 Weeks

Ending 9/27/20

3.0 4.3 1.11.9

25.6

12.5 10.71.4

35.5

17.3 14.4

-0.2

Throughout 2020, Large Format Stores Are Viewed as Easier and More Convenient

to Shop than C-Stores; Shoppers Value One-Stop-Shopping and Physical Distancing

3.6 3.2 4.3 4.92.3 2.9

5.4 4.12.9 4.5 6.1 4.3

-0.6 -3.3 -3.6-0.4

22.0

6.7 6.3

-1.5

29.7

10.6 9.7

0.0

Conv MULO Grocery

-1.0

-9.1-3.0 -5.8

-0.6

21.7

6.0 5.8

-1.7

27.5

8.7 7.7

Sales and Price / Mix Trends: Total Store / Channels

% Change vs. YA, C&G

Source: IRI TSA; * Mar – April 2020: Excluded from remaining slides; *Dollar sales-weighted price per volume and volume change across categories


High-Growth Categories Pre-, During-COVID-19 Include Bev Alcohol, Energy, Sports

Drinks; Salty Snacks, Pastry/Doughnuts Decelerated as On-the-Go Occasions Eroded

Top 21 Total Store Categories with Sales of $1B+ // C&G // % Change vs. YA

Dollars Volume

Ranked by C&G

Pre-COVID-19 $

Pre-COVID 52 Weeks

$ (MM)

3/3/19 to 2/23/20

Pre-COVID-19

52 Weeks

3/3/19 to 2/23/20

May – Aug 2020

5/10/20 to 8/30/20

Latest 4 Weeks

Ending 9/27/20

Pre-COVID-19

52 Weeks

3/3/19 to 2/23/20

May – Aug 2020

5/10/20 to 8/30/20

Latest 4 Weeks

Ending 9/27/20

TOTAL STORE $160,280 3% 4% 1% -0.6% 0.0% -4

EDIBLE $82,751 4% 5% 2% 0.6% 0.5% -3

NONEDIBLE $77,529 2% 4% 0.2% -2% -0.6 -5

CIGARETTES $55,595 -0.9% 2% -1% -5% -1% -6%

BEER/ALE/ALCOHOLIC CIDER $20,586 5% 17% 11% 1% 12% 6%

ENERGY DRINKS $9,694 8% 3% 2% 7% 2% 2%

CARBONATED BEVERAGES $8,597 0.3% 3% -0.3% -4% 0.9% -4%

SMOKELESS TOBACCO $7,663 6% 7% 4% 0.9% -0.5% -4%

SALTY SNACKS $5,740 5% -7% -5% 0.7% -12% -11%

ELECTRONIC SMOKING DEVICES $4,680 52% -8% -0.4% 44% -12% -6%

BOTTLED WATER $4,548 3% -4% -6% 5% -9% -12%

CIGARS $3,504 -0.1% 16% 8% -1% 10% 2%

TEA/COFFEE - READY-TO-DRINK $3,399 -0.4% 0.3% -1% -5% -5% -8%

SPORTS DRINKS $3,135 8% 10% -3% 0.1% 4% -10%

CHOCOLATE CANDY $2,860 1% 2% 3% -2% -4% 0.4%

NON-CHOCOLATE CANDY $2,104 4% 6% 8% 1% 0.0% 2%

PASTRY/DOUGHNUTS $1,760 4% -8% -6% -2% -13% -10%

DRIED MEAT SNACKS $1,665 4% 10% 9% 6% 1% -4%

BOTTLED JUICES - SS $1,536 -0.8% 2% -3% -3% -1% -7%

ENTREES - RFG $1,451 -0.4% -8% -9% -3% -5% -8%

MILK $1,351 -6% 2% 2% -9% 0.9% -1%

SPIRITS/LIQUOR $1,350 15% 43% 33% 13% 33% 22%

WINE $1,162 5% 13% 10% 3% 8% 6%

GUM $1,046 2% -27% -27% -0.7% -29% -28%

Category Dollar Sales Growth Above Total Store Growth

Source: IRI TSA


Major C-Store Pre-COVID-19 Growth Contributors Under-Indexed During Summer

Months, Including Energy Drinks and Salty Snacks; Beer / Wine / Spirits Over-Indexed

Top 25 C&G // C&G // % Contribution to $ Change

Ranked by C&G % Contribution

Pre-COVID-19

52 Weeks

Pre-COVID 52 Week $ Sales

3/3/19 to 2/23/20

May – August 2020

5/10/20 to 8/30/20

Pre-COVID-19 $ (MM) % Contribution to $ Change Index % Contribution to $ Change Index

Electronic Smoking Devices* $4,680 1178 -207

Beer/Ale/Alcoholic Cider $20,586 155 359

Energy Drinks $9,694 268 76

Smokeless Tobacco $7,663 197 161

Salty Snacks $5,740 166 -187

Sports Drinks $3,135 244 222

Spirits/Liquor $1,350 453 735

Bottled Water $4,548 112 -106

Non-Chocolate Candy $2,104 139 145

Pastry/Doughnuts $1,760 121 -213

Dried Meat Snacks $1,665 123 222

Wine $1,162 155 274

Chocolate Candy $2,860 47 57

Carbonated Beverages $8,597 9 81

Gum $1,046 60 -884

Cigars $3,504 -3 340

Entrees – Rfg $1,451 -14 -220

Bottled Juices – Ss $1,536 -29 52

Tea/Coffee - Ready-to-drink $3,399 -13 7

Milk $1,351 -217 40

Cigarettes $55,595 -33 58

All Other $13,383 86 39

Source: IRI TSA; Index: % $ Contribution/% $ / *Flavor bans and other restrictions on electronic smoking devices have negatively impacted the category.

-6%

-6%

-3%

-2%

53%

5%

7%

6%

8%

2%

3%

2%

1%

4%

-4%

-2%

8%

0.5%

0.1%

0.3%

19%

4%

0.4%

-0.1%

-0.1%

-0.3%

9%

-0.3%

-2%

-11%

34%

20%

16%

9%

5%

4%

3%

1%

1%

6%

0.8%

0.5%

2%

1%


Alcohol trip frequency has improved across MULO+C, but still posting negative YA growth, except

in Club and C-Store; Liquor channel trip frequency has shifted negative vs. YA in latest period

1.8

0.4

1.10.6

0.2 0.1 0.3

2.0

-0.1

1.40.4

0.0 0.0

0.2

1.9

-0.4

1.20.9

-0.2

0.2

GroceryX Walmart Liquor DrugClub MassX C-Store

0.0

% HHS BUYING CHANGE VS. YA

TRIPS PER BUYERS % CHANGE VS. YA

DOLLARS PER BUYER % CHANGE VS. YA

DOLLARS PER TRIP % CHANGE VS. YA

12.6

-0.3

20.4

3.5

-1.9-7.1

16.39.8

1.0

16.3 17.8

5.7 8.8

38.7

8.5 4.910.6

18.010.0

23.5

35.8

Liquor C-StoreGroceryX Walmart Club Drug MassX

-1.5-5.1

2.8

-1.2

-15.6

-7.9

-0.3

-2.2-9.1

0.93.7 4.1

-1.1-3.7

-1.2

6.8

-1.3-4.0

7.8

GroceryX Walmart MassXLiquor C-StoreClub Drug

-4.1-0.7

14.3

5.1

17.1

4.8

16.2

0.9

16.712.311.1

15.313.7

10.2

9.5

33.2

9.8 8.9 11.9 10.4 11.4

28.6 26.0

DrugGroceryX Walmart C-StoreLiquor Club MassX

Source: IRI CSIA, Rolling 4 Weeks, Total US All Outlets

BEVERAGE ALCOHOL CASE STUDY

Convenience Benefits from Elevated Beverage Alcohol Dollar

Growth, Aided By Increased Trip Frequency, Spend per Trip vs. YA

4 WE Jul-12-2020

4 WE Aug-09-2020

4 WE Sep-06-2020


Ranked by C&G % Contribution – Pre-COVID-19

BEVERAGE ALCOHOL CASE STUDY Assortment of Spirits

and Wine Is

Expanding and Their

Contribution to Sales

Is Also Growing

Pre-COVID-19 52 Week $ Sales3/3/19 – 2/23/20

May – August 2020

5/10/20 – 8/30/20

Latest 4 Weeks Ending

9/27/20

% Contribution to $ Change

Beer / Ale /

Alcoholic Cider20% 53% 127%

Spirits / Liquor 4% 8% 22%

Wine 1% 2% 6%

With Access to Bars

and Restaurants Still

Limited, Focus Is On

Consuming at Home

Source: IRI TSV

Operators and manufacturer partners have a great

opportunity to cross-promote categories that are

complementary to beverage alcohol, including salty snacks,

snack nuts, refrigerated entrées, soft drinks and more.


Growth Contribution

BEVERAGE ALCOHOL CASE STUDY

Beverage Alcohol

Sales Growth

Is Up Across

Channels Compared

to Pre-COVID-19

Levels;

Convenience

Channel Lost

Its Growth

Lead During

the Pandemic

Rolling 52 Weeks Ending 02-23-20

Latest Completed 26 Weeks Ending

10-04-20

Latest Completed 4 Weeks Ending

10-04-20

Total U.S.

Convenience46% 37% 32%

Total U.S.

Multi-Outlet54% 63% 68%

Total U.S. – Food 33% 51% 55%


Several Categories That Declined in C&G in Summer Grew Significantly in Large

Format and Online Channels, Including Salty Snacks, Ref. Entrées, Pastry/Doughnuts

Top 21 C&G Categories // % Change vs. YA by Channel // May to Sept 2020

Ranked by C&G $ % Change vs. YA

Pre-COVID-19 52 Weeks $ C&G MULO Grocery eComm w/POS

Beer / Ale / Alcoholic Cider

Spirits / Liquor

Wine

Energy Drinks

Carbonated Beverages

Bottled Water

Tea / Coffee RTD

Sports Drinks

Bottled Juices – SS

Salty Snacks

Dried Meat Snacks

Chocolate Candy

Non-Chocolate Candy

Pastry / Doughnuts

Gum

Entrées – RFG

Milk

Cigarettes

Smokeless Tobacco

Electronic Smoking Devices

Cigars

Source: IRI TSV; E-Market Insights; May-Sept 2020: 05-10-20 to 09-27-20

16.0%

41.0%

12.0%

3.0%

3.0%

-5.0%

0.0%

8.0%

1.0%

-7.0%

10.0%

3.0%

7.0%

-8.0%

-27.0%

-8.0%

2.0%

2.0%

6.0%

-7.0%

15.0%

20%

27%

18%

19%

18%

10%

15%

19%

18%

16%

17%

17%

14%

13%

-21%

15%

11%

1%

-1%

-18%

3%

127%

109%

158%

37%

123%

101%

101%

70%

112%

106%

79%

101%

79%

104%

52%

45%

139%

90%

N/A

N/A

N/A

17%

23%

17%

16%

16%

8%

14%

15%

15%

14%

18%

11%

4%

11%

-23%

14%

9%

-14%

-16%

-93%

-6%


Major C-Store Growth Contributors Such as Beer/Wine/Spirits Also Drove Growth

in Large Format, While Tobacco Products Were a Growth Driver Primarily in C&G

Top 25 C&G Categories // % Contribution to Dollar Growth by Channel // May to Sept 2020Ranked by C&G $ % Contribution % Contribution – Dollar Change

May to Sept 2020 C&G MULO Grocery

Beer/Ale/Alcoholic Cider

Cigarettes

Spirits/Liquor

Cigars

Smokeless Tobacco

Sports Drinks

Energy Drinks

Carbonated Beverages

Dried Meat Snacks

Non-chocolate Candy

Wine

Chocolate Candy

Milk

Bottled Juices – SS

Tea/Coffee - Ready-to-Drink

Bakery Snacks

Cookies

Electronic Smoking Devices

Entrées – RFG

Pastry/Doughnuts

Snack Nuts/Seeds/Corn Nuts

Snack Bars/Granola Bars

Bottled Water

Gum

Salty Snacks

All Other

Source: IRI TSV; May-Sept 2020: 05-10-20 to 09-27-20; Index: % Sales Contribution / % Sales

-2%

5%

5%

1%

55%

15%

2%

4%

8%

8%

8%

3%

0.3%

2%

0.4%

0.0%

-0.6%

-1%

-4%

-2%

-2%

-3%

-3%

-4%

-6%

11% 78%

2%

1%

4%

1%

1%

2%

0.4%

0.2%

1%

0.5%

0.1%

0.4%

0.4%

4%

1%-0.6%

-0.6%

-0.4%

-0.1%

-2%

1%1%

2%

4%

-0.3%

-0.5%

73%

2%

1%

4%

0.7%

1%

3%

0.2%

0.4%

0.5%

0.5%

0.2%

0.4%

0.4%

3%

2%

0.6%0.8%

2%

5%

0%

0%0%

0%

0%


De-Densification of Cities Is Hurting Sales in Urban Markets, While Suburban/Rural

Are Driving Growth; Shifts Indicate a Need for Retooling Assortment

Performance by Store Location // Non-Alc LRB + Snacks // 2020 YTD // C&G Comp Stores* // All Shoppers

Dollars, % Change Trip, % Change Dollars per Trip, % Change

Suburban and rural clusters have led sales growth in 2020, while struggling urban

stores continue to face work-from-home disruptions, gov’t restrictions and civil unrest

Trip traffic continued to be a weakness across all clusters as work commutes are disrupted and “pantry stocking” behavior

remains popular in other channels

Despite fewer trips, shoppers are spending more on each trip across all stores; a sign of avoidance to store exposure and elements of stock-up behavior / seeking large packs

4.6

3.6

3.5

4.7

3.9

5.2

5.0

6.1

4.5

3.8

-0.6

-0.6

4 WE 092720

May-Aug 2020

L52 WE 022320

Rural

All Stores Suburban

Urban

-0.6

-7.8

-7.7

-0.4

-7.4

-6.1

-0.2

-6.0

-7.2

-1.4

-11.0

-10.9

L52 WE 022320

May-Aug 2020

4 WE 092720

5.2

12.3

12.1

5.1

12.2

12.0

5.2

12.8

12.5

5.3

11.8

11.6

4 WE 092720

L52 WE 022320

May-Aug 2020

Source: C&G Retail data thru 09-27-20; *Store universe excludes “unassigned” clustered stores within scope of rural, suburban, & urban classification


Construction Strength in Recent Months Is Increasing Optimism for Economic Recovery; Shifts

to Suburban Living, Work-From-Home Hours Will Drive C-Store Foot Traffic in New Ways

2020 Housing Starts % Change vs. YAG

Source: Wall Street Journal articles Aug-Oct 2020.

35

28

8

-13

-22

-10

11

25

Jan Feb March July August

April May June

Strong Home Sales

and New Construction

In Addition to Housing Boom, Construction Projects Drive Traffic, Both Indicators That Convenience Channel Is in Recovery


With Flexibility of Work-From-Home, Convenience Is Seeing Increased Weekday

Sales, But Fridays Are the Busiest; Even in Recovery, Many Workers Will Stay Home

Day of Week % Chg, Non-Alcohol LRB + Snacks

Dollars, Comp Stores*, All Shoppers

Total $MM

(May-Aug) $53 $55 $56 $58 $62 $54 $44

Dol % Shr of Total

Wk (May-Aug) 13.9% 14.3% 14.7% 15.1% 16.1% 14.2% 11.6%

Pt Chg vs. YA

(May-Aug) 0.3 0.3 0.2 0.2 -0.7 -0.3 0.0

ALL DAYS

May-Aug 2020

$382MM; +3.6%

WEEKDAYS (Monday – Thursday)

May-Aug 2020

$222MM; +5.4%

WEEKENDS (Friday – Sunday)

May-Aug 2020

$160MM; +1.2%

4.6 4.7

4.6

6.0

4.2

3.9

5.1

3.8

3.6

5.6 5.9

4.9 5.1

-0.5

1.1

3.8

3.5 3.9 4.2

4.1 4

.6

2.4

1.1

4.7

ThursdayTuesdayAll Days SaturdayMonday FridayWednesday Sunday

May-Aug 2020L52 WE 022320 4 WE 092720



Mornings Continue to Struggle Even in Recent Periods; Mid-Day, Afternoon,

and Evenings Are Growing and Taking Share From Other Day Parts

Time of Day % Chg, Non-Alcohol LRB + Snacks

Dollars, C&G Comp Stores*, All Shoppers

Total $MM

(May-Aug) $42.8 $83.9 $87.3 $83.4 $60.9 $23.5

Dol % Shr of Total

Day (May-Aug) 11.2% 22.0% 22.9% 21.8% 15.9% 6.2%

Pt Chg vs. YA

(May-Aug) -0.5 -1.4 0.6 0.3 1.2 -0.2

4.6 5.2 6.0

4.4

4.4

3.4

3.03.6

-0.8

-2.7

6.4

5.0

11.8

1.1

3.5

-0.2

-1.3

4.7

3.4

9.3

11.7

Late Night

(10p-2a)

Early Morning

(2a-6a)

Morning

(6a-10a)

Total Day Mid Day

(10a-2p)

Afternoon

(2p-6p)

Evening

(6p-10p)

May-Aug 2020L52 WE 022320 4 WE 092720



Once a Traffic Driver, Operators Must Invest to Rebuild Valuable Foodservice

Operations; Focus on New Daypart Solutions, Technology Solutions for Ease

High margin offerings including fountain sales, coffee, and baked goods took

a hit during pandemic due to temporary suspensions to implement new safety

protocols and dip in visits / traffic.

Operators can fight back by boosting customer service, including hiring

additional personnel to staff fresh food offerings; supporting in-store cleanliness;

offering curbside and drive-through fulfillment.

Operators should consider adopting new technologies to accommodate

online orders, curbside pick-up and even delivery.

Shift focus away from morning commute to different day parts to accommodate

work-from-home breaks and school-from-home breaks; evening.

For urban areas, factor in lost commuter traffic and focus on urban dwellers; in

suburban / rural markets, cater to larger populations working and studying from home.

Standout foodservice items should be available all day. Convenience built its

reputation on “all hours” operation, and even limited, but high-quality foodservice

items will drive traffic. Promote complementary items and even household essentials.

Pre-package food items into kits and bento boxes support in-home and

on-the-go dining. C&G stores have an opportunity to reignite America’s love

of road trips with signature offerings.


Example

C-Stores Can Help Re-Ignite America’s Love of Road Trips

Even if fewer commuters are driving to work, C&G operators

can promote lower gas prices and the pleasures of a car outing.

Find inspiration from newly opened Wally’s, Home of the Great

American Road Trip, Pontiac, IL, which recaptures the upside

of family road trips of years past with all the amenities desired

today, including ample space and social distancing.

• “Experience stations” of foodservice, fountain drinks and popcorn

• Varying fuel types, including diesel and EV charging

• Wally’s-branded and Route 66-branded t-shirts, hats and other merchandise

• General merchandise

• Social media fun

• Winnebago HQ – everything for an RV road trip and camping


Specifically in Convenience, Midsize Chains Are Disappearing as Larger Firms

Buy Them Up to Build Scale; Independents Dominate by Number of Stores

Convenience Store Industry Consolidation

Source: NACS 2020 Factbook. IRI Growth Consulting secondary research. IRI Growth Consulting Analysis; https://www.supermarketnews.com/retail-financial/7-eleven-buying-3900-speedway-stores-21-billion-deal

Convenience Channel M&A Activity Store Counts by Chain Size

Independents

Large Chains(>500 Stores)

Small &Midsize Chains(2-500 Stores)

145,119

19,252(13%)

35,910(25%)

89,957(62%)

2006

148,126

19,969(13%)

34,948(24%)

93,209(63%)

2011

154,535

26,629(17%)

30,402(20%)

97,504(63%)

2016

153,237

34,786(22%)

18,045(12%)

100,406

(66%)

2020

In August 2020, 7-Eleven entered an agreement with Marathon Petroleum Corp. to acquire the 3,900 store Speedway chain. The addition of Speedway would lift 7-Eleven to 14,000 units.

In 2017, 7-Eleven acquired 1,108

Sunoco stores

In 2015 / 2016 / 2017, Circle K parent

Alimentation Couche-Tard acquired 1,800

The Pantry stores, 1,146 Valero stores, and

522 Holiday Stations

Acquired 1,500 HESS / Wilco HESS stores

and in 2018 / 2019, 1,100 Andeavor stores

In 2018, EG Group acquired 1,000 Kroger

Convenience stores, 225 TA stores, 75

Certified Oil stores, and 600 Cumberland

Farms locations


Top Trip-Driver Categories Hold Potential for Assortment Optimization vs. MULO;

Especially With Shift in Urban and Suburban Markets, It’s Time for Review

MULO’s advantage over convenience is often based on greater variety and the right

pack size. As operators and their manufacturer partners revisit traffic and shopper

patterns, a fresh look at pack size and assortment will reveal pockets of growth.

Total U.S.

Convenience

Total U.S.

Multi-Outlet

Dollar Sales

% Change vs. YA

Dollar Sales

% Change vs. YA

Energy Drinks 2.8% 12.9%

Salty Snacks -4.0% 11.9%

Bottled Water -4.1% 9.1%

Sports Drinks 6.4% 15.2%

Pastry / Doughnuts -4.6% 7.8%

Milk -1.0% 9.2%

Entrees - Rfg -6.3% 13.9%

Bottled Water Example

Among top 25 ranked

seltzer items based on

average weekly dollars

per $MM ACV, convenience

has very low distribution,

meaning that most c-stores

are not carrying this item.

Major brands Bubly and

La Croix do not rank in the

top 25 because they are

mainly sold in multi-packs.


Top Items Ranked on Average Weekly $ per $MM ACV in MULO+C

Example

Single Serve Seltzer and Sparkling Water Have High Average Sales per Store

Carrying Top 8 Items Could Potentially Bring $8,400 Profit per Store Annually

Source: IRI Unify, Sales Latest 26 Weeks Ending 10/04/20

Average Weekly

$ per $MM ACV$14.55 $13.90 $14.91 $11.70 $12.62 $7.78 $7.20 $4.89

Average Weekly

$ per Store$29.48 $20.50 $16.94 $19.51 $12.81 $18.60 $13.63 $8.94

Average Weekly

Profit $ per Store$14.74 $10.25 $8.47 $9.75 $6.41 $9.30 $6.81 $4.47


Example

Wider Selection of Seltzers in Convenience Is an Area of Opportunity

MULO has had double-digit growth in the top 5 brands of seltzer; however, the convenience

channel has not had the same trend due to carrying mostly single serve. As with all

carbonated beverages, shoppers are purchasing more multi-packs since the crisis began.

Source: IRI Unify, Sales Latest 26 Weeks Ending 10/04/20

% of Sales

Pack

CountConv MULO

1 97.7% 32.2%

8 0.5% 26.3%

12 0.8% 27.2%

24 0.1% 6.1%

TOP 5 SELLING SELTZER BRANDS IN MULO

Sparkling IceConv 0.0%MULO +29.2%

La CroixConv -8.0%MULO +22.6%

BublyConv +6.4%MULO +33.1%

PolarConv -18.9%MULO +25.4%

PerrierConv -13.4%MULO +1.9%


33% 37% 32% 30%

34%

4% 6% 3%12% 10%

-29% -27% -27% -22% -11%

Grocery Drug Convenience Mass Merchant

Dollar

Lack of Stimulus Likely to Impact

Convenience Similar to Grocery

Spending Impact by Channel if Extra $600 Weekly

Unemployment Benefit Is Reduced to $300-$400

[If extra unemployment payments are reduced from $600 to $300-$400, how will it impact where you shop for groceries, healthcare, and other HH essentials? BASE:= Receiving Unemployment : N = 159 ‘About the same’ and ‘Do not shop this type of retailer’ answers not shown

Net Difference

Spend More

Spend Less

Source: IRI Survey of Primary Grocery Shoppers 8/21-8/23


Forecasting the Convenience Channel’s Rebound

Total Store – U.S. Convenience Channel – Sum of Index

Opportunity

• Continued and/or increased restriction

on eating & drinking out drives more

alcohol and foodservice trips in

convenience and other channels.

• Holiday travel more likely by car vs.

airplane, bringing road-stop traffic.

• Shifting assortment to appeal to

changing needs for convenience

(e.g., health items, late night

indulgence, food delivery, last-minute

holiday gifts, etc.).

Headwinds

• COVID-19 resurgence and/or cold

winter weather can further limit

consumer mobility and likelihood to

stop at convenience.

• Greater loss of low-wage jobs.

Source: IRI CPG Demand Index Forecast; Note: Forecast results based on data available as of 10/14/20. Mobility rates, additional federal stimulus, and economic recovery will impact forecast moving forward.

13 WE

12-13-20

2020

Ending

12-27-20

2021

Ending

12-26-21

YTD

2020

YTG

2020

Conservative Scenario

Optimistic Scenario 105.8

103.6

107.6107.4

101.6 102.3 98.4100.0

103.7 103.0 103.0103.7102.8


Convenience Retailers Focus Investments on Core

Value Proposition: Greater Convenience for Shoppers

NACS Retailer Member Pulse Survey* Provides a Glimpse of What’s in Store for Convenience Operators

Source: https://www.cspdailynews.com/company-news/c-store-retailers-continue-see-mixed-results-2020; *Survey conducted in October 2020 among 72 NACS members companies representing 1,762 stores

21% 21%

14% 14%

have added curbside pickup

focusing more on drive-thru

added contactless payment

have added delivery

The 7NOW delivery app aims to make

life easier and convenient for shoppers.

7-Eleven customers can order-in their favorite comfort foods at any time.

• Offered in 1,300 cities

• Supports 60MM households

• Delivery in 30 minutes

• October offers a “Free Hot Pizza” promo

Enhanced Cleaning Protocols

Will Be a Part of Every

Successful Store Operation

and Survey Respondents

Indicate They’ll Make Cleaning

Efforts More Visible to Patrons


C-Stores Accelerate Tech Innovation to Fight the Effects of COVID-19

Convenience stores have pivoted to a technology-forward strategy that has sparked innovative

new ways to attract customers to a traditionally small and not-so-socially distanced format.

CURBSIDE PICK-UP

Curbside pick-up is quickly becoming a c-store standard, allowing customers to

remain in the car and socially distant from others. Casey’s, QuikTrip and

Cumberland Farms have fully integrated curbside pick-up within their

mobile apps. Alltown Fresh offers a call-ahead option, while Kum & Go

launched a full-service fueling and curbside pick-up pilot.

DELIVERY

DoorDash partnered with 7-Eleven, Wawa and others to launch a digital convenience store that delivers in 45

minutes or less with an option for contactless delivery. Some c-stores still offer their own delivery services, like 7-

Eleven, which delivers through its 7NOW platform. With that, 7-Eleven

has now joined Casey’s in the c-store pizza delivery game.

CASHLESS PAYMENT

Minimizing the interaction at checkout is essential to keeping customers

comfortable during the pandemic. Many c-stores have introduced alternatives to

cash and cards, like Apple Pay and Google Pay. However, Circle K is taking frictionless checkout to another level by piloting Mastercard’s AI-based payment

technology, Shop Anywhere, and announcing plans to open a cashierless

store, similar to Amazon Go, in 2021.


CONTACTLESS FUEL PAY

Sheetz and Kum & Go both offer contactless payment at the pump.

While Sheetz uses Apple Pay, Kum & Go enables customers to fuel up using their mobile app. Activating the pump through the app eliminates the number of contact points, keeping customers safe and even rewarding

them in the process.

DRIVE-THRU

The customer journey is changing, and drive-thrus are an opportunity to offer greater convenience and efficiency,

especially for the combination of foodservice with other purchases. Most

current c-store locations cannot accommodate drive-thrus, but this will be a consideration for new stores and

remodels moving forward.

VIRTUAL COLLABORATION

Casey’s General Stores, Kum & Go and Yesway have partnered with RangeMe,

an online product discovery platform that connects retailers with more than

175,000 suppliers. These c-stores hope to leverage virtual collaboration with suppliers by tailoring assortment to what customers want. In a period in

which consumer behavior is constantly changing, keeping shelves stocked with

the right products is crucial.

C-Stores Accelerate Tech Innovation to Fight the Effects of COVID-19 (cont’d)

Convenience stores have pivoted to a technology-forward strategy that has sparked innovative

new ways to attract customers to a traditionally small and not-so-socially distanced format.


Implications for Reinvigorated Convenience Channel

• As the channel bounces back, re-evaluate assortments (e.g., larger packs, multi-serve packs).

• Partner with convenience retailers to bring excitement to your categories; support cross-promotion with products associated with trip drivers.

• Growth of suburban/rural units and loss in urban markets indicates an opportunity to review assortment and reframe for changing needs of shoppers; for urban markets especially, promote convenience of purchasing meal solutions with essential products.

• Offer products that fit both cash-strapped consumers and premium products for those not impacted by unemployment or financial constraints.

• Boost assortment of healthy options that support both pandemic and flu season.

• Adapt and communicate the key value proposition of the channel: convenience. Invest in omnichannel technology for pre-ordering, curbside pickup and home delivery. Expand assortment for curbside pickup and home delivery as consumers shop for more in-home consumption occasions, especially with foodservice offerings and other meal and snack solutions. Encourage pairing with essentials like milk and paper products.

• Tailor assortment and pack sizes to drive additional growth in categories such as beverage alcohol, non-alcohol drinks, and others.

• Leverage “trip driver” categories such as beverage alcohol to promote complementary items, such as snacks, refrigerated entrées, and foodservice items.

• Urban markets are suffering with de-densification; operators should shift support to later dayparts such as mid-day, late night vs. morning.

MANUFACTURERS

RETAILERS


Vivek Sankaran

President & CEO, Albertsons Companies

August 25, 2020

Ram Krishnan

Global Chief Commercial Officer, PepsiCo

August 17, 2020

Brian Cornell

CEO of Target

July 16, 2020

https://www.iriworldwide.com/en-us/csuite2




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The IRI CPG Demand Index™ provides a

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IRI CPG Demand Index™ is available for eight

U.S. regions, all U.S. states, UK, France, Italy,

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CLICK HERE FOR MORE!

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The IRI CPG Channel Shift Index provides a

standard metric for tracking changes (migration)

in spending on consumer packaged goods across

select channels. The index measures weekly

changes in consumer purchases by dollar sales

and product trips against the year-ago period for

edible and non-edible products. The index is

available for seven geographies—All Outlets,

Grocery, Club, Dollar, Drug, Mass and Total E-

Commerce.


IRI CPG Channel Shift Index™



The IRI CPG E-Commerce Demand Index provides a standard metric for tracking changes in spending on consumer packaged goods purchased online. The index measures rolling quad-weekly changes in consumer purchases by dollar sales against the year-ago period across releasable edible and non-edible departments. The index is available for three channels--Total E-Commerce, Brick & Mortar E-Commerce and Online E-Commerce, and two fulfillment types –Click & Collect and Delivery / Shipment.


IRI CPG E-Commerce

Demand Index™



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Documents

POWERING THE FUTURE OF CONVENIENCE RETAIL...2020/10/20 · Source: IRI POS data Convenience channel for edible scan products. Includes archived data. Moody’s Aug 2020 baseline Includes