Times they are a
changing once again. Have you heard that Volkswagen delivered around 394,000 electric vehicles (EVs) in
2023, which is a growth of 21.1% from the previous year 1. The largest markets for Volkswagen’s EVs included China, Germany, the US,
the UK, Sweden, France, Norway, and Belgium 1. The simple fact is it will not be long
that gasoline will not be a key driver for consumers stopping at a convenience
store according to Steven Johnson
Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.
In what they
call a ‘National Report’ CSNews recently outline
what they believe lies ahead for the industry.
We want to share that in the event you missed it. Here it is:
“The industry is pretty well aware of
what lies ahead: a changing forecourt, a changing foodservice offering and a
changing merchandising mix. Focusing on where the emerging trends that are
driving these changes intersect will hold the key to thriving for years to
come.
EVs
& the Convenience Value Proposition
The
impact electric vehicles (EV) have on the convenience channel remains to be
seen. Driven by consumers' desire to "go green" and legislative moves
on the state and federal levels aimed at phasing out gas-powered vehicles could
be a huge game changer for the industry. However, there are some critics who
are not ready to crown EVs as the next big thing. In late October, economist
Steve Moore told Fox Business' Varney & Co. that EVs may be the "next
big flop" for automakers and likened it to Ford's Edsel model car.
But
c-store retailers cannot take a wait-and-see approach if they want to keep up
with major chains that are already preparing for a growing EV customer base by
adding charging stations to their stores.
Last
year, Altoona, Pa.-based Sheetz Inc. surpassed a
major milestone of more than 2 million EV charging
sessions. An early adopter of public EV charging stations, the
convenience retailer installed its first EV charger in Pennsylvania in 2012.
And in September 2023, Media, Pa.-based Wawa Inc. added charging stations to
its 150th location.
Aside
from embracing the evolving mobility scene, both these c-store chains have
something else in common: well-known foodservice platforms that have built up
what some may call a fanatical fan base. And foodservice could play — and most
likely will play — a critical role in attracting the EV consumer.
"Our
convenience store customers are all having that conversation about what does
five years, 10 years look like when EVs take a higher percentage of cars on the
road, and how do they capture that market share of folks who need to settle
down and wait for 30 minutes instead of a five-minute fuel up,"
said Patrick O'Mara, senior solution principal for RELEX Solutions, a
supply chain and retail planning platform.
"How
do you then actually transfer people from in their cars — where the cars
essentially become little TV studios or movie theaters themselves — and get
somebody out of their car into the facility for whatever purpose you're trying
to serve?" he asked.
As
O'Mara noted, Sheetz has a mix of indoor and outdoor dining options and travel
centers offer an array of quick-service restaurant (QSR) options. "I think
an interesting model is the truck stop-travel center model. They obviously
cater to customers who are already on that similar kind of timeline, although
the rest period of a driver is significantly longer than that of somebody who's
just making a road trip, for example," he explained. "I think it's a
good model of where you've seen QSRs that invite people to come in and sit down
as opposed to having folks more of that kind of grab-and-go traditional
convenience."
Whatever
the mix, when it comes down to it, if retailers are positioning themselves for
a future where EVs account for 20% or 50% of the market they need significantly
more space dedicated to dining or entertainment "to be able to attract
people to your fueling station or recharge station versus another," he
added.
EVs
& the Evolving Foodservice Offer
It's
not just the dedicated space that will change, but the offer itself. As Convenience
Store News posed in our May 2023 issue, do c-store retailers without
foodservice have a future in the industry? The answer is, probably not. Add EV
customers who are looking for something to do while charging their vehicles and
the answer slips closer to no.
Whether
that foodservice offer begins to resemble something like the Central Perk
coffee shop in TV sitcom "Friends" or a fast-casual sit-down
restaurant depends on the retailer and the geography.
"I
don't think there's a one-size-fits-all approach. In convenience today you've
got Sheetz, Wawa and Casey's that are foodservice operators at a high degree,
selling very different food products to very different consumers," O'Mara
said. "On the east coast, having more of that lounge kind of feel makes a
lot of sense, whereas maybe in the Midwest and small towns, having that coffee
shop doesn't make as much sense because it doesn't attract that type of
consumer."
EVs
& the Evolving Experience
What
is important, according to O'Mara, is standing out from the crowd. "Having
that unique differentiated experience that's going to drive people into that
specific location is going to make sense," he said, specifically calling
out Buc-ee's. "If I'm on a road trip and I stop into a Buc-ee's, even
though I'm getting gas, I'm going to spend 30 minutes inside walking through
and just marveling at it. They already have an experience that's set up.
They're just missing the EV charging ports because right now their consumer is
a fuel consumer.
"That's
something I would describe as a unique experience. Yes, there's foodservice,
you can get coffee. They don't call it a lounge or in-store dining, but they're
already capturing customers for 30-ish minutes," he added. "I think
having differentiated experiences based on where you're located and who your
consumer is, is really going to make the difference and who's successful and
making that transition to an EV consumer."
The
experience does not need to be extreme and could be as simple as a dog park. As
a travel center operator, Oklahoma City-based Love's Travel Stops is already
well positioned to attract EV customers traveling the nation's highways. Add to
it its growing dog park network, and it has upped the ante.
"Labor
costs are growing exponentially, especially in this industry, being able to
have something that's low cost like a dog park where you've got more long-term
maintenance costs associated as opposed to day-in, day-out labor costs, that's
a great way to capture customers at a higher margin as long as you're also
getting them to spend," O'Mara said.
That
brings up another conversation around EV charging: monetization, he noted.
"Right now, we're almost training consumers that fuel should be free, and
that's not sustainable," O'Mara said. "As we get 75% of Americans
driving EVs, you have to charge for electricity. How can retailers figure out
the monetization of the EV component, but then also how do they then extend and
capture that customer?"
With
a dog park, that may be selling dog treats or having a walk-up coffee window,
so customers do not have to come inside with their dogs. "Being able to
kind of pair that, again, differentiated experience I think is something that's
going to create a winning environment," he noted.
Value
& the Convenience Proposition
The
future may bring rise to a new growing customer base, the EV consumer, but the
economics of the here and now has brought rise to the value-seeking consumer.
At
its meeting on Nov. 1, 2023, the Federal Reserve Board held short-term interest
rates steady for the second consecutive month but the impact of continuous rate
hikes since March 2022 could be felt for some time to come — especially with
the possibility of a future hike on the table for the board's December
meeting.
Inflationary
pressures and uncertainty are taking its toll on U.S. consumers and it has been
reflected on their shopping habits, noticeably when it comes to shifting to
private label brands.
Value
& the Growth in Private Label
For
the first half of 2023, store brands again posted record sales and share —
similar to the past 18 months, according to a report from the Private Label
Manufacturers Association (PLMA). The success of store brands at the checkout
includes outdistancing national brands in two key metrics.
Store
brand dollar sales across all U.S. retail outlets increased 8.2% vs. 5.1% for
national brands year over year for the six-month period ending June 18, 2023,
according to Circana data. That extends store brands' powerful two-year run.
Measured against the first six months of 2021, dollar sales during the same
period this year improved by 16%, or roughly $17 billion ($91 billion
in 2021 vs. $108 billion in 2023).
C-store
chains are taking notice and many are ramping up their selection of private
label items on the shelves.
Over
the past three years, Ankeny, Iowa-based Casey's General Stores Inc. expanded its private label
line to more than 300 SKUS from an assortment that previously had bottled water
and some bag candy.
"It's
been a tremendous boom to our business. Today about 10% of our units and about
10% of our gross profit dollars in the grocery general merchandise category
come from our private label brands," President and CEO Darren Rebelez said
following the company's Investors Day in late June. He added 120 of those
300-plus items are SKUS only found at Casey's. "They're unique to
us. It gives our guests another reason to come to the store."
Additionally,
Laval, Quebec-based Alimentation
Couche-Tard Inc., the parent company of the global Circle K banner, has
identified private label brands as an opportunity to grow as part of its next
five-year plan.
As the retailer announced on Oct. 11, 2023, it is looking to launch
approximately 110 new products to its stores this year on top of the 250
to 300 products already in the merchandising mix across its stores. Currently,
private brands are approaching 10% penetration in Couche-Tard's strongest
markets.
Private
Label & Staying Power
Regardless
of what happens with the economy, there is some indication that consumers'
interest in private label products could be here to stay. The second
installment of the 2023 Power of Private Brands series from FMI – The
Food Industry Association found that 96% of grocery shoppers purchase
store brands at least occasionally and 46% purchase private brands most or all
of the time.
Furthermore,
approximately 60% of shoppers are buying private brands much more or somewhat
more in the past year, compared to 26% national brands.
And,
according to FMI's research, 90% of shoppers say they are likely to continue
purchasing private brands regardless of inflation or grocery price changes
which points to the growing loyalty shoppers have for store brands. Sixty-eight
percent of shoppers still cite price as their top reason for buying private
brand items, while nearly and equal number (67%) cite good value.
Foodservice
Solutions® team is here to help you drive top line sales and bottom-line
profits. Are you looking a customer ahead?
Visit GrocerantGuru.com for more information
or contact: Steve@FoodserviceSolutions.us Remember success
does leave clues and we just may the clue you need to propel your continued
success.
.jpg)
