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Consumers thirsty for better-for-you beverages 

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In 1886, Atlanta pharmacist John S. Pemberton came up with the most consequential new consumer packaged good product idea in recorded human history—Coca-Cola. The key to this innovation was the mixing of uniquely flavoured syrup with carbonated water, creating the first Carbonated Soft Drink (CSD).

A single serving of Coca-Cola in 1886 sold for 5 cents per glass and daily consumption was approximately nine glasses per day, making for an annual revenue of less than $200. From this humble start, the Coca-Cola Company has grown during its 100-plus years to a market cap of roughly US$230-billion. Current global consumption of all types of Coca-Cola beverages is close to 2-billion servings per day.

 Trend is your friend, until it ends

Despite its market dominance, there are storm clouds gathering on the horizon for traditional Coca-Cola. 

 According to Euromonitor International, a leading independent provider of strategic market research, North American sales by volume of CSDs have shrunk by approximately 1% per year since 2014. In contrast, during the same period, sales of better-for-you health and wellness beverages have increased nearly 30%.

In a recent presentation, Beverage Marketing Corporation noted: “Carbonated soft drinks… declined slightly for the 14th consecutive year, and declines have continued into 2019… more declines are likely to come in the years ahead (as) consumers are migrating to healthier options and want more variety.”

CSDs, while still a significant slice of the beverage pie, are trending down in mature Western markets.

 The rise of functional beverages

Technomic’s 2018 Canadian Beverage Consumer Trend Report details important shifts in the beverage market:

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Functional beverages defined

 There are many terms that can be applied to beverages under the umbrella of better for you (BFY) or health and wellness .

 Broadly speaking, they cover naturally occurring or essential additives that offer the potential of enhanced health and/or reduced risk of disease. So-called healthy beverages generally tend to:

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What’s new in functional beverages?

The Innova New Product Database is the world’s largest database tracking new food and beverage product launches. The top ranked beverage health claims as a percentage of total new launches (2018) include:

  1.   Antioxidant
  2.   Energy / alertness
  3.   Digestive / gut health
  4.   High source of protein
  5.   Probiotic

Claims of digestive/gut health, high protein and probiotics are all trending up. Significantly, the global trend on new soft drinks launches with a kombucha claim tracked 68% growth. (See below for examples of new products.)

Be thirsty for change

Screen Shot 2020-02-14 at 9.23.04 AMTechnomic’s 2018 Canadian Convenience Store Consumer Trend Report states: “Healthy eating trends are creating opportunities for c-stores. Increasingly, consumers are seeking not just healthy options, but foods and beverages that provide meaningful benefits.” Global consumer demand for functional beverages is expected to expand at a compound annual growth rate (CAGR) of 11% from 2019-2023, with 36% of the growth coming from North America (Exhibit 1).

And there’s even more on the line when it comes to owning the beverage space. For instance, using beverage offerings to achieve broader consumer reach is exactly what McDonald’s did a decade ago when it set out to target Starbucks and Tim Hortons with a fully revamped coffee program.

McDonald’s recognized that breakfast was the fastest growing part of the day for foodservice. According to research company NPD Group, breakfast sandwiches make up a third of all orders placed during that time of day. Combine that with the interest of GenZ consumers in premium coffee offerings, and McDonalds strategic path was clear—grow coffee consumption as a means to win the breakfast wars.

In 10 years, McDonald’s has tripled its drip coffee sales and more than doubled its market share to north of 13%. Its newest streetfront McCafés outlets extend the café experience with an eye towards capturing even more away-from-home food dollars.

The bottom line for your bottom line

Screen Shot 2020-02-14 at 9.32.59 AMAfter a century of unparalleled growth, shifts in consumer tastes away from CSDs have primed a reorientation in the beverage space. Fortunately, convenience stores can leverage competitive advantages to profit from this change. The opportunity is at hand to translate c-store strengths—diverse channel affiliations, large refrigerated and ambient shelf-space, and deep category knowledge—into the taking of a bigger slice of the pie. 

Increasingly fragmented consumer demand for better-for-you beverages should be seen as a welcome challenge, an opportunity to leverage a c-store point of difference, and grow your bottom line.

 

Darren Climans is a foodservice insights professional with close to 20 years’ experience partnering with broadline distributors, CPG suppliers, and foodservice operators. His practice is to understand issue-based decisions by taking a data-driven approach to strategic decision making

Originally published in the January/February issue of Convenience Store News Canada. 


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5 topline insights from C-store IQ: National Shopper Study

Defining convenience: New data delves into the minds and habits of Canadian c-store shoppers

Convenience means different things to different people, but for most c-store shoppers it’s about saving time and effort.

As expected, the definition of convenience includes location, hours and product selection, however, for a growing number of Canadian consumers it also comes down to overall ease of experience. 

Convenience stores that prioritize simplifying the shopping and purchase steps are more likely to see rewards with increased traffic and basket size, according to insights from the new C-store IQ: National Shopper Study from Convenience Store News Canada.

C-Store IQ is the first convenience and gas specific study that delves into the wants, needs, perspectives and habits of Canadian consumers. We worked with the research team at EnsembleIQ and Canadian Viewpoint Inc. to survey more than 1,000 convenience shoppers across the country to bring our readers and our partners the insights and data necessary to better understand customers and achieve business success. 

Survey participants shared their definitions of convenience and so much more in this comprehensive study: This is a topline report and we will be digging into the data throughout 2020, both in the magazine and online. 

For starters, Canadian convenience store shoppers associate the word ‘convenience’ with overall speed—41% of those surveyed said it purely comes down to having a “convenient” experience and 34% define this as a “quick stop/in and out.”

Proximity—to home and work—is important, with 25% of shoppers saying convenience is “close to me,” while 16% said longer hours and being open when larger stores are closed is important. 

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WHO’S SHOPPING?

A quick stop at a convenience store is part of the fabric of daily life for most Canadians: 43% shop chain convenience stores and 38% visit independently-owned convenience stores at least once a week.

Millennials lead the charge when it comes to convenience shopping: 50% said they shop a chain c-store at least once a week, compared to 45% of generation X and 36% of baby boomers. For independently owned c-stores, 42% of millennials are more likely to shop at least weekly, compared to 34% of generation X.

WHAT’S DRIVING CUSTOMERS IN-STORE?

Location, location, location: For more than half—54%—the key element that prompts them to visit a particular c-store is proximity, followed by the need to purchase gas (46%) and loyalty programs (28%). 

More than half of c-store customers shop at a convenience store that has a loyalty program and 42% are enrolled in and actively use their store’s loyalty program. 

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Technology and related apps aren’t huge overall drivers for Canadian c-store shoppers, however when analyzing data by generation, new patterns emerge. Younger shoppers prefer less bulk in their wallets, opting instead for mobile apps.

Millennials respond more readily to digital promotional tactics (mobile app, social media promotions, mobile ordering and email) and younger shoppers in general are influenced by promotional signage or car wash promotions during their shopping trip. 

Here’s how digital efforts measure up:

  •     Mobile app: Millennials (14%) are more likely to be influenced than generation X (8%) and boomers (3%).
  •     Social media promotion/offer: Millennials (10%) are more likely to be influenced than generation X (8%) and boomers (4%).
  •     Text message: Millennials (5%) are more likely to be influenced than boomers (0.2%).
  •     Mobile ordering: Millennials (4%) are more likely to be influenced than generation X (3%) and boomers (1%).
  •     Email: Millennials (8%) and generation X (9%) are more likely to be influenced than boomers (4%).

All indicators are that the future is digital, which calls for better optimization and integration of stores’ digital infrastructures.  

WHERE AND WHEN DO CANADIANS SHOP?

Screen Shot 2020-02-11 at 12.56.41 PMCanadians are a loyal bunch, with 70% of shoppers saying they typically visit the same store each time. When considering the convenience store they shop most often, foundational attributes, including the price of products (40%), fun to shop (18%), quality of prepared foods (20%), loyalty programs (19%) and variety of products offered (16%) are the top five reasons why they favour a particular store. 

Screen Shot 2020-02-11 at 12.57.57 PMThe breakfast hours are ripe for shopper conversion, with only 17% of shoppers starting their day with a trip to the convenience store. Visits gradually increase throughout the day and peak during the rush hour/early dinner daypart, with visits from 39% of shoppers.  

 

In an ideal world, shoppers who purchase gas would also pop into the c-store to spend more money, however only 3% say they purchase merchandise and/or foodservice “every time,” while 17% purchase these items “almost every time.” In turn, 19% of shoppers say they “rarely” purchase merchandise or foodservice.

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Of the more than one-in-four people who shop for both gasoline and in-store merchandise at least once a month, 28% say they were recently influenced by frequent buyer/loyalty programs to make the trip inside and spend. About one-in-five were influenced by promotional signage and one in 10 were influenced by mobile app promotions/deals.

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WHAT ARE CONSUMERS BUYING?

Shoppers typically visit a variety of stores to satisfy their needs, however convenience stores are the channel choice of choice for a number of categories. 

Lottery tickets are a key driver, with 53% of shoppers purchasing lottery tickets in the past month, while 46% purchased gasoline. Traditional convenience products are among the most frequent purchases, with 36% of shoppers buying salty snacks, followed by candy or gum (33%), canned/bottled soda (30%), bottled water (26%) and hot dispensed beverages (25%). 

Screen Shot 2020-02-11 at 12.58.43 PMNot surprisingly, among those who purchase cigarettes and other tobacco products, c-stores are the destination of choice: 22% of consumers visit a c-store to buy cigarettes. 

Frozen drinks, almost exclusively the domain of chain c-stores, are a big pull, with 19% of shopping buying these within the last month. 

And, yes, the milk run is still a huge part of the c-store experience, with 30% of shoppers buying milk in the last month. 

There’s still plenty of room for growth in foodservice, with 16% of shoppers stopping for grab-and-go prepared foods (hot dogs, packaged sandwiches, salads etc.) and only 10% buying made-to-order food.

It’s worth noting that those who define themselves as “health-conscious shoppers” are likely to spend more than non-health-conscious shoppers, mostly owing to the higher priced better-for-you products. 

HOW MUCH ARE SHOPPERS SPENDING?

On average, shoppers spent $13.56 during their most recent convenience store trip, not including the price of gasoline. Cards are king, with more than one-third of shoppers (35%) using a debit card, while 31% opted for a credit card. Cash is still a major mode of payment for 30% of shoppers, while mobile payment accounts for only 1% of purchases. It’s worth noting, however, the generational divide when it comes to payment preferences: 38% of boomers and 29% of generation X are more likely to have paid with cash, compared to 22% of millennials. Instead, 41% of millennials said they paid via credit card, compared to 27% of generation X and 25% of boomers.

Younger shoppers already demonstrate higher usage of debit and mobile payment compared to older generations and, as a result, convenience stores will continue to benefit from opportunities to offer more digital or frictionless shopping, payment, and promotional solutions. 

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According to spending patterns, younger shoppers are the c-store shopper of the future: A large percentage of boomers spend less than the younger generations, perhaps indicating they depend less on quick c-store visits to buy essentials. 

Overall, however, as Canadian consumers feel increasingly time-pressed and, in turn, seek solutions to make life easier and more streamlined, c-stores have an important role to play in meeting these needs by delivering the right products, at the right time, right away:  It’s all about convenience. 

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