Between the pandemic and evolving regulations on key categories, it’s been an extraordinary year of changes and challenges for the convenience industry. CSNC editor Michelle Warren talks with Anne Kothawala, president and CEO of the Convenience Industry Council of Canada, about how the convenience industry has adapted and evolved in 2020, plus the priorities moving forward.
How did the industry fare during the early days of COVID-19?
AK: The pandemic has shown us is that c-stores are an incredibly resilient industry. We responded quickly to the challenge. At the CICC, the first thing we did was to lobby governments to ensure that every single province and territory acknowledged convenience stores to be an essential service. We also established a COVID-19 working group: It was a huge investment of time, but it was amazing to see the degree to which competitive issues were set aside to share information on dealing with the pandemic. Some of our members were able to share not only best practises from a Canadian context, but also from the U.S., Europe and other parts of the world.
What was top of mind for your members?
AK: First and foremost, our members were thinking about how do they protect our staff and our customers? That was mission-critical from the first day. How do we access PPE? How do we work quickly to install Plexiglas shields? Then, we turned to complying with the patchwork of mask regulations at the municipal level: Were they mandatory, or were they not? Having customers coming from one municipality where masks were optional and shop in a different municipality where masks were required was creating massive confusion.
What were the early lessons?
AK: Everyone quickly realized that the product mix needed to change. With more people working from home and big line-ups at grocery stores, people were going to their convenience store, ironically, for the things that they used to go to their convenience store for, like bread and milk and eggs. Kudos to our vendor partners, who quickly adapted and supplied our stores with the products that customers wanted. Whether they were independents or chains, the convenience industry really filled that role of being core to the community.
Looking ahead, what are some of the focus areas?
AK: At the CICC, we continue to advocate for fewer restrictions on the products that we are permitted to sell, as well as minimizing the regulatory burden on our industry. There's no question that everybody's expenses have gone up—you have to retool your store, provide masks to your staff, install Plexiglas. So what are we going to do to make up for it in terms of revenues? In the case of Ontario for instance, let’s make sure that the government follows through on their commitments for beer and wine in convenience stores. Despite the fact that government is obviously focused on COVID-19 related issues, they have nonetheless, to their credit, recognised that this is now more important than ever. I have no doubt the government will follow through; it’s just a question of timing. Chances are that it will be timed before a long weekend, perhaps Canada Day next year!
How are your members grappling with evolving vaping regulations?
AK: Vaping has obviously been a problem for our industry. The only silver lining is that the federal government will at some point introduce regulations with respect to both nicotine strength and flavours. This keeps getting delayed, but the latest that we're hearing is that draft regulations can be expected early next year.
We hope that the federal government will realise some of the mistakes the provinces have made. Unfortunately, the vaping issue is no longer about harm reduction or offering choice to adult smokers who want to switch. Instead, it has become about solving the youth vaping problem. People thought because kids go to convenience stores and convenience stores sell vape products, therefore we should not let convenience stores sell vape products. Never mind that we sell all sorts of age-restricted products and have the strongest track record on age verification. We want to continue to be able to offer choice to our customers. If we have adult smoking customers who come into our stores to purchase cigarettes and they want to try vaping as an alternative, they should be able to do that in the place where they buy the cigarettes—it only makes sense.
Speaking of cigarettes, contraband tobacco continues to eat into profits at the c-store level: Any updates there?
AK: Through our committee and other members, we started getting calls from people in government who were noticing that the convenience channel was bringing in a lot more tobacco tax revenue during the lockdown. We looked at which stores were generating more tobacco tax, and found they were close to reserves. When the reserves closed, our tobacco sales started to increase significantly, but as soon as they reopened our tobacco sales started to decrease. We know the importance of having third party verified research, so we've engaged Ernst & Young to do a comprehensive study on contraband tobacco across the country. We need much stronger public policy to address this issue because it can create a win-win: When demand increases in the legal sales channel, we’re remitting more taxes to government and the higher cost deters smoking. Convenience stores are not interested in Canadians taking up smoking, they're just frustrated by trying to sell tobacco and collect the taxes when they’re faced with illegal, non-tax-collecting competition.
With people using less cash and instead opting to tap and pay—how is that impacting the industry?
AK: What the pandemic has done is really shone a light on a number of issues that were there before and that we've advocated on in the past. A good percentage of transactions were always being done by credit card and now that’s even higher. In the 2019 election, the federal government committed that they would remove the interchange fee from the tax component of purchases, but then the pandemic hit. We are continuing to hold their feet to the fire on that issue because it’s quite significant—that we have to pay an interchange fee on the taxes that we collect and remit for government seems a bit ridiculous.
The proposed ban on single-use plastics is hugely significant for the convenience industry—how big a focus is this for your members?
AK: The plastics issue is similar to the mask issue in the sense that, for a lot of CICC members, particularly those that operate nationally, the blizzard of provincial and municipal regulations on single-use plastics is difficult to figure out and expensive to comply with. The federal government is consulting on this and we're going to be fighting for greater consistency and to ensure that any new regulatory regime isn’t overly burdensome for retailers and customers. It's all encompassing. We're going to be monitoring this issue very closely, participating in the consultations and potentially working with other, like-minded trade associations.
We’ve definitely learned this year that c-stores have to be open to change—what are the opportunities here?
AK: It’s being more nimble and also returning to their roots as a community hub. That hub is going to become increasingly important as people spend more time at home and in their neighbourhoods. How do we make convenience stores a go-to destination? With most people working from home, should the local convenience stores stock some office supplies? Should they create offers timed to the morning or afternoon coffee break that customers normally would take with colleagues? How do you insert yourself in people's new day-to-day lives and where are those opportunities? It's getting ahead of that and trying to predict where the customer is going: What are the things that they're going to be looking to us for? Understanding these things will really help the convenience industry get through this and potentially even grow business.
Originally published in the November/December issue of Convenience Store News Canada.