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What's on the horizon for Canadian convenience in 2023?

CSNC spoke to industry experts and consultants, c-store owners and executives, and pored over the latest research and news. Those sources helped curate our list of the top 11 trends that will likely shape, impact and define convenience in 2023.

Like all retailers, the convenience store has been impacted by rapid change, from what customers expect from the experience to technological advances. Keeping a pulse on the trends, and acting on the opportunities and challenges they create, is what helps a c-store business keep relevant and moving in the right direction.

With that in mind, CSNC spoke to industry experts and consultants, c-store owners and executives, and pored over the latest research and news. Those sources helped curate our list of the top 11 trends that will likely shape, impact and define convenience in 2023.

1. ‘Quick quality’ in foodservice

According to global market intelligence firm Innova Market Insights, the appetite is rising for quick better-for-you meals, snacks and beverages. Its 2023 Trends Survey found two out of three global consumers agree that they are “looking for simple and convenient ways to ensure my daily nutrients intake.” (The survey included respondents from Canada.)

“Culinary creativity blossomed during the pandemic and now needs to come with added convenience to meet busier routines,” says Innova, which has identified “Quick Quality” as one of its top 10 food trends for 2023.

Convenience chains are looking to keep their profile growing as a destination for healthier foods. Especially given partnerships, like between QSR banner Freshii and Parkland’s On the Run, 7-Eleven Canada, Suncor and Shell, have proven fruitful. Freshii reported a 33% increase in its consumer-packaged goods business (largely through the convenience channel) in Q3 2022 versus Q3 2021, led by its elixir, or superfood beverage shots. Their sales spiked 68% during the same period!

2. Heightened price-sensitivity

During the pandemic, people didn’t like the idea of going into a potentially crowded grocery store to pick up a few necessities. And c-stores jumped on the opportunity, carrying staples like milk and bread at a higher price point than most grocers for that convenience and peace of mind.

But the economy is changing behaviours. Consumers are now more willing to jump from store to store to get the lowest price on items.

Even as inflation has led to price increases over the past few months, “I see retail getting more aggressive on price in 2023,” says Bruce Winder, retail analyst and author of Retail Before, During & After COVID-19. “People are going to cherry pick and be more reluctant to buy at regular price.”

3. Subscriptions to supercharge loyalty

“2023 will bring a host of new subscriptions from convenience stores looking to engage customers and differentiate their brands,” predicts Jeff Hoover, director of strategy and data insights at Paytronix, a software-as-a-service customer experience management solutions provider.

“Customers accustomed to paying this way for everything from groceries to pet supplies see subscriptions as a source of value, while speeding up service,” notes Hoover. “And the convenience industry has seen the spike in recurring digital revenues that subscription offerings provide to convenience store loyalty programs.”

Couche-Tard’s Circle K expanded its car wash subscription product to Canadian loyalty app users in 2021. It also has a monthly “Sip & Save” beverage subscription offering.

In Alimentation Couche-Tard’s Q2 2023 earnings call on Nov. 23, 2022, Brian Hannasch, president and CEO for the company, highlighted its subscription products amid an increasingly price-sensitive consumer mindset.

“Our Sip & Save beverage subscription program continues to drive trips, enhance basket, and attract new users while providing great value,” said Hannasch. “With the ongoing inflationary pressures, more than 420,000 subscribers are seeking deals and see the good value offer in Sip & Save.” 

4. Price increases, more warnings on age-restricted products

New regulations have arrived on vaping products. As of January 1, 2023, vaping products can only be sold in Canada that have paid an excise duty (and marked as such with an excise stamp). This has increased their cost. 

Further changes are expected to Canada’s vaping laws and regulations, says Jeff Brownlee, vice-president communications and stakeholder relations for the Convenience Industry Council of Canada. “For 2023, Health Canada is likely to advance new regulations on vaping product manufacturers that would require more frequent sales reporting to the Government of Canada, along with the identification of ingredients in these products.”

In addition, the convenience channel is keeping a close eye on developing flavour bans and restrictions on vape products: Of Canada’s 13 provincial and territorial governments, six have adopted legislation or regulations to ban the sale of any e-cigarette liquid other than tobacco flavour, including Nova Scotia, Prince Edward Island, New Brunswick, Yukon, Northwest Territories and Nunavut. British Columbia, Ontario and Saskatchewan have adopted regulations to restrict the sale of flavoured vaping liquids to specialty vape shops where children are not permitted to enter. There are no restrictions in Manitoba, Quebec, Newfoundland and Labrador or Alberta. 

In what would be a first worldwide, Canada is also proposing health warnings be printed on individual tobacco products including cigarettes rather than just on-package. The new regulation would likely take effect in the latter half of 2023.

“In Canada, non-illicit tobacco is seriously declining,” says Eli Mail, a retail consultant and convenience store expert who was Parkland’s VP, merchandising and store design from 2019 until March 2022.  “A continued focus on growing categories outside of tobacco will be important for the industry.”

5. Continued experimentation at checkout

According to a recent projection from  Global Payments Report, cash will account for just 3% of all point-of-sale transactions in Canada by 2025. That makes mobile and digital wallets and automated app payments a huge market.

Innovative payment solutions continue to be experimented with at retail. After being tested in Amazon Go convenience stores, the retail giant’s Amazon One quick palm-waving checkout device recently expanded to 16 Whole Foods locations in the Dallas area.

By linking their palm print on the device to their credit or debit card, customers can pay for purchases by simply hovering their hand over the device. It remains to be seen, however, if biometric payments will be adopted by consumers given their perceived privacy risks.

6. Labour changes amid ongoing staffing woes

According to the Labour Force Survey and the Vacancy and Wage Survey, Canada’s unemployment-to-job vacancy ratio is at an all-time low of 1.4 unemployed persons per job vacancy.

“Hiring will continue to be a challenge in 2023,” predicts Alison Manning, Parkland’s VP, people and culture, Canada. “Retailers have had to get creative on their offerings with increased wages, provide signing and retention bonuses, and provide flexible hours in order to attract and retain employees.”

And that is not just for store managers. That creativity needs to extend to junior hires. While signing bonuses are not a norm, “small retention bonuses and wage increases are what we are seeing for c-store staff,” adds Manning.

However, there is some respite for stores whose staffing pool includes international students. Canada has lifted the 20-hour per week cap on the number of hours that international students can work off-campus while class is in session “to address current labour needs.” The lift is temporary: until Dec. 31, 2023.

7. Building out a sustainability story

As c-stores with a legacy attachment to gas slowly shift to electric vehicle chargers and add more foodservice, consumers are going to be expecting to hear from them on their ESG platforms, says Marty Weintraub, national retail leader at Deloitte Canada, whose clients include c-store chains. “There had been a legacy cloud over the sector, and so they have been later to the game on ESG,” says Weintraub. “But there has been an acknowledgment within the sector that has to change.”

He notes, for instance, chains will want to communicate about what they’re doing with waste from foodservice. Its research shows 72% of Canadians prefer to shop at food retailers with strong sustainability or ethical practices.

8. A lean into localization

Single and two c-store operators typically rely on the loyalty of regular customers to keep competitive with larger players. However, the behaviour of even their most loyal customers could change because of the economy, especially if Canada enters a recession.

“Customers may go to the bigger chain stores for lower prices in order to save a few bucks,” says Jehvaughn Cente, owner at Jayy’s Cheers Convenience, which has two locations in the Greater Toronto Area.

Independents can’t—and shouldn’t try—to beat them at the pricing game. “Bigger chain stores compete by offering lower prices due to their large buying power,” he says. “To keep up, independent c-store owners will have to be resilient by maintaining the sense of community around their local area.”

One way to do that: include grab-and-go products that appeal specifically to the neighbourhood and its residents. “I think it will become even more important for stores to show the local customer that they understand them with product assortment,” says Mail.

He expects the big chains to also try and make this play.  But as the consultant and former Parkland executive notes, “to localize one or two stores as an independent owner is easy. But trying to localize product assortment across 700 stores? That is very difficult.”

9. Private label boom

“Whether it’s Parkland, Couche-Tard or 7-Eleven, I expect we will see a lot more activity on private label,” says Mail.

When he left Parkland in March 2022, it had launched about 72 private label SKUs. “It was definitely something the company had been putting a lot of energy in.”

That makes sense given the success grocers have had with private label, not to mention their popularity during tougher economic times. When U.S. consumers were asked in a Statista study why they switched from a national brand to a private label brand in January 2022, almost 90% said it was because of better value.

10. Strides with data

C-store chains are gleaning tons of customer data, including from transactions and loyalty programs. But they haven’t used the data to glean insights as much as they would no doubt have liked.

In Couche-Tard’s Q3 2023 earnings call, Hannasch said the company had a tough time retaining data scientists, especially domestically, creating a headwind on its path to data-informed decision making. However, he said “we’ve set up an office in India, and we’ve been very pleased with the talent we’ve been able to source.”

One order of business: optimize promotional activity. “It’s really using data to drive our discipline to what promotions really make a difference and which ones are noise,” Hannasch told investors. “And so, you are seeing—and should see—fewer promotions, but more effective promotions, which should result in both higher sales and higher margin over time.”

11. Managing supply issues with mindful stocking

Supply issues remain an issue for Canadian retailers. Serge Nadeau, vice-president projects & development, Groupe Beaudry, says c-store operators need to stock their stores with care to avoid disappointing customers if their favourite products are not available. He also notes that convenience stores will also have to work harder at getting small-size items because suppliers are currently focused on regular and larger family sizes for their grocery channels. “It’s important to offer smaller sizes in some categories to provide customers with alternatives,” explains Nadeau.

The challenge for c-stores is avoiding price increases for products. It may be difficult when confronted with higher salaries, labour issues and elevated distribution costs because of fuel costs, but Nadeau points out that operators need to fight the perception that items purchased at convenience stores are more expensive. Some data shows 75% of customers hold that belief.

Nadeau is hopeful that 2023 will see an easing of supply chain issues for c-stores, but he cautions retailers will need to forecast their sales efficiently to avoid extra deliveries from providers and wholesalers. He predicts that the hot products for c-stores will be fresh food (including fruits and vegetables), beverages and food service items (especially ready to serve ones), while the demand for commodity products (soup, condiments and cookies, etc.) will ease.

 -with files from Michele Sponagle

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