State of the Industry Report 2014

Transcription

AACS
State of the
Industry Report
2014
Welcome to the 2014
AACS State of the
Industry Report
This report remains a sought after publication by retailers,
suppliers, regulators and analysts as it is the most credible
insight into the Australian Convenience industry.
Once again we
are pleased to
bring the annual
AACS State
of the Industry
report to you.
I thank the Retailers who took the time to provide data to enable us
to publish this year’s report. In addition, I thank Emmy SwithenbankJones and the team at IRI-Aztec for their insights and excellent work in
compiling this year’s report. I also thank this year’s contributors being
him! International, Nielsen, Pulse Plus, Imperial Tobacco and the
ACRS at Monash University.
Importantly I thank the major sponsors of this year’s AACS State of
the Industry Report, Coca-Cola Amatil and Imperial Tobacco.
AACS remains committed to our pillars of Representation,
Innovation, Communication and Education.
We will continue to advocate for our industry in areas affecting the things
that matter to our members and could affect them both positively or
negatively e.g. tobacco regulation, ‘health’ taxes, food regulations, penalty
rates, liquor sales regulations, container deposit legislation and importantly
petrol theft.
welcome
AACS State of the Industry Report – 2014
1
he AACS 2014 Overseas Study Tour to Japan, Korea and the USA was well
T
supported, and we visited a number of excellent stores and met some terrific industry
people along the way. The learning around food service will be very useful as our
industry moves quickly to further develop our stores in these categories.
the third year running, Australia’s entrants enjoyed prestigious wins at the
For
international convenience industry awards, which are part of the National Association
of Convenience Stores (NACS) Show in the USA in 2014.
The future of Australia’s convenience industry is clearly in good hands with Callum
MacKay of 7-Eleven winning the Global Scholarship Award in the Retailer category
and Kathryn Newiss from Philip Morris Australia winning the Supplier category award
- excellent achievements.
A
t the AACS AGM held in Melbourne
in November 2014 the following Members
were elected to serve as the AACS Board:
Peri Hunter
BP Chair
Rob Anderson APCO Vice Chair
Julie Laycock
7-Eleven Treasurer
Karim Sumar
Caltex
Chris Andrianopoulos
AA Holdings
Darren Park UCB
Steve Cardinale
New Sunrise Group
were elected Retail Member Directors of AACS.
Brett Barclay Advantage Group
Jo Moxey Coca-Cola Amatil
Jason Erickson Philip Morris Limited
were elected Supplier Member Directors of AACS.
AACS Board
2
Jeff Rogut
In 2015 the Australasian Association of
Convenience Stores (AACS) celebrates 25 years
as the peak body for the convenience industry
in Australia and as the drive to innovate gathers
momentum, the need to focus on customer
service and optimise performance of key
categories has never been greater.
As you will read further in this report, 2014
again saw convenience in store sales grow by
4.5% and fuel volumes by 3.6% - a very credible
performance in relatively tough retail conditions.
We are justified in having ongoing confidence in
convenience through our 6070 stores.
We look forward to continuing to work with our Members
for the benefit of our industry.
Jeff Rogut FAIM MAICD
Chief Executive Officer
Australasian Association of Convenience Stores Limited
ACN: 156 638 023
3
Report Methodology
The AACS State of the Industry Report continues to
provide the industry with a compelling report with the
best industry, national and global data.
This year, IRI-Aztec were appointed by the AACS board to compile the report for the first time and as
well as using their own data services, they have engaged the following service providers to the channel:
Australian Centre for Retail Studies (ACRS) at Monash University
Provided insights into future trends in technological developments and shopper considerations
Him! International
Provided global insights into the Convenience channel – both locally and overseas
IRI-Aztec
Provided Scan sales data for the convenience channel and snapshots of performance of top categories
within the Grocery channel as well as economic, population and convenience shopper attitudes.
Nielsen
Provided topline retail trends, economic trends and market insights
Pulse-Plus Research
Provided the Retailer-Supplier benchmarking from their ‘Convenience Pulse’ service
The Realise Group
Provided research from June 2014 to determine key drivers of customer satisfaction within the
convenience channel
methodology
4
Report Methodology
The report is a combination of data from the above mentioned companies, while leading retailers also provide
levels of insight into their business to provide a comprehensive understanding of the Convenience channel.
Not all Convenience retailers are members of AACS, therefore not all have provided data for this report.
Retailer
Fuel
Metrics
Merchandise
Metrics
Employee
Statistics
Store
Statistics
IRI-Aztec Scan
Retail Sales
7 Eleven
AA Petroleum
APCO
BP COCO
BP Regional
Caltex
Coles Express
Not a member of AACS
Freedom Fuels
Night Owl
New Sunrise
Peregrine
Puma Energy
UCB
Woolworths
Not a member of AACS
5
Report Methodology
The following chart gives an understanding of how the report has been compiled and the data that has needed
to be extrapolated so everyone has a clear understanding of the report’s dynamics.
Market Representation:
Represents 62% of the Market
Scan Accounts 7-Eleven, APCO, BP, Caltex,
Coles Express, Night Owl, Freedom Fuels
and Woolworths Petrol
Data provided to the report by Retailers
AA Petroleum, New Sunrise Group, Peregrine,
Puma Energy and UCB
Data estimates from Independent Retailers
representation
6
Report Methodology
The Convenience Channel
has come a long way
since 1994…
ince the report that was published in
S
1994, the industry has come a long way.
tore numbers were reported as 606 in 1994,
S
whereas today we are seeing a number tenfold
of that at 6070 stores.
he average merchandise transaction was $4.63 vs
T
$8.48 in 2014
he contribution from Tobacco has always been significant,
T
but has become more so in recent times, as tax excises raise
prices. Beverages accounts for a much greater percentage of sales,
with segments such as Energy Drinks not even launched back in 1994. And
categories such as Communications, which now account for nearly 10% of merchandise
sales, did not even exist in 1994.
% Merchandise Sales in Convenience Channel
Tobacco
Beverages
Confectionery
Grocery
On the Go Food
Milk
Printed Materials
Bread & Cakes
Ice Cream
Snack Foods
General Merchandise
Automotive
Health and Beauty
Fresh Fruit & Veg
Communications
30.2
16.5
8.6
36.9
24.2
6.2
7.6
1.0
7.6
4.0
1.9
2.3
1.8
6.4
5.3
4.6
3.5
2.2
2.9
2.1
2.7
3.9
1.9
2.4
1.5
1.0
0.6
0.1
9.9
1994
2014
7
Contents
9 General Market Overview
20 Retail Market Overview
28 Convenience Merchandise Performance
54 Supplier Partnerships
57 Review of 2014 Study Tour
59 Overseas Trends
62 Future Trends in Retail
69 Summary
8
2014 General
Market Overview
Over the last
year, the retail
environment
continued its
volatile journey.
As agreed with the ACCC, the Major Supermarkets ceased their
aggressive fuel discounting in the first quarter of 2014, which appears
to have impacted their fuel performance in the Petrol and Convenience
channel.
There is strong evidence of continued Channel Blurring, with Quick Serve
Restaurants aggressively targeting the Frozen Beverages offer through
their $1 dollar promotions, and the Supermarkets actively seeking small
sites to develop further their Small Store Format proposition in city centres
and capitalise on the continuing shopper need for convenience through
location and ease of shop.
Continued low interest rates and substantially cheaper fuel prices towards
the end of 2014 went some way to stimulate retail spending and combat
the lower Consumer Sentiment recorded in Australia in the latest year.
Discounters performed well both in the Grocery and Pharmacy channels
as shoppers continue to shop around for value.
Those retailers which are continuing to react to the ever-changing shopper
demands appear to be performing well, where as those more reticent to
jump on board are not trading so well in the current challenging conditions.
overview
9
Convenience
Channel Summary
The Convenience channel has performed
well in 2014 (+4.5% vs YA), continuing to
outgrow the Grocery channel (+2.6%) under
competitive trading conditions.
+4.5%
Convenience channel
performed well in 2014
We see the ‘On the Go’ food and drink offer continue to
flourish, with interesting innovation from a number of leading
retailers, which is successfully encroaching on the traditional café culture
in Australia. Hot Coffee continues to perform well, with 31% growth in the last year, driven by 7-Eleven
and BP. Food on the Go added an additional $11million to the channel’s growth, with 7-Eleven driving
performance through their Krispy Kreme and Munch range, and Mrs Macs performing strongly through
increased distribution.
The tobacco excise continues to impact sales’ performance, through substantial price increases. This has led
to further evidence of smokers downtrading to brands within the sub value brands. Two years on, the impact
of plain packaging on smoking cessation is still open to debate.
Both retailers and suppliers are keenly monitoring the impact of the sugar tax imposition on sugary beverages
in Mexico, as other markets consider it as a potential tool to combat increasing trends of obesity and
diabetes. Initial findings in Mexico are reporting an estimated 10% decrease in sales in first quarter of the tax
introduction.
The cost of petrol theft has seen a significant increase for some retailers in the last year, who are attributing
this rise to the high petrol prices throughout most of 2014. This is particularly pronounced in WA and
highlights the continued need for the police and politicians to take it seriously and act accordingly.
10
Consumer Confidence
According to Nielsen’s consumer confidence index, confidence saw a significant
decline in the first half of 2014 but has seen some recovery in the second half
of the year. Consumers’ top concerns for 2014 focussed on job security
and the increasing cost of living. Terrorism made an entrance into the top
5, most likely driven by the siege in Martin Place, Sydney at the end of
2014 and subsequent terrorist attacks overseas.
Top Concerns
TERRORISM ENTERS AUS TOP 5 CONCERNS Consumer confidence recovering, but sLll below confidence levels this Lme in 2013 Australian Consumer Confidence Australian
Consumer
Confidence
94 98 96 Top Concerns Increasing Utility Bills
97 95 Job Security
93 89 Job Security The Economy
85 Increasing U7lity Bills Copyright ©2012 The Nielsen Company. ConfidenLal and proprietary. The Economy Health Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Health
Terrorism
Terrorism Source: Nielsen Consumer Confidence Survey – Q4 2014
Source: Nielsen Consumer Confidence Survey – Q4 2014 2 AACS State of the Industry Report – 2014
11
Global Trends: Nielsen Consumer Confidence
lobal consumer confidence ended 2014 with an index score of 96 — a decline
G
of two index points from the previous quarter, which comes after several
quarters of positive momentum. While confidence fell slightly in
every region in the fourth quarter from the previous quarter,
the global index closed the year up two points from last
Global
Consumer
Confidence
GLOBAL
CONSUMER
CONFIDENCE
GLOBAL
CONSUMER
CONFIDENCE
year (94 in Q4 2013). The index, which has been on
GLOBAL CONSUMER CONFIDENCE
GLOBAL
CONSUMER SURVEY
CONFIDENCE
SURVEY
–TREND
60 Countries
a slow and steady rise for about two years,
is still CONSUMER
GLOBAL
CONFIDENCE
–TREND
60 Countries
– 3-Month
Trend –
60 COUNTRIES
– 3-MONTH
60 COUNTRIES – 3-MONTH
Q4-2014
Nielsen
Consumer
Confidence
Index
Q4-2014
NIELSEN
CONSUMER
CONFIDENCE
INDEX
Q4-2014
Nielsen
Consumer
Confidence
Index
GLOBAL
CONSUMER
CONFIDENCE
SURVEY
–
60
Countries
–
3-Month
Trend
Q4-2014
NIELSEN
CONSUMER
CONFIDENCE
INDEX
above a pre-recession level of 94 from third60 COUNTRIES – 3-MONTH TREND
Q4-2014 Nielsen ConsumerQ4-2014
Confidence
Index
NIELSEN
CONSUMER CONFIDENCE INDEX
quarter 2007.
IND
SURVEY
–TREND
60 Countries
– 3I–
ND
EX
60 COUNTRIES
3-MONTH
EX
ES
+3
ES
-2
+3
-2 IN Q4-2014
-5 INDEX ABO
Q4-2014 Nielsen-4Consumer
Confidence
ACONFIDENCE
-4 Index
B
NIELSEN
CONSUMER
-5
V
O
D
COU
INDEX
CO
NF
LES
S
CO
NF
LES
S
TE
RA
NTRY
129
INDEX
INDIA
COUN
120
TRY
129
120 INDON
INDIA
E
SIA 120
114 PHI
I
N
LIP
DO
120
11
U
PIN
NES
10 1 T NITE
PH
ES 11
IA
4
IL
7
H
D
UN IPPIN
CH AILA ARA 1 111
I
E
B
T
0
S
N
T
ED
IN
E7 M H
D
A
CIRHA AILA ARA
BE
INTES ND
MI
A
COU
INDEX
COU
INDEX
UB
L
TV IC
80
CH IA
ILE
81
TU
RK
81
EY
EST
ON
82
IA
SWED
84
EN
85
AUSTRIA
CZ
85
EC
H
MEXICCO
ZE
85
RE
CH
PU
RE
LA BLIC
PU
TV
LA BLIC
80
CH IA
TV
ILE
81
TU
80
CH IA
RK
81
EY
ILE
81
EST
TU
ON
R
8
2
KE
IA
81
Y
SWED
84 ESTO
82
EN
NIA
85 SW
84
AUSTRIA
EDEN
85
85
MEXICO
85 AUSTRIA
85
MEXICO
85
LA
RE
P
H
EC
AT
NTRY
129
INDIA
120
I
N
D
120
ON
ESIA
114 PHI
L
111
UN IPPIN
10
ES
TH ITED
7
CH AILA ARA
BE
ND
IN
MI
A
R
S
TE
RA
NTRY
129
INDIA
120
I
N
D
120
ON
ESIA
114 PHI
L
111
UN IPPIN
LES
SC
1
ES
TH ITED
ON 07
F
CH AILA ARA
BE
ND
IN
MI
A
CO
NF
LES
S
PU
BL
TV IC
80
CH IA
ILE
81
TU
RK
8
EY
1
EST
ON
82
IA
SWED
84
EN
85
AUSTRIA
85
MEXICO
85
RE
LA
H
CZ
+1
NT
DE
FI
96
AY
RW
O AND
N
AY
EL
W
S
IR
D
PT
ND R
92
O
N
Y
A
EG HERL N ELA
90
T
R
T
DS
90
92SIA I
NE
YP
LAN
EG
LAY 90
ER
89
MA
0RICANETH
H A9F
SIA
89
SOUT
LAY
89
MA
88
RICA
UANIA
H AF
89
SOUT
87 LITH
88
UANIA
ISRAEL
85
87 LITH
ISRAEL
85
AY
RW D
O
N
A
N
EL T
IR
DS
92
YP
LAN
EG
ER
90
H
T
90
NE
SIA
LAY
89
MA
RICA
H AF
89
SOUT
88
UANIA
87 LITH
ISRAEL
85
EC
M
CE
EE
-5
NT
DE
FI
IN
GR
RA
UK
NT
DE
FI
CZ
IS
53
-7
IM
EE
CE
-3
PT
GR
E
-4
-2
-4
O
UK
OA
IA
-5
45
ITALY
48
45
MEA
ITALY EN8T
ISR
49
KO
TH IM
IA
ID 4
52
REAF 49
SOUOPT ROAT
2 H KO
A
C
I
A
T
5
I
T
52
RB ESOU 53
OA
SE
CR
IA
52
IN
RB E
RA CE
53
SE
TE
CR
EE
IN
0
-1
-5
+3
+4
RB
-4
96
MAN
ERM
100JIN
APSIN6
75
97
102 97 -3S
ANY
AN
WZE
ARGENTI
A3APOR6E
9
IG
SW
EW
ITZAL
98 NA
95
7
ITZE
1015 NB
ERL
GGAER67
L
9
U
R
R
R
-3
MMAN 77
BR
97B
4 +1
LAN
94
AZ TAN A
PAKIS
U
VENEZUEL
101
I
Y
A
70
A
I
D
SWLG
9
L
ZIL
CO
95
GLOBAL
9
77
C
BE ITZERAN
93 4101U PER
LU
93 4 U OLO
IA 70
9
W LAAN
BR
SLO
94 VAK
NI OMB
I D 7
+1 N
AVERAGE
AZTAI
MB
10A0 -3
IA
SITN
94 LA
ITQ3-2014
E
G
COND IL 72 AN IA
A
I
A
U
PO
A
D
(
-2
change
from
)
RE
M
US ED
93 PO
98 ST
UN LONMRO73 USS
G R KIN
KI
TR
-3
97-6 RE
PA B 75R
AL MANGY
NG
AL
IA
AU JAITE
DO
S
I
WIT A
DO
95
IA
6
ST GADRKIA
Z
7
E
RLA M
M
BR
94
BULRA UIN
ND
7
M
-6
AZ
-2
LLIGI GD 7
IL
9 -4C
BE A AN OM 77
93 4 U OLO
IW IA
79
-4
+4
TA
+1A NITE MBIA
N
A
A
US
D
M
SI
KI
TR
RO US
NG
-4
+1
-8
AL
R
DO
IA
M
AY
RW D
O
N
A
N
EL T
IR
DS
92
YP
LAN
EG
ER
90
H
T
90
NE
SIA
LAY
89
MA
RICA
H AF
89
SOUT
88
UANIA
87 LITH
ISRAEL
85
-8
-5
GR
53
+4
0
-4
96
N-1
JAPA
75 )
( -2 change from
Q3-2014
RIA
76
A
G
BUL 0 UM
-4
77
I
LG
N
77
BE
A
IW -1IA
-2
79
A
T
N
A
A
M
SI
R-1O US-5
R
D 72 -1
POLAN
73
N
JAPA
75 -4
A
I
R
76
GA
BUL
M
77
U
I
G
L
7
7-1
BE
AN
IW IA
79
A
T
-5
AN IA
M
S
RO US
R
-2
+3
RA
CE
mong the world’s biggest -4
A
economies, consumer confidence
-1
-5
decreased two points in the U.S.
(106), four points in China (107)-2and
+4
four points in Japan (73). Conversely,-8
confidence rose one point each in
Germany (98) and in the U.K. (94).
UK
45
ITALY
48
EA
49
KOR
52
52
TIA
OA
E
-1
SE
TH
IA
EE
IN
-2
45
ITALY
48
EA
KOR A 49
TH
TI
52
52
SOU
SOU
CR
RB
SE
GR
RA
UK
96
TE
ES
S
E1
+5
EX
VE
onsumer confidence declined one
C
0
+5
ES
0 +3
10
-2
AB
+2
0
-5
-4
+2
+1OV
IN
+1
E
+5
D
0
-2
10
IC
point in North America (106) and
-2
-5+2
0
A
-5
IN
+1
D
-3
IC
-4
-3
-2
I
N
A
-5
DE
Asia-Pacific (106) in the fourth
XE
SA
-2
+3 0
-2
-4
-2
-3
BO
-5
-4
VE
+5
quarter — the only regions to score -2
0
0
10
+2
-2
+2
0
+2
IN
+1
D
-2
-2
+4
-2
G
above the baseline reading of 100.+2
-5
-2
G
N
N
H
O -4ES
H
O
K
U
S
-3
E
+4
K
U -2
AT
-1 NG
POG NG
G
AT
-2
ST
PO NG
AR
Confidence also decreased one -2
N
NR
ST
O
D
H
O
H
-2
RT AR
EGS Y
KSO TU
ED
UN
H
ITE
Y
T
T
U
M
-1
I
N
L
G
A
SL
A
7 -1U
AL
-2
M
OSVT
5
PO
G
N
7
A
OV G-3
5+2
UN TNA MORE
TN
MO4
10 6
E
O
4
RT AR -3
point in the Middle East/Africa
T10 6
EN L
RK
VIE
H T ITFERD NIA 55 RE C
Y
RK CO
10
U
VIE
EN
MA
IA 55
N
FR
SL
-1 10
O
N
MA
N
56
AN M
AM
7IDE UN A
06 -3 DEN
N ID
OV GAL
N
54
6
C
1
-3
-2
E
5
N
0
E
0
O
CE RE-2
6
1
D
1 6
DA
-2
FIINET
EN
A
3
A
G
K
D
T
0
5
F
N
R
1 N CA
5
INL
C
V LAN A
7
(95), three points in Latin America
I
FR
NA
10
103
EN
AND 57 ON
HNMD
AN A 5 5
6
-3 02 CA I ARABIA
ES
KO02
ID
IA
61
CE
6
10
-2
SDPEAUIN
N DA
61
1
G 1 -1 T AUD
SPAIN -1 -2
FIN
AUD
N 10S2TA S
57 -1
LAN
103 PORCANGAAR63
2 S
O
10
D
D
AR
6
IA
(88) and two points in Europe
AN
3
GEN
D
E 1 NEW ZE
H
TUA I YARAB
ARGENTI
ZEAL
TI
T
2
N
EW
I
0
10
N
6
-1
1
D
67
SL SAG
1
NA 67
M
U
SPAIN
101 M
7
-1
UN TNA-2 PAKIST
0-3
2OVE A AL70 54 AND
OR TAN
10ZUEL
VENE
10 6
101 RK
63 0
EC
VENEZUELA 70
NEW
101 PAKIS
ARGENTI
55AL
VIE
GLOBAL
IA ZE
NT
A
N
F10
10
(76) from the previous quarter,
O
NA 67
RA1GLOBAL
101
N
NM PERU
DE
6
70
N
IA
I
-2
101
E
5
VAK
PER
0
SLO
U
C
70
6
1
D
0
E
A
TAN
AVERAGE
SLOVAKIA-2
PAKIS
-2
VENEZUELA 70 -2
100+4
FIN101
SINGAP
100 SI
5772
NAD
LAVERAGE
103
A
D
A
N
GLOBAL
72
C
N
N
LA
(
-2
change
from
Q3-2014
)
GAPOR
D
D
PO
ABI
101
( -2
change
from
)
according to the Nielsen research.
PER
3
U Q3-2014
POLAN
E
102 98AUDGIEARR
SLOVAKIA 70
SPA AN61 7
+4 98 G
S
AVERAGE
-1 73
0
+3
+4
+4 -8
+2
-5 +2
0 -4
-10
+3
+5
-3
-3
-4
-4
+6
-3
-5
-7
+4
-5
+2
+1
-10
-4
+2
-3
+5
+6
+1
-7
-4
LATIN AMERICA
EUROPE
AFRICA, MIDDLE
EAST
EUROPE
-5
+4
+2
-5ASIA-PACIFIC
AFRICA, MIDDLE EAST
+1
-4 -3
-7
NORTH
AMERICA
LATIN
AMERICA
+2
-10
+2
+5
+6
-4
-3
+6
+5
AFRICA,
MIDDLE
EAST
ASIA-PACIFIC
+2
-10
till, year-over-year, confidence scores in 39 of NORTH AMERICA
S
NORTH AMERICA
LATIN AMERICA
EUROPE
60 markets improved. And while all global consumer
confidence indicators declined in the fourth quarter
AFRICA, MIDDLE EAST
NORTH AMERICA
LATIN AMERICA
EUROPE
*SurveyisbasedonrespondentswithInternetaccess.Chinasurveyresultsreflectamixedmethodology.
Indexlevelsaboveandbelow100indicatedegreesofoptimism/pessimism.
— job prospects (-3 percentage
points), personal
Source:NielsenGlobalSurveyofConsumerConfidence&SpendingIntentions,Q42014
finances (-1 pp) and immediate spending intentions
(-1 pp) — year-over-year performance was positive.
Index levels above and below 100 indicate degrees of optimism/pessimism.
4
4
4
4
QUARTER 4 2014
- GLOBAL C
QUARTER 4 2014 - GLOBAL CONSUMER
CONFIDENCE
R
QUARTER 4 2014 - GLOBAL CONSUMER CONFIDENCE REPORT
QUARTER 4 2014 - GLOBAL CON
12
Spending Trends
hoppers have continued to increase savings in the latest quarter,
S
focussing on savings on gas and electricity and spending less on
new clothes.
oncerns about job prospects have seen a significant increase on
C
last year, but more than half are still positive about their personal
finances in the coming year.
What drives
convenience
store choice for
shoppers?
his cascades through a greater intention to take a holiday
T
and also pay off debts and / or loans in the next year.
2014 was about getting
Good Value and Ease of Shop
Low Prices for most items
Consumer Confidence
Q4, 2013
Q4, 2014
48
Food and groceries are good
Value for Money
55
55% worried about job prospects
Convenient to get to
but more than half still positive about
personal finances in the coming year
61
63
Provide Enjoyable Shopper
Experience
63% cut spending in the past year
Always have what
I want in stock
and are trying to save on gas and
electricity, spending less on new clothes
54
53
53% positive about next years finances
increasing intention to take a holiday and
pay off debts/loans
Shoppers have continued to
increase their awareness of
the price of products with 67%
(62% in 2013) claiming that
they know the price of most
items they purchase.
Source: Nielsen Shopper Trends 2014
13
Economic Trends
CPI Index
According to the Australian Bureau of Statistics, CPI increased by 1.7% in 2014 versus 2.7% in 2013
2.7
2.2
1.7
2012
2013
2014
CPI Index
Significant increases in Alcohol & Tobacco (+7.4%), Education (+5.6%) and Health (+4.4%)
7.4%
Alcohol & Tobacco
5.6%
Education
4.4%
Health
December Key Points
THE ALL GROUPS CPI
– rose 0.2% in the December quarter 2014, compared with a rise of 0.5% in the September quarter 2014.
– r ose 1.7% through the year to the December quarter 2014, compared with a rise of 2.3% through the
year to the September quarter 2014.
OVERVIEW OF CPI MOVEMENTS
– T
he most significant price rises this quarter were for domestic holiday travel and accommodation
(+5.8%), tobacco (+4.8%) and new dwelling purchase by owner-occupiers (+1.1%).
– T
he most significant offsetting price falls this quarter were for automotive fuel (-6.8%), audio, visual and
computing equipment (-5.2%) and audio, visual and computing media and services (-3.8%).
14
FMCG Market Dynamics
Dollar Sales growth in FMCG markets was up 2.5% in 2014, which is similar to levels seen in 2013. The most
noticeable difference has been performance in Unit Sales, which have suffered a decline in the last quarter of
2014, in contrast to the consistently positive performance seen in 2013. This is due, in part, to soft Christmas
2014 sales in Grocery. Despite this, sales growth by quarter has been relatively steady over the past 2 years.
FMCG Market Dynamics (%)
2.6
2.5
2.4
Q1
2013
2.9
2.7
Q2
2014
Q3
2.6
Q4
2.6
2.4
2.4
Q1
Q2
Q3
2013
Price ($/Unit) change
2.5
Q4
2014
Units change
Nominal growth
Source: IRI-Aztec MarketEdge P&C and Pharmacy, ShopperView
National Employed and Unemployed Levels Trend
6.4
65.4
6.2
65.2
Unemployment rate
6.0
65.0
5.8
64.8
5.6
64.6
5.4
Participation rate
Australian Unemployed and Participation Rates (%)
64.4
5.2
5.0
64.2
4.8
64.0
Unemployment rate
Participation rate
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013
2014
Source: ABS
15
6.3%
Unemployment
The Unemployment Rate
increased to 6.3% at the end of
2014, compared to 5.8% at the
end of 2013. As seen in the
Nielsen numbers, job security
remains a key concern for
Australians in 2014.
December Key Points
TREND ESTIMATES (MONTHLY CHANGE)
Employment increased to 11,646,800.
Unemployment increased to 770,900 from a revised November 2014 estimate.
Unemployment remained steady at 6.2% from a revised November 2014 estimate.
Participation rate remained steady at 64.7% from a revised November 2014 estimate.
Aggregate monthly hours worked decreased 1.8 million hours to 1,602.0 million hours.
SEASONALLY ADJUSTED ESTIMATES (MONTHLY CHANGE)
mployment increased 37,400 to 11,679,400. Full-time employment increased
E
41,600 to 8,105,300 and part-time employment decreased 4,100 to 3,574,100.
nemployment decreased 16,200 to 759,200. The number of unemployed persons looking
U
for full-time work increased 6,000 to 551,500 and the number of unemployed persons only
looking for part-time work decreased 22,300 to 207,700.
Unemployment rate decreased 0.1 pts to 6.1% from a revised November 2014 estimate.
Participation rate increased less than 0.1 pts to 64.8%.
Aggregate monthly hours worked decreased 7.7 million hours (0.5%) to 1,597.8 million hours.
16
2.0%
Interest Rates
Current Cash Rate
As of 05/05/15, RBA
Cash Rate at 2.0%
Australian Interest Rates
3.5%
3.0%
2.5%
2.0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013
2014
Excerpt from the Statement by Glenn Stevens, Governor: (7/4/15)
Moderate growth in the global economy is expected in 2015, with the US economy continuing to strengthen,
even as China’s growth slows a little from last year’s outcome.
Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular is much
lower than it was a year ago. These trends appear to reflect a combination of lower growth in demand and, more
importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global
output and temporarily to lower CPI inflation rates. Prices for key Australian exports have also been falling and
therefore Australia’s terms of trade are continuing to decline.
Financial conditions are very accommodative globally, with long-term borrowing rates for several major
sovereigns at all-time lows. Financing costs for creditworthy borrowers remain remarkably low.
17
Interest Rates
Currently sitting at 2.0% (April 2015)
In Australia the available information suggests that growth is continuing at a below-trend pace, with overall
domestic demand growth quite weak as business capital expenditure falls. As a result, the unemployment rate
has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare
capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain
consistent with the target over the next one to two years, even with a lower exchange rate.
Credit is recording moderate growth overall. Growth in lending to investors in housing assets is stronger than to
owner-occupiers, though neither appears to be picking up further at present… Dwelling prices continue to rise
strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with
other regulators to assess and contain risks that may arise from the housing market. In other asset markets,
prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.
The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so
against a basket of currencies. Further depreciation seems likely, particularly given the significant declines in key
commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.
At today’s meeting the Board judged that it was appropriate to hold interest rates steady for the time being.
Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in
demand and inflation consistent with the target. The Board will continue to assess the case for such action at
forthcoming meetings.
18
Population Increase % vs YA
Australian
Population Trends
he preliminary estimated resident
T
population (ERP) of Australia at
30 June 2014 was 23,490,700
people.
his reflects an increase of
T
364,900 people since 30 June
2013 and 68,400 people since
31 March 2014.
NT 1.0%
QLD 1.5%
WA 2.2%
SA 0.9%
NSW 1.5%
ustralia’s population grew by 1.6%
A
during the year ended 30 June 2014.
atural increase and Net Overseas
N
Migration contributed 42% and 58%
respectively to total population growth for
the year ended 30 June 2014.
VIC 1.9%
ACT 1.2%
TAS 0.3%
ll states and territories recorded positive population
A
growth in the year ended 30 June 2014.
– W
estern Australia continued to record the fastest growth
rate of all states and territories at 2.2%.
– Tasmania recorded the slowest growth rate at 0.3%.
Australia’s population
23,490,700
1.6%
19
Retail Market
Overview
Fuel Financial Metrics
Total Fuel Sales (litres 000s)
Av Fuel Sales per Store per Year (litres 000s)
Average Fuel Transaction in Litres
Cost of Petrol Theft per store per week
2014
% Change vs YA
11,009,923
+3.6%
5,336
+0.5%
36
+2.6%
$220.58
+6.8%
Fuel volumes have seen an increase on last year, however this does not include Coles Express,
Woolworths Petrol or United. Average Fuel Sales per store are relatively flat, as we see the decline
versus performance in 2013 slow down. We see an increase in the average litres per transaction
of +1 litres or 2.6%. Cost of Petrol Theft continues to grow in 2014 after a significant increase in
the prior year. Industry experts suggest that a combination of high fuel prices and lack of support
from Police in combatting this theft has led to the increase, which is a significant and ever growing
challenge to Petrol and Convenience retailers.
+3.6%
Fuel
sales
+2.6% increase in average
litres per transaction
Petrol theft
+6.8%
Average price per litre
$1.49, +1¢
overview
(Versus Year Ago)
20
Retail Market Overview
Woolworths do provide fuel performance results through their annual report and in the first quarter of FY 2015,
fuel volumes were down -3.6% and -4.5% in dollar sales. Grant O’Brien said the company had suffered from
the restriction on shopper docket fuel discounts, referencing in the report “the cycling of higher fuel discount
activity” vs the prior year.
Coles Express reported headline fuel volumes as declining by -3% during the first quarter and comparable
fuel volumes declining by -4.6 per cent, with lower fuel prices during the quarter more than offset by reduced
fuel discounts following the December 2013 undertaking to the Australian Competition and Consumer
Commission. (source AFN 03/11/2014).
Both supermarkets reached an enforceable deal with the Australian Competition and Consumer Commission
(ACCC) last year to limit petrol discounts to 4 cents per litre, amid concerns supermarket subsidised heavy fuel
discounting was hurting independent service stations.
That said, subsequent to this agreement:
Woolworths found to have breached ACCC fuel dockets deal
By consumer affairs reporter Amy Bainbridge
Updated 14 Apr 2014,
“The Federal Court has found supermarket giant Woolworths has breached an undertaking on fuel shopper
dockets, but that Coles did not break the agreement….
In February, the ACCC took court action, alleging the supermarkets had breached the agreement by
offering bundled discounts.
The Federal Court today found that Coles did not breach the agreement, because it funded its discounts of up
14 cents a litre primarily through its Coles Express stores located within the service stations.
“Since 1 January 2014, the 4 cents per litre offer has been wholly funded by Coles Express,” said Justice Alan
Robertson in his judgment.
“Prior to 1 January 2014, Coles Supermarkets typically bore 75 per cent of the cost of the offer by way of
internal rebate from Coles supermarkets to Coles Express, although this proportion changed from time to time.”
…However, the court said Woolworths breached the agreement for the first three months of this year when it
offered discounts of up to eight cents a litre.
21
“It follows, in my opinion, that the 8 cents per litre discount on the single acquisition at retail of fuel was
contingent on the acquisition of Woolworths supermarket (non-fuel) goods or services since, as a matter
of the terms and conditions of the offer, the customer could not obtain that discount absent the customer’s
satisfying the prerequisite,” Justice Robertson explained.
Woolworths has welcomed the “clarity” created by the court’s decision, saying it has already changed the
structure of its fuel discounts.
“We said at the time when we sought a declaration from the Federal Court that we accepted we needed
to make our discounts independent of each other, and this change was implemented some time ago,” the
company noted in a statement.
“Woolworths will continue to offer 8 cents a litre discounts on petrol. We are pleased that the court’s
decision backs our position.”
“The ACCC welcomes the decision that offering a 4 + 4 cent fuel discount conditional on supermarket
purchases breaches the undertaking to the ACCC,” he noted in a statement.
“We are disappointed however that the Court has found that Coles and Woolworths can bundle a
supermarket fuel offer with a petrol station offer. We will carefully consider the judgment and its
implications for competition in fuel markets and any detrimental price impact on fuel consumers.”
Mr Sims voiced his concerns about fuel discounts in July last year, saying he believed they could lead to
higher fuel prices in the longer term.
“If these shopper dockets continue at these levels, it’s going to be very hard for other players to compete
and we may end up with just two companies in the country selling petrol,” he said at the time.”
22
The average price of fuel in 2014 was $1.49, which was 1 cent per litre higher than 2013. That said, fuel
prices saw a significant decrease at the end of 2014. Pricing is consistently higher in Northern Territory
and Tasmania, and lower in Victoria and South Australia.
Average Price of Litre of Petrol (cents)
Average Price of Litre of Petrol (cents) 180.0 160.0 142 140.0 120.0 125 125 2006 2007 120 112 141 144 148 149 2011 2012 2013 2014 NT TAS Na9onal 126 100.0 80.0 60.0 40.0 20.0 0.0 2005 NSW VIC 2008 QLD 2009 SA 2010 WA With a heavier focus on pricing disparities between metro and regional areas, the ACCC has been granted
additional powers to investigate this in more detail.
“Allegations of petrol price gouging in rural areas prompts ACCC scrutiny”
Source Sydney Morning Herald 15 January 2015
The Australian Competition and Consumer Commission has unveiled its new plan to scrutinise petrol prices
across the country, as the price discrepancy stretched to more than 40 cents more per litre between cities
and some regional areas.
ACCC Chairman Rod Sims said the new monitoring process would “go a long way” to determining why the
gap between petrol prices in regional areas and metropolitan areas had tripled, while prices in Sydney and
Melbourne had dropped by 45 cents a litre since July.
23
“Under the new arrangement, fuel prices in all capital cities and 180 regional centres will be
monitored, and the ACCC’s power to compel information will be used to examine petrol companies’
price-structuring systems.
Determining the cost of transferring fuels to regional centres, as well as storage and distribution costs
would be crucial to working out why some places had large gaps between the wholesale price and
pump price, Mr Sims said.
“I think we will be able to put the producer on the spot in the way they have never been before,” he said.
But with the global oil price hitting a six-year low this week, these reasons alone did not justify the
current price discrepancy, he said.”
Average unleaded petrol price per litre
Average Average uunleaded nleaded Average ppetrol etrol up
nleaded price rice pper er plletrol itre itre price per litre (Average - Aust. Capital Cities) vs % Change in Value Sales
7 7 7 150 5 5 5 140 3 3 130 1 1 120 110 100 1 -‐1 -‐1 -‐1 -‐3 -‐3 -‐3 -‐5 -‐5 -‐5 Feb-‐13 Feb-‐13 Mar-‐13 Mar-‐13 Apr-‐13 Apr-‐13 May-‐13 May-‐13 Jun-‐13 Jun-‐13 Jul-‐13 Jul-‐13 Aug-‐13 Aug-‐13 Jan-‐13 Sep-‐13 Sep-‐13 Feb-‐13 Oct-‐13 Oct-‐13 Mar-‐13 Nov-‐13 Nov-‐13 Apr-‐13 Dec-‐13 Dec-‐13 May-‐13 Jan-‐14 Jan-‐14 Jun-‐13 Feb-‐14 Feb-‐14 Jul-‐13 Mar-‐14 Mar-‐14 Aug-‐13 Apr-‐14 Apr-‐14 Sep-‐13 May-‐14 May-‐14 Oct-‐13 Jun-‐14 Jun-‐14 Nov-‐13 Jul-‐14 Jul-‐14 Dec-‐13 Aug-‐14 Aug-‐14 Jan-‐14 Sep-‐14 Sep-‐14 Feb-‐14 Oct-‐14 Oct-‐14 Mar-‐14 Nov-‐14 Nov-‐14 Apr-‐14 Dec-‐14 Dec-‐14 May-‐14 Jan-‐15 Jan-‐15 Jun-‐14 Jul-‐14 Aug-‐14 Sep-‐14 Oct-‐14 Nov-‐14 Dec-‐14 Jan-‐15 90 3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2013
2014
Value % growth vs YA 160 Value Value %
% ggrowth rowth vvs s YYA A Price per litre (cents) (Average (Average -‐-‐ AAust. ust. CCapital apital (Average CCi6es) i6es) -‐ Avvs ust. s %
% CChange hange apital iCin n i6es) VValue alue vs SS%
ales ales Change in Value Sales 2015
Avg Avg ppetrol etrol pprice rice -‐-‐ A
Australia ustralia Avg M
M
petrol etro etro ©
p©rice ( (LHS) LHS) -‐ Australia Metro © (LHS) Convenience Convenience GGrowth rowth ((%) %) Convenience ((RHS) RHS) Growth (%) (RHS) Source: Nielsen and Motormouth.com
Source: Source: N
Nielsen ielsen aand nd M
Motormouth.com otormouth.com Source: Nielsen and Motormouth.com AACS State of the Industry Report – 2014
24
Site Statistics
The Convenience channel comprises of 6070 stores. The numbers with an asterisk are estimated
numbers based on information collected from Retailer websites and supplier data. BP have sold off some
stores in South Australia, which Peregrine (On the Go) have brought into their portfolio to become a 126
store network in 2014.
Store Numbers: Retailer Contribution
Retailer
2014
2013
Difference
% Difference
7-Eleven
611
595
16
3%
AA Holdings
51
52
-1
-2%
APCO
22
19
3
14%
BP COCO
185
199
-14
-8%
BP Regional
130
157
-27
-21%
Caltex All Star
595
562
33
6%
Coles Express
646
627
19
3%
Freedom Fuels
41
43
-2
-5%
Independents*
667
640
27
4%
New Sunrise
764
779
-15
-2%
Night Owl
62
63
-1
-2%
On the Run (Peregrine)
126
102
24
19%
Puma Energy
206
230
-24
-12%
UCB
1058
1126
-68
-6%
United (including Distributors)*
398
407
-9
-2%
Woolworths Petrol
508
482
26
5%
6070
6083
-13
0%
TOTAL
The channel has a diverse mix of store ownership models. Retailers such as BP, On the Run, Woolworths
Petrol, Coles Express and some Caltex stores have a company owned model, whereas Retailers such
as 7-Eleven and Caltex have a franchised operation. There continues to be a mix of dealer owned and
operated sites under the UCB Buying Group.
25
Store Statistics
After experiencing a reduction in site labour costs in 2013 (as a % of sales), most retailers have seen
an increase in 2014 back to 2012 levels. Staff turnover remains an industry challenge at 44% and a
particular focus for Retailers concentrating on the ‘On the Go Consumption’ proposition which somewhat
relies on retaining quality staff to deliver and enhance the overall shopper experience.
Retailer
2014
% change
2013
2012
Site labour costs as a % of site sales
(total fuel and merchandise sales)
3.6%
+10.2%
3.3%
3.5%
Staff turnover % at site level
43.9%
-0.3%
44.0%
45.2%
Total store costs of running your outlets
as a % of turnover
6.7%
-3.0%
6.9%
7.1%
Source: Retailer Contribution
Despite the change to regulations to limit credit card surcharges to “the reasonable cost of card
acceptance” by the Reserve Bank in 2012, the convenience channel continues to reject this change.
Only a small proportion of two reported retailers have chosen to pass on any form of credit card
surcharge in 2014.
Site Labour costs
10.2%
Staff turnover
0.3%
Total store costs
(% of turnover)
3.0%
26
Merchandise Transactions
The average numbers of merchandise customers visiting a convenience store each day has increased by
1% in 2014, from 489 to 492 per store per day, across the Retailers who contributed this information.
This equates to 3 more transactions per store per day.
The amount spent per transaction on merchandise has increased +6% to $8.48 ($8.04 in 2013).
PER STORE PER DAY
Average merchandise
transactions 492,
1% increase
3 transactions per store per
day more than last year.
1%
Average customers visiting
a convenience store each
day has increased.
Amount spent per
transaction $8.48,
6% increase
6%
Amount spent per transaction
on merchandise has increased.
27
Convenience
Merchandise
Performance
Channel Performance
The Convenience channel value increased by
4.5% in 2014, up from the growth of 3.7% in
2013. It is now estimated to be worth $7.6B in the
latest year. However, dollar sales excluding Tobacco
were up 2.1%, highlighting the continued importance of
Tobacco to P&C channel sales.
+4.5%
Convenience channel value
increased by 4.5%
The main contributor to growth in Non-Food, as it was in 2013, was Tobacco, despite volume increasing only
0.3%. The additional sales generated this year in Tobacco contributed more than 100% of the Non Food
growth. The price increases from excise tax was the main driver of this growth, despite shoppers continuing
to trade down to more value offers. This means that Non Food excluding Tobacco sales actually declined by
-0.3% in 2014, primarily driven by the decline in sales of Printed Materials. The older demographic is the key
shopper group for newspapers and magazines, and this is a group that the channel does not actively pursue.
The slower 2014 growth rate in Food vs 2013 can be attributed to Ready To Drink (+2.5% growth, down from
+4.6% in 2013), and Ice Cream (+4.7% growth, down from +8.8%). However one category that bucks this
trend is Take Home Beverages (+8.7% growth, up from +6.2%), driven by stronger sales of V and Red Bull
multipacks. Confectionery’s performance also improved (+1.0% growth, recovering from the -1.0% decline
seen in 2013). Leading the way is Extra chewing gum, particularly in both Caltex and 7-Eleven.
performance
28
Convenience Merchandise Performance
Convenience Channel Performance
Category
1
2
3
Value ($000,000s)
Share
Total Convenience
$7,607
100.0%
Total Non Food
$4,285
56.3%
0.6%
5.5%
Total Food
$3,322
43.7%
-0.6%
3.2%
Tobacco
$2,841
37.3%
1.5%
8.9%
Ready To Drink
$1,486
19.5%
-0.4%
2.5%
Take Home Beverage
$333
4.4%
0.2%
8.7%
Communications
$645
8.5%
-0.2%
1.8%
On The Go Food
$339
4.5%
-0.1%
3.0%
Ice Cream
$165
2.2%
0.0%
4.7%
Take Home Milk
$161
2.1%
0.0%
3.8%
Snackfoods
$164
2.2%
0.0%
3.7%
Confectionery
$491
6.5%
-0.2%
1.0%
Medicinal
$34
0.5%
0.0%
13.0%
Bread
$49
0.6%
0.0%
4.2%
Grocery
$85
1.1%
0.0%
2.3%
Take Home Food
$49
0.6%
0.0%
3.8%
Personal Care
$38
0.5%
0.0%
0.55
$8
0.1%
0.0%
1.1%
General Merchandise
$326
4.3%
-0.2%
-0.8%
Car Accessories
$206
2.7%
-0.2%
-3.2%
Printed Materials
$187
2.5%
-0.3%
-6.8%
Household
Share +/-
Growth
4.5%
Source: IRI-Aztec MarketEdge P&C – MAT ending 31/12/2014 + Retailer Contribution
29
Grocery Performance
In 2014, Grocery channel sales grew by +2.6%, slightly up on 2013 growth of +2.3%. Growth was consistent
across Food and Non Food. As we saw in the Convenience channel, the primary contributor to growth in NonFood Grocery was Tobacco. Within Food, Dairy Products contributed strongly to growth, driven by Eggs. Note
that the data excludes Fresh Meat, Fruit and Vegetables.
Category
1
2
Value ($000,000s)
Growth
Total Grocery
$57,140
2.6%
Total Non Food
$20,401
3.6%
50%
Total Food
$36,739
2.0%
50%
Tobacco
$8,306
8.3%
44%
Dairy Products
$7,511
3.2%
16%
Pet
$2,584
4.6%
8%
Chilled Meals & Snacks
$1,428
7.1%
7%
Ice Cream & Desserts
$1,428
6.7%
6%
Snacking
$4,146
2.0%
6%
Ambient Beverages
$5,273
1.5%
5%
Confectionery
$2,011
2.2%
3%
Bakery
$2,318
1.7%
3%
Dry Grocery
$9,320
0.4%
2%
Frozen Meat & Vegetables
$1,926
0.9%
1%
$739
2.0%
1%
$1,811
0.4%
0.5%
$288
0.6%
0.1%
Frozen Meals & Savouries
$1,088
0.1%
0.1%
General Merchandise
$1,206
0.0%
0.0%
Household Products
$3,742
-0.3%
-1%
Health
$1,593
-1.1%
-1%
$420
-5.0%
-2%
Baby
Beauty
Chilled Beverages
3
Front of Store
Share of Growth
Source: IRI-Aztec ShopperView – MAT ending 31/12/2014. Figures do not include Fresh Meat, Fruit & Vegetables.
30
Category Margin
+0.9%
Total Category margin was slightly up
(+0.9%) in 2014, from 32.6% in 2013
to 32.9% this year, with the mix of margin
continuing to change based on category
growth performance.
Total Category margin increased
to 32.9% this year
Category Margin (%)
Ready To Drink Beverages
20.2
Tobacco
On The Go Food
27.3
47.4
11.2
Confectionery
45.9
7.7
Take Home Milk
4.5
Communications
4.4
General Merchandise
3.4
Grocery & Household
2.8
Ice Cream
46.7
28.1
32.0
8.8
45.6
35.2
46.0
2.5
Snackfoods
2.4
Car Accessories
2.0
Services
1.6
News & Mags
1.5
Bread
0.6
45.8
42.7
39.1
13.3
% Category Margin
26.2
% of Total Store Margin
Source: Retailer Contribution
The store margin contribution of Tobacco continues to grow, as do less traditional convenience categories
such as Grocery and Household, and Milk. We see the traditional heartland categories of Beverages and
Confectionery experiencing some decline in their percentage contribution to store margin.
Equally, we see that the Grocery & Household and Milk margins have seen growth in 2014, whereas
Communications, Beverages, Printed Materials and On the Go Food have all seen some margin erosion versus
2013 retailer data contributions.
31
Category Overview
+3.5%
1. Beverages
Beverages category
The Beverages category grew by +3.5% in 2014,
although the growth has slowed from +4.9% in 2013.
Take Home Beverages sales were up 8.7%, while Ready
To Drink sales increased 2.5%, which combined added more
than $62 million in category sales to the channel.
$62 million
category sales
AUD$ Dollar Growth % YA
(segment
order
based
on contribution
category
AUD$
AUD$
Dollar
Dollar
Growth
Growth
%toYA
% YAgrowth)
3.5
Beverages
Beverages
3.5
31.0 31.0
Hot Drink
Hot Drink
Dedicated
Dedicated
Ice Coffee
Ice Coffee
Energy Energy
Drinks Drinks
Sports Sports
Water Water
Other Other
Flav Milk
Flav Milk
FCB
FCB
Carb Soft
Carb
Drinks
Soft Drinks
10.3 10.3
4.1 4.1
10.4 10.4
1.5 1.5
-1.6 -1.6
-2.1 -2.1
-7.5 -7.5
-2.3 -2.3
Source: IRI-Aztec MarketEdge P&C, MAT ending 31/12/2014
Below are some promotional dynamics for the Beverages category (excluding Hot Drinks):
Litres sold on promotion increased from 24% in 2013 to 33% (2014), off the back of 45% growth in
%
promotional volumes.
he key segment driving this is Energy Drinks, where promotional volume increased 76%, despite total litres
T
sales increasing 6%.
hat said, all Beverage segments apart from Juices relied on promotional volume to generate most or all of
T
their volume growth.
As a result, all but 2 segments experienced promotional volume growth of at least 25% in 2014.
nly Packaged Water achieved non-promotional volume growth, due in the main to Private Label Water
O
launches in Coles Express and Woolworths Petrol.
32
1. Beverages
At an overall level, the major contributors to Beverages’ growth have been Hot Drinks (driven by the retailers’
coffee offer) and Dedicated Iced Coffee. Shoppers are purchasing fewer ‘traditional’ P&C Beverages such
as Carbonated Soft Drinks and FCB, the latter of which has been impacted by stronger competition from
Quick Serve Restaurants’ $1 dollar promotions (an example of which is Mc Donald’s ‘More bang for
your buck’ promotion).
With increasing focus from the World Health Organisation on what ‘healthy’ levels of sugar consumption
should be, there is strong interest in understanding what the impact has been since the introduction of a
sugar tax on sugary beverages in Mexico a year ago. In a country which has some of the highest obesity
and diabetes rates in the world, initial reports are suggesting that the tax has been successful in reducing
consumption. Something worth considering if this is ever introduced here in Australia…:
“
A year later, preliminary data suggest consumption rates are falling, though it’s too early to say
precisely how much, said Barry Popkin, who teaches global nutrition at the University of North
Carolina in Raleigh and is working with Mexico’s National Institute of Public Health to study
the country’s soda tax.
The institute’s earliest results suggest in the first three months of 2014, purchases of sugary
drinks dropped by 10 percent from the same period in 2013. “The results were pretty positive.
In essence there was a reduction in sugary beverage intake, and there was some increase in
healthier drinks, like water,” Popkin said.
Source: International Business Times (11 Jan 2015)
”
33
1. Beverages
Hot Drink sales in 2014 grew +31%,
equating to $29 million of additional sales, or
almost half of all Beverages’ dollar sales growth.
7-Eleven has been leading the way in the Hot Drink
segment, followed by BP.
+31%
Hot Drink Sales
$29 million
additional sales
It is estimated that the Convenience channel currently
has less than 3% share of the estimated $4.3 billion coffee
sales for all channels for 2014-15 (source: IBISWorld). Given that
Convenience shoppers have recently ranked coffee as the number 2 reason
why they visit a Convenience store, and that they rate the category very favourably,
this presents the channel with a great opportunity to continue to focus on and communicate their
Coffee offer.
Dedicated Ice Coffee: after achieving 12.4% growth in 2013, the segment has continued to grow
strongly, with sales up 10.3% (almost $21 million) in 2014. Dare Iced Coffee is responsible for
much of this growth, as a result of increased promotional activity. In addition, there is stronger
competition in this segment due to the launches of Barista Brothers and V Iced Coffee, which has
accelerated sales growth in this segment to +16% in the last quarter of 2014.
Energy Drinks segment is currently growing at 4.1%. The key contributors to increased sales are
both V and Red Bull multipacks, who have increased their sales through increased promotional
activity versus 2013. As a result, growth of all Energy Drinks Multipacks increased from +5% in
2013 to +34% in 2014. While the growth in singles has slowed recently, shoppers are consuming
more (and spending more on) Energy Drinks, suggesting that Multipack promotions have been
successful in driving Energy Drinks consumption, albeit at a cheaper price/litre.
Dedicated Iced
Coffee sales growth
10.3%
Energy drinks
segment growing
4.1%
34
2. Tobacco
The value of the tobacco category continues
to grow, increasing 8.9% in 2014. This growth
added $232 million in value to the category.
8.9%
Tobacco Category growth
Further high tax increases have continued to put
pressure on tobacco consumers to shop around for better
value. This has led to lower price segments growing in both
volume and brand footprint.
$232 million
in value to category
More traditional smaller pack size shoppers are now seeking out larger pack
sizes and more shoppers are moving toward RYO (Roll-Your-Own Tobacco) as there
is value found both in retail price but also in being able to control how much tobacco is used in
each cigarette.
Volume % Growth 2014 vs 2013
43%
Cigarette Sub Value
15%
RYO
Cigarette Mainstream
-16%
Cigarette Premium
-23%
Cigarette Value
-23%
Source: IRI-Aztec MarketEdge P&C – MAT ending Dec 2014 vs MAT ending Dec 2013
This downtrading trend is highlighted when we look at the top 5 brands for volume in
Convenience from 2012 compared to 2014. In 2012 there were no sub value brands present
in the top 5 volume brands. In 2014 the 2nd biggest volume brand in convenience was JPS.
35
2. Tobacco
2012 Rank
2014 Rank
Cigarette Brand
1
1
Winfield
8
2
JPS
2
3
Peter Jackson
3
4
Longbeach
4
5
Benson & Hedges
56 million
Tobacco New Product Sales
$34 million
increase in 2014
Source: IRI-Aztec MarketEdge P&C (Volume) – MAT ending Dec 2012 and MAT ending Dec 2014
Tobacco sales have also benefitted from more NPD sales in 2014 vs 2013. New product sales in 2013 were
$22 million, however the 2014 new product sales were $56 million, driven by the launch of Rothmans.
Quick Facts: Tobacco Shopping in Convenience
Around 10% of cigarette/tobacco smokers use the Convenience channel as their main place of purchase.
hile still small, usage of the convenience channel is growing especially for the Roll Your Own tobacco
W
category.
9.3%
10.5%
7.3%
9.1%
Dec 13
Dec 14
Dec 13
Dec 14
Tailor made cigarettes
Roll your own tobacco
Source: Imperial Tobacco Profiler Tracking (MAT Dec’14)
24% of Convenience Organised shoppers are finding it hard to shop for cigarettes/tobacco these days.*
In general, this is driven by legislation such as retail display bans and plain packaging and lack of detail
on price boards or at point of sale. This means the consumers are finding it hard to know what brands/
products are available.
2% of Convenience Organised shoppers will always compare prices at various stores for cigarettes/
2
tobacco before they decide where they will be buying their tobacco.*
9% of Convenience Organised shoppers compared the prices of different brands on their last cigarette/
1
tobacco purchase.*
* Imperial Tobacco Profiler Tracking (Nov- Dec’14)
36
2. Tobacco
How does the convenience shopper compare prices of different brands?
66%
44%
19%
Asked retailer
Price board
On shelf
1%
1%
Others
Can’t remember
Plain Packaging: Two Years On
The 1st December 2014 marked the 2 year anniversary of the introduction of Plain Packaging in Australia.
After two years, the data from Australia shows that plain packaging is failing to meet its policy objectives:
Plain packaging has not reduced youth smoking.
Plain packaging has not made Graphic Health Warnings (GHWs) “more effective”.
Plain packaging has not reduced volumes or smoking rates amongst adults.
Youth Smoking
One of the key drivers for introducing plain packaging was to stop youth smoking. Mike Daube, Director of
Public Health Advocacy Institute and Professor of Health Policy at Curtin University said “Plain packaging will
stop children from taking up the habit.” A submission from Cancer Council Australia and the National Heart
Foundation of Australia to the Senate Enquiry stated, “Plain Packaging is likely to… reduce youth smoking and
decrease smoking uptake by youth.”
Fact: Slight increase in youth smoking
Breaking a long-term trend, the smoking rate for 12-17 year olds is up from 3.8% to 5.0% between 2010 and
2013. This represents a 32% increase.
(Source: Australian Government National Drugs Strategy Household Surveys, 1991 – 2013, Australian Institute of Health and Welfare).
37
2. Tobacco
More Effective Graphic Health Warnings (GHWs)
The Plain Packaging Act itself states that plain packaging increases “the effectiveness of HWs on retail
packaging of tobacco products.” Once again Cancer Council Australia and the National Heart Foundation of
Australia supported this ideology, “Plain Packaging is likely to: make health warning messages on packs more
prominent and enhance recall.”
Fact: Graphic Health Warnings are not “more effective”
Data from the New South Wales Cancer Institute shows that health warnings are less salient for consumers
since plain packaging was introduced. In 2014, 59% of smokers said they did not believe that the GHWs on
packs encouraged them to stop smoking. This number has increased from 53% in 2012, suggesting that since
the introduction of plain packaging, fewer smokers believed that warnings encouraged them to quit.
(Source: Economics analysis of New South Wales Cancer Institute Tobacco Tracking Survey (CITTS) obtained through FOI)
Reduction in Volumes or Smoking Rates
The Plain Packaging Bill states that a major aim of the legislation is “discouraging people from taking up
smoking or using tobacco products.” Nicola Roxon, the Australian Minister for Health 2007-2011 and AttorneyGeneral 2011-2013 said that plain packaging “might actually achieve its aim – which is to reduce the level of
smoking.” Once again Mike Daube, Director of public Health Advocacy Institute and Professor of Health Policy
at Curtin University supported the Bill saying, “it will help to reduce smoking in adults.”
Fact: No real change to people smoking
Prior to plain packaging there was a steady and slow natural decline in volumes of around 3% per year. Over
the first 12 months of plain packaging, industry volumes increased for the first time in a decade, by almost 1%.
38
2. Tobacco
The long-term decline in adult smoking rates
has not accelerated since the introduction of
plain packaging. In fact, 2013 data shows a 1.8%
annual increase in smoking rates before reverting to
the long-term decline trend in 2014.
+14.3%
Illegal tobacco trade has
increased from 13.5% to 14.3%
(Source: Smokefacts – Roy Morgan Incidence Report, access requires subscription)
At the time of going to print the Federal Government are currently conducting
a Post Implementation Review (PIR) to check whether the Plain Packaging Act met its objectives.
Illicit Tobacco
The exorbitant rate of excise (additional 4 x12.5% ad-hoc excise) on tobacco is affecting the stability of the legal
tobacco market. The latest KPMG Illicit Tobacco in Australia Report shows the share of illicit tobacco has now
grown to 14.3% of the total market, costing an estimated $1.2 billion dollars in lost revenue for the government.
Roman Quaedvlieg, CEO of the Australian Customs and Border Protection Service, said recently “Serious and
organised crime will use the same infrastructural spine upon which it imports prohibited drugs to import tobacco. I put
(org crime role in illicit tobacco) down partially to the fact that the excise in duty payable on tobacco is increasing.”
Significant increases to the price of a packet of cigarettes is a measure which drives the illegal trade in tobacco.
Australia has the highest cigarette prices within the Asia Pacific region, and this large price differential between
Australia and other relatively nearby markets creates smuggling opportunities for those involved in the illicit market.
High duty rates make legitimate tobacco products expensive for consumers. As a result, those on lower incomes
are more likely to move from legitimate tobacco products to illegal tobacco products (which would typically cost
between 50-75 per cent of the price of legal tobacco products).
The report found that more branded illegal cigarette packs are being smuggled into Australia than ever before.
Contraband cigarettes are now the largest component of the black market.
The report highlights that:
The illegal tobacco trade is up from 13.5% to 14.3% of total consumption in the 12 months to June 2014.
The Australian Government and taxpayers are losing $1.2 billion in unpaid excise annually.
Contraband cigarette consumption (imported to Australia without excise paid) is growing.
A pack of 20 cigarettes is up to 7 times more expensive in Australia than South Korea.
39
3. Communications and Travel
After achieving 5.8% growth in 2013 following several years of double-digit decline, Communications’ sales
continued to grow, increasing at 1.8% (almost $13 million) in 2014. Sales of Myki, which was largely responsible
for the turnaround in Communications’ performance in 2013, have stabilised recently and consequently, category
growth has softened.
National P&C Value (000s) Growth Actual YA
12,905
Communications
17,159
Phone Card
12,258
Mobile Access
4,627
Tickets
Pre-paid Net
-1,050
Connection Dev
-1,185
Recharge Card
-18,843
Phone Card growth has mostly come from the launch of E-Pay Ukash in BP in September 2013. As a result,
BP’s percentage growth for Phone Cards far exceeded the national growth.
A product that is attracting shoppers to the store is the launch of OPAL travel tickets, primarily in 7-Eleven NSW.
As with Myki in VIC, sales of Travel Tickets are higher than sales of most categories in 7-Eleven in the State of
NSW. Therefore retailers could look for these travel card contract opportunities to add significant sales to their
business, and footfall to their stores.
40
4. Confectionery
Growth in Confectionery sales was a modest 1.0% increasing sales by $4.6 million, although this is an
improvement on the prior year’s dollar decline of -1.0%.
Value Growth % YA
1.0
Total Confectionery
10.5
Choc Bags Single
3.6
Other Choc
5.1
Sugar Bags Single
3.0
Mints
1.0
Gum
0.5
Other Sugar
Choc Bar King Size
Choc Bar Medium Size
-2.5
-6.2
(segment order based on contribution to category growth)
Sugar Confectionery sales growth improved from -1.7% in 2013 to a positive +2.4% in 2014. The key
driver of the improved performance is Gum, with growth of +1.0% in 2014 vs -6.1% in 2013. Extra was
the brand mostly responsible for this change, due to new line launches (pellets and bottles). Sugar Bags
Singles have generated the greatest sales growth for the Sugar segment in 2014, off the back of increased
distribution of Haribo, and stronger promotional activity for Starburst Party Mix.
Chocolate Confectionery sales growth in 2014 was -0.2%, down from the previous year’s growth of +0.5%.
While Chocolate Bars performance continues to be affected by the deep discounting in supermarkets,
Chocolate Bags have been gaining sales. The Maltesers promotion program in 2014 was stronger than in
2013, driving growth for the brand and segment.
41
5. Food on the Go
Sales in 2014 increased 3.0%, down from 2013 growth of 4.6%. Food on the Go sales increased
$11 million in 2014.
Value Growth % YA
3.0
Total On The Go Food
19.9
Fresh Cakes
2.1
Hot Pastry
-5.0
Produce
Biscuits
-47.2
-0.8
Sandwiches
Food Service
-12.4
(segment order based on contribution to category growth)
The category growth was driven by Fresh Cakes, where sales have achieved double-digit growth in the past 2
years. In particular, 7-Eleven has performed strongly through their focus on both Krispy Kreme and their Munch
range. Hot Pastry growth has resulted from new ranging of Mrs Macs in 7-Eleven from mid-2013, and wider
distribution of Mrs Macs in BP at around the same time.
42
5. Food on the Go
We know that Food on the Go has been identified as a major opportunity for the Convenience channel, with
some fantastic innovation being trialled by a number of the leading retailers in this space. Let’s have a look at
the Jack & Co concept in some detail as a great example of strong execution in this area.
The Jack & Co concept is less reliant on tobacco and traditional convenience store items such as confectionary
and drinks, instead focusing on the fresh food category. While convenience stores have traditionally focused
on packaged branded goods, Jack & Co aims to create a point of difference by offering customers fresh and
healthy food. Jack & Co also serves barista-made coffee, bread and rolls baked in-store, and freshly made
salads and sandwiches, as well as having a top-up grocery offer.
Fruits, nuts, cereals, cold meats, sauces, magazines, and
Ben and Jerry’s ice creams all feature in the store,
while those on a gluten-free diet are well catered
for, with a range of gluten-free baked and
snack foods. Jack & Co aims to connect
with customers in more interactive
ways including via Facebook
and Pinterest, and has also
developed a mobile ordering
application.
The app allows
customers to order
coffee and food so
that it is ready when
they arrive at the
store (Source:
Manning River
Times, April 2013).
43
Category in the
Spotlight: Medicinal
Although Medicinal sales in 2013 were up
7.3%, sales growth accelerated to +13.0% in
2014, adding almost $4 million in category sales.
The key drivers of the stronger growth this year were
wider distribution of both Nurofen and Panadol Optizorb.
The growth achieved in Medicinal over the past 2 years is very
encouraging, albeit off a small base.
+13.0%
Medicinal sales increased
$4 million
in category sales
Although shoppers naturally gravitate to pharmacies or even the grocery channel
for their medical needs, the later opening hours of Convenience retailers do present the
channel with an opportunity to tap in to ‘distress purchase’ shopping mission.
Given that the pharmacy channel is under increasing pressure from supermarkets, and that the ‘Health’
department performance in Supermarkets is soft, Convenience retailers could explore the opportunity to offer
more specialised medicinal products at a premium price.
44
Supplier Channel Performance
Supplier
Rank
Value Growth % YA
BAT
1
4.2%
Philip Morris
2
-0.8%
Coca Cola
3
-1.8%
Imperial Tobacco
4
44.7%
Epay
5
3.4%
Frucor
6
11.9%
Lion Dairy & Drinks
7
-1.8%
Parmalat
8
4.9%
Red Bull
9
6.7%
Schweppes
10
1.5%
Source: IRI-Aztec MarketEdge P&C – MAT ending 31/12/2014
Of the top 10 suppliers to P&C, seven achieved growth, while four of those exceeded the average P&C channel
growth.
The rank order largely reflects the rank in 2013, with the two key differences being Frucor replacing Lion Dairy
& Drinks as the 6th-largest supplier, and Red Bull replacing Schweppes as the 9th-largest supplier.
The impact of the tobacco excise, and the consequent downtrading to sub value brands, resulted in Imperial
Tobacco achieving very strong growth (44.7%), while Philip Morris lost sales.
Frucor Beverages sales increased 11.9% this year, off the back of a number of new line launches (V Kaboom,
Maximus and others).
EPay recovered from lost sales in 2013 to register a growth of +3.4% in 2014.
45
NACS 2014 State of the Industry Report Highlights
Fuel Contributes to a Successful, Historic Year for Convenience
CHICAGO – Buoyed in part by low fuel prices, the U.S. convenience store
industry had record in-store sales of $214.9 billion in 2014, higher than
overall industry sales in 1998, according to figures released today by NACS.
Overall industry sales for 2014 reached $697.5 billion, evidence that the
value of convenience continues to resonate with consumers.
The industry’s 2014 numbers were announced at the NACS State of the
Industry Summit, a two-day conference that reviews and analyses the
industry’s key economic indicators.
The industry’s in-store sales of $214.9 billion represent an increase of 4.6%
over 2013, which was itself a record year. Although more gallons of fuel
were sold in 2014 than 2013, total industry fuel sales decreased by 1.8%,
due to gasoline prices that were 4% lower in 2014 than the previous year.
Even though fuel sales decreased, the link between fuels and convenience
retailing continues to grow. Overall, 83.5% of convenience stores (127,588
total) sell motor fuels, a .7% increase (930 stores) over 2013, according to
the 2015 NACS/Nielsen Convenience Industry Store Count. The growth
of convenience stores selling motor fuels is double the overall growth in
the industry, as fuel retailers add convenience operations and convenience
retailers add fuelling operations. The U.S. convenience store count
increased to 152,794 stores as of December 31, 2014, an almost 1%
increase (1,512 stores) from the year prior.
Founded in 1961 as the
National Association of
Convenience Stores, NACS
(nacsonline.com) is the
international association
for convenience and
fuel retailing. The U.S.
convenience store industry,
with more than 152,000
stores across the country,
posted $697.5 billion in
total sales in 2014, of which
$482.6 billion were motor
fuels sales. NACS has 2,100
retail and 1,600 supplier
member companies, which
do business in nearly 50
countries.
Convenience stores also account for 33.9% of all retail outlets in the United
States, according to Nielsen, which is significantly higher than the U.S. total
of other retail channels including drug stores (41,799 stores), supermarket/
supercentre (41,529 stores) and dollar stores (26,572 stores).
In-store sales growth in 2014 was driven by sales gains in both foodservice
and merchandise, with the highest growth in commissary (e.g., packaged
sandwiches, deli salads) up 9.8%, salty snacks (up 8.5%) and packaged
beverages (up 6.5%).
46
Here’s how in-store sales were broken down in 2014:
2014 In-Store Sales
Tobacco
11.4
7.3
Food Service
35.9
10.6
15.4
Packages Beverages
Centre of the Store
Beer
19.4
Other
Centre of the store (candy; sweet, salty and alternative snacks): 10.6%
Meanwhile, foodservice accounted for 33.5% of gross profit dollars, a 4.4 percentage point increase over 2013.
While tobacco products constituted 35.9% of in-store revenue dollars, they accounted for only 17.3% of gross
margin dollars. Packaged beverages were third, accounting for 18.5% of gross profit dollars.
The industry’s 2014 metrics are based on the NACS State of the Industry survey powered by its wholly owned
subsidiary CSX, the industry’s largest online database of financial and operating data. Complete data and
analysis will be released in June in the NACS State of the Industry Report of 2014 Data.
47
Inside (Merchandise) Sales performing on par with the Convenience channel here in Australia, but Fuel sees a
decline in the last year. The US channel has also enjoyed a very strong increase in Pretax Profit in 2014.
Key Industry Metrics
Snapshot
2013
2014
% Change
Store Count
151,282
152,794
1.0%
Inside Sales
$204.0B
$214.9B
4.6%
Fuel Sales
$491.5B
$482.6B
(1.8)%
Total Sales
$695.5B
$697.5B
0.1%
Pretax Profit
$7.1B
$10.2B
47.3%
Credit Card Fees
$11.2B
$11.4B
2.3%
US Gas Consumption (bbl/day)
8.75M
8.84M
1.1%
Employees
2.20M
2.43M
10.6%
Fuel Margin (cpg)
18.7¢
22.2¢
18.8%
Net of CC Fees
13.4¢
16.9¢
26.4%
Fuel Consumption is = Average Monthly Barrels per Day (Thousand Barrels)
In-Store Contribution (%)
Sales
GP$
Tobacco
11.4
7.3
35.9
14.0
3.9
17.3
Food Service
Packages Beverages
10.6
12.8
Centre of the Store
33.5
15.4
Beer
18.5
19.4
Other
2013: 18%
14.6% for stores selling beer
2013: 29.1
8.8% for stores selling beer
Food service continues to be a strong contributor to overall merchandise profit, now
accounting for a third of GP$ and close to a fifth of Sales ($) in 2014.
48
Convenience Shoppers
IRI-Aztec’s ShopperView Attitudes is a survey service which connects online to an engaged group of primary
household shoppers who are keen to share their opinions, thoughts and values in order to improve their
shopping experience. Focusing on understanding the ‘why’ behind what shoppers do, Attitudes can present a
holistic and truly compelling story when combined with actual, recorded purchasing habits through ShopperView.
As the Convenience industry continues to face a challenging landscape, it is becoming evermore crucial to
connect with and maintain relevance amongst shoppers in order to meet their core needs. While the Petrol
and Convenience channel in Australia continues to be primarily a destination for fuel purchases, retailers have
worked hard to expand the in-store offer in a bid to encourage customers into store and extend their purchasing
repertoire. IRI-Aztec recently conducted a ShopperView Attitudes survey to understand whether this strategy
is working; determining who the Convenience shopper is, what they purchase, and how they currently view the
Convenience channel.
Who is the Convenience Shopper?
Whilst fuel continues to dominant the channel with over half of all shoppers stating that purchasing fuel is the
primary reason to visit a Convenience store, retailers’ efforts in-store appear to be making progress. Please
note that for the purpose of this study, newsagents and milk bars/independent grocers were included in the
channel definition.
1.Purchase 1
2 2. Purchase a
Fuel newspaper or 52%
3
25%
magazine 52%
Purchase
Fuel
Purchase a
newspaper or
magazine
Purchase
a drink
11%
25%
What is the main purpose 9 a for visiting Purchase
a meal
convenience store?2%
Top up on
grocery items
What is the main
10.Purchase purpose
for visiting a
a m
eal convenience store?
10%
2%
9. An emergency purchase 3%
An emergency
8
purchase
3%
4
5
Purchase
a snack
7
3. Other 16%
6
Other
non food
8%
Purchase
8. Pcigarettes
urchase or
6. 4%
Cigarettes tobacco
or tabacco 3% 7. Other Purchase a 3%
non food snack Shoppers stated a number of
reasons to visit a Convenience
store other than fuel, with the
three most popular being; to
buy a newspaper or magazine
(25%), purchase a drink
(11%) or top up on grocery
items (10%).
Purchasing cigarettes or
4. Purchase tobacco (3%), emergency
a drink purchases (3%) and buying
a meal (2%) attracted
11%
the smallest proportion of
shoppers.
5. Top up on grocery items 10%
49
Many of these factors are influenced by a shopper’s demographic profile. Whilst buying a newspaper or
magazine was the primary purpose for visiting a Convenience store for a quarter of all respondents, this almost
exclusively resonated amongst those aged over 55 years. This age group also appear to more ‘health aware’;
they are much less likely to buy cigarettes, snacks or drinks but instead frequent Convenience stores to buy
non-food items such as lottery tickets. Those under 35, on the other hand, behave quite differently. This age
group is significantly more likely to buy into categories such as, cigarettes, meals, snacks and drinks. Only
4% of under 35s’ primary purpose for visiting the store was to buy a newspaper or magazine. This raises the
question whether the over 55s are less engaged because the Convenience offer doesn’t appeal to them, or
because they are disengaged with the channel? Furthermore, shoppers’ life stage and household size also play
a key role in purchasing behaviour, with families and large households (those with more than 5
people) much more likely to visit a Convenience store in order to top up on grocery items.
Do Convenience shoppers buy on impulse?
Whilst the vast majority of shoppers pre-plan their Convenience purchase, with
over 70% of responders stating that they did not purchase any items that they
had not planned to, there is a group of shoppers that are driven to purchase
once in store.
Yes
%
27% of What
shoppers
impulse
purchase?
If shoppers do buy on impulse, they are most likely to buy snacks (35%)
and drinks (28%). A smaller proportion of people also buy newspapers or
magazines (18%), top up grocery items (16%) and even fuel (13%) on impulse.
Of note, the survey was conducted as a time when fuel was at a recent low.
No
73%
N = 1654
What do shoppers purchase on impulse? (%)
35
A Snack
28
A Drink
18
A newspaper/magazine
16
Top up on grocery items
13
Fuel
6
Other non-food
A meal
3
An emergency purchase
2
Cigarettes/tobacco
2
N = 453
Perhaps unsurprisingly,
(based on retailers’
strategy to focus primarily
on attracting the younger
shopper), it is those under
35 that are the most likely
to purchase on impulse.
Young families and those
with larger households
(3+) are also more likely
to impulse purchase.
Conversely, the older you
are, the less likely you are
to buy on impulse.
Multiple responses allowed
50
Key reasons for buying on impulse (%)
25
I was hungry and/or thirsty
21
20
It was at a good price
I walked past it on the way to pay
13
12
10
The display caught my eye
It was on promotion
I realised I had run out once in the store
8
It was on the counter
The staff drew my attention to it
I didn’t realise I could buy it in the store
It was a new product that I wanted to try
The healthy option
N = 453
4
3
3
2
The three key drivers for buying
on impulse are needs based
(i.e. hunger, thirst), price and
awareness (e.g. walked past the
product in store). Those aged
under 35 are the most driven
by price and awareness and
this age group is more likely
to purchase impulse items in
store if they are on promotion,
staff direct them to it or they
view it as being at a good price.
Alternatively, promotions have
much less appeal to shoppers
aged over 40 years.
What are the key barriers to purchasing in Convenience?
On the whole it is a positive story, with the majority of shoppers stating that they are satisfied with
their Convenience offering. Two thirds of those surveyed stated that the current range of products
and services offered is either “good” or “very good”. Those over the age of 55 years, and in particular
retired couples, were the most likely to reflect positively on their Convenience store.
What is the main barrier to shopping
at a convenience store (%)
78
More expensive than other stores
47
Limited product range
25
Lack of healthy options
Poor store presentation
Poor customer service
Poor product quality
Poor forecourt presentation
Health & safety concerns
Poor perception of the store’s brand
Lack of available car parking
N = 1654
11
10
8
4
3
3
2
The two areas that shoppers
are the least satisfied with are
loyalty programmes and in store
promotions. 19% of respondents
view the loyalty programme offered
as either poor or very poor whilst
13% of responders scored in
store promotions in one of these
buckets. Based on this, it is not
surprising that expense is by far
the largest barrier to purchasing
in a convenience store, with 78%
of buyers stating that it is more
expensive than other stores. This
barrier was particularly prevalent
amongst younger age groups
(under 44 years).
51
Additional Services
There are a number of additional services or products that shoppers identified as adding value to the current
Convenience offer. Post office services (33%), healthy food options (29%) and freshly baked items (24%)
were listed as the top 3 needs. Although the addition of selling alcohol (6%) sat relatively low on the list of
additional services desired, it was of particular interest to the under 35s, who identified that it would improve
their perception of the products offered by the Convenience store.
What other products and services would you
like to see in a convenience store (%)
33
Post office services
29
Healthy food options
24
Freshly baked items
20
More extensive grocery range
17
Fresh food/produce
Late night food options
12
Banking services
12
11
Food to go
9
Internet access/WIFI
Sells alcohol
N = 1654
6
52
In addition to the ShopperView Attitudes survey conducted by IRI-Aztec, The Realise Group conducted some
earlier research in June 2014 to determine how the following banners had delivered on key aspects of the
customer experience:
7-Eleven
Woolworths Petrol
BP
Coles Express
StarMart United
240 customers who had visited a petrol / convenience store were surveyed – 40 from each of the banners.
KEY INSIGHTS:
Four key variables continue to hold the highest probability of predicting high customer satisfaction and high
likelihood to recommend scores (i.e. 90% or greater)
Value for Money maintained the strongest influence on Customer Satisfaction, followed by Staff Friendliness,
Speed of Service, and Store Appeal. Customer Satisfaction, in turn, had the strongest influence on likelihood
to recommend the retailers, followed by perception of Value for Money and Store Appeal.
Value for
Money
Customer
Satisfaction
Staff
Friendliness
Speed of
Service
Likelihood to
Recommend
Store
Appeal
Source: The Realise Group, June 2014
53
Supplier
Partnerships
Convenience Pulse provides key suppliers in the industry with real information, sourced from over 660 respondents
representing more than 1000 Convenience retailers nationwide: delivering real information for FMCG Suppliers &
Traditional Wholesalers on what your retail customers want and need, from direct to store servicing.
Convenience Pulse joined AACS in 2013 and for past three years has held a successful alliance with Convenience
World magazine that distributes the nationwide Industry survey and publishes the Snapshot Report.
Store & Respondent Profile
A Convenience Retailer’s satisfaction with its Suppliers directly affects the latter’s sales, as seen in Convenience
Pulse’s Service Satisfaction survey conducted in late 2014.
The majority of these retailers are Independent service stations and Convenience outlets, as well as News Agencies,
Tobacconists and Organised Convenience. The annual turnover for 57% of retailers surveyed ranged from $1.6 - 3
million. In terms of the respondents profile, 88% of those surveyed were either an owner or manager, predominantly
males, and 31 - 40 years of age with 4-6 years experience.
This indicates that Convenience management is on the whole a younger audience and in large requires constant
engagement by FMCG Suppliers, traditional wholesalers and service providers, as they have been in the
Convenience channel a relatively short period of time compared to that of other mainstream FMCG Retail channels.
The best source of information for
Convenience retailers remains to be the Sales
field agents, followed by trade publications.
Which is the Best source of Information
for your store? (%)
Sales field force agents
79
Trade magazines
Online
Trade shows/conferences
N = 661
Total more than 100% due to multiple responses
76
31
22
Online sources is growing at 31%. Not only
is the source of this information important but
also the manner it is presented as the decision
makers may have English as their second
language. Hindi, Arabic and Indian are the
most spoken by the Convenience Retailers
decision makers and as such Suppliers must
be aware of this when sending out information
to the Convenience channel.
54
Supplier Partnerships
Suppliers
Respondents were asked which suppliers they would like to see more regularly and the suppliers most named had
a mean call cycle of 4.4 to 4.7 weeks. Retailers stated that would like to see more regularly sales reps from Mars
Confectionary and Red Bull as well as Vodafone and Mondelez International.
Which suppliers would you like to see more regularly? (%)
Mars Confectionery (Snickers,Milky Way)
31
Red Bull
27
Mondelez International (Kraft,Cadbury,Oreo)
24
Vodafone
24
Coca-Cola (Mt. Franklin, Nestea, Powerade)
19
Frucor (V, Evian, Rockstar)
17
Superior Sales Force (SSF,Up&Go,Berrocca)
17
Schweppes (Spring Valley,Solo,Pepsi,Monster)
16
Lion Co (Dare,Pura,Dairy Farmers)
12
Nestle Confectonery (Kit Kat, Allens,Butter Menthol, Wonka, Lifesavers)
12
Smith's Snackfoods (Red Rock Deli, Twisties)
12
Peters Ice Cream (Maxibon,Drumstick,Frosty Fruits,ICY Pole,Weis)
9
Stuart Alexander (Mentos,Fisherman's Friend, Pringles)
9
Unilever (Lipton Ice Tea)
8
Australian Convenience Foods (AFC)
6
Goodman Fielder's (Helga's,Buttercup)
6
Snack Brands Australia (Kettle,Thins,Natural Chips, CC's,Cheezels)
6
Pacific Optics (Telstra Prepaid)
5
Parmalat (Norco,Paul's)
5
Bundaberg Brewed Drinks
4
George Weston Foods(Tip Top)
4
Go Natural Health Foods
4
Mrs Mac's
4
Patties (Four n'20)
4
Unilever (Streets Ice-Cream,Ben & Jerry's)
4
GSK (Panadol,Ribena,Nicorette)
3
Optus Optics
3
Wrigley (Eclipse,Extra)
N = 661
2
Battery Specialties (Energizer, Evereday)
1
Ferrero (Tic Tac, Rocher, Kinder Surprise)
1
Total more than 100% due to multiple responses
55
Supplier Partnerships
Wholesalers
Wholesalers were also benchmarked by respondents according to the frequency of rep calls and overall
satisfaction with the rep’s services. There are large gaps in performance among this small pool of competitors,
as demonstrated by the wholesaler rep call cycle ranging from 2.2 weeks to 5.5 weeks.
Convenience retailers place more importance on Wholesalers who provide deals, new products offerings and
on-time deliveries, which is very different from what they expect from Suppliers as previously outlined.
Wholesaler Attributes Most Important to your business (%)
Offers deals and promotions
51
Advises on new products
49
On time deliveries
46
Rep calling
43
Accurate Invoices
34
Notifies on all out of stocks
33
Accepts phone orders
27
Delivery windows are met
26
Fast credit claim processing
26
Provides professional advice
Electronic Ordering Systems
24
18
56
2014 AACS
Study Tour
“Convenient Convenience”
By Jeff Rogut: CEO AACS
In Japan where there are over 50,000 well
developed convenience stores, or one
convenience store for every 2000 people,
around 150 convenience located stores
within a square mile, and over 1million
vending machines, there are certainly
lessons to be learned by visitors to that
country just as there are in Korea which has
25,000 convenience stores.
The AACS 2014 Overseas Study Tour visited
the NACS Show in Las Vegas, and then the
major focus this year was Seoul in Korea and
Tokyo in Japan to see what new products or trends
we should be aware of that may impact our market.
Aside from the warm hospitality shown to us in each country,
our group had access to senior operators and companies who
shared knowledge openly with us, and for which we are certainly
appreciative.
Excellent Bakery
presentation
in Circle K,
Japan
AACS Study Tour
attendees welcomed
by senior execs of
Circle K, Japan
There were also exclusive presentations made to our group, so that rather than just visiting
stores as anyone could do, we had the benefit of understanding the background as to how the industry arrived at its
current excellent development, as potentially what the future may hold for the convenience industry in the countries
we visited, as well as our own.
We often hear from retailers or suppliers about the challenges of implementing innovative new ideas. Yet faced
with very competitive conditions, changing consumer demographics and customers who constantly expect fresh
new products, the convenience industry does manage to achieve that successfully in the markets we visited. The
operators that we were fortunate to meet are constantly looking to evolve their offers.
The future for our industry is in fresh food – this is a global trend.
How each company goes about this will differ, but unless there is accelerated innovation in this category both by
retailers and importantly suppliers, we will be open to risks through not meeting our customers needs for fresh,
healthier options as lifestyles change.
57
2014 AACS Study Tour
Convenience
store showing
the wide variety
of ready to drink
coffee and teas
For the third year running, Australia’s entrants
have enjoyed prestigious wins at the
international convenience industry awards,
which are part of the National Association
of Convenience Stores (NACS) Show in
the US.
The future of Australia’s convenience
industry is clearly in good hands with Callum
MacKay of 7-Eleven winning the Global
Scholarship Award in the Retailer category
and Kathryn Newiss from Philip Morris
Australia winning the Supplier category award.
Fresh presentation
in a supermarket in
Seoul, Korea
As the 2014 winners of the Peter Jowett
Scholarship Award, administered by the Australasian
Association of Convenience Stores (AACS), Callum
and Kathryn travelled to the US to compete for global
recognition.
They presented to an audience of leading convenience industry
professionals from around the world.
“
All the finalists, including those from
Australia, Canada and New Zealand, gave
excellent presentations and the four judges
had a tough task separating the finalists.
Callum and Kathryn’s success is a fantastic
example of the efforts of Australia’s
convenience industry in innovating for the
future. A big congratulations to them both.
AACS CEO Jeff Rogut said.
”
58
Overseas
Trends
With the ever growing shopper-need for convenience across the globe, we have seen some interesting developments
in the last few years, particularly in the areas of ‘on-the-go’ consumption and ‘meal for tonight’ solutions.
How do you/your household do your grocery shopping? (%)
80% of the world’s population now use convenience shops.
Global Average
21%
59%
20%
ousehold don’t do a main grocery
H
shop - household just does smaller
shopping trips through the week.
Japan
Germany
ousehold does a main grocery
H
shop but also “tops-up” on items
through the week.
Russia
Poland
ousehold does all grocery
H
shopping in one go once a week/
fortnight and doesn’t need to top-up
in between.
South Africa
Netherlands
Taiwan
Ireland
France
Australia
27%
62%
11%
United Kingdom
0
20
40
60
80
100
Source: him! international
Globally, 25% of respondents claim that they top up or convenience shop more often than they did a couple of
years ago. This trend is evident in Australia at 24% of respondents.
When we consider the different shopping missions that a convenience store can satisfy, we see that Shoppers
“top-up” shop on average 2.6 times per week, at a global level. This is slightly lower at 2.06 times per week in
Australia, but this reflects the different nature of the convenience store vs some overseas propositions, which are
similar to a mini supermarket. This frequency of visit does not take into account the additional shop visits driven
by Food to Go, Snacking, Distress purchase, etc. missions that the convenience store can also satisfy and where
we have seen some good innovation in Australia over the past couple of years.
Developing a range of solutions to meet different shopper missions will become even more important in
the future to help retailer differentiation. There are opportunities to increase shop visit frequency further by
providing solutions for the wide range of missions that can be fulfilled in-store.
59
Overseas Trends
20-30% of shoppers around the world believe that c-stores are
competing better against supermarkets now than 3 years ago. If
we marry that statistic up with the fact that 56% of shoppers will
often decide what they’re having for dinner on the day itself, but this
rises to 62% in Australia, the opportunity is evident.
If we add to this picture that 24% of shoppers leave home regularly
without having breakfast and 28% eat lunch on-the-go, the opportunity for the
Convenience channel to capitalise on these consumption trends is even greater.
Corner Bakery, Engen,
South Africa
We will call this an opportunity for the Australian Convenience channel, because whereas
39% of shoppers buy food-to-go from c-stores at a global level, this is driven by countries such
as Taiwan, Japan, South Africa and Ireland, all of which have a strong on-the go offer.
Australia currently lags behind this trend with 25% of shoppers buying food-to-go from c-stores.
So in which nation are shopper ratings the
highest for convenience stores?
(Across 14 criteria relating to service, products, range & prices)
Australia is ranked 9th out of
the 11 countries covered
across a range of 14
service and product
ratings criteria.
Country
Taiwan
Russia
Ireland
South Africa
United Kingdom
Japan
Poland
Holland
Australia
Germany
France
Source: him! international
60
Overseas Trends
The ‘Look and Feel’
is not dissimilar to
the Jack and co.
store proposition
here in Australia,
albeit on a larger
scale.
AppleGreen in Ireland is a good example
of a P&C retailer capitalising on the
‘food-to-go’ opportunity presented by
Shopper needs. Their aim is to provide
“Fresh delicious reasonably priced
food” which translates into a range of
‘Wholesome Soups and Salads’, ‘Hand
Held Hot Savoury Snacks’, custom and
pre-made sandwiches, paninis, rolls,
etc., as well as own-brand juices, water
and a sustainable freshly ground coffee
offer linked to the iTierra! Project.
Waitrose recently (April 2015) opened a new Little
Waitrose store in West Kensington, its fifth in the borough of
Hammersmith and Fulham, an upmarket area in London, UK. The
new store features a bakery, fresh fruit and vegetables, and range of
take-away sandwiches and snacks, alongside everyday items.
‘‘
It is another example of how the supermarkets are continuing to target and encroach on
the Convenience channel. We have seen similar activity in Australia with Coles and
Woolworths actively seeking out 200-400 square metre sites to develop their
small store format proposition in city locations such as Surry Hills, Sydney and
Flinders Street, Melbourne.
61
Future Trends
in Retail
Retailing in an Era of Disruption
Retail disruptions, from emerging generations of consumers to innovative new businesses, are combining to
reshape global retail. Disruption is also the key concern for global retail leaders over the next 12 months, according
to recent ACRS research. This is of little surprise given that the past five years have been especially characterised
by both unprecedented and disruptive change. Further, the pace of change has quickened, turning evolution into
revolution as retailers battle to maintain relevance.
Every aspect of the retail industry - from manufacturing to e-commerce - has fundamentally shifted. Although
some shifts can be seen as negative, retail today is more dynamic and exciting than ever before and there is an
abundance of possibilities for growth. Further, and despite the pressure to react in the era of disruption, the basic
fundamentals of retail must be in place.
Connected consumers and relentless technology advancements have been
key drivers of disruption in retail.
Connected consumers come of age
New generations of connected consumers have come of age, developing more sophisticated expectations of
product, service, value, and store environment. Consumer power is also consolidating with improving access to
information, an ever-widening choice of goods and services and opportunities to share their experiences more
widely. However, while the digital revolution has handed additional power to consumers, including more information
and more choice, it has also increased the complexity of making consumption decisions.
Consumers have found ways of dealing with this ‘tyranny of choice’ and many now use tools such as social media
or price comparison websites to inform their decisions and exert their power.
For retailers, the prominence of connected consumers has meant that word-of-mouth is more important
than traditional paid advertising, experiences are more important than transactions, as are individualised and
personalised experiences, services and product offerings. This new world is also reflecting consumers’ desire for
convenience - to get what they want, when they want it and how they want it.
62
Future Trends in Retail
Technology’s
paradigm shift
The convergence of mobile, social and
cloud technology has greatly disrupted
retail. Other technology trends include
ubiquitousness utilisation, the ability to
turn insight into action (e.g. big data) and
the Internet of Things (e.g. interconnected
devices), as well as omni-commerce solutions.
Such changes in technology have created
a paradigm shift in the way people shop - a
‘once in a lifetime’ change in consumer shopping
expectations and habits. By the same token,
technology has had a profound effect on what retailers
are able to provide.
Macro Disruptions
Ten macro factors are currently disrupting retail.
Establishing a seamless experience for consumers across the store, online, mobile,
tablets, and social media is accepted as the required retail model. This means that the
days of brick-and-mortar or online as exclusive touch points no longer exist. Further,
the physical and virtual worlds have merged to create a new retail offer, one that
strengthens the consumer experience and subsequently drives sales. However,
Omni-channel
executing
omni-channel retailing remains difficult, with customers, digital technology
retail
and service at the heart of any successful omni-channel strategy. Further, cultural
change must be affected from the top of the organisation. Successful omni-channel
retailers are also structuring themselves internally in ways that incentivise employees to
think as customers do.
1
Brands investing in omni-channel are reaping the rewards. The UK based John Lewis Partnership, recently
reported year-on-year online sales growth of almost 20%, 56% of which comes from click-and-collect.
63
Macro Disruptions
Mobile has proven to be a game-changer in retail, taking omni-channel to the next level, both
inside and outside of the physical store. In fact, mobile devices in some way influence
70% of purchase decisions. Three years ago, driving consumers from mobile to store
was critical. Today, however, there are so many traffic drivers that the current focus is
about using mobile in-store. Indeed, consumers often shop stores without interacting
Mobile
with staff - they can look, compare and pay via their mobile. The big opportunity
communication
lies in encouraging interaction with these kinds of consumers and building a mobile
strategy around that.
2
On Black Friday 2014, mobile traffic accounted for 52.1% of all internet traffic in the USA,
the first time mobile devices have accounted for a larger share than their PC counterparts for
internet browsing. In addition, 28% of all Black Friday purchases were made on a mobile device.
We also see examples of the progressive retailers in the Petrol & Convenience channel developing apps for
customers to place their coffee and food orders in advance to cut down wait times in the store.
3
Wearable technology is the next evolution of mobile technology, allowing consumers
to be connected at all times. Today, wearable technology is in approximately the
same place as smartphones were 10 years ago: available and useful, but not
Wearable
widely
accepted as they are yet to fully fit into consumer lifestyles and behaviour.
technology
Nonetheless, wearable technology devices of all kinds are entering the marketplace
to great fanfare and excitement and are already impacting the way consumers live,
work and socialise. Inextricably linked to the Internet of Things, these new devices, such
as the Apple Watch and Google Glass, represent a game-changing influence set to utterly
disrupt the modern business world.
The global smartwatch sector is currently estimated to be at $1.6 billion AUD, and is expected to surge to
$12.7 billion by 2018 according to Deloitte. The market is expected to be driven by the arrival of big new
players such as Apple as well as existing luxury watchmakers such as Mont Blanc adapting their product offer.
64
Macro Disruptions
Data is fundamentally changing business and redefining consumer interactions. In fact, big
data and the new generation of advanced analytics have been acknowledged as ‘the
new oil in retail’. The challenge lies in the ability to collect and store large quantities
of information and putting that data to work to answer strategic business decisions
that impact the longer term. Key application areas include customer relationship
Big data and
management, store location and layouts, supply chain optimisation, and dynamic
analytics
pricing. Opportunities also exist in the creation of more meaningful customer
relationships by using their data to create personalised experiences.
4
There is a demand for in-store analytics to become as precise and granular as online
analytics, which has caused the rise of new capabilities from firms such as Nomi and RetailNext.
Bricks and mortar retailers can now measure metrics such as average dwell time, most viewed item in store,
and item abandonment just like their pure play counterparts.
5
Cyber security
and data
privacy
Technology advances have allowed retailers to get closer to customers and suppliers,
however they have also created new risks regarding cyber security and data privacy.
Although retailers hold these risks as extremely high priorities and are heavily
investing in preventative measures, recent high-profile successful attacks against
retailers, technology companies, utilities, and even government agencies, have
focused consumer attention on the issue. Unlike attacks on non-consumer facing
industries that seek proprietary corporate information, cyber attacks on retailers are
aimed at sensitive customer financial data.
A McAfee survey revealed that consumer confidence in online retailers’ data security has
fallen since 2009. Only a third of consumers believe that most websites are safe for shopping, compared to
44% in 2009. Now that retailers are handling a hugely broad range of data – from financial data to location
based data, the industry at large has data privacy and security as a key focus.
65
Macro Disruptions
6
Cross border
e-commerce
The number of consumers shopping online continues to rise, with global e-commerce sales
reaching US$1 trillion in 2013. Competition in retail naturally stems from domestic
players, but it is increasingly coming from online retailers in other continents. As
such, retailers are looking to grow international sales and are adopting cross border
e-commerce in a number of ways.
Some retailers are opening their domestic websites to local and/or international
orders, or pursuing cross-border sales from a domestic location. Several are entering
new markets with a pure-play online model to test the market, and following up by
opening stores. Still others are entering new, high-growth or under-served domestic
markets via multiple channels, or upgrading their omni-channel offer in locations where they
already have stores.
7
Price
transparency
Price transparency is not a competitive threat in retail; it is a disruptive shift in
how consumers shop. The rise and success of comparative price shopping and
‘showrooming’ have underpinned this challenge. As such, retailers are looking for
innovative ways to keep consumers from abandoning them for a cheaper price.
Importantly, price transparency is evolving and the newest generation of mobile
shopping apps, websites and services are designed to create a win for both retailers
and consumers. Innovation has created opportunities for retailers, allowing them
to engage their customers even when they are not in a physical store environment.
Ultimately consumers want quality products, but they also want affirmation that they are
paying a fair price.
Setting the standard in ultimate price transparency is US ecommerce store Everlane. The company boasts
‘Radical Transparency’ as its point of difference. Browsing the site, users can see the cost of materials, labor,
duties and transport that went into producing the item. In this way, consumers get an idea of the ‘true cost’ of
each piece of clothing.
66
Macro Disruptions
8
Vertical
integration
Retailers are becoming more vertically integrated to contain costs and enhance operating
efficiency. Through controlling the whole value chain, from manufacturing to retail,
vertical brands can offer attractive economics. With traditional retail channels on the
decline, many manufacturers – especially those in beauty, consumer electronics,
textiles, furniture, leather goods, sporting goods, and luxury goods - are also vertically
integrating in order to better manage their brands. Nonetheless, vertically integrated
commerce and innovation has only just begun to disrupt the retail industry.
Australian Shoes of Prey epitomizes the vertical integration mindset – the custom shoes
company owns its manufacturing facility and directly employs all factory staff. By taking
control of the entire supply chain, Shoes of Prey hopes to offer overnight delivery on custom
shoes by 2020. The company has recently expanded into luxury US department store Nordstrom and currently
offers a two week turn around on high-end, ultra customizable products. Other brands that are reaping the
benefits of the increased control and often lower cost of vertical integration include US eyewear sensation
Warby Parker and menswear favourite Bonobos.
. There are a number of well-known global consumer shifts occurring, including a
growth in ageing communities, as well as the number of consumers and single-person
households. Technology is also having a profound effect on the way consumers
live, shop and inform their expectations. As such, consumers are demanding retail
Changing
‘their way’ and are incredibly connected. Connected consumers are epitomised
demographics
by Millennials, those born between 1982 and 2004. Growing up with the Internet,
& lifestyles
Millennials are quick to adopt new technology and media - a key reason why retailers
are struggling to keep up with their rapidly evolving demands and consumption
patterns. Millennials are pushing back against traditional notions of consumption. In a
2013 survey by the Boston Consulting Group, millennials anticipated that they would spend the
greatest amount of money on fresh product and natural products rather than luxury goods, soda and fashion
accessories.
9
Many brands are directly targeting Baby Boomers (60+), for example Joan Didion, now 80 is the new face of
Celine in a big to attract the huge spending power of this generation. A wellness renaissance means that this
segment is much more ready, willing and able to spend than they once were.
Brands should also be mindful of the aging population over time. By 2050, 33% of populations in developed
nations will be over 60 according to data from the United Nations magnitude of aging report.
This presents the P&C channel with a big opportunity which no-one appears to be tapping into currently with
targeted and relevant offers and innovation.
67
Macro Disruptions
10
Talent
requirements
Retail has become one of the most complex business models, and thus talent requirements
and capabilities have evolved considerably. Arguably, retailers need more expertise in
information technology, data analytics and social media than in the past.
Even at the executive level, there is a requirement to have someone who
understands social media and digital products. Rising concerns surrounding cyber
security and data privacy are also seeing the role of the IT executive gain prominence.
Already, some retailers are recruiting from outside the industry to introduce specific
expertise, diverse experiences and new thinking into their culture.
Future Trends - Summary
A disrupted path to purchase
The era of disruption in retail has ultimately disrupted the consumer’s path to purchase. Rather than the
traditional funnel-shaped path, consumer journeys are now subject to interruptions, diversions and delays.
Moreover, when considering a purchase, consumers prefer to ‘pull’ information, rather than have brands ‘push’
it to them. For example, consumers are actively looking for inspiration by exploring other consumers’ social
media profiles, rather than be inspired by brands through traditional advertising. Post-purchase, consumers
are not only actively sharing views that influence others, but are also becoming more involved in product
development. This means that consumers have also become critics and creators themselves. Savvy retailers
are responding by making it as easy as possible for consumers to complete their purchase path through
listening, inspiring and co-creating. With new technologies entering the mainstream, more disruptions to
the traditional path to purchase are expected. Nonetheless, these technologies also offer retailers new and
different opportunities for engaging with consumers.
About ACRS
For retail, consumer and services-oriented businesses who need to better understand consumers, traverse
global trends and best-practice, or employ marketing as a source of competitive advantage, the ACRS is the
place to turn. Respected throughout the world as a definitive source of retail and marketing knowledge, and
located within Monash University’s Department of Marketing, the ACRS has a 35 year history of working
with business to deliver insight. With one foot firmly anchored in sound academic thinking and the other in
commercial relevance and practicality, the ACRS combines the latest advances from the academic world with
the best of business strategies.
68
Summary
Overall we have seen another positive
year for the Australian Convenience
Store channel and we can justifiably have
‘confidence in convenience’ in the future.
There are still excellent opportunities for the industry to embrace, such
as ‘food on the go’, but also challenges in providing ‘value’ so that we are
increasingly seen as a destination and credentialed for offering a range of
healthy products, at fair prices with excellent customer service in modern,
clean, bright and safe locations.
There is a raft of new technological advancements, that retailers are just
starting to tap into with some success, and that could be leveraged further
to engage with both the current and potential shopper bases out there.
It is encouraging to see a diverse range of in-store innovation over the
past year, with the execution of many store trials testing the feasibility of
new and exciting propositions.
In addition, Convenience Retailers continue to invest in their store
refurbishments and their in-store merchandise propositions, pushing
the boundaries and creating pleasant shopping environments for their
customers. They are also testing new ideas and taking key learnings
onto the next stage of development as they continue on the journey of
enhancing their shoppers’ overall experience.
69
Summary
On the flip side, we need to keep focused on the some of the key areas
which have the potential to negatively impact the growth of the channel;
these include grocery retailers and QSRs encroaching on the ‘traditional’
territory of the convenience channel, further tobacco excises looming
this year and next, the potential of a sugar tax which is being monitored
overseas currently and the increasing cost of petrol theft.
This report has been compiled to provide you with key metrics and insights
into the convenience channel and also stimulate some more thoughts on
where the channel could develop in the Australian market place.
AACS values your feedback on this report and any areas you may wish
to see covered in future reports. Please contact Jeff Rogut to share any
comments that you may have. Contact details are below:
Jeff Rogut Chief Executive Officer
Australasian Association of
Convenience Stores Limited
Mobile 0467 873 789
Office 03 9807 5552
email jeff@aacs.org.au
www.aacs.org.au
PO Box 2309, Mt Waverley
VIC 3149 Australia
Contact
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State of the Industry Report 2014

Transcription

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