Convenience continues to resonate with consumers, with record in-store sales of nearly $215 billion and overall industry sales closing in on $700 billion in 2014
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 analyzes 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 fueling 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.
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/supercenter (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%).
Beyond sales, convenience stores remain an important part of the economy. The convenience and fuel retailing industry employed 2.43 million people last year (a 10.6% increase from 2013). Overall, convenience store sales represent about 4.1% — or one out of every 24 dollars — of the entire estimated $17.7 trillion U.S. gross domestic product. If total industry sales were compared to the GDP of other nations, our $697.5 billion industry would rank at #20, slightly lower than Saudi Arabia and just above Switzerland.
“These numbers demonstrate that Americans turn to us for their daily needs,” said NACS Chairman Steve Loehr, vice president of operations support at La Crosse, Wisconsin-based Kwik Trip. “We are a vital part of consumers’ daily lives and the U.S. economy. We also continue to innovate and deliver on our promise of providing fast, one-stop shopping to consumers, whether they are on the road or in their communities.” Convenience store pretax profits increased in 2014 to $10.2 billion, due primarily to higher profit margins as wholesale fuel costs decrease. The industry saw an 18.8% increase in fuel margins this year, at an average of 22.2 cents per gallon for 2014 compared to 18.7 cents per gallon in 2013. In a same-firm comparison, the number also rose from 5.4% to 6.8%, a significant increase over 2013.
Motor fuels continued to drive sales dollars, but in-store sales drove profit dollars. Overall, 69.2% of total sales were motor fuels, but motor fuels only accounted for 39.5% of profit dollars.
The industry’s bifurcation also continues, with a considerable difference between top quartile and bottom quartile performers — although the gap was less pronounced this year in some categories. The year also brought unprecedented M&A activity in the convenience channel, mainly driven by Master Limited Partnerships (MLPs), with four of the top five firms by store count selling or acquiring stores in 2014.
Here’s how in-store sales were broken down in 2014:
Tobacco (cigarettes and OTP): 35.9% of in-store sales
Foodservice (prepared and commissary food; hot, cold and dispensed beverages): 19.4%
Center 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 (pre-ordering is now available).