Holding the Line

Retailers expect to see more of the same in terms of sales for most product categories this year

By Angela Hanson

CONVENIENCE STORE OPERATORS projected cautious optimism for 2021, with sales expected to hold steady in most product categories and grow in some. For 2022, c-store retailers largely expect to see more of the same for most categories, although the current supply chain disruptions and labor shortage have tempered optimism somewhat, resulting in shifts in minority opinions for some categories, according to the 2022 Convenience Store News Forecast Study.

Categories with the greatest projected disparity between dollar sales and unit volume include motor fuels and tobacco, primarily due to rising prices. Other categories, such as prepared food, reflect the perception that things are improving — expectations for this category aren't as high as they were two years ago, but more retailers predict sales will see a bump this year.

Here are the individual category forecasts for 2022, according to retailers:

MOTOR FUELS

Expectations for motor fuels in 2022 are a mixed bag. Optimism about dollar sales is fairly widespread, as 53 percent of c-store retailers expect their average motor fuel dollar sales per store to increase, and 36 percent expect sales to stay the same. Both large and small operators are in agreement that fuel dollar sales are unlikely to decrease in 2022.

On the other hand, c-store operators are far less confident about fuel volume. A quarter of retailers expect their average gallons sold per store to decrease, while 47 percent expect gallon sales to stay the same. Just 19 percent believe their gallon sales will rise.

Growth in electric vehicles and the increasing movement toward more fuel-efficient cars are among the trends retailers cite as having a likely effect on motor fuel sales in 2022. And Forecast Study participants overall agree on one particular problem: fuel prices. can no longer afford to fill their cars, but the credit card companies are taking bigger chunks when the dollar amount of the transaction goes up," one retailer said. "We can't win."

While large and small operators did not express significantly different sentiments about the category's 2022 prospects, some retailers point out a disparity in impact.

Category Forecast: Motor Fuels

3%

Decrease

36%

Stay the same

DOLLAR SALES

8%

Don't sell

53%

Increase

Average % Expected Increase = 14% Average % Expected Decrease = 10% Average % Expected Increase = 14% Average % Expected Decrease = 8%

8%

Don't sell

25%

Decrease

GALLONS

19%

Increase

47%

Stay the same

Category Forecast: Cigarettes

19%

Decrease

39%

Stay the same

6%

Don't sell

36%

Increase

DOLLAR SALES

Average % Expected Increase = 10% Average % Expected Decrease = 14% Average % Expected Increase = 12% Average % Expected Decrease = 10%

6%

Don't sell

44%

Decrease

UNIT VOLUME

19%

Increase

31%

Stay the same

Source: Convenience Store News 2022 Forecast Study

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another retailer said. "Also, there are times that we run out and our supplier does not deliver in a timely manner."

TOBACCO

Similar to motor fuels, pessimism is much higher in the cigarettes category when it comes to unit volume vs. dollar sales. Forty-four percent of retailers project that their average cigarette unit volume per store will decline in 2022, while 31 percent expect it to stay the same, and 19 percent expect an increase.

While most c-store operators don't expect cigarette dollar sales to go down this year, they are fairly evenly split on whether average dollar sales per store will increase (36 percent) or stay the same (39 percent).

Higher costs, whether driven by tax hikes or manufacturer price increases, are once again to blame, according to study participants, who tend to view the cigarettes category as a must-have yet increasingly challenging segment.

"Tobacco is a drug for those that have to have tobacco," noted one retailer. “It is a needed product I feel I must carry to be able to keep a good percentage of my business. It is like trying to balance on the sharp edge of a knife; no matter which way you jump, you will find those that are against/for the product.”

The majority of c-store operators do not expect to make changes this year to either the number of cigarette SKUs they offer or the amount of square footage they give the segment. However, the percentage of retailers that say they will decrease the number of SKUs (32 percent) and linear square footage (27 percent) both rose 4 points year over year.

When it comes to the other tobacco products (OTP) category, retailer sentiment overall is more positive regarding this segment than for cigarettes. Half of retailers expect their average OTP dollar sales per store to increase in 2022. More large operators than small operators report that they foresee sales in this segment growing.

Optimism is more tempered for OTP unit volume. Half of retailers expect volume to stay the same and 36 percent expect it to grow, in a near-reverse of their expectations for dollar sales. Nearly two-thirds of retailers say the number of OTP SKUs they offer will stay the same in 2022, and 71 percent expect the square footage they devote to OTP to stay the same.

Product costs, new products and the popularity of vaping are among the list of trends retailers cite as likely to have an impact on OTP’s performance this year. Flavor bans are also top of mind.

"With increased vape and flavored tobacco bans, it is anticipated that more previous combustible cigarette smokers will return to

Category Forecast: Other Tobacco Products

11%

Decrease

6%

Don't sell

33%

Stay the same

50%

Increase

DOLLAR SALES

Average % Expected Increase = 10% Average % Expected Decrease = 16%

8%

Decrease

6%

Don't sell

50%

Stay the same

UNIT VOLUME

36%

Increase

Average % Expected Increase = 9% Average % Expected Decrease = 20%

Category Forecast: Prepared Food

6%

Decrease

19%

Don't sell

22%

Stay the same

53%

Increase

DOLLAR SALES

8%

Decrease

19%

Don't sell

22%

Stay the same

50%

Increase

UNIT VOLUME

Average % Expected Increase = 17% Average % Expected Decrease = 13% Average % Expected Increase = 15% Average % Expected Decrease = 12%

Source: Convenience Store News 2022 Forecast Study

using combustible cigarettes rather than these alternatives," one retailer pointed out.

"While many combustible cigarette smokers will return to what they know, new product offerings make take the place of those products for these consumers," another retailer added.

FOODSERVICE

Positive feelings about the foodservice category are rebounding after dropping sharply due to the COVID-19 pandemic. While expectations for 2022 are still far below the pre-pandemic projections for 2020, when 95 percent of c-store operators predicted their foodservice sales would rise, the number of retailers this year who expect foodservice dollar sales and volume to increase both rose compared to the 2021 Forecast Study.

Fifty-three percent of retailers predict their average prepared food dollar sales per store will increase in 2022, while 22 percent expect them to stay the same, and just 6 percent expect dollar sales to decline. This optimism is shared by convenience retailers of all sizes, with at least half of both large and small operators expecting dollar sales to grow.

The projections for average prepared food unit volume per store are similar, with 50 percent of retailers expecting volume to increase and 22 percent expecting no change.

A majority of retailers (55 percent) say they will increase the number of prepared food SKUs offered in their stores, up 16 points from a year ago. Expectations for square footage are split, with 41 percent of retailers saying they will increase space (up 19 points from last year) and 45 percent planning to keep it the same (down 21 points from last year).

Retailers report they are prepared to spend a considerable amount (or have already done so) in order to meet the requests and needs of consumers who are seeking more options, healthier choices and quicker meals. Online ordering, social media advertising and third-party delivery are all expected to have a sizeable impact on prepared food this year.

Supply chain disruptions and price increases are challenges to the category, as they are to other product segments, but retailers still see prepared food as one of the best opportunities to generate profit and boost the bottom line.

"We are working harder at it because we have to make money somewhere," said one retailer.

Foodservice beverages, which include hot, cold and frozen dispensed drinks, are largely expected to see sales consistent with 2021 levels this year, although the number of retailers that expect to see segment sales decline did fall slightly.

Overall, 56 percent of retailers forecast average dispensed beverage dollar sales per store to stay the same, while 31 percent expect them to increase. Similarly, retailers believe dispensed beverage volume is likely to resemble 2021 levels, as 64 percent expect the average unit volume per store to stay the same and 22 percent expect it to increase.

Unlike with prepared food, more than three-quarters of retailers say the number of dispensed beverage SKUs they offer and the square footage devoted to the segment will stay the same. It is also worth noting that the number of retailers that plan to add more SKUs fell 17 points to 9 percent, while the number of retailers that plan to decrease SKUs rose 8 points to 15 percent.

Retailers are looking to increased morning foot traffic and innovative product offerings to boost dispensed beverages, but many acknowledge

6%

Decrease Category Forecast: Dispensed Beverages

8%

Don't sell

6%

Decrease

8%

Don't sell

Average % Expected Increase = 11%

Average % Expected Decrease = 13% Average % Expected Increase = 10%

Average % Expected Decrease = 19%

56%

Stay the same

31%

Increase

DOLLAR SALES

64%

Stay the same

22%

Increase

UNIT VOLUME

uncertainty, particularly due to the ongoing effects of the pandemic. Rising prices are also a factor. One retailer predicted a "rebound of coffee, but slowdown on growth across the category with retail hikes.”

Others, though, point to the inherent appeal of the segment as a reason it will rebound.

"There are those that want to dispense their own beverage, regardless of the negative feeling toward the COVID19 virus," another retailer remarked. "Especially young teenagers and a large number of adults that like to size their drinks."

PACKAGED BEVERAGES

The packaged beverages category reaped the benefits of many consumers being unable or unwilling to purchase dispensed beverages early in the pandemic. Expectations for growth have settled down since then, but c-store operators are still confident the category will continue to perform well in 2022.

More than four in 10 retailers expect their average packaged beverage dollar sales per store to increase this year, while half expect sales in this category to stay the same.

Operators are somewhat more confident that packaged beverage unit volume will at least hold steady from 2021: 58 percent of retailers project average unit volume per store to stay the same, while a third of retailers expect it to increase.

Most retailers say they will not change the number of packaged beverage SKUs they offer (62 percent) or their square footage for the category (79 percent). The percentage of retailers that plan to increase either SKUs or square footage also declined from last year.

Energy drinks, flavor innovation and stronger demand for better-for-you beverages are among the trends retailers see having a significant impact in 2022. One retailer noted that "the single-purchase consumer is back," which should mean good things for packaged beverages. But rising prices and product outages may serve as stumbling blocks.

"This is up to the distributors to fix," another retailer lamented. "Both Coke and Pepsi have decreased their flavor lines due to closures and inputs being unavailable. The trucking industry has to get fixed!"

Category Forecast: Packaged Beverages

3%

Decrease

6%

Don't sell

3%

Decrease

6%

Don't sell

50%

Stay the same

42%

Increase

DOLLAR SALES

Average % Expected Increase = 8% Average % Expected Decrease = 6% Average % Expected Increase = 9% Average % Expected Decrease = 20%

58%

Stay the same

33%

Increase

UNIT VOLUME

Category Forecast: Beer & Malt Beverages

3%

Decrease

25%

Don't sell

11%

Decrease

25%

Don't sell

53%

Stay the same

19%

Increase

DOLLAR SALES

53%

Stay the same

11%

Increase

UNIT VOLUME

Average % Expected Increase = 7% Average % Expected Decrease = 20% Average % Expected Increase = 6% Average % Expected Decrease = 11%

Source: Convenience Store News 2022 Forecast Study

BEER & MALT BEVERAGES

saw sales rise early in the pandemic as consumers turned to convenience stores for quick, in-and-out purchases of their favorite brews. C-store operators don't expect that kind of situational boost to repeat this year, but express generally positive sentiments for this section of the cold vault.

Among the surveyed retailers that sell beer and malt beverages (a quarter indicated they do not), 70 percent expect their average dollar sales per store in the category to stay the same in 2022, while 26 percent think sales will increase.

Average unit volume per store for the category is also projected to stay the same by 70 percent of the retailers who sell beer and malt beverages. Meanwhile, an equal percentage think volume will increase or decrease (15 percent for both).

For the most part, c-store operators intend to keep the contents of their coolers and beer caves the same this year. Two-thirds say the number of beer/malt beverage SKUs they offer will stay the same, consistent with 2021 figures. The percentage of retailers that plan to keep the category's square footage the same rose 17 points year over year to 89 percent. The percentage of retailers that plan to expand either SKUs or square footage saw a significant decline, down 19 points and 21 points, respectively.

Notable category trends for 2022 include new brands and flavors, locally sourced products, and "beyond beer" offerings such as ready-to-drink cocktails. Some retailers speculate that the hard seltzer segment has reached saturation.

Once again, retailers point to rising prices and product outages as among their frustrations in the packaged beverages category.

"You can't sell what you don't have, and I can't whip up some Corona in the kitchen to try to make up for it," one retailer remarked.

CANDY

The candy segment is another area where c-store operators largely don't expect sales to get worse, but also don't hold high expectations for improvement in 2022.

Three-quarters of retailers expect their average candy dollar sales per store to stay the same in 2022, a notable jump from 2021’s projections. Conversely, the percentage of retailers that expect candy dollar sales to increase fell 10 points, now at 22 percent.

Nearly eight out of 10 retailers forecast average candy unit volume per store to stay the same in 2022. The remaining retailers are evenly split on whether unit volume will increase or decrease (both at 11 percent).

Category Forecast: Candy

3%

Decrease

75%

Stay the same

22%

Increase

DOLLAR SALES

Average % Expected Increase = 7% Average % Expected Decrease = 5% Average % Expected Increase = 6% Average % Expected Decrease = 5%

11%

Decrease

11%

Increase

78%

Stay the same

UNIT VOLUME

Category Forecast: Salty Snacks

3%

Decrease

3%

Don't sell

6%

Decrease

3%

Don't sell

67%

Stay the same

28%

Increase

DOLLAR SALES

Average % Expected Increase = 9% Average % Expected Decrease = 1% Average % Expected Increase = 9% Average % Expected Decrease = 7%

67%

Stay the same

25%

Increase

UNIT VOLUME

Source: Convenience Store News 2022 Forecast Study

and square footage dedicated to candy, as 83 percent and 94 percent of retailers, respectively, report that they do not intend to make any changes this year.

Some c-store operators are concerned that price may have a particular impact on candy, driving customers to rethink treating themselves to small indulgences.

"The prices are going up and people are skipping this reward," observed one retailer.

Others expect the biggest differencemaker to be focusing on the fundamentals of having the most popular SKUs on the planogram and keeping them in stock, as well as strategically placing products in high-traffic areas to improve impulse sales.

"Candy/gum is a very high-profit planogram," noted another retailer.

SNACKS

Similar to candy, retailers largely anticipate more of the same from the salty snacks category in 2022, although there is a bit more optimism for this segment.

Approximately two-thirds of retailers (67 percent) say their average salty snack dollar sales per store will stay the same in 2022, while more than a quarter (28 percent) forecast an increase. The number of c-store operators expecting no change in sales has risen from last year's figures. Sentiment is very similar for projected unit volume per store, as 67 percent expect it to stay the same and 25 percent predict an increase.

More than three-quarters of retailers plan to offer the same number of salty snack SKUs this year vs. 17 percent who plan to increase SKUs. Almost nine out of 10 retailers (89 percent) will keep square footage the same, while 9 percent expect to increase it.

Continued interest in perceived-healthier snacks featuring seeds and grains is expected to have an impact on the category this year, as well as bold flavor varieties and spicy options. One operator predicts that Asian flavor profiles will jump in popularity.

As with candy, retailers believe that focusing on the fundamentals will help them overcome challenges in the segment. "Salty snacks are high-impulse items also. Strategic placement, with fresh, competitive pricing is essential to success in this category," one operator stated.

Category Forecast: Alternative Snacks

6%

Decrease

8%

Don't sell

6%

Decrease

8%

Don't sell

67%

Stay the same

19%

Increase

DOLLAR SALES

Average % Expected Increase = 18% Average % Expected Decrease = 11% Average % Expected Increase = 14% Average % Expected Decrease = 6%

69%

Stay the same

17%

Increase

UNIT VOLUME

Category Forecast: Edible Grocery

17%

Decrease

6%

Don't sell

17%

Decrease

6%

Don't sell

56%

Stay the same

22%

Increase

DOLLAR SALES

Average % Expected Increase = 10% Average % Expected Decrease = 16% Average % Expected Increase = 10% Average % Expected Decrease = 14%

61%

Stay the same

17%

Increase

UNIT VOLUME

Source: Convenience Store News 2022 Forecast Study

Convenience channel retailers anticipate alternative snacks will follow a similar trajectory this year. Around two-thirds of retailers (67 percent) believe their average dollar sales per store of alternative snacks will stay the same, while 19 percent expect an increase. Just under seven in 10 retailers expect average unit volume per store in the segment to stay the same, while 17 percent expect alternative snack unit volume to rise.

A significant majority of retailers (70 percent) intend to offer the same number of alternative snack SKUs this year. However, the 27 percent that plan to increase SKUs marks a 10-point increase from 2021. Nearly nine out of 10 retailers expect to keep the same amount of square

footage — a 9-point increase year over year.

Some retailers expect the "continued movement toward non-traditional snacks," as well as demand for better-for-you items, to keep lifting the category.

"[It] all depends on the flow of the traffic," said one study participant.

EDIBLE GROCERY

C-store retailers are adjusting their expectations for the edible grocery category this year due to diminishing consumer concerns about making longer shopping trips inside larger stores.

"People are returning to mass retailers/ grocery stores for their grocery needs after the pandemic," said one retailer. "C-stores [are] becoming less important."

The percentage of retailers that forecast their average edible grocery dollar sales per store to stay the same in 2022 rose to 56 percent, while the percentage that expect a decrease likewise rose to 17 percent. Just 22 percent believe dollar sales in the category will increase.

Just over six in 10 retailers (61 percent) expect edible grocery unit volume per store to stay the same, while 17 percent expect it to increase, and 17 percent expect it to decrease.

Nearly three-quarters of retailers plan to offer the same number of edible grocery SKUs this year, and 77 percent expect to maintain the same square footage. The percentage of retailers that plan to increase SKUs or square footage both declined by 9 to 11 points.

Healthy offerings and the increased adoption of third-party delivery services may have a positive impact on edible grocery's future in the convenience channel, but some retailers are pessimistic that it will be a strong category post-pandemic.

"Convenience purchases of eggs and milk just don't happen when you can call the grocery store and have your order ready for your car or even on your doorstep," said one respondent. "This is still for the person that forgot to pick something up and this is their last stop before home."

NON-EDIBLE GROCERY

The percentage of retailers that expect to see no change in the non-edible grocery category this year also jumped up from

Category Forecast: Non-Edible Grocery

14%

Decrease

8%

Don't sell

64%

Stay the same

14%

Increase

DOLLAR SALES

Average % Expected Increase = 21% Average % Expected Decrease = 7% Average % Expected Increase = 42% Average % Expected Decrease = 4%

19%

Decrease

8%

Don't sell

67%

Stay the same

6%

Increase

UNIT VOLUME

Category Forecast: General Merchandise

17%

Decrease

3%

Don't sell

17%

Decrease

3%

Don't sell

50%

Stay the same

31%

Increase

DOLLAR SALES

Average % Expected Increase = 18% Average % Expected Decrease = 7% Average % Expected Increase = 23% Average % Expected Decrease = 8%

61%

Stay the same

19%

Increase

UNIT VOLUME

Source: Convenience Store News 2022 Forecast Study

2021 projections. Nearly two-thirds (64 percent) believe their average non-edible grocery dollar sales per store will stay the same. Retailers that think dollar sales will increase or decrease are evenly matched at 14 percent each.

Similarly, 67 percent of retailers expect average unit volume per store for non-edible grocery to stay the same, while 19 percent expect it to decrease, and just 6 percent think volume will increase.

The vast majority of retailers intend to keep non-edible grocery product SKUs and square footage the same year over year (both at 88 percent).

For the most part, retailers anticipate supply issues, inflation and online shopping habits having more of an impact than specific product types. Some expect ecofriendly/green products to increase in popularity, while others are of mixed opinions on whether cleaning and sanitizing products will continue to be impactful in 2022.

"The costs are going up and people buy less each," one retailer said.

GENERAL MERCHANDISE

C-store retailers' expectations for the general merchandise category this year are largely the same as in 2021. Half of retailers expect their average dollar sales per store in the segment to stay the same. More than three in 10 (31 percent) project an increase in dollar sales.

Average unit volume per store is even more likely to stay consistent year over year, according to the 61 percent of retailers expecting no change. Nineteen percent foresee unit volume rising, while 17 percent expect it to decline.

About two-thirds of retailers (66 percent) plan to offer the same number of general merchandise SKUs in 2022, while one in five expect to increase SKUs. Seventy-one percent of retailers plan to keep the same amount of square footage for general merchandise, while 17 percent expect to increase it.

Some c-store operators believe that general merchandise will see less demand as consumers return to their pre-COVID shopping habits, while others think the industry simply needs to rethink its offering in this category.

"Expect to see more tech trends, more point-of-sale impulse items," said one retailer.

Category Forecast: Health & Beauty Care

25%

Decrease

11%

Don't sell

25%

Decrease

11%

Don't sell

47%

Stay the same

17%

Increase

DOLLAR SALES

Average % Expected Increase = 5% Average % Expected Decrease = 12%

53%

Stay the same

11%

Increase

UNIT VOLUME

Average % Expected Increase = 4% Average % Expected Decrease = 10%

Source: Convenience Store News 2022 Forecast Study

average HBC dollar sales per store to stay the same in 2022, while a quarter of retailers expect dollar sales in the category to decrease.

HEALTH & BEAUTY CARE

Opinion on the future of the health and beauty care (HBC) category at convenience stores is shifting slightly this year. The largest proportion of retailers expects sales to stay more or less the same, but the percentage of retailers with negative expectations has risen vs. a year ago. C-store operators are even more likely to expect the status quo for unit volume, as 53 percent of retailers foresee average HBC volume per store staying the same, with 25 percent reporting that they expect unit volume to decrease.

Three-quarters of retailers intend to offer the same number of health and beauty care SKUs this year, and 78 percent expect to maintain the same square footage, marking little change from a year ago. Large operators are more likely than small operators to have shifted their plans this year for both from "increase" to "stay the same."

At least one retailer, though, is bullish on the HBC business. "This is our bread and butter," they said. "OTC categories must have the mostshopped SKUs, with a renewed focus on converting patients to house brand products to improve sales and profitability. Must have merchandise mix not available online."

Some retailers connect pandemic recovery with a general interest in wellness. "Health and beauty is expected to increase as people reconnect face-to-face and become more wellness minded," another retailer predicted.

However, rising prices, limited stock and online shopping are seen as issues likely to keep the category from growing, according to numerous operators.

"Health and beauty is a very competitive category. Trends are extremely important, as well as competitive pricing," said one retailer. "We do not have the space that big boxes have, so we must be diligent in our product mix and pricing." CSN