Cautiously Optimistic, But Still Realistic

A majority of the convenience channel’s suppliers and wholesalers feel good about their 2022 business outlook, though stumbling blocks remain

By Melissa Kress

A NEW YEAR brings the promise of hope. As the two-year anniversary of the COVID19 pandemic inches closer in the United States, the new year brings with it hope for a return to normal — or as normal as possible, considering how the pandemic has changed the convenience channel.

According to the results of the 2022 Convenience Store News Forecast Study, the channel's suppliers and wholesalers are cautiously optimistic as they head into 2022. Notably, 53 percent feel positive about U.S. economic conditions this coming year. This is down 1 point from a year ago, but far outpaces the 29 percent who report having negative feelings.

When asked about their 2022 outlook for their respective businesses, more than half of the c-store industry’s suppliers and wholesalers (51 percent) said they are optimistic about prospects in the new year. However, the percentage who feel positive declined by 6 points while, at the same time, the percentage who feel negative jumped 13 points to 19 percent.

Members of the supplier and wholesaler community are more bullish on their particular product categories. More than two-thirds (67 percent) feel positive about their product category, representing an increase of 13 points compared to a year ago.

The X Factors

There are several factors in play when it comes to how suppliers and wholesalers view 2022.

It should come as no surprise that chief among their concerns is supply chain issues. Specifically, 38 percent of this year’s respondents say supply chain issues will have the biggest impact on sales and profitability in 2022. Additionally, 78 percent rank this concern in their top three.

"Currently, we are experiencing issues with our supply chain, and improvements do not look promising for 2022," one respondent commented.

Company View of U.S. Economic Conditions in 2022

29%

Very/slightly negative

17%

Neutral

Total Suppliers/ Wholesalers

53%

Very/slightly positive

Overall Outlook for Business in 2022

Terrible, wake me when it’s over

1

5% 14% 29%

1 2 3

5

It’s going to be our best year ever!

41%

4 10%

5

Overall Outlook for Product Category in 2022

24%

Very/slightly negative

9%

Neutral

Total Suppliers/ Wholesalers

67%

Very/slightly positive

Source: Convenience Store News 2022 Forecast Study

study, are affecting prices as well as lead times, and finding alternative products is easier said than done.

"Almost every vendor is signaling difficulty. … Chasing down substitutions eats up time and effort for personnel," another respondent explained.

three issues suppliers and wholesalers say will have the biggest impact on sales and profitability in 2022. Raw material costs last year ranked as the fifth biggest concern.

Labor has been a major thorn in the convenience channel's side since the pandemic started to take a hold in the United States. Many suppliers and wholesalers contend that it is hard these days to both find and keep qualified workers.

"Labor costs are continuing to increase, and the supply of qualified and dependable employees is a challenge in this environment," one study participant pointed out.

Last year, the top three supplier/ wholesaler concerns heading into 2021 were the COVID-19 pandemic, consumer spending growth, and new product development in their category. This year, those concerns fell in rank to fifth, seventh and eight places, respectively.

Convenience Is King

Even with the challenges and stumbling blocks, the supplier and wholesaler community still has a favorable view of the convenience channel. According to this year’s study, a majority (71 percent) rate the current conditions in the convenience channel as positive.

Compared to last year, they also indicate greater positivity toward mass merchandise stores and dollar stores, while sentiment about the convenience channel remained unchanged.

However, that is not to say cross-channel competition is not heating up. Nearly 60 percent of the industry’s suppliers and wholesalers expect cross-channel competition against c-stores — including e-commerce — to increase in 2022. That's up two points vs. 2021.

The biggest threat is online grocery sales, according to 47 percent of respondents. Compared to last year's competitive view, suppliers and wholesalers also see increasing threats coming from fastcasual restaurants (up 10 points vs. 2021), mass merchandise stores (up 4 points), quick-service restaurants (up 4 points), drugstores (up 3 points), and dollar stores (up 2 points).

On the other hand, those members of the c-store supplier and wholesaler

Anticipated Impact of Issues on Sales & Profi tability in 2022

(% of Total Suppliers/Wholesalers identifying as "Biggest Impact" and in Top 3)

Ranked Biggest Impact Ranked in Top 3

Supply chain issues Labor turnover & hiring Raw materials cost Rising labor costs COVID-19 pandemic Increasing regulations New product development in category Consumer spending growth Consumer spending decline Retailer consolidation

E-commerce Emerging technologies Retailer unit expansion 38% 78%

19% 47%

12% 41%

2% 31%

3% 22%

9% 19%

9% 14%

2% 12%

2% 12%

2% 7% 0% 7%

3% 5% 0% 5%

Current Conditions in Retail Channels Company Works With

VERY/SLIGHTLY POSITIVE NEUTRAL VERY/SLIGHTLY NEGATIVE

Convenience

Mass

Dollar

Grocery

Drug

71%

61%

59%

57%

44% 17%

32%

26%

21%

41% 12%

15%

21%

15%

Expectations for Cross-Channel Competition Against Convenience Stores in 2022 3%

Decrease

Total Suppliers/ Wholesalers

38%

Stay the same

59%

Increase

Source: Convenience Store News 2022 Forecast Study

community who view Amazon and Amazon Fresh as the biggest threat to the convenience channel dropped 8 points year over year — though it is still a notable number at 33 percent. CSN