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AACS STATE OF THE INDUSTRY REPORT: CONVENIENCE CLIMBS IN VALUE TO $8.8 BILLION TO MARK MILESTONE MOMENTS

6 May 2020: The Australian convenience industry achieved solid growth of 2.1% in merchandise sales (excluding petrol) in 2019, with the performance of the Food and Beverages category in particular catapulting the value of the channel to nearly $8.8 billion.

While calendar year 2019 was categorised by various challenges in retail trade conditions, convenience once again proved its value proposition to consumers, with the AACS State of the Industry Report shining the spotlight on the categories which will shape the future of the industry.

The 2019 report was launched online this week to AACS members. Food was a clear standout, with Food sales up nearly 6% to $4.038 billion.

On the flipside, Non-Food categories delivered sales of $4.738 billion, down by more than 1% on the 2018 result. The decline is in part due to the Tobacco category delivering growth of 0.83% in 2019 compared to 6.4% the previous year.               

The number of convenience stores in Australia according to the report sat at 6,995 as at the end of 2019. Now in 2020, the year which marks the 30th anniversary of the establishment of the AACS as the voice of Australian convenience, the industry for the first time is looking to exceed 7,000 stores nationally.

“The continued strong performance of the convenience channel as highlighted by the AACS State of the Industry Report is an ideal accompaniment to the major milestones our industry is celebrating, including the 30th birthday of AACS,” AACS CEO Jeff Rogut said.

“The value proposition we provide consumers has never been clearer than right now as the coronavirus pandemic plays out. Government has deemed our industry an essential service and we take our responsibility to provide the items people need in these distressing times very seriously.

“The strong 2019 result, and the way we are still serving our customers today in bright, modern, clean and safe stores, is a testament to the many great operators and staff who make our industry tick,” he said.

According to AACS State of the Industry Report, the value increase in merchandise sales for the convenience channel in 2019 was $179 million, slightly down on the 2018 result of $201 million (+2.4%).

The average transaction value for the year was in line with the year prior at $9.69 while the average daily number of merchandise transactions per store was 498, an increase of 3.1%.

Beverages: a refreshing result

During 2019, on average more than 70% of convenience shopping baskets included a beverage, the AACS State of the Industry Report shows.

Packaged Beverages grew 4.4% over the year to deliver the greatest dollar value contribution of any convenience category of $79 million.

“Convenience customers are increasingly including a beverage among their purchases, in many instances combined with a Food on the Go purchase, with the trend to healthier alternatives continuing to play out and new market entrants in 2019 having a positive impact on the category,” Mr Rogut said.

Energy drinks, soft drinks and flavoured milk led the way in terms of dollar share in the Packaged Beverages category, while Tea Drinks and Protein drinks delivered the best performance in terms of dollar growth.

Hot Dispensed Beverages was the fastest growing category in convenience for the third year running, growing 18% to contribute another $46 million in sales, taking the category value to in excess of $300 million.

“Convenience stores are now legitimate coffee destinations as premium quality offerings are being rewarded with more frequent visits from customers. Those who typically get their caffeine fix from the convenience store now do so more than once every two days,” Mr Rogut said.

Healthy appetite for Food on the Go

The Food on the Go category grew at 11.5% generating $68 million in additional sales to the channel. This outstanding result made it the second fastest growing category in convenience in 2019, accounting for 38% of total channel growth and total sales of $659 million for the year.

“Food has been one of the key innovation focus areas for our industry in recent times and the efforts of leading operators are being rewarded. Convenience stores are now an established destination for fresh sandwiches, wraps and hot food, with customers responding positively to the quality and freshness of the convenience food offer,” Mr Rogut said.

In the Take Home Food category, growth slowed to 3.5% in 2019 in a sign the category is maturing with consumer having now accepted that meals on offer from convenience stores represent value for money. This category generated $149 in sales for the channel, $5 million up on the 2018 result.

In the other food categories, Confectionery (+2.1%), Snackfoods (+4.1%) and Ice Cream (+5.6%) all recorded impressive growth over the year.

Other key numbers

  • Fuel theft cost the average store $166.91 in losses each week in 2019, a 1.8% decrease over the prior year, yet still a significant sum for any small business.
  • Shoppers increasingly visited convenience stores for milk and bread in 2019, with the Milk category growing 1.4% to record sales of $146 million and Bread up 5.3% for sales of $40 million.
  • Though growth in Tobacco sales was only 0.8% for the year, it is still a very important legal category for convenience stores, with the contribution of legal tobacco sales to the overall channel sales being almost 39% in 2019.
  • The Grocery category grew 1% for sales of $40 million however the result for this year will tell an interesting story as consumers show a preference to grab their staples from convenience stores during the pandemic.
  • The AACS thanks its retailers for the data provided and Convenience Measures Australia for compiling the report. 

Looking ahead after 30 years

At the time AACS was established in 1990, the convenience channel was undergoing change as new players, products and innovations converged to shift perceptions of what the modern convenience store was, and the role in the community it would play.

This change is the constant, Mr Rogut said.

“The convenience industry, more than most, has a reputation for adaptation. Over the years we’ve seen categories rise and fall, trends come and go, but through a commitment to innovation, the convenience industry has thrived,” Mr Rogut said.

“In the context of these shifting goalposts, the latest result positions 2019 as one of the convenience industry’s best-performing years of the past three decades, considering the economic backdrop and challenges for retailers generally.

“The challenges and the changes will keep coming, the COVID-19 crisis being the latest factor to impact our stores, but convenience remains resilient, responsive, innovative and in many areas, ahead of the curve. The outstanding efforts of the retailers and suppliers to convenience give us every reason for continued confidence.

“As we respond to this pandemic, one area of concern is the high cost of unfair tap-and-go debit card fees, which are impacting our members.

“We strongly believe that a system known as least cost routing, which automatically routes customer transactions across the payment scheme with the lowest fees, would save money for our members at a time when every dollar counts to keep businesses afloat and people employed. We urge the RBA and the banks to move forward with this crucial reform immediately,” Mr Rogut said.

The complete AACS State of the Industry Report 2019 is available to AACS members as part of their membership in the ‘members section’ of the AACS website, and for purchase by non-AACS members for $2900.00 inc. GST.

Further information:                                                                     

Jeff Rogut                                                                                                                                            

Chief Executive Officer                                                                 

Australasian Association of Convenience Stores                                 

Ph: +61 467 873 789                                         

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