Black-market tobacco impact revealed in AACS’ Mid-Year State of Industry Report

The Australian Association of Convenience Stores (AACS) launched its 2023 Mid-Year State of Industry Report in Sydney and Melbourne last week, with over 200 retailers and suppliers in attendance.

The launch featured presentations by Theo Foukkare, CEO of AACS, Brett Barclay, Director at CMA and Non-Executive Director of AACS, and Daniel Bone, Insights Director at Circana.

Total convenience retail in store shop sales for the first half were up 4.3%, however, like most Australian retail channels, sales in the quarter ending June slowed on the back of the broader issues impacting consumers.

Excluding tobacco, the channel experienced growth of 10.7 per cent, with Snackfoods continuing its strong value growth from 2022 up 21.2 per cent while hot beverages grew 17 per cent, packaged beverages increased 11.5 per cent, making it the second largest category after tobacco with 26.9 per cent of total merchandise sales.

The black-market trade in illicit tobacco and nicotine vape products has taken a toll on the channel, with tobacco sales dropping 13.7 per cent to 28.7 per cent share of channel sales in the first half of the year, and even more concerning, a 19.8 per cent decline in the quarter ending June.

Barclay explained that if the channel lost three billion dollars in tobacco sales, up to half of all stores in the channel would struggle to operate profitably.  

Barclay highlighted the importance of performing well in the September quarter, stating that this is the biggest sales quarter of the year that we are cycling over from 2022.

“If we can have a good third quarter, then we should finish the year strongly because, in fact, December was a negative for the channel, we had a relatively soft December in 2022.

“So hopefully we can get through this quarter reasonably well, and we should be able to deliver a strong back half.”

With no rate rise expected in September, Barclay said that if the RBA decides not to increase rates in October or November, then consumer confidence should come back.

Looking elsewhere in the channel, foodservice continues to perform strongly with 13.6 per cent growth led by an 18.9 per cent increase in food savouries (pies and sausage rolls), while take home food slowed on the back of three years of strong growth with an increase of 7.1 per cent.

“Outside of tobacco, topline sales are relatively healthy, which is great, but tobacco remains a concern for all retailers because it has the potential to reduce consumer foot traffic,” said Barclay. 

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