Half year result shows convenience industry resilience

The release of the half year AACS State of the Industry report into the performance of the Australian convenience industry demonstrates the resilience of the convenience sector and the value proposition that stores continue to offer their customers.

The report, from the Australasian Association of Convenience Stores (AACS), shows the convenience channel recorded a strong growth rate of 4% for the first half of 2014. This impressive result follows the 3.7% increase recorded for the whole year in 2013.

AACS CEO Jeff Rogut said the strong momentum was a testament to the retailers and suppliers at the forefront of the industry.

“The half year result demonstrates the industry is tracking well for another year of sustained growth. The commitment to innovation on both the supply and retail side of the industry is clearly paying dividends in what remains a challenging environment for retailers generally,” Mr Rogut said.

“Generally speaking, strong performing product categories in 2013 have continued to show growth, while the challenge to extract value from underperforming categories remains,” he said.
Once again Non Food grew at a faster rate, increasing by 4.6% in the first half. Food has dropped slightly on the 2013 result at 3.2% growth in the first half of 2014 compared to 3.5% last year.

After a strong result in 2013 the Ice Cream category has maintained its momentum into the first half of 2014, once again having the strongest growth for the first half at 10.6%.

Other leading categories for the half included Medicinal, which grew 8.6%, Take Home Beverages at +5.5% and Food on the Go, which increased 4.5%.

Continuing the trend driven by further Government excise increases, the massive growth in the tobacco sub-value category of 61.7% and roll your own tobacco of 29.1% saw Tobacco category sales for the half increase 7.3%. This result must be viewed in the context of the huge growth in the illicit tobacco market.

“Another round of Government excise increases on tobacco and the growth in the illicit tobacco market driven by plain packaging continues to impact small businesses, pushing legal tobacco customers to cheaper product alternatives, with price firmly established as the key driver in tobacco sales,” Mr Rogut said.

Mainstream Cigarettes remains the largest category, however the growth rate was just 0.9%, while the Premium category, which remains the second largest, declined 7.4%.

The alarming incidence of petrol theft crimes remains the perhaps the most concerning area for the convenience industry, with petrol theft now costing on average $191 per store per week, equating to almost $60 million annually. This is an increase of 30%.

“Petrol theft crimes are occurring in unprecedented numbers. Aside from the potentially dire safety consequences, the financial implications for convenience store owners have become critical,” Mr Rogut said.

“The AACS will remain outspoken on the issue as theft is a cost that can’t be absorbed by retailers and will necessarily be passed on to motorists. Petrol theft is increasing, and while police fail to acknowledge the issue, it will continue to get worse,” he said.

Nevertheless, on a whole, to see the convenience industry continue to achieve growth against a backdrop of high fuel prices and budget uncertainty is especially pleasing, Mr Rogut said.

“After strong performance in 2013 in a challenging environment of subdued consumer confidence and a market which is prioritising value, it was encouraging to see the convenience channel has again achieved growth above CPI,” Mr Rogut said.

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