Are You Running Your Business Based On A 10-Year-Old Business Model?

by Paul Schlossberg
Posted On: 7/2/2019

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Paul Schlossberg
At the recent NACS (National Association of Convenience Stores) 2019 State of the Industry (SOI) Summit there were some comments which really caught my attention. NACS Media Daily reported about product category sales data and trends. Charlie McIlvain, chairman and chief executive of Coen Markets (Canonsburg, PA) said "The 'Cokes and smokes' business model has crested." He was referring to the increasing importance of instore foodservice (more about the relevant data later).

McIlvain went on to note that the "top-quartile retailers, that is, those retailers who produced total sales in the top 25% of the channel" drove the (majority of the) growth in foodservice sales. Continuing, he said "The bottom half is still (working with) a 10-year-old business model" --clinging to tobacco and beer sales.

CSPDailyNews.com summarized the category data -- SOI 2019: Record In-Store Sales Driven by Foodservice . It noted that "Foodservice powers growth." In 2018, foodservice sales were 22.6% of instore sales. That includes "prepared food (69% of both category sales and profits), as well as commissary foods and hot, cold and frozen dispensed beverages." While foodservice sales have gained as a proportion of instore sales, beer and cigarettes have decreased in sales -- not just in 2018, but also over the past 10 years (2009-2018) based on NACS SOI data.

Shrewd and innovative companies in the convenience store industry learned that there was only one way to differentiate versus their competitors. After all, everyone in the industry pretty much sold the same stuff -- fuel, packaged beverages, snacks, etc., and, of course, cigarettes and beer. Those category leaders invested in developing their own, proprietary, foodservice products and branding. It worked. As the data from the SOI proves, it's still working.

Think back to the business models our industry has seen over the years. There is the "four Cs" -- that's Cola, Coffee, Candy and Cigarettes. Fortunately that era is long gone. Now we see the explosive growth of micromarket placements and the emergence of pantry services. Food has generated an increasing share of sales for many operators.

Are there companies in our industry who are still working with a 10-year-old business model? Maybe it's yes; maybe it's no. What matters is what you're doing with your business on a day-in and day-out basis? How are you diversifying your sales beyond cold drinks and candy/snacks?

Don't think about this at the macro-level -- the totals at your company. Dig deeper into the data. It's the micro-level data -- account by account -- that should get your attention. Find the accounts where your product sales do not include food -- or at locations where food is a small portion of volume. What can you do to drive food sales at those sites? Of course there will be some sites where it's not productive or practical to push increased food sales.

In March 2018, we posted " How Come Everybody Sells The Same Stuff ?" It addressed the issues operators in our industry must deal with to differentiate their product offering from the competition? You must differentiate what you sell -- not just within our industry, but also versus convenience stores and fast food restaurants.

If you want to sell more stuff, you cannot be stuck with a 10-year-old business model.

Paul Schlossberg is president of D/FW Consulting, working with clients to merchandise and market products in impulse-intense selling environments, such as vending, onsite foodservice and convenience stores. Based in the Austin, TX, area, he can be reached by emailing to Paul@DFWConsulting.net, calling him at (972) 877-2972. The company is online at www.DFWConsulting.net.