Sales lift a matter of convenience

Eli Greenblat,

6th May 2020

The Australian

The $9bn convenience store sector, covering service stations and corner stores, is discovering a revival amid the coronavirus pandemic as anxious shoppers shun crowded supermarkets to buy their staples such as bread and milk from a local retailer.

Chief executive of the Australian Association of Convenience Stores, Jeff Rogut, will release a state of the industry report on Wednesday that will show solid sales growth in 2019, led by strong demand for healthy food and beverages, but challenges lie ahead in the health crisis.

Mr Rogut said the nation’s 7000 convenience stores were confronting a “double-edged sword”, with some petrol stations suffering a 50 per cent slump in fuel volumes as people stay at home but at the same time a 30 per cent leap in food sales.

He described the corner store revival as akin to a rejuvenation of the sector as it returns to its roots of supplying daily groceries, with the supermarket chains having seized that ground for the past decade with their launch of $1 milk and other bargains.

But the convenience sector, which in 2019 saw sales rise 2.1 per cent to $8.8bn, was bumping up against some roadblocks including supply chains, the proliferation of counterfeit tobacco, and fast-food chains such as McDonald’s being allowed to sell staples like milk during the pandemic.

“It’s a double-edged sword at the moment. There are reports of fuel volumes down 30-50 per cent, and in the CBDs where there is not a lot of people working, shops and offices closed, volumes are down,” Mr Rogut told The Australian.

“However, when you get into the suburbs many stores are holding their own and some in fact are doing a bit better. With crowds in supermarkets and shoppers not wanting to be subjected to the pressure of people gathering, they are going to a convenience store for staples.

“Some stores are reporting 30-35 per cent growth since the pandemic in basics like milk, bread and packaged goods.”

Mr Rogut said this marked a return to what convenience stores had once built their success on. “We’ve now come back to our roots of real convenience. Many stores are finding that rejuvenation. Social distancing, when we had panic buying and hordes of people at supermarkets in the mornings, it was a crazy time, and we in fact benefited from that.

“Bread and milk, that used to be the staple of convenience stores, we lost a lot of that business when the supermarkets went down to $1 milk and 80c loaves and whatever else. That has come back enormously now.” Food sales were also a key driver of sales for the sector in 2019, rising nearly 6 per cent to $4.038bn for the year. Many petrol stations catered to the growth with healthy snacks and drinks.

Mr Rogut said the sector was struggling to obtain supplies of some items, both in groceries and personal hygiene products, as the competition regulator recently allowed Woolworths and Coles to collaborate on sourcing and the big supermarket chains stepped up their demand for grocery supplies as their own shelves were stripped by consumers.

“People are starting to come back to us but our stores are battling to find stocks of cleaning equipment, sanitisers, pasta, rice, flour, many of the basics,” Mr Rogut said.

“We have really struggled with in recent weeks.”

The proliferation of illegal or counterfeit tobacco hurt convenience store sales last year, with the AACS estimating counterfeit tobacco now made up more than 15 per cent of the market.

“We’ve now come back to our roots of real convenience”