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By Mehgan Belanger
NEW YORK -- The total retail food market -- made up of food and consumable sales through all channels -- grew 4 percent to $859 billion in 2006, according to a new report by Willard Bishop and the Food Institute. While non-traditional grocery channels increased presence in the food marketplace, losses slowed and sales improved for the traditional grocery channel. Meanwhile, in the convenience corner, growth is coming from a redefining of the channel in the face of shrinking revenue from gas and tobacco.
Convenience stores continued steady growth with a 4-percent increase in food sales in 2006, according to the report. Dollar sales for the convenience channel totaled 16.2 percent, reaching $138.8 billion. The figures "represent a historically very strong experience compared to numbers posted in the past," said Jim Hertel, managing partner for Willard Bishop. "It's a vital sign of the health of an industry that has defined itself as single-serve and convenience. Customers have responded to that."
Two areas of development for the c-store channel have been foodservice and private label, said Bill Bishop, chairman of Willard Bishop. "Convenience stores are refocusing their efforts … rethinking what's going on with in-store sales, focusing on consumer behavior and category business plans. In most instances, stores are focusing on immediate, single-serve consumption, and have done an excellent job on foodservice."
He continued: "Almost all growth in the private label category is coming from convenience, because branded manufacturers can't be found that fit into the channel's strategy."
However, market share for convenience formats remained flat -- at 2.4 percent for c-stores without gas and 13.8 percent for c-stores with gas.
In addition, convenience stores with gas fell to third place in annual sales and market share, being ousted by the Traditional Supermarkets and Supercenters channel, which saw $125 billion in annual sales and a 14.5 percent market share, according to the report.
Competition from other channels is heating up as well. Dollar stores saw an 8.8 percent increase in sales over 2005, reaching $14.9 billion. Market share for the dollar channel remained flat in 2006. Drug store sales reached $42.2 billion, and held a steady market share of 4.9 percent, according to the report.
The report also focused on new grocery formats, including Publix's Greenwise market, Tesco's Fresh & Easy, and Giant Eagle's Giant Eagle Express.
"You might think Giant Eagle Express is just another convenience store, but take a look at its offering, which is high-quality cheese, a staffed pharmacy and full grocery and food-to-go sections. It's clear this is more in a smaller box," said Hertel.
To read more about Giant Eagle's Express format, see Convenience Store News’ June 18th issue, where we took an in-depth look at the company's first Express store, in Harmar Township, Pa. And for even more information, visit CSNews Online's Bonus Content section, located on the home page, where an in-depth look at a Giant Eagle GetGo consumer is available. Or, click here: Meet Debbie Rice: Loyal GetGo Customer.
The report also outlined projections for food retailing by 2011. The dollar share of food and consumables by traditional grocery retailers will decrease from 49.8 percent in 2006 to 43.5 percent by 2011. Meanwhile, non-traditional grocery retailers will increase their dollar share from 34 percent to 40.3 percent. At that rate, non-traditional retailers will pass traditional retailers by 2013, according to the report.
By 2011, sales of grocery and consumables will increase at a rate of 3.9 percent for c-stores with gas, and 1.8 percent for c-stores without gas, although dollar sales will hold steady for the channel, according to the report.
Inflation will also play a part in the convenience channel's food retailing success. The study estimated the annual compounded inflation rate will total 2.9 percent between 2006 and 2011. While some retailers -- supercenter, dollar, fresh format, wholesale and c-stores with gas formats -- will surpass the rate, a number of formats -- including drug, mass, c-stores without gas, small grocery and traditional grocery -- will struggle to keep pace with inflation or will not be able to meet inflation.
Long-term performance for the convenience channel will hinge on the redefinition of the channel to emphasize in-store offerings such as foodservice and fresh foods, while moving away from its dependence on gas and tobacco sales, according to the report.