Growth was a little harder to come by for the convenience store industry last year, but the sector - now worth £24.9bn -continues to offer tremendous potential, according to IGD in its latest report Convenience Retailing 2006.
The headline sales growth figure of 4% was down on the past three years, but still ahead of value growth in the overall grocery retailing sector. It was also achieved despite a contraction (by 1.1%) in the total number of convenience stores, caused by a continued decline in the number of forecourts and non-affiliated independents.
For most sub-sectors within the industry, the past year was largely one of consolidation. Co-ops had a steady year, with only low levels of growth in store numbers and sales, although this is largely due to the Co-op Group - by far the largest society - having a quiet year, while other societies such as United enjoyed strong growth.
But there is no doubt that the significant movers, year on year, were convenience multiples and symbol operators.
Multiples may not have had their strongest year for store openings, swelling their numbers only by a net 48, but sales through these outlets soared by 16% year on year to break through the £3bn barrier, according to IGD research.
Within the convenience multiples category, a higher proportion of outlets are now operated by supermarket giants such as Tesco and M&S, meaning that the average sales per store for convenience multiples is also rising fast. Multiples may only have a 4.6% share of outlet numbers in the small store sector, but they now account for 12.4% of sales in the under 3,000sq ft category, and are growing fast.
Symbol stores are also continuing to grow, both in outlet numbers and sales. In the past year store numbers have swelled by more than 5% to 13,035 as recruitment from independents, new builds from existing retailers and improved offers from wholesalers come on stream.
And symbol retailers have not only become more numerous but also more successful. Their sales grew by more than 10% in the past year and now account for roughly £1 in every £3 spent in the small food store sector. According to IGD, average sales per store within symbol groups is 125% higher than that achieved by non-affiliated independents.
The decline in pure independents that has characterised the market in recent times is continuing, although the fall in store numbers in the past year was not as dramatic as previously. A net total of 980 outlets left the market in 2005-06, a slowdown compared with the fall of 2,000-plus the year before. For the first time, though, non-affiliated stores now represent less than 50% of the market in terms of store numbers, and have also lost their top spot in terms of store sales. During the year covered by the IGD's report, symbol groups overtook pure independents in terms of retail sales.
However, taken collectively, independents still remain a powerful force in the market, argued IGD business manager David Gordon. He said: "Independents and symbols taken together still account for more than 60% of the sales value in convenience, and it is important that suppliers recognise that these channels are an important route to market."
In the forecourt sector, sales increased by only 1.8% on the year, leading to a slight decline in share. However, this was a fair performance given that the number of forecourt outlets with c-stores fell by 3.6%, and the number of fuel outlets overall fell by 5.2%. Store sales are now a fundamental part of a forecourt offer, and 92% of sites now have shops with a wide enough product range to be considered stores in their own right.
There have also been significant movements within product categories. Fresh food has been notable and makes up 25% of sales in the average c-store, compared with 19.5% in 2000. Within convenience multiples, the three fastest-growing categories are chilled foods, fresh fruit & veg and sandwiches.
Symbols support services more than any other sector, with a high incidence of offering utility payments, cash machines, DVD rental and the lottery.
Gordon explained: "Symbol stores clearly see catering to their local communities as a priority, while the multiples take a more business-like view based on speed of service."
While this year's figures show a slowdown in growth, the prospects for the future remain strong, according to Gordon. He said: "Within convenience, growth is still there for the taking. UK adults spend an average of £9.79 a week in c-stores - an increase of more than 20% compared with last year."
Convenience Retailing 2006The annual Convenience Retailing report, now in its 10th edition, is acknowledged as the industry 'bible' for facts and figures, and is one of the IGD's key publications.
New for this year is a modular Convenience & Wholesale Service, which allows users access to a single research database of information about the c-store, forecourt and wholesale industries via the internet. In addition, issues from the report will be discussed by executives from IGD and convenience market specialists HIM at a Convenience & Wholesale seminar in London on May 11.
Convenience Retailing 2006 is available as a printable report, or as an i-report via the Convenience & Wholesale Service. A single-user PDF-based licence costs £495, while the i-report costs £1,200 for IGD members or £1,700 for non-members. For more information visit www.igd.com or call 01923 851956.