text: Midyear Category Data Report 2012 | Page 2 | CSP Daily News
  Top categories hold steady as retailers seek to innovate.
  General Merchandise Insight
  What started out as tinkering has turned into what could be an all-out assault on dollar stores.
  In an effort to head off a channel bent on selling more conve­nience goods, West of Alon Brands Retail looked into toys that could be priced at $1.79 alone or bundled.
  "It's starting to generate excitement about new dollars," says West, emphasizing that picking the right items is critical. "We've had tried-and-true novelties with plush toys and bracelets, but we wanted something different."
  The renewed interest in dollar items has led the chain to a 23% increase in general-merchandise sales so far this year. Already, West and his team have created five formats for their value-priced sections. One being installed this summer is 20 feet long. A significant rollout in El Paso, Texas, this summer is generating a lot of internal buzz.
  "So we're looking at putting a value program in as many stores as we can," West says. "Low-cost, low-retail [priced] health and beauty works. Our initial startups have been very good."
  Beyond rediscovering once-stagnant categories, West is inter­ested in diving more into what's hot today. "We neglected energy shots," West admits, even though SymphonyIRI data shows the category on a continual climb. "We neglected it, took it for granted. We forgot there are other types of products, the calming [products], hangover relief. … We're now taking a look at that."
  Foodservice Insight
  Murphy Oil USA saw foodservice sales grow 3% to 4% in the first half of 2012. It's a bit less than the chain of more than 1,100 convenience stores would have liked, but it's ahead of the c-store industry as a whole and double that of foodservice-industry growth in general.
  "Growth in c-store foodservice has outpaced overall indus­try sales since 2008," according to the Technomic Inc. report "Outlook and Opportunities in C-Store Foodservice" issued in February. "The segment experienced nominal sales growth of 2.8% over the past four years, compared to just 1.5% for the entire foodservice industry."
  For El Dorado, Ark.-based Murphy Oil, dispensed bever­ages kept Ben Lucky, category manager for foodservice and dispensed beverages, guessing for much of the first half of 2012.
  "Beverages are running about flat, maybe up or down 1%, depending on which market it is," he says. "As temperatures now are coming up and staying up, I'm actually seeing a 7% week-to-week jump that puts the subcategory back where we should be [compared to] the same time last year."
  Not that cooler weather doesn't have its perks. "The corol­lary is that my coffee sales were actually up," Lucky says. "So early on [the weather] was friendly to coffee and not friendly to fountain, and then vice-versa."
  On the food side, Lucky found good fortune with prepared sandwiches and prepared heat-and-eat items, two areas that Technomic predicts will grow over the next couple of years.
  "Projected foodservice category growth in convenience stores through 2014 is expected to exceed the previous four-year period, driven by soups and salads, fully cooked meats, frozen dispensed beverages and pizza," according to the Tech­nomic report. "Of the major foodservice categories, only cold dispensed beverages are expected to grow less."
  Meanwhile, consumer acceptance of foodservice in c-stores continues to be a struggle.
  "While c-stores have made inroads into foodservice, the underlying challenge remains driving traffic to them and away from other foodservice options," according to the report.
  One-third of 1,000 consumers surveyed by Technomic said they visit a c-store for foodservice two or three times a week.
  Tobacco Insight
  John Strickland Jr. is not upset about holding steady with his cigarette volumes and margins, especially having seen a couple of price increases in recent months.
  "Sales dollars have been flat year over year," says Strickland, a 14-store retailer based in Goldsboro, N.C. "But we've not suffered a loss of gross-profit margin."
  The malaise with cigarettes appears indicative of his market­ing area. "Gas [prices have] come down, but we have not seen a positive impact," Strickland says. "In our neck of the woods, customers are out of money."
  Yet even the cash-strapped hold onto the staples, which according to Strickland are cigarettes and alcohol. Data from SymphonyIRI shows a 1% increase in cigarette dollar sales year to date ending June 10, 2012. That's an increase on $24.4 billion in U.S. c-store sales. Unit sales saw less of a lift of 0.25% on more 4 billion units.
  The hero in terms of percentage growth continues to be OTP. Smokeless tobacco surged 8% on $2.2 billion in dollar sales. For Strickland, moist tobacco continues to grow in sales at his loca­tions. He sees potential in multi-can promotions and specials.
  Other new products in the category "have yet to turn a whole lot of dirt for us," he says. "Do they have a place for us in our market? No question. We may ratchet down a few SKUs, but we're going to keep [these new categories]."
  Snacks Insight
  Similar to last year's Midyear Category Data Report, the growing popularity of foodservice appears to be buoying snack sales, with multiple subcategories achieving double-digit growth. The three subcategories with the largest dollar sales—potato chips, tortilla/tostada chips and other salted snacks (no nuts)—all showed increases ranging from 12% to 14%.
  For Strickland of Wayne Oil, what he calls his "grocery" sec­tion, which includes packaged snacks and chips, are "holding up very well." He and his team recently reviewed that category and decided they could improve. They did what he called a "radical" makeover in terms of SKU mix and pricing, while still managing to maintain margins. The effort helped, with Strickland describ­ing the category as a "bright spot" for 2012.
  McCourt of SymphonyIRI says retailers such as Strickland have "gone back to their roots" by tweaking core categories.
  Candy Insight
  The candy category has been difficult for retailer West of Alon. He says the price of raw ingredients has been pushing prices up, with his response being to price lower to eliminate the differential between the c-store and competing channels. But to zig after a zag, West has been pushing volume by doing two-for-three promotions in king-sized products. "Business is picking up," he says.
  A revelation that he had this year was with seasonal displays and candy. Recent Halloweens have shown lackluster perfor­mance in candy; however, this past Easter, he and his team saw a 90% sell-through of items.
  Because of their potential, he says the snacks and candy sets are now coming under more frequent review, potentially going from once a year to once every other month.
  McCourt of SymphonyIRI cites the tie to promotional dol­lars. Chocolate dollar sales are up 8.7% over the 52 weeks ending July 15, 2012. Promotional dollars for the category were up 16.2% over the same time period.