CDA Convenience Trends 2016 September 27, 2016 Chelsea Gross | chelsea.gross@retailnetgroup.com
Today’s Session Convenience Learning from Intro Forecasts Summary Store Initiatives the Disruptors Real-time Retail • • Channel View • Prepared Foods Grocery • Inspiration Outside • • Segment View • Flagship Stores QSR • the Industry • Top Banners • Automation Click & Collect • Key Takeaways •
Introduction Drivers of Change Not Past Trends Define the Future STEIP Model We Bring the Future to the Present Traditional RNG process planning process T - 5 Today T + 5 Trends Drivers of Change ocietal echnology conomic ndustry olitical Track the Drivers Shaping the 2020 Retail Landscape to Guide Planning 3
$8 trillion Added in Retail Sales – Introduction 39% from New Shoppers, 61% from Increased Spending STEIP Model Same Shoppers New Shoppers Spending More 4
Attention Spans Shrinking & Processing Speeds Accelerating, Introduction Generational Differences Important Consumer Impact
Introduction Competitive Set Changing Drastically for Proximity Retailing Channel Blurring Express Discount Drug Grocery Food Convenience Future of Traditional Progressive Superstores Convenience Competing with & Rolling Up QSR / Food Service Independents
Introduction Top Drivers of Change Convenience Retailers Drivers of Change Meal Solutions / Future of the Trip Types Prepared Foods Front End Desire to Pricing & Retail Health Experience Promotion
Convenience Channel to Grow 5.5% 17E-20E, 28 Basis Points Forecast Ahead of Total US Retail Channel Analysis Channel Sales Share Matrix 9% Discounters Apparel Specialists Sales CAGR 17E-20E Convenience Food Service Home Specialists 6% Hyper/Super & Mass / QSR Health & Consumer Leisure Beauty Electronics Grocery US Retail Average Sales Other Category Cash & Carry/Club CAGR 17E-20E: 5.3% Specialists 3% Department Stores 0% 0% 5% 10% 15% 20% Share of 2020E Sales Source: RNG Database, excluding 3P marketplaces
Convenience Superstores Outpace Traditional Convenience Forecast Segment in Sales and Store Growth Through 2020E Channel Analysis Sales (USD bil) Share of Sales Sales CAGR Sales Added (USD bil) Share of Sales Added Segment 2016E 2020E 2016E 2020E 13-16E 17E-20E 13-16E 17E-20E 13-16E 17E-20E Convenience Superstore $27 $33 1% 1% 8.0% 6.3% $6 $5 2% 1% Traditional Convenience $55 $64 2% 2% 5.8% 5.1% $9 $9 2% 2% US Convenience Total $82 $97 3% 3% 6.5% 5.5% $14 $14 4% 3% RNG Total US Chain Retail $2,605 $3,038 100% 100% 5.2% 5.3% $366 $434 100% 100% Stores Share of Stores Stores CAGR Stores Added Share of Stores Added Segment 2016E 2020E 2016E 2020E 13-16E 17E-20E 13-16E 17E-20E 13-16E 17E-20E Convenience Superstore 11,995 12,707 2% 2% 2.4% 1.9% 816 712 3% 3% Traditional Convenience 44,165 45,736 9% 9% 0.8% 1.2% 1,001 1,571 4% 7% US Convenience Total 56,160 58,443 11% 11% 1.1% 1.3% 1,817 2,283 7% 11% RNG Total US Chain Retail 509,186 530,766 100% 100% 1.9% 1.4% 27,414 21,580 100% 100% Source: RNG Database
Convenience Superstores Represent 6 of the Top 10 Convenience Forecast Banners by Sales Added, 5 of 10 for Stores Added Channel Analysis Sales Added (USD bil) Stores Added 1 7-Eleven +$4.3 1 7-Eleven +820 2 QuikTrip +$1.3 2 Mobil Mart +210 3 Wawa +$1.2 3 Speedway +193 Speedway +$1.1 Casey’s General Store +150 4 4 5 Circle K +$0.8 5 Kwik Trip +120 6 Sheetz +$0.6 6 Wawa +119 7 Casey’s General Store +$0.5 7 Circle K +100 8 Mobil Mart +$0.4 8 Sheetz +80 9 RaceTrac +$0.4 9 QuikTrip +60 10 Kwik Trip +$0.3 10 RaceTrac +59 Source: RNG Database
Convenience Stores Shift to Multi-Destination Superstores 5 Core Convenience Zones = New Trips Store Initiatives Fuel Coffee QSR Foods Refreshments Traditional Convenience Store Assortment Source: RNG Store Tours
Convenience Disciplined Category Expansion to Broaden Trip Relevance Store Initiatives Oxxo – Mexico City Source: RNG Store Tours
Meal Solutions and Prepared Foods Driving Traffic Across Day Parts Convenience – Also Supports Localization Efforts Store Initiatives Oxxo – Guadalajara Source: RNG Store Tours
Convenience Driving New Trip Occasions, Blending Further with QSR Store Initiatives RaceTrac – Orlando, FL Source: RNG Store Tours
Convenience Private Label to Strengthen Value Offering Store Initiatives 7 Eleven – Miami, FL Source: RNG Store Tours
AM PM in Brazil Launches Flagship Store, Expanding Fresh Assortment Convenience Store Initiatives to Compete Against Full Grocery Trip AM PM – Sao Paulo Source: RNG Research, AM PM Portal
Convenience Moving Store Locations Beyond the Highway Stop Store Initiatives Sheetz – Penn State Campus Source: RNG Store Tours
7 Eleven- Next Generation Concept Store Aligning to Store & Convenience Network Renewal Trends Store Initiatives Healthy foods marketed as treats Employee recommendations bring craft beers to local tastes Day Parts reinforced with digital menus Third party salad vending machine maintaining supply of fresh, adds 7 Eleven – Chicago, IL authenticity to local supply chain Source: RNG Store Tours
Sainsbury’s Small Store Format, Sainsbury’s Local, Convenience Now Adding Pharmacy Into Convenience Store Store Initiatives Queuing both self-checkout and pharmacy Front end exclusively self-checkout Health & wellness informational material Prepared foods adjacent to spread throughout pharmacy, driving impulse and efficiency Attached to hospital, serving patients, employees, and regular pharmacy customers Sainsbury – London Source: RNG Store Tours
Convenience Mobile App Extends the Power of the Retailer Beyond Small Box Store Initiatives Source: RNG Store Tours
Channel Blurring Driven by Format Diversification, Targeting Learning from the Ethnic, Small Format, and Discounter Trips Disruptors Oct 2009 – Kroger opens first larger May 2015 – CVS launches Feb 2016 – Kroger May 2016 – format, Kroger Marketplace CVS y mas format launches Main & Vine Whole Foods fresh format opens first 365 April 2005 – Publix July 2014 - Target format May 2010 – H-E-B launches launches first targeted Nov 2015 – Amazon launches small format first discount banner, Joe V’s Hispanic banner, opens first brick & mortar, Target Express Smart Shop Publix Sabor Amazon Books Evolution of Food Relevant Retailers – US Timeline July 2004 – Oct 2006 – H-E-B launches July 2012 – Target Sept 2015 – Ahold Feb 2016 – H-E-B opens H-E-B first targeted Hispanic launches first urban launches fresh format, first small format store launches first banner, Mi Tienda format, CityTarget bfresh large format H1 2017 – Publix H-E-B Plus! Nov 2015 – Costco opens expected to open first March 2014 – Walmart first hybrid business Sept 2007 – Publix launches small/ campus format launches convenience format, center/ warehouse first organic format, Greenwise Walmart To Go Source: RNG research & analysis
H-E- B’s First Urban Store Maintains Look & Feel of Traditional Learning from the Big Box Banner Disruptors H-E-B – San Antonio, TX Source: RNG Store Tours
Express Premiumization Approach, Combining Grocery & Learning from the Restaurant Disruptors Lunds & Byerly’s Kitchen – Wayzata, MN Source: RNG Store Tours
Experience is Elevating - McDonald’s “Create Your Taste” Campaign Learning from the Disruptors – Combines Digital Integration, New Healthy / Quality Ingredients Quality / Fresh Ingredients Digital Integration Marketing/ Social Media Table Service
Learning from the Walmart Automating Sampling Across Formats Disruptors Swipe Sam’s membership • card for new weekly sample of shelf-ready goods – food & non-food Brands receive member info • for further marketing & engagement Rolled out to ~650 Sam’s • Clubs in the US Various health & beauty • samples for $1 each Pay with credit card at kiosk • Samples displayed • alongside machine Test in select Texas stores • Sam’s Club – Dallas, TX Walmart Supercenter – Dallas, TX
Mass Merchandise Express Formats Solving for Big Box Learning from the Weaknesses, Accelerating Development of Click & Collect Disruptors Target (Express) – St. Paul, MN Source: RNG Store Tours
Economics Driving Emphasis on Click & Collect – Retailers Look Learning from the Disruptors to Ameliorate Ecommerce Economics By Removing Last Mile In-Store Click & Collect Home Delivery Pick Shopper Retailer Retailer Pack Shopper Retailer Retailer Ship Shopper Shopper Retailer Profitability
Variation Across the Globe Fueling Click & Collect Diversification Learning from the Disruptors – Innovation Seen Across Emerging and Developed Markets Source: RNG research & analysis
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