“Should CPG brands invest more in c-store?”
Your answer would depend on how you’re seeing the c-store channel right now.
But if you’re thinking in terms of the opportunities in c-store — especially with this whole COVID situation — your answer would likely be “yes.” And here’s why:
C-stores expect tremendous growth over the next five years.
Studies predict a $700 billion upheaval from traditional grocery to other channels — and c-stores are expected to be a key player among those channels.
And COVID is escalating trends that were already disrupting the CPG industry. These include the rise of digital engagement, the importance of value and price sensitivity, and the explosion of e-commerce.
So, should CPG brands invest more in c-store? Wrong question. Instead, marketers should now be asking these four questions:
- Can c-stores reduce the negative impact of COVID on CPGs?
- Should c-store still be a priority channel for CPGs?
- Are there any more opportunities in c-store beyond big-name chains?
- What should CPG marketers be spending on in the c-store channel?
Let’s take a closer look at each one so you can determine the best strategy for your brand.
1. Can c-stores reduce the negative impact of COVID on CPGs?
First off, the opportunities COVID has provided for many (if not most) CPG brands outweigh any negative impacts it may be causing.
CPG marketers and brands have been experiencing record sales since the start of the pandemic — due to the panic buying behavior of consumers.
Case in point: In the two weeks ending March 21st, total CPG sales in the US increased by $8.5 billion.
Image credit: Nielsen
And as of August 28th, total CPG demand was up 8% year over year.
So for the most part, CPG brands are benefiting more as consumers stock up on the basics. (We all know baking supplies and toilet paper have been flying off the shelves for months now.)
And even more so in the C-store channel:
COVID has created more opportunities for CPG brands in c-stores.
For starters, COVID upended the way people shop. 75% of US consumers changed their shopping behavior since the pandemic started. The top three reasons they did?
- Convenience (which is where c-store comes in)
- Value
- Product availability.
Image credit: McKinsey
So convenience is one of the main reasons consumers have changed their behavior in this season — especially in the US.
And this means they’ll rather go to a nearby c-store than go anywhere farther than that if the nearby store has what they’re looking to buy.
But will they go back to normal after the crisis?
Not likely. 60% of shoppers plan to continue their new shopping behaviors post-crisis.
And analysts expect other changes in consumer behavior to stick in the “new normal” as well. These include:
- Price sensitivity
- High digital engagement
- Attention to health and wellness
- Nesting at home
How c-stores can help CPG brands during COVID:
C-stores are well-positioned to take advantage of these new consumer behaviors. This means that they can help CPG brands during COVID in several ways:
- C-stores provide a convenient and safe way to shop during the pandemic. And anything that blends convenience with safety is what consumers are looking for right now. People want to avoid large crowds, stick to their neighborhood, and get in and out of the store quickly.
- Many c-stores have added grocery staples and cleaning supplies to their shelves. This makes them an attractive choice for quick fill-in trips. And in March, these quick trips increased in frequency by 26%.
- C-stores get your product back in front of consumers. And in-store shopping drives impulse buying and new product trials. A study in the Journal of Consumer Psychology shows that 89% of women and 78% of men added extra items to their cart in-store. By comparison, only 77% of women and 67% of men did the same online.
2. Should c-store still be a priority channel for CPGs?
Many opportunities in the c-store market result from decades-long industry upheavals.
And as consumer behavior shifted, traditional retailers were often slow to adapt. So discounters, c-stores, and dollar stores caught the opportunity to gain market share.
Image credit: McKinsey
Remember that $700 billion? It’s expected to shift from traditional grocery to other channels by 2026. And c-stores expect to pick up 4 - 9% of that revenue.
Plus, changes in shopping behavior as a result of COVID have only served to speed up these dynamics. C-store sales in China, for example, were 8% higher in March than in January.
And in the US, total c-store sales in May were up 3.2% compared to the previous year.
To keep up with rising demand, c-store giant 7-Eleven is even adding 20,000 jobs.
Besides the booming market, another opportunity exists for CPG brands in c-stores.
They’re the perfect channel for CPG marketers to run product trials because smaller package sizes are less risky for consumers.
Lindsay Hutter, National Association of Convenience Stores (NACS) exec, puts it this way: “Someone will try a new 12-oz beverage. But they won’t try two cases of it.”
Investment CPG marketers have to make for c-store to work:
To get the most out of the c-store channel, one of the most important things you need to do is invest in digital promotions.
In 2019, digital channels influenced 30% of offline sales, even in majority-offline industries. And that number is only going to rise.
High digital engagement is a behavior that’s expected to stick post-COVID. So you can harness this engagement and use it to drive traffic and sales through c-stores.
And real-time mobile offers are especially effective at influencing consumer behavior. But how can brands do this in a cost-effective way? Partnerships.
You can partner with a vendor that has the technology solutions you need to deliver mobile offers and drive incremental sales in the c-store channel.
Partnerships are an old trick in many marketing playbooks, but they still work.
They allow brands to access capabilities that otherwise would be too costly. An example would be partnering with a trade promotion management company like Koupon (our product).
You can team up with Koupon to:
- launch mobile offers and reach 15+ million consumers.
- increase sales frequency, volume, and average basket value.
On top of these, you get an effortless setup process with dedicated onboarding and fast support.
But is it all rosy with c-store? Nope. As a CPG marketer, there are challenges you’ll face with the C-store channel:
A common challenge CPG marketers face with c-store:
The biggest challenge CPG marketers face with c-store is that the c-store industry is large and fragmented. This makes collaboration difficult between brands and retailers.
This is another area where partnerships can ease your c-store burden. Take Koupon, for example. We leverage our network of 45,000 c-stores to simplify the process for both brands and retailers. More on this in #3 below.
3. Are there any more opportunities in c-store beyond big-name store chains?
While big-name chains (like Sheetz or Wawa) are a great opportunity, they’re not the only opportunity in c-store. There are over 153,000 convenience stores in the US and more than 95,000 of them are one-store operations.
This means there are thousands of smaller stores beyond 7-Eleven and Circle K, which only account for about 11% of total c-store locations in the US. So how do you reach those smaller chains that collectively make up a massive opportunity?
Koupon to the rescue (again). We’d do you a great disservice if we didn't tell about our solution that helps CPG brands reach c-stores chains of all sizes.
It starts with our network of 45,000 c-store locations, including chains like QT, Speedway, Yesway, and MurphyUSA. We help brands and retailers build connections, then we launch promotions that reach shoppers and move units.
Case in point: our partnership with a major confection brand last year.
The company wanted to run a channel-wide promotion that tied into a national campaign. Their goals were to drive brand trial, awareness, and incremental sales in c-stores.
Koupon secured 29 retailers and managed the execution of the campaign across 38,000 stores. This involved:
- Ensuring the campaign met the brand’s vision and goals
- Levering Koupon’s digital promotion technology to integrate offers directly into retailer-owned channels including mobile app, SMS, and email
- Managing fulfillment and ensuring the campaign stayed on budget
At the end of the campaign, the confection brand sold 300,000 incremental units. This was an increase of 42% over the previous quarter and 29% year-over-year. Plus, they achieved national reach with 38,000 participating c-store locations.
4. What should CPG marketers be spending on in c-stores?
Thanks to COVID, economic insecurity is rampant.
This is leading to reduced spending on certain products across the globe. In fact, 46% of consumers in the US and 28% of Chinese consumers plan to reduce spending in the near future.
Image credit: McKinsey
While this isn’t the best news for CPG brands, there is a silver lining…
When consumers reduce spending, they are likely to change channels and seek deals. And you can use this to your advantage by targeting spending on the following:
- Mobile offers to improve foot traffic and encourage customers to try new products.
- Sales promotions and discounts to boost in-store sales.
- Analytics to understand the effects of promotions on profits (before you run them).
Conclusion
So, should CPG brands invest more in c-store? Remember, marketers should ask these four questions instead:
- Can c-stores reduce the impact of COVID on CPGs? (YES)
- Should c-store still be a priority channel for CPGs? (YES)
- Are there any more opportunities in c-store beyond big-name chains? (YES)
- What should CPG marketers be spending on in c-store? (DIGITAL)
The bottom line is, growth in the c-store channel is more than a trend.
It’s an industry game-changer.
So make sure your brand is in position to take advantage.
