Convenience Store Distributors Outlook for 2014

Convenience Store Distributors Outlook for 2014

Convenience distributors continue to fight for improved profit margins, turning to new product offerings, increased efficiency through technology, and efforts to attract new customers within their marketplace as they seek to heat up the bottom line. AWMA’s annual online survey of members in late 2013 showed the vast majority of respondents continue to increase reliance on foodservice and fresh fruits and vegetables as one way of making up for declining cigarette sales. But that is not the only strategy being used by distributors to boost profits. Coming out of the blue (or blu) in the past couple of years is the electronic cigarette and all of its attendant variations and accompany-ing products, with AWMA’s industry outlook survey showing sales increasing by huge mul-tiples for almost every distributor. Overall, the survey, completed by 39 distributors, revealed that 34 expect overall sales to increase in 2014 with 14 expecting to boost sales by 5 percent or less, and 16 forecasting increases of up to 10 percent. Two distributors said sales would jump by up to 20 percent and two others predicted increases even higher than that. Likewise, 27 distributors forecast higher gross profits in 2014, with 23 expecting increas-es of 5 percent or less, and nearly half attributing those expectations to the addition of new product categories—principally, e-cigarettes.

Improvements in operations efficiency and of new customers within their marketplace were given by 62 percent and 74 percent, respectively, as reasons for expected increased profits. The levels of bullishness among distribu-tors varied, of course, but overall responding distributors are looking for a good year in 2014 as they seek to capitalize on opportunities and improve their use of technology and data. AWMA’s InfoMetrics program is an important tool used by 21 of the 37 responding distributors.

Capitalizing on Opportunity “Opportunities exist for just about everybody, and we intend to take advantage of them,” said Keith Canning, managing partner at Pine State Trading Co., Gardiner, ME, in a post-survey interview. “We are confident of increases in 2014,” noted Chad Gummer, president & COO, Gummer Wholesale Inc., Heath, OH. “We are doing our best to grow our business, but it is getting tougher out there. It is hard to compete when it comes to price. You’ve got to really be able to sell yourself, to convince your customer that your service and relationship is of value.” Nearly 75 percent of respondents said they expected to add new customers within their marketplace, and 17 percent said their market-place would be expanded through acquisition—another indicator that consolidation within the industry can be expected to continue. In Pine State’s case, Canning said he anticipates making one or two acquisitions over the next 14 months, but not necessarily of other distributors. “It may be in single commodity DSD (direct store delivery) companies that can no longer afford to cover the miles and incur the expenses,” he said. “Those products need to be bundled [with other products sold by distributors], whether it is dairy, general merchandise, snacks—it holds true across the country. This opportunity exists from Washington state to Maine.” When Hostess Brands LLC emerged from bankruptcy, it switched from DSD to warehouse delivery of its Twinkies, CupCakes, Donettes and other baked snack products, a move company president Rich Seban said would allow it to reach nearly all 150,000 convenience stores in the U.S., compared to about one-third via DSD. “We’ve benefited from that,” said Gummer. “That’s helped us increase our pastry snack sales.”

Source: Convenience Distribution Jan/Feb 14