it's 'go time' for convenience retailers
by: Sarah Kneebone
The Australian convenience industry grew at 4.5% in 2016, and is currently an $8.3 billion industry, according to the AACS State of the Industry Report 2016.
Convenience retailers are adapting. They are focusing on innovation and taking a customer-first approach, which has helped the industry trump grocery growth, year on year, since 2012.
What’s fuelling the robust force of the Australian convenience industry? Let's look at the rise of On The Go food.
'On the go' food
One of the biggest driving forces for the convenience industry's growth, is On The Go food.
The On The Go food category grew 18.5% in 2016 and is valued at $465 million in Australia.
Convenience retailers are responding to changing shopper habits and the Australian market is beginning to look more like further developed markets across the world.
Justin Nell (Mintel) recently commented on Australian food trends for 2017:
"We've actually seen a 55 per cent increase in the number of food and drink launches in Australia with an 'on the go' claim between 2012 and 2016".
Increasingly busy lifestyles mean that people are shopping little and often and increasingly buying breakfast and lunch ‘to go’ - with 21% of metro Australians eating lunch at their desks.
Then there’s the coffee culture. Need I say more, Australia? (No judgement, I'm addicted too.)
Grabbing that delicious morning, lunch and maybe even afternoon flat white to go (with a breaky wrap or some banana bread…), is part of many shoppers’ daily lives.
For those who don’t insist on visiting their favourite barista each morning, convenience chain 7-Eleven has experienced great success driving traffic through the door with its $1 coffee offering.
In the cold drinks segment, Boost Juice has tapped into the desire for On The Go drinks, while resonating with today’s ever-more health conscious Australians. The brand has now opened a drive-through store, to further elevate it’s offering for time-poor shoppers.
As health becomes more of a priority for many Australians, introducing healthy, fresh, On The Go food options, such as wraps, sushi, sandwiches and salads, is a key opportunity for convenience retailers.
Last year, Coles tested The Big Yum at Little Coles stores in Melbourne, offering a wider range of healthy snacks and On The Go meals, along with 80c coffee. This was a strategy built on good quality, fresh choices which targeted office workers and inner-city residents.
These quality products tend to have higher margins, which shoppers are willing to pay a premium for, on the fly.
However, in the first instance, retailers are using low price items such as cakes, pastries and doughnuts, to get shoppers in the door – and aware of their new offering.
More choice in stores
Australasian Association of Convenience Stores (AACS), CEO Jeff Rogut stated that On The Go food’s growth in 2015 was driven by the fresh cake (28.0%), hot pastry (39.8%) and sandwich (21.5%) categories.
By investing in a more enticing fresh sandwich offering, with fresh daily deliveries in some cases, retailers can ensure that grabbing a sandwich extends beyond restaurants, cafes, and fast food outlets.
You only have to look at the size of On The Go lunch sections of stores in the UK, such as M&S, Boots and even Tesco, to see the potential for Australian retailers, as shoppers grow increasingly time-poor and become more comfortable buying food in convenience stores.
At these stores in the UK, there is an abundance of good value choices for lunch; sandwiches, pastas, wraps, pastries, fruit packs, salads and meal deals (Christmas dinner triple pack sandwich used to be my personal fave).
Could this be the next big growth opportunity for convenience retailers in Australia?
The upcoming generation
Millennials are also helping drive the ‘grab-and-go’ food culture, often seeking out convenience over cuisine, with a strong ‘have it now’ mentality. Millennials are eating out more often and looking for quality, fresh food options – on the go.
Going forward, convenience retailers will need to expand or improve On The Go offerings, to win over this generation of consumers.
The future of convenience
All in all, it looks like the convenience and On The Go food market is only going to get bigger.
Jeff Rogut CEO at AACS stated:
The short- and long-term outlook for the convenience industry in Australia is undeniably positive and the 2016 results underline the value proposition of convenience stores in the Australian retail landscape.
The continuing evolution of retail generally necessitates an unwavering focus from our retailers and suppliers to continue to evolve their offering to meet customers’ needs,” he said. “The good news is that our operators are eager to embrace this challenge.
Focus on technology
In the food industry, Australia has already jumped on the home delivery app revolution, with companies such as UberEATS, Foodora, HelloFresh, Deliveroo and MenuLog bursting onto the scene, with great success.
Quickly and easily, office worker lunch orders, healthy pre-prepared dinners and guilty pleasure desserts, are brought to shoppers' doors.
Technology is providing a platform for suppliers and retailers to better service the shifting demands of today’s shopper.
In Europe, Domino’s Pizza has announced that it plans to use self-driving robots to deliver pizzas (looking at flights over there, right now).
On this side of the world, of course the big question for Australian supermarkets is whether (or indeed when) AmazonFresh will enter the Australian market, and really shake things up for the grocery sector.
I suppose we'll have to watch this space...
Over to you
> The e-commerce landscape in Australia vs. other markets.
> The online grocery revolution. Benefits & expectations.
> Growth drivers & challenges for Australian online grocery.
> The outlook. The future of Australian online grocery.
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