Fresh Foods: A Growing Opportunity in the North American Convenience Store Sector

Executive Summary
The convenience store (C-Store) sector is one of the largest retail channels in North America and one of the most varied. Small local shops and corner stores compete with large national chains offering an impossibly wide varied selection of goods. As diverse as the goods they carry, these retail outlets range in size from a basic kiosk to over 4,000 square feet and everything in between. The corner stone of these outlets was once tobacco (and in many cases gasoline), but that is slowly changing. In the case of food stuffs, these outlets have traditionally carried a mix of staples and snacks, but many stores are moving to offer consumers a variety of fresh food options, including fresh produce, in an effort to offset diminishing tobacco and fuel sales. This move is much more than stocking shrink wrapped gas station sandwiches, outlets are thinking high quality foods, luxury packaging and premium ingredients and taste. This is an aggressive move, but one that may hold enormous opportunities for small producers, particularly those looking for a realistic outlet for the growing "local food" movement.


Overview
The US convenience store sector is a US$400 billion industry. There are roughly 140,000 convenience stores in the U.S. Approximately 60% of outlets are part of a chain, or a common group. The remaining 40% or roughly 60,000 are "mom & pop" or independent locations. The top 50 chains in the US control some 30,000 retail outlets. The largest chain, 7-Eleven has over 5,600 outlets, only 40% of which sell gasoline, and the smallest of the top 50 chains has over 140 outlets. This illustrates both the opportunity of the sector and the variety of options open to serve the sector.

Canada has over 25,000 convenience stores. The largest chain is Alimentation Couche-Tard Inc., which owns and operates nearly 5,000 stores (2,000 in Canada), making it North America's fourth-largest in that channel. Some 70% of Couche-Tard outlets sell fuel.

Bringing fresh food into C-Stores will be a challenge because traditionally these outlets rely almost entirely on fuel and tobacco for their survival. The typical C-Store with a gas bar sees 60 to 70% of its sales come from fuel. Cigarettes make up 15% of total sales and groceries sales follow with 15% (20% when beer is included in the total).