Convenience Stores - UK - April 2014
Introduction
 
Convenience is changing
Convenience is one of the higher-growth segments in grocery retailing. Its near 5% growth rates are comfortably in excess of the circa 3.5% growth for all grocery retailing. 

The encroachment of the grocery multiples such as Tesco and Sainsbury’s is changing convenience shopping from a distress or emergency top-up shop to a regular part of consumers’ grocery shopping repertoire. As a consequence, these retailers are helping to grow the sector. 

At the same time, the boom in online grocery shopping is contributing demand for top-up shops between occasional internet shops. 

These factors mean fresh foods, meal solutions and food-to-go are increasingly important. They also mean that not all convenience retailers will benefit equally from a rising market. 

Consumer questions
Mintel’s consumer research addresses these changes. This year we asked about:

●	Types of stores respondents use for main grocery shops and top-up shops;
●	Which convenience retailers respondents use regularly;
●	What products respondents buy most frequently at convenience stores; 
●	Usage of, and attitudes towards, convenience stores for meal occasions such as breakfast, lunch and dinner; 
●	Attitudes to food-to-go from convenience stores; 
●	Store locations used and how respondents get to the store;
●	Attitudes to shopping at convenience stores, including the issue of pricing; 
●	Usage of, and attitudes towards, convenience stores at petrol filling stations.

Sector definition
A convenience store (c-store) is a small-store grocery-focused retail format which in effect is complementary to a supermarket. Conventionally, it offers a convenience service for people needing to undertake top-up shopping or make distress purchases. With the entrance of major grocers into the sector in recent years, with higher standards of fresh and chilled foods and trusted own-brands, the sector has become increasingly prominent in consumers’ last-minute meal shopping.

In practice, c-stores should:

●	Be open seven days a week and have extended hours of opening
●	Sell a range of groceries beyond simply CTN (confectionery, tobacco, news) categories
●	Usually trade from a unit of less than 3,000 sq ft (280 sq m). Stores above this size cannot trade all day on a Sunday. For this reason, Tesco Metro falls outside this report; however, Tesco Express is included. Some M&S Simply Food stores are larger than 3,000 sq ft, but this retailer is predominantly a top-up shopping destination, justifying inclusion as a c-store operator.

The scale and offer of a convenience store is dictated by its location and the amount of business it can attract.

At one end of the spectrum, a c-store can come close to fulfilling the primary shopping needs for a particular location. This is particularly true of the c-stores of the major grocers such as Tesco, Sainsbury’s and The Co-operative Food, but also of symbol groups such as Spar and Nisa

At the other, smaller stores serving more limited catchments can be more akin to a super-CTN. One Stop, Mace, Premier Express and Best-One are examples of these smaller c-stores.

The following are excluded:

●	All food specialists, from bakers and greengrocers to off-licences and tobacconists.
●	Hard discounters and Iceland – these are in competition with the superstores and are not convenience stores.

Financial definitions
●	Sales: turnover as reported by the company, excluding VAT.
●	Operating profits: profits after depreciation, but before interest and tax and excluding non-trading income such as the sale of fixed assets and any exceptional items, including provisions.
●	Pre-tax profits: operating profit less net interest payable and exceptional charges, but before tax, dividends and other appropriations.
●	Operating margin: operating profits as a percentage of sales.

VAT
●	In general, all company sales data are quoted excluding VAT.
●	Consumer spending data are quoted including VAT unless specifically stated otherwise.
●	VAT-inclusive figures are used for the sector size and forecast.
●	VAT-exclusive sales are used to calculate market shares.
●	The UK reduced the standard rate of VAT from 17.5% to 15% on 1 December 2008, before increasing it to 17.5% on 1 January 2010 and 20% on 4 January 2011.

Sales per store, sales per sq m
●	Sales per store is calculated using the average number of trading outlets during the year.
●	Sales per sq m is the sales generated during the year divided by the average area traded from during that year.

Other
●	Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland.
●	Value figures throughout this report are at retail selling prices (rsp) unless otherwise stated. Market sizes at constant 2013 prices have been calculated using Mintel’s food deflator.

Trade definitions
●	Delivered wholesaler: a wholesale model where products are supplied to retailers solely through delivery to store rather than collection. Examples include Palmer & Harvey and Musgrave Retail Partners.
●	Cash-and-carry: wholesalers supplying largely through self-service depots. Their primary customers are independent retailers. Examples include Booker and Makro.
●	Symbol group: franchises or voluntary groups comprised of independently owned stores operating under a common fascia. Benefits to independents include a recognised fascia, improved buying power and own-label ranges. Such groups will have a symbol group operator. Examples include the Budgens fascia operated by Musgrave, and Premier operated by Booker.
●	Retail club: an affiliation of independent retailers to a wholesaler with an agreement to purchase from the wholesaler in partial return for benefits such as use of a fascia or promotional materials and support; one step down from membership of a conventional symbol group. Examples include Best-One from Bestway Group and Today’s from Today’s Group.
●	Buying group: A federation of retailers or wholesalers who group their buying power but continue to maintain separate retail/wholesale operations. Examples include Nisa-Today’s.

Space allocation methodology
●	For this report Mintel estimated the space allocations in typical stores. This was by visiting the stores and pacing out each category to give an estimate of the sales area allocated to each product area.
●	Average stores were chosen, in the sense that they are typically between 2,500 and 3,000 sq ft and so come below the Sunday trading laws threshold.

Abbreviations
ATM	Automated Teller Machine	
B2B	Business-to-Business	
C-store	Convenience Store	
CAGR	Compound Annual Growth Rate	
CFC	Customer Fulfilment Centre	
CPI	Consumer Prices Index	
CTN	Confectioner, Tobacconist and Newsagent	
e 	Mintel Estimate	
EBITDA	Earnings Before Interest, Tax, Depreciation and Amortisation	
f 	Mintel Forecast	
FMCG	Fast-Moving Consumer Goods	
GDP	Gross Domestic Product	
GM	General Merchandise	
GMI	Global Market Insite Inc.	
IPO	Initial Public Offering	
jv	Joint Venture	
M&S	Marks & Spencer	
na	Not Available or Not Applicable	
NPD	New Product Development	
ONS	Office for National Statistics	
OTC	Over-The-Counter (drugs)	
P&H	Palmer & Harvey	
POS	Point of Sale	
RPI	Retail Price Index	
RSP	Retail Selling Prices	
SKU	Stock Keeping Units	
USP	Unique Selling Point	
VAT	Value Added Tax