Gen Z Cuts Spending in Face of Inflation

Rising prices are causing Gen Z to reduce spending and dine at home.

Over the past year, 73% of Gen Zers say that they’ve changed their spending habits due to increased prices, according to the Bank of America’s Better Money Habits survey.

These lifestyle changes include cooking at home more often instead of dining out (43%), spending less on clothes (40%) and limiting grocery purchases to essentials (33%). Nearly all those who adopted new spending habits plan to maintain them over the next year even as inflation slows, the survey showed.

Additionally, a third of Gen Z reported experiencing a financial setback, forcing them to either stop saving or accumulate more debt.

“Gen Zers are definitely looking for ways to improve their financial health,” Holly O’Neill, president of retail banking at Bank of America, told Reuters. “They are proactively making lifestyle changes to combat inflation.”

The generation is also feeling less confident in the economy as a whole, with 32% feeling confident the job market will improve, compared to 46% in 2021, and 26% confident the housing market will remain strong, compared to 32% in 2021.

While Gen Z may be cutting back on spending, older generations are spending more.

According to Bank of America data regarding credit and debit card spending per household, Gen Z spending declined by over 2% between May 2022 and May 2023, while spending increased by 2.5% (Boomers) and 5% (Traditionalists, those born prior to 1945).

“Consumer repayments still remain strong,” O’Neill added. “From a delinquency perspective, we are still not where we were pre-pandemic. Even though there has been a change in spending and payment behavior, the consumer is still very healthy.”

Read the article “Generation on the Rise” in NACS Magazine to understand Gen Z and what and how they want to buy in today’s economy.

Source: NACS

Here’s What Happened in Q1 at Independent C-Stores

May 23, 2023

Although fewer people are shopping at c-stores, revenue has not been impacted, according to Skupos data.

This article is brought to you by Skupos.

Skupos’ Q1 Independent Convenience Retail Trend Report. While revenue was up in the first quarter, weekly foot traffic was down 2.6%.

“This means that although fewer people are walking into convenience stores, revenue has been boosted by higher prices,” said Jake Bolling, the CEO and founder of Skupos, a technology and data platform that specializes in serving small-chain and independent convenience retailers.

Packaged beverages—a top in-store category for sales—was impacted by inflation and rising prices last year, which resulted in a decline in unit sales, according to Skupos data. While unit sales were down, packaged beverages still posted strong revenue. Energy drinks, carbonated soft drinks and sports drinks were the main drivers of the category. When combined, these three subcategories made up more than $1.1 billion in independent retail dollar sales.

Additionally, Skupos found that promotional and pricing strategies vary by region. For example, the South Central region has the highest average price for a 20-ounce carbonated soft drink at $2.23; however, the region has the lowest promotional take rate (percent of units sold on discount) at 7%. Conversely, the West region has the highest promotional take rate at 39% and the second highest average selling price at $2.14, meaning that pre-discount prices in this region are generally much higher.

Skupos’ data is powered by scan data from over 15,000 retailers, and the company has created the largest network of small chain and independent convenience retailers in the country, serving as a single platform to measure and improve product performance across thousands of stores.

“Our technology helps brands sell smarter because they have a bird’s-eye view of how each of their products are selling in a market they haven’t previously had visibility into,” said Bolling. “When brands harness the power of data, they can make informed decisions and optimize their strategy across the hard-to-access independent market.”

Source: NACS

A Closer Look at Hot Coffee and Other Hot Dispensed Beverages

By: Pat Pape | March 9, 2023

Hot coffee is on the rebound, but the real heroes of the category are hot chocolate and customization.

ALEXANDRIA, Va.—After two years of working from home, Marty Ruiz returned to her office on a part-time basis. On the three days she commutes, she stops at a convenience store for a rich, hot latte. Other mornings she brews java in her kitchen, adding oat milk and sweetener.

“Coffee in the morning is non-negotiable,” she said. “When I drive to the office, stopping for a cup that I can customize myself is part of my ritual. But when I work at home, I never go out that early. So, I make it myself. It’s cheaper.”

For decades, most convenience store hot dispensed beverage sales occurred between 6 and 8 a.m. on weekdays. But during the pandemic, one-third of morning commuters were working at home, according to the U.S. Census Bureau. Although more employees are back in the workplace, morning hot dispensed beverage sales have not returned to pre-pandemic levels (2019) but were slightly higher in 2021 compared to 2020.

“According to the U.S. Census Bureau, in 2021, about 68% of workers drove alone to work, compared to roughly 76% in 2019,” said Jayme Gough, research manager at NACS. “That corresponds to nearly 15 million fewer people commuting.”

Convenience store coffee sales rebounded in 2021, but relative to other dispensed beverage subcategories, coffee did not recover to the same degree. The NACS State of the Industry Report of 2021 Data indicates that although coffee sales improved by 6.9% year over year to $3,976 per store, per month, this modest increase did not prevent coffee from declining from 82.6% of hot dispensed beverage sales in 2020 to 79.1% in 2021.

Coffee gross profit also rose slightly, improving by 5.2% to $2,672 per store, per month. Coffee gross margin was impacted by rising costs, however, resulting in a decline of 1.10 percentage points to 67.20%.

Sweet sales came from hot chocolate, which rose from 6.9% of hot dispensed beverage sales to 9.0% in 2021. Hot chocolate gross profit also expanded, rising to $289 per store, per month in 2021, an improvement of 35.7%, according to the NACS State of the Industry Report. 

Among consumers purchasing hot dispensed beverages, nearly 90% chose coffee and specialty coffee. “From 2020 to 2021, specialty coffee’s share of the category increased from 6.5% to 9.7%,” said Gough.

“Equipment innovation, such as bean-to-cup machines, permits greater consumer customization and lets retailers better meet the needs of shoppers looking for something like a cappuccino or latte. Generation Z loves to customize their beverages as much as possible,” she said.

Read the remainder of this month’s Category Close-Up, “Hot Coffee for On the Go,” in the March issue of NACS Magazine.

Source: NACS

Survey: Private-Label Goods Are Here to Stay

March 6, 2023

Most people would keep buying private-label goods even if their economic situation improves.

ALEXANDRIA, Va.—According to a new survey, “73% of people have acquired a taste for private-label brands and plan to keep buying them even as the economy improves.” The survey was done by Attest for Food Dive and found that 9 out of 10 shoppers are bargain hunting when shopping for groceries and 41% visit multiple stores to find the best bargains.

Although sales of familiar, comforting brands spiked during the pandemic, inflation fueled a move by consumers to private labels.

An effort to improve the quality of private-label products also could be a factor. “In 2021, a survey from FMI found 91% of food retailers and manufacturers planned to significantly or moderately ramp up their private-label efforts in the next years. In addition, 58% of companies said they were adding new offerings focused on innovation,” Grocery Dive reported.

In an August 2022 article titled “An Exclusive Offer,” NACS Magazine dove into private-label goods from a convenience retailer perspective: “Private-label sales in c-stores … are dramatically underdeveloped compared to other outlets. According to Jason Zelinski, client director, convenience and growth accounts at NielsenIQ, private-label products make up only 2.4% of total sales in c-stores. But the good news is that sales in the convenience channel are growing at a fast clip—up 19% last year, Zelinski said—easily outpacing trends in other channels.”

The article noted that among the merchandise categories where c-stores have ventured with their own labels are salty snacks, packaged sweet snacks, packaged beverages, prepared foods and automotive supplies. “According to Zelinski, salty snacks and packaged sweet snacks show the biggest opportunity. In all channels, private-label salty snacks comprise 12% of category sales, but in c-stores, they only account for 2% of category sales.”

Last month, NACS Magazine provided a snapshot of private-label trends at c-stores.

Source: NACS

What’s Going on With Salty Snacks

The category hasn’t stopped growing since its pandemic comeback, and spicy flavors reign on.

By: Sara Counihan | February 13, 2023

ALEXANDRIA, Va.—It’s a comeback story for salty snacks. In 2021, the salty snacks category was up 11.3% over 2020, and in-store sales averaged $7,913 per store, per month, according to the NACS State of the Industry (SOI) Report of 2021 Data. That growth continued into 2022. In fact, the first three quarters of 2022 showed even stronger improvement for salty snacks than in 2021, according to CSX monthly data. The category saw double-digit growth during that period, trending above 2019, 2020 and 2021 numbers.

“In 2020, people were working from home, so they weren’t going out to grab a snack during the middle of the day or on their way to and from their workplace,” said Jayme Gough, NACS research manager. “But 2021 was a phenomenal bounceback year for all in-store categories, including salty snacks, and 2022 to date has delivered even more growth for the category.”

Salty snacks made up 4.36% of inside sales in convenience stores in 2021, and though that may be a small contribution, gross margins in the category were mighty. C-store salty snacks saw gross margins of 40.83% on average in 2021, up 0.93 point year over year. Gross profit was up 13.9% in 2021 over 2020, averaging $3,231 per store, per month, and gross margin contribution was also up 0.26 point year over year to 5.19%.

Getting Chippy

The potato chips subcategory accounted for the largest percentage of category sales at 38.5%, according to 2021 NACS SOI data. The subcategory increased sales year over year by 8.1% and gross profits by 11.1%.

“Potato chips are a staple for convenience stores and a profit driver,” said Gough. “We’re seeing a ton of innovation in this subcategory, including spicy, limited-edition flavors and international flavors.”

Gough also pointed to strategic partnerships that are emerging in the salty snacks category overall, and in particular, the potato chips subcategory. In 2021, Kellogg’s partnered with Wendy’s on a co-branded Pringles chip flavor called Wendy’s Spicy Chicken, following a successful collab on a Wendy’s Baconator-flavored Pringles chip in 2020.

“Chips remain one of the most versatile products when it comes to flavors,” said Gough. “There are options for everyone.”

According to Nick Hammitt, vice president, salty snacks, Campbell Soup Company, the company’s Kettle Brand and Cape Cod brands are performing exceptionally well.

“Both brands ranked in the top 15 for growth in total convenience among leading potato chip brands,” said Hammitt. “We continue to see strong growth and demand for our many salty snack brands, including potato chips, with Kettle Brand achieving double-digit growth in 2022.”

Read the remainder of this month’s Category Close-Up, “A Spicier Comeback,” in the February issue of NACS Magazine.

Source: NACS

Price Increases Are Last Year’s Problem

January 18, 2023

Consumers are recoiling from higher prices, and with easing costs, many companies are stopping the higher-price cycle.

ALEXANDRIA, Va.—Companies are beginning to ease up on price increases, and it could be another sign that inflation in the U.S. is waning, reports the Wall Street Journal.

Many companies made substantial price increases to their products throughout 2022 in response to record-high fuel costs, as well as increased cost for ingredients, parts and labor. But as fuel prices ease and supply-chain issues begin to sort out, these costs are beginning to fall.

For product manufacturers, 2023 is the year of cost cutting, Mark Malo, a consultant and former executive at Clorox, told the Journal. On average, expenses should be flat as shipping rates fall, he said, but labor and other costs remain high for some products.

Conagra Brands indicated that it’s done increasing the cost for its products, which include Slim Jim and David seeds, after raising prices by 17% in the latest quarter and 10% in the previous two quarters. The company’s sales volumes decreased by 8.4% in the quarter ended November 27, and Conagra partially blamed the slip in sales on shoppers recoiling from the price increases.

Likewise, Constellation Brands plans to implement smaller price increases after the company saw sales slow after higher-than-usual price increases in October. And T-shirt company Chummy Tees raised the cost of its T-shirts by about $4 in 2020, according to founder Josh Neuman, but the company has since lowered the prices back to original levels after sales fell.

“The consumer’s mind-set has changed,” Neuman told the Journal. “They want to save money and raising prices is not an option for me in 2023, even though many of my costs are still elevated.”

The Journal reports that some companies raised prices not only because of increased costs for themselves but in anticipation of rising costs, which in turn, caused inflation to rise. A study by economists at the Federal Reserve Bank of Kansas City found that higher margins were a major driver of inflation in 2021.

Andrew Glover, a senior economist at the Federal Reserve Bank of Kansas City, told the Journal that he doesn’t expect prices to fall this year, but he anticipates that the pace of increase will continue to slow.

However, there are additional reasons why inflation is still high and could remain elevated, including China’s reopening, which could boost global demand for commodities and energy, as well as a tight labor market in the U.S. Inflation is down to 6.5%, falling from its peak of 9.1% in June, but it’s still well above the Federal Reserve’s target of 2%.

“We welcome these better inflation reports,” Fed Chairman Jerome Powell said last month. “But I think we’re realistic about the broader project.”

Meanwhile, top company executives are prepping for a global recession, albeit a mild and short one, according to a survey by the Conference Board, and they expect growth to return by late 2023 or the first half of 2024.

Source: NACS