Irish Convenience Market Trends 2017

6 months into 2017 and it’s easy to think that this year is going the same way as the last, with so much unpredictability swirling around in every walk of life from politics to culture and sport, it’s becoming increasingly difficult to predict what the future will hold for the convenience industry in the second half of the year and beyond.

One thing for certain is that it’s almost impossible to stand still in this day and age, and to do so risks a fall which can be difficult to get up from. There is so much dynamism in the consumer sphere and so many opportunities to take advantage of.

Convenience is as popular as ever in Ireland, with shoppers visiting a convenience store on average at least twice a week. However, time spent and subsequently money spent in store is falling behind that of the UK for example. In fact, 2 in 3 shoppers spend less than 5 minutes in a store in Ireland compared to less than half of those in the UK and it’s even less in the rest of Europe.

One of the key factors at play here is the basket size. In Ireland the average shopper purchases 3 items per trip, this rises to 3.3 for the rest of Europe and 3.5 for UK in particular. Driving basket size and spend therefore is a key opportunity for convenience stores in Ireland to thrive under the current climate.

At HIM we know convenience shoppers and one of their key features is that more often than not they are on ‘autopilot’ mode and crashing this autopilot opens the door to success. It’s no surprise really when you consider that they will shop in your store over 100 times a year and are often buying a combination of the same products, however through inspiring and impactful displays and solutions in store it is possible to interrupt their predesigned behaviour and once you can tap into it the convenience shopper is very impulsive and upsell opportunities can be maximised.

With so many possibilities to explore we take a look at those which will be having the biggest impact over the next 18 months.

"OBESITY SET TO HIT RECORD LEVELS BY 2025"

Health and wellness will continue to dominate the lives of the shopper in 2017/18. This is no longer a niche trend and very much broke through into the mainstream during the back end of the year and with increased awareness comes an improvement in knowledge from the shopper as expectations change as health’s definition has evolved.

Obesity rates are highest in Europe with 1 in 3 expected to be obese by 2025. At the same time, health awareness has never been more prominent, with 1 in 7 people now members of a gym (growing at a rate of 5%). Out of 600,000 food items in a grocery store, 80% contain added sugar. Pressure is now on the food & drink industry to help consumers make healthy choices.

Ultimately, shoppers are now expecting more from retailers and suppliers to help them maintain a healthy diet. "Healthy living is shared responsibility" said Tim Smith, Group Quality Director, Tesco PLC during the recent Food Matters Live event in November 2016. But these needs vary shopper to shopper.

Groupings should to factor in life stages (at the least!) as health needs differ most prominently by age. Despite the increasing number of people wanting to have a healthier diet, the number of shoppers in Ireland who think stores offers enough heathy options is below the European average in all day parts, except lunch.

Retailers need to make sure they are stocking healthy options to meet the need of all shoppers. Wider range is then required to meet modern day diet, meeting the need of older shoppers in particular because of the rise of malnutrition & age related diseases. With the ageing population, there is an opportunity for suppliers to shout about those health benefit.

Though convenience stores of the future will need to embrace the health conscious attitude of the modern shopper, we cannot ignore the fact that some of the most common categories bought from smaller stores are impulsive treats (alcohol, confectionery and soft drinks).

With this in mind there is a fantastic opportunity to create theatre around indulgences in store and to provide inspiration and impulse opportunities for those times when we just want to treat ourselves. Shoppers in Ireland, however, spend less time in store compared to other European countries, meaning they can be difficult to interrupt and to influence. Using targeted promotions to encourage impulse spend, and ensuring offers are time of day and location relevant could help in boosting basket spend and size.

Irish convenience stores are already ahead of the curve compared to the UK and most of Europe when it comes to healthy options in store and this is in no small part to the strong food to-go presence that convenience stores have in the market place compared to similar stores around the rest of Europe and the UK in particular who are certainly playing catch up in this area.

Food to go is a mission which holds big potential for the convenience sector because it is in growth - 48% of Irish shoppers are on a FTG mission in convenience compared to 34% in the UK. It is key for retailers and suppliers to work together in order to provide shoppers inspiration via hot and chilled meals options.

There is an opportunity to learn from the UK regarding Top Up (35% of Irish shoppers are on a top-up mission compared to 45% in the UK convenience channel). Delivering higher satisfactions across needs like availability, ease of shop, speed of service, product quality and price perception will encourage shoppers in Ireland to be more actively seeking out c-stores to appease their everyday needs.

Whereas with health it’s often the case that something is removed, think less sugar, less salt, less calories, there is another health trend which actively seeks to add – namely protein. The functional food trend is certainly one which the Irish market has jumped on and we’re seeing Irish shoppers responding well to protein added products. Protein stations have appeared in convenience stores and impulse is strong within the forecourt specific channel. Large consumer brands such as Avonmore have delivered huge growth in the category through their protein milk products.

The functional proteins market is projected to grow at a CAGR of 6.6%, in terms of value, from 2017 to reach USD 5.73 Billion by 2022 globally. With Ireland growing in line, if not ahead, of the global average. At HIM, we have recently spoken to 2,000 Irish Convenience Shoppers as part our global shopper research and we know that 21% want to see more functional foods in convenience stores, as a comparison only 18% said the same thing for free-from products.

Clearly the demand is there and there is a real opportunity for NPD in traditional snacking categories to introduce functional derivatives of existing brands to tap into this growing market. The high concentration of shoppers looking for food on the move and a ‘quick fix’ in convenience also means that this is a channel in which the category fits well and should prosper if delivered correctly.

With sugar tax on the horizon it’s no surprise that we have seen an increase in innovation in the soft drinks category within the Irish convenience market. Lucozade Suntory Ribena stand out here and have invested heavily in NPD as they strive to maintain position as a market leader with so many new SKUs fighting for fridge space.

Flavoured water, coconut water and particularly energy drinks are enjoying strong support from distributors and retailers alike. At HIM we have been speaking to shoppers for 50 years and we have a wealth of trended data to help us understand what has happened in the convenience market and predict what the future may hold.

When we look at the category mix over the last 10 years for example, it paints an interesting picture. Whereas the decline in traditional footfall driving categories is well documented – tobacco, news, etc. – there is one category which continues to outperform its rivals. That category is soft drinks.

We believe that the convenience channel represents a fantastic opportunity for the soft drink category. Large, varied ranges of all the leading brands within each category, all fully chilled and a shopper base which is looking for instant refreshment on the go.

There aren’t many channels that can boast this, and when you consider the traditional food to go players are somewhat tied to a small range or particular brands and the big supermarkets are unable to match the chilled offering it’s not hard to see that there is a real opportunity for the convenience channel to become a destination for the soft drink category.

Last , but certainly not least, Ireland is finally waking up and smelling the value of coffee. The large roasters are vying for position amongst convenience stores. Insomnia, Seattle’s Best and Bewleys are all in competition. The coffee offer is close amongst these three, so it looks as if the accompanying products may prove to be the difference for customers. All companies have invested in partners for their coffee.

This ‘new wave of coffee’ has traditionally been way behind the UK but is now catching up. Clearly convenience stores in Ireland are getting something right in the eyes of their shoppers. Our latest research shows that 29% of convenience shoppers in Ireland rate the hot drinks to go offer in stores as ‘outstanding’ v just 18% for UK shoppers. 1 in 10 shoppers in Ireland now say that ‘to buy a hot drink to go’ is the main reason they are visiting the store, on a level with lottery and only three percentage points behind the newspaper category.

It’s not a long shot (or a double espresso shot!) to suggest that over the next few years that we will see coffee overtake newspapers as a more important footfall driver to convenience for shoppers. With coffee such an impactful footfall driver it’s important to consider the incremental sales opportunities around the drink itself.

This is where both the key trend of health and treat play together to create a compelling offer for shoppers across all day parts. Interrupting and inspiring shoppers when they are at the point of purchase to truly unlock the full potential of what a strong coffee offer can bring to a store.

Inspiration and interruption. Two words that should be the mantra of any successful convenience retailer. The key difference in today’s modern world is what it takes to achieve these two holy grails is forever evolving. It’s often easy to think that convenience doesn’t need to keep up to date with the latest trends and technology because shoppers will always have a need for convenience because nobody ever plans everything.

However, one thing to note about the world getting smaller and smaller is that everything is getting more and more convenient. From smartphone apps, to smart commuting and social media all shoppers are not just more knowledgeable about the options available to them but can access what they want when they want and it’s all at their fingertips, what could be more convenient than that. Shoppers are actively looking for convenient solutions and what can be a better opportunity for convenience stores to not only survive but to thrive in tomorrow’s world.