to the Canadian Convenience Stores Association, the Canadian Convenience Industry includes over 23,000 retail locations and,
excluding automobiles, represents 8.6% of the total retail economy; the fifth highest category.
One in every three Canadians patronizes a convenience store every day. Convenience stores with gasoline
(NAICS 44711) sell an annual average of $3.2 million in motor fuel and $820,000.00 in merchandise per site.
In the sections below, we will examine three important trends:
VALUE OF CONVENIENCE STORES
1. Demographics Driving Demand in the Convenience Channel
2. National and Regional Economic Performance
3. Major Challenges to the Convenience Industry
Over time, the economic performance of all local retail markets move toward the national industry
averages. So, the economic trends for the industry as a whole reflect the long-term health of the subject
Important Demographic Trends
The low growth of the Canadian population is well documented. The retail economy is especially
dependent on demographics. Population growth and personal income are the two most important components
of retail demand. The Canadian population grew by 5% during the 5-year period between 2002 and 2007, or
an average of 1% per year. However, the growth was uneven across the provinces. The
Maritimes generally lost population while Alberta and the Yukon Territory grew because of economic expansion and Ontario and
British Columbia grew because of immigration.
VALUATION OF CONVENIENCE STORES
population is projected to grow by 4% between 2007 and 2011, with Ontario experiencing a higher than average increase of 5%
during this period.
OF CONVENIENCE STORES
Consumer spending growth
was high in 2007 and 2008 (4.5% and 3.4, respectively), but this rate of growth has dropped sharply in 2009 and is expected
to remain much lower to 2010. Debt as a ratio to personal income has been increasing in recent years and
the savings rate is much lower.
EVALUATION OF CONVENIENCE STORES
growth in spending was 14% between 2002 and 2007, of which 11.5% was due to inflations and 5% due to population growth.
It is apparent that except for alcohol and personal care/health care products, other product categories seem to have
reached a stage of maturity. While spending on food has grown at the same rate as inflation, spending on
tobacco and lotteries has declined sharply. For a number of products on which stores depend for growth
and profitability, household spending is stagnating or shrinking.
is forecast at 7.8% in 2010, higher than the 6% level in 2006. Inflation is expected to remain about the
same, at 2.3% in 2010.
In summary, the overall demographic trends in population growth
and personal income indicate a challenging long-term economic environment for the convenience industry. Slow
population growth and reduced personal spending will likely cause more consolidation in the convenience industry and reduce
average net profits per store. We will examine economic performance in the next section.
National and Regional Economic Performance
In the 2006-2007 expansionary
period, retail sales in Canada were largely driven by residential development (construction, renovation and household appliances).
With current slowdown in manufacturing and weaker job creation, the data suggest than 2009 and 2010 retail sales will
be much slower. In 2008, the national average growth in retail sales was 3.4%. With
an underlying inflation rate of 3.3%, this essentially means no real growth in retail sales occurred in 2008.
For the past several years, the Western Provinces have outperformed the rest of the country. Saskatchewan
and Alberta experienced double-digit growth rates in retail sales in 2006-2007 and consistently higher growth rates in the
previous decade. Ontario’s retail sales growth rate has tracked with the national average.
Growth in convenience industry sales were forecast at 8.9% in 2008,
after a 10.1% growth rate in 2007. However, most of this increase is due to increases in the price of gasoline.
The quantities of gasoline sold have actually decreased.
the nation, convenience store sales per establishment averaged $1,756,024.00 in 2008. Higher numbers are
reported in the western provinces where the number of persons per store is higher. Ontario reported sales
per establishment of $1,725,056.00, nearly identical to the national average.
Convenience stores without gasoline sell on average $700,000.00 in merchandise, while convenience
stores with gasoline sell $820,000.00. The attraction of gasoline is estimated to account for 20% to 30%
of sales and customer traffic. With gasoline totaling $3.2 million in 2008, the total per site sales in
2008 were $4.1 million.
With 23,435 store locations across Canada, the geographic distribution
of stores closely follows the population totals. For example, Ontario and Quebec account for 62% of Canada’s
population and have 63% of the total convenience stores. The average store-to-population ratio is 1: 1,417.
Ontario closely follows the national average with one store for every 1,443 persons. In contrast,
the West has fewer stores. Alberta, for example, has only one store for every 2,157 persons.
So, industry growth opportunities are greater in the West than other areas of the country and stores in the West are
achieving higher sales and profits than stores in the Maritimes.
store size is 147 square meters. The average rent paid per store is $21,335.00 per year.
GAS STATION APPRAISAL
Sales per square meter of store area averaged $5,620.00 in 2008.
Gasoline accounts for about 72% of total sales for those stores that sell gasoline. While tobacco,
lotteries and beverages (excluding milk) account for the three largest merchandise sales categories, the three categories
of tobacco, beverages and confectionary account for 45.2%, or nearly half, of profitability. These products
that contribute most to profitability are declining or only growing slightly. To offset this decline, stores
today must expand by offering food service, or other products and services.
GAS STATION EVALUATIONS
Gross margins for convenience stores with gasoline have been declining
since 2004. As shown in Figure 1 below, gross margins for convenience stores with gas stations was 17% in 2004, 14.7% in 20066,
and 12.7% in 2008. The average gross profit per store was $66,129.00 in 2008.
GAS STATION EVALUATIO
GAS STATION APPRAISAL
Convenience Industry Gross Margins
in Canada: 2004, 2006 and 2008