7-Eleven's Impulse Shoppers Fuel Consumer Recovery

Impulse buyers are heading back to convenience stores for sodas and Hershey bars.

PepsiCo Inc. and Coca-Cola Co. say the volume declines at convenience stores slowed last quarter for the first time in at least a year. Hershey Co.’s first-quarter chocolate, mint and gum sales in those stores grew about 6 percent.

“We’re definitely seeing improving trends,” said Dennis Phelps, senior director of beverages for 7-Eleven Inc., the world’s largest convenience retailer. “Maybe customers feel a little better about letting go of some money.”

Consumers bought less candy and soda last year at 7-Eleven and other on-the-go stores that typically generate higher profit margins for manufacturers. Dollar sales excluding cigarettes at U.S. convenience stores rose 0.5 percent in March after a 1.3 percent decline during the previous 52 weeks, according to Consumer Edge Research LLC.

“We saw a pick-up in consumer discretionary spending, which resulted in improved sales for impulse purchases in convenience stores,” said Bill Pecoriello, chief executive officer of Stamford, Connecticut-based Consumer Edge. The research firm analyzes store scanner data from Information Resources Inc. to determine sales.

‘Encouraging’ Trends

“Encouraging” volume trends for beverages at U.S. convenience stores continued into the second quarter, Eric Foss, head of PepsiCo’s bottling unit, said on an April 22 conference call. Coca-Cola also saw slight improvement at convenience stores, said Dana Bolden, a spokesman for the Atlanta-based company.

Snacks, too, showed signs of recovery in the first quarter, said John Compton, CEO of Americas Foods for Purchase, New York- based PepsiCo, the world’s biggest snack maker.

“I would characterize it as improving,” he said during the call. “It has a ways to go as the unemployment numbers need to improve and the overall economy needs to improve.”

The recession, record high gas prices and increased federal cigarette taxes imposed in March 2009 reduced convenience-store visits in the U.S., 7-Eleven’s Phelps said. In 2009, soft-drink volume industrywide at U.S. convenience stores fell 0.6 percent to 1.74 billion liters, according to Chicago-based researcher Euromonitor International.

Customer Counts

That trend may be reversing. U.S. customer counts at 7- Eleven fell less in the first quarter and may grow in the current quarter, now that the tobacco-tax increase is a year old and gas prices are stable, Phelps said. There are 38,000 7- Eleven stores worldwide. Dallas-based 7-Eleven, a unit of Seven & i Holdings Co., operates or franchises 6,000 in the U.S.

Non-alcoholic beverage sales at 7-Eleven stemmed declines in the first quarter, compared with the fourth quarter of last year, Phelps said. He declined to provide dollar sales figures.

In April, packaged beverages “will probably have one of the best months we’ve had in over a year,” Phelps said.

U.S. retail sales increased 1.6 percent in March, more than anticipated and the biggest gain in four months, according to Commerce Department figures. The Conference Board’s consumer confidence index jumped to 57.9 in April, the highest level since September 2008.

“We really saw volume in convenience return in a big way,” Hershey CEO David West said on an April 22 conference call.

Half of convenience store purchases are on impulse, he said. Convenience stores accounted for 13 percent, or about $590 million, of the company’s $4.5 billion in U.S. sales last year, according to Hershey, based in the Pennsylvania town of the same name.

“There’s no question about it, we’re seeing better sales,” said Mike Thornbrugh, a spokesman for closely held Quiktrip Corp., the Tulsa, Oklahoma-based operator of 548 convenience stores. “It’s not as much as we’d like but they’re still spending.”

To contact the reporter on this story: Duane D. Stanford in Atlanta dstanford2@bloomberg.net

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