Dave Hooker is the Executive Director of the New Zealand Association of Convenience Stores. Supermarket News spoke with him about some of the industry’s biggest topics right now, what is happening inside the NZAC and what the future holds for convenience.
Hooker has been in the industry for over 35 years. He credited this to all the relationships he has developed over time, “the people that are in this industry tend to stay for a long time. I still have relationships with suppliers and retailers that go back 30 years.” Hooker spent 20 years with Mobil and eight years with BP, but it was quite early in his career that he specialised in the retail side of the industry, and it grew to be a passion.
Wholesale
New government wholesale regulations are something Hooker still finds a bit confusing. He is unsure of what will change and how the regulations will work when ultimately, things come down to the supplier. He does not doubt that the major players are working hard behind the scenes to provide solutions to high prices, but there is yet to be any fallout. Convenience stores might only order one or two cases of a drink, while the supermarket down the road orders an entire truckload. Are the suppliers going to be expected to manage these varying costs?
With Costco recently entering the wholesale market, Hooker believes that if they offered products at the right price, businesses might use them as a supply outlet. But, realistically, with only one store in West Auckland, there is only so much impact the company can have. Costco is also a competitor in the convenience sector with their fuel offering. Businesses within its trading area are almost definitely being impacted due to their petrol prices being so much lower. If they were to expand, it could become a problem for petrol companies as customers in Auckland are already travelling from far and wide to fill up their tanks with gas that isn’t so hard on the wallet.
Ram raids and security
The members of the NZAC have invested millions, if not tens of millions of dollars, over the last 15 years on security - so they are well ahead of the game. A few years ago, members experienced a severe rise in robberies and ramraids. After investing in security measures such as night pay windows, smash-proof glass, CCTV, fog cannons, safe rooms and personal alarms, incidences dropped off dramatically.
The group's members are predominantly organised retailers and multinationals with the capital to make significant security investments and with employee safety as the number one concern. Hooker noted that the retailers getting hit in ramraids are predominantly smaller dairies, liquor stores and jewellers that unfortunately, don’t have the means to invest in heavy-duty security measures.
SmokeFree
There are three areas of concern regarding the SmokeFree regulations for NZAC members. The first is the tight proposition, which will see between 6,500 and 7000 retailers shrink to 500.
“It’s incredibly impractical. New Zealand has around 2,000 postcodes, each one having up to 10,000 households. Even dropping numbers to 2,000 stores wouldn’t even be enough to service the population.”
Then there is concern over how stores will be selected to licence. Will it be the dairy, FourSquare, liquor store or service station in one small town? Not only is deciding who gets it and who doesn’t a challenge, but the store that does get the licence will be a target; they will have to factor in the extra cost of stock and the long hours needed for service.
The second issue is the proposal of very low levels of nicotine. As a product of genetically modified tobacco, it is currently not commercially available in New Zealand and doesn’t deliver the amount of nicotine a smoker requires.
“It is like asking someone addicted to alcohol just to drink low alcohol beer; they have a better chance of drowning themselves before getting the desired effect.”
The third piece is the ‘SmokeFree Generation’. The practicalities around having to ID people progressively getting older are complex; there are non-citizens, tourists, and people on work visas who also need to be considered.
Hooker believes that vaping is a helpful transition for smokers, but these regulations also need to improve. The NZAC lobbied unsuccessfully to continue to sell a limited number of flavours, even if it was just six adult flavours. Flavours were then regulated exclusively to Vape shops. But regardless of the current ruling, convenience is still seeing growth in vape sales.
“Like everything to do with smoke-free, the aspirations are good, and we fully support them, but the practicality of it is very, very thorny and difficult.”
Within the NZAC
At the end of August, the NZAC held its annual awards evening. Over 100 guests and 30 companies attended after a long break since the last event due to Covid.
“It was a really good night, probably our strongest and best attended in quite a number of years,” said Hooker.
The Peter Jr. Scholarship for young people in the industry is held alongside the awards. Nine thought-provoking entrants participated this year, a much higher intake than the typical five or six entrants. Kathlynn Lee from BP was the scholarship recipient, with her presentation on reinventing convenience coffee. She suggested bar taps filled with quality pre-made bulk coffee that lies between horrible push-button coffee and staff-heavy barista-made coffee. The runner-up was Fernand Dignadice from Frucor Suntory, who discussed a pharmacy dispensary machine called Farmer Collect. As valuable products are prone to theft, a vending machine to service the category would protect the items.
Scholarship Winner Kathlynn Lee
Another event from the NZAC is the Convenience and Impulse Expo and Industry Leaders Symposium. Held from October 19 to 20, the main focus is leadership, with speakers from NPG Retail, Trents Wholesale, Coca-Cola Oceania, Z Energy and Bowser Bean.
What the future holds
When we asked Hooker what the future of convenience looked like, he said there is no way to be sure of what will happen.
For the first time in many years, the industry received an annual report highlighting areas where sales are going backwards; in-shop sales were down $64 million on the previous year, excluding tobacco sales which were down $6 million, and unit growth was down five percent. It is becoming a challenging sales environment as the prices of everything increase. In particular, as petrol prices increase.
“Petrol used to flirt around $2, and we thought $2-$2.20 would be the breaking point for shop sales, but things just keep increasing. Now we are struggling to get under $2.60, and we have even bounced off the $3 plus numbers.
While the correlation between petrol price and shop spend is prevalent in-store, there is a change among different categories. Tobacco will continue to decrease and is yet to be offset by e-cigarette and vaping sales. Beverages and confectionery are still strong. Coffee has always been a stand-out category, but this year, it seems to have reached its peak with no growth for the first time ever. In turn, a category that appears to be increasingly popular is pharmacy and health products.
“I couldn’t tell you what the next few years will look like because it will be a very interesting space to watch. But that is a common answer for everyone at the moment - no one knows. Depending on the Smokefree outcomes, things could be very different.”
