Australasian Association of Convenience Stores

Mr Don Challen

Chairman

Premier’s Economic and Social Recovery Advisory Council

Dear Mr Challen,

On behalf of the Australasian Association of Convenience Stores it gives me great pleasure to provide you with a simple outline of the initiatives that will greatly stimulate the small retail sector in Tasmania.

As you are aware, we are experiencing an event not seen for around 100 years since the Spanish flue pandemic. Governments around the world have reacted very differently and we are fortunate that the Australian government had the foresight to act early and even ahead of the WHO declaration of a pandemic.

We do however see many businesses shuttered and government spending at levels never before seen to support small businesses and people affected by this virus. Many businesses are taking different approaches to keep trading and even innovate during these times as we can no longer just do business the old way.

What are some of the areas that the Convenience industry would like to see that will assist our industry recover more speedily and to a stronger future in Tasmania:

1. Temporary suspension of non-essential regulatory reviews: time consuming reviews that add nothing to productivity, business growth or public benefit should be held over until the economy improves or even reviewed in terms of whether they should proceed at all. 2. Support of a federal Moratorium on further tobacco excise increases and greater law enforcement at ‘street level’ on sales of illicit tobacco: we have seen the steady growth of illicit tobacco sales in our country, taking away sales from legal and responsible retailers and suppliers as well as robbing the government of excise. Certainly, we see the excellent work that Border Force is doing in making seizures of large quantities of tobacco products, however products are still making it to street level and being sold at prices far cheaper than legitimate products with no taxes being paid. As the cost of legal tobacco increases consumers shifts their purchasing to these illicit products which are sold to people of all

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ages. Its time to recognise this real problem and to bring some reality back to the pricing of legal tobacco. 3. Extension to tax relief including reducing corporate tax rate and consideration of wider tax reform and the removal or significantly reduction of payroll tax, land tax and stamp duty: tax reform is a topic tat has been discussed in so many forums over the years without real outcomes. As the government looks to kick start the economy in the wake of COVID-19 this is one area that will spur investment, incentive and employment. Why penalise businesses, particularly small businesses, for giving people meaningful employment? 4. Opening internal borders when appropriate: governments, federal and state, have done an excellent job in containing the spread of COVID -19, however there will be a time that relaxation of restrictions are required to boost tourism, regional businesses and movement across our country. 5. Allowing the Convenience industry to sell alcohol: Convenience store operators are responsible retailers. We sell age restricted products now such as tobacco and lottery and with the appropriate training in place we can safely and responsibly also sell alcohol. This would not be 24 hours but in line with other retailers in their local areas. Alcohol regulations are archaic in many states and it has given the major supermarket operators further competitive advantage over smaller retailers. 6. Allowing eCigarettes to be sold in Convenience Stores: Public Health UK has stated that eCigarettes are 95% less harmful for users than traditional tobacco products. Many Australian experts agree that they are a safer alternative and should be made available. As with illicit tobacco being indiscriminately sold to anyone, so too is there a market for eCigarettes and even nicotine-based liquids which are illegal, and from unknown sources of manufacture. 7. Develop guidance for our industry as to what safe trading looks like in a COVID-19 environment: AACS has developed a basic plan for our operators as a minimum stadrad and will continue to be guided by Australian Health experts on any changes required or new developments. In this we do recommend the download of the COVIDSafe app for all staff as well as flu shots.

Obviously as you work your way through this process, we would be more than delighted to assist further in elaborating on these initiatives.

Yours sincerely,

Jeff Rogut

Chief Executive Officer

Australasian Association of Convenience Stores Limited

ACN: 156 638 023

Mobile: 0467 873 789

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Office: 03 9807 5552 email: [email protected]

Website: www.aacs.org.au

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State of the Industry Report 2019 ACN 156 638 023

Contents

Introduction 1 Report Methodology 6 Industry Overview 7 Category Performance Trend 12 Tobacco 14 Tobacco Legislation 15 Packaged Beverages 16 Hot Dispensed Beverages 18 This State of the Industry Report (Report) is commissioned by the Australasian Association of Convenience Stores Ltd (AACS) and prepared by Convenience Food on the Go 19 Measures Australia (CMA). It is subject to and issued in accordance with the agreement between the AACS and Convenience Measures Australia. CMA Take Home Food 20 and AACS are not responsible and will not be liable to any other person or organisation for or in relation to any matter dealt within this Report, or for any Confectionery 21 loss or damage suffered by any other person or organisation arising from Snackfoods 22 matters dealt with or conclusions expressed in this report (including without limitation matters arising from any negligent act or omission of CMA or AACS Ice Cream 23 or for any loss or damage suffered by any other party relying upon the matters dealt with or conclusions expressed in this Report). Other parties should not Household 25 rely upon the report or the accuracy or completeness of any conclusions and Milk 24 should make their own inquiries and obtain independent advice in relation to such matters. Bread 24 This report is produced using information provided by AACS members, Grocery 25 CMA, IRI, ASX company announcements and available data on company and industry websites. The commentary is based on data available and in General Merchandise 25 discussions with AACS members. The validity and comprehensiveness of Front of Store/Lifestyle 26 supplied information has not been independently veriﬁed. Communications 26 This Report cannot be copied or reproduced in whole or part for any purpose without the prior written agreement of AACS. This Report may not be copied, Travel Tickets 26 reproduced in whole or part for any purpose, stored in information or retrieval Printed Materials 26 systems, or transmitted in whole or part, in any form or by electrical or mechanical means, photocopying, recording or otherwise without the written Petrol/Vehicle Care 27 permission from AACS. Use or copying of this document in whole or in part without the written permission of AACS constitutes an infringement of copyright. Fuel 27 Car accessories 28 AACS Awards 31 Trends 32 Our ‘3 Pillars’ remain Introduction extremely relevant for our industry and they are:

– Advocacy – Connection We are pleased to bring the ‘2019 AACS – Knowledge State of the Industry report’ to you.

Once again, I have pleasure in In 2019 sales at total C-stores Convenience in-store welcoming you to our latest AACS were up 2.08% as at December merchandise sales growth State of the Industry Report. As I 2019. In dollar terms this is write this the world is still seeing the $8.776billion. The pleasing area is spread of the Coronavirus which is the growth in Food and Beverages 2.1% creating much uncertainty and which has received much attention affecting people’s lives in so many in recent years. Food & Beverage Total Beverages share ways. We can only hope that this sales were $4,038billion, up of Sales will be contained soon and that 5.98%, however Non Food sales vaccines and other preventative at $4,738billion declined by measures will be found by those -1.02% on 2018. This decline is 24.9% who specialise in these areas. in part due to the Tobacco category Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements which only grew at 0.83% in 2019 Having come through drought and compared to 6.4% the previous year. bushfires in 2019 it is pleasing to see the resilience of our industry. There are other categories as With many retail channels suffering well which showed very pleasing difficult times and even closures the growth in 2019 and the details are convenience industry held its own in this report. and in fact in some areas showed I thank all of our Retailers who very positive growth. took the time to provide their The year ahead in 2020 however data without which this report will present us with challenges as would not be possible or credible. Australia and the world grapple with I also thank Brett Barclay and his the Covid-19 pandemic. Team at CMA for the work in producing another excellent We are well positioned to address report for our industry. competitive threats with almost 7,000 stores nationally. Special thanks also to CCA, BAT Convenience stores are continuing and Campbell’s for again showing to innovate and to offer their their support of AACS and our customers merchandise and industry by sponsoring this report services to make their lives easier – thank you. Jeff Rogut and save time for those on the go. FIML, MAICD, FCLP Chief Executive Officer

AACS SOI 2019 Report Sponsors

AACS State of the Industry Report 2019 1 Introduction

So what of the future? As we look ahead to the year ahead Convenience in-store and new decade, our path is clear: merchandise sales growth AACS will continue to focus on our we’re focused on helping you Pillars for the benefit of the industry understand where we are, where Advocacy, Connection and $8.8b i.e. we’re going, how we’ll get there Knowledge. and how we may add value to your Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements The Australasian Association of business – large or small. Convenience Stores (AACS) is the Our vision is 20-20….and champion of the convenience beyond. industry and now in 2020 we As consumers become more celebrate our 30th anniversary. We Convenience in Australia: brand disloyal, marketers have a long history serving retailers Where we are can no longer expect 20% and suppliers; we’ve witnessed Our industry is dynamic and as lines of their portfolio to drive 80% seismic changes, game-changing between retailers increasingly blur, of their sales. innovations, shifts in consumer new competitors emerge and The data behind disloyalty is behaviour, new regulations and trading conditions present new staggering: Only 8% of global much more. challenges, the fast-paced evolution consumers are loyal to the As we highlighted some years ago which defines convenience will only brands and products they’ve when we produced our ‘AACS speed up more. always bought. Convenience 2020’ report By virtue of our key reason for It’s important to note that important elements to success being – to offer a convenient “better value for money” is remain collaboration, innovation and service – we are at the cutting edge the No. 1 influencer globally. differentiation. It’s also the strongest influencer across four of the globe’s five primary regions. Your AACS Board members In Asia-Pacific, consumers Retail Member Directors Supplier Member Directors rank “enhanced or superior quality or function” above CEO AACS: Jeff Rogut Theo Foukkare, Pacific Optics value for their money. Globally, Chair: Julie Laycock, 7-Eleven Caroline Waite, Frucor enhanced or superior quality or function ranks No. 2 (of Vice Chair: Amanda Woollard, BP Brett Barclay, CMA the five top influencers), Treasurer: Rob Anderson, APCO which reinforces the fact that Chris Andrianopoulos, AA Holdings cost isn’t always the best Darren Park, UCB motivational lever to pull. Source: Nielsen, Disloyalty is the New Black, Steve Cardinale, New Sunrise Group Looking to Land in Consumer Baskets? Don’t Bank on Your Brand Power Martin Monaghan, Caltex HYPERLINK “https://www.nielsen.com/us/en/ insights/cpg-fmcg-and-retail/” CPG, FMCG & Retail Stephen Crystal, VIVA Energy 07-02-2019

2 AACS State of the Industry Report 2019 Introduction

of retail change. We need to Collaborations might be achieved understand our customers if we are through franchised operations run to go on the journey with them. side by side, incorporated in stores 2019 or, like we saw with the partnership We need to know who they are, between BP and David Jones, fully In terms of Connection who they will be in the future, and branded offers. and Knowledge for the who we want to shift across. As past year we have had: Consumers will determine the consumers age, socio-economic backgrounds change and ethnicities success of these strategies, but we diversify, we need to ask ourselves need to offer them choice. Just as AACS Annual State of the if we’re prepared for the changes. we must continue to offer Industry Report Launch The ‘AACS Convenience Usage & customers the choice to buy legal Attitudes’ research we undertook in products like tobacco, sold – AACS Supplier round 2019 is a valuable member responsibly. table meetings resource in this regard. Despite the long-term trend in the – AACS Downunder decline of tobacco sales, our This year, new and different Study Tour in Melbourne channel continues to do well. Yet competitors have emerged and Governments continue to pocket – AACS Convenience more invariably will, so we need to exorbitant taxes from consumers on Leaders Summit and be clear on our value proposition. legal tobacco, systematically AACS Gala and Awards We must take the time to increasing excise, while largely dinner in Sydney understand why some customers ignoring the illicit tobacco ﬂooding shop with us, why some don’t, what – AACS Collaboration and communities at street level. we offer that no-one else can, and Innovation workshops what new entrants are attempting Illicit tobacco sales account for – AACS Overseas to compete with us on. around 15% of the total tobacco market according to KPMG, with Study Tour to the USA Food, is another example. We have these products potentially more – AACS PJ Convenience already carved out a reputation for harmful to consumers given their Industry Award being a viable meal option, but we unknown origins and ingredients. still see the opportunity for ‘better Government and health bodies like – AACS Women in for you’ food and beverages. the Cancer Council still remain very Convenience events quiet on this issue, instead focusing Perhaps part of the solution lies in – AACS Store of on responsible retailers of legal collaborations. Food is still the the year award tobacco. This needs to change. future for our industry, but whether – AACS Weekly the focus is on proprietary ranges As for e-cigarettes, the landscape eNewsletter publication developed speciﬁcally for retailers, shifted in 2019. Developments in or through collaborations with the USA give us cause to pause known brands, is a question for and consider, and we will need to operators. be guided by experts on this score, although Public Health England still maintains through its research that AACS State of the Industry Report 2019 3 Introduction

e-cigarettes are 95% safer than really exploiting this growing It is clear that convenience must traditional tobacco. opportunity? How about digital continue to evolve, both inside and wallets and acceptance of mobile outside the store, to ensure we The changes we’ve experienced payments – are we preparing or keep pace with what’s happening in 2019 set the scene for more ready for this development? around us. And we will. challenges and opportunities ahead. We need to be prepared for some Where we’re going dramatic changes in the industry, We know the reason behind most “Chinese consumers were be they driven internally or externally. visits to the convenience store is to the first to embrace the multi- We read in the media about the satisfy an immediate need. How we functionality of mobile phones, rebranding for Caltex to Ampol. do this as needs and expectations using these devices to interact We have read about the possible shift will define our success. with peers as well as brands. In entry into Australia by the 2015, China was the first market convenience giant Couche Tard. Fresh food on-the-go will continue to spend more on mobile than We have seen the successful entry to draw customers in. Quality, any other device. In 2018, 77% by E.G. into Australia. We have freshness, availability and value are of digital purchases in China seen the alliance between BP and the key drivers. You could argue were mobile based.” David Jones. we’ve got lunch covered but convenience is still not capitalising Source: Euromonitor 2019 How we’ll get there on breakfast and dinner, so these We have a reputation for innovation present growth opportunities for Similarly, how long before the first and the runs on the board. Our savvy retailers. frictionless store opens in Australia? industry’s recent efforts to innovate, Beverages – particularly hot Judging by the acceptance, use particularly in food, have changed beverages – will continue to grow and growth of this concept in the perceptions as to what the as new developments in flavours USA, and while it may not be convenience offer is. and equipment emerge. How long suitable in every location, it has Now is not the time to rest on our until a robot barista is making our both potential and appeal in laurels. Instead we must ramp up coffee? This is something that will Australia. The savings in terms our commitment to innovating and develop in the future for speed and of labour costs and time for embracing change. By listening to consistency, as well as from the consumers make it a trend to watch the cues that research gives us, consumer interaction perspective. and for retailers to experiment with, as costs of implementation reduce mining international trends and Technology will keep moving the and technology improves. integrating new offers, programs goalposts, so we have to keep up. and experiences based on our Product delivery is an area Even small format unstaffed stores understanding of our customers, undergoing change. For instance, present opportunities, as was we will grow and flourish in the drone delivery experiments are highlighted during the recent AACS new decade. already taking place while mobile Overseas Study Tour to the USA in Our industry will have to embrace ordering is here, but are retailers 2019 and to China in 2018. – and that means plan for and invest in – artificial intelligence (AI).

4 AACS State of the Industry Report 2019 Introduction

Ideally, convenience operators are Your Association We’ll also keep our foot on the already mobilising in this space. The pedal in seeking new opportunities applications and scope for AI and The AACS will continue to serve and avenues for growth. We’ll keep robotics in convenience, in many as the proactive voice and agent working to elevate the Australian areas, is impossible to ignore for change for the Australian convenience range up to the level and hopefully retailers and their convenience industry. We will of the rest of the world. We are suppliers are actively investigating represent our Members, large lagging in many respects and the possibilities here, from supply or small, retailers or suppliers Government needs to be constantly chain to customer loyalty and to our industry. reminded that we’re getting left interactions. Some of our focus areas as we behind. Partnerships will also influence our embark on a new decade are Packaged alcohol is a key potential future success. For example, familiar. We will continue to rally growth category and one that we despite the slow growth of electric against the rising cost of doing will pursue for our industry. vehicles (EVs), there remain only a business by seeking a more level few operators investing in charging playing field for our retailers and We will also continue to invest in facilities for consumers. Now is the small businesses generally, calling research and bring results to our time to flag that we understand the out anti-competitive tactics, and Members of new insights that may potential future needs of our lobbying Government where required. positively impact their businesses. customers and to start Much has been written in the media accommodating those needs. about underpayments by various Consumers who do drive EVs will companies. This issue is sure to need charge points so we should restart discussions about awards, The AACS is your Association partner with leading providers of this cost of doing business, and and it’s our mandate to maintain service at appropriate sites from ensuring that companies do our focus on the areas important early on. Some shopping malls operate ethically. to you. If there’s an issue or and centres are already doing it. Crime, including but not limited to initiative that you would benefit petrol theft, is perhaps the most us lending our voice to, Then there are the impacts of let us know. driverless cars to consider, with the critical issue we’re facing. We will potential growth of these vehicles continue to work with other industry We sincerely thank our Retailers possibly bypassing service stations. bodies and our members to and Suppliers for their ongoing How do we continue to offer these implement new programs and efforts, particularly in very consumers value? initiatives to protect our people, while advocating for a zero- challenging times. Our industry, indeed our world, will tolerance approach from law be vastly different ten years from enforcement authorities, the now. Our challenge and our judicial system and legislators. opportunity is to read where possible the writing on the wall, and ensure we not only respond to what’s happening, but lead the way. AACS State of the Industry Report 2019 5 Report Methodology

CMA have again been appointed by AACS to compile the AACS State of Industry Report.

CMA uses both IRI’s Market Edge In instances where a retailer is not The categories represented remain scan data and Retailer speciﬁc sales able to provide data through either the same as 2018 in which changes data for those not included in IRI, of these methods, a projection is were made to condense the allowing for broad coverage of the included to represent their contribution amount of categories reported Petrol & Convenience Channel. to the P&C retail market. from 19 to 16 and includes Total industry and category data Hot Beverages as its own category, The headline performance metrics presented in this report is a separate from Total Beverages. combination of these results. for each of the 16 categories proﬁled in this report are based on IRI The Shopper Insights and measures Not all P&C Retailers are members coverage in combination with AACS provided in the report are from of AACS or are able to provide data members contributions derived from the CMA Convenience Shopper across all areas of their business. an industry survey. Report 2019. As such not all have provided data forEstimated this report. other 8%

Retailer contributions 28% Chart of coverage IRI Market Edge 64% Estimated other 8%

Retailer contributions 28%

IRI Market Edge 64%

Source: AACS Retailer Submissions, IRI Market Edge, Company Websites

6 AACS State of the Industry Report 2019 Industry Overview

Performance A slightly softer year in 2019 v 2018 with the slowing Dollar Sales growth in the Tobacco category having the largest impact. $8.776b The growth of 2.1% remains above CPI of 1.8% as reported by the ABS for 2019, which was in line with 2018. 2.1% 2.4% in 2018

– Hot Dispensed Beverages for the – Tobacco remains the largest $ Value Increase 3rd year in a row was the fastest category adding $28m, although growing category adding another growth slowed to 0.8% driven $179m $46m of growth or 18% by a 6.8% unit decline $201m in 2018

– Food on the Go grew at 11.5% – The Snacking categories were Dollar Sales adding $68 million of growth to all up with Ice Cream +5.2%, (Excluding Tobacco) the Channel Snackfoods +4.1% and Confectionery + 2.1% all $5.359b – Packaged Beverages grew at significantly stronger than 2018 4.4% and delivered the greatest 2.9% dollar value contribution of any Flat in 2018 category totalling $79 million Average Transaction Value $9.69 Key Industry Changes 0.2% EG Australia VIVA Energy Average Merchandise take over the Woolworths Petrol takes 100% ownership of Liberty Transactions per day business in April Chevron Caltex agrees to buy Puma Energy 498 open their first Metro site in (to be completed in 2020) 3.1% partnership with Woolworths in Couche Tarde North Ryde Margin offers to buy Caltex for $8.8b 7 Eleven (3rd bid). EG enters the bidding 33.5% open their first cashless store in war early 2020 Richmond Victoria 0.1% Caltex 33.4% in 2018 BP announce they will rebrand Ampol partners with David Jones and after Chevron terminates the opens first store in Bayside Victoria agreement

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements

AACS State of the Industry Report 2019 7 Industry Overview

Performance – Store numbers continue to exceed – Communications, Travel Tickets Store Numbers Channel and CPI growth @ 2.9% and Printed Material categories 6,995 mainly driven by New Sunrise continued the decline of 2018 +17% and Metro Petroleum +11% which resulted in $89m of lost 2.9% sales and $15m in margin – Margin was slightly stronger driven Source: AACS Retailer Submissions, IRI Market Edge, Company Websites by Hot Beverages +6.8% mainly – 2019 provided the largest gap due to increased Barista offer in between growth of the Food & Independents Beverage segment vs. Non Food segment. Food & Beverage grew – Food on the Go delivered $38m CMA Shopper Insights (+6%, adding $228m in value) of extra margin despite overall versus Non Food (decline of 1%, Shopper Visit Frequency percentage margin remaining ﬂat or $49m in value) – 2.8 Tobacco margin dropped below – Shopper visit frequency, according an average of 20% and delivered per week the CMA Convenience shopper $18m less than in 2018 Report 2019, improved from 2.7 Items Per basket to 2.8 visits per week. Number of items however, was down from 2.0 2.1 to 2.0 items per basket items The Australian market growth was less than half of the USA – The Convenience channel growth Convenience market, which was slightly below the Food and Shoppers increased by 4.4% despite a Non Alcoholic Beverages average growth of 2.6%, as reported by Male Female slight decline of less than 1% in Convenience stores operating the ABS CPI 2019 data report according to NACS State of 63% 37% Industry data

Source: CMA Shopper Report 2019

Group Growth

Food & Clothing Convenience Non Alcoholic Alcohol & Tobacco & Footwear Housing Beverages 2.1% 2.6% 6.5% 1.4% 0.2%

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements, ABS CPI 2019 Data

8 AACS State of the Industry Report 2019 Site statistics of retailers used in channel measurement

Stores 2019 2018 Difference % 7-Eleven 708 692 16 2.3% AA Petroleum 53 53 0 0.0% APCO 24 22 2 9.1% BP 321 304 17 5.6% BP Buying Group 383 400 -17 -4.3% Caltex 708 702 6 0.9% Coles Express 713 713 0 0.0% Freedom Fuels 49 47 2 4.3% Metro Petroleum 227 205 22 10.7% Independents 300 300 0 0.0% New Sunrise 948 813 135 16.6% NightOwl 73 75 -2 -2.7% OTR 149 145 4 2.8% Puma Energy 221 226 -5 -2.2% UCB 1180 1164 16 1.4% United 403 398 5 1.3% EG Australia 535 540 -5 -0.9% TOTAL 6995 6799 196 2.9%

Note: 2018 numbers adjusted to include retailers not previously reported. Source: AACS Retailer Submissions, IRI Market Edge, Company Websites, ASX Announcements

Food & Beverage Non Food 2019 $ Sales 2019 $ Sales $4.04b $4.74b 6.0% +$228m 1.0% -$49m 2018 3.0% $111m 2018 1.9% $90m

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements

Trend Chart Food & Beverage Non Food 7 Channel Average +6.1% 6 +6.0%

5 +4.5% +3.9% 4 Change to line graph +3.7% +3.0% 3 +3.5% +2.5% +2.4% 2 +3.2% +2.1% +1.0% 1 +1.9%

0 -0.1% -1 -1.0%

2015 2016 2017 2018 2019

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements

AACS State of the Industry Report 2019 9 State Performance

AUST WA growth was signiﬁcantly

above Australian Convenience +1.5 +2.1 +40% and population average

QLD

+1.7 +1.9 +12% WA

NSW +1.1 +9.0 709%

+1.4 +1.1 -21% SA

VIC +0.9 +1.0 +11%

+2.1 +2.9 +38% Key TAS Population

P&C +1.1 +0.3 -73% Index

Source: AACS Retailer Submissions, IRI Market Edge, ABS

10 AACS State of the Industry Report 2019 Industry Overview

Basket Penetration

Food Grocery & Beverages on the Go Fuel Snacking General Tobacco Merchandise 2018 73% 22% 19% 17% 18% 7% 2019 72% 25% 19% 16% 19% 6%

– Beverages continue to be – Food on the go continues to – Tobacco slight decline present in over 70% of grow basket penetration up identiﬁes less people buying baskets 3 points on 2018 from the channel

Source: CMA 2019 Shopper Report

Table of value of growth +79m +68m

+46m

+28m

+15m +10m +8m

-5m -11m

-31m

-$47m

Packaged Food on Hot Tobacco General Confectionery Ice Cream Car Printed Travel Communications Beverages the Go Dispensed Merchandise Accessories Materials Tickets Beverages

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements

AACS State of the Industry Report 2019 11 Category Performance Trend

Non Food

Ranked by 2019 Value Contribution Food & Beverage

Top 5 Positive 2015 2016 2017 2018 2019

Packaged +2.2% +2.6% +2.5% +1.2% +4.4% Beverages

Food +13.0% +18.3% +13.3% +9.9% +11.5% on the Go

Hot Dispensed +29.7% +24.7% +16.1% +14.6% +18.0% Beverages

Tobacco +5.2% +5.6% +3.4% +6.4% +0.8%

General +9.8% +20.6% -2.4% -3.7% +3.4% Merchandise

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements

Top 4 Negative 2015 2016 2017 2018 2019

Car -2.8% -2.0% -7.0% -5.1% -3.3% Accessories

Printed -8.5% -8.2% -10.2% -11.2% -9.4% Materials

Travel Tickets +6.6% -5.0% -13.5% -14.0% -17.0%

Communications -10.1% -11.7% -10.7% -13.0% -16.2%

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements 12 AACS State of the Industry Report 2019 Category Channel Performance

2019 Value 2018 Value Actual Growth 2019 2018 Category ($000,000s) ($000,000s) YA ($000,000s) Share Growth Growth

Total Convenience 8,776 8,597 +179 100% +2.1% +2.4%

Total Non Food 4,738 4,787 -49 54.0% -1.0% +1.9%

Total Food 4,038 3,810 +228 46.0% +6.0% +3.0%

Hot Dispensed 302 256 +46 3.4% +18.0% +14.6% Beverages

Food on the Go 659 591 +68 7.5% +11.5% +9.9%

Bread 40 38 +2 0.5% +5.3% -3.9%

Ice Cream 162 154 +8 1.9% +5.2% -4.8%

Packaged 1885 1806 +79 21.5% +4.4% +1.2% Beverages

Snackfoods 202 194 +8 2.3% +4.1% +0.7%

Take Home Food 149 144 +5 1.7% +3.5% +10.1%

General 462 447 +15 5.3% +3.4% -3.7% Merchandise

Confectionery 493 483 +10 5.6% +2.1% +0.1%

Milk 146 144 +2 1.7% +1.4% -1.4%

Grocery 212 210 +2 2.4% +1.0% +0.0%

Tobacco 3417 3389 +28 38.9% +0.8% +6.4%

Car Accessories 146 151 -5 1.7% -3.3% -5.1%

Printed Materials 106 117 -11 1.2% -9.4% -11.2%

Communications 244 291 -47 2.8% -16.2% -13.0%

Travel Tickets 151 182 -31 1.7% -17.0% -14.0%

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements AACS State of the Industry Report 2019 13 Tobacco

Performance – Tobacco unit Sales declined 6.8% – Dollar share continues to increase Sales Performance in 2019 with South Australia in both lower priced cigarettes $3.4b having the highest decline of and Roll Your Own Tobacco 10.9%, while Western Australia – 0.8% $28m was ﬂat Despite the lower growth rate the Tobacco Category still delivered 2018 Growth – Tobacco share of Convenience $28m in extra value or 15.6% 6.4% $204m Channel fell from 39.4% to of total value growth 38.9% Margin Dollar – Competitive pricing in Share – Growth rate in Tobacco is the Supermarkets and Tobacconists 19.9% 38.9% lowest since 12.5% Excise Tax on the key 20’s pack size was legislation was brought in one of the drivers for the weaker Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements results in 2019 – The category margin declined from 20.6% in 2018 to 19.9% in 2019 and is off the highs of 22.8% in 2016 CMA Shopper Insights Dollar Dollar Visit Frequency Tobacco Shoppers Dollar Growth Growth Share 2019 2018 3.0 Low Price Cigarettes 17.5% 28.9% -5.8% times per week Roll Your Own 11.8% 13.0% 19.9% Deep Discount Cigarettes 40.1% -2.0% 17.5% Average Spend with Mid Priced Cigarettes 22.1% -9.0% -5.7% Tobacco in basket Premium Cigarettes 8.5% -11.0% -2.2% $37.30 Source: AACS Retailer Submissions, IRI Market Edge and Supplier Contribution per visit Shopper Insights Main Mission – Loyalty to Convenience stores – Tobacco purchases are highly – Tobacco for Tobacco purchases is strong planned with 55% of Tobacco 55% with almost 50% of shoppers shoppers on a speciﬁc Tobacco buying their Tobacco needs from mission, which was up 3% Tobacco Shoppers Convenience stores on 2018

Male Female – Despite the softening in the – Visit frequency of Tobacco growth rate average basket Shoppers was up 7% versus spend was up 16% on prior year 2018 and was above the industry 67% 33% average of 2.8 times per week

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

14 AACS State of the Industry Report 2019 Tobacco Legislation

Administration today issued E-Cigarettes a policy prioritising enforcement E-Cigarettes remain a banned against certain unauthorised flavored e-cigarette products that These tighter controls could product by the Federal Government be launched immediately in Australia however they continue appeal to kids, including fruit and mint flavors. Under this policy, in Australia as according to be sold in Convenience Stores to a new study reported in throughout the globe. Recent companies that do not cease manufacture, distribution and sale The New England Journal stronger regulations have been of Medicine, published 7th introduced in the United States of unauthorised flavored cartridge- based e-cigarettes (other than February 2019 e-cigarette after an increase in deaths smokers kicked the habit attributed to e-cigarettes. tobacco or menthol) within 30 days risk FDA enforcement actions. at double the rate of In September 2019 Walmart, standard nicotine the worlds largest retailer, made “The United States has never seen replacement therapies. the decision to ban the sale of an epidemic of substance use arise as quickly as our current epidemic At the conclusion of the e-cigarettes which came about after 12 month study, 18% of the the FDA looked to toughen laws. of youth use of e-cigarettes. HHS is taking a comprehensive, e-cigarette group had quit “Given the growing federal, aggressive approach to enforcing smoking, compared to 9.9% state and local regulatory the law passed by Congress, under of the nicotine-replacement complexity and uncertainty which no e-cigarettes are currently group. After a year however, regarding e-cigarettes, we on the market legally,” said HHS of those who had stopped plan to discontinue the sale Secretary Alex Azar. “By prioritizing smoking, 80% were still of electronic nicotine delivery enforcement against the products using e-cigarettes compared products at all Walmart and that are most widely used by to only 20% still using Sam’s Club U.S. locations,” children, our action today seeks to nicotine replacements. Walmart said in a statement. strike the right public health balance “We will complete our exit after by maintaining e-cigarettes as a All Tobacco companies in Australia selling through current inventory.” potential off-ramp for adults using would support the introduction of combustible tobacco while ensuring e-cigarettes as a way of helping The FDA decision published on these products don’t provide an reduce traditional smoking rates its website https://www.fda.gov/ on-ramp to nicotine addiction for in Australia. news-events/press-announcements/ our youth. We will not stand idly fda-finalizes-enforcement-policy- by as this crisis among America’s unauthorized-flavored-cartridge- youth grows and evolves, and based-e-cigarettes-appeal-children we will continue monitoring the on January 2nd 2020. Amid the situation and take further actions epidemic levels of youth use of as necessary.” e-cigarettes and the popularity of certain products among children, the U.S. Food and Drug

AACS State of the Industry Report 2019 15 Packaged Beverages

Performance – Packaged Beverages increased – Value growth was strongest Sales Performance its dollar share of the channel in Western Australia and from 21% to 21.5% in 2019 Queensland which were both $1.9b 39% above the channel average – Packaged Beverages delivered 4.4% $79m the highest dollar value growth in – An increase in Promotional 2018 Growth 2019 with $79m or 44% of total Pricing for Packaged Beverages 1.2% $21m channel growth helped drive a 9 cents price per litre increase in 2019, with the – The Packaged Beverages growth Margin Dollar biggest growth coming from the rate was 4.4% which was Share RTD Coffee +$1.08 and RTD 45.8% 21.5% signiﬁcantly up on 1.2% in 2018 Tea category +$0.84 – Category margin was slightly – Energy Drinks delivered the Source: AACS Retailer Submissions, IRI Market Edge, down by 1% on average, ASX Announcements strongest value growth for 2019 however still delivered an extra delivering an extra $25m dollars $18m or 25% of total channel of value versus 2018 margin growth – Soft Drinks added $20m of CMA Shopper Insights – Container deposit scheme was growth to the channel up 5.2% launched in Queensland for the versus 1.2% in 2018 Visit Frequency full 2019 year (launched Nov 18) Beverage Shoppers however, unit growth was at – After successive years of decline, 1.8% versus National average Water grew at 4.5% and added 2.4 of 1.5% $10m of value growth in 2019 times per week after declining 1.2% in 2018

Average spend with Beverages in basket $10.20 Shopper Insights per visit – The average spend of the – Visit frequency of Beverage Main Mission Beverage shopper has increased shoppers continues to increase – To buy a Drink with co-purchase of Food on the up to 2.4 times per week Go up 5 points although below channel average 53% by 14% – The Better for you trend Beverage Shoppers continues to grow penetration of – Beverage Shopper Main mission Functional and Health drinks up To buy a Drink increased from

Male Female 2 points, and 26% of all Cola 48% in 2018 to 53% in 2019 purchases being Sugar Free with Energy Drinks being the 66% 34% strongest at 58%

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019 16 AACS State of the Industry Report 2019 Packaged Beverages

– Total Flavoured Milk declined in 2019 by 0.2%. Dedicated Iced Beverage Penetration 2019 Coffee maintained growth of 1.2% while Flavoured Milk declined by 6% 24% Total Energy – Sports Drinks was the fastest 19% Total Cola growing of the established packaged Beverage categories 16% Iced Coffee growing at 7% in 2019 14% Total Water – Kombucha continues to grow the Tea segment although 11% Frozen Carbonated Beverages percentage growth has more 8% Flavoured Milk than halved in 2019, it still

contributed $3.5m in extra 7% Flavoured CSD sales value 6% Sports Drinks – Protein Drinks rebounded after

a 20.2% decline in 2018 to 3% Fruit Juices be back in solid growth, with new entrants to the market the 3% Functional/Health Drinks key driver 1% Liquid Breakfast/Protein Drinks – RTD provided all the growth in 2019 with Take Home 1% Iced Tea packs in decline versus 2018, dropping $400k Source: CMA Shopper Report 2019

Beverage Category Dollar Share Dollar Growth 2019 Dollar Growth 2018 Energy Drinks 28.2% 5.1% 0.8% Soft Drinks 22.0% 5.2% 2.1% Flavoured Milk 20.6% -0.2% 1.3% Water 12.7% 4.5% -3.5% Sports Drinks 8.0% 7.0% -0.5% Frozen Drinks 4.0% 2.8% 1.2% Juice 2.1% -3.1% 2.1% Tea Drinks 1.4% 20.4% 50.1% Protein Drinks 1.0% 24.9% -20.2%

Source: AACS Retailer Submissions, IRI Market Edge, Supplier Contributions

AACS State of the Industry Report 2019 17 Hot Dispensed Beverages

Performance – Hot Dispensed Beverages was – The category has added $113m Sales Performance the fastest growing category in value over the last 3 years or $302m again in 2019 at 18% and +60% in value since 2016 passed $300m in total value 18.0% $46m – Pricing increases to a minimum – Dollar contribution was the $1 along with the expansion 2018 Growth second highest adding $46m of that offer in the broader 14.6% $36m of value or 26% of total growth market has contributed to the strong growth Margin Dollar – Overall margin percentage Share increased from 54.8% to 61.6% 3.4% 61.6% while delivering an extra $38m in margin contribution Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements

Items Purchased with Hot Coffee

CMA Shopper Insights 25% Visit Frequency Hot Beverage Shoppers 15% 3.7 7% 6% times per week 3%

Average spend with Food Fuel Grocery & Snacks Tobacco on the Go General Hot Beverage in basket Merchandise

$6.90 Source: CMA Shopper Report 2019 per visit Shopper Insights Main Mission – Visit frequency is the highest – Coffee shoppers remain largely – To buy a Drink of all categories driven by Male with a highly planned 71% 38% of Hot Coffee shoppers purchase of 97% who visit daily – Average spend of the Shopper Hot Beverage Shoppers – Visit frequency continues purchasing in the category

to improve with an increase Male Female improved by $0.70 cents per from 3.5 times per week to transaction with improvements 3.7 in 2019 driven by purchases with Food 66% 34% on the Go

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

18 AACS State of the Industry Report 2019 Food on the Go

Performance – Food on the Go was the second – Food Service category continues fastest growing category to grow as a share of Food Sales Performance delivering $68m in extra sales on the Go as more retailers $659m or 38% of total channel growth broaden range especially around Snacking alternatives 11.5% $68m – Margin was slightly up to 50.4% while delivering an – Sandwiches and Wraps growth 2018 Growth extra $38m in margin in 2019 has matured after a strong two 9.9% $53m year period of growth 2017 – Dollar value share of the channel Margin Dollar 26%, 2018 17% and 7.5% has improved from 6.9% in Share in 2019 2018 to 7.5% in 2019 50.4% 7.5%

Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements Food on the Go Category Dollar Dollar Dollar Share Growth Growth 2019 2018 Hot Food 40.0% 9.7% 7.5% CMA Shopper Insights Sandwiches & Wraps 29.0% 7.5% 17.0% Visit Frequency Food on the Go Shoppers Fresh Cakes 21.0% 12.4% 6.1% Food Service 10.0% 11.4% 5.8% 2.7

Source: AACS Retailer Submissions, IRI Market Edge and Supplier Contribution times per week

Shopper Insights Average spend with Food on the Go in basket – Bakery Snacks grew 5 points – 92% of Food on the Go to have the highest penetration Shoppers planned to buy the $11.20 within Food on the Go items they purchased. Of those per visit 69% new exactly what they – Spend of the shopper was were going to purchase Main Mission up $0.40c on 2018 and visit – To buy a Meal frequency also increased from – Visit frequency of Food on 2.5 to 2.7 times a week the Go Shopper increased 34% from 2.5 to 2.7 times per – Beverages is the highest cross week, while basket value Food on the Go Shoppers category purchase with Food also increased $0.20 cents on the Go, driven by Hot Male Female Coffee which accounts for more than half of the Beverage purchases 67% 33%

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

AACS State of the Industry Report 2019 19 Take Home Food

Performance – Take Home Food growth slowed has been consistent since 2017 Sales Performance in 2019 to 3.5% down from despite the value growth 10.1% in 2018 and 18% in 2017 $149m – IBIS World report Industry 3.5% $5m – After adding $33m of growth revenue is expected to increase in the last two years, Take Home at an annualised 1.0% over the 2018 Growth Food value growth in 2019 ﬁve years through 2019-20, to 10.1% $13m was $5m $971.5 million

Margin Dollar – Margin percentage dropped from – There are currently 196 Share 29% in 2018 to 28.3% in 2019 businesses in Australia producing 28.3% 1.7% while dollar margin contribution Prepared Meals remained ﬂat at $42m, which Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements According to Technomic, consumer demands are intensifying. Consumers are becoming more health-oriented, activist, ethnic, and urban. This is key to understanding the Key Industry Changes direction of product development across the food industry, as these traits are linked to speciﬁc ideas about food, such as: The ACCC • Health-oriented – fresh, natural, and nutritious reported in September that the total chilled ready meals • Activist – transparent, local, and sustainable market continues its growth • Ethnic – bold, authentic, and adventurous and is worth approximately • Urban – gourmet, trendy, and convenient $130 million per year at retail level Shopper Insights Woolworths – The Ready Meals segment – According to a CMA Shopper invests $30 million in Marley growth for total market was Matters online survey June Spoon maker of Meal kits for 4.1% in 2019 and is forecast 2019, 14% of Convenience a 9% stake in June 2019 to be at 3.6% in 2020 slowing store shoppers are most likely The ACCC over the next 4 years as the to purchase food as a meal in September 2019 blocked market matures from Convenience Stores* B&J City Kitchens’ proposed – The average consumption of – The main reasons Shoppers acquisition of Jewel Fine Ready Meals grew to 13.4kg purchased meals from Foods who went into per person in 2019 and this Convenience Stores is Value Administration in April 2019. is expected to remain in slight for money, availability and ability Since then Coles have growth to 13.6kg over the to get in and out quickly* purchased Jewel Fine next 4 years Foods in March 2020.

Source: ACCC and ASX Company announcements Source: Statista (Ready Meals September 2019 Report) www.statista.com *Shopper Matters June 2019 20 AACS State of the Industry Report 2019 Confectionery

Performance – Confectionery growth of 2.1% – Nutritional Bars (now represented backed up 2018’s slight growth in Confectionery category) have Sales Performance and is the strongest result maintained the strongest growth $493m since 2016 rate at 14% although still represent under 4% of Category 2.1% $10m – Value in 2019 was up $10m value after delivering a ﬂat growth 2018 Growth in 2018 and declining $16m – Category Dollar share remained +0.1% Flat in 2017 consistent with 2018 at 5.6% Margin Dollar – Margin percentage was down – Chocolate Bars remains the Share 1% to 45.9% impacting margin strongest sub segment of 45.9% 5.6% contribution which fell by $1m Confectionery representing Source: AACS Retailer Submissions, IRI Market Edge, 30.6% of all Confectionery sales ASX Announcements

CMA Shopper Insights Dollar Dollar Dollar Growth Growth Visit Frequency Confectionery Category Share 2019 2018 Confectionery Shoppers Chocolate Confectionery 57.3% 1.1% 1.6% 1.9 Sugar Confectionery 26.9% 4.5% -2.4% times per week Gum & Mint 12.0% 1.6% -1.5% Nutritional Bars 3.8% 14.0% 17.0% Average Basket Spend with Confectionery in basket Source: AACS Retailer Submissions, IRI Market Edge, Supplier Contributions Note: Nutrional Bars is now included in the splits of Confectionery Category rather than Snackfoods previously $10.50 Shopper Insights per visit – Confectionery is a highly – Category Shopper swung from impulsive category with 20% a slight Male over index to an Main Mission – to buy Fuel of shoppers buying more items even split between Male and than they planned when buying Female, signiﬁcantly different to 29% Confectionery the overall channel demographics

– 32% of all Confectionery – Visit frequency of the Confectionery Shoppers purchased is bought on Confectionery Shopper was

promotion with an average down from 2.1 to 1.9 visits per Male Female spend of $11.30 week and sits 33% below channel average 50% 50%

Source:CMA Shopper Report 2019 Source: CMA Shopper Report 2019

AACS State of the Industry Report 2019 21 Snackfoods

Performance – Snackfoods growth of 4.1% was – NPD is an important part Sales Performance the strongest in the last 3 years of the category success and after a slight 0.7% increase represented 5.6% of total sales $202m in 2018 in 2019 4.1% $8m – Margin was down 1.7% to – Nuts, Jerky and Rice Snacks 2018 Growth 44.4% however, it still delivered delivered the highest percentage 0.7% Flat positive dollar margin growth of growth at 8.3% however of $1m Chips delivered the greatest Margin Dollar value contribution Share – Dollar share remained in line with 2018 at 2.3% – Popcorn continued for a second 44.4% 2.3% year to have double digit value – Category Basket value improved Source: AACS Retailer Submissions, IRI Market Edge, decline after signiﬁcant category ASX Announcements 9% on 2018 and had a swing growth in 2016 towards Female shoppers who now represent 49% of the category CMA Shopper Insights

Visit Frequency Snackfoods Shoppers Dollar Dollar Dollar Growth Growth 2.2 Snacking Category Share 2019 2018 times per week Chips 80.4% 5.0% 0.5%

Average spend with Nuts, Jerky & Rice Snacks 16.0% 8.9% 8.5% Snackfoods in the basket Popcorn 3.6% -26.0% -18.5% $10.80 Source: AACS Retailer Submissions, IRI Market Edge, Supplier Contributions Note: Nutrional Bars is now included in the splits of Confectionery Category rather than Snackfoods previously per visit

Main Mission Shopper Insights – to buy a Drink – Better for you Snacks has – The Snackfoods shopper is one 36% increased its share of of the youngest with an average Snackfoods from 45% to 51% age of 37 driven by a high share Snackfoods Shoppers of 18y - 25y olds. – Main mission for Snackfoods Male Female Shoppers is to Buy a Drink and – A swing towards Female now represents over a third of Shoppers in the category Shopper Missions for increasing 5% in 2019 51% 49% Snackfoods Shoppers versus 2018

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

22 AACS State of the Industry Report 2019 Ice Cream

Performance – Ice Cream had a strong 5.2% – NPD has been a key contributor Value increase the ﬁrst growth to the growth especially around Sales Performance year since 2015. This delivered licensed brands and extension an extra $8m in sales value of core high selling brands $162m 5.2% $8m – Margin dropped by 1.1% to – Home delivery has also helped 44.8% although margin dollar drive growth through the relevant 2018 Growth contribution still increased by platforms and NPD in Take -4.8% -$8m an extra $2m in 2019 Home Ice Cream has helped drive both in store and home Margin Dollar – Better For You has played a role Share delivery growth this year, with strong launches 44.8% 1.8% in Dairy Free which increased – A reduced reliance of Source: AACS Retailer Submissions, IRI Market Edge, category penetration promotional activity & higher ASX Announcements RRPs have also contributed to growth in the 2nd half of the year

CMA Shopper Insights Visit Frequency Dollar Dollar Ice Cream Shoppers Dollar Growth Growth Ice Cream Category Share 2019 2018 1.6 Ice Cream Singles 74.9% 4.0% -5.3% times per week Ice Cream Take Home 6.3% 19.1% -4.8% Average spend with Icy Poles Singles 6.0% 21.3% -0.1% Ice Cream in the basket Source: AACS Retailer Submissions, IRI Market Edge, Supplier Contributions $8.30 per visit

Shopper Insights Main Mission – To buy a Snack – Ice Cream shoppers are less – 25% of Ice Cream shoppers are likely to buy on promotion buying the Ice Cream for kids 34% than the average with only – Growth seems to have come 8% doing so Ice Cream Shoppers from more Males engaging in – In 2019 the Ice Cream shoppers the category versus 2018 main mission changed from increasing 9% although females Male Female being Fuel focused as in 2018, still over index versus channel to being a Snack mission average 54% 46%

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

AACS State of the Industry Report 2019 23 Milk Bread

Performance Performance Sales Performance Milk Sales Performance $146m – Milk grew at 1.4% in 2019 $40m 1.4% $2m after a decline of 1.4% in 2018 5.3% $2m and delivered ﬁrst year of growth 2018 Growth since 2016 2018 Growth -1.4% -$2m -3.9% -$2m – Category Margin percentage Margin Dollar declined from 35.3% to 29.8% Margin Dollar Share so delivered margin dropped Share 29.8% 1.7% $7m in 2019 23.7% 0.5%

Source: AACS Retailer Submissions, IRI Market Edge, – Full Cream Milk delivered the total Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements growth with Modiﬁed Milk declining ASX Announcements 4.9% in 2019

CMA Shopper Insights CMA Shopper Insights

Visit Frequency Bread Visit Frequency Milk Shoppers Bread Shoppers – Bread grew by 5.3% in 2019 and 2.2 delivered an extra $2m in sales 2.6 times per week – Margin percentage declined from times per week 27.9% to 23.7% and margin Average spend with Milk dropped to $9m down $1m Average spend with in basket Bread in the basket in value contribution

$9.60 – Visit frequency of Bread shoppers $11.70 per visit did jump from 2.3 in 2018 to per visit 2.6 times per week in 2019 Main Mission Main Mission – Top Up Shop – Top Up Shop

70% Shopper Insights 71%

Milk Shoppers – Both Bread and Milk had a Bread Shoppers signiﬁcant swing in mission Male Female Male Female to more Top Up Shopping as the main mission, 52% 48% up from 57% in 2018. 48% 52%

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

24 AACS State of the Industry Report 2019 General Grocery Merchandise

Performance Performance Sales Performance Grocery Sales Performance $212m – Grocery category grew by $2m $462m 1.0% $2m after being ﬂat in 2018 and 3.4% +$15m strong growth of 17.5% in 2017 2018 Growth 2018 Growth 0% Flat – Margin percentage decline from -3.7% -$7m 32.8% to 29.1% however Margin Dollar maintained the same overall Margin Dollar Share dollar margin contribution Share 29.1% 2.4% – Grocery Staples remain the 46.2% 5.3%

Source: AACS Retailer Submissions, IRI Market Edge, strongest category share Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements representing 40% while Medicinal ASX Announcements is the second highest at 25% of category sales CMA Shopper Insights CMA Shopper Insights Visit Frequency General Visit Frequency General Merchandise Shoppers Grocery Shoppers Merchandise 2.3 2.3 – General Merchandise was times per week times per week up 3.4% after a 3.7% decline in 2018, delivering $15m in Average spend with General Average spend with dollar value Merchandise in the basket Grocery items in the basket – Margin was up 0.9% which $15.80 $15.80 which helped deliver an extra per visit per visit $11m in dollar margin in 2019 Main Mission Main Mission Shopper Insights – Top Up Shop – Top Up Shop – While Main mission remained 40% 40% similar to that of 2018 for Grocery and General General Merchandise Grocery Shoppers Merchandise, more female Shoppers shoppers were engaging Male Female within the category, increasing Male Female from 47% in 2018, to 55% 45% 55% in 2019 45% 55%

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019

AACS State of the Industry Report 2019 25 Front of Store/Lifestyle

Performance Performance Performance

Sales Performance Sales Performance Sales Performance $244m $151m $106m 16.2% -$47m 17.0% -$31m 9.4% -$11m 2018 Growth 2018 Growth 2018 Growth -13.0% -$44m -14.0% -$30m -11.2% -$15m

Margin Dollar Margin Dollar Margin Dollar Share Share Share 11.3% 2.8% 5.4% 1.7% 11.8% 1.2%

Source: AACS Retailer Submissions, IRI Market Edge, Source: AACS Retailer Submissions, IRI Market Edge, Source: AACS Retailer Submissions, IRI Market Edge, ASX Announcements ASX Announcements ASX Announcements Communications Travel Tickets Printed Materials – Communications declined – Travel tickets had the greatest – Printed Materials declined by 16.2% for the fourth straight percentage decline in 2019 9.4% which was a drop of year of double digit decline -17% and $31m in dollar value $11m in value in 2019 dropping $47m in value – Margin was ﬂat versus 2018 at – Margin percentage declined – Margin percentage was slightly 5.4% however, delivered $2m from 14.9% to 11.8% in 2019 down to 11.3% from 12.2% in less in margin dollar contribution which meant delivered margin 2018 with delivered margin dropped $5m – dropping $8m in 2019 Travel tickets’ share of store sales has dropped from 2.1% – Overall Dollar share of the – Recharge cards continues to in 2018 to 1.7% in 2019 channel dropped from 1.4% have the greatest impact in 2018 to 1.2% in 2019 dropping 19.2%

Shopper Insights Shopper Insights

– Average spend of – The visit frequency of Printed communications shoppers Material Shoppers declined increased 20% in 2019 and 40% in 2019 although sits more than double the average spend increased by channel average although they 36% which shows signiﬁcant visit less frequently than the changes in behaviour in the average shopper category

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019 26 AACS State of the Industry Report 2019 Petrol/ Vehicle Care

Performance – According to the ACCC Petroleum – Petrol Theft dropped 1.8% Report Gross indicative retail however still costs $166.91 per Price Growth differences (GIRDs) for 2019 were fuel retail outlet per week 1.6% 12.6 cpl which was slightly above – 12.5cpl which is the average over Fuel Prices started the year Litres per transaction the last two years as they ﬁnished in 2018 at the lowest price point and gradually – The average fuel price for 2019 increased until June. There was 1.8% dropped 1.6% according to the some easing after June, yet the API Annual Retail Price Report, year ﬁnished at the highest point Petrol Theft which was well down on the which was the complete opposite 1.8% average 11.6% increase in 2018 to 2018 $166.91 per week – Average litres per transaction increased 1.8% which improved Total Litres after the 2.6% drop in 2018 3.0%

Source: AACS Retailer Contribution, AIP Annual Retail Price Daily average prices (on a rolling seven-day average basis) Data 2019, ACCC Report on the Australian petroleum market cpl CMA Shopper Insights 170 Fuel Shopper Visit Frequency

160 1.7 per week 150

140 Average spend on items (exc. 130 Fuel) when Fuel is purchased 120 $8.20 110 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec per visit 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019

Source: ACCC calculations based on FUELtrac data. Main Mission – To buy Fuel

Shopper Insights 85%

– Despite the slightly lower prices, – While Fuel Mission still remains Fuel Shoppers shop basket value when fuel the number one reason Fuel

was purchased dropped by shoppers come to store it Male Female 3.5% while visit frequency did decline by 6% to 85%, of the fuel shopper remained highlighting a greater interaction stable at 1.7 visits per week by Fuel shoppers with Shop 60% 40%

Source: CMA Shopper Report 2019 Source: CMA Shopper Report 2019 AACS State of the Industry Report 2019 27 Petrol/ Vehicle Care

Performance

State Fuel Prices Summary Car Accessories Sales Performance Nationally Fuel Prices dropped – Declined 3.3% in 2019 or $5m $146m 1.6% to an average of 142.0 in dollar sales value versus 2018 per litre versus 144.3 in 2018 which drove dollar share down 3.3% -5m 0.1% to 1.7% in 2019 2018 Growth South Australia was the -5.1% -$8m only state where fuel prices – Overall percentage margin was went up during 2019 up down 0.5% while overall margin Margin Dollar 1.1% and 0.7 cents above dollar contribution dropped $3m Share the national average – While value was down 3.3% unit 43.9% 1.7% NSW and Victoria had sales were up 19% driven by Air Source: AACS Retailer Submissions, IRI Market Edge, the lowest average price for Freshener Trees with lower value ASX Announcements the year at 141.1 per litre transaction of between $3-$4 or 0.9 cents below the – One Shot Windscreen washer – Fuel cans units were down 2% National average concentrate grew by over however, value was down 3.2% Western Australia had the 900% in 2019 due to cheaper imported product greatest decline versus 2018 being sold -2.1% and ended up 1.4% slightly below the national average

2019 petrol price Gross indicative QLD retail differences -1.7% 142.8 NATIONAL

-1.6% 142.0 NSW WA -1.7% 141.1 -2.1% 141.8

SA VIC

+1.1% 142.7 -1.6% 141.1

Source: AIP Annual Retail Price Data 2019 Report - Average Petrol Retail Price Published 8th January 2020 28 AACS State of the Industry Report 2019 Petrol/ Vehicle Care

ACCC Financial performance of the Australian downstream petroleum industry 2002 - 2018 (Released April 2020)

Retail Sales Performance Value Net Margin 25b litres (approx) down 3% $35b (approx) 2.2 cents per litre

Key Takeouts

In 2017–18 around 63 per cent Net profits on petrol products profits over the period 2009–10 of total net profits in the retail (RULP, PULP and EBP) have to 2013–14, in 2017–18: sector ($390 million) were increased in most years since – generated from fuel sales, which 2008–09 and in 2017–18 they PULP 95 net profits were equates to average net profits of were the highest on record ($333 around 50 per cent higher, 2.2 cents per litre (cpl) across all million, or 3.0 cpl). In cents per at around $82 million fuels. This compares with average litre terms, net profits on petrol – PULP 98 net profits were net profits of 1.5 cpl across all products in 2017–18 were almost almost double, at around fuels in the period 2008–09 to double the average in the period $117 million. 2013–14. Net profits on petrol 2008–09 to 2013–14 (1.6 cpl). products, (i.e. RULP, PULP and Net profits of PULP 95 and EBP), were $333 million in In 2017–18 net profits on PULP PULP 98 contributed around 2017–18, which made up over (both PULP 95 and PULP 98) 60 per cent of profits on all 85 per cent of net profits on all were $199 million, significantly petrol products, while only fuels. Net profits on diesel were larger than those on other petrol representing around a third $52 million in 2017–18. products (RULP and EBP). of petrol volumes sold. Compared with average net

RetailRetail secsectortor net net p rprooﬁtsﬁts per per lit rlitree on onRUL RULP,P, PULP PULP 95, PULP 95, PULP 98 and 98 EBP: and 2009 EBP:–10 2009–10 to 2017– 18to 2017–18

RULP PULP 95 PULP 98 EBP cpl (real terms)

Retail sector sales volumes for RULP, PULP 95, PULP 98 and EBP: 2005–06 to 2017–18

12 RULP

PULP (total) 10 PULP 95

8 PULP 98 EBP 6 billion litres

0 Petrol/

VehicleRetail sector net proﬁts Care per litre on RULP, PULP 95, PULP 98 and EBP: 2009–10 to 2017–18

RULP PULP 95 PULP 98 EBP

ACCC Financial performance of the Australian

downstreamcpl (real terms) petroleum industry 2002 - 2018 (Released April 2020) (continued)

Over time, PULP 95 and PULP average price differential between international benchmarks and 98 have become more expensive RULP and PULP 98 similarly potentially changes in the quality relative to the retail price of RULP. increased from 16.5 cpl to 20.4 of PULP products. However, the Between 2009–10 and 2017–18, cpl—an increase of 3.9 cpl. increases in PULP prices in the annual average price recent years may be translating, differential between RULP and Higher average prices for PULP, at least in part, to higher profits PULP 95 increased from 10.9 cpl relative to RULP, can be on PULP. to 13.0 cpl—an increase of 2.1 influenced by a variety of factors, cpl (in real terms). The annual including adjustments to specific

Retail sector sales volumes for RULP, PULP 95, PULP 98 and EBP: 2005–06 to 2017–18 Retail sector sales volumes for RULP, PULP 95, PULP 98 and EBP: 2005–06 to 2017–18

12 RULP

PULP (total) 10 PULP 95

8 PULP 98 EBP 6 billion litres

Retail sales volumes of PULP between 2009–10 and In contrast, sales volumes of (particularly PULP 98) have 2012–13, with PULP 95 RULP have declined. Between increased over time, contributing volumes subsequently trending 2009–10 and 2017–18 RULP to the total net proﬁts generated slightly downwards. sales volumes decreased from on PULP: around 66 per cent of petrol sales – PULP 98 sales volumes, to around 55 per cent. – PULP 95 sales volumes however, generally increased

increased from around 9 per throughout the period, from Source: ACCC calculations based on data obtained from monitored cent of petrol sales in 2009–10 around 10 per cent of petrol companies. The 11 companies from which the ACCC collects ﬁnancial data are: to around 13 per cent of petrol sales in 2009–10 to around - reﬁner–wholesalers—BP, Caltex, Mobil and Viva Energy sales in 2017–18. The majority 18 per cent in 2017–18. - independent wholesalers—Liberty, Puma Energy and United - supermarket chains—Coles Express and Woolworths of this increase occurred - large independent retailers—7-Eleven and On The Run

30 AACS State of the Industry Report 2019 AACS Awards

PULSE The AACS Awards held in August 2019 were based on the CONVENIENCE Winter 2019 Programme with the winners being:

Convenience Pulse® is Award Winner conducted twice a year Retailer of the year BP benchmarking 16 Retailers Supplier of the year PepsiCo and 50 Suppliers across Beverages Frucor Suntory 5 Performance Areas: Confectionery Mondelez – Business Practices Distributors The Distributors – Personnel Food on the Go Patties Grocery & GM Paciﬁc Optics – Category Management Snacking PepsiCo – Execution/Marketing Telecommunications Optus – Supply Chain Tobacco Philip Morris

Key Insights

Retailer Overall was only up by 1 point over the Ensuring that you have a Overall the Retailer average same period. strong Business planning process continued to improve with scores and are clear in the company increasing 8 points versus the Business Practices Focus strategy and plans, while Winter 18 results. 4 of the 5 On review of previous results delivering against each others Performance Areas showed it was established that those initiatives, can deliver a strong consistent growth however, Retailers and Suppliers who sales outcome for both Supply Chain declined 1 point had strong Business Practices, businesses. on average. scored well overall. Good Business Practices: It all starts from strong Supplier Overall – Refer back to your business collaboration and a trust in the The Supplier overall result was plans regularly process between both parties. up 6 points with Category Being Proactive in negotiations – Set benchmarks for success Management up 11 points is a very important part of the – Monitor performance highlighting a greater Objective process, as poor standards can approach towards Category – Adapt to change often get in the way of productive Management. Personnel however – Lead by example discussions.

AACS State of the Industry Report 2019 31 Trends

Health Food on the Go Cashless Technology

As per 2018 this will continue This remains the second fastest Continues to grow globally to make to grow as customers look growing category in the channel the checkout experience seamless for more Fresh, Plant based and continues to grow basket however has come up against products, Better for you Snacks penetration each year. This is based many hurdles in 2019. Regulatory & Beverages and Protein products. on a more credible consistent concerns against disadvantaging One of the big drivers is the short offer across the network although those limited by the ﬁnancial ingredient list on products and also some retailers have a greater system or technological devices, the lower sugar and fat content. representation than others. has seen some states ban Retailers are extending ranges in As shoppers eat more on the cashless stores in the USA. The these areas both in Australia and go and are looking for more technology is expensive and has Globally and while it still represents snacking alternatives. not taken off at the rate predicted a low proportion of sales, it can’t in 2018. be ignored.

Sustainability Supply Chain Electric Vehicles

Is a must for the future for both This includes both delivery to and We are seeing fuel volume Retailers and Suppliers. We have delivery from Convenience Stores. continue to decline mainly through seen some examples of this We saw in 2019 delivery through more fuel efﬁcient cars and a already implemented in Australia Uber Eats, Deliveroo etc. extend small uptake of Electric Vehicles. and Globally however, we still have even further in the retail A Boston Consulting Study a long way to go. Governments landscape. Home delivery through published in 2019 found at are being very active on this online ordering continues to grow least a quarter of Petrol Stations subject and will continue to focus as highlighted by Amazon up by worldwide risked closure by 2035 on this, especially with the weather $270m in 2019. We have also without signiﬁcant changes to conditions and impacts of the last seen the extension of Woolworths their business models. Time will 12 months. tell on this however, with Britain into the wholesaling space in 2019. banning new Petrol/Diesel cars by 2035 it may force the change to happen.

32 AACS State of the Industry Report 2019 Corporate information

Jeff Rogut FIML, MAICD, FCLP Chief Executive Ofﬁcer Australasian Association of Convenience Stores Limited

ACN 156 638 023

Mobile 0467 873 789

Email [email protected]

Website www.aacs.org.au

Mail PO Box 3037, Mornington VIC 3931 Australia

AACS State of the Industry Report 2019 33