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Convenience Stores - UK - April 2018

“Growth in the convenience sector accelerated for the third consecutive year, in part driven by inflation. However, it was the structural changes, both through acquisitions and failures, which made it a defining year for the sector. The increased power of the multiples in the market is likely to be both beneficial to those who find themselves now supplied by some of the biggest names in the grocery sector, but equally challenging to those outside of these new organisations.”

– Nick Carroll, Senior Retail Analyst

This report examines the following issues:

  • Consolidation-on-consolidation: the future of supply and own-brand in c-stores 
  • Healthy eating in c-stores: From food-to-go, to top-ups do retailers need to up their health offering?
  • Deliveroo and Co-op: Is this the solution to shatter the glass ceiling to online for the sector?

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Rising inflation a key trend of 2017
              • Figure 1: Average weekly earnings growth vs CPIH inflation, January 2014-February 2018
            • Growth in the convenience sector accelerates for the third consecutive year
              • Figure 2: Convenience store market size, including VAT, 2012-22
            • The convenience sector accounts for around a quarter of all grocery sales
              • Figure 3: Estimated breakdown of the grocery sector (inc-VAT), 2012-17
            • Companies and brands
              • Tesco the largest player, a position only consolidated by the merger with Booker
                • Figure 4: Estimated C-store market shares (ex-vat), 2016 and 2017
              • Multiples give far more space to fresh-food
                • Figure 5: Convenience stores: space allocation estimates, April 2018
              • The consumer
                • One in three regularly shops for groceries in c-stores
                  • Figure 6: Where consumers typically shop for groceries, February 2018
                • Usage skews toward the younger generations
                  • Figure 7: Convenience store shoppers, by age and gender, February 2018
                • Most visit at least once a week
                  • Figure 8: Frequency of convenience usage, February 2018
                • Most visit to top-up shop
                  • Figure 9: Reasons for using convenience stores, February 2018
                • Tesco Express the most popular destination
                  • Figure 10: Convenience retailers regularly used and used most often, February 2018
                • C-store users want more hot lunch options on the menu
                  • Figure 11: What consumers would like to see more of in the convenience stores they use most, February 2018
                • Own brand plays an important role in c-stores
                  • Figure 12: Convenience users’ attitudes towards own-brand in c-stores, February 2018
                • Just under half agree it is difficult to eat healthily when frequently shopping in c-stores
                  • Figure 13: Attitudes to healthy eating and food-to-go in convenience stores, February 2018
                • What we think
                • Issues and Insights

                  • Consolidation-on-consolidation: the future of supply and own-brand in c-stores
                    • The facts
                      • The implications
                        • Healthy eating in c-stores: From food-to-go, to top-ups do retailers need to up their health offering?
                          • The facts
                            • The implications
                              • Deliveroo and Co-op: Is this the solution to shatter the glass ceiling to online for the sector?
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Rising inflation a key trend of 2017
                                      • Levels of renting remain high with smaller households set to grow
                                        • Growth in the convenience sector accelerates for the third consecutive year
                                          • The convenience sector accounts for around a quarter of all grocery sales
                                          • Market Drivers

                                            • Real incomes under pressure, but growing again
                                              • Figure 14: Average weekly earnings growth vs CPIH inflation, January 2014-February 2018
                                            • High inflation in core categories
                                              • Figure 15: Annual percentage change in the price of food and non-alcoholic beverages and alcoholic beverages and tobacco, January 2016-February 2018
                                            • Food retailers continue to underperform
                                              • Figure 16: Annual percentage change in the value of retail sales at current prices, non-seasonally adjusted, January 2016-February 2018
                                            • Ongoing changes in the housing market
                                              • Figure 17: UK households, by tenure, 2012-16
                                            • More people living in smaller households
                                              • Figure 18: UK Households, by size, 2012-22
                                              • Figure 19: Breakdown of UK Households, by size, 2012-22
                                          • Market Size and Forecast

                                            • C-store market estimated to have grown by 2.7% in 2017
                                              • Figure 20: Convenience store market size, including VAT, 2012-22
                                              • Figure 21: Total convenience store market size (including VAT), at current and constant (2017) prices, 2012-22
                                            • How the grocery sector breaks down
                                                • Figure 22: Estimated breakdown of the grocery sector (inc-VAT), 2012-17
                                              • Forecast methodology
                                              • The Consumer – What You Need to Know

                                                • One in three regularly shops for groceries in c-stores
                                                  • Usage skews toward the younger generations
                                                    • Most visit to top-up shop
                                                      • Tesco Express the most popular destination
                                                        • C-store users want more hot lunch options on the menu
                                                          • Own-brand plays an important role in c-stores
                                                            • Just under half agree it is difficult to eat healthily when frequently shopping in c-stores
                                                            • How They Shop for Groceries

                                                              • More than one in three consumers uses convenience stores
                                                                • Figure 23: Where consumers typically shop for groceries, February 2018
                                                              • Almost a third are loyal to one type of store
                                                                • Figure 24: Repertoire of where consumers typically shop for groceries, February 2018
                                                              • More than half shop multiple times a week
                                                                • Figure 25: Frequency of convenience usage, February 2018
                                                              • Similar usage against last year
                                                                • Figure 26: Usage of convenience stores in the last year, February 2018
                                                            • Demographics of Convenience Store Users

                                                              • Men more likely to use convenience stores
                                                                • Figure 27: Convenience store shoppers, by age and gender, February 2018
                                                              • Usage linked to affluence
                                                                • Figure 28: Convenience store shoppers, by socio-economic status, February 2018
                                                              • Proximity to convenience stores also influences usage
                                                                • Figure 29: Convenience store shoppers, by location, February 2018
                                                              • Young people shop more frequently…
                                                                • Figure 30: Frequency of convenience store use, by age, February 2018
                                                              • …and have increased convenience store usage in the last year
                                                                • Figure 31: Usage of convenience stores in the last year, by age, February 2018
                                                            • Why They Use Convenience Stores

                                                              • Most see convenience stores as an opportunity to top-up
                                                                • Figure 32: Reasons for using convenience stores, February 2018
                                                              • Young people more likely to do main shop
                                                                • Figure 33: Reasons for using convenience stores, by age, February 2018
                                                              • More than two thirds have multiple reasons for usage
                                                                • Figure 34: Repertoire of reasons for using convenience stores, February 2018
                                                            • Convenience Retailers Used

                                                              • Over half of c-store users regularly visit Tesco Express
                                                                • Figure 35: Convenience retailers regularly used and used most often, February 2018
                                                                • Figure 36: Repertoire of convenience stores regularly used, February 2018
                                                              • Over half of Tesco Express shoppers use it most often
                                                                • Figure 37: Convenience retailers used regularly, by those used most often, February 2018
                                                              • Traditional categories a driver for symbols
                                                                • Figure 38: Leading convenience retailers regularly used, by age, February 2018
                                                              • M&S under-indexes with 16-34s compared to rivals
                                                                • Figure 39: Leading convenience retailers regularly used, by age, February 2018
                                                            • What They Would Like to See More of In-Store

                                                              • Consumer want more lunch-to-go options
                                                                • Figure 40: What consumers would like to see more of in the convenience stores they use most, February 2018
                                                              • Local produce would have a broad appeal
                                                                • Figure 41: What consumers would like to see more of in the convenience stores they use most, February 2018
                                                              • M&S could offer more premium food-to-go products
                                                                  • Figure 42: What consumers would like to see more of in the convenience stores they use most, by retailer, February 2018
                                                              • Own-brand in Convenience Stores

                                                                  • Three quarters typically buy own-brand when visiting c-stores
                                                                    • Figure 43: Purchasing of own-brand products, February 2018
                                                                  • 25-44s most likely to buy own-brand
                                                                    • Figure 44: Purchasing of own-brand products, by age, February 2018
                                                                  • Most see own-brand as a good way to save, and high quality own-brand could drive patronage
                                                                      • Figure 45: Convenience users attitudes towards own-brand in c-stores, February 2018
                                                                    • Premiumisation of own-brand
                                                                      • Figure 46: Grocery Tracker: Purchasing of premium own-brand, March 2016-December 2018
                                                                  • Attitudes Towards Healthy Eating and Food-to-Go in Convenience Stores

                                                                    • Most agree healthy eating options in c-stores are expensive
                                                                        • Figure 47: Attitudes to healthy eating options and food-to-go in convenience stores, February 2018
                                                                      • 16-34s most likely to feel it is hard to eat healthily when shopping in c-stores
                                                                        • Figure 48: Attitudes to healthy eating options and food-to-go in convenience stores, by age, February 2018
                                                                      • Most see range as an issue for more frequent use of food-to-go
                                                                        • Figure 49: Attitudes to food-to-go in convenience stores, February 2018
                                                                      • Limitations of food-to-go felt more by symbol group shoppers
                                                                        • Figure 50: Attitudes towards food-to-go in convenience stores, by convenience retailer used, February 2018
                                                                    • Leading Retailers – What You Need to Know

                                                                      • Tesco the largest player, a position only consolidated by the merger with Booker
                                                                        • The Co-op in line to make its own significant acquisition
                                                                          • Further consolidation was seen throughout the market
                                                                            • M&S winning in the experience stakes but Tesco Express has ubiquity
                                                                              • Multiples give far more space to fresh-food
                                                                              • Competitive Strategies

                                                                                  • Multiples
                                                                                    • Figure 51: Leading multiples, key metrics, 2017
                                                                                  • Co-operatives
                                                                                    • Figure 52: Co-operative food, members by estimated stores and sales, 2017/18
                                                                                  • Symbol groups
                                                                                    • Figure 53: Top 20 convenience store retailers total store numbers by type of operation, 2014-17
                                                                                  • Petrol forecourts
                                                                                      • Figure 54: Total number of, and breakdown in ownership of UK forecourts, 2015-17
                                                                                  • Leading Retailers – Key Metrics

                                                                                      • Sales: Co-op had a positive 2017 despite store consolidation
                                                                                        • Figure 55: Leading c-stores, sales, 2013/14-2017/18
                                                                                      • Stores: Tesco & Booker provide a significant store presence
                                                                                          • Figure 56: Leading c-stores, outlets, 2013/14-2017/18
                                                                                        • Sales-per-outlet: multiples see a far greater return per unit
                                                                                          • Figure 57: Leading c-stores, sales per outlet, 2013/14 - 2017/18
                                                                                      • Market Shares

                                                                                        • Co-op the largest player in 2017, but Tesco and Booker will become market leader
                                                                                          • Figure 58: Estimated C-store market shares (ex-vat), 2016 and 2017
                                                                                          • Figure 59: Estimated C-store market shares (ex-vat), 2013/14-17/18
                                                                                      • Brand Research

                                                                                          • What you need to know
                                                                                            • Retailer map
                                                                                              • Figure 60: Attitudes towards and usage of selected retailers, April 2018
                                                                                            • Key retailer metrics
                                                                                              • Figure 61: Key metrics for selected retailers, April 2018
                                                                                            • Retailer attitudes: M&S seen to be worth paying more for
                                                                                              • Figure 62: Attitudes, by retailer, April 2018
                                                                                            • Retailer personality: Tesco Express has the edge in accessibility
                                                                                              • Figure 63: Retailer personality – macro image, April 2018
                                                                                            • Spar seen as basic by many
                                                                                              • Figure 64: Retailer personality – micro image, April 2018
                                                                                            • Retailer analysis
                                                                                              • M&S Simply Food: Seen as expensive, but recognised for its quality
                                                                                                • Figure 65: User profile of M&S Simply Food, April 2018
                                                                                              • Tesco Express: Broad usage driven by accessibility
                                                                                                • Figure 66: User profile of Tesco Express, April 2018
                                                                                              • Sainsbury’s Local: High awareness and usage but lacking a distinctive trait
                                                                                                • Figure 67: User profile of Sainsbury’s Local, April 2018
                                                                                              • The Co-operative: history weighs heavy but the message is connecting with younger consumers
                                                                                                • Figure 68: User profile of The Co-operative, April 2018
                                                                                              • Spar: Lagging behind rivals
                                                                                                • Figure 69: User profile of Spar, April 2018
                                                                                            • Space Allocation Summary

                                                                                                • Space allocation overview
                                                                                                  • Figure 70: Convenience stores: space allocation estimates, April 2018
                                                                                                • Fresh food is a key footfall driver for convenience stores
                                                                                                  • Figure 71: Convenience stores: Fresh food and other food mix, by percentage share of total in-store space allocated to food, April 2018
                                                                                                • Food-to-go and RTE meal options are popular reasons to visit a convenience store
                                                                                                  • Figure 72: Budgens of Islington, Cook freezers, April 2018
                                                                                                • Detailed space allocation estimates
                                                                                                  • Figure 73: Convenience stores: Detailed space allocation estimates, April 2018
                                                                                                  • Figure 74: Convenience stores: Detailed space allocation estimates, April 2018
                                                                                              • Retail Product Mix

                                                                                                    • Figure 75: Leading convenience stores, estimated proportion of sales by broad product category, 2017
                                                                                                    • Figure 76: Leading convenience stores, estimated sales by broad product category, 2017
                                                                                                • Innovation and Launch Activity

                                                                                                  • On-demand convenience store that brings groceries to your door step
                                                                                                    • 24/7 fully automated convenience stores
                                                                                                      • Carrefour trialling new convenience store format for immediate consumption
                                                                                                        • Embracing digital currency
                                                                                                          • Co-op speeding up the checkout process with ‘shop, scan and go’ app
                                                                                                            • Hard Rock-branded c-store
                                                                                                              • 7-Eleven redefining convenience with expanded delivery options
                                                                                                                • Connecting and engaging with today’s digital-savvy consumers
                                                                                                                • Advertising and Marketing Activity

                                                                                                                  • Supermarket and c-store advertising spend down 8% year on year in 2017
                                                                                                                    • Figure 77: Recorded above-the-line, online display and direct mail total advertising expenditure by UK supermarket and convenience store operators, 2013-17
                                                                                                                  • Convenience store campaigns
                                                                                                                    • Figure 78: Leading UK supermarket and convenience store operators: Recorded above-the-line, online display and direct mail total advertising expenditure, 2013-17
                                                                                                                  • TV attracts the lion’s share of advertising expenditure
                                                                                                                    • Figure 79: Recorded above-the-line, online display and direct mail total advertising expenditure by UK supermarket and convenience store operators, by media type, 2017
                                                                                                                  • Nielsen Ad Intel coverage
                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                    • Data sources
                                                                                                                      • Financial definitions
                                                                                                                        • Trade definitions
                                                                                                                          • Sales per store, sales per square metre
                                                                                                                            • Exchange rates
                                                                                                                              • Abbreviations
                                                                                                                                • Consumer research methodology
                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                  • Forecast methodology

                                                                                                                                  Convenience Stores - UK - April 2018

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