2024 was a mixed year for convenience retail. The first half of the year saw declines in the average fuel price (-7.8%), inside sales (-1%), total transactions (-3.4%) and total store gross profit (-1.8%), according to data from NACS Research.

And in the third quarter of 2024, consumer research data firm Circana stated that dollar sales at retail were down about 2.4% year over year, foodservice dollars were flat, underlying customer traffic was down 4%, customer trips were down a little more than 6% and fuel gallons were down 3.5%.

“There are just some macro headwinds that retailers are facing,” said David Portalatin, senior vice president and industry advisor, food and foodservice, at Circana.

The good news is there are plenty of opportunities for retailers in the year ahead.

Portalatin shared an insight about foodservice, but it can apply more broadly: “There are a lot of ways you can differentiate the assortment to lean into where consumers are going, and that’s the pathway to overcome these macro headwinds that otherwise are weighing things down right now.”

From leveraging AI to catering to the price-conscious consumer and more, these are trends that are front and center heading into what is sure to be a dynamic 2025.

AI Has Arrived

AI is the fastest-growing technology humans have ever seen—faster in its growth than the Internet, computers, iPhones or tablets ever were, said Brian Gray, managing director of Accenture, during an Education Session at the 2024 NACS Show. According to a study he cited, 39% of U.S. adults are now using generative AI, 24% of workers are now starting to use it weekly, and about one in 10 people are now using it daily.

“But we are still just scratching the surface of AI,” said Gray, noting that “a lot of retailers are dragging their feet when it comes to taking advantage of AI, but there are real use cases now that could immediately start driving value.”

With all the buzz, speculation and debate about what AI is—and what it isn’t—it’s imperative that retailers understand how to leverage AI for their business, said Sanjeev Satturu, chief information officer for Casey’s General Stores, during the presentation. By finding practical use cases for the technology, retailers can reduce labor burdens, increase efficiency, save time and enhance their business model.

“We’re seeing AI-powered inventory management solutions that provide real-time insights into stock levels, product placement and inventory trends, enhancing operational efficiency and reducing waste,” said Satturu, also noting that there is a lot of opportunity to use AI for fuel pricing. “And AI video analytics can enhance security by analyzing video feeds to detect unusual behavior, unauthorized access or potential theft incidents.”

In addition to using AI security camera analysis to increase safety, Jacksons Food Stores has implemented AI to track metrics that would have previously been difficult to measure.

The company works with a supplier to track activity in the forecourt, including the number of cars that came through, time spent at the pump and active time the fuel dispenser was in use. That data can be leveraged for things like fraud detection and strategies to increase customer conversion rates, said Robert Hampton, VP of technology services and innovation at Jacksons Food Stores, during the session “Use Cases for AI Inside of the Store” at the NACS Show.

“Say you have 1,000 vehicles one day and observe 300 people walking inside—you know you have a 30% conversion rate. You could increase that by doing A/B testing, where you put two different types of promos on the pump and watch to see which one gets more people into the store,” said Hampton.

He said Jacksons has also used camera analysis inside the store at food prep areas, roller grills, and hot boxes to track how much food is present, how long food has been out, and if there is theft or food waste. AI can then send alerts to staff to add more items or turn over food products after a certain time.

Jacksons also has a fleet of a few hundred truck drivers and uses AI cameras installed in trucks to increase safety. For example, the cameras can identify street signs and speed limit signs and alert a driver to slow down. They can also score drivers based on their driving safety and adherence to traffic laws.

Voice analytics have also helped Cubby’s Inc., which operates 42 retail locations in Nebraska, Iowa and South Dakota, increase its operational efficiency across stores. The retailer works with a supplier that places microphones at the register and records conversations between customers and employees. AI then analyzes those conversations.

“The dashboard breaks conversations down by keywords and can show us that there are 10 mentions of a problem with a fuel pump at a specific store, for example, or that the card reader is down,” said De Lone Wilson, president of Cubby’s, while presenting with Hampton. “Our maintenance techs can see that and open work orders to address it.”

Jerome Rose, GM of U.S. retail and consumer goods at Microsoft, said that one of the most underrated elements of AI is the ability to save someone even just 15-20 minutes per day on menial tasks.

“Think about what that gain looks like across your whole employee base. People can then put time and energy into the things they want—in this case, spending time with customers,” he said.

Rose cautioned that in order to effectively use AI, your data has to be ready—it has to be clean, organized and well structured. “When you’re leveraging generative AI, you’ve got to be able to point it to the right information.”

And of course, privacy is paramount. This means you need to protect both your organization’s data and the personal information of your customers.

“AI is a wide-open thing, and as soon as you’re connected to the Internet, you put yourself at risk of being under a cyberattack,” said Satturu.

“Responsible AI incorporates all of these elements: It needs to be secure, it needs to be unbiased and it needs to be built based on data that has some integrity to it, and be the right data,” said Rose.

A Frenzy of Flavor Trends and Foodservice Opportunities

A walk through the NACS Show Expo in October left no attendee hungry and no question about some of the trends CPG manufacturers are zeroing in on for the year ahead, including multipurpose items that pack a punch, better-for-you products and functional beverages, and a handful of emerging flavor profiles.

John Fieldly, CEO of energy drink manufacturer Celsius Holdings, said the energy drink category is seeing a significant shift toward zero-sugar drinks. “It’s been a major growth driver—90% of the category growth is coming from within sugar free. Consumers want better for you, but they don’t want to sacrifice flavor or taste. That’s a trend that’s going to continue to grow as health and wellness trends continue to scale,” Fieldly said.

And consumers are looking for those better-for-you products to have beneficial and functional attributes—energy drinks with vitamins and clean ingredients, high-protein snacks and drinks such as protein water, and water packed with extra electrolytes for hydration, for example.

“Beverage consumption—both in home and away from home—is up year over year, and part of that is because we are approaching beverages for a variety of needs,” said Portalatin.

And that concept applies to snack foods as well, with consumers seeking snacks that give them energy and help them stay alert throughout the day, he added.

“Protein is another big platform consumers are looking for right now and they want snack foods that are a good source of protein. Generation X, in particular, will look for meat snacks when they want to add protein to their diet,” said Portalatin. “Meat snacks are already an important category at convenience retail, so are we looking at the overall snack assortment and at various value tiers of what we’re offering the consumer in that category? For example, when consumers want to add protein, they’re oftentimes looking for yogurt—a convenient, portable, handheld item. Are you including those kinds of options across the store?” he asked.

“We know that 71% of consumers are focused on protein consumption in their diet, ranking it as the No. 1 nutritional element consumers are looking to increase,” said John Frost, Chobani chief customer officer. “They are turning to fresh, portable, nutrient-dense snack products like yogurt and milk because they are affordable sources of protein with lower cost per gram compared to traditional alternatives.”

Providing the right assortment of snack foods that meet these demands can also help retailers pick up lost sales from the lunch daypart, as consumers blur eating occasion boundaries, times and the types of foods they’re buying to satisfy their hunger in the afternoon, Portalatin added. Retailers should focus on providing flexibility around what Portalatin calls the three P’s: “portability, portion sizes and price points.”

“As we have more fluid lifestyles and rhythms of the day, there’s an opportunity to rethink how people are composing eating occasions and what kinds of flexibility across the assortment retailers can give consumers that empower them to meet those needs,” he said. “Convenience stores have a unique opportunity to provide flexible, more fluid solutions that could include packaged goods, prepared foods and sometimes the two in combination with one another.”

Serving the Value Customer

Heading into 2025, a majority of consumers are concerned about their financial outlook. According to Michael Headly, director at Alix Partners LLP, the amount of people who are very or extremely concerned about their financial health increased nearly 10% year over year, from 28% of consumers in September 2023 to 37% of consumers in August 2024.

And the future sentiment is even worse, he noted during his NACS Show Education Session “How Inflation Is Changing Consumer Shopping Habits.” The number of people who think the financial outlook for their household will get better in the remainder of the year dropped 10% from March 2024 (48%) to August 2024 (38%).

Some tried-and-true consumer response to financial challenges is changing, Headly stated. “We’re not seeing the usual trade down from restaurants to fast food, fast food to convenience or take away more.” Instead, “consumers are planning to reduce their occasions.”

And when they do make purchases, they’re looking to get the most bang for their buck.

“Price and value are very important, but it’s no longer about opening price point. It’s other elements of the value equation,” said Portalatin. “It’s about getting those craveable items that I can’t make for myself and treat-type of rewards that I can get at an affordable price point. Therefore, it doesn’t have to be the least expensive option—it has to be the option that best satisfies my needs without breaking the bank.”

And with that, there is opportunity to differentiate yourself as an operator, Headly said. “This is an opportunity to be better than your competitor, and secure that customer for their potentially reduced occasions, but demand the price for the services that you are consistently delivering and that they value you for.”

It also creates an opportunity to lean into premiumization, Portalatin added.

“When consumers are under pressure financially, the entire value equation comes more into focus and they sort of pick and choose [what to buy]. They say, ‘We’re not going [out] as often, so when we do, we might want to get what’s slightly better,’” he said. “So there’s an opportunity to differentiate, or have items in the assortment that are differentiated around some more premium attributes.”

Lorelai Bergin, vice president of North American retail at NIQ, noted similar behavior in consumers, stating that customers are shifting from cautious to intentional spending. “[Customers] are going to focus primarily on what gives them a sense of prosperity and well-being,” she said during the NACS Show Education Session “Effective Strategies for Understanding the Value Sensitive Shopper.”

As consumer shopping habits continue to evolve in 2025, Headly recommended operators focus on improving customer engagement and driving loyalty. Consumers are more focused on customer experience to make sure the price tag is worth it, so invest in strategies that improve the experience. Some examples he mentioned include tailoring promotions and discounts to the value-conscious consumer, optimizing loyalty programs to strengthen retention and working to improve the in-store experience.

Portalatin said many purchasing decisions will also be driven by consumers’ desire to treat themselves, especially as consumers become more price sensitive and choosy about what they’re willing to spend money on. “Convenience stores are right in that sweet spot for being able to offer consumers those affordable treats and rewards, and they have the opportunity to be the go-to spot for that by playing into that idea.”

Portalatin noted that consumers are using specialty coffee drinks, dirty sodas, frozen treats and certain candies as ways to treat themselves.

One Trend Above Them All …

“The innovation in the industry is starting to coalesce into a larger message to consumers and brands,” said Sean McCaffrey, CEO of GSTV, as c-stores become destinations in their own right and not just a place to get a soda or coffee while filling up. People in the industry are already there—as are many consumers—but the rest of the c-store customer base is catching on.

That ties into another trend—an industry that is already forward-leaning will accelerate even more into the future. Expect to hear the phrase “future-proofing” a lot in 2025, across a range of c-store touchpoints including loyalty, foodservice and customer experience.