Convenience stores battle for marginal change

Ashley
Ashley Fitzpatrick
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Lorne Russell, owner of Russell’s Ultramar in Blaketown and Mike Hammoud, president of the Atlantic Convenience Stores Association, speak with reporters at the Holiday Inn in St. John’s on Monday. — Photo by Ashley Fitzpatrick/The Telegram

The president of the Atlantic Convenience Stores Association (ACSA), Mike Hammoud, says it is up to the provincial government to save the small businesses. He claims stores are being financially pressed into closure by existing provincial legislation.

“We’ve called this press conference to bring light to a situation where many convenience stores in this province are struggling and more stores per capita are closing than anywhere else in the country,” he said, speaking Monday at the Holiday Inn in St. John’s.

Hammoud said a total of 92 convenience stores closed up shop in 2009-10. He said he did not know if a similar number of closures would be seen this year, but felt the number is likely to remain high.

“Our profits are being squeezed because many of our largest selling products including gas, lottery and beer have margins set and controlled by government agencies. The margins rarely, if ever, increase,” he said.

“At the same time, government legislative costs go up every year.”

On top of the list of costs are legislated increases in minimum wage.

“Between October 2008 and April 2012, Newfoundland and Labrador’s minimum wage will have increased 25 per cent, from $8 an hour to $10 an hour.

“Convenience store owners want employees to earn as much as they possibly can, but they cannot afford to absorb these continual, annual increases while their margins remain frozen,” he said.

Hammoud said there have been no increases for retailers on lotto margins since 1982. On beer sales, he said a “slight” increase earlier this year, of 12 cents per case, is not enough. It’s “almost less than half the margins in Quebec, which would be the other province in Canada that has the ability to sell beer.”

He said stores in smaller areas need better margins to remain viable.

“Newfoundland has a smaller population base per business. So it is very, very important they strive at maintaining certain margins to stay in business.”

Lorne Russell owns Russell’s Ultramar in Blaketown. He was with Hammoud, speaking on behalf of ACSA members and in particular members in rural areas. “The thing I find a bit frustrating is we can’t afford to pay our employees enough to keep them,” he said.

The provincial Department of Finance did not agree with the assessment that government actions were the problem.

“Currently (on lotto sales) retailers get a five per cent commission based on their total sales of Atlantic lottery product, a $0.10 encashment fee each time they pay a prize of any amount and they also receive a retailer’s prize worth one per cent of a validated prize valued $10,000 or more that they sold in their store,” stated a spokesperson with the department in response to questions late Monday.

“With regards to beer sales, on May 1 of this year, the commission paid to convenience stores increased by 8.7 per cent. Since 2006, the commission has increased by 18.75 per cent.”

He called the May hike “perhaps the largest one-time increase ever.”

“We receive many requests from various groups as part of the normal budget process and particularly during the time of an election and we must balance all requests we receive with our obligation to ensuring the public purse is managed effectively,” he stated.

The spokesman said margins on gas sales are negotiated by retailers with suppliers.

For a change in lotto margins, all four provinces would have to become involved. Yet, for now, the ACSA wants this province to take the lead, and make whatever changes it can to help.

afitzpatrick@thetelegram.com

Organizations: Atlantic Convenience Stores Association, Holiday Inn, Department of Finance

Geographic location: Newfoundland and Labrador, Quebec, Canada Blaketown

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Recent comments

  • The realist
    September 21, 2011 - 11:14

    Pulling stuff out of your @rse doesn't make it so...ALC is the lottery organization that has a monopoly on this business in Atlantic Canada. Other lottery agencies operate in other jurisdictions...do these have the same 'Lotto sale conditions', I don't know, however, I would be extremely surprised if they did. Bottomline, is 5% enough margin to cover all the expenses of running a business, not likely! But what do you do to squeeze a few extra %s out of the monopoly? You don't have much leverage in that negotiation! But I bet they aren't hurting for a $ in HQ in NB!

  • Buck
    September 20, 2011 - 13:35

    I'd love to give a crap, but I don't. I find it hard to feel sorry for a bunch that charge the biggest kinds of mark ups of any retailers that sell basic living needs. And if you ask anyone from rural Newfoundland who are the most well off families, 9/10 chances, it's the family who run the local convince store.

    • retailer
      September 20, 2011 - 23:39

      Did you ever think that CONVENIENCE stores need to charge these prices on some CONVENIENCE items to offset the low margins imposed on other products such as beer and lotto. If you would rather save those extra few cents on your hamburger buns or condoms then drive to your grocery store or pharmacy and get it. I'll bet you'll find their hours differ slightly then your local convenience store. Before you go making statements about your local convenience stores mark-ups try checking out your hardware stores mark-ups or your furniture stores mark-ups, im SURE you will be un-pleasantly suprised!

  • bill
    September 20, 2011 - 09:20

    The ACSA forgot to mention that in Quebec the large grocery store's such as Costco, IGA,etc can also sell beer and wine. That's a change that I would welcome here.

  • Donny Dooley Dildo NL
    September 20, 2011 - 08:52

    Boo hoo! Listen, if you can't make a living at it - get out of it! You didn't mind charging the maximum price for a litre of gas all these years and instead of competing with other gas bars, you all sold it at the same maximum price to the tenth of a cent. Enjoy your closing sale!

    • retailer
      September 20, 2011 - 23:50

      Contrary to popular belief, gas margins don't really differ that much from beer or lotto. They are minimal and once again, for the most part, government imposed. at 5%, an independant gas station selling about 17,000 liters per day at $1.33 per L stands to make about $1200 a day in profit. $320 in wages and a jackass that just left the pumps with $150 in fuel in his brand new $50,000 truck WITHOUT PAYING doesnt leave much for operating or other expenses!!

    • ex-pat dave
      September 21, 2011 - 00:14

      As the son of a convenience store owner i'd like to address the negative comments expressed by some of these grossly misinformed folk. As for the notion that owning a convenience store makes your part of the merchant elite of old Newfoundland is bunko. The high costs of business (utilities and taxes) and low margins make for meager profits, many times you can barely keeps the lights on. We never well off, but my Dad put in 14 hour days 7 days a week to keep food on the table and roof over our heads. As for gouging the customer with high mark-ups, that's a fallacy, the big end retailers like Walmart and Costco sell low on high volume, a small store in a small town cannot afford to cut their own throat to sell at rock bottom prices. No one is asking for a hand out just some plain old fairness. It is shameful the comments made here are so callous and uninformed.

  • The Economist
    September 20, 2011 - 08:43

    I see no problem here. If the margin on beer sales is too low and Quebec is the only other province to allow them to sell beer, then do like the other eight provinces and stop them from selling beer. Lotto sale conditions are the same in all provinces why should we be different.

    • John
      September 21, 2011 - 01:01

      I don't know if this is something to celebrate because ultimately if all the little guys gradually go out of business then you are limited in choice and you will get SQUEEZED. . onfecionaries in Ontario have been saying the same thing for the last couple of years. Out here in Saskatoon, really it has gotten to the point your only choce is between two huge chains Macs or 7-11 and believe me prices are as HIGH if not HIGHER than they are in NL