'Tough number to swallow': Romans breaks down inflation data

New York (CNNBusiness)Americans are cutting back at the gas pump — and not just the amount of fuel they put in their tanks. Consumers are also changing the way they fill their grocery bags with rest-stop food and other essentials.

The trigger: soaring inflation.
The average price of gas is hovering around $5 a gallon after it recently crossed that mark for the first time on record. Households are paying much more for gas at the same time that inflation has made grocery purchases more expensive, too.

Gas station convenience stores typically serve as an ideal substitute to a grocery store when all that’s needed is a case of water, a couple bags of chips, a carton of milk or a late-day coffee grab on the way home from work. This impulse buying behavior is a good barometer of the health of the consumer at any given time.

“The price of gas and everything is much higher, but people have to drive, said Arie Kotler, president and CEO of Arko Corp, a convenience store operator. “They’re still coming to the pump but they’re recalculating their road trips.”

Kotler has been observing shopping patterns at ARKO-operated gas pumps and connected convenience stores. The company operates nearly 1,400 convenience stores, most with gas stations, in smaller towns and rural communities in 28 states.
He’s noticed two trends emerge during shoppers’ gas station visits.

“Compared to the same time last year, people are coming more frequently to the pump but instead of fully filling up the tank, they’re filling half or quarter tank at a time,” he said. “They’re driving less and shorter distances.”
At the same time, consumers are shopping less frequently at the gas station convenience store. “But when they do come into the store, they’re consolidating their purchases,” he said. “Instead of buying just one or two items, they’re making a bigger basket of purchases, maybe for the entire week.”

Bigger bags of chips, lots of frozen pizza & 99-cent coffee

With consumers even more focused on value pricing, Kotler said ARKO is recalibrating its offerings, services and promotions to try to keep prices down and sales up.
“In the past, it would be a single drink and a small bag of chips,” he said. “Now they’re shopping for value. So it’s a bigger bag of chips for $4.59, for example versus a small bag for $2.29. They can get a couple of servings from it.”
Similarly with drinks, he said two liter bottles are outperforming smaller sizes as are 12- and 15-pack cans of drinks.

Cheap coffee, grab-and-go sandwiches and frozen pizza are also hot sellers among budget-constrained shoppers.
And since the beginning of the year, Kotler said, ARKO has added fully automated bean-to-cup coffee machines in over 500 store locations. “These are self serve and remove the labor cost for us. So we can sell hot and ice coffee for 99 cents,” he said.
The company also has invested in additional grab-and-go coolers at over 600 locations where shoppers can pick up sandwiches and frozen foods like pizza, hamburgers and TV dinners.
“Our peanut butter and jelly sandwich are a $1.29, ham and cheese for $3.99,” said Michael Bloom, the company’s chief marketing officer. “We’re similar to grocery store prices but maybe $1 to $3 less.
Pizzas typically are among the most purchased items at gas station stores.
“Many people can’t afford to go out to a restaurant right now. Our frozen family pizzas for $5.69 to $9.59 are a very popular item right now,” said Kotler.

Additionally, he said stores are offering deals like buy two, get one free and discounts on gas when customers sign up for the company’s loyalty program.
“All these savings stack up for consumers,” said Kotler. “Every few months we are trying to reinvent our stores to stay competitive, stay in business and stay relevant to shoppers in this environment.”
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