When a profit pillar falls: lessons from 7-Eleven Australia’s tobacco reset.
At a Glance
Australia's shrinking legal tobacco market is forcing convenience retailers to reconsider a long-standing source of sales and profit. 7-Eleven Australia says growth in food and drink has more than offset its lost tobacco sales. The food-led model from Japan, is being watched well beyond its home market. How well will it travel globally?
A profit pool in retreat
For years, tobacco anchored Australian convenience retail. According to Australian Association of Convenience Store (AACS) and Circana MarketEdge, tobacco remained the channel's top-selling category as recently as 2023, before packaged beverages overtook it in 2024.
The legal market has come under sustained pressure from high excise, declining affordability and the growth of illicit trade. The AACS attributes much of the pressure to illicit tobacco, which it values at more than AUD$10bn.
The AACS reported signs of stabilisation in tobacco during the first half of 2026, attributing some improvement to stronger enforcement against illegal trade. However, the category remains well below historical levels, while foodservice and packaged beverages remain the key growth drivers, up 5.8% and 3.6%, respectively.
For retailers, the strategic challenge is to build alternative sources of demand and profit without relying on a return to tobacco's former role. For 7-Eleven Australia, food is central to that transition.
Food as the replacement
7-Eleven Australia CEO Fiona Hayes told Bloomberg that growth in food and drink had already replaced tobacco sales lost through regulation and tax increases. The product range has roughly doubled to almost 3,000 items since Seven & i took direct control. Cold food, hot food, packaged drinks and groceries each grew 14% to 15% in 2025, and Hayes says those rates have continued this year.
We visited the newly opened ANZAC rail station store in Melbourne. It is filled with instant noodles, snacks and food-to-go, not unlike the stores we see in Asia. There is also a local version of egg-salad sandwich, and plenty of combo meal deals to attract shoppers.
The investment is in equipment in older stores. More than 150 of 763 stores have been substantially refurbished or fitted with automated ovens and fryers that turn out hot pies, chicken and chips in minutes. Private label staples such as A$4.50 sausage rolls and chicken schnitzel sandwiches are in strong demand.
7-Eleven is aiming for 1,000 outlets in Australia by 2030, close to a new site every week. It also aims to increase EBITDA from around A$194m in 2025 to A$380m by 2030.
Where the model is still being fine-tuned
Offsetting tobacco has not meant every product works. Hayes concedes that a cheeseburger has been a stretch for Australian shoppers, and replicating onigiri texture is hard because local rules require cooked rice to be stored at lower temperatures than in Japan.
The lesson for retailers is that the winners will be value-led staples adapted to local rules and tastes, not a straight copy of Japan. The challenge is more complex than replacing tobacco revenue. Fresh food brings additional labour, waste and replenishment costs, while tobacco historically supported frequent, habitual visits.
What it means for suppliers
A range of almost 3,000 products and a near-weekly opening cadence need supply partners. At the May 2026 awards, attended by more than 500 suppliers and partners, Koshi Sushi’s onigiri won own-brand Product of the Year and Patties Food Group won Food Supplier of the Year.
The rice-storage rules show what suppliers face. Formulation, temperature control and shelf life must be solved locally and at scale for daily delivery.
Monetising the new engine: retail media and forecourt
On 2 October, it launched Anytime Media @ 7-Eleven, billed as Australia’s first dedicated convenience retail media network. It is backed by about 4.6m weekly transactions and the My 7-Eleven loyalty programme. The launch extends retail media beyond traditional grocery environments into high-frequency convenience, where suppliers can connect with shoppers in impulse-led moments.
7-Eleven has also agreed with EnergyAustralia to install 10 ultra-fast chargers across Victoria, New South Wales and Queensland over two years. Longer EV charging stops can create opportunities for coffee, prepared food and convenience purchases, compared with conventional refuelling.
What it means for retailers and suppliers
Retailers
Diversify beyond traditional profit pools, but evaluate food investments on incremental gross profit, transactions, waste, labour costs and store-level returns. The priority is profitable growth, not simply a broader assortment.
Suppliers
Develop differentiated products for immediate-consumption occasions and demonstrate the ability to scale consistently. Expect high standards on quality, temperature control and delivery frequency. Assess retail media opportunities on their individual commercial merits.
What lies ahead
Australia is a live test of whether the Japan model, built on fresh prepared food and daily services, can succeed abroad. If it does, it clears a path for expansion into Europe and Latin America. Seven & i aims to grow from 20 to 30 countries this decade and is moving towards direct ownership of its country operations. Australia is only about 3.5% of group sales, but its strategic weight is much larger. The Australian result suggests the work is in operations and localisation.