CSN - April 2017 by ensembleiq

Our People | Our Brands | Your Success

VIEWPOINT By Don Longo, Editorial Director

Transparency & Relevancy

Retailers must work hard to win the trust of today’s consumers

n a world where consumers have little trust in business, government, nonprofit organizations, and media, the need for transparency is becoming more and more important to all business leaders. The 2017 Edelman Trust Barometer, an international study of consumer trust in key institutions, noted a broad decline in all four institutions for the first time since the organization began tracking trust in 2012. Earlier this year, we reported on a Nielsen survey that found 56 percent of consumers on some level do not trust “industrially” prepared foods. The breakdown in trust has implications for retailers and marketers. Consumer trust is key to building loyalty and successful brands. This is especially important for convenience stores where persistent poor consumer perceptions about food quality can make it difficult for a retailers to grow sales in the important category of foodservice. It’s heartening to see food manufacturers trying harder to build trust with consumers. At For comments, please contact Don Longo, Editorial Director, the recent Grocery Manufacturers at (201) 855-7606 or Association (GMA) conference in dlongo@ensembleiq.com. Las Vegas, the CPG and grocery retail industries introduced SmartLabel, a platform designed to put product and company transparency at consumers’ fingertips. The initiative reveals important information on nutrition, ingredients, allergens, third-party certification, and company information

on food products. GMA is leading the way to create and initiate SmartLabel. The association estimates nearly 30,000 products will use SmartLabel by the end of 2017. In addition, a survey commissioned by GMA found that 75 percent of consumers would be likely to use SmartLabel. Transparency-driven claims are growing across the store. Nielsen reports seeing the trend in indulgent categories like salty snacks and candy. “It’s a push toward simplicity; a less is more, fewer processed ingredients. A sort of back-to-basics movement when it comes to the products we consume,” noted Nielsen. Kudos go to CPG companies like Hershey, Unilever and Campbell Soup Co., which, among others, are revealing more information about their products’ ingredients to consumers. For convenience store retailers, transparency takes on even more significance because so many c-stores are dependent on their proprietary foodservice offerings. Consumers equate the quality of the store’s food offerings with their trust in the store’s brand name. Consumers want foods that taste “real.” They want ingredients they can understand. This means they desire fresh ingredients prepared with simple techniques and presented at relevant times, in relevant ways for convenient consumption. C-store retailers must step beyond their traditional ways of thinking. They must be frank and honest with the customers, and their offerings must be relevant to their customers’ needs and wishes. Only by putting their customers at the center of everything they do will c-stores gain and maintain their trust.

EDITORIAL EXCELLENCE AWARDS (2013-2017) 2016 American Society of Business Press Editors, National Azbee Awards Gold, Best How-To Article, March 2015 Bronze, Best Original Research, June 2015 2016 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best How-To Article, March 2015 Silver, Best Original Research, June 2015 2015 American Society of Business Press Editors, National Azbee Awards Silver, Best Profile (long form), February 2014 2015 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best Special Supplement, November 2014 Silver, Best Profile (long form), February 2014 2013 American Society of Business Press Editors, Midwest Regional Azbee Awards Bronze, Best Editorial/Commentary, July 2012 2016 Trade Association Business Publications Intl. Tabbie Awards Silver, Front Cover Illustration, June 2015

EDITORIAL ADVISORY BOARD

2013 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2012 2013 Jesse H. Neal National Business Journalism Award Finalist, Best Profile, August 2012

2016 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2015 Business to Business, Retail, Single/Series of Articles, August 2015 2015 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2014 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013 Business to Business, Retail, Single Article, February 2013 2013 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2012

4 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

Brett Atherton Bolla Management Jon Bratta Core-Mark International Inc. Rick Crawford Green Valley Grocery Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Jim Hachtel Eby-Brown Co. Ray Johnson Speedee Mart Kirk Leff McLane Co. Inc. Jack Lewis GPM Midwest

Danielle Mattiussi Maverik Inc. Kyle McKeen Alon Brands Inc. Richard Mione GPM Southeast Jonathan Polonsky Plaid Pantries Inc. Greg Scriver Kwik Trip Inc. Roy Strasburger Convenience Management Services Inc. Jon Urbanik CST Brands Inc.

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CONTENTS APRIL 2017

VOLUME 53/NUMBER 4

26 | COVER STORY

Is the C-store Tobacco Business About to Get Turbulent?

Strong headwinds appear to be on their way, blowing in with various threats. 34 | International Atmosphere The U.S. tobacco market is increasingly drawing multinational companies.

50 FEATURES 42 | Couche-Tard + CST Brands = ??? Industry insiders believe Couche-Tard will likely rebrand the stores Circle K, while adapting some of the foodservice and loyalty concepts acquired in the sale. 50 | Competitive Watch: Amazon Go Retail and technology experts weigh in on the new small-format store from the online giant.

18 | Supplier Tidbits Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright ÂŠ 2017 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

6 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

CONTENTS

570 Lake Cook Road, Ste. 310, Deerfield, IL. 60015 (224) 632-8200 Fax: (224) 632-8266 www.csnews.com Direct Mailing Address for Convenience Store News: 111 Town Square Place, Suite 400, Jersey City, N.J. 07310

BRAND MANAGEMENT

CATEGORY MANAGEMENT FOODSERVICE

60 | Bringing Teamwork to the Table Partnerships between convenience stores and branded foodservice providers can boost a store’s visibility and entice customers to come inside. SERVICES

68 | What the Car Wash Pros Know Operational and marketing practices c-stores can “borrow” from professional car washes.

DEPARTMENTS VIEWPOINT

4 | Transparency & Relevancy Retailers must work hard to win the trust of today’s consumers. 10 | CSNews Online 20 | New Products SMALL OPERATOR

22 | Punch Up Your C-store Game There are more small-format stores than ever, meaning more competition. STORE SPOTLIGHT

72 | ‘Fancy Parker’s’ Gets Even Fancier Parker’s Market undergoes a gourmet makeover to enhance its foodservice offerings. EXPERT’S VIEW

74 | Five Leadership-Building Tips for First-Time Managers The move from peer to boss can be tricky. Here’s some advice. OUT & ABOUT

76 | Convenience on the Menu NAFEM Show 2017 highlighted c-stores’ importance to foodservice equipment manufacturers.

Group Brand Director (330) 840-9557

Ron Lowy rlowy@ensembleiq.com

EDITORIAL Editorial Director (201) 855-7606 Editor-in-Chief (201) 855-7608 Senior Editor (201) 855-7618 Associate Editor (201) 855-7619 Associate Managing Editor (201) 855-7604 Assistant Editor (201) 855-7614 Contributing Editor (303) 741-3377 Contributing Editor (201) 280-2614

Don Longo dlongo@ensembleiq.com Linda Lisanti llisanti@ensembleiq.com Melissa Kress mkress@ensembleiq.com Angela Hanson ahanson@ensembleiq.com Danielle Romano dromano@ensembleiq.com Chelsea Regan cregan@ensembleiq.com Renée M. Covino reneek@aol.com Tammy Mastroberte tmastroberte@gmail.com

ADVERTISING SALES & BUSINESS Business Development Manager Michael Hatherill (201) 855-7610 mhatherill@ensembleiq.com Southeast Regional Sales Manager Erika Cann (330) 357-9207 ecann@ensembleiq.com Northeast Regional Sales Manager Rachel McGaffigan (508) 385-2524 rmcgaffigan@ensembleiq.com Western Regional Sales Manager Dian Melius (949) 387-1451 dmelius@ensembleiq.com Account Executive & Classified Advertising Terry Kanganis (201) 855-7615 tkanganis@ensembleiq.com Classified Production Manager Mary Beth Medley (856) 809-0050 marybeth@marybethmedley.com

CUSTOM MEDIA Vice President/Custom Media Division Pierce Hollingsworth (224) 632-8229 phollingsworth@ensembleiq.com General Manager, Custom Media Kathy Colwell (224) 632-8244 kcolwell@ensembleiq.com

MARKETING Strategic Marketing Director (224) 632-8214

Bruce Hendrickson bhendrickson@ensembleiq.com

AUDIENCE DEVELOPMENT Director of Audience Development Gail Reboletti (224) 632-8214 greboletti@ensembleiq.com Audience Development Manager Shelly Patton (646) 217-1045 spatton@ensembleiq.com List Rental The Information Refinery (800) 529-9020 Brian Clotworthy Subscriber Services/Single-Copy Purchases (978) 671-0449 EnsembleIQ@e-circ.net

ART/PRODUCTION Director of Production (973) 358-4875 Advertising/Production Manager (314) 403-4753 Art Director (224) 632-8245

Kathryn Homenick khomenick@ensembleiq.com Roz Gilman rgilman@ensembleiq.com Michael Escobedo mescobedo@ensembleiq.com

CORPORATE OFFICERS

OUT & ABOUT

77 | At the Intersection of Wholesale & Retail All sides of the industry gathered at the 2017 Convenience Distribution Marketplace. 90 | Getting to the Core

Executive Chairman Alan Glass President & CEO Peter Hoyt Chief Operating Officer Rich Rivera Chief Financial Officer Len Farrell Chief Business Development Officer & President, EnsembleIQ Canada Korry Stagnito Chief Customer Officer/President of Strategic Platforms Ned Bardic Chief Digital Officer Joel Hughes Chief Human Resources Officer Greg Flores Chief Brand Officer Jeff Greisch

CONVENIENCE STORE NEWS AFFILIATIONS 8 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

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CSNEWS.COM TOP 5 Daily News Headlines The most viewed articles online.

1 | Couche-Tard Takes Three-Step Approach to Growth Despite the headwinds faced by the overall retail industry, Alimentation Couche-Tard Inc. continues to build on its reputation with a three-pronged approach to success, according to President and CEO Brian Hannasch. He pointed to CoucheTard’s expertise in acquiring and integrating companies it can develop, organic growth, and its ability to control expenses as the retailer’s formula for winning. 2 | New Report Pinpoints Highest-Rated C-store Brands by State According to data collected from millions of GasBuddy mobile app user ratings throughout the United States, Tulsa, Okla.based QuikTrip Corp. takes the top spot in eight states — including its home state, plus Arizona, Georgia, Kansas, Missouri, North Carolina, South Carolina and Texas. Pennsylvania-based Wawa Inc. is the highest ranked in five states: Delaware, Florida, Maryland, New Jersey and Virginia.

ONLINE EXCLUSIVE Looking Into the C-store M&A Crystal Ball Trying to predict the next seller or new buyer who’s about to enter the convenience store merger and acquisition market can be a little tricky. On the seller side, Terry Monroe, founder and president of American Business Brokers & Advisors, said it’s a safe bet to look for companies that are either publicly traded or owned by a private equity group, which usually sells its assets in five to seven years. On the buyer side, Dennis Ruben of NRC Realty & Capital Advisors noted that “the usual suspects” may be getting some company as there are new players out there that want to get into the convenience channel. For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT

The most viewed New Product online. 3 | Altria Takes Early Cigarette List Price Hike The calendar may only say March, but Altria Group Inc. has already raised the list price on its Philip Morris USA cigarette brands. The change equates to an approximately 2-percent to 3-percent increase, according to Bonnie Herzog, managing director at Wells Fargo Securities. 4 | Wawa Springs Into Hiring Spree A spring hiring campaign by Wawa will bring new talent to all 750 stores across its six-state footprint, according to the convenience store chain. “We are excited to launch our spring hiring campaign to recruit new Wawa associates,” said Dave Filano, manager of talent acquisition at Wawa. 5 | Top CPG Performers Satisfy Both Nutrition & Indulgence In an otherwise lackluster year for U.S. sales of consumer packaged goods, some top performers in the industry generated growth by satisfying both nutrition and indulgence. Sales of ice cream, spirits, wine and salty snacks all grew by 4 percent to 5 percent — a rate three times faster than retail sales in the CPG industry overall, according to research findings from The Boston Consulting Group and IRI.

Coca-Cola March Madness Bottles Coca-Cola, the official fan refreshment of the NCAA, is offering commemorative 8-ounce glass bottles emblazoned with team logos, nicknames and battle cries for more than 50 colleges and universities for March Madness. The limited-edition bottles are available in original Coca-Cola, Coca-Cola Zero and Diet Coke through April 14. Fans have the option of choosing between March Madness, The Big Dance, Sweet Sixteen, Elite Eight, and Final Four branded bottles. Coca-Cola also teamed up with Powerade for a digital promotion called the NCAA March Madness Bracket Refresh. The Coca-Cola Co. Atlanta (800) 438-2653 www.coca-colacompany.com

MARKET SPOTLIGHT: Florida Sizzles With C-store Competition Given its warm weather, population of “snowbirds,” and number of tourist attractions, it’s no surprise convenience stores have been drawn to the Sunshine State. The Florida landscape has become so competitive that some retailers are selling gas below cost in order to drive traffic into their stores. With this in mind, Convenience Store News checked in on a few c-stores during a recent visit to the Orlando area. On the roughly 75-mile drive from Orlando to Tampa, travelers can find several big-name players in the channel: 7-Eleven, Circle K, Love’s Travel Stops & Country Stores, RaceTrac, Thorntons and, relative newcomer to the state, Wawa. 10 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

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INDUSTRYROUNDUP

Getty Realty Eyes 2017 as Year of Opportunities The company moves on from its “transitional properties” By Melissa Kress

etty Realty Corp. is putting the past behind it and setting a course for this year that can be summed up in two ways: redevelopment and acquisition opportunities. Recapping 2016, Getty Realty President and CEO Christopher Constant said: “I am pleased to report that with the disposition and leasing activity completed during the year, we have essentially completed the repositioning of former transitional properties, which has been one of our primary strategic initiatives over the past several years. As such, going forward, we will no longer characterize properties as transitional.” The term “transitional” applied to properties formerly leased by Getty Realty to Getty Petroleum Marketing Inc. (GPMI). Getty Realty took back the properties when GPMI filed for bankruptcy. “In the years that followed, we have either repositioned or sold hundreds of these transitional assets, finally leaving us at the end of 2016 with a quality portfolio absent of any additional overhang from this difficult chapter in our history,” Constant said. “Due to the successful efforts of the entire Getty organization, we are now at the point where our resources can

12 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

be dedicated to growing our portfolio.” At the end of 2016, Jericho, N.Y.-based Getty Realty’s portfolio consisted of 829 properties — 808 of which are subject to triple net leases, six of which are actively being redeveloped, and 15 of which are vacant. For 2017, Getty Realty plans to redevelop several existing properties and build up its portfolio through acquisitions. Currently, the company has 13 redevelopment projects with signed leases and letters of intent, and it continues to evaluate its portfolio for additional redevelopment opportunities, according to the chief executive. Getty Realty also remains active in the market seeking potential acquisitions. “In our core asset class, we are seeing a mix of single units and portfolio acquisition opportunities in geographic regions that overlap with our existing sites, and in several markets where we have been looking to add assets,” Constant explained. Taking all that into consideration, the CEO stated: “We view 2017 as a building year for Getty. Absent acquisitions — which we do not include in guidance — our core business is stable and growing.”

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INDUSTRYROUNDUP FAST FACTS Among consumers who experience an out-of-stock situation at a convenience store, 29 percent will stop shopping that store for a period of time. Source: Carbonview Research

Since CVS Health exited the tobacco business, adult consumers who had purchased cigarettes exclusively at CVS were 38 percent more likely to stop buying cigarettes all together. Source: CVS Health Research Institute

When it comes to mobile offers, food and beverage categories provide both solid reach and redemption. Gas and tobacco have low reach, but a high rate of redemption. Source: Koupon Media

Annual eatings per capita of snack foods consumed at main meal occasions is forecasted to grow by 12 percent by 2024. Source: The NPD Group

14 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

Marcia Clark to Keynote CSNews Top Women in Convenience Awards Famed prosecutor is best known for the O.J. Simpson trial

arcia Clark, the lead Los Angeles prosecutor in the O.J. Simpson “Trial of the Century,” will be the keynote speaker at this year’s Convenience Store News Top Women in Convenience (TWIC) awards gala, to be held in Chicago this fall. Clark, who is also the author of several bestselling legal thrillers and serves as a public speaker on a range of women’s issues, will discuss empowering women in the workplace at TWIC, the industry’s first and only awards program that recognizes women making outstanding contributions to their companies and the convenience retail industry overall. A practicing criminal lawyer since 1979, Clark joined the L.A. District Attorney’s office in 1981, where she served as prosecutor for the trials of Robert Bardo, convicted of killing actress Rebecca Schaeffer, and most notably, Simpson. She recently re-released her 1997 bestselling book on the Simpson trial, “Without a Doubt,” as an e-book with a new foreword, and she launched a new crime fiction series featuring defense attorney Samantha Brinkman last May. CSNews launched the TWIC awards program in 2014. This year’s gala will be held at the Hyatt McCormick Place Hotel on Oct. 18, and encompass four differ-

ent award categories honoring the full convenience retail spectrum: Women of the Year, Senior-Level Leaders, Rising Stars, and Mentors. Top Women in Convenience nominees must either work for a convenience store retailer company or a wholesaler or supplier directly serving the convenience store industry. Judging will be conducted by CSNews in conjunction with the Network of Executive Women and the 2017 TWIC Advisory Board. Winners will be selected based on achievements during the previous 12 months that illustrate a candidate’s innovative corporate initiatives, extraordinary financial and strategic accomplishments, astute problem-solving acumen, exceptional performance and selfless charitable participation, among other attributes that go above and beyond the call of duty.

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INDUSTRYROUNDUP SEEN on SOCIAL MEDIA

eye on growth n Casey’s General

n QuikTrip Corp. plans to build a

Stores Inc. opened 13 new-store constructions, completed seven replacement stores, and acquired eight stores during its recently completed third quarter of fiscal year 2017.

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new 250,000-square-foot manufacturing and distribution facility in north Tulsa, Okla. The facility will accommodate growth of the company’s QT Kitchens foodservice concept.

n Love’s Travel Stops and Country

Stores kicked off the new year by opening seven new locations within the first six weeks of 2017. The retailer now has more than 410 stores spanning 40 states. n Stockholders of

n Yesway added seven convenience

stores to its portfolio, two in Iowa and five in Kansas. The Pic Quick stores in Hutchinson, Kan., are the retailer’s first in that state. n Wawa Inc.

Tesoro Corp. and Western Refining Inc. voted yes to the companies’ proposed merger on March 24. The move will make Tesoro a 3,000-plus station operation.

Wawa Inc., Wawa, Pa.

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Sheetz Inc., Altoona, Pa.

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16 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

opened its first three South Florida stores on March 23. Two of the stores are in Palm Springs Wawa first broke and the third is in ground in South Florida in July 2016. Riviera Beach.

retailer tidbits n Cumberland Farms’ new

600,000-square-foot headquarters in Westborough, Mass., known as its Store Support Center, boasts

based retailer is raffling off 100 prizes monthly through November.

Pride began in 1917 with a focus on servicing horses and buggies.

n The first Chevron gas stations in

40,000 square feet of culinary space, and 120,000 square feet for the corporate support center. Amenities at the facility include a gymnasium, a convenience store, and an 80-seat cafeteria. n The Pride chain of convenience

stores is marking a milestone: celebrating 100 years in the convenience and fuel retailing industry. The Springfield, Mass.-

Hawaii have been rebranded as Texaco with Techron stations, its sister brand. All remaining Chevron sites are expected to complete the rebranding process by the end of this year. n QuickChek Corp. is celebrating

its 50th anniversary by rewarding customers with 10 weeks of special promotions. Five promotional in-store and mobile app offers will be featured each week. The promotions run through April 30.

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supplier tidbits The Best Record for the Fuels of Today and Tomorrow!

n Conagra Brands Inc. is acquiring Thanasi

Foods LLC, maker of Duke’s meat snacks, and Bigs LLC, maker of Bigs seeds. Financial terms of the deal were not disclosed. n Santa Fe Natural Tobacco Co. will no longer use

“additive-free” on any Natural American Spirit cigarette labels, advertising or promotional material. The change is part of a pact with the Food and Drug Administration to resolve a 2015 warning letter. n Lime-A-Rita will become the first brand in

the Anheuser-Busch U.S. portfolio to be marketed exclusively to women. The “Make It A Margarita Moment” campaign will feature new pop-art-inspired package design and ontrend flavors. Anheuser-Busch’s Busch beer’s new look made its Busch brand also introduced debut in February when Kevin refreshed packaging featuring a Harvick’s No. 4 Busch Ford comnew look for all varieties. The peted in The Clash at Daytona International Speedway. new look pays homage to the Busch brand’s outdoor heritage. n MilkPEP’s latest initiative under its “Built With Chocolate

Milk” campaign features the National Basketball League’s Klay Thompson. Point-of-sale and other marketing materials target basketball fans and exercisers.

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n Talking Rain Beverage Co., the maker of

Sparkling Ice flavored sparkling waters, unveiled a “Be Not Bland” multifaceted ad campaign. This is the brand’s first campaign to feature a series of commercial ads airing nationally. n Jack Link’s is building upon its

“Workin’ Out With Sasquatch” initiative with new advertising spots featuring NBA player KarlAnthony Towns. Jack Link’s also opened a new showroom and office in downtown Minneapolis. n NJOY LLC acquired the assets of NJOY Inc. as the for-

mer completes its financial restructuring. In conjunction with this acquisition, NJOY LLC completed a $35-million equity capital raise.

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Shock Top is rolling out a new spring Citrus Variety Pack while debuting the brand’s first-ever “full bottle” makeover. The Shock Top Citrus Variety Pack features Holy Citrus (5.2 percent ABV), Ruby Fresh (5.2 percent ABV), Lemon Shandy (4.2 percent ABV), and its original Belgian White (5.2 percent ABV). Shock Top’s new look and feel remains authentic to the brand, “but with a fresh, youthful optimism and spirited energy,” according to the maker. Shock Top is also introducing its new tagline with the variety pack — “Cheers to What’s Ahead.” More new flavors will be coming throughout the year.

Hershey’s Reese’s brand will soon launch the Reese’s Crunchy Cookie Cup. The product features a Reese’s Peanut Butter Cup stuffed with crunchy, chocolate cookie bits. The Reese’s Crunchy Cookie Cup will be available nationwide in May. It will come in a standard two-cup size (1.4 ounces, suggested retail price of $1.09) and in a king two-cup Big Cup size (2.68 ounces, SRP of $1.79).

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Red Diamond Fruzen Tea Red Diamond’s latest new product offering is Fruzen, a frozen tea line. The fresh beverage alternative is made with the best tea and natural flavors, according to the company, which also notes that Fruzen can be enjoyed alone or mixed to create a slushy cocktail. Fruzen is currently available in two varieties: Citrus Green Tea and Peach Tea. Red Diamond Moody, Ala. (800) 292-4651 reddiamondbevservice.com

The Hershey Co. Hershey, Pa. (800) 468-1714 thehersheycompany.com

Véa Savory Crackers Véa is Mondelez International’s new wholesome savory cracker brand. The well-being snack line is designed to drive growth in the savory cracker segment. Véa was developed for the on-the-go, well-beingfocused millennial consumer, according to the company. Véa crackers are baked with visible herbs, spices and other natural flavors. The recipes contain no artificial ingredients, colors, flavors or trans fats, and are non-GMO project verified. Véa crackers come in a variety of forms, including crunch bars, world crisps, and seed crackers. Mondelez International Inc. East Hanover, N.J. (855) 535-5648 mondelezinternational.com

1893 Premium Cola New Flavors 1893 from the Makers of Pepsi-Cola rolled out a pair of new varieties: Citrus Cola and Black Currant Cola. They join 1893 Original Cola and 1893 Ginger Cola in the portfolio. The Citrus Cola incorporates grapefruit into 1893’s Original Cola recipe. The Black Currant Cola likewise features the Original Cola recipe as its base, but its unique flavor is created with the infusion of black currants. All 1893 colas come in 12-ounce cans for a suggested retail price of $1.79. PepsiCo Inc. Purchase, N.Y. (800) 433-2652 pepsico.com

20 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

SMALLOPERATOR

Punch Up Your C-store Game

There are more small-format stores than ever, meaning more competition

ecently, Walmart announced they are opening yet another version of a convenience store — you’ve got to expect that one of these times, they are going to get it right! More and more grocery retailers have also started selling gas over the past 10 years, resulting in the introduction of some new types of conveBy Sue Nicholls, nience store formats. Dollar stores keep Category Management adding categories, and drugstores have Knowledge Group improved their convenience offer. What’s the net result? More competition for convenience stores, and more small-format stores than ever. So how do you — as a single-store owner or a small operator — survive in this competitive environment? There’s an opportunity for you to increase strategic focus in your business, build analytic and fact-based decision making, and ultimately find new ways to drive sales and profit. In net, you need to focus on the key shoppers who come into your store, and learn how to address their needs better than your competition does. I’m going to cover some ways for you to do this by: 1. Considering different perspectives; 2. Better understanding the convenience channel (format, store types, consumer profiles); and 3. Starting to use data to make more fact-based decisions. Let’s go through each one in more detail. CONSIDER DIFFERENT PERSPECTIVES

To become more strategic in your approach, the first thing you need to do is change your perspective and think bigger picture. You should take advantage of the category knowledge, data and resources that your suppliers and distributors can (or should!) offer. Your suppliers should understand your category and update you on trends in the category (using data), and let you know how the category is growing, how convenience

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is performing within that growth, and ways for you to improve your category business. Both you and your suppliers need to talk about the shopper, whose perspective is commonly forgotten. Different shoppers are going to come to your store dependent on what type of convenience store you run (a neighborhood store, commuter store or highway store). How do the ideas that your suppliers bring in match with the most important shopper in your store? The opportunity: NACS, the Association for Convenience & Fuel Retailing, has reported that operators with one to 10 locations have inside sales of $3,500 per day and generate a pretax income of $150,000. Increasing your gross margin by 2 percent would increase pretax income by almost $13,000 per year. Coupled with a 2-percent increase in sales per day, it would result in a $20,000 increase in your pretax profit. BETTER UNDERSTAND THE CONVENIENCE CHANNEL

Convenience stores have evolved over the past 10 years, and there are some important things to note about this rather complex retail channel: • Store size plays a huge role in the merchandise that is carried and the services offered at the outlet. C-stores range in size from 800 square feet to upwards of 5,000 square feet. More than 80 percent of convenience stores sell fuel, which is a destination category for these stores. The small stores primarily sell fuel and, as the square footage of the store increases, there’s a larger emphasis on in-store sales, as well as foodservice. • There are different types of stores in convenience. NACS has identified three store types: Neighborhood Stores (frequented by soccer moms and locals in the neighborhood), Metro Stores (located on busy streets, primarily frequented

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SMALLOPERATOR by commuters on their way to and from work), and Highway Stores (found on highway exits, frequented by travelers and professional drivers). Distinguishing your store type helps you to begin to define your service opportunities. Shoppers approach different types of stores with different shopping priorities and occasions in mind. What type of store is yours? • There are different types of shoppers who shop the convenience channel. Blue-collar workers, professional drivers, smokers, junk food lovers, and soccer moms, to name a few. Each of these different types of shoppers are on completely different trip missions and have different needs. The opportunity for you is to better understand your most important shoppers, and determine how to better meet their needs through the tactics (space, assortment, price and promotion). For many retailers, 20 percent of their most loyal buyers represent up to 80 percent of their sales and profit. Learn how to better satisfy their needs. MAKE MORE FACT-BASED DECISIONS

You shouldn’t rely on gut feeling and intuition to run your business. While it has tremendous value, what’s more important is to back it with data. You may be surprised that some of your “hunches” are not validated by the data you can access. You should start to ask for fact-based insights from your suppliers and distributors to help you make these decisions, and you should start using some of your own internal data to make better and more profitable decisions for your stores. Two specific ways for you to make more fact-based decisions for your stores are: • Space and inventory turns: Turns is the number of times your store’s inventory cycles, or turns over, per year. Another way to think about it is that it’s the number of times a retailer sells their average investment in inventory each year. Increasing turnover is beneficial for you because it means less money tied up in inventory, better cash flow, and higher profitability (and who doesn’t want that). Some ways to increase turns in your store are to: carry the right product assortment with

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the fastest-selling SKUs; reduce days of supply with less facings on the shelf (particularly on slower-moving products); incorporate space to sales; avoid single facings; reduce inventory days on hand; minimize back-room inventory (and breakage, damages and loss); and don’t bring in things to sell in your store that are never going to sell. • Pricing strategy: Do you have a gross margin percentage (GM%) objective in each category that you apply to every item when establishing retail prices? If so, you may want to consider adopting a more strategic approach to determining the right retail prices for your store(s). By assigning strategies to key items in the category (e.g., turf protecting, transaction builder, etc.), you can then establish thresholds (e.g., within what percent of your competitor’s pricing do you need to be at) for each strategy. Some items will have much lower GM% objectives than others, based on the role they play in the category. But ultimately, you will achieve your overall GM% — or even exceed it — while meeting consumers’ needs as they relate to pricing. These are just a few examples of some analytics that can help you make more strategic choices in your business, which will ultimately drive sales and profit for retail headquarters and retail stores in the convenience channel. The next time you make decisions on any of the tactics (shelf, assortment, price, promotion), try to incorporate some data into your decision-making process (or ask your supplier for more information or data to help you). The examples above are only a few of the ways that you can become more strategic in your business, with the ultimate goal being to increase sales and profit. You need to make strategic, fact-based, tactical decisions that consider and address the needs of your key shoppers better than your competition. You will be pleased with the results, which will help you grow sales and profit in a continuously competitive environment. CSN Sue Nicholls is founder and president of Category Management Knowledge Group (CMKG), based in Calgary, Canada. She is a speaker and consultant, working with business partners to bring category management training solutions to different areas of retailing like the convenience channel. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

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STRONG HEADWINDS APPEAR TO BE ON THEIR WAY, BLOWING IN WITH VARIOUS THREATS

By Melissa Kress

or convenience store operators, the tobacco retailing business can often feel like a tornado, a disorienting swirl of taxes, legislation, regulation, product evolution, and changing consumers. Two years ago, the industry saw combustible cigarette volumes rebound, but it was short-lived, as the past year-plus saw the market settle back down to historical deceleration rates. Calling it â&#x20AC;&#x153;an industry in secular declines,â&#x20AC;? Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, puts the cigarette volume deceleration rate at roughly 2 percent to 2.5 percent for 2016, and a predicted 3.8 percent for 2017. The latest Nielsen Co. all-channel numbers, released in early March, show cigarette dollar sales increased 0.7 percent during the four-week period ended Feb. 25, an uptick driven by solid pricing and

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DEMAND A

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2017 (estimated)

E-Cig/Vapor Market Size — $4.4B

Vapors/Tanks/Mods & Personal Vaporizers $3B

E-Cigarettes $1.4B

C-store, Food, Drug & Mass Retail Channels $700M

Online & Other Retail Channels $700M

Online $400M

Online & Other Retail Channels $700M

Vape Shops $1.8B

C-Store, Food, Drug & Mass Retail Channels $500M

Other $300M*

Source: Nielsen C-store Database, Wells Fargo Securities LLC estimates *Other non-tracked channels include tobacco-only outlets and other e-cig retail locations.

a slight moderation in volume deceleration, according to Herzog. On the other hand, smokeless tobacco, cigarette’s backbar neighbor, remains a bright spot in the tobacco business as consumers continue to respond positively to brand expansions, she noted. According to the same Nielsen data, dollar sales in the smokeless segment grew 4.9 percent during the four-week period, compared to 3.3 percent for the 12-week period. Then, there’s the electronic cigarette segment, which has proven to be the biggest headscratcher. Not that long ago, many industry players were getting ready to proclaim the end of the e-cigarette boom as consumers turned back to combustible cigarettes — presumably driven by a combination of increased disposable income due to lower gas prices and a dissatisfaction with the e-cigarette products on the market. However, all-channel e-cigarette dollar sales increased by “an impressive 29.9 percent in the recent period — and 28.2 percent for the 12 weeks — driven by a solid 8.8-percent pricing increase and a 19.4-percent volume increase,” Herzog said. The vapor segment as a whole — including electronic cigarettes — could be in for some more interesting times as reduced-risk products (RRPs) emerge onto the scene. Speaking at Tobacco Plus Expo 2017, the Wells Fargo analyst explained that in the approximately $900-billion global tobacco market in retail sales, vapor accounts for just 1 percent. The United States tops the

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list of global markets. “The U.S. is the largest market and the most lucrative opportunity,” stated Herzog. Consumer sentiment remains lukewarm at best, though, and retailers are wary of having “dead inventory” on their shelves under the black cloud of the Food and Drug Administration’s (FDA) final deeming rule and the regulations to come. That being said, Herzog remains bullish on vapor. She predicts that by the end of 2017, the vapor industry will grow to $4.4 billion in retail sales. She also believes retail sales of vapor and RRPs could eclipse $10 billion by 2020. BEYOND THE NUMBERS

Despite what the data tells us about the “now,” convenience store operators have to be on the lookout for what headwinds may be around the corner. Similar to concerns about the effects of the FDA’s final deeming rule, retailers are bracing themselves for the impact of the $2-per-pack hike in California’s state cigarette excise tax. Known as the California Healthcare, Research and Prevention Tobacco Tax Act of 2016, the measure also places an equivalent tax increase on other tobacco products and electronic cigarettes containing nicotine. It went into effect April 1. As Wells Fargo Securities’ latest Tobacco Talk retailer survey found, retailers anticipate the levy increase will accelerate the cigarette segment’s return

TASTE

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SALES

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to historical volume declines of 3 percent to 4 percent, despite a relatively strong adult tobacco consumer. And California is by no means the only state to be affected by legislative and regulatory changes. “Nationally, I expect volume decreases in the 3.5-percent range,” one Tobacco Talk retailer told Wells Fargo Securities. “Individual markets, however, will get hit worse. Not only the California tax, but also several areas have recently passed 21 age requirements, and I expect this to become more common. As you remove part of the potential market, there will be an impact on overall consumption averages.” In fact, efforts to push the legal age to buy tobacco products to 21 are gaining momentum across the United States. According to Vivien Azer, director and senior research analyst at Cowen and Co., 22 states as of March had introduced “Tobacco 21” legislation this year. Measures already failed in four states, leaving the possibility alive in 18 others. To date, only Hawaii and California have passed legislation making 21 the minimum legal buying age statewide. Hawaii’s regulation went into effect Jan. 1, 2016, and California followed in June 2016. Washington, D.C., also passed a similar bill last year. “Indeed, we’ve seen similar legislation introduced at the state level over the past few years, but the pace of bill introduction has increased meaningfully, as just 15 states introduced bills to increase the tobacco purchasing age in 2016,” Azer cited. “Of these states with proposals introduced this year, many have not seen a Tobacco 21 bill proposed in recent years, including Florida.” THE THREE E’S

The unending winds of change around tobacco could easily overwhelm convenience store retailers, who have high stakes in the business. However, there are some key strategies they can leverage to not just stay grounded, but rather ride the currents successfully. Remember the three R’s from schooldays (reading, writing and arithmetic)? For today’s tobacco retailers, it’s all about the three E’s: educate, evolve and engage, according to David Bishop, managing partner of sales and marketing firm Balvor LLC. “With everything retailers are going through, the industry is harder to understand. What can retailers do in a proactive way — or an active way — to ensure they are not only complying with regulations and laws, but also positioning their businesses to win?” he posed. There are no guarantees and there are a lot of ques-

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Should a c-store’s “tobacco” business include non-tobacco products — think cannabis, reduced-risk products, smoking cessation, etc.? As the landscape continues to evolve, retailers may want to rethink what belongs on the backbar.

tions out there; however, retailers should be doing — or doing more of — the three E’s, Bishop advised. EDUCATE

When it comes to tobacco retailing, a key measurement or assessment is how well a retailer complies with regulations prohibiting the sale of tobacco products to minors. A recent Balvor analysis showed retailers are doing an effective job of enforcing and complying with the laws and regulations, according to Bishop. “From that context, I would give very high marks to the retailers. However, especially in light of the increased fines, the risk is only that much higher and retailers have to be forever diligent in this area — especially when they are faced with staff turnover,” he said. While he is not suggesting c-store retailers have become complacent, he said they do have to maintain a high level of preparedness. “It’s not going to get easier, it’s not going away, and it’s going to be an issue that they are going to constantly have to address because of all the changes in staffing and regulation,” Bishop explained.

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COVER STORY

Federal numbers may focus on violation rates, but retailers should celebrate that for every one violation, there are probably nearly nine successful compliance checks, he said. “We constantly can get better, but we have to constantly be diligent. I think the retailers deserve more credit in the way the narrative unfolds and it is clear, to at least me, the regulators and government agencies are not going to be inclined to frame this in a positive way because it does not support their point of view or mandate,” said Bishop. ENGAGEMENT

To tell the positive story and set the narrative, retailers and retailer associations need to engage consumer groups, media, and legislators so that others know they are doing a really good job.

“Unfortunately, the reality is that the motivations and interests of the different parties — retailers, manufacturers or even wholesalers — are sometimes not in full agreement. Not that they are in violent conflict, but what is good for the manufacturer isn’t always good for the retailer. And vice versa.” — David Bishop, Balvor LLC

Although some retailers do fail compliance checks, and tobacco products are still ending up in the hands of underage consumers, social sources of tobacco remain a reality and retailers cannot control them, as Bishop pointed out. “That’s where I think the education and engagement come hand and glove. Retailers and retail organizations need to shepherd that message because no one else is going to do that,” he encouraged. Also, the convenience channel cannot rely on its manufacturing and supply chain partners to join in telling the story. “Unfortunately, the reality is that the motivations and interests of the different parties — retailers, manufacturers or even wholesalers — are sometimes not in full agreement,” Bishop acknowledged. “Not that they are in violent conflict, but what is good for the manufacturer isn’t always good for the retailer. And vice versa.” Retailers who have common interests would benefit

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from coming together to amplify their voice. Politics is local and retailers need to demand and rely on themselves first, and others second. “If there is a tendency to rely on the support of others, then they are simply putting their future in someone else’s hands who may or may not have the same point of view,” Bishop said. EVOLVE

Not to sound dramatic, but standing still could kill a c-store’s tobacco business. The business is ever-changing — one minute, combustible cigarettes are the main game in town, while the next minute, electronic cigarettes are the darling of the category. Retailers must stay on top of consumer demands, manufacturer innovations, and even regulatory-induced trends. For example, legalized medical and recreational marijuana is garnering more attention across the nation. As it spreads, it opens up new areas of opportunity for the convenience channel, namely in the cannabis accessories segment. This is not to say retailers are going to be selling marijuana in the stores; that’s not going to happen in the near future until a lot of things change, Bishop said. Cannabis accessories are just an extension, and they should be added by retailers on a case-by-case basis. “Not that it’s something for all retailers; it clearly isn’t. But it is an example of how the landscape is changing,” he added. “Some would argue, ‘that’s not tobacco.’ That’s true, but it is a combustible product or a leaf-based product that is consumed in a similar way.” Smoking cessation is another segment c-store retailers should consider adding to their tobacco space, Bishop suggested, pointing to Reynolds American Inc.’s ZONNIC gum. “…It does provide a way to evolve what we think of tobacco. Part of that is reframing what exactly we mean,” he said. “If we take the risk-reduction continuum or harm-reduction strategy, on one side, you have traditional combustible products and, more recently, we have electronic nicotine devices. What is to stop us from going a little further to smoking cessation?” The “tobacco” retailing business can evolve in any number of ways. It just depends on the retailer and how they are positioned. “It’s rethinking what that backbar represents. Does it simply represent tobacco, or does it represent a certain need or usage occasion that we could look at differently?” he questioned. CSN

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International Atmosphere

The U.S. tobacco market is increasingly drawing multinational companies

he British America Tobacco plc (BAT) and Reynolds American Inc. (RAI) tie-up. Imperial Brands’ acquisition of several U.S. brands and assets as the third player in the 2015 merger of RAI and Lorillard Inc. Speculation of a Philip Morris International (PMI) and Altria Group Inc. combination. These three headlines reflect the international invasion happening in the U.S. tobacco industry, but truth be told, multinational companies are no strangers to the stateside market. BAT has had a presence in the U.S. through its 42.2-percent ownership of WinstonSalem, N.C.-based RAI. The recent merger agreement between the two tobacco giants will give the Londonbased company full ownership for $49 billion. The deal is on track to close in the third quarter. Imperial Brands, previously known as Imperial Tobacco Group, was already familiar with the U.S. tobacco scene through its Commonwealth-Altadis portfolio. The company made a bigger splash two years ago when it paid $7.1 billion for the Winston, Kool and Salem brands from RAI and the Maverick and blu eCig brands from Lorillard. In addition, United Kingdombased Imperial acquired Greensboro, N.C.-based Lorillard’s infrastructure, including the company’s manufacturing facility, headquarters offices, research and development facility, and approximately 2,900 employees. Its combined U.S. business is now known as ITG Brands LLC. PMI is likewise not new to the U.S. tobacco market. In fact, PMI and Altria were once one company. Richmond,

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Va.-based Altria spun off PMI nearly a decade ago. WHAT ANALYSTS ARE SAYING

Retailers say it is too early for them to tell what impact the BAT-RAI transaction will have on their tobacco business. Analysts have weighed in, though. When BAT first put an offer on the table for full ownership of RAI, it carried a $47-billion price tag. The final handshake deal reached in January came in at $2 billion more, a move that did not surprise Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC. Calling the higher price tag “expected,” she said the revised offer is on the low end of average historical bump-ups in bid offers; however, it makes sense given BAT’s “sizeable pre-existing ownership stake” in the No. 2 U.S. tobacco company and the strength of its original offer. “We believe the revised offer reflects BAT/RAI’s global potential to compete in reduced-risk products (RRPs) including procurement, [research and development], and other cost considerations,” Herzog said. Vivien Azer, director and senior research analyst at Cowen and Co., explained that this transaction will increase BAT’s exposure to the United States, which represents the largest market globally in terms of dollar sales, excluding China. “BAT acquires the No. 2 player in the U.S. market with the No. 1 menthol brand, Newport, and three out of the top four brands,” Azer said, adding that London-based BAT will also have access to RAI’s next-generation technology, including VUSE digital

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A New Tobacco Competitor?

Manufacturers could turn to standalone stores to market their new products When it comes to the backbar, convenience store retailers need to manage the here and now, while also keeping an eye on what may be coming down the pike — and sometimes that pike is outside the United States. David Bishop, managing partner of sales and marketing firm Balvor LLC, points to Japan as an area retailers should be watching. Japan Tobacco International (JTI) and Philip Morris International (PMI) are both opening standalone stores there as they introduce their new heat-not-burn products, which have been growing significantly — especially PMI. According to Bishop, it’s more of a supply issue than a demand issue for PMI and In Japan, Philip Morris International has opened its heat-not-burn product iQOS. Leading standalone stores to meet the high demand for its research in Japan indicates iQOS is creatnew heat-not-burn product iQOS. ing a drag, or headwind, for traditional mass-made cigarettes. “As that product enters the United States — as people expect it to in 2018 — what will happen if and when they open up a similar type of store in the U.S.? Convenience retailers could be faced with some very stiff headwinds if similar trends develop in the U.S. as in Japan,” he said. There are many reasons why PMI, JTI and other tobacco companies would pursue standalone outlets. One of the lessons learned from electronic cigarettes is that convenience stores aren’t necessarily the best places to introduce new innovation that requires educating the consumer. “Speed of service is paramount; the c-store staff isn’t necessarily trained to be as knowledgeable as a vape shop or tobacconist,” Bishop explained. “So, anything new that requires any degree of explanation or education is better handled in other classes of trade.” Case in point: the arrival of open systems, or vaporizers, on the market was one of the major drivers of vape shops. “Going forward, if this is in fact the case, it should be a concern to convenience retailers. What will this do to their business?” Bishop asked. When PMI introduces iQOS in the U.S., it will be through an agreement with Altria Group Inc., and Altria has amassed — and continues to amass — an active and robust direct marketing database through direct mail and its mobile apps. “If they want to turn on a new product, they can go directly to the consumer to promote it and drive them to wherever they want to drive that traffic,” Bishop said. “Today in the U.S., those apps drive you to a physical store that typically will be a convenience store. But tomorrow, if iQOS is introduced and they open stores of their own, where does that traffic get driven to?” Will c-store retailers even stock iQOS? And if so, will the promotional offers be directed to the retailers or to the company’s own outlets? Bishop further questioned. “There may be some combination. I am not suggesting that Altria is going to open a thousand of these stores, but look at Japan,” he said. “It’s likely they will open up some sort of experiential outlet, probably in high-traffic areas like Times Square or downtown Chicago. Who knows?”

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vapor cigarettes. VUSE holds a more than 40-percent share in its segment in the U.S. The agreement between BAT and RAI has triggered increased chatter about the possibility of PMI and Altria coming together — a possibility that was first buzzed about in late 2013 when the two tobacco leaders partnered on alternative tobacco products. “We don’t expect [PMI] to sit idly by as BAT becomes the world’s largest global tobacco and [reduced-risk products] company,” Herzog said. REDUCED RISK & U.S. INTEREST

In December 2013, subsidiaries of Altria and PMI entered into a series of agreements around intellectual property licensing, regulatory engagement, and contract manufacturing. Specifically: • Altria is providing PMI with an exclusive license to commercialize Altria’s e-vapor products internationally; • PMI is providing Altria, on an exclusive basis, two of PMI’s heated tobacco products for commercialization in the United States; and • The companies are cooperating on scientific assessment, regulatory engagement, and sharing improvements regarding those products. In July 2015, the two companies expanded their strategic framework to include a joint research, development and technology-sharing agreement. Merger or no merger, the companies are working to bring PMI’s heat-not-burn product, iQOS, to the U.S. This past December, PMI submitted an application to the U.S. Food and Drug Administration (FDA) to designate

COVER STORY

iQOS as a modified risk tobacco product. It is also prepping a Pre-Market Tobacco Application to submit to the agency. As PMI navigates the regulatory path, Altria is “working closely with PMI to marry insights from iQOS lead markets with our expertise regarding the U.S. adult smoker, trade channels and marketplace,” Altria’s Chairman, CEO and President Marty Barrington stated during a presentation at the 2017 Consumer Analyst Group of New York Conference. Key to bringing iQOS successfully to market in this country will be a proper introduction to the U.S. adult tobacco consumer. To that end, Altria’s Philip Morris USA (PM USA) unit is developing marketing plans to launch the product into a lead U.S. market. “Fundamental to those plans is a high-touch, integrated engagement model to educate interested adult smokers at retail and in the digital space,” Barrington said. “Additionally, PM USA plans to use new, flexible retail concepts, creating opportunities for guided trial.” While Altria hasn’t further detailed the plans or named potential lead markets, it did reveal the heat

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sticks used with the iQOS system will carry the Marlboro brand in the U.S. Still, with or without PMI, Altria has been building a portfolio of potential reduced-harm products. “A growing body of evidence suggests there is a continuum of risk among tobacco products, with cigarettes at the highest end of that spectrum,” Barrington explained. “It’s the FDA’s role to evaluate potentially reduced-harm tobacco products and decide what manufacturers may communicate to consumers about them,” he added. For its part, according to the chief executive, Altria’s role is to understand the preferences of the adult tobacco consumer, develop products to meet those preferences, and seek FDA authorization to market them. TRANSFORMATIVE JOURNEY

RAI has also made transforming tobacco a key element of the company’s future. One of the most recent initiatives in its strategy was the creation of a new subsidiary, RAI Innovations Co., in January 2016. The subsidiary is focused on product

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development, innovation and commercialization of next-generation vapor and nicotine products. RAI’s soon-to-be new owner, BAT, is also committed to developing harm-reduction products. In late February, BAT unveiled its 2016 Harm Reduction Report highlighting that commitment and its work toward delivering innovative products. The report builds on a 2012 BAT strategy to satisfy consumers “in tobacco and beyond,” the company said. “I see this as having the potential to offer a triple win: a win for society in reducing the public health impact of smoking; a win for consumers in offering a choice of exciting, less risky products; and a win for our products and our shareholders in generating sustainable value,” said Nicandro Durante, chief executive of BAT. Among BAT’s growing portfolio of next-gen products are Vype Vapour Products, which are currently available in 10 markets around the globe, and a new heat-not-burn product, glo, which launched in Japan in December. STALLING INNOVATION?

Still, despite all the research and development around

RRPs, concerns exist over the effects of the FDA’s final deeming rule and its regulations on innovative products. In Wells Fargo Securities LLC’s fourth-quarter Tobacco Talk survey — the most recent available as of press time — retailers were optimistic about RRPs long term, but expect “a significant ramp-up timeframe,” expressing uncertainty about timing and the FDA approval process. “After the mirage of the e-cigarette category wore off, it’s difficult to get excited about another reducedrisk product,” one Tobacco Talk retailer respondent said. “The fact that [Swedish Match’s] General Snus couldn’t receive the certification after submitting almost 200,000 pages of science to the FDA, it’s hard to believe anything will receive the badge of honor for being reduced risk.” Still, Wells Fargo Securities found that 56 percent of Tobacco Talk retailer respondents are optimistic about the future of RRPs. CSN Stay in the know on tobacco industry news by subscribing to the biweekly Convenience Store News Backbar digital newsletter. Go to https://tinyurl.com/lquguos to subscribe.

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Couche-Tard + CST Brands = ???

Industry insiders believe Couche-Tard will likely rebrand the stores Circle K, while adapting some of the foodservice and loyalty concepts acquired in the sale

n a move that will make it the largest U.S. independent convenience store operator in store count, Circle K parent Alimentation Couche-Tard Inc. announced plans to acquire CST Brands Inc. for $4.4 billion in August 2016. The company has been expanding through a number of acquisitions as of late, but this one offers an opportunity to purchase one of the few remaining North American c-store chains with more than 1,000 stores. “CST Brands has properties in both the U.S. and Canada, so there were a lot of synergies associated with that, and Circle K has not been shy about the fact that they want to grow dramatically,” Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, based in Scottsdale, Ariz., told Convenience Store News. “They have bid aggressively on a number of acquisitions that have come along, and this is an opportunity for them to grow very significantly in one transaction. It makes a lot of sense.”

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As part of the deal, Couche-Tard will acquire 1,146 CST Brands c-stores, primarily operating under the Corner Store, Nice N Easy and Flash Foods banners, and also control the general partner of Allentown, Pa.-based CrossAmerica Partners LP. Additionally, Couche-Tard plans to sell CST Brands’ Canada retail assets to Parkland Fuel. “They are buying sites with c-stores so they can immediately re-identify and rebrand to expand their brand in Texas, where they are already pretty big. It also gets them in California and a few other states where their presence is not as heavy,” noted Ken Shriber, managing director and CEO of Petroleum Equity Group in Chappaqua, N.Y. Despite the hefty price tag, it’s a great deal financially for Couche-Tard because by increasing its mass of stores, the company increases its buying power and decreases its marketing costs, according to Terry Monroe, president of American Business Brokers and

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CST’s Corner Stores (left) are expected to be rebranded to Couche-Tard’s new global Circle K brand (right) within a year of the acquisition closing.

Advisors, based in Naples, Fla. “There are 154,000 c-stores out there, and there is no McDonald’s so to speak. There is no No. 1, and Couche-Tard will be No. 1. When they go to talk to Pepsi or Frito-Lay or any vendors, their buying power is getting better and better,” Monroe explained. Couche-Tard will also save money in the backoffice costs that CST Brands was paying to run its company. With CST making $1 billion a year in net profit, the back-office costs could be around $200 million. For Circle K, those costs will go down to about $40 million, according to Monroe. THE FUTURE OF CST

Despite its best efforts, the market grew impatient with CST. The retailer did creative things like purchasing Nice N Easy and CrossAmerica, but some activist investors were buying shares and there was a lot of pressure on the company to do a transaction, Ruben explained as to how CST found itself on the sale block. “The sale was more shareholder driven because as a standalone chain of c-stores with gas, unless you are growing significantly, there is not much of an opportunity to improve the performance of the company and, hence, the share price,” Shriber agreed. “Despite their best efforts, CST didn’t have a significant growth plan that would satisfy shareholders.” Some investors thought the stock price was not high enough, noted Ruben. “I don’t think they were given enough time to establish an independent presence in the marketplace,” he remarked. “They were only an independent spinoff for a couple of years, and some

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activist investors were trying to stir things up. The board felt they had to respond and hired a financial advisor to look at alternatives. They went out to see if they could get offers. I think some of the investors were just impatient.” While Couche-Tard has not announced any specific plans regarding the rebranding of CST Brands’ c-stores, convenience store industry analysts and experts believe the stores will eventually be turned into Circle K sites. This will allow Couche-Tard to expand the global Circle K brand and gain brand recognition in new areas of operation. “I would suspect within the first year, it will be rebranded,” NRC’s Ruben said. “They look at each deal separately to see how to transition it. We sold them a chain in Texas and some stayed and some were converted. There may be markets they convert to Circle K and some where they keep the Corner Store name, but generally they convert stores to their brand.” Monroe compared the deal to the acquisition of Amoco by BP, where everything was eventually rebranded BP. He foresees the same future for CST and Couche-Tard. Speedway also did the same thing with Hess’ retail assets, which were all converted to the Speedway brand in less than a year, he pointed out. “If McDonald’s acquired a chain of stores, they wouldn’t leave them Joe’s Hamburgers. They would eventually convert them over,” Monroe said. The only exception to the rebranding could be CST’s Nice N Easy locations because 21 of the locations are franchised to a single owner, explained Steven

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Montgomery, president of b2b Solutions LLC, based in Lake Forest Ill. “Should the Nice N Easy company-operated locations be rebranded, they may determine that occurrence diminishes the brand’s value and elect to create their own standalone brand,” Montgomery said. The future of CST’s fuel brand, which is currently Valero, is also a question mark. “I’m fairly certain the stores will be rebranded Circle K, but the gas brand is in question,” Shriber acknowledged. “Do they keep Valero, do they convert to other brands, or do they leave it as Circle K and be unbranded? It depends on the terms of the deal.” So, what does this mean for CST Brands and its employees? The current executives may benefit financially from the deal, but the likelihood of them being offered a position with Circle K is slim, according to Shriber. However, the Petroleum Equity Group head does believe Couche-Tard will extend offers to store personnel and field management. The San Antonio Business Journal reported CST Brands CEO Kim Lubel could receive nearly $20 million in compensation, including $5.5 million in separation payments, with the remainder from incentive plans and stock options, including previously restricted stock. Other executives are likewise entitled to severance payments, annual short-term incentive awards, and health benefits, which could total $24 million, according to documents on file with the U.S. Securities and Exchange Commission (SEC). Former CrossAmerica Partners CEO Joseph Topper will receive compensation, too, cashing out his 1.2 million shares in CST for $59 million, according to SEC documents. ADOPTING NEW PRACTICES

With the likelihood of the CST stores being rebranded, many of the current brands or offers found within Corner Store are also likely to be changed to Circle K, and this includes the work CST Brands did on its foodservice offerings. However, Monroe believes Couche-Tard will look at the aspects of CST that are working well and may consider incorporating some of those into the Circle K brand. “They may take an aspect CST was doing well, such as foodservice, and test it. If they can incorporate it into their other stores, they will,” he said. “CoucheTard is publicly traded and will look for profitability.” Ruben cited the example of Sunoco LP’s purchase of Susser Holdings Corp., where Sam Susser had devel-

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Couche-Tard CEO Brian Hannasch recently stated that Corner Store’s foodservice offer “fits very well for the southern half of the U.S.”

oped the Stripes chain and Laredo Taco Co., which was a “big money-maker.” Sunoco is trying to roll out Laredo Taco Co. now. “It will be interesting to see what Couche-Tard decides to do after they take a look at what CST Brands is offering,” said Ruben. Circle K does have its own brands and concepts, including the Simply Great Coffee program, which as of November 2016 had been rolled out to more than 400 stores in its North America network. The chain plans to introduce the offering to 750 stores within the year, according to Couche-Tard CEO Brian Hannasch. Additionally, Couche-Tard is expanding the offering of fresh sandwiches, pastries and salads to more of its stores, and the chain’s fresh prepared food program — referred to as “foodvenience” — was operational at 10 sites as of November. During the company’s second-quarter earnings call for fiscal year 2017, Hannasch commented on the foodservice operations of CST, saying: “They’ve been on the same journey with regard to foodvenience or made-to-go type offer. And I think they’ve got an

offer that fits very well for the southern half of the U.S.” The chief executive added that his company is anxious to get the experts together from both retail chains “in the coming years, as I’m confident that it can accelerate our journey.” When CST acquired Nice N Easy, one of the reasons the acquisition was attractive was because of the foodservice capabilities the locations demonstrated, Montgomery noted. This is something Circle K will want to apply where it can, but would be limited to its larger-format stores, he said, explaining Circle K will also utilize the loyalty program knowledge gained from CST’s purchase of Flash Foods. INDUSTRY IMPACT

As Couche-Tard continues to grow and dominate more regions in terms of presence and buying power, what does this mean for competitors, or the convenience store industry as a whole? The biggest impact will be for those companies bidding against the retailer for future acquisition deals, Ruben predicts. “In the last few years, there has been an ongoing consolidation, and when we do deals, there is a big number of larger buyers who could do a deal without having to get financing,” he explained. “I think this will mean a less competitive environment for deals because with Couche-Tard buying CST, there is one less big player to call.” For those in direct competition with Circle K stores, the bigger Couche-Tard gets, the better the buying

power, so it will become more difficult to compete with the retailer on price, Monroe pointed out. Couche-Tard will be getting better deals from vendors, leaving neighboring stores to find other ways to stand out. “These competing stores will have to accept the fact that they can’t get the same deals from vendors. It’s no different than when Walmart came to town and put people out of business,” Monroe said. “Companies need to distinguish themselves from Circle K, whether it’s different flavors of coffee or their own type of breakfast rolls.” Foodservice is a great way to differentiate from the competition in any area and, for those competing against Circle K, another option is to offer services they don’t, such as a loyalty program, said Ruben. “Some Circle Ks are branded Shell and they have a loyalty program, but many are unbranded,” he noted. “If a store competes in an area with Circle K and they offer a loyalty program, this is something they should promote.” Overall, Circle K’s reputation in the industry is very good, and they are known as great operators, Ruben shared. This will give the entire industry a boost and give people the incentive to “improve their game and offering.” “By putting more name-brand equity into the marketplace and showing, good consistent operations, it helps the entire c-store industry,” Monroe agreed. CSN

Couche-Tard directors (from L to R) — Brian Hannasch, Richard Fortin, Réal Plourde and Alain Bouchard — showed their support for the new Circle K look.

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Competitive Watch: Retail and technology experts weigh in on the new small-format store from the online giant

By Renée M. Covino

nother Amazon star is born, and it is being touted as the new, true “grab and go.” Amazon Go was recently unveiled as the online behemoth’s new small-format brick-and-mortar store, much like a traditional convenience store, but with one very attractive key feature — no waiting on a checkout line. In fact, there is no checkout at all. (“No, seriously,” as Amazon Go playfully puts it on its website). How does the Amazon Go shopping experience work? Basically, it’s three steps: the shopper scans in using a smartphone, passing a turnstile to enter the shopping area; the shopper picks up their items, which Amazon technology adds to the shopper’s cart; and then the shopper leaves the store, charged for the items via their Amazon account. “Our checkout-free shopping experience is made possible by the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning,” Amazon explains on its website. “Our

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Just Walk Out Technology automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. When you’re done shopping, you can just leave the store. Shortly after, we’ll charge your Amazon account and send you a receipt.” As of press time, Amazon Go was currently a onestore “beta” format in Seattle, open only to Amazon employees. The store was reportedly scheduled to open to the public by the end of March, but is facing delays due to technology glitches. As for additional locations, Maxwell Legocki, business analyst at Wilton, Conn.-based Cadent Consulting Group, believes it’s only a matter of time. “I wouldn’t be surprised if they open more stores by this fall,” he told Convenience Store News. A IS FOR ADVANTAGE

Clearly, Amazon has many things working in its favor as it steps over the “brick” line — and this has a lot of

How Real Is the Threat to Convenience Stores? Should the convenience store industry be threatened by Amazon Go? Depends on who you ask. Below is a sampling of viewpoints recently shared with Convenience Store News by retail industry and technology industry experts: “With Amazon Go making its way into the world of brick-and-mortar, convenience stores should prepare for impacts and determine strategies that will get customers back in their doors. However, they have something Amazon doesn’t: existing customer data. By looking to this data, they can get a better sense of who their customers are and what they want. Advanced analytics platforms then allow businesses to extract valuable insights from the historical data, ultimately presenting decision makers at individual stores with the information they need to optimize their product offerings, store design, and overall processes to best serve customers.” — Guy Amisano, CEO, Salient Management Co. “Every retail channel should be worried. Amazon Go is simply a representation of what Amazon has committed itself to, which is innovation in service of a greater customer experience, rather than short-term profits or gains. Given the nature of the c-store trip, the channel has been at a disadvantage when trying to capitalize on the data-driven approach that is becoming more commonplace in the retail market, whereas Amazon will have the ability to translate their customer data-driven profiles into more personalized experiences at brick-and-mortar.” — Brian Cohen, Executive Vice President, Group Director & Head of Digital Integration, Catapult “Threatened? No. Motivated? Yes. Convenience stores, grocery stores and all retailers should always be interested in what Amazon is doing, and Amazon Go is no exception. It’s still in the early stages, but the concept of cashier-less retail and automated shopping is exciting, and it’s a revolutionary technology that we’ll see a lot more of in the future.

Advanced technology automatically detects when a product is taken off the shelf.

companies in the retail marketplace (convenience store operators included) watching and, in some cases, worried. “More than any other company, Amazon is committed to topline growth, expansion and customer experience, rather than bottom-line profits, though that is expected to change over the next three to five years,” said Brian Cohen, executive vice president, group director, and head of digital integration for marketing agency Catapult, based in Westport, Conn. “For now, this allows for a higher level of investment in innovation, market expansion, and vertical expansion. It makes them a very, very scary proposition for a large number of industries; retail being the most obvious.” Other Amazon advantages include: • Brand Name — Amazon is thought of as reliable, trustworthy and easy, noted Don Stuart, managing partner of Cadent Consulting Group. Amazon already dominates the digital space of “convenient shopping,” so its physical stores should carry the same perception by shoppers, added Legocki of Cadent. “This will help promote the Amazon name among shoppers who don’t use ecommerce as much.” • Fewer Ongoing Costs/Lower Prices — Amazon Go store management will save money on salaries they don’t have to pay, as opposed to a traditional store, Stuart pointed out. “Those savings, coupled with the remarkable supply chain they have at their disposal, can create huge savings,” he said. “Being able to lower costs offers the opportunity for Amazon Go to lower prices, attracting even more shoppers while increasing margins.” • Customer Convenience — Cosmas Wong, an advisor for technology startups and CEO of New York City-based Grey Jean Technologies, cites the ability to “Amazonize” the shopping experience by putting customer convenience above all else. “They’ve done this for decades in the ecommerce space, and a physical store is just an extension of that,” said Wong. “With Amazon Go, they’re offering shoppers the ability to walk into a physical store and walk out with the same immediacy of Amazon’s one-click checkout online, with no lines and no wait. It’s the same seamless customer experience.” • Loyalty — Amazon has “maybe the most loyal customer base of any retail entity out there,” according to Mark Hardy, CEO of Chicago-

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Because of that, instead of feeling threatened, c-stores should start planning for how the future will look for their industry. Embrace technology, such as mobile apps, AR [augmented reality] and VR [virtual reality], and begin to think about how stores of the future will look, as well as how shoppers will want to shop your store. We already know brick-and-mortar stores are starting to shrink their physical footprints and reduce in-store SKUs. Omnichannel shopping is quickly becoming the new norm, and the sooner c-stores adopt new technologies, the faster they can cater to the latest consumer trend.” — Mark Hardy, CEO, InContext Solutions “It depends on whether they have been burying their heads in the sand about where retail is going, or if they have been proactively developing their own transformational strategies. Labor will be a key pain point for retailers in the future, and those who optimize their stores from a labor perspective will come out ahead, compared to those who don’t. Amazon has a proven track record of disrupting entire categories of business, but the key to the c-store business is the ‘C.’ These physical points of distribution for items consumers need right now certainly won’t go away, but we can all hope they will deliver better shopping experiences — better inventory, better experience, better retail.” — Bridget Johns, Head of Marketing and Customer Experience, RetailNext

Amazon Go boasts “Just Walk Out Technology” for customers’ ultimate convenience.

based InContext Solutions, a virtual reality solutions provider for retailers like 7-Eleven and Walgreens. “Consumers are already familiar with Amazon’s mobile apps; they know they can count on the customer service; and they trust the speed and accuracy of Amazon’s ecommerce and delivery services. They will expect no different from Amazon Go stores.” • Prime Member Data — With so much data on hand, Amazon has “a real opportunity to provide personalized experiences for each shopper via targeted email and loyalty programs through Amazon Prime members’ accounts,” said Guy Amisano, CEO of Salient Management Co., a data analytics provider for convenience and grocery stores, based in Horseheads, N.Y. “These kinds of tactics are sure to bring customers in the door.” • Seemingly Unlimited Resources (technology and otherwise) — There are no legacy environments hampering innovation at Amazon Go, according to Bridget Johns, head of marketing and customer experience for RetailNext, based in San Jose, Calif. “They can build the model from scratch to optimize the existing technologies that power Amazon Go, like video analytics, Wi-Fi, RFID and others. And they can invest heavily in what will be needed for future rollouts, namely deep learning, artificial intelligence, and more precise measurement of item-level RFID solutions,” she stated. “Amazon also has an unbelievable amount of data that will help it scale a concept like this faster than most would be able to, not to mention the cash to acquire an existing player if its model makes more sense.”

“On the note of innovation, c-stores should be excited for the future of this development; Amazon Go is proving that the physical store has the potential to be redefined. This is going to force convenience stores to rethink their business model and align with this innovative thinking. There’s an opportunity for c-stores to shift their future strategies to be similar to that of Amazon Go, but build on improving that digitally integrated shopping experience in physical stores, possibly carving out a new area that they own.” — Maxwell Legocki, Business Analyst, Cadent Consulting Group

EXPECTED CHALLENGES

“They should be both worried and excited. Worried because Amazon will be a trailblazer in redefining convenience shopping, with the Amazon brand name backing the push. In the short run, Amazon Go will obviously

Of course, no one does retail perfectly, especially at the onset. Retail industry and technology industry experts expect there will be a number of challenges for Amazon Go to overcome. For instance, Cohen of Catapult thinks Amazon may struggle most with assortment and merchandising strategies in the physical locations, and maintaining the balance with online integration. “I’m sure there will

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G a r t

steal business from c-stores. Also, Amazon Go puts c-stores in a position of having to play catch-up with regards to attracting shoppers, retaining their customer base and, most importantly, developing innovation.” — Don Stuart, Managing Partner, Cadent Consulting Group “The reality is we’re seeing a convergence of channels — quick-serve restaurants, c-stores, grocery, drug and Amazon Go are all competing for the same ‘grab-and-go’ share of stomach. Amazon’s focus on capturing this share of stomach with Amazon Go should urge c-stores to more quickly shift focus from what drives their trips and volume today to what better serves the changing desires of consumers. Improving the quality of their prepared foods and the ease of their shopping experience will help them cater to evolving consumer habits — especially those of millennials who are already predisposed to a grab-and-go lifestyle.” — Curtis Tingle, Chief Marketing Officer, Valassis “C-stores should view this as an opportunity because the services offered by Amazon Go are indicative of where customer demands are heading. Customers are looking for expedient, customized and, yes, convenient service. That’s what Amazon Go is promising. If the c-store industry can evolve with the times and think about how technology can support easier checkout or delivery for customers, the industry can only stand to benefit.” — Kathleen Ulrich, Director of Marketing, Brillio “Amazon is forcing grocers and convenience stores to rethink how their entire omnichannel experience, from brick-and-mortar stores to digital channels, works in tandem to bring in new customers, increase sales, and create a loyal band of customers. It’s not all about digital and it’s not all about physical stores. C-stores need to carefully consider how they can better leverage technology — whether it’s frictionless payment systems, beacon and location technology, AI [artificial intelligence] and machine learning, or predictive recommendation engines — to deliver the experience their customers want, regardless of where that experience is taking place.” — Cosmas Wong, CEO, Grey Jean Technologies

Ready-to-eat breakfast, lunch, dinner, and snack options are made fresh every day for the store.

be a few operational hiccups along the way as they transition their business model from an online pure-play to an integrated brick-and-mortar offering,” Cohen predicts. The potential for technology failure could prove to be a huge hiccup, observed Stuart of Cadent Consulting. “The ‘computer vision’ offered by Amazon Go could have a hard time recognizing loose fruit/vegetables of various sizes; deformable or unstructured items such as bags of rice; items that change color such as fruit; and shopper identification, i.e. a shopper removing their jacket in-store,” he said. “Also, a store that relies solely on technology to function can face system errors, resulting in the whole store crashing.” RetailNext’s Johns agrees, and expands the scope of this challenge to also include “the precision of their analytics — an area Amazon needs to be 100 percent on,” she said. “As soon as customers are charged for items they didn’t buy or not charged for items they took with them, you have a significant problem. The nature of c-stores centers on low-margin products, and managing the POS [point-of-sale] is critically important.” One question that comes to mind for Wong is: Where does personalization fit in with checkout-free stores? “Amazon is regarded as a leader in the ecommerce space for pioneering personalized experiences by showing different homepages for different customers based on their past clickstream paths or previous purchase behaviors,” he said. He wonders whether there will there still be an opportunity for Amazon to leverage its digital presence to engage consumers with personalized experiences that supplement its brick-and-mortar offerings — or is Amazon Go simply about convenience? The Grey Jean Technologies head believes that in order to maintain the same level of competitiveness it’s had in the digital arena, Amazon will need to consider how it can use technology to deliver personalized in-store offers to each individual shopper.

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“Since today’s shopper has the expectation that retailers will know them personally, leveraging data about consumers’ unique behaviors and preferences will be the key to delivering tailored in-store mobile offers in the same way Amazon has done with its ecommerce platform,” Wong reasoned. How fast consumers will adapt to the concept could present another challenge, cited InContext Solutions’ Hardy. “People are creatures of habit, and while some will be lining up to try it out, others To shop at Amazon Go, an individual needs an Amazon account, a supported smartphone, and will be slow to embrace this kind of the free Amazon Go app. technology fully.” Kathleen Ulrich, director of marketing for global app, and a smartphone. “This also limits the ability to technology and business solutions consulting company, go shopping with family members and friends if they Brillio, based in Santa Clara, Calif., agrees that the don’t have any of the above as well,” he pointed out. biggest challenge is customer buy-in to a relatively new And then there are other challenges that all brickway to shop. and-mortar retailers face. For instance, avoiding out“There’s a reason why customers don’t all want to of-stocks. “The advantage Amazon has had up until use the self-service checkout station at supermarkets,” now is its ability to avoid being out-of-stock — or Ulrich said. “There’s a customer learning curve that appearing to be in stock — due to its ecommerce needs to be taken on, and I think Amazon won’t be warehousing system,” said Salient Management’s able to completely lose the human element [of] the Amisano. “The challenge as it moves into brickbrick-and-mortar store.” and-mortar will be to continue avoiding this age-old challenge of retail, and optimize its stock better than everyone else.” “It’s still in the early stages, but the Another challenge shared by all brick-and-mortar retailers that will be new for Amazon Go is the concept of cashier-less retail and importance of location, location, location. “Store automated shopping is exciting, and location is always important, and it’s important to consider the proliferation of c-stores and discountit’s a revolutionary technology that ers already at most of the best-trafficked locations,” Johns of RetailNext. we’ll see a lot more of in the future.” noted “Finding the right locations will be key,” she con— Mark Hardy, InContext Solutions tinued, “and determining what services will be offered will also be critical. If the stores are all storefront without fueling services, perhaps it becomes a different Hardy also believes the matter of security is a category to what we consider c-stores altogether.” potential challenge, including “people feeling a little Lastly, Amazon Go may be serving a market that’s like ‘Big Brother’ is watching them.” He also quesgoing away, cautions Wes Higbee, industry blogger tions: How safe are credit cards and payment options? and president of New York City-based Full City Tech And what if you forget your phone one day — are you Co. Most people don’t care how the groceries get into out of luck to purchase anything at Amazon Go? their cupboard, he explained. Along these same lines, Stuart questions the limita“Services like Amazon Fresh are where the future is tions around who can shop at an Amazon Go store: — ‘keep my cabinets full of what I want without needcustomers need an Amazon account, the Amazon Go ing to go to the store,’” Higbee said. CSN

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FOODSERVICE

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Bringing Teamwork to the Table

Partnerships between convenience stores and branded foodservice providers can boost a store’s visibility and entice customers to come inside By Bob Phillips

or a convenience store retailer, partnering with a well-known foodservice brand can provide a boost in visibility, which should result in increased foot traffic and greater total rings. While refueling, messaging at the pump from a Subway, Blimpie or Dunkin’ Donuts, among others, may entice customers who otherwise would “pump and run” to come into the store for a quick bite. In order to maximize profits, it is important that both parties — the branded foodservice partner and the retailer (who is often a franchisee) — work together in harmony for the partnership to function at top efficiency. Step one for the c-store retailer is to find the right foodservice partner. “You don’t see a lot of fried chicken franchises in c-stores in the Providence, [Rhode Island] market, but you’ll see a lot of them in the South. Pick something that’s strong in your region, and make sure that it’s a strong franchisor,” said Leo Vercollone, president of VERC Enterprises Inc., a Duxbury, Mass.-based chain of 26 convenience stores and car washes in eastern Massachusetts and southern New Hampshire. Vercollone was Dunkin’ Donuts’ first convenience store franchisee in the United States. Dunkin’ Donuts, which began as a single doughnut shop in 1950, started franchising its stores in 1955 and now has approximately 8,200 Dunkin’ Donuts restaurants in the U.S., nearly all of which are owned and operated by franchisees. After opening his first store in 1980, Vercollone quickly learned how important coffee was to his overall business, both in terms of profitability and traffic. “And in the Boston area, the best coffee

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was Dunkin’ Donuts,” he said. Speaking of the teamwork between VERC and Dunkin’, Vercollone dubs it “a great relationship. They want to do what’s best — both for their business and for the customer.” Dunkin’ holds all its franchisees to a high standard. “If your parking lots or restrooms aren’t properly maintained, they’ll let you know,” he explained. “It’s a partnership.” VARYING FOOTPRINTS

For a c-store retailer, finding the right foodservice partner can also be a question of footprint. There’s big and small c-stores. There’s rural, urban and suburban c-stores.

FOODSERVICE

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While many of its locations are standalone units, Subway operates more than 4,600 restaurants in convenience stores and gas stations throughout the U.S. As one might imagine, floor plans vary greatly from store to store. Headquartered in Milford, Conn., Subway offers 16 varieties of sub sandwiches with several choices of breads and accoutrements. Some Subway restaurants are situated within the convenience store environment and have little or no seating at all, explained Allison E. Morrow, Subway’s assistant director of new business development. Others are attached to the c-store in their own proprietary space, which provides ample seating. “While we continue to develop both types of locations, our preference, when possible, is to develop Subway restaurants at c-store/gas station locations where we can have our own space attached to the store, with a separate entrance as well as an interior entrance that allows customers to pass freely from the c-store into the Subway restaurant,” said Morrow. “This gives the Subway restaurant its own separate identity, and gives it a more ‘traditional’ feel.” There is some debate as to which model works best for marketing a branded foodservice operation in a convenience-store environment: the “store-within-a-store” approach or, as preferred by Morrow, separate entities

HOW TO “C-stores need to analyze their CREW INSIGHT prospective branded partner’s

track record on staff training and retraining, distribution partnerships and sourcing, product innovation, merchandising, visits from regional and district managers, suggestions for menu offerings, and pricing in a specific location and consumer insights.” — Tim Powell, Q1 Consulting

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with easy back-and-forth access. Ryan Krebs, director of foodservice at Rutter’s Farm Stores, a York, Pa.-based convenience store chain with more than 60 locations throughout central Pennsylvania, feels the best strategy is to leverage the branded foodservice partner and c-store on the same property, but with separate entrances. “Maybe a small corridor leading from one to the other, but not a so-called ‘storewithin-a-store,’” he said. While Rutter’s itself does not participate in a branded foodservice partnership — opting instead for a wholly proprietary foodservice program — Krebs feels this strategy is the best way to maximize the effectiveness of store branding for c-stores that do. “If your customers see a Subway right in your footprint, they might not bother to even look at your sandwiches or roller grill,” Krebs reasoned. “Having a foodservice partner on the property but right next door allows the c-store operator to have its own identity.” Papa John’s Pizza, which has a presence in the convenience channel, also believes the best practice is for the branded foodservice to be separate from the convenience store. Joe Smith, senior vice president of global development, cited a few reasons why: the customer perceives this as a “food experience” occasion; it allows the employees to focus on food operation; and this approach provides the branded food operation the space to advertise and serve customers while also having an opportunity to serve customers who visit the convenience store. On the other side of the debate, Tom Cook, principal at King-Casey, a Westport, Conn.-based restaurant, foodservice and retail consulting, branding and design firm, feels the best practice is for a c-store operator to integrate the branded foodservice partner physically into the store. “The integration of the concepts offers impulse purchase opportunities for both,” Cook noted, adding that this method also creates opportunities to crossmerchandise. “For example, Subway’s foodservice offerings could be merchandised in the cold beverage section of the c-store.” Alex Neville, director of international operations

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for Kahala Brands, which counts Blimpie among its stable of restaurant franchise brands, believes branded foodservice can be successful either within the store or as an adjacent restaurant. Either way, he said a key element to success is creating a distinct and noticeable presence for the branded foodservice partner. “The customer’s eyes need to be drawn to the [branded partner’s] space, so it’s important that the brand’s identity be distinct from the convenience store’s,” Neville advised. In terms of signage and display, “the brand’s colors, textures and standards should be present to draw in the customer and provide instant brand recognition.” Location is one of several factors that play a vital role in deciding whether to make the branded foodservice partner part of the store or a separate restaurant. The first question posed by Ed Burcher, principal of Burcher Consulting, a company specializing in foodservice, convenience, retail and merchandising solutions located in suburban Toronto, is: Is the store a neighborhood, commuter or highway location? “Stores with a branded foodservice partner in a commuter area may want to emphasize the drive-thru and minimize in-store seating for labor and space efficiencies,” he explained. While a branded foodservice program should be a component of the retailer’s overall messaging and product line offerings, it will most often require its own marketing plan as well. “There are a variety of unique brand attributes or product offerings that open great opportunities for business that will only be maximized if approached strategically,” added Steve Evans, senior vice president of marketing for Kahala Brands. “Perhaps the brand added a product line that allows the store to market itself to a completely different audience, or added a daypart offering like breakfast that requires marketing campaigns specific to driving in customers as they commute to work.” SUPPORT IS KEY

A branded foodservice partner should provide c-stores with easy access to point-of-sale and promotional materials, product information, and prepara-

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Our How To Crew David Bishop — Balvor LLC Joseph Bona — Bona Design Lab LLC Ed Burcher — Coen Markets Nancy Caldarola — Food Training Group Joseph Chiovera — XS Foodservice & Marketing Tom Cook — King-Casey Jack W. Cushman — CST Brands Inc. Chad Dewberry — McLane Co. Inc. Dean Dirks — Dirks & Associates Ryan Krebs — Rutter’s Farm Stores Mathew Mandeltort — Eby-Brown Co. LLC Larry Miller — Miller Management & Consulting Services Tim Powell — Q1 Consulting Wesley Price — Murphy USA Inc.

tion and equipment guidelines. “These should be minimum requirements from the supplier to ensure the manufacturer is supporting the operator, while at the same time protecting their brand and the way it is presented at retail,” said Sharon Kuncl, vice president of merchandising — foodservice for convenience distributor Eby-Brown Co. LLC. “Some branded foodservice programs are intended to be part of the store, while others work well as a standalone. It depends on how the program is structured, and how the brand is offered in other similar stores.” A foodservice partnership should always include an extensive training program to equip the franchisee with the knowledge and tools they need to be successful. Subway, for instance, requires an extensive two-week training program, including classroom instruction and hands-on training conducted in local training restaurants. “Once the restaurant opens, our local development agents and their staffs provide ongoing operational and marketing support, including monthly restaurant evaluations to help keep franchisees on track with operations and marketing initiatives,” noted Subway’s Morrow. In addition to an extensive national marketing initiative, Subway offers its c-store franchisees local marketing support — signage, media, etc. — and provides them with tips and best practices for implementing their

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own marketing initiatives. Retailers, too, must consider startup fees and percentages paid to their potential partners when shopping around for branded foodservice programs, pointed out Tim Powell, vice president of Q1 Consulting, a Chicagobased foodservice consultancy. “C-stores need to analyze their prospective branded partner’s track record on staff training and retraining, distribution partnerships and sourcing, product innovation, merchandising, visits from regional and district managers, suggestions for menu offerings, and pricing in a specific location and consumer insights,” Powell said. From Kahala Brands’ perspective, a branded partner needs to offer convenience stores the same level of support, training and marketing as it would any traditional location. Every store has its own unique set of opportunities and challenges. “A c-store location is unique and comes with its own set of challenges,” noted Evans of Kahala Brands. Such challenges include parking, insufficient signage, and limited build-out space. “There must be a collaboration between the franchisee and partner

teams to discuss and address these concerns and to identify solutions,” Evans continued. “In this way, advantages can be leveraged from either a marketing or operational standpoint.” Managing a foodservice operation is never easy, and that is why it’s imperative for a foodservice provider to deliver as much support to its partners as possible, said Steve Watkins, CEO of Sioux Falls, S.D.-based Orion Food Systems, a major supplier of pizza and chicken products to convenience stores. Orion maintains a team of experts that focuses on overall foodservice operations, including food safety, profitability analysis, Food and Drug Administration compliance, and HACCP certified training. “Considering gas margins are unbelievably low, it’s vital that stores place a large focus on foodservice — because that’s where the higher profits reside,” Watkins said. CSN

HOW TO “If your customers see a Subway right in CREW your footprint, they might not bother to INSIGHT even look at your sandwiches or roller grill. Having a foodservice partner on the property but right next door allows the c-store operator to have its own identity.” — Ryan Krebs, Rutter’s Farm Stores

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What the Car Wash Pros Know

Operational and marketing practices c-stores can “borrow” from professional car washes By Renée M. Covino

mitation is not only the sincerest form of flattery, but it can also be a wise business move. Take, for instance, convenience store car washes. What better way to improve service than to imitate a few moves from the pros? Evaluating the overall business, it helps to recognize what most separates the way a professional car wash service is run vs. the way a c-store car wash service is run. A retail professional car wash typically generates all of its income from washing cars, so the process of cleaning cars gets 100-percent focus from the owner/ operator. “Wash quality is constantly monitored, and problems are caught early and addressed immediately,” said Steve Robinson, vice president of marketing for Mark VII Equipment Inc., a provider of vehicle washing equipment and car wash technology. What’s more, the main focus of the professional car wash today is based largely on the customers’ experience — “making it fast, convenient and even entertaining, with high-quality LED signage and lighting packages that combine with specialty chemical packages to not only produce clean, dry and shiny cars, but also enhance the wash experience with vibrant colors and pleasing scents,” said Kevin Collette, vice president of sales and CTO (Compact Tunnel Organization) for Sonny’s Enterprises Inc., manufacturer of conveyorized car wash equipment, parts and supplies. Additionally, many professional car washes invest in a high-quality central vacuum system that’s offered to all customers as “free vacs.” These are seen as professional, easily accessible, and are a huge traffic-builder magnet, according to Collette. In contrast, convenience stores have many product categories competing for the attention of the owner/ operator, meaning wash quality may not be monitored as closely. “If it’s not, wash quality will deteriorate over time and dissatisfied customers will look else-

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Constant monitoring of wash quality is paramount, along with preventive maintenance.

where to get their cars washed,” said Robinson. “This can be easily avoided with a conscious effort by the owner/operator to monitor wash quality, ensure preventive maintenance is performed, and quickly resolve any issues that arise.” PRO OPERATIONAL TIPS

More specifically, here are top operational practices that c-stores can “borrow” from professional car wash businesses, according to supplier experts: • Inspect the bay several times daily. Ensure that it is clean and inviting for customers. “Clean up any debris in the bay and make sure doors, lighting and customer signage are in good condition and working order,” said Robinson. Also, make sure disposal cans are emptied and the vacuum area is inviting, added Collette, and check that the signage is current and easy to follow. • Run test washes every day to assess wash quality. “If there’s an issue, contact your service provider

to have it addressed immediately, before it leads to downtime and costly repairs,” Collette advises. • Invest in dedicated car wash staff. Those with specific job duties designed to ensure the car wash is running at optimal levels every hour that it is open will mimic a professional car wash, according to Collette. • Consider your point-of-sale system. Do you have state-of-the-art POS equipment that allows customers to pay easily and upgrade easily beyond the average ticket sale? • Make a chemical and equipment check. “Wash chemicals have to be applied properly and consistently, while teaming with the cleaning equipment, to provide a fast, safe, clean, dry and shiny car,” said Collette. Investments in equipment and in your wash tunnel that allow for wash demand to be captured is key. PRO MARKETING TIPS

Marketing-wise, professional car washes today focus their efforts in two main areas: attracting new customers, and maintaining existing customer loyalty. Here are top marketing practices c-stores can copycat from professional car wash businesses: • Market using professional terminology. Terms and buzzwords such as “fast/express,” “3-minute service,” and “offering free vacs” are what the pros use. “These components, when tied to an attractive base price point of $3 to $5, serve as the magnet for drawing customers into the wash,” Collette told Convenience Store News. • Prominently display the car wash menu at all points of sale. For a convenience store, this means: gas pumps, the checkout counter, and car wash entry system. “Make sure the menu clearly describes the added value the customer will receive by upgrading to top wash packages,” relayed Robinson. • Provide clear directional signage. Make sure there’s signage around the site to guide customers to the wash bay. “You’d be surprised how many c-store wash bays have no signage on the bay exterior to let customers know there’s a car wash inside,” Robinson said. • Cross-merchandise the car wash with related service items. Such items could include a multi-function air vacuum like the PowerVac from Industrial Vacuum Systems, which allows customers to vacuum their cars and fill their tires with air by just

Upgrades, like this one, are available to enhance the customer experience.

flipping a switch. “A lot of this business is impulse and curb appeal, and multi-function units are an attention-getter,” explained Patrick Pearson, sales manager for Industrial Vacuum Systems. C-store car wash operators are coming up with different ways to utilize the product — some are charging for both services, charging just for the vacuum and giving the air away for free, or offering both services for free with a car wash package. • Run promotions several times a year. Call attention to the benefits of the car wash. “Keep the messaging bold and simple, and display it all around the property to encourage store and gas customers to get a wash while on-site,” Robinson said. • Create a loyalty program that rewards repeat customers. A program can be managed by any modern car wash entry system, according to Robinson. From the professional car wash stance, “unlimited wash” programs/clubs allow customers to wash their cars as many times as they desire for a monthly subscription price. “Typically, the unlimited wash programs are sold at three or four times the cost of the base wash price,” noted Collette. For example, if a base wash is $5, the monthly subscription price would be about $19.95. Many pro car washes offer a premium wash package as well. “When the club member approaches the POS, a RFID identifies the member. [Package] upgrades, such as tire shiner and high-quality conditioners, create an average ticket well above the base cost.” The billing is done monthly via credit card. • Consider a community giving event. A charity/ fundraising event, like a renewable towel exchange program, can bring in customers and create further loyalty.

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WHAT IDEAS NOT TO BORROW

With all these “dos,” are there any practices of a professional car wash business that do not fit with a convenience store car wash business and should not be copied? “Many of today’s professional car washes are trying to be everything to everybody by creating a business model known as ‘flex serve’ — offering customers exterior-only washes and [then] offering optional interior cleaning; in effect providing ‘full service’ as an option. This may be a great concept for a professional wash, but I believe a c-store needs to create a wash model that suits it and its potential customer base, and then operate that at the highest level,” Collette maintained. He also believes it should be recognized that professional car washes do a lot of market research to determine what style of wash to build and where to build it. “Most c-stores are where they are; they can’t change their demographics,” he said. So, he advises c-stores to study their sites and analyze each property to determine its “car washing potential,” and then configure the wash that will best maximize the busi-

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ness on that site. Collette said the most common question Sonny’s gets from c-store operators is: How can I upgrade and make my car wash more profitable? This ties in to the aforementioned “car washing potential,” which can be a tricky undertaking, Collette acknowledged. “Car washing potential requires a significant amount of due diligence. It’s not as simple as, ‘Well, we sell 250,000 gallons of fuel a month, so we should sell X amount of car washes per month,’” he explained. “To properly analyze, many factors must be evaluated such as traffic, traffic patterns, demographics, car washing competition, and the physical attributes of the site itself.” The bottom line is that c-store car washes are evolving as a highly profitable operation and not just a side operation that could potentially help sell more fuel and cigarettes. In fact, many c-store operators are looking at car washing as a standalone business due to the rapidly growing “Express Exterior” business model, reported Collette. CSN

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STORESPOTLIGHT Parker’s Market Urban Gourmet

‘Fancy Parker’s’ Gets Even Fancier

The retailer conducted a thorough SKU evaluation ahead of the remodel to ensure the market’s product mix matches customer preferences.

Parker’s Market undergoes a gourmet makeover to enhance its foodservice offerings By Danielle Romano

he winds of change were calling Parker’s Market Urban Gourmet’s name. And Greg Parker, president and CEO of The Parker Cos., operator of Savannah, Ga.-based Parker’s convenience stores, was prepared to heed the call. Dubbed by the company as “Fancy Parker’s,” Parker’s Market Urban Gourmet opened in 1999 to provide customers with an upscale, one-stop shop, grab-and-go experience in a market setting. Today, the flagship location remains open 24 hours a day, seven days a week. “At the time, there was no 24/7 retail option for convenience items, freshly prepared foods, gourmet foods, fine wine, craft beer and creative gifts. I knew there was a need to open an upscale, 24/7, grab-and-go experience in Savannah, featuring a market with prepared foods,” Parker recalled to Convenience Store News. Residing in a restored 1899 Mediterranean-style building located at 222 Drayton St. in the heart of Savannah’s National Landmark Historic District,

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Parker’s Market has since been featured in USA Today and named the No. 4 best restaurant in Savannah on TripAdvisor. “Earning accolades from TripAdvisor is especially meaningful to us at Parker’s because that honor comes from our customer base,” the chief executive said. “… [It] is a grassroots vote of confidence from our customers who choose to go online and rave about our hot deli offerings — from our award-winning crab stew to our delicious chicken tenders made with hormone-free and antibiotic-free chicken breast.” Still, a remodel of the store had been in sight for some time. The location underwent one major remodel in the fall of 2007. With spring traffic just around the corner and with January trending as a quieter month, the retailer decided the timing was right for a remodel, knowing it would have minimal effect on customers and local staff. During the remodel, staff were offered vacation days or the option to relocate to a different store — whichever their preference.

In mid-January, Parker’s announced via the company’s Facebook and Instagram accounts that “big changes” were coming to the “Fancy Parker’s.” Less than two weeks later — 12 days to be precise — local residents and tourists were welcomed back to the newly renovated Parker’s Market Urban Gourmet, which had transformed into a foodservice oasis. A LESSON IN MERCHANDISING

From its inception, the core design and layout of Parker’s Market has remained largely the same. However, that cannot be said about the store’s product mix. A practice that has remained tried-and-true for the retailer at its flagship location is that it consistently redefines and expands the product selection based on consumer demand and customer preferences. One way of doing this is analyzing by SKU to determine which products are popular and which are less popular, and adjusting its inventory accordingly. “Parker’s Market is an evolving concept in terms of its aesthetics, design and product mix,” explained Parker. “I agree with Steve Jobs that it’s important to understand the changing desires of consumers and to anticipate their needs.” Evaluating the SKUs and services of Parker’s Market before the remodel revealed the store had too much space dedicated to wine and gifts, and not enough space for packaged beverages and prepared foods. Parker’s customers were also looking for more healthy options. It is with this feedback that the retailer decided to introduce a full-service salad bar to “Fancy Parker’s.” The salad bar — a trend that has been popping up at c-stores in recent years — offers more than 30 toppings and homemade salad dressings. A hot panini press has also found residency at Parker’s Market, offering a selection of specialty flatbread sandwiches, complete with a sauce and condiment bar with 30-plus fixings. For those looking to satisfy their sweet tooth, the store’s bakery case has been expanded, now loaded with a variety of freshly made cookies, brownies, muffins, bagels, and more. Customers looking to quench their thirst during sultry Savannah days have a bevy of beverage choices via Parker’s Market’s expanded selection of fountain and frozen drinks, including newly added milkshakes and specialty bottled beverages like artisan juices, craft sodas and cold-brew coffees. As part of the retailer’s strategy to offer more of

what customers are looking for, the executive decision was made to remove the growler station at Parker’s Market. “Sales at the growler station didn’t justify the space devoted to it at Parker’s Market. We decided to make our packaged beer more accessible with reach-in, doorless coolers, and to focus more on the craft beer category,” Parker explained to CSNews. Beyond product offering, the interior of Parker’s Market also received a new, innovative look. With strategic aesthetic changes to the store’s layout designed to make the customer experience more convenient, the checkout area was removed and replaced with a queue line for impulse items. The retailer also expanded the kitchen; replaced coolers; ordered custom-made equipment for optimal freshness and quality; replaced fixtures; and upgraded the store’s lighting. The remodeled look was finished off with retiled walls, porcelain brick, flatiron accents, and Mediterranean-style tile throughout the store. SOMETHING UNIQUE

The Parker’s Market remodel is just one of several ways Parker’s is growing strategically and responding to the evolving needs of its customers. According to Parker, the The additions of a salad bar, panini remodel is a calculated step in press, and expanded fresh beverages the company’s five-year plan, were part of the store’s transformation into a foodservice oasis. which is to exceed $1 billion in annual sales. The five-year plan was announced during the company’s 40th anniversary in 2016. When asked if customers can expect to find another Parker’s Market opening in the future, Parker assured CSNews that this store is a oneoff for the retailer. “This store has always been a unique concept for Parker’s, and we intend to keep it that way,” he expressed. Parker’s operates 48 convenience stores throughout southeast Georgia and South Carolina. CSN

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EXPERT’SVIEW NEW Horizons

Five Leadership-Building Tips for First-Time Managers The move from peer to boss can be tricky. Here’s some advice

it down with a woman at the top of the retail industry and you’ll likely hear about a career journey that started with an entry-level, in-store role. The convenience store industry is especially known for moving women from behind the checkout to the By Nancy Krawczyk, store manager’s office — and on to Network of positions of even greater influence. Executive Women It isn’t easy to transition from being a great individual contributor to an effective leader of others. A step up the ladder can be exciting, empowering — and uncomfortable — for women or men who are hesitant to embrace authority, or place special value on their workplace friendships. Once-friendly peers become distant direct-reports. Performance is evaluated less on easy-to-measure “doing” and more on harder-to-quantify “leading.” What you say and how you say it is constantly judged by your team, your new peers, and your boss. Here are five ways to make the shift successful:

Ask for the leadership development you need First-time managers often step into their new roles with little leadership training. Add in the delicate

Convenience Store News is pleased to continue this series of exclusive educational columns by the Network of Executive Women (NEW), coinciding with the annual CSNews TOP WOMEN IN CONVENIENCE Top Women in Convenience awards given out each fall. More than 60 female managers, executives and directors who work in the convenience store industry were honored in our 2016 program. In addition to being a presentation sponsor for the Top Women in Convenience program, NEW

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task of redefining work relationships, and first-time managers can find themselves tossed on the waves of new responsibility. The faster you become an effective manager, the fewer problems your friends and former coworkers will have adjusting to your new role. You probably made your mark getting things done, but are you able to delegate to others effectively? How are you at establishing goals that align with the company’s business goals? How about coaching others so that they can reach their full potential? Do you need to beef up your communication and team-building skills?

and CSNews have partnered to develop this series of columns directed at helping corporate leaders drive more inclusive company cultures. Sponsored by:

Step up with confidence Projecting confidence may not feel easy, but it’s necessary for first-time managers — especially women, who are often judged more severely than male peers who take on a new role.

Prepare yourself for losing a work friend Research by the Center for Creative Leadership found that the primary concern of most first-time managers is the move from friend to boss. One of the nearly 300 first-time managers participating in the research summed up the challenge: “It’s hard for me to adjust to managing people who used to be my

Moving from peer to boss can be tricky, but the convenience store industry will benefit when it advances more women leaders. And so will you and your team. coworkers. Sometimes I feel that people don’t take tasks and projects as seriously as they should because they think they can use their friendly relationship with me to their advantage. I’m having a hard time drawing this line because we used to work at the same level.” If you’re navigating the transition from friend to boss, be proactive. Set expectations and work boundaries with every direct-report. Be clear about your vision for the group. Have an honest conversation with work friends about what management expects from you and your desire to meet those goals. It may feel natural to spend more time with direct-reports

with whom you’re friendly, but be sure your time, company resources, and rewards are allocated fairly.

Earn credibility No first-time manager has all the answers. Don’t fake it. The more authentic you are, the faster you will build trust. You’ll earn respect through honest, direct conversations about your vision for the team. Don’t push problems you may have inherited under the rug; it’s OK to question the past practices. Be sure to ask each direct-report how they like to be led and how they see themselves contributing to the group’s goals.

Ask for honest feedback, early and often Effective leaders need to hear the truth about team dynamics, business strategies and results. I know few women who have the courage to offer the boss the unvarnished truth. Amy Gallo, author of the Harvard Business Review’s “Guide to Managing Conflict at Work,” offers a few tips to build trust and get the feedback you need: • Explain how you’ll respond to the feedback. • Don’t wait for review time to ask for input. • Don’t rely on one source for feedback. Turn to a few trusted people who can tell you what others really think about your performance and ideas. • Don’t assume you’re going to get 100-percent honest feedback, especially at first. Start by gathering feedback anonymously to show your directreports you’re receptive. Moving from peer to boss can be tricky, but the convenience store industry will benefit when it advances more women leaders. And so will you and your team. CSN

Nancy Krawczyk is vice president, corporate partnerships and engagement, for the Network of Executive Women, Retail and Consumer Goods, a learning and leadership community representing more than 10,000 members, 950 companies, 100 corporate partners and 20 regional groups in the United States and Canada. Learn more at newonline.org. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

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OUTABOUT &

Spotlighting major industry events

Convenience on the Menu NAFEM Show 2017 highlighted c-stores’ importance to foodservice equipment manufacturers By Angela Hanson

he foodservice growth opportunities found in the convenience channel were reflected in the product development and strategic plans of many exhibitors at the 2017 NAFEM Show, held in Orlando Feb. 9-11 by the North American Association of Food Equipment Manufacturers. Many vendors on the show floor reported an increased focus on catering to convenience store operators. Even some equipment manufacturers whose clients typically NAFEM Show operate outside the c-store segOrlando, Fla. ment said they are attempting to February 9-11, 2017 break into c-stores or plan to do so in the near future. “As lines have blurred, we all know they’re fighting for that dollar,” remarked Vickie Sims of Taylor Co., a foodservice equipment supplier that exhibited at the show. New innovations showcased included: ANTUNES: Antunes’ Egg Station unit occupies a small footprint and allows users to cook perfectly formed egg patties for breakfast sandwiches. Each egg can be cooking individually, allowing for staggered cook times and less waste. Also of particular note for c-stores that operate in regions with a large Hispanic population is Antunes’ compressed toaster for tortillas that provides pressed, hot tortillas in just seconds. The prototype unit is currently being tested at a c-store chain and has so far yielded positive results, the company told Convenience Store News. BUNN: The launch of Bunn’s Infusion coffee brewer series is part of an overall rebranding of the company’s visual look. The sleek, modernized design of the twin brewer changes its function as well as its form. The company focused on easy cleanability, as the top of the coffee drum comes completely off, allowing users to reach in and clean. The single handle on top of the drum also replaces the old design for an easy, one-hand carry. ELOMA NORTH AMERICA: Two years after having virtually no foodservice equipment suitable

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for c-stores, Eloma is specifically targeting the channel with its Genius MT unit. Designed to provide the service and utility of a full-size combi unit in a pintsized version, the unit has nine cooking methods. “The versatility for c-stores is increasing tremendously,” said Thomas Stegmaier, president of Eloma North America. RESTAURANT TECHNOLOGIES: This provider of back-of-house innovations kicked off the “Year of the Smarter Kitchen” at this year’s NAFEM Show. Focal points were its automated Total Oil Management solution and its recently launched Automist, an automated hood, flue and fan cleaner. Total Oil Management utilizes a permanent setup that delivers oil to the fryer through pipes. The system tracks oil usage data, allowing operators to cut down on waste. The Automist allows foodservice operators to achieve a “steady state of clean” in the hood through daily misting. WELBILT INC.: Formerly Manitowoc Foodservice, Welbilt attended the NAFEM Show as its first trade show under its new name. The company invited members of the media to attend a morning mingle with President and CEO Hubertus M. Muehlhaeuser. “Kitchen is the heart of our business,” Muehlhaeuser said, describing how the company views the kitchen as more than the sum of its parts, and designs all its products with consideration of how they will work with one another. Welbilt strives to reduce waste and improve energy with every piece of equipment, he continued, something that was true under the company’s old name and remains so under the new one. CSN

At the Intersection of Wholesale & Retail All sides of the industry gathered at the 2017 Convenience Distribution Marketplace By Melissa Kress

layers from all corners of the convenience channel took a break from the winter to enjoy the warmth and sunshine of Florida while attending the Convenience Distribution Association’s (CDA) 2017 Convenience Distribution Marketplace event. On the agenda were new insights, products, services and equipment available Convenience to retailers and distributors. Distribution The conference, held Feb. Marketplace 13-15 at the Hilton Orlando, February 13-15, 2017 featured a program packed Orlando, Fla. with concurrent educational sessions. Topics ranged from food safety with Anne Barker Smith, president of A. Barker-Smith Consulting; to category insights with Kit Dietz, president of InfoRhythm; to tobacco legislation with Thomas Briant, executive director of the National Association of Tobacco Outlets. Mitch Zeller, director of the Food and Drug Administration’s (FDA) Center for Tobacco Products (CTP), was also on hand to provide a six-month update on the agency’s final deeming rule, which went into effect Aug. 8 and gives it Mitch Zeller of the FDA provided authority to regulate all an update on the agency’s tobacco products. deeming rule. Zeller acknowledged there are still several sticking points with the deeming rule, particularly the inclusion of premium cigars, and uncertainty surrounding the role and future of vape shops. Any efforts to change the rule governing premium cigars will be left up to Congress, Zeller reported. And as for vape shops, according to the CTP head, existing

A full-day exhibition featured approximately 150 vendors.

statute — not the FDA — defines a “tobacco manufacturer,” and vape shops that mix their own liquids, for example, fall in line with that definition. However, as Zeller pointed out, not all vape shops mix e-liquids. Some are traditional retailers that sell finished products to an end user and, therefore, do not meet the statutory definition of a manufacturer. Since the deeming rule went into effect, there have been more than 2,500 warning letters issued by the agency for newly deemed products. EXHIBITING INNOVATION

Along with the wide-ranging educational programming, approximately 150 exhibitors took part in a full-day Convenience Distribution Marketplace exhibition on Feb. 15. Participating companies covered all areas inside a c-store. Alligator Ice of Wentzville, Mo., showcased offerings in the dispensed beverage space, including its slush brand, while Dallas-based Global Tobacco LLC displayed its tobacco lineup from cigarettes to e-liquids. Representing man’s best friend, Treat Planet featured its Chewzees dog treats — a product line the Maryland Heights, Mo., company launched specifically for convenience stores. And new to the industry and the CDA show was SKUPOS, a San Francisco-based software company that provides inventory management tools to both c-store retailers and distributors. CSN

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HOTPRODUCTS Special Advertising Section

ATMâ&#x20AC;&#x2122;s

Car Wash Solutions

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HOTPRODUCTS Financial Services

Special Advertising Section

Gourmet Pet Treats

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HOTPRODUCTS Special Advertising Section

Skimming Prevention

FOR ALL YOUR NEW PRODUCTS AND SERVICES ADVERTISE IN

CSN

HOT PRODUCTS

CALL

TERRY KANGANIS

201.855.7615

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CLASSIFIED Credit Card Processing / Merchant Services

WWW.CSNEWS.COM | APRIL 2017 | Convenience Store News 81

CLASSIFIED Pet Treats

Why not?...

50% of your customers own a dog. Gross profit margins average 40%. Our retail prices are 30-50% below the big box pet stores. Our product variety and quality offers a selection for any type of dog. Our wooden display case is handmade in our Michigan workshop and brings attention to itself.

PIG EAR DISPLAY COMING SOON! ting Celebrsa in the 10 Yeaer Market C-Stor 2017! in

It pays to be Different.

Please contact your distributor, Michael or Rick at 877-715-4555

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3302 Associates Dr. Burton, MI 48529

CLASSIFIED General Merchandise

ATMs

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CLASSIFIED Pre-Paid/Cellular Products

Air Vacs

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CLASSIFIED Plastics

Age Verifier

Petroleum/Equiment

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CLASSIFIED Sunglasses

Age Verifier

FOR ALL YOUR NEW PRODUCTS AND SERVICES ADVERTISE IN

CSN

HOT PRODUCTS

CALL

TERRY KANGANIS

201.855.7615

86 Convenience Store News | APRIL 2017 | WWW.CSNEWS.COM

CLASSIFIED Air Vacs

Services

of retailers

who read Convenience Store News do so because they want to find out about new products. Reach those important hard to reach retailers by advertising here in the Hot Products Section of Convenience Store News by contacting:

Terry Kanganis EnsembleIQ at:

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CLASSIFIED Financial Services

Financial Services

ATMâ&#x20AC;&#x2122;s

Equipment / Supplies

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Equipment / Supplies

Wholesale Refrigeration

CLASSIFIED Check Guarantee Services

General Merchandise

FUR TAILS FROM $2-$15 DAVY CROCKETT HATS $5.00 Silver Fox tails are a good seller!

We have: Red Fox tails, Coyote tails, White tails, Racoon tails, etc.

Leopard Rabbit Skin

Rabbit Skins come in White and Ivory for $2.00 and Leopard for $8.00

Strips Inc. Tel.: (718) 786-3381 Fax: (718) 786-0203 http://stripsinc.tripod.com STRIPSINC1@aol.com

ADINDEX Altria Group Distribution Company .................................................2-3 Anheuser-Busch.................................................................................92 Cash Depot..........................................................................................40 Cenex ...................................................................................................71 Regional Cheyenne International ....................................................................41 Cookies United ...................................................................................17 Crown Imports ....................................................................................13 Del Monte Fresh Produce ..................................................................11 E-Alternative Solutions .....................................................................19 Heineken .............................................................................................51 ImageWorks Tobacco Display ...........................................................55 Industrial Vacuum Systems...............................................................70 InLine Plastics.....................................................................................38 ITG .......................................................................................................33,47 John Middleton...................................................................................23 JT International U.S.A,Inc. ................................................................35 Kretek ..................................................................................................31 Liggett Vector Brands ........................................................................25 Living Essentials ................................................................................5 Mondelez International .....................................................................21 Nat Sherman .......................................................................................43 National Tobacco ................................................................................37 Omega Flex .........................................................................................18 Organic Valley ....................................................................................65 Perfetti Van Melle...............................................................................53 Premier Manufacturing, Inc. .............................................................39 PFS Bands ...........................................................................................66-67 RJ Reynolds Tobacco Company .......................................................9 SM Brands ...........................................................................................59 Subway................................................................................................63 Swedish Match ...................................................................................27,45 Swisher International Inc. ................................................................15,29,49,91 Tillamook Country Smoker, Inc. .......................................................57 Tyson ...................................................................................................7,61 Universal Merchant Services ............................................................Outsert

570 Lake Cook Road, Suite 310, Deerfield IL 60015 Phone (224) 632-8200 Fax (224) 632-8266 www.ensembleiq.com Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright Â© 2017 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

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GETTINGTOTHECORE

At Your Service C-store shoppers are open to trying drive-thru, delivery and more

ith today’s consumers more time-strapped than ever, savvy convenience store operators are broadening their slate of services, as well as enhancing the ease of shopping their locations. To get a gauge on exactly what types of services c-store shoppers are open to trying, Carbonview Research, sister company of Convenience Store News, recently surveyed roughly 500 U.S. consumers who shopped at a convenience store in the past month about their attitudes and purchasing behavior around new trends, products and services.

If the following services were available at a convenience store, how likely would you be to try each? ALREADY TRIED IT

Drive-thru Mobile ordering Mobile payment Delivery Lockers (UPS, Amazon pickup)

9.7% 6.1% 6.1% 4.9% 2.4%

LIKELY

NEUTRAL

NOT LIKELY

64.5% 47.5% 42.0% 46.4% 37.9%

13.0% 19.9% 20.9% 18.7% 19.9%

12.8% 26.4% 31.0% 30.0% 39.8%

C-store shoppers are least keen on trying lockers, like Amazon or UPS pickup.

More than six in 10 convenience store shoppers said they would be likely to try drivethru service if it were available, and roughly one in 10 said they have already tried it. C

Base: 507 respondents who shopped at a c-store in the past month Source: Convenience Store News Market Research, 2017

“A convenience store that is far from my house DELIVERY was able to deliver food to me and that was pretty awesome since their food is really good and homemade.” — An 18- to 24-year-old male from Delaware

If drive-thru were available at a convenience store, how likely would you be to try it? MALE

Not likely Neutral Likely Already tried it

16.6% 17.0% 55.8% 10.6%

FEMALE

8.7% 8.7% 74.0% 8.7%

Females are notably more open than males to trying a convenience store drive-thru.

Base: 507 respondents who shopped at a c-store in the past month Source: Convenience Store News Market Research, 2017

Want to collaborate and share expertise with your peers? The Council of Retail Experts (CORE) is an exclusive network of convenience store retail leaders who do just that. For more information on how to join CORE, please visit www.cvcoreinsights.com.

If mobile ordering were available at a convenience store, how likely would you be to try it? MALE

Not likely Neutral Likely

Survey respondents sourced via ProdegeMR, a leading provider of data collection solutions for the research industry. Visit www.prodegemr.com for more info.

Already tried it

29.8% 18.5% 43.8% 7.9%

Base: 507 respondents who shopped at a c-store in the past month Source: Convenience Store News Market Research, 2017

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FEMALE

22.7% 21.5% 51.7% 4.1%

Mobile ordering is more appealing to female c-store shoppers than their male counterparts.

CMY