NACS Magazine June 2024

Advancing Convenience & Fuel Retailing

JUNE 2024 DAYPART DISRUPTION Consumer mealtimes are changing MENTHOL PROHIBITION Data shows bans create a black market

Behind Numbers the

Exclusive insights from the 2024 NACS State of the Industry Summit show many paths to greater profitability.

convenience.org

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NJOY

ONTENTS

96

NACS / JUNE 2024 FEATURES

34 Optimizing the Foodservice Formula

This article is brought to you by Krispy Krunchy Chicken.

Krispy Krunchy Chicken’s simplified menu and streamlined supply chain leads to more profit for retailers.

38 Six Insights from the SOI Summit

Back to the basics … and the future is here.

48 Another Record Year for Sales

Sales grow as labor remains a challenge and operating expenses increase.

56 The More Things Change …

Led by a few standout subcategories, in-store sales look steady.

68 The Age of On the cover: tanewpix289/Shutterstock

Convenience Retail Resiliency

70 Region

Breakdowns Data from the six NACS regions shows that even when big trends align, there are important differences in performance around the country.

78 Evolving Globally Convenience innovations from around the world will propel the industry forward at home and abroad.

84 The Only Thing

Predictable in the Fuels Market is Unpredictability Volatility may come from the sky, whether humanmade missiles or Mother Nature’s storms.

90 A Friction-Free Future

Convenience retail experts look at the ways to transform the customer and employee experience through technology.

Retailers can find success in the current ‘Goldilocks economy.’

Daypart Disruption

With fewer people following a traditional meal schedule, innovative offerings can cater to a wider selection of eating occasions.

106

122

No one is coming to save you—so put on your own cape.

NACS Human Resources Forum provides insights on what’s next for HR professionals.

Surviving a Time of Possibilities

110 Brewing Up

Perfect Partnerships This article is brought to you by SEB Professional.

Future Foresight

128

Unpacking the Menthol Black Market

Want to make coffee a destination driver? Start by collaborating with your suppliers.

Massachusetts and California provide a scary preview of what happens during a menthol prohibition.

114 Let It Roll

134 3 Potential Futures

Despite an increase in foodservice options, c-stores remain a haven for roller-grill aficionados.

This article is brought to you by Kretek International.

for the Backbar

With smoking down and future bans looming, retailers will have to reevaluate their tobacco assortment.

STAY CONNECTED WITH NACS @nacsonline facebook.com/nacsonline instragram.com/nacs_online

Subscribe to NACS Daily—an indispensable “quick read” of industry headlines and legislative and regulatory news, along with knowledge and resources from NACS, delivered to your inbox every weekday. Subscribe at www.convenience.org/NACSdaily.

linkedin.com/company/nacs NACS JUNE 2024 1

ONTENTS NACS / JUNE 2024

DEPARTMENTS 06

From the Editor

08

The Big Question

10

NACS News

18

Convenience Cares

22 Inside Washington

Class action lawyers settled the swipe fee litigation … and it’s a bad deal for retailers.

So what’s next?

30 Ideas 2 Go IT’S A FACT

$4,178

Candy’s gross profit dollar contribution per store, per month in 2023 CATEGORY CLOSE-UP PAGE 144

Hat Six Travel Center offers unique gifts, private label snacks and locally made items.

138 Cool New Products 142 Gas Station Gourmet NFA Burger draws a line of customers from both near and far to the Dunwoody, Georgia, Chevron station.

144 Category Close-Up

Candy continues to contribute to a healthy bottom line.

152 By the Numbers

PLEASE RECYCLE THIS MAGAZINE 2 JUNE 2024 convenience.org

The presence of an article in our magazine should not be permitted to constitute an expression of the association’s view.

/ JUNE 2024 EDITORIAL

NACS BOARD OF DIRECTORS

Jeff Lenard V.P. Strategic Industry Initiatives (703)518-4272 jlenard@convenience.org

CHAIR: Victor Paterno, Philippine Seven Corp. dba 7-Eleven Convenience Store

Ben Nussbaum Editor-in-Chief (703) 518-4248 bnussbaum@convenience.org Lisa King Managing Editor lking@convenience.org Leah Ash Editor/Writer lash@convenience.org Lauren Shanesy Editor/Writer lshanesy@convenience.org CONTRIBUTING WRITERS Terri Allan, Chrissy Blasinsky, Shannon Carroll, Sarah Hamaker, Al Hebert, Adam Rosenblatt, Emma Tainter DESIGN MX www.themxgroup.com

MEMBERS: Chris Bambury, Bambury Inc.; Tom Brennan, Casey’s; Frederic Chaveyriat, MAPCO Express Inc.; Andrew Clyde, Murphy USA; George Fournier, EG America LLC Terry Gallagher, Gasamat Oil/Smoker Friendly;

NACS SUPPLIER BOARD

Stacey Dodge Advertising Director/ Southeast (703) 518-4211 sdodge@convenience.org

CHAIR: David Charles, Cash Depot

Ted Asprooth National Sales Manager/ Midwest, West (703) 518-4277 tasprooth@convenience.org

PUBLISHING Stephanie Sikorski Vice President, Marketing (703) 518-4231 ssikorski@convenience.org Nancy Pappas Marketing Director (703) 518-4290 npappas@convenience.org

Join us at conveniencecares.org

PAST CHAIRS: Don Rhoads, The Convenience Group LLC; Jared Scheeler, The Hub Convenience Stores Inc.

ADVERTISING

Jennifer Nichols Leidich National Advertising Manager/Northeast (703) 518-4276 jleidich@convenience.org

COME TOGETHER. DO MORE.

OFFICERS: Lisa Dell’Alba, Square One Markets Inc.; Annie Gauthier, St. Romain Oil Company LLC; Chuck Maggelet, Maverik Inc.; Don Rhoads, The Convenience Group LLC; Brian Hannasch, Alimentation Couche-Tard Inc.; Varish Goyal, Loop Neighborhood Markets; Lonnie McQuirter, 36 Lyn Refuel Station; Charlie McIlvaine, Coen Markets Inc.

Logan Dion Digital Media and Ad Trafficker (703) 864-3600 ldion@convenience.org

CHAIR-ELECT: Vito Maurici, McLane Company Inc. VICE CHAIRS: Josh Halpern, JRS Hospitality/BCIP dba Big Chicken; Bryan Morrow, PepsiCo Inc.; Kevin LeMoyne, Coca-Cola Company PAST CHAIRS: Kevin Farley, W. Capra; Brent Cotten, The Hershey Company; Drew Mize, PDI MEMBERS: Tony Battaglia, Tropicana Brands Group; Patricia Coe, Advantage Solutions; Jerry Cutler, InComm Payments; Jack Dickinson, Dover Corporation; Matt Domingo, Reynolds; Mark Falconi,

Raymond M. Huff, HJB Convenience Corp. dba Russell’s Convenience; John Jackson, Jackson Food Stores Inc.; Ina (Missy) Matthews, Childers Oil Co.; Brian McCarthy, Blarney Castle Oil Co.; Tony Miller, Delek US; Natalie Morhous, RaceTrac Inc.; Jigar Patel, FASTIME; Robert Razowsky, Rmarts LLC; Kristin Seabrook, Pilot Travel Centers LLC; Babir Sultan, FavTrip; Richard Wood III, Wawa Inc. SUPPLIER BOARD REPRESENTATIVES: David Charles Sr., Cash Depot; Vito Maurici, McLane Company Inc. STAFF LIAISON: Henry Armour, NACS GENERAL COUNSEL: Doug Kantor, NACS

Greenridge Natural; Ramona Giderof, Diageo Beer; Mike Gilroy, Mars Wrigley; Danielle Holloway, Altria Group Distribution Company; Jim Hughes, Krispy Krunchy Foods LLC; Kevin Kraft, Q Mixers; Jay Nelson, Excel Tire Gauge; Nick Paich, GSTV; Sarah Vilim, Keurig Dr Pepper RETAIL BOARD REPRESENTATIVES: Scott E. Hartman, Rutter’s; Kevin Smartt, TXB; Tom Brennan, Casey’s STAFF LIAISON: Bob Hughes, NACS SUPPLIER BOARD NOMINATING CHAIR: Kevin Martello, Keurig Dr Pepper

NACS Magazine (ISSN 1939-4780) is published monthly by the National Association of Convenience Stores (NACS), Alexandria, Virginia, USA. Subscriptions are included in the dues paid by NACS member companies.

Subscriptions are also available to qualified recipients. The publisher reserves the right to limit the number of free subscriptions and to set related qualifications criteria.

Subscription requests: nacsmagazine@convenience.org POSTMASTER: Send address changes to NACS Magazine, 1600 Duke Street, Alexandria, VA, 22314-2792 USA. Contents © 2023 by the National Association of Convenience Stores.

Periodicals postage paid at Alexandria VA and additional mailing offices.

1600 Duke Street, Alexandria, VA 22314-2792

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UP FRONT FROM THE EDITOR

The View From NACS Research

I

t has been a busy few months here at NACS Research. The State of the Industry Summit in April kicked off what is just the beginning of a packed year ahead.

The State of the Industry Report® of 2023 Data will hit shelves this month.

We’re gearing up for another successful summer of NACS Convenience Voices survey work—last year we collected almost 10,000 responses, and our goal is to surpass that number this year. My colleague Jayme Gough, research director at NACS, unveiled the NACS State of the Industry Talent Insights Dashboard, and interest has been through the roof.

Both one-year and five-year versions are updated with 2023 data and available for purchase. Our propriety database, CSX, and the NACS SOI Data Archive continue to grow.

For those who Look for notes joined us at the from Guest Editor Summit in Chicago Chris Rapanick throughout this year, thank you. this issue.

We were thrilled to see both new and repeat attendees. I hope you were as excited to bring NACS State of the Industry data back to your operations as we were to share it.

I’ve been with NACS for 15 years, and if there’s one thing I’ve learned, it’s that you must manage what you measure.

And conversely, you can’t manage what you don’t measure.

There were a lot of themes at this year’s Summit: expenses, transaction counts, basket value and fuel margins are just a couple that come to mind.

All of these were explored in the 15+ sessions at the Summit, giving attendees 6 JUNE 2024 convenience.org

a deeper understanding of the industry in which they operate.

Before you dive into this issue’s thorough recaps of the Summit sessions, I want to call out some trends I saw in the data. Increasing inflation and retail prices continued to be an issue in 2023.

Looking further into 2024, we may see this impact diminish, but without inflation-fed prices, we will likely see declines in merchandise sales performance and considerably lower growth rates in foodservice. It is imperative that retailers focus on building inside transactions and basket values as growth of inside sales will likely slow in 2024.

To be profitable in 2024, retailers will also have to be laser-focused on expense control. Although operating expense growth slowed in 2024, there seems to be no permanent relief in sight.

But it is not all bad news. Retailers selling fuel in 2023 were able to earn outstanding margins to subsidize gross profits in-store. Employee and manager turnover rates declined and the slowdown in growth of expenses, like wages and benefits and repairs and maintenance, allowed retailers to add some additional dollars to the bottom line.

Our goal here at NACS is to provide the data you need to build your business, and we cannot do it without you. So here is a heartfelt THANK YOU to the over 30,000 convenience stores across the United States that supplied operational data to NACS for this year’s report.

Thank you for reading. As always, reach out to me at crapanick@convenience.org if you have any questions or want to get involved with NACS Research. See you next year at the 2025 State of the Industry Summit in Dallas.

Chris Rapanick managing director, research

To be profitable in 2024, retailers will have to be laser-focused on expense control.

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UP FRONT THE BIG QUESTION

What was your experience like representing the industry on Capitol Hill—and why is it so important to preserve the 199A deduction?

Through NACS, I was invited to represent not only the convenience retail industry, but all small business owners. The 199A deduction and the bonus depreciation in this case only affect pass-through corporations.

Before testifying, we actually went to see the opposition on this one. We were invited by the Republicans. Jon Taets [from NACS] said, ‘You know what, the Republicans are on board.

We’ll do some meetings with them, but I’ll see if I can get some meetings with the opposition.’ And it ended up that the opposition asked more questions of me than the side that invited me, which was very interesting. We thought that was great.

In the prep for testifying on the Hill, the NACS team was fantastic. The first sheet of paper they give you says, ‘Always tell the truth.’ You don’t have to embellish. One of the representatives asked me, ‘With all that money from the 199A depreciation, you didn’t run off to Tahiti, did you?’ Well, it just so happened that I did have a trip planned to Tahiti. I said, ‘I actually am taking a trip to Tahiti, but it’s not because of 199A.’ That was the only time I actually knew there were people behind me, because they all laughed. It was a little bit of levity.

Specifically on the 199A, let me say it this way. I appreciated all of the small business tax cuts prior to this one, but I never really saw the effects of them in my business. Overall, at the end of the day, my taxes would go up.

8 JUNE 2024 convenience.org

 Ray Huff, the president of HJB Convenience, testified in April in front of the House Small Business Committee.

With this one, I got a call from my CPA firm, and the accountant said, ‘Listen Ray, you have the option of a bonus depreciation because of all the coolers you bought … We recommend that you take it.’ Having that come in for my company was a godsend.

I realized this was an opportunity. I could do more. This was found money.

What do you do with found money? If you own a small business, you invest back into it. So I said, let’s go ahead

and get those other fixtures and equipment that we couldn’t purchase before. Let’s get the tech cleaned up at our self-serve stores. And we did some other stuff that the company needed. It was significant. So I just kept investing, investing, investing. The 199A did work for me, and it worked great.

And all that investment is good for the economy. It’s good for small businesses and it’s good for the economy overall.

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UP FRONT NACS NEWS

NACS State of the Industry Report Is Available to Purchase Stay one step ahead with data and analysis that saves you time and money.

Today’s dynamic convenience retail landscape requires a balance of efficiency and effectiveness that can free up resources and fuel new growth. Success requires knowing where you must invest and how to harness data to deliver targeted, personalized offerings and customer experiences.

The NACS State of the Industry (SOI) Report® is the industry’s best tool for improving your business. For more than 50 years, the convenience and fuel retailing industry has relied on the SOI Report to provide a benchmarking tool and the most comprehensive collection of data and trends. The SOI Report will help you: • Understand the big picture with data and analysis on economic, market and shopper dynamics.

• Maximize effectiveness and profitability with access to aggregate financial, operational and category data from

more than 30,000 convenience stores across the United States.

• Benchmark against top performers in the industry and determine key drivers to their success.

Retailers get a behind-the-scenes look at aggregate data in critical areas, including financials, store operations, merchandising, foodservice, fuels and more. Suppliers will be able to streamline R&D resources with targeted insights that will help them discover their next big product innovation or development opportunity.

Here’s what you’ll find: • The Convenience Shopper—Valuable consumer insights from the NACS Convenience Voices program.

• Regional Performance—Comprehensive regional data.

• Industry Overview—Critical findings and actionable recommendations from veteran industry analysts.

ta of 2023 Da

NACS Day on the Hill Shows Convenience United Day on the Hill attendees represented nearly 12,000 convenience store locations across the country.

Sharing your story and building relationships is the easiest way to let Congress know what is important to you.

More than 150 convenience industry advocates from around the country came to Washington, D.C., for NACS Day on the Hill this March. The event offers retailers an opportunity to directly talk

10 JUNE 2024 convenience.org

• Data Visualizations—The insights you need at a glance with compelling charts, graphs and tables that illustrate key trends and patterns.

• Category Studies—A deep dive into category and subcategory performance data across a broad spectrum, including motor fuels, grocery, tobacco, foodservice and more.

• NACS/NIQ Convenience Store Census—Developed by NIQ TDLinx, the premier source of retail/on-premise channel information and endorsed by NACS, the Convenience Store Census offers universally accepted counts and classifications of businesses in the convenience and fuel retailing channel.

Upon purchase of a digital license, you will receive access to the report through a DRM-secured PDF through your convenience.org login profile.

Discounts are available for purchasing multiple licenses. Purchase your copy of the State of the Industry Report at convenience.org or contact Chris Rapanick at crapanick@convenience.org.

NACS Pro Tip: Submit your data to the NACS State of the Industry Survey and receive a complimentary license of the NACS State of the Industry Report and one complimentary registration to the NACS State of the Industry Summit.

Don’t Forget: NACS Research has imported all the data from the past 10 years of the NACS State of the Industry Report into a searchable database. The NACS State of the Industry Data Archive is now available online via subscription to NACS members only.

with elected leaders about the issues affecting them and their businesses.

The day before descending on Capitol Hill, NACS President and CEO Henry Armour and Senator Roger Marshall, M.D. (R-KS) opened the general session meeting by discussing the Credit Card Competition Act (CCCA). Senator Marshall encouraged advocates to build long-term relationships with not just the legislator but the entire legislative staff.

“It’s always about relationships.

Why is your business successful? It’s your relationship with your customers, with your employees, with your supply chain,” Marshall said.

The senator explained that it was “story after story” about the effects of swipe fees that helped him understand the urgency of the issue to retailers.

“When I heard that retailers can spend more on swipe fees than utilities, health

insurance, or even rent—I understood that. I ran a business for 25 years and I understand what those costs mean for a business.”

Industry advocates then went to Capitol Hill the following day to meet with congressional leaders and share the impact skyrocketing credit card swipe fees have on their businesses.

Learn how you can participate at convenience.org/events/day-on-the-hill.

NACS JUNE 2024 11

UP FRONT NACS NEWS

Convenience Leaders Exchange The Convenience Leaders Exchange is a series of invitation-only, local events for convenience retail representatives to gather together and discuss key industry issues and trends impacting convenience retail—all in an intimate, roundtable setting. Invited representatives include CEOs, owners, managing directors and senior representatives who operate local, national and multinational convenience retail stores.

“The very definition of convenience is constantly evolving around the world. These Exchanges allow high-level leaders from specific markets to interact with leaders from around the globe to to share ideas that can continue to push convenience forward,” said Mark Wohltmann, director of NACS global.

This past April, NACS hosted two Convenience Leaders Exchange meetings: One in Buenos Aires, Argentina, and one in Hamburg, Germany.

Argentina hosted the inaugural NACS Convenience Leaders Exchange for the region, and more than 80 industry leaders from across Latin America attended the event. The two-day conference highlighted the latest developments in the convenience and fuels industry as well as a curated store tour.

The conference showed that despite some challenges, such as navigating the transition to EVs, there was a general sense of optimism among participants for the industry in Latin America. The region’s economic growth and increasing urbanization are creating favorable conditions for industry growth.

More than 150 convenience retailers participated in the Convenience Leaders Exchange D-A-CH in Hamburg, Germany, the industry’s only English-speaking event in the German-speaking markets. The event launched in 2017, and brings together senior leaders from Germany, Austria and Switzerland with thought leaders in other markets.

Upcoming NACS Convenience Leaders Exchanges are: • Sub-Saharan Africa (September 2024) • Poland (Warsaw, January 2025) • Middle East/North Africa (November 2025) For more information on Convenience Leaders Exchanges, including how to participate, reach out to Mark Wohltmann at mwohltmann@convenience.org.

Calendar of Events 2024

JULY NACS Financial Leadership Program at Wharton July 14-19 | The Wharton School University of Pennsylvania Philadelphia, Pennsylvania NACS Marketing Leadership Program at Kellogg July 21-26 | Kellogg School of Management, Northwestern University Evanston, Illinois NACS Executive Leadership Program at Cornell July 28-August 01 | Dyson School, Cornell University Ithaca, New York

12 JUNE 2024 convenience.org

OCTOBER NACS Show October 07-10 | Las Vegas Convention Center Las Vegas, Nevada NOVEMBER NACS Innovation Leadership Program at MIT November 03-08 | MIT Sloan School of Management Cambridge, Massachusetts

NACS Women's Leadership Program at Yale November 17-22 | Yale School of Management New Haven, Connecticut 2025

JANUARY Conexxus Annual Conference January 26-30 | Loews Ventana Canyon Tucson, Arizona FEBRUARY NACS Leadership Forum February 11-13 | The Ritz-Carlton Amelia Island, Florida For a full listing of events and information, visit www.convenience.org/events.

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NACS JUNE 2024 13

UP FRONT NACS NEWS

Member News RETAILERS

Chuck Maggelet retired as CEO and chief adventure guide of Maverik.

Under Maggelet, the Salt Lake Citybased conveChuck Maggelet nience retailer acquired Des Moines, Iowa-based Kum & Go last year.

When the deal closed in August, the company doubled its footprint, growing to more than 800 locations and 14,000 employees.

Nelson P. Griffin now serves as chief supply chain officer at Wawa.

Griffin joined Wawa after previously serving as senior vice president of strategic sourcing for Independent Purchasing Cooperative. Prior to joining IPC, Griffin spent over eight years with Red Lobster, where he was executive vice president, chief procurement and real estate officer.

Joe Zietlow

NATSO appointed Joe Zietlow, industry and trade association manager for Kwik Trip Inc., as its new chairman of the board.

SUPPLIER

Seneca Companies announced Mike Freese as its new vice president of business development–midwest Mike Freese region (IA, IL, KS, MO, NE). Freese joined Seneca Companies in 2009, beginning in the warehouse and later promoted to a sales position in 2014. Freese was named Seneca’s top petroleum salesman in both 2016 and 2017. In 2019, Freese was promoted to director of inside sales and DSS.

14 JUNE 2024 convenience.org

Seneca Companies promoted Brian Moon to vice president of business development–southern region (AR, CO, Brian Moon MO, OK, TX).

Moon joined Seneca in 2016 as an outside salesman. Since then, Moon has dedicated himself to building and sustaining valuable relationships in Seneca’s southern region, leading to a transition into the role of strategic account manager.

The Coca‑Cola Company announced that Selman Careaga now serves as president of the ASEAN and Selman Careaga South Pacific operating unit. In his new role, Careaga will report to Henrique Braun, president of international development. Careaga will be based in Singapore and will lead a diverse team that covers a variety of developed and developing countries across Southeast Asia and the South Pacific.

Hoshizaki America Inc. named Sally Ray as its vice president of marketing. Ray has been with the company for Sally Ray nearly nine years and advanced through a variety of marketing roles. Additionally, as a certified foodservice professional (CFSP), Ray is actively involved in industry associations and currently serves on many committees with NAFEM, NACS and NRA. Hoshizaki also welcomed Loanne Freedlund as vice president of finance. Freedlund brings with her a wealth of experience garnered

from finance leadership roles, notably at foodservice equipment manufacturers including DoLoanne ver and Welbilt.

Freedlund Freedlund will play a pivotal role in driving financial stewardship and operational excellence across all facets of Hoshizaki America.

Bill Rice now serves as EVP, head of sales, operations and supply chain at Chester’s Chicken. Rice Bill Rice joins Chester’s after nearly four decades of experience in foodservice supply chain management.

Under Rice’s leadership, new initiatives include supply chain optimization, new and profitable menu items, equipping the team with new sales tools and bringing on additional resources to the field teams.

KUDOS

TravelCenters of America announced Sandy Rapp, SVP and CIO, was named winner of the Ohio ORBIE Sandy Rapp award in the Large Enterprise Category. The ORBIE Awards is the premier technology executive recognition program in Ohio honoring CIOs who have demonstrated excellence in technology leadership.

Driving the industry forward, together Convenience is always evolving, but NACS delivers the insights and innovative tools to help retailers win. Our latest initiatives improve how you serve your customers and communities and keep your business one step ahead.

Revolutionizing age verification at the register and beyond

Optimizing retailers’ digital presence to drive traffic & growth

NACS JUNE 2024 15

UP FRONT NACS NEWS

New Members

NACS welcomes the following companies that joined the Association in March 2024. NACS membership is company-wide, so we encourage employees of member companies to create a username by visiting convenience.org/ create-login. All members receive access to the NACS Online Membership directory and the latest industry news, information and resources. For more information about NACS membership, visit convenience.org/membership.

SUPPLIERS American Range Pacoima, CA

Ledzone Lighting Co. Ltd Shenzhen, Guangdong, China www.lightonshop.com

Silver iRely Fort Wayne, IN www.irely.com

AUTEC Carwash Systems Statesville, NC www.autec-carwash.com

Life Cider Draper, UT www.lifecider.com

Bronze Acuity Brands Lighting Conyers, GA www.acuitybrands.com

Bitcoin Depot Operating LLC dba Bitcoin Depot Atlanta, GA Bitcoindepot.com

MIC Food Miami, FL Micfood.com

Greenridge Naturals Elk Grove Village, IL

CarePro National Painting White House, TN Carepropainting.com

RETAILERS Community Energy Co. Inc. Rumford, ME

Commercial Refrigeration Co. Houston, TX Commercialrefrigerationco.com

Curby’s Express Market LP Lubbock, TX www.curbys.com

Displaydata Atlanta, GA www.displaydata.com

NEW HUNTER CLUB MEMBER

Fav Trip Grandview, MO www.favtrip.com Four Corner Variety Union, ME Fullerton Foodmart Inc. Broadview, IL J. Hara Store Kurtistown, HI Johnson Petroleum Inc. Huntington, IN Johnsonpetroleum.com Keystops LLC Franklin, KY Mentzer Oil Company North Platte, NE www.mentzeroil.com Thunderbird Entertainment Inc. Norman, OK www.playthunderbird.com Towne Centre Market Mount Pleasant, SC 16 JUNE 2024 convenience.org

Eternal Smoke Orlando, FL www.eternalsmoke.com Fixture King Atlanta, GA GLI Services LLC Coral Gables, FL www.postobon.com Harbar LLC Canton, MA www.harbar.com Ice House America Moultrie, GA www.icehouseamerica.com Jackson Advisory & Consulting Long Beach, CA Jones Soda Company Seattle, WA www.jonessoda.com Kate’s Real Food Jackson, WY www.katesrealfood.com

Midway Business Group Oakbrook Terrace, IL Monark Monarkbrands.com Nano Products H2O LLC dba VitaNourish Las Vegas, NV www.vitanourish.com One Hundred Coconuts New York, NY www.100coconuts.com Revent Incorporated Somerset, NJ www.revent.com Saputo USA LLC dba Saputo Convenience Dallas, TX Solar Camera Inc. Ontario, Canada Solarcamera.com Taiga Data Inc. Cincinnati, OH www.taigadata.com The Krusteaz Company Tukwila, WA Krusteazpro.com Thrive Freeze Dry American Fork, UT www.thrivefoods.com Tillamook County Creamery Association www.tillamook.com Webster Bank Boston, MA

CONVENIENCE CARES

Shell stations feature The Giving Pump each fall. A portion of a fill-up price is donated to a local charity.

Convenience and Community Go Hand in Hand

S

hell and Meals on Wheels show how industry partnerships can serve the greater good.

Convenience stores are an integral part of the community—from the products they sell to how they give back. Convenience Matters, the NACS podcast that discusses the latest happenings in the convenience industry, highlighted how one retailer and community nonprofit collaboration tied mobility with local need.

NACS Vice President of Strategic Initiatives and Convenience Matters host Jeff Lenard talked with Renee Power, CMO/GM mobility marketing North America at Shell, and Kristine Templin, chief development and marketing officer at Meals on Wheels America, about Shell’s latest consumer-focused initiative.

18 JUNE 2024 convenience.org

“Consumers expect big brands to be a force for good. And I say I expect that of us as well,” said Power. “So, when we looked at what organizations we could partner with, the fact that Meals on Wheels is in the community, staffed by the community and most of our wholesalers and the people who owned the sites and operate the sites are part of that community, it was a great match.”

In addition to usual loyalty program features, in November 2023, Shell created an opportunity for members to give. When platinum members filled up, the fuel retailer would donate for every gallon purchased at no extra cost.

Through the campaign, Shell was able to donate $200,000 to Meals on Wheels to help tackle senior hunger during the Thanksgiving season.

“It was literally customers doing something good as they did their everyday chores. So, we were able to do that, and help those in the community that are suffering from hunger in isolation,” said Power.

With roughly 150,000 convenience stores in the United States, the potential that c-stores have to make people feel good about everyday tasks is unique.

“When you can get people excited about going to get a basic fill up, the whole dynamic changes,” said Lenard.

Shell continues to build awareness about local nonprofits such as Meals on Wheels in the community. The Giving Pump, the company’s national campaign, features a specially marked pump with colorful, purple signage where a portion of a fill-up will be donated to a local children’s charity. It’s a wholesaler-led program that enables Shell customers across the United States to give back to charities in their local communities. When customers pull up at a Shell service station in September and October, they will see the colorful pumps, gain awareness about local charities and can fill up and donate.

Last year, Shell had more than 7,500 service stations participate. Since 2021, the program has raised more than $4 million for 532 different local and national charities that wholesalers support, including organizations such as the Boys and Girls Club, St. Jude’s Children Research Hospital, Big Brothers, Big Sisters, Make A Wish and others.

“I really commend Shell,” said Templin “… because people really are searching for purpose.”

“When you create a frictionless program such as this, that makes a great charitable experience. It just permeates throughout the whole day—it has a ripple effect,” said Templin “If we can encourage other brands and convenience stores to think about the purpose that they want to extend to their customer, you can kind of pay it forward.”

CONVENIENCE CARES In The Community Every year, the convenience retail industry dedicates billions of dollars to advancing the futures of individuals and families in our communities. The NACS Foundation unifies and builds on NACS members’ charitable efforts to amplify their work in communities across America and to share these powerful stories.

Learn more at www.conveniencecares.org.

ENMARKET CHARITY CLASSIC RAISES $270,000 1 Enmarket’s 2024 Charity Classic golf tournament raised $270,000, with 271 golfers and 115 companies participating in the charity event. The proceeds will be evenly distributed between the 200 Club of the Coastal Empire, which is devoted to assisting spouses and children of first responders lost in the line of duty, and Make-A-Wish Georgia.

RUTTER’S CHILDREN’S CHARITIES BRINGS BACK $50,000 YOUTH SPORTS GIVEAWAY

LOVE FAMILY WOMEN’S CENTER OPENS 3 In 2019, Mercy Hospital Oklahoma City started a campaign for a new women’s center.

Judy and Tom Love of Love’s gave a $10 million lead donation to kick off the project and helped raise more than $30 million from Oklahoma families and businesses. The new center is a 175,000-square-foot, four-story building on the Mercy Hospital Oklahoma City campus and has 30 patient rooms.

CASEY’S BACKS LOCAL TRUCKER PROGRAM 4 Casey’s donated $100,000 to the Des Moines Area Community College’s (DMACC) Transportation Institute. The donation will go toward upgrading and expanding the institute. The new building will allow the CDL training program to double its student capacity, resulting in more fully certified truck drivers.

2

2 Rutter’s Children’s Charities announced the return of its $50,000 Youth Sports Giveaway for 2024. Local youth sports leagues applied and 50 teams were chosen to receive a $1,000 donation for use towards uniforms, equipment, travel expenses and other team needs.

ROYAL FARMS DONATES $150,000 TO JOHNS HOPKINS CHILDREN’S CENTER 5 Royal Farms donated $150,000 to the Johns Hopkins Children’s Center.

The donation was made possible through the Coin Canister program and the collective efforts of Royal Farms customers and staff.

The donation will directly support critical programs and services aimed at providing medical care, research and support to young patients facing complex medical challenges.

MFA OIL PARTNERS WITH FEEDING MISSOURI 6 MFA Oil partnered with Feeding Missouri as the company’s official charity partner. Feeding Missouri, a network of six regional Feeding America food banks, is dedicated to a well-nourished and hunger-free Missouri.

By joining forces with Feeding Missouri, MFA Oil aims to make a meaningful impact on food insecurity and contribute to building stronger, more resilient communities. The partnership will involve various initiatives, including fundraising campaigns, volunteer opportunities for MFA Oil employees and awareness programs to highlight the critical issue of hunger in Missouri.

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4 20 JUNE 2024 convenience.org

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INSIDE WASHINGTON

Far From Settled

The class action lawyers settled the swipe fee litigation … and it’s a bad deal for retailers. So what’s next?

BY ANNA READY BLOM

The proposed settlement does not look much better than the one NACS successfully fought in 2012.

O

n the morning of March 26, news outlets started reporting a landmark settlement in longstanding litigation between Visa, Mastercard and the largest card-issuing banks on the one hand and the merchant community on the other hand over credit card operating rules. The proposed settlement was made to seem like a win for retailers, who would see $30 billion in relief from swipe fees.

What soon became clear in the details of the settlement, which was leaked to the press by the credit card industry, was that it was a sweetheart deal for them and a raw deal for retailers and their customers.

WHERE IT BEGAN In 2005, NACS and other retail groups and companies filed suit against Visa, Mastercard and their largest issuers over the industry’s price fixing of interchange fees and onerous rules.

The many lawsuits were consolidated into a case titled “In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.” The cases collectively sought relief from the courts over the credit card industry’s clear violation of the antitrust laws.

22 JUNE 2024 convenience.org

In 2012, a landmark settlement was reached in the case, but it became quickly clear that the settlement was not helpful, and even harmful to retailers. It would have allowed Visa and Mastercard to continue their worst business practices while preventing current and future retailers from ever pursuing litigation against Visa and

jacoblund/Getty Images

dealing with the operating rules of the card networks (though virtually all merchants that didn’t opt out were part of both classes).

In 2019, a monetary settlement of $5.5 billion was reached. That monetary-only settlement is moving forward.

The proposed settlement reached in late March dealt only with the Visa and Mastercard operating rules, not money.

Unfortunately, the problems with that settlement were deja vu all over again for retailers.

Mastercard in the future. NACS led a group opting out of and objecting to the settlement. NACS President and CEO Henry Armour noted, “The people asking the court to approve the proposed settlement simply do not represent the interests of most merchants; we do. The proposal represents a minority view and must be rejected.”

The Second Circuit, which heard the appeal of the settlement, ended up throwing it out completely. It was a major legal victory for NACS and other retailers and gave new life to the litigation. At that point, the litigation was bifurcated with two sets of lawyers representing two classes of merchants, one seeking monetary relief and one

DEJA VU The proposed settlement does not look much better than the one NACS successfully fought in 2012. The biggest problem is that the proposed settlement preserves and cements Visa and Mastercard’s ability to price-fix for their issuers and require retailers to take all of their cards (or none of them) no matter how expensive they are and without regard to the banks’ refusal to compete with each other on price and service.

This cartel behavior, and the egregious fees that result from it, was the main reason for seeking relief from the courts. Without addressing it, Visa and Mastercard will keep extracting fees that are much higher than a competitive market could bear.

NACS JUNE 2024 23

INSIDE WASHINGTON

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from left to right: Tom Schofield (FJ Management), Olivia Pappas, Doug Beech (Casey’s General Stores), Nancy Pappas (NACS), David Hancock (Maverik), Rep. Zach Nunn (R-IA-3), Scott Hill (Jack Link’s Protein Snacks), Temur Samiev (Mega Saver) and Doug Kantor (NACS)

Convenience United: Celebrating NACS Day on the Hill Industry advocates head to Capitol Hill and urge Congress to stand up for Main Street.

BY MARGARET HARDIN MANNION As tourists flocked to Washington, D.C., in March to enjoy an early peak bloom of the iconic cherry blossom trees, nearly 200 convenience industry advocates also traveled from near and far to D.C. to call on Congress to stand up for Main Street businesses and their constituents.

NACS Day on the Hill is the convenience and fuel retailing annual advocacy event that gives retailers and suppliers the opportunity to advocate on

Senator Bill Cassidy (R-LA) with Samuel Gauthier

Pablo G Mediavilla/Getty Images

The settlement is “mandatory” which means that it would bind all litigants— including those in the separate suits that NACS and others who opted out of the case have been pursuing for years. If approved, the settlement would cut off any legal rights to injunctive relief and rules claims for the next five years other than what is in the settlement. And, what’s in it won’t help retailers.

While the proposed settlement purports to lead to approximately $30 billion in swipe fee savings for merchants over five years, it won’t do that because it includes a major loophole. The settlement says that Visa and Mastercard can increase the network fees that they directly charge retailers at any time and by as much as they want. And that is already happening. On April 15, Mastercard moved forward with network fee increases of $260 million. Additionally, Visa and Mastercard could turn around and give the banks discounts on what they pay to handle transactions without retailers knowing it.

The proposed settlement claims to help merchants with surcharging, yet retailers can’t really take advantage of that unless they stop taking American Express and Discover cards.

Remarkably, that makes the settlement a bigger win for Visa and Mastercard in cementing their market dominance than anything in it helps merchants.

And, surcharging is not a good answer to Visa and Mastercard’s abusive rules.

Rather than addressing the root cause

behalf of the industry on Capitol Hill. On March 12 and 13, NACS hosted 193 attendees representing about 12,000 locations around the country. Attendees met on two issues that are top of mind to the industry: tackling credit card swipe fees and removing the SNAP hot foods restriction.

The event kicked off with a general session meeting on Tuesday, during which Credit Card Competition Act co-sponsors Senators Roger Marshall (R-KS) and Dick Durbin (D-IL) stopped by to speak to attendees. Senator Marshall encouraged advocates to build long-term relationships with not just the legislator but the entire legislative staff.

“It’s always about relationships,” Marshall said. The senator explained that it was “story after story” about the effects of swipe fees that helped break through to him. “When I heard that retailers can spend more in swipe fees than utilities, health insurance or even rent—I understood that. Tell your story. We want to know how much you care.”

“For more than a decade, I’ve been fighting to stop the big banks and credit card giants from ripping off Americans with their high swipe fees. The convenience store industry has been with me every step of the way. And together, we’ve racked up some big wins to rein in these outrageous fees,” said Durbin. “I’m thankful to have NACS as a partner in this fight and I look forward to getting the Credit Card Competition Act across the finish line.”

On Wednesday, attendees made their way to Capitol Hill to share their stories with 215 lawmakers.

Teams pushed Congress to pass the Credit Card Competition Act and deliver much needed relief to Main Street businesses and their customers. Teams also asked Con-

25 JUNE 2024 convenience.org

from left to right: Kevin LeMoyne (Coca-Cola), Kevin Carroll (RaceTrac), Rep. David Scott (D-GA-13), Haley Bower (Clipper Petroleum) and Scott LeFevre (Clipper Petroleum)

from left to right: Ken Kramer (Smoker Friendly), Ray Huff (Russell’s Convenience), Rich Spresser (Alta Convenience) and Dennis Dirkse (Alta Convenience)

gress to modernize the SNAP program and allow the sale of hot food for those who use SNAP benefits.

Nothing beats the power of showing up in person to tell your

story. Interested in joining us on Capitol Hill next year? Save the date for NACS Day on the Hill 2025: Tuesday, March 11 and Wednesday, March 12.

INSIDE WASHINGTON

of the problem, it makes retailers the bad guy with their customers by forcing them to collect big fees for the credit card industry.

All of the other provisions of the settlement include fatal loopholes and shortcomings as well.

WHAT’S NEXT NACS and other merchant groups have urged the court to reject the settlement.

The court will go through a process of preliminary and then final consideration of the agreement. At each stage NACS and its members will have the opportunity to provide the court with their views of the deal. Contact NACS to find out more about how to make sure your voice is heard.

The fact that 20 years of litigation has led to two settlements that harm merchants underscores the power of the Visa and Mastercard duopoly, the limits of the legal system to deal with it, and the need for congressional intervention. NACS continues to urge Congress to pass the Credit Card Competition Act, which would finally make Visa and Mastercard compete for retailers’ business on every credit card transaction. Real relief is needed. And, we will only get it if you take action. You can scan the QR code to tell your members of Congress to help today.

Anna Ready Blom is NACS director of government relations.

She can be reached at ablom@convenience.org.

ONE VOICE This month, NACS talks to

Rob Gallo,

chief strategy and marketing officer, Impact 21 What does NACS political engagement mean to you and what benefits have you experienced from being politically engaged?

NACS political engagement is a driving force for our industry.

I know companies across the convenience and fuel retailing ecosystem appreciate knowing there is proactive and consistent advocacy on their behalf. The research and insights provided by the NACS government relations team have helped me in my projects and conversations with clients. They have also proven valuable in conversations with convenience store shoppers regarding certain legislation. NACS events like Day on the Hill give me a chance to experience the process firsthand by engaging directly with our nation’s policymakers.

What federal legislative or regulatory issues keep you up at night (with respect to the convenience store industry)?

The convenience store industry has repeatedly demonstrated its ability to evolve regardless of the headwinds it faces.

I don’t expect the current environment to be any different.

That said, I do think that swipe fee legislation would benefit both retailers and consumers. It would enable convenience retailers to reinvest in the customer experience as consumer trends continue to evolve.

RUNSTUDIO/Getty Images

What c-store product could you not live without?

One? I love shopping at convenience stores! Fresh brewed iced tea with nugget ice and lemon. It’s the perfect complement to great foodservice items like Casey’s breakfast pizza and Spinx fried chicken.

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INSIDE WASHINGTON NACSPAC DONORS NACSPAC was created in 1979 by NACS as the entity through which the association can legally contribute funds to political candidates supportive of our industry’s issues. For more information about NACSPAC and how political action committees (PACs) work, go to www.convenience.org/nacspac. NACSPAC donors who made contributions in April 2024 are: Hal Adams Cadena Comercial OXXO S.A. de C.V. Carlton Austin The Coca-Cola Company Matt Beale Impact 21 Chad Beck Core-Mark International

David Espinal NACS Leonard Gega Curaleaf Ramona Giderof Diageo Beer Company USA Danielle Gordley GSP

John Benson AlixPartners LLP

Krister A. Hampton Altria Group Distribution Company

Daniel Bernstein iSee Store Innovations

Matthew Hautau Core-Mark International

Jason Blazensky InStore.ai

Bradley R. Heetland Advantage Solutions

Nate Brazier Stinker Stores Dereck Budahl Moyle Petroleum Company Kathleen Byrd Home Market Foods Ryan Calong Pabst Brewing Company David Charles Jr. Cash Depot Sandra D’Asaro Core-Mark International Michael Davis MichaelAngelo’s & More Jack Dickinson Dover Corporation Nathaniel Doddridge Casey’s General Stores Inc.

Benjamin Hoffmeyer TXB Stores

Jeff Kahler Ready Training Online Simmi Kelly Altria Group Distribution Company Jerry Marfut Pace-O-Matic Nick Marino CORD Financial Services Kevin Martello Keurig Dr Pepper Brandon Mayer The Hershey Company Eamonn Mcsweeney Home Market Foods Reed Mills VIBEZ Sunglasses

Jack Hogan Mashgin Inc.

Drew Mize PDI Technologies

Mark Hopkins J & M Distributors Inc.

Trevor Moyle Moyle Petroleum Company

Curtis Hughes The Coca-Cola Company

Kelly Naudain Altria Group Distribution Company

James Hughes Krispy Krunchy Foods LLC Sam Johnson J&M Distributors Inc.

Matthew Nix Littlefield Oil Company Jason Noll Capital One Bank

Samuel Jonas nData Services LLC

Erik Ogren Patron Points

Jennie Jones Schaerer

Steven O’Toole Stuzo LLC

Mike A. Jones S&S Petroleum Inc.

Corey Paluch Moyle Petroleum Company

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Matt Pascal Pace-O-Matic

Matt Taylor Anheuser-Busch LLC

Giulio Petraccaro Schaerer

Dave Thompson Jr. 3 LEAPS

Daniel Razowsky Rmarts LLC

Shane Thompson Littlefield Oil Company

Gina Trumm Reinhardt Pace-O-Matic Adrienne Reinhold Altria Group Distribution Company Janet Ries Energy North Group Robert Rivera The Coca-Cola Company Rashid Samiev Mega Saver Greg Schube Dualite Sales & Service Inc. Art Sebastian Nextchapter LLC Vince Seery E-Z Stop Food Marts Inc. Joseph Sheetz Sheetz Inc. Michael Simon Altria Group Distribution Company Barrett Sims Pak-A-Sak Inc. Margaret Sotrop GSP Saurabh Swarup Liquid Barcodes Inc. Tom Taunton Gurley’s Food

Brian Trout Greater Houston Retailers Cooperative Association Inc. Mike Vanderwagen Weigel’s Stores Inc. Marvin Vines The Coca-Cola Company Jim Weber The Spinx Company Inc. Paula Weeks The Coca-Cola Company Chris Welcelean CORD Financial Services Marguerite White TruAge Julie Whittington Hunt Brothers Pizza Doug Woodward CROSSMARK Bryan Zeiger The Spinx Company Inc. Jeffrey Ziegler Midwest Petroleum Company

IDEAS 2 GO

A Sweeter Stop Hat Six Travel Center offers unique gifts, private label products and locally made items.

Name of company: Hat Six Travel Center Year founded: 2001 # of stores: 1 Website: hatsixtravel.com

BY SARAH HAMAKER If you stop by locally owned Hat Six Travel Center in Evansville, Wyoming, bring your sweet tooth. You’ll need it to sample the store’s wide array of private label candy.

“We offer something for everyone who wants candy,” said Megan Williams, director of operations. The products range from “candy bars to brownie bites to licorice.”

The complex also caters to truckers, tourists and locals with a carefully curated selection of Wyoming-made novelty and gift items. But Hat Six didn’t always provide such variety of fresh food, packaged goodies and gifts—the transformation took place over several years.

THE ORIGIN OF HAT SIX More than 20 years ago, the owners of Hat Six purchased East Gate Travel Center, which had evolved from a very small 1970s gas station and truck fueling stop with a restaurant and tiny bar to a travel plaza. “The owners had a vision around

30 JUNE 2024 convenience.org

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IDEAS 2 GO

2014 for a better travel center, one with more modern amenities and better parking for trucks, as well as more fuel options,” Williams said. “They wanted Hat Six to become more of a destination for shopping and fueling in a bigger, more modern facility.”

The revamped Hat Six Travel Center debuted in 2016. With the location right off I-25, having the right mix of fuel was important. Hat Six has 14 gas pumps, seven diesel fueling spots and eight Tesla charging stations. “We have propane too, with an easy in, easy out parking lot,” Williams said.

Several restaurants provide a variety of fresh-prepared foods for travelers and locals. Cowboy Deli, the in-house deli and bakery, serves burgers, burritos, corndogs and chili, and Hat Six Heritage offers healthy and high-end options, such as a charcuterie box, steak salad and chicken avocado salad.

Three restaurants provide a variety of fresh prepared foods for travelers and locals. While Schlotzsky’s Deli and Cinnabon are chains, Hooch’s Bar & Drive-Thru has an original menu with burgers made from Wyoming grass-fed beef, as well as sandwiches like a French dip and BLT, appetizers and soups.

“Hooch’s recently unveiled a new menu, and “the reception has been good from our local clientele and truckers,” Williams said. “It’s something different on the same property, so Hooch’s is a great amenity for our professional drivers.”

Hat Six offers bean-to-cup coffee and fresh-brewed espresso drinks from its own Wild Pony Coffee Company. “We sell coffee from our local roaster as well as make craft drinks like espresso, Red Bull drinks, lattes and mochas,” Williams said. For packaged beverages, the retailer has “any drink you’ve seen on Instagram in our 17 cooler doors,”

she said. That includes natural juices and kombucha as well as energy drinks and sodas.

The store stocks a wide range of protein bars and other snacks in addition to its private label candy. Five freezer doors carry locally raised meat like steaks and hamburger. “Some of our drivers like to grill their own meals, so we provide the fixings for that,” Williams said. “We also have one-of-a-kind Wyoming-made snacks, from cake pops to cheesecakes to freeze-dried candy.”

UNIQUE NOVELTIES One major way Hat Six differentiates itself from other convenience stores and travel centers is with its mostly Wyoming-made gifts and novelties.

“We’re a good place to look for a gift because we aren’t your typical c-store and truck stop,” Williams said. “We have fewer spinners with name plates and more of an assortment of boots, western hats and belts,” plus art and artist-made jewelry.

Hat Six carries a wide selection of other Wyoming-made products too, from Bloody Mary mixes to salsas and honey. Locally made artwork, pottery and jewelry provide even more opportunities to find unique items. “We also have our own label of hoodies and t-shirts with Wyoming-inspired sayings or pictures,” she said.

“Gifts is one area where we are different and pride ourselves on catering to a unique experience rather than the usual items found at truck stops or c-stores,” Williams added For Hat Six, the goal is to provide a great experience the customer can’t get anywhere else. “Whether they’re travelers or locals, this is a place to go for a drink or gifts,” she said. “We offer a clean, inviting environment from the common area to the bathrooms, and the

BRIGHT IDEAS Hat Six Travel Center’s private label candy has expanded recently. “We started out with our own private label soda and popcorn, but added candy within the last few months,” said Megan Williams, director of operations for the Evansville, Wyoming, travel center.

“Now we have a whole candy section that’s just our private label.”

The private label candy includes candy bars, brownie bites, licorice, freeze-dried candy and other old-school candy. “This is our biggest private label selection and sales have been good,” she said. “We’ll be keeping it and probably adding to it in the months to come.”

most unique Wyoming-made items in the area. We pride ourselves on being better than anyone else, and our selection reflects that.”

Sarah Hamaker is a freelance writer, NACS Magazine contributor, and award-winning romantic suspense author based in Fairfax, Virginia. Visit her online at sarahhamakerfiction.com.

Ideas 2 Go showcases how retailers today are operating the convenience store of tomorrow.

To see videos of the c-stores we profiled in 2023 and earlier, go to www.convenience.org/Ideas2Go.

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It’s our Main Ingredient!

CHIEF FRUIT OFFICER GORDON RAMSAY

SCAN TO LEARN MORE

TM ® & © 2024 PIM Brands, Inc. The Welch’s name and banner are registered trademarks of Welch Foods Inc. A Cooperative. All Rights Reserved.

FOR MU LA OPTIMIZING THE FOODSERVICE

Krispy Krunchy Chicken’s simplified menu and streamlined 34 JUNE 2024 convenience.org

This article is brought to you by Krispy Krunchy Chicken, a NACS Hunter Club Member.

BY LAUREN SHANESY

A

ccording to NACS Convenience Voices, 25.7% of customers said they planned to buy quick service or fast food somewhere else within 30 minutes of visiting a c-store.

To cut down on food leakage and capture those customers, c-stores need to offer a competitive foodservice program.

Krispy Krunchy Chicken has served the industry for decades and is undergoing a major evolution. Today, the brand has nearly 3,000 locations and plans to open over 700 stores by the end of 2024, and is making moves to attract even more c-stores. “For example, we revamped our offerings and built a premium sandwich with quality ingredients that is competitive. So instead of losing those chicken sandwich sales to the fast-food place across the street, c-store operators are able to be much more relevant and competitive,” said Joe Gordon, chief execution officer.

Krispy Krunchy has conducted extensive market research to build a best-in-class foodservice offering. In response to the same trends that retailers know too well—a contracting labor pool, supply chain woes, food spoilage and more—the foodservice solution provider has narrowed down its menu to the most-efficient, best-selling items and streamlined its logistics and supply chain processes.

“The biggest key to success is really being able to understand the c-store industry, especially its challenges, and then attack those with solutions,” said Jim Norberg, CEO of Krispy Krunchy Chicken. “For example, one of the things we heard from operators a few years ago was that our operating model just had to be simpler, and be easy for one person running the counter to do if they’re in the store by themselves.”

Krispy Krunchy took that feedback and implemented it at every level of its business, from the menu to the supply chain. Here’s how.

ON THIS MENU, LESS IS MORE Krispy Krunchy cut the menu down to fewer—but more carefully curated—items. It’s counterintuitive, but with less options, profits went up. But it wasn’t as simple as just taking things that didn’t sell off the menu.

“When conducting menu optimization, a lot of brands will just look at how much they sell,” said Alice Crowder, chief marketing officer. But that doesn’t tell the whole story.

“What if I have two menu items that both sell, say, five items a day? If I cut one of them out, will everyone just order something else and not care, or will I lose five customers?”

That’s a question that can be answered by a TURF analysis, which stands for total unduplicated reach and frequency, a study that determines the impact of product choices on consumer purchasing decisions.

“TURF tells us the unique value of every item on the menu. And it helps us craft an offering that attracts the most people, the most frequently, with the least items,” said Crowder.

What Krispy Krunchy found was that its menu had a lot of redundancy. “We came down to a smaller group of products, but that reached the same amount of people and generated the same frequency.”

Not only did Crowder’s team look at what was offered on the menu, but at how it was displayed.

“The previous menu had family meals listed first and then individual meals. But most people visit for an individual meal, so you’re signaling to them that this menu isn’t for them,” said Crowder. “We did research on menu architecture and figured out which design got people engaged the most quickly.

How you organize the menu impacts your check average.”

When Krispy Krunchy took items off the menu initially, there was trepidation from retailers who assumed that offering less

The Krispy Krunchy display at Ez Trip in Smyrna, Georgia.

The Mini Stop Deli in Baltimore, Maryland, gladly serves Krispy Krunchy.

supply chain leads to more profits for retailers.

NACS JUNE 2024 35

TASTE TEST

Krispy Krunchy has historically been focused on the operator as the end user—not the chicken-sandwich loving c-store shopper. The company realized it had an opportunity to reach potential fans directly to build awareness.

“We were named by Thrillist as ‘the best fried chicken you’ve never heard of.’ I’ve put my own spin on that phrase, and now say, ‘We’re the best fried chicken you’ve never heard of … yet,’” said Jim Norberg, CEO of Krispy Krunchy Chicken.

To promote the launch of its new Cajun Chicken Sandwich, Krispy Krunchy widened its scope and sought to reach a new pool of potential customers. Krispy Krunchy offered in-store sampling for customers who were already there, but more importantly, set up tents in landmark destinations, handing out sandwiches in New York’s Times Square and the beaches of Florida, among other locations, to get the sandwich in consumers’ mouths. They also engaged nearly 50 influencers and tested geo-targeted media. “Once people see us and taste us, they’re hooked,” said Alice Crowder, chief marketing officer.

And as c-stores position themselves as a destination for food that customers will go out of their way for, Krispy Krunchy’s brand awareness efforts are critical for bringing more foot traffic into stores.

“I think there’s a world ahead for c-stores as they redefine what having good food at a gas station really means,” said Norberg. “And it’s not necessarily just attracting the customer who comes to get fuel but doesn’t go inside, it’s about getting that customer who lives in your community and uses your store in different ways, and how you can capitalize on that to give them what they need.”

There’s a world ahead for c-stores as they redefine what having good food at a gas station really means.”

36 JUNE 2024 convenience.org

would mean fewer transactions. “But we can actually sell more by having fewer items, plus it’s less labor and it’s less waste. We saw all of those things happen in the testing,” said Gordon. “And now that we’ve taken slow-moving, high-waste items off the menu, that gives back time and labor to focus on the core products that are the bigger movers.”

Crowder echoed that, saying she had operators who at first said “if I don’t have X item on my menu, it’s really going to hurt my business—but their margins actually went up. We don’t do anything without a mathematical, insights-based reason for doing it. And our licensees are responding to that.”

A STREAMLINED SUPPLY CHAIN Just as important as the menu is what customers don’t see—the back-end operations behind how the food gets in front of them in the first place. With supply chain disruptions a common challenge in the channel, having efficient logistics cuts down on food waste, spoilage and delivery times.

Krispy Krunchy transitioned its model from one that used 14 independent distributors to just one. The centralized distributor works with 70 local suppliers, which means

“we’ve moved product closer to the markets and we’re not doing stretch distribution, plus we are able to recover much faster if something goes wrong,” said Gordon. “So we are providing a much better service and a better shelf life, because the food now is in many more distribution points much closer to the end consumer.”

The simplified menu also alleviates supply chain pressure from dwindling chicken supply. “We moved away from offering the eight-way product [referring to eight different cuts of chicken meat] because the bird size for that is getting harder to source,” explained Gordon. Instead of selling so many different cuts, Krispy Krunchy now focuses on tenders, wings, drums and thighs, and the new improved chicken sandwich.

“We still have the crucial options consumers want, but instead of fighting for the limited, diminishing supply to try to get the eight-piece cut up in our size, now we can buy chicken from a lot of different manufacturers,” he said. “We’re able to leverage that to bring prices down for those items, and we also have more availability of the product and fewer supply chain interruptions. We were buying from two different suppliers before, but now there are 20 suppliers that can provide our mix of products.”

And those benefits—and savings—get passed on to retailers.

“Our major focus this year is on improving operator profitability, which we have already been able to do with the menu simplification.

We’re able to pass on a lot of those savings to operators,” said Gordon. “We are continuing to leverage suppliers, reduce freight rates and improve our logistics initiatives to make our operators more profitable. Our program is about raising all of their c-store sales—not just their food sales, but we think about how we can be a more profitable program for them so that they’ll want to sell more Krispy Krunchy and take more dollars to the bank.”

Lauren Shanesy is a writer and editor at NACS, and has worked in business journalism for a decade.

She can be reached at lshanesy@convenience.org.

38 JUNE 2024 convenience.org

Back to Basics … and the Future Is Here

Six Insights from the SOI Summit

BY JEFF LENARD

W

e’ve all heard that the pace of change is accelerating faster than it ever has. That’s true—and will likely always be true.

Today, a business makeover life cycle can be as short as four to seven years, compared to the past where businesses could go decades without having to significantly reinvent themselves.

The NACS State of the Industry Summit presented a compelling case for why—and how—retailers can change.

It was a chance for 600-plus attendees to move on signals, instead of following what others are already doing.

NACS JUNE 2024 39

Attendees heard how the industry is in back-to-basics mode ... and accelerating towards the future.

How do you innovate out of customer utility instead of out of fear?”

40 JUNE 2024 convenience.org

Keynote speaker Crystal Washington said that a period of rapid change—such as the one we are now experiencing—should be thought of as a “renaissance,” a period during which great things are possible. “How do you innovate out of customer utility instead of out of fear of being left behind?” she asked attendees.

That was the whole point of the two-day Summit. It presented reams of data and analysis, all designed to share ideas for how NACS members can best marshal their resources, define how they can look at change and ultimately grow their businesses.

The future “will require you to both think slow and think fast” in how you approach long-term strategies and attack short-term issues, noted NACS Chairman and CEO Henry Armour.

Six common themes emerged from the presentations.

FOODSERVICE IS THE DIFFERENCE The c-store industry has experienced over two decades of record in-store sales, and foodservice has played a central role in that. Foodservice now accounts for 30% of in-store revenues and 37% of profit dollars. A stunning one in four gas customers (25%) who went inside the store when buying gas say they purchased a sandwich or meal on that trip (May 2024 NACS Magazine, “A Parting of the Clouds”).

The growth of foodservice has been so profound that the overall industry model has

shifted to one where drivers no longer think of c-stores as a place to buy fuel and maybe also get food. Instead, they are restaurants that also happen to sell fuel.

That doesn’t mean that everyone does foodservice well. The difference between the top 10% of the industry and bottom 10% is stark, with the top performers selling 5.5 times more foodservice, resulting in profits that were 12.5 times higher.

And it also doesn’t mean that foodservice is easy. Wages and benefits for top performers are more than double those of the bottom performers, and the costs of spoilage can be high.

Also, just because the industry has specific category definitions doesn’t mean that customers think that way. Portability and low price points also provide some non-traditional opportunities for snacks that become meals, whether string cheese, yogurt, a piece of fruit or other snacks merchandised in the open-air cooler or in other areas. Those offers greatly reduce labor costs and spoilage associated with traditional foodservice. And they may appeal more to customers on weight-loss drugs like Ozempic that can tamp down the desire for a larger meal. These customers are eating differently, but not less, noted David Portalatin, senior vice president and industry advisor for food and foodservice at Circana.

Retailers offering traditional foodservice are winning sales increases by focusing on special offers exclusively for food, as opposed to a food

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Merchandise shrink almost doubled to

$2.5 billion and beverage tie in. After all, most customers purchasing food are naturally going to purchase a beverage. “Strategically, you have to focus on an approach where foodservice is an integral part of your future,” said Armour.

Overall U.S. foodservice sales are expected to grow 1% in 2024—meaning 580 million more visits to restaurants and retail outlets selling food. “Get your share,” said Portalatin.

EVERYONE IS COMPETITION—AND COMING FOR YOUR BUSINESS C-stores aren’t the only channel innovating.

So are grocers and QSRs, and in most cases they are looking to grow their share of the convenience market.

Aldi launched a “virtual c-store” that provides 30-minute delivery for 2,000 items. Dollar General has 5,000 stores that offer fresh produce. Chick-fil-A is opening pickup-only lanes at select stores.

Changes in commuting patterns are also reshaping the competitive landscape. Workfrom-home policies for office workers have taken a big bite out of lunch sales, with many

42 JUNE 2024 convenience.org

workers opting to make their lunch at home once or twice a week instead of going out with colleagues. Lunch sales may never come back to pre-pandemic levels, and that loss of core business for QSRs means that they are looking at traditional c-store dayparts to grow sales—especially breakfast, afternoon snack time and late night/early morning.

QSRs are aggressively rolling out morning sweets and other snacks that extend their offer to target these dayparts (for example, KFC brownies) that have traditionally been dominated by c-stores.

“QSRs are coming for your business,” said Portalatin.

IT’S THE CONSUMER, STUPID Former President Clinton’s campaign manager James Carville coined the memorable phrase “It’s the economy, stupid,” and ever since it’s been a way to remind politicians to pay attention to the top issue that affects consumers.

But today, economic sentiment is complicated. It’s not stupid to ask what “the economy” even means to consumers.

On a macroeconomic level, the economy looks pretty good: The first quarter of 2024 saw double-digit stock market returns.

Housing values have soared over the past few years, enriching those in certain markets.

Other economic indicators—unemployment and inflation, in particular—point toward a “Goldilocks economy” that is not too weak or too strong, noted John Benson, a partner at AlixPartners.

However, on a microeconomic level where consumers are, things are tougher. Inflation has cooled, but it’s still over 3%, and key categories of inflation are growing faster than wages, such as housing, which hovers just under 6%. That continues a worrisome trend of costs outpacing wages. Overall, there has been a 4.7% decrease in real median income since 2019.

Also, consumer debt has increased, especially credit card debt, which jumped 14.1% from 2022 to 2023. Consumer spending is further limited by the more than 20 million people who had student loan payments restart in October after a long pandemic-related pause.

These pocketbook concerns could all cut into spending, and that’s a big concern; 40% of business leaders say that inflation and high interest rates are a significant threat to their business.

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A First-Timer’s View

The SOI Summit audience is a mix of retailers looking to improve their business and suppliers looking to refine their knowledge of the industry to better serve their customers. We thought it would be interesting to talk with a first-time attendee to get a better sense of what brought her to SOI Summit and what she found most interesting.

—Chris Rapanick, guest editor TAKE US INSIDE YOUR WORLD A LITTLE BIT. WHAT BROUGHT YOU TO THE SOI SUMMIT? WHAT STOOD OUT TO YOU? A lot of people I met at SOI know Tillamook from the grocery store, and that is a result of our growth journey, largely over the past five years. During that time, we’ve expanded from being a re­gional to a national brand, now found in 80% of grocery stores, and in one in four homes. We also continue to be the top cheese brand that is called out on restaurant menus.

We just reached that point in the last six months or so.

With that, and the fact that we recently released eight SKUs of our ice cream in pints—a form we know is wellpositioned for convenience—I went to the SOI Summit to begin to better understand how shoppers use c-stores differently than the chan­nels we are already in.

We know our shoppers are in the convenience channel, and we want to be where they are.

We’re currently working with distributors as well as several convenience chains to build a plan to enter the channel. Our goal will be to help convenience store operators address challenges I heard discussed at the Summit, and to support as they seek to increase transactions, and compete for larger share of stomach.

We don’t expect this to happen overnight. We’ll take a thoughtful, measured approach to testing and Alison Rosenblum, learning in this very databusiness development, driven channel. One focus Tillamook County area was understanding Creamery Association chan­nel leakage, after one of the presenters said 25% of c-store visitors are going to a QSR within 30 minutes.

This raised questions for me about what role we may play in keeping those food purchases in the channel?

My experience at the event was overall positive. I felt very welcomed, and the NACS team helped me find my way as a first-timer. I had done my homework and had researched who I hoped to connect with, and the atmosphere was very conducive to these discussions.

44 JUNE 2024 convenience.org

This price sensitivity is also playing out with foodservice: 90% of restaurants say that customers are value conscious. Families with children are the most likely to abandon eating out because of costs.

Even those who aren’t eating out less are eating out differently. QSR customers are trading down purchases, opting for smaller drink or meal sizes and selecting regular sandwiches instead of the premium offers they previously purchased. And, while families with kids are eating out less, kid’s meals have grown in popularity. Adults are increasingly purchasing these meals for themselves to limit costs and for portion control. There could be an opportunity to rebrand these meals to reflect the expanding sales opportunities.

Price sensitivity is also on c-store customers’ minds: 56% of them say they favor a specific c-store because it usually has lower prices (May 2024 NACS Magazine, “A Parting of the Clouds”) and the value-priced 4th tier cigarette subcategory showed a substantial sales increase even as cigarette sales overall continue their long-term decline.

GET RUTHLESS ON EFFICIENCIES With competition intensifying and consumers seeking out value, aggressively managing costs is essential.

Be ruthless when pruning menu items, speakers suggested. A too-broad menu increases costs across the board, especially from spoilage. Foodservice waste grew 17.6% in 2023, which is down from the 33.2% in 2022, but the cumulative two-year effect puts huge pressure on margins. Reduce menu items that add to spoilage, take too much time to prepare or require added storage or training.

Overall, direct store operating expenses (DSOE) continue to go up. Despite an overall decrease in gas prices in 2023, card fees grew to $19.7 billion. (Go to the “advocacy” tab on convenience.org to send an e-mail to your elected leaders to support the Credit Card Competition Act.) Crime also has an impact on costs: Merchandise shrink almost doubled in 2023 to $2.5 billion.

Softer sales in the first few months of the year make it even more essential to aggressively manage costs.

“The path to profitability requires tighter expenses control with sales and profits down from November 2023 to February 2024,” said Varish Goyal, president and CEO of Loop Neighborhood Markets.

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LET’S GET PHYGITAL Ninety percent of Americans have cell phones and they spend a lot of time on them—an average of 4.5 hours per day. Washington said that if you take your phone to bed—or your bedside—you’re probably addicted to it.

“If you did the same thing with a beer every night, we’d be talking about that being a problem,” she joked.

46 JUNE 2024 convenience.org

As screen time pushes further into daily life, retailers can look at opportunities to meld both the physical and digital worlds into a phygital world that maximizes customer engagement.

Get consumers to use your mobile app and then use the app to tell the story about how much you give back to the community, noted Sanjeev Satturu, senior vice president and chief information officer at Casey’s.

And as the IT team builds out technology, make sure that they understand the end user’s needs. Require them to be in stores once a week, said Satturu.

Most of all, customize offers for customers in the digital world.

“If you just throw stuff at them, you become spam,” said Conexxus Executive Director Gray Taylor. “It’s about personalization and community.”

The digital world also presents challenges for convenience retailers, especially with foodservice. Data from Circana shows that 27% of c-store lunch customers are there because it’s a convenient location, while only 10% select the store because “I like it there.”

If the competition makes their food more convenient in the digital realm, you’ll have to win on taste and value.

Autonomous vehicles, another technology that will come slowly, then suddenly, also could decrease impulse sales and make it more important to offer foodservice that drivers seek out.

WHAT’S NEXT? There is no one-size-fits-all answer for retailers. Those who focus on leveraging their strengths to give customers what they want— or don’t yet know that they want—are the ones most likely to be high performers.

It’s a matter of reviewing broad trends and those specific to your business. After all, your frontline people who interact with customers every day already have key insights to redefine your future. And so does NACS, both with its suite of State of the Industry products and other research.

“Go seize the future,” implored NACS Vice President of Research and Education Lori Buss Stillman in closing the Summit.

Jeff Lenard is NACS vice president, strategic industry initiatives. You can reach him at jlenard@convenience.org.

Ron and Patty Thomas/Getty Images

The NACS SOI Summit heads to Dallas next year. It will be held April 8-10 at the Hyatt Regency at DFW International Airport, the same location as the 2023 event.

AI IS NOT A JOKE We’ve all seen the bad side of artificial intelligence (AI), whether photos with six-fingered people or sentences that are more confounding than assembly instructions for IKEA furniture.

However, whether you like it or not, AI will have a dramatic impact on our industry.

“AI has been described as something that comes slowly, then suddenly. Well, we’re in ‘suddenly,’” said Armour.

AI is much more than just ChatGPT. It can significantly help drive efficiencies.

For example, Circle K is deploying more than 10,000 AI-camera checkout systems to make transactions quicker.

AI can help with loss prevention—it can, for example, flag if a pack of cigarettes leaves the backbar but there’s no corresponding purchase. It can cut the phone line based on key-word detection when a gift card scam is called in to an employee.

The technology can even help track how employees interact with customers, allowing stores to refine messaging and reward good behavior.

“AI helps you get out of clutter,” said Robert Hampton, vice president of technology and services at Jacksons Food Stores, “and allows you to focus on how to remove friction for the customer.”

AI also can help with fuel-pricing decisions—but it’s still too early to automate decisions that require the nuance that humans still provide better. It is more valuable for arbitrage for companies buying fuel, especially for their fleets.

While AI can help with efficiencies, it does raise larger concerns about the electric grid.

AI computing pulls an increasingly high share of the nation’s electricity. More AI will require massive upgrades to the system and perhaps inhibit the growth of EVs. On the flip side, as AI becomes more powerful and people become more comfortable deferring to machine wisdom, autonomous driving may become more routine.

crisp convenient cocktails

Record Year Another

Labor markets will still be tough.

Inflation will be less than it was last year, but at the end of the day it will still be a thing. Try to manage your expenses so you don’t need to dig into the fuel pot for gross profits.”

Chris Rapanick, guest editor

48 JUNE 2024 convenience.org

for Sales

BY CHRISSY BLASINSKY

T

he convenience industry broke records last year, clocking impressive growth and profits across many categories. At the same time, stores grappled with inflationary pressures and cost increases, and not every aspect of the channel thrived.

These were themes Varish Goyal, CEO of Loop Neighborhood Markets and previous NACS chairman of research and technology, unpacked during “Financial and Operational Lessons from 2023,”—the NACS State of the Industry Summit session that reveals all the topline operational and financial performance metrics from 2023.

Here’s a quick look at some of the year’s most important numbers:

Sales grow as labor remains a challenge and operating expenses increase.

Varish Goyal, CEO of Loop Neighborhood Markets and previous NACS chairman of research and technology

NACS JUNE 2024 49

Per Store, Per Month Topline Industry Data Per Store/Per Month

2022

2023

% Change

Total All Sales

$748,456

$701,268

(5.7)%

Fuel Sales

$554,996

$494,105

(11.0)%

Fuel Gallons

139,525

139,936

0.3%

$3.98

$3.53

(11.2)%

Average Selling Price Inside Sales

$213,517

$223,522

4.7%

Foodservice

$55,438

$60,578

9.3%

Merchandise

$158,550

$163,483

3.1%

Mdse Less Cigarettes

$112,090

$118,749

5.9%

Cigarettes

$46,725

$44,765

(4.2)%

Total Transactions

45,503

45,312

(0.4)%

Source: NACS CSX Convenience Benchmarking Database

Sales Mix Marks a Return to Normal After Volatility 8.8%

9.5%

9.1%

8.3%

9.7%

24.5%

30.9%

24.8%

20.8%

23.0%

66.7%

59.6%

66.1%

70.9%

67.3%

2019

2020

2021

2022

2023

Fuels

Merchandise

Foodservice

Source: NACS CSX Convenience Benchmarking Database

Industry Transaction Counts YoY: +8.8%

13.4 B

YoY: (17.3)%

10.9 B

12.8 B

YoY: +8.5%

YoY: (0.4)%

14.2 B

14.6 B

44.4 B

36.9 B

39.2 B

42.2 B

40.9 B

2019

2020

2021

2022

2023

Inside Transactions

Pump Transactions

Sources: NACS CSX Convenience Benchmarking Database and NACS/NIQ YE2023 Convenience Store Census

50 JUNE 2024 convenience.org

• Total industry sales hit $859.8 billion in 2023, $327.6 billion of which were from inside sales and $532.2 billion from fuels.

• Inside sales increased for the 21st consecutive year.

• Prepared food, which grew 12.2% to $51,500 per store, per month, was the No. 1 category for in-store sales.

• Foodservice represented 26.9% of in-store sales, up 1.3 percentage points from the year prior.

• The average basket increased 3.7% from $7.36 in 2022 to $7.80 in 2023.

• Industry store count increased 1.5% for the second consecutive year to reach 152,396 stores.

• Fuel sales decreased from $603.2 billion in 2022 to $532.2 billion, largely due to lower gas prices, which decreased 11.2% to an average of $3.53 per gallon.

• Direct store operating expenses (DSOE) increased 3.3% to $150.1 billion, with wages and benefits being the largest operating cost at $84.2 billion.

• Average wages for full-time employees increased 30 cents to $14.73 per hour and $13.86 for part-time.

• The U.S. c-store industry paid or collected $208 billion in taxes, which is 24% of total sales dollars at convenience stores.

• On a per-store basis, taxes collected averaged nearly $1.4 million. It is estimated that stores also paid $4.4 billion in swipe fees on these taxes collected for the local, state and federal governments.

Monthly DSOE has increased by 40% in just two years.”

Store Growth for Different Retail Channels

+1.5%

(2.8)%

+1.2%

+1.7%

Convenience

Gas Kiosks

Liquor

Smoke Shop

+0.8%

(0.6)%

+3.7%

(0.1)%

QSR

Drug

Dollar

Grocery

Source: NIQ TDLinx YE2023 Retail Channel Census

How Profitable Was the 2023 Basket?

Basket Value

$7.80

Minus COGS

$4.91

Minus DSOE and Facility Expense

$3.04

Inside GP$ + Op Income

$2.89+.20

=

2022 Labor Cost Per Inside Transaction

Inside Operating Profit Per Transaction

5¢

$1.33 Source: NACS CSX Convenience Benchmarking Database

Fuel sales decreased from $603.2 billion in 2022 to $532.2 billion in 2023.

52 JUNE 2024 convenience.org

HOW TOP PERFORMERS STACK UP Store operating profit across the board was largely in the black for 2023. But the difference between the top and bottom performers, and their fuel verses inside sales, was stark.

If you’re not familiar with the NACS State of the Industry Report®, but you’ve seen the data broken out by the top quartile at the Summit, here’s what that means: The top quartile is the ranking of all the top 25% of companies by their store operating profit, which is sales minus the cost of goods, facility expense and DSOE. This calculation includes fuel gross profit dollar and expenses, but all corporate income and expenses are not included (e.g., administrative expenses, asset sales, income from other operations).

Top decile performers are firms in the top 10% of the SOI survey sample ranked by store operating profit. These retailers differentiate themselves with merchandise and foodservice sales, which drives higher margin fuel sales—and guess what? “Their employees stay longer, are more productive and more efficient,” said Goyal.

By ranking the top 10% against the top 25%, we can start to see the best of the best in the industry emerge, which in turn delivers better benchmarking opportunities.

In 2023, all deciles reported positive store operating profit. However, we start to see

the deciles shift when we remove the impact of fuel margins and focus just on the inside store operating profit.

“When the impact of fuel margins is removed, the performance of the same companies looks much different. The companies in the bottom decile move from $7,248 of inside store operating profit to a loss of just under $15,000—a swing of over $22,000,” said Goyal.

“Even more impactful is the swing in the top decile companies,” he continued, noting that the top decile profit went from over $106,000 per store, per month to around $13,500 without fuel—a difference of about $93,000 per store, per month.

Of the 150 companies that participated in the SOI survey this year, “only about onethird would be profitable when fuel gross profit dollars are removed from their profit and loss,” said Goyal.

At the end of the day, Goyal noted that the top performers earn 84 cents of inside store operating profit per transaction, which is 16.8 times the national average of 5 cents.

He encouraged companies that are in the bottom decile to act now to move up.

“Moving from the bottom decile to the ninth will generate over $17,000 in inside store operating profit per store, per month,” said Goyal, adding, “Make a plan to move one decile in 2024!”

OPERATING EXPENSES ARE EXPENSIVE There’s one number worth digging into from this year’s report: $150.1 billion for direct store operating expenses (DSOE), which have been growing … and growing—meaning they’re trending in the wrong direction.

“If we index DSOE back to January 2021, we see that monthly DSOE has increased by 40% in just two years,” said Goyal. Two expense lines are notable: wages and benefits, up 38.8%, and repairs and maintenance, up 38% during this timeframe (January 2021-December 2023).

In 2022, DSOE growth outpaced inside gross profit dollar growth in 9 of 12 months.

For 2023, after three years of double-digit growth of DSOE, a 5% increase is a welcome change; however, the increases the industry experienced over the past few years have likely created a ripple effect that will continue for several years.

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Turnover Percentages Improved for Managers and Employees Metric (Per Store/ Per Month)

2022

2023

Change

Non-Manager Turnover (annual)

122.7%

118.8%

(3.9) pts

Manager Turnover (annual)

27.5%

24.2%

(3.3) pts

In-Store GP$ per Labor Hour

$36.10

$38.34

6.2%

Wages and Benefits as a % of GP$

29.6%

30.3%

0.6 pts

Source: NACS CSX Convenience Benchmarking Database

Retail Quits Declined Significantly in 2023

645,000

-15.7% 611,000 515,000

519,000 469,000

2019

2020

2021

2022

2023

Retail Trade Total Quits Source: U.S. Bureau of Labor Statistics

Average wages for full-time employees were $14.73 per hour and $13.86 per hour for part-time employees.

OUR PEOPLE ARE OUR BEST ASSET “Labor is consistently a top concern for convenience retailers,” said Goyal, noting that 2023 was another challenging year.

National unemployment remained low at 3.7% as of last December, and 11 million jobs remain unfulfilled. The labor environment is not improving.

Additionally, the labor force participation rate only increased by a tenth of a point in 2023. “This metric has been essentially static since the fourth quarter of 2022, adding to the challenges for convenience retailers to become fully staffed,” said Goyal.

Like 2022, convenience retailers continued to outspend other retail channels to get and keep employees, with total compensation (wages and benefits) increasing at a much higher rate than the average of all retail channels.

For convenience stores, average wages for full-time employees were $14.73 per hour and $13.86 per hour for part-time employees in 2023. With 25 of 50 states increasing or planning to increase their minimum wage in 2024, higher wage concerns will impact more than just convenience.

There’s good news and bad news. The good news is that the quit rate for overall retail, not just convenience, declined 15.7% from 2022-2023. But here’s the bad: Almost 8 of 10 separations were voluntary. “This is definitely a reflection of culture in our offices and in our sites,” said Goyal.

“There are companies in our channel that have built a reputation as being great retailers and great employers. These companies keep their turnover rates well below 100%, even in this environment, which is an amazing feat considering the industry average for associates hasn’t been under 100% since 2015,” he said.

Recapping 2023, Goyal cited a bright spot that is worth focusing on in 2024 and beyond: investing in your workforce. Employees were more productive—inside gross profit increased by 7.8% while labor hours only increased by 4%.

“It’s clear that the additional investment to keep employees also pays out in productivity,” said Goyal.

Chrissy Blasinsky, digital and content strategist, has been with NACS for 19 years and can be reached at cblasinsky@convenience.org.

54 JUNE 2024 convenience.org

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Change…

The More Things

Led by a few standout subcategories, in-store sales look steady.

BY BEN NUSSBAUM

T

he details are different, but the direction is the same. That was the message during the “In-Store Performance Lessons From 2023” session, presented by Annie Gauthier, CFO and co-CEO of Y-Not Stop and St. Romain Oil. She added that this is “a welcome change after the past several years being very volatile and very unexpected in a lot of ways. We seem to be back to incremental moves.”

Her presentation covered foodservice and the top six in-store merchandise categories, which together make up 87.4% of inside sales and 86.2% of inside gross margin.

NACS JUNE 2024 57

Eight of the Top Ten In-Store Merchandise Categories Saw Growth Green arrows indicate growth outpaced inflation Cigarettes

Cold

9.6%

11.0%

9.1%

6.7% 7.1%

7.1% 8.3%

6.8% 8.6%

7.0%

16.0%

12.2%

11.1%

10.8%

2019

62.9%

2020

62.5%

2021

8.6%

64.5%

2022

5.6% 7.0% 7.5% 10.3%

Alternative Snacks

Pkg. Sweet Snacks

Milk

Pkg. Ice Cream

$4,204 4.3%

$3,619 5.2%

$3,396 (2.6)%

$2,242 5.3%

$10,390 9.2%

Sales Sales YoY Change

$8,241 8.2%

Source: NACS CSX Convenience Benchmarking Database

69.6%

Four of the Five Foodservice Categories Made the Top 10 in Inside Sales Prepared Food

Cigarettes

Pkg. Beverage

Beer

OTP

$51,500 12.2%

$44,765 (4.2)%

$40,339 7.9%

$18,078 2.2%

$16,844 6.9%

Salty Snacks

Candy

Hot Disp.

Cold Disp.

Commissary

$10,390 9.2%

$8,241 8.2%

$6,324 5.1%

$5,233 9.4%

$4,260 6.0%

2023

Source: NACS CSX Convenience Benchmarking Database

Foodservice continued its ascent, with all five categories—prepared food, commissary, hot dispensed, cold dispensed and frozen dispensed—showing sales and profit increases.

Prepared food, the bell cow of foodservice, posted a 12.2% gain in sales and 13.9% gain in gross profit year over year, bringing in $51,500 per store, per month.

The 2023 numbers show that foodservice made up 26.9% of in-store sales; just a dozen years ago, in the State of the Industry Report® of 2011 Data, it made up 16.8% of in-store sales.

(For more on how foodservice performed, read “Foodservice Sales Stack Up” in the May issue; a follow-up article on foodservice performance will appear in the August issue.)

Some topline foodservice takeaways: • Within the commissary category, sandwiches/wraps spiked 19.7% in sales.

• Coffee had a slight rebound, with 6.0% sales growth.

• In cold dispensed, non-carbonated (think tea and lemonade) is a big mover at 79.2% sales growth. Non-carbonated now represents 14.6% of the category.

58 JUNE 2024 convenience.org

$16,844 6.9%

Commissary

11.4%

58.7%

$18,078 2.2%

Salty Snacks

Candy

Sales Sales YoY Change

Sales Sales YoY Change

Source: NACS CSX Convenience Benchmarking Database

Foodservice and the Top Six In-Store Merchandise Categories Make Up Most Sales, Profit 12.4%

13.7%

3.6% 4.7% 7.0% 7.4%

4.9%

18.0%

20.0%

26.9%

Inside Sales Contribution

86.2 %

Frozen

OTP

$40,339 7.9%

87.4%

Hot

Beer

Sales $44,765 Sales YoY (4.2)% Change

Prepared Food Drives Foodservice Growth Prepared Food

Pkg. Beverage

5.1% 3.8% 5.8%

All Other Categories Candy Salty Snacks Beer

21.6% 7.8%

Other Tobacco Products Packaged Beverages

37.3%

Cigarettes Foodservice Categories

Inside Gross Margin Contribution

Source: NACS CSX Convenience Benchmarking Database

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Cigarettes See Broad Decline but Growth in Fourth Tier Premium

-3.0%

Sub-Generic/ Private Label

-8.8%

Branded Discount

-5.9%

1.7% -4.4% -13.4%

Fourth Tier Imported

20.4% -7.5%

91.6% -6.6%

SALES CHANGE YOY

GROSS PROFIT CHANGE YOY Source: NACS CSX Convenience Benchmarking Database

CIGARETTES No. 1 inside sales merchandise contributor; No. 2 inside margin merchandise contributor Cigarettes saw a -4.2% sales change year over year (NACS CSX data). Units declined even more, with a -7.4% change (NIQ). These are familiar trends that closely mirror last year’s numbers (-3.2% and -7.5%). Of note: Fourth tier saw huge growth

(from a very small base) rebounding from a major decline in 2021. The category posted a 14.40% gross margin contribution.

Gauthier highlighted three trends: • “There are more options than ever before,” with

smokeless tobacco and vapes increasingly putting pressure on cigarette market share.

• The unusually high usage during the pandemic has waned, and price is on the minds of consumers.

• Regulations continue

to grow. (In a win for the industry, the Biden administration delayed its proposed menthol ban shortly after the Summit.)

A year from now, packaged beverages could well topple cigarettes as the top inside sales merchandise contributor. Packaged beverages also happen to be the category must frequently purchased with cigarettes. Going back a dozen years, in the State of the Industry Report of 2011 Data, cigarettes outpaced packaged beverages nearly three to one, with the combustibles bringing in $52,064 per store, per month while packaged beverages contributed $18,292 per store, per month.

Annie Gauthier, CFO and co-CEO of Y-Not Stop and St. Romain Oil

60 JUNE 2024 convenience.org

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Packaged Beverages Subcategories Mostly Showed Positive Change Carbonated Soft Drinks Energy Drinks Sports Drinks

7.7% 19.6% -5.8%

19.3%

-7.4%

Bottled Water Iced Tea (RTD) Other

8.0%

7.9%

7.7%

8.8%

11.4%

-5.4%

-6.2%

Juice/Juice Drinks

3.6%

Enhanced Water

4.1% 12.8%

12.0%

SALES CHANGE YOY

GROSS PROFIT CHANGE YOY

Source: NACS CSX Convenience Benchmarking Database

PACKAGED BEVERAGES No. 2 inside sales merchandise contributor; No. 1 inside margin merchandise contributor The star of the in-store merchandise world, the top performer in terms of inside margin was packaged beverages, lending $17,908 per store, per month in gross profit with 44.39% gross margin.

Units ticked up slightly, according to NIQ data, at

0.1% growth year over year, but sales and unit price were both up 7.9%.

The big three of packaged beverages—carbonated soft drinks, sports drinks and energy drinks—comprised about 73% of total category sales. Sports drinks (which

showed the strongest seasonality of the three) were a big positive mover in 2022 but lost those gains in 2023, with a -5.8% change in sales, while energy drinks surged 19.6%.

Indexing to January 2021, only one subcategory—the small catch-all of other pack-

BEER

In Beer, Imports Continue to Grow Premium

-3.0%

-2.1%

Flavored Malt

-0.1%

-1.9%

No. 3 inside sales merchandise contributor; No. 6 inside margin merchandise contributor

Imports

11.8%

13.2%

Budget

11.8%

13.4%

Popular Microbrews/ Craft Super Premium

-10.9%

-10.5%

-3.6%

-3.3%

-5.6%

-4.3%

Malt Liquor

3.9%

Non-Alcoholic

6.4% 30.2%

SALES CHANGE YOY

38.9%

GROSS PROFIT CHANGE YOY Source: NACS CSX Convenience Benchmarking Database

62 JUNE 2024 convenience.org

aged beverages—showed a decline, while enhanced water showed the most growth (from a small base).

Gauthier noted that private label is currently 2.2% of packaged beverages, and that private label growth in packaged beverages slightly lags behind the overall category growth.

The trends remain the same: Consumers are gravitating towards beverages that can tout some sort of positive effect, whether that’s energy drinks, functional beverages (perhaps endorsed by influencers) or enhanced water, a small subcategory showing strong growth.

“We continue to see innovation in this category, and we continue to be challenged as retailers to figure out how to allocate share of cooler space based on the classics that drive consumer behavior and dominate in the category and balance that with trends that are continuing to show up,” Gauthier said.

Beer showed signs of consumers trading down, with sales up 2.2% according to NACS CSX data—failing to keep pace with inflation— even while units were slightly up, with 0.6% growth, according to NIQ data. Beer posted a 20.5% gross margin.

(Turn to By the Numbers at the end of this issue for more on inflation and in-store merchandise.)

Imports continued their upwards trend, registering

BEER 11.8% sales growth. The budget category recorded the same growth in sales.

Some of the budget category growth may have been taken out of the super premium, microbrew, and premium categories, which all registered sales change of between -5.6% and -3.0%. Also notable: Flavored malt growth

halted after a prolonged period of steady growth, showing a 0.1% decline in sales. This subcategory merits watching—will new brands and innovations allow it to recapture upwards growth?

Imports and flavored malt each account for about 17% of category sales, with imports

slightly outpacing flavored malt.

Sales in the non-alcoholic subcategory spiked a dramatic 30.2%—but from a very small base.

“Younger drinkers are more frequently opting for non-alcoholic beverages,” Gauthier said, flagging it as a trend to watch.

OTP Category Remains Dynamic and Evolving Smokeless E-Cigarettes

12.2%

19.9%

3.5%

2.5%

Other

22.6%

31.3%

Cigars

1.1%

Pipes

* YoY Change Not Measurable

Papers

-1.7% * YoY Change Not Measurable

4.0%

Pipe/ Cigarette Tobacco SALES CHANGE YOY

9.0% 12.4%

12.5%

GROSS PROFIT CHANGE YOY

Source: NACS CSX Convenience Benchmarking Database

OTP No. 4 inside sales merchandise contributor; No. 3 inside margin merchandise contributor OTP posted 6.9% sales growth. Retailers have gotten used to positive numbers: As Gauthier noted, “I really like the chart here for OTP. … Nice, consistent year-over-year growth for the past four years.” The category overall posted a 29.58% gross margin.

Where there’s smokeless, there’s fire: The smokeless subcategory, already the category leader, posted 64 JUNE 2024 convenience.org

12.2% gains in sales and 19.9% growth in gross profit. It now accounts for almost half of OTP sales.

Smokeless has widened its lead over e-cigarettes, where sales have leveled off, “largely likely a function of increasing legislative and regulatory scrutiny.”

Indexing to January 2021, only two subcategories register a decline: pipes and pipe/cigarette

tobacco. Cigars are mostly flat in that timespan, showing small growth, while the catch-all category of other tobacco shows the largest growth.

A major trend continues to be the evolving consumer: The cigarette customer is becoming the nicotine customer, with polyusers crossing categories and subcategories, often in the same basket.

SALTY SNACKS No. 5 inside sales merchandise contributor; No. 4 inside margin merchandise contributor Consumers are still in the mood for a snack. Last year’s SOI Summit revealed that the category jumped 14.2% in sales in 2022, and a positive sales trend continued into 2023, with a 9.2% boost in sales to go with a 41.10% gross margin. That sales increase, though, was fueled entirely by higher prices, as units posted a -1.1% change.

From a subcategory standpoint, the old standby of potato chips increased its share of the category over the last year, representing about 44% of overall category sales.

Looking at all subcategories since January 2021, the trend lines are tight together, with performance across all subcategories closely matching. “The category just kind of goes the way it goes,” Gauthier noted.

However, “what we did see, especially the past 12 months or so, is that mixed and pretzels broke away from the pack a little bit in 2023.”

Private label accounted for 2.0% of sales in 2023 (per NIQ) and has increased 61.5% in the category since 2020, compared to overall salty snacks category growth of 41.2%. For those thinking of starting a private label operation, “Your mileage may vary for your company,” advised Gauthier.

Gauthier also noted the importance of two key commodity areas: Fats and oils and potato and corn. Fats and oils have seen steady growth

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SALTY SNACKS Nearly All Salty Snack Subcategories Experienced Growth Potato Chips Tortilla/ Corn Chips

13.6%

12.1%

18.4%

Other -1.5%

17.4%

CANDY

0.3%

Nuts/Seeds

2.5%

Puffed Cheese

16.5%

15.8%

22.0%

Pretzels Mixed

20.9%

15.0%

Crackers

17.4%

11.6%

RTE Popcorn

No. 6 inside sales merchandise contributor; No. 5 inside margin merchandise contributor

3.6%

13.1%

1.8%

0.0%

SALES CHANGE YOY

GROSS PROFIT CHANGE YOY

Source: NACS CSX Convenience Benchmarking Database

in price, while potatoes and corn has been more of a rollercoaster. After a big spike in the summer of 2022 for both potatoes and corn and another spike in 2023 for potatoes, both areas trended lower in pricing toward the end of 2023.

The fluctuations in the price of commodities is one of the trends driving this category, Gauthier noted.

Another trend, one that carries over from packaged beverages, is that

consumers are looking for items that have a health benefit of some kind.

And, of course: spice—the movement towards heat continues.

“While we’re less constrained in merchandising this category than we are in packaged beverage, with finite cooler space, we still face that challenge of making room for innovation while maintaining the classics that are core to this category,” Gauthier said.

All Candy Subcategories Saw Year-Over-Year Growth Chocolate Bars/Packs

3.1%

Bagged/ Repacked Peg

1.3%

7.9%

Gum

7.2%

18.4%

Non-Chocolate Bars/Packs

3.8%

Novelties/Seasonal

7.6%

18.2% 1.0% 10.8% 22.7%

21.5%

Rolls/Mints/Drops Bulk Candy

46.4%

43.6%

Change Makers/ Penny Candy

24.4%

29.9%

SALES CHANGE YOY

GROSS PROFIT CHANGE YOY

Source: NACS CSX Convenience Benchmarking Database

66 JUNE 2024 convenience.org

Candy tells a similar story as other categories, with price increases helping to offset slow or negative unit growth.

In the case of sweets, units were down 4.4% while unit prices increased 14.7%, netting to an 8.2% sales change. The category posted a 51.13% gross margin.

“We see consistent, steady growth over the past few years,” Gauthier said.

Chocolate bars and packs, combined with pegged candy, combine to account for about 67% of overall category sales.

While the price of corn sweeteners, which spiked in the early part of 2023, have now fallen, the price of cocoa, stable in 2020 and 2021, has jumped to a 46-year high, Gauthier said. Inevitably, this has driven up the price consumers pay for chocolate, a trend that is “likely to continue.” Connecting the dots: “Chocolate sales, compared to other subcategories, have melted a little bit,” Gauthier said.

The past year saw big jumps in bulk candy and change makers/penny candy.

These are small subcategories worth keeping an eye on.

Private label growth lagged overall category growth, with private label accounting for 1.4% of candy industry sales in 2023, a 17.5% growth from 2020 in a category that has grown 37.4% overall in that time (NIQ data).

Even in the candy category, consumers are looking for the balance of indulgent but also better for you, said Gauthier. She also noted a trend towards nostalgia in the category, as retailers try to find the right balance between novelty and old standbys.

Ben Nussbaum is the editor-in-chief of NACS Magazine.

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R etail Resiliency

The Age of Convenience

Retailers can find success in the current ‘Goldilocks economy.’

BY CHRISSY BLASINSKY

T

wo years ago at the NACS State of the Industry Summit, the overarching theme was disruption.

There were high inflation rates that had not been seen in 40 years, fundamental shifts in the labor market from the Great Resignation and new Covid variants, not to mention the global ripple effects of the first ground war in Europe in 70 years.

“Today, a lot of that fog that we talked about over the past two years—the uncertainty, disruption and what’s going to happen—has lifted,” said John Benson, partner at AlixPartners LLP, at this year’s summit.

Although there’s still a fair amount of risk, the challenges and opportunities for our industry are clearer for 2024, he said, noting that convenience retail is “highly complex, competitive and rapidly changing.”

“Companies and leaders need to be adaptable and agile,” Benson said, adding that the overarching theme now and heading into 2025 is resilience—“resilience of the economy, resilience of the consumer and how we [retailers] need to become more resilient to succeed in this environment.”

68 JUNE 2024 convenience.org

We’re spending extra in the channel to find and keep good people, and it’s working some. We’re still a long way from home.”

Chris Rapanick, guest editor THE ‘GOLDILOCKS ECONOMY’ Recession? What recession? As Lemony Snicket said, “We’re not out of the woods yet.”

Benson noted that there’s still a chance we could dip into a recession this year, but the picture is rosier than it was in 2022 and 2023.

Most CEOs (82%) surveyed by AlixPartners in 2023 were expecting a recession or economic downturn in their region that would last more than one year. In 2024, 62% of CEOs surveyed said they now expect economic growth in their region over the next 12 months.

Inflation was 3.2% in February 2024, a reduction from 5% in July 2023 and 9.1% in June 2022. Although consumer spending has been strong, consumer debt has increased 24% since 2019. Meanwhile, supply chain disruptions have subsided.

These factors put us in a “Goldilocks economy” at a macro level: Not too strong, not too weak, but just about right. The U.S. unemployment rate was low at 3.9% in February, U.S. GDP growth has accelerated from 2022 levels and inflation could continue to come down, noted Benson.

On a micro level, however, convenience retailers seem unconvinced, citing concerns around costs (sales are up, but profits down) and low consumer sentiment.

A March 2024 AlixPartners survey found that rising prices and high interest rates are the primary sources of concern for consumers, with credit card debt on the rise.

“U.S. consumers are spending 11% of their total household income on food, and that’s the highest percentage they’ve spent in 30 years,” Benson said.

Among the competing channels, the good news is that consumers have a higher perception of value for convenience retail compared to QSRs, fast casual restaurants, casual dining and grocery.

“Companies will need to remain vigilant and shift from pricing to productivity initiatives to protect margin and combat sustained inflation,” said Benson.

WHAT TO FOCUS ON NOW The rest of 2024 is likely to only confirm just how complex and competitive the convenience industry is, said Benson. He noted six priorities that could help deliver success: 1. Go back to the basics on merchandising and operating our stores well. “Are we succeeding at the basics of forecasting, ordering, stocking, managing out of stocks and shrink?” he asked.

2. Invest in your people through training, upskilling and developing highperforming teams.

3. Embrace digital capabilities that can enhance how you do business, not add complexities.

4. Break the tradeoff between profits and growth.

5. Make data-driven decisions that drive sales, merchandising and the customer experience.

6. Act now so you can respond to future disruptions.

Chrissy Blasinsky is the digital and content strategist at NACS. She can be reached at cblasinsky@ convenience.org.

Looking Beyond 2024 There are a number of key factors to watch for the remainder of the year, and each come with risks and opportunities: • This is an election year: Former President Donald Trump becoming president again would impact issues like trade, taxes, immigration, vehicle emissions standards and electrification.

• M&A activity: According to AlixPartners, 81% of CEOs expect to actively pursue mergers and acquisitions in the next 12 months. “How will this play out for convenience stores, where roughly two-thirds of units are operated by entities with less than 25 units?” said Benson.

• Consumer spending: While many are under financial stress, others are more resilient with their spending. How will retailers adjust to this spectrum of shoppers?

• Interest rates: There could be three rate cuts in 2024, although some suggest that rates could be “higher for longer.”

• Electric vehicles: With EV growth slowing, OEMs like GM and Ford have pushed back nearterm sales targets due to challenges with consumer demand.

• Cost of capital: It remains to be seen whether rate cuts in 2024 will become reality. The longer the cost of capital remains high, the longer it will take for companies to grow.

NACS JUNE 2024 69

Reg 70 JUNE 2024 convenience.org

ion

Data from the six NACS regions shows that even when big trends align, there are important differences in performance around the country.

BY LEAH ASH, JEFF LENARD AND BEN NUSSBAUM

Breakdowns A

Getty Images

s part of its State of the Industry reporting, NACS separates the United States into six regions, which are based on the fuel PADDS that the U.S. government uses.

Data from these six regions allows operators to compare like with like, given the large differences in performance between c-stores in different parts of the country.

NACS JUNE 2024 71

Region 1 Scorecard Metric Per Store, Per Month

National

Region 1

Region 1 Diff. vs.

Nat’l.

Inside Transactions

32,650

42,469

30.1%

Average Basket Value

$7.80

$9.29

$1.49

Inside Store Operating Profit

$3,724

$29,885

702.6%

Non-Manager Turnover (annual)

118.8%

109.7%

(9.1) pts

Manager Turnover (annual)

24.2%

27.2%

3.0 pts

In-Store GP$ per Labor Hour

$38.34

$123.51

34.1%

Wages and Benefits as a % of GP$

30.3%

31.0%

0.7 pts

Source: NACS CSX Convenience Benchmarking Database

Only Beer Recorded Unit Gains in Region 1 Among Top Ten In-Store Merchandise Categories YoY Unit Change

National

Region 1

Region 2

Region 3

Region 4

Region 5

Region 6

(7.4)%

(10.2)%

(5.9)%

(6.0)%

(8.9)%

(7.1)%

(9.0)%

Packaged Beverages

0.1%

(2.9)%

1.9%

1.9%

0.5%

(2.2)%

(0.2)%

OTP

(3.3)%

(7.4)%

(1.20)%

(0.1)%

(4.7)%

(5.9)%

(5.2)%

Beer

0.6%

1.2%

1.4%

1.3%

(0.3)%

1.5%

0.3%

Cigarettes

Salty Snacks

(1.1)%

(1.4)%

0.9%

(3.0)%

(0.4)%

(5.4)%

(0.6)%

Candy

(4.4)%

(7.0)%

(4.0)%

(2.0)%

(3.6)%

(5.7)%

(4.4)%

Alternative Snacks

(5.2)%

(6.0)%

(7.5)%

(4.1)%

(4.8)%

(5.1)%

(3.1)%

Packaged Sweet Snacks

(5.3)%

(7.3)%

(4.5)%

(5.7)%

(5.2)%

(5.2)%

(4.0)%

Milk

(12.8)%

(16.6)%

(15.8)%

(9.8)%

(11.9)%

(8.5)%

(7.3)%

Packaged Ice Cream

(5.4)%

(9.2)%

(5.5)%

(3.7)%

(0.8)%

(1.9)%

(6.2)%

Total Store

(2.2)%

(5.2)%

(0.9)%

(1.1)%

(2.1)%

(3.7)%

(1.0)%

Source: NACS CSX Convenience Benchmarking Database

REGION 1: THE NORTHEAST Region 1, the Northeast, is the longstanding foodservice leader.

Foodservice accounted for 15.0% of the region’s sales mix (with merchandise at 24.8% and fuels at 60.2%). Nationally, foodservice accounted for 9.7% of sales.

Foodservice gross profit is where the region really shines in the 2023 data, with the category delivering $84,009 gross profit per store, per month, a 9.2% increase year over year and more than $50,000 higher than the national average.

More good news for the region: Inside transactions tipped up slightly to 42,469 per store, per month, a 1.9% increase.

Additionally, inside operating profit per transaction was 68 cents. “That is very, very strong. It’s the highest across all the regions,” said Jayme Gough, director, research, at NACS. With busy stores and robust foodservice offerings comes 72 JUNE 2024 convenience.org

higher costs. The region easily leads the other five in wages and benefits, at $76,362 per store, per month. Total DSOE was $130,973 per store, per month, almost twice the amount in Region 5, which had the lowest DSOE of any region. The investment is paying off, with inside gross profits of $161,886 per store, per month more than double the figure for any other region except Region 3.

Unit sales were a less positive side of Region 1’s 2023 performance. Only beer posted an increase, with a modest 1.2% gain.

Cigarettes posted a -10.2% change.

Andrew Baill, senior manager of customer insights and strategy at Wawa, shared that “some of the work we’re doing within our team” is continuing to refine the retailer’s understanding of how declining cigarette sales is impacting other categories.

“That customer is clearly buying more than cigarettes,” he said.

REGION 2: THE SOUTHEAST “A little bit of good, a little bit of bad” is the recurring theme in looking at data from Region 2, which encompasses seven states in the southeastern United States.

Let’s start with the good news, particularly related to fuels. Retailers in the region sold nearly 50,000 more gallons per store, per month than the national average (188,667 vs. 139,936). Overall, fuel accounted for 47.4% of gross profit dollars, almost 8 percentage points higher than the national average.

Strong traffic at the pump—transactions were up 5.7%—also drove customers inside the store, with in-store transactions up 1.2%, leading to sales growth in most categories. Customers coming inside the store also spent more money; basket size increased 60 cents to $9.38, significantly higher than the $7.80 national average.

For the just-okay news, foodservice sales were up a strong 13.1% but are still 33.8% less than the national average ($40,051 vs. $60,578). While many retailers nationally see foodservice as a huge profit driver, that’s not the case in Region 2: Only 10.4% of gross profit dollars came from foodservice, less than half the percentage nationally (23.1%).

Now for the bad news. While in-store categories did well, inflation rose faster than sales growth—and costs outpaced sales, whether inflation adjusted or not.

Wage & Benefits was the only expense that was less than the national average, but turnover was much higher (171.4% vs.

118.8%). Every state in the region had quit rates above the national average.

Region 2 Scorecard Metric Per Store, Per Month

National

Region 2

Region 2 Diff. vs.

Nat’l.

Inside Transactions

32,650

23,339

(28.5)%

Average Basket Value

$7.80

$9.38

$1.58

Inside Store Operating Profit

$3,724

$(6,498)

$10,222

Non-Manager Turnover (annual)

118.8%

171.4%

52.6 pts

Manager Turnover (annual)

24.2%

37.7%

13.5 pts

In-Store GP$ per Labor Hour

$38.34

$36.92

(3.7)%

Wages and Benefits as a % of GP$

30.3%

24.7%

(5.6) pts

Source: NACS CSX Convenience Benchmarking Database

Bigger Baskets in Region 2 Aren’t Yet Translating to Bigger Profits Metric (Per Store/ Per Month)

National

Region 2

$7.80

$9.38

Net Cost Of Goods Sold

$4.91

$6.27

Inside GP$ + Other Income per Transaction

$3.09

$3.11

Basket Value

Net DSOE + Facility Expense per Transaction

$3.04

$3.75

Inside Operating Profit/Transaction

5 cents

(37) cents

Source: NACS CSX Convenience Benchmarking Database

Factoring in all these expenses didn’t just squeeze in-store profits; it eliminated them.

While the national in-store profit was 5 cents per transaction, retailers in Region 2 lost 37 cents on every in-store transaction.

Strong sales at the pump helped offset the losses per transaction inside the store. More careful management of expenses, especially expenses related to turnover, can help turn around in-store profits in 2024.

NACS JUNE 2024 73

REGION 3: THE MIDWEST Region 3, the Midwest, includes six states and about 15% of the total U.S. c-store count. The region bucked national trends by increasing in-store transactions, which grew 2.3% to 33,457 per store, per month.

Jenna Collard, director, education engagement at NACS, noted that “2023 inside sales look great compared to 2022 and is tracking against 2019 (pre-pandemic) pretty well.” On the fuel side, 2023 pump transactions beat 2022 transactions by 3.2% and bested 2019 significantly.

Mark Buscher, regional VP at 7-Eleven, stated that operators in the region have noticed the same pattern, and also reported optimistic

Region 3 Scorecard Region 3 Diff. vs.

Nat’l.

Metric Per Store, Per Month

National

Region 3

Inside Transactions

32,650

33,457

2.5%

Average Basket Value

$7.80

$7.28

(52 cents)

Inside Store Operating Profit

$3,724

$1,191

(68.0)%

Non-Manager Turnover (annual)

118.8%

90.9%

(27.9) pts

Manager Turnover (annual)

24.4%

22.7%

(1.7) pts

In-Store GP$ per Labor Hour

$38.34

$34.31

(10.2)%

Wages and Benefits as a % of GP$

30.3%

32.1%

1.8 pts

Source: NACS CSX Convenience Benchmarking Database

patterns for the future. “Customer transactions have been very favorable for us in this region. One thing that we’ve noticed is that customers responded very favorably to deals and promotions, mostly value-added propositions, and that’s where we saw the most gain.

With the deals, operators feel encouraged because this traffic feels similar to pre-Covid and possibly even stronger. They feel optimistic about the seasons ahead,” Buscher said.

The good news continues when looking at the key metric of foodservice gross profit, which was $28,951 per store, per month, in the region, a 15.9% increase year over year.

The region’s foodservice gross profit is second only to that of Region 1.

From an overall sales mix perspective, foodservice has increased 1.6 points since 2019. With the rise of foodservice, in-store merchandise took a slide back over the same period of time, falling 2.5 points.

Another Region 3 improvement was in turnover. Non-manager turnover decreased by 3.7 points to 90.9%, while manager turnover decreased by 2.6 points to 22.7%. Both metrics are the best of any region.

Region 3 is also the top performer when it comes to other income, which includes things such as car washes, ATMs and lottery sales.

This catch-all segment earned $9,026 per store, per month.

Region 3 Benefits From Solid In-Store Merchandise Gains YoY Sales Change

National

Region 1

Region 2

Region 3

Region 4

Region 5

Region 6

Cigarettes

(4.2)%

(3.2)%

(5.1)%

(2.9)%

(7.6)%

(6.5)%

(1.6)%

Packaged Beverages

7.9%

7.5%

10.6%

11.8%

6.5%

5.1%

8.5%

OTP

6.9%

7.1%

8.2%

10.9%

(0.8)%

7.3%

8.3%

Beer

2.2%

2.1%

2.8%

7.4%

(10.4)%

0.2%

1.9%

Salty Snacks

9.2%

10.0%

8.3%

8.5%

14.0%

7.5%

10.5%

Candy

8.2%

8.7%

10.3%

13.0%

1.8%

4.4%

6.9%

Alternative Snacks

4.3%

5.6%

11.3%

6.5%

2.7%

1.8%

2.0%

Packaged Sweet Snacks

5.2%

4.9%

11.1%

11.4%

9.9%

0.8%

3.5%

Milk

(2.6)%

(1.7)%

(8.8)%

1.3%

(6.6)%

(6.7)%

1.3%

Packaged Ice Cream

5.3%

2.4%

5.3%

12.0%

(6.4)%

12.4%

(4.0)%

Total Store

3.1%

2.6%

6.9%

4.6%

(0.5)%

1.1%

4.4%

Source: NACS CSX Convenience Benchmarking Database

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Region 4 Scorecard Region 4 Diff. vs.

Nat’l.

Metric Per Store, Per Month

National

Region 4

Inside Transactions

32,650

25,361

(22.3)%

Average Basket Value

$7.80

$7.56

24 cents

Inside Store Operating Profit

$3,724

$(7,715)

$(11,439)

Non-Manager Turnover (annual)

118.8%

135.3%

16.5 pts

Manager Turnover (annual)

24.4%

24.7%

0.5 pts

In-Store GP$ per Labor Hour

$38.34

$25.02

(34.7)%

Wages and Benefits as a % of GP$

30.3%

26.9%

(3.4) pts

Source: NACS CSX Convenience Benchmarking Database

REGION 4: SOUTH CENTRAL The South Central region, anchored by Texas, is known for its high store counts and competitive convenience markets. In 2023, the region’s sales mix was 72.6% fuels, 21.3% in-store merchandise and 6.1% foodservice.

Chris Rapanick, managing director of research at NACS, noted that operators in the region have opportunities to grow inside operating profit.

The region’s inside transactions came in at 25,361 transactions per store, per month, lower than the national average by 22.3%. Additionally, the average basket value was $7.56, 24 cents lower than the national average.

On a positive note, while inside transactions decreased 4.4% since 2022, the average basket value increased by 42 cents.

Stores in the region can look to address pump-to-store movement to draw in more fuel customers, perhaps moving their mix

closer to the national average. Ben Hoffmeyer, vice president of marketing and merchandising at TXB, stated that the retailer is using its loyalty program to drive customers into the store. “Our loyalty program has been going on for two years, and we’ve been using gamification to get more people onto our loyalty program. A customer goes to our app, plays a scratch to win—just like a lottery ticket—and wins a digital coupon. The customer then has 24 hours to redeem the coupon and it drives immediate pump-to-store movement.”

Inside sales were boosted by foodservice sales, up 7.5%, with merchandise sales posting a -0.5% change. The region had some noteworthy in-store trends, with beer, which grew in every other region, posting a -10.4% change and OTP, which posted at least 7.1% growth in every other region posting a -0.8% change. However, the region saw the highest increase in salty snacks sales, at 14.0%.

Beer Posted Big Decline in Region 4 YoY Sales Change

National

Region 1

Region 2

Region 3

Region 4

Region 5

Region 6

Cigarettes

(4.2)%

(3.2)%

(5.1)%

(2.9)%

(7.6)%

(6.5)%

(1.6)%

Packaged Beverages

7.9%

7.5%

10.6%

11.8%

6.5%

5.1%

8.5%

OTP

6.9%

7.1%

8.2%

10.9%

(0.8)%

7.3%

8.3%

Beer

2.2%

2.1%

2.8%

7.4%

(10.4)%

0.2%

1.9%

Salty Snacks

9.2%

10.0%

8.3%

8.5%

14.0%

7.5%

10.5%

Candy

8.2%

8.7%

10.3%

13.0%

1.8%

4.4%

6.9%

Alternative Snacks

4.3%

5.6%

11.3%

6.5%

2.7%

1.8%

2.0% 3.5%

Packaged Sweet Snacks

5.2%

4.9%

11.1%

11.4%

9.9%

0.8%

Milk

(2.6)%

(1.7)%

(8.8)%

1.3%

(6.6)%

(6.7)%

1.3%

Packaged Ice Cream

5.3%

2.4%

5.3%

12.0%

(6.4)%

12.4%

(4.0)%

Total Store

3.1%

2.6%

6.9%

4.6%

(0.5)%

1.1%

4.4%

Source: NACS CSX Convenience Benchmarking Database NACS JUNE 2024 75

REGION 5: CENTRAL

Region 5 Scorecard Region 5 Diff. vs.

Nat’l.

Metric Per Store, Per Month

National

Region 5

Inside Transactions

32,650

25,877

(20.7)%

Average Basket Value

$7.80

$6.93

(0.87) cents

Inside Store Operating Profit

$3,724

$1,797

(51.7)%

Non-Manager Turnover (annual)

118.8%

165.4%

46.6 pts

Manager Turnover (annual)

24.2%

31.6%

7.4 pts

In-Store GP$ per Labor Hour

$38.34

$30.94

(19.3)%

Wages and Benefits as a % of GP$

30.3%

33.3%

3.0 pts

Source: NACS CSX Convenience Benchmarking Database

Region 5 Benefits From Contained Expenses Metric Per Store, Per Month

National

Region 5

Region 5 Diff. vs.

Nat’l.

Wages and Benefits

$43,885

$38,358

(12.6)%

Card Fees

$11,291

$8,738

(22.6)%

Utilities

$4,449

$4,362

(1.9)%

Repairs and Maintenance

$4,943

$3,999

(19.1)%

Supplies

$2,522

$1,624

(35.6)%

Total DSOE

$77,240

$67,729

(12.3)%

Facility Expense

$17,248

$13,333

(22.7)%

Total DSOE and Facility Expense

$94,488

$81,062

(14.2)%

Source: NACS CSX Convenience Benchmarking Database

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Historically, Region 5, which stretches from Missouri to Montana, has closely matched the national average in terms of the percentage contributions of fuels, merchandise and foodservice—a trend that continued in 2023. The region’s mix was 9.9% foodservice, 22.0% merchandise and 68.2% fuel, while the national average was 9.7%, 23.0% and 67.3% in those areas.

One noteworthy positive was the improvement in inside store operating profit, which went from -$457 in 2022 to $1,797 per store, per month in 2023. “This highlights how high-margin foodservice items are becoming a larger part of the margin mix” in the region, explained Jenna Collard, the director of education engagement at NACS. Overall, inside operating profit per transaction grew from 5 cents to 32 cents.

The region saw positive change in inside transactions, registering 25,877 transactions per store, per month, for 0.5% growth, despite pump transactions dropping 12.6%, from 12,025 per store, per month to 10,513.

From a foodservice perspective, Region 5 lags the national average in sales but leans on profits from prepared food to compensate.

The region’s stores generated $29,177 per store, per month gross profit on prepared food, a 7.1% increase year over year and slightly higher than the national average of $28,627.

While Region 5’s turnover numbers are worse than the national average, led by 165.4% non-manager turnover compared to 118.8% nationally, they show improvement on a year-over-year basis, with non-manager turnover dropping 14.0 points from 2022 and manager turnover dropping 0.2 points.

Mike Wilson of Cubby’s, based in Omaha, Nebraska, shared some steps that the retailer is taking to address turnover. Wages lead the way, with the company investing substantially more in that area. In addition, the retailer has a podcast its executives use to speak directly to frontline workers and a text message system for communication. “Everything is driven down to the employee level instead of just the managers,” Wilson said.

Region 6 Scorecard

REGION 6: THE WEST The West may be the most unique of the six NACS regions, with California playing an outsize role in the region’s metrics. Land is at a premium in Region 6, so store footprints are much smaller than in the rest of country; foodservice, though growing rapidly, lags well behind the national average; and healthy fuel sales and margins remain more essential to profitability than elsewhere. The region also has fewer inside transactions than the national average, but transactions came in at a much higher average value, with baskets averaging $13.58.

In Region 6, fuel sales were $704,168 per store, per month—more than $200,000 higher than the national average of $494,105.

Those Region 6 sales represented a 9.3% decline from 2022, even though fuel gallons were up 4.8% to 172,414 per store, per month.

“There’s plenty of opportunity to be profitable selling fuel in your region,” said Chris Rapanick, managing director, NACS research, although he noted that, in the coastal states especially, it’s imperative to think ahead and plan for the increased electrification of the fleet.

Foodservice results point to investments in this vital area. The region lagged behind the national average in every category except cold dispensed, falling almost $20,000 behind per store, per month in prepared food. But the growth story was solid, with prepared food leading the way with a 13.5% year-over-year increase.

Foodservice gross profit growth, though, lagged behind. Prepared food, for example, earned only a 1.2% increase in gross profit to $12,585 per store, per month. Rapanick cited shrink, overproduction, mismanaged promotions and the swings in food supply prices as possible reasons for this relatively small gross profit growth.

California fast food workers now make a minimum $20 an hour, and overall wage growth was evident in the region’s direct store operating expenses. Wages and benefits grew from $36,295 per store, per month in 2022 to $40,040 in 2023, a 10.3% bump.

Metric Per Store, Per Month

National

Region 6

Region 6 Diff. vs.

Nat’l.

Inside Transactions

32,650

14,306

(56.2)%

Average Basket Value

$7.80

$13.58

$5.78

Inside Store Operating Profit

$3,724

$(2,145)

(157.6)%

Non-Manager Turnover (annual)

118.8%

110.3%

(8.5) pts

Manager Turnover (annual)

24.2%

28.4%

4.2 pts

In-Store GP$ per Labor Hour

$38.34

$36.18

(5.7)%

Wages and Benefits as a % of GP$

30.3%

26.0%

(4.3) pts

Source: NACS CSX Convenience Benchmarking Database

Region 6 Foodservice Sales Show Strong Growth, Lag Behind National Averages $51,500 Region 6 Sales National Sales

$31,771

$6,324 $2,502

YoY Δ:

$5,787

$4,182

$3,403

$5,233 $1,246

$4,260

Prepared Food

Frozen Dispensed Beverages

Cold Dispensed Beverages

Hot Dispensed Beverages

Commissary

13.5%

6.5%

15.7%

9.2%

1.2%

Source: NACS CSX Convenience Benchmarking Database

Leah Ash is an editor/writer at NACS. She can be reached at lash@convenience.org.

Jeff Lenard is NACS vice president, strategic industry initiatives. You can reach him at jlenard@convenience.org.

Ben Nussbaum is the editorin-chief of NACS Magazine.

NACS JUNE 2024 77

BY LISA KING

78 JUNE 2024 convenience.org

Dmitry Rukhlenko/Shutterstock; bygermina/Getty Images

Convenience innovations from around the world will propel the industry forward—at home and abroad.

Globally Evolving

W

ith about 1.5 million convenience stores worldwide—and an immense amount of creative operators—there’s a huge opportunity for retailers in the United States to learn from their counterparts abroad.

“Convenience stores around the world are facing the same issues,” Mark Wohltmann, director of NACS Global, said at the 2024 NACS State of the Industry Summit. “NACS is all about knowledge, connections and advocacy, and that is what NACS Global is trying to support. By reaching out to our network around the world, we learn what is happening elsewhere, connect with the right people that are driving our industry forward and learn from policy issues.”

NACS JUNE 2024 79

Our store becomes way more than a store.”

EV CHARGING INNOVATION Car manufacturers have traditionally led the way in creating EV charging infrastructure, but there’s a growing need for retailers to step into this space and offer more than just a place to recharge vehicles.

“Car manufacturers, especially Tesla, out of a lack of anything else existing, are creating their own charging parks,” Wohltmann said, noting that these charging stations often just consist of a room with a vending machine for customers to get a snack and sit at a table to relax.

“They are not experts on hospitality. They are not experts on convenience retail sales.

This is a lost opportunity and a threat to convenience stores,” Wohltmann said. “We need to make sure that wherever EV charging takes us, we as an industry will be there as well.”

GRIDSERVE in the United Kingdom is working on an EV charging-only forecourt— instead of fuel pumps, there are only EV chargers for customers. The building behind the chargers looks like a large c-store, but inside a different scenario emerges—the building has a classic convenience store but also a café, a gym and even a small meeting area to cater to the

Mark Wohltmann

80 JUNE 2024 convenience.org

longer dwell times of EV charging customers.

“The needs of the EV customers are different than fueling customers,” said Wohltmann.

“We need to think about what is it that the customer needs and what we can offer them in those 35 minutes they spend on site.”

Wohltmann shared that “if you ask the retailers in Norway [which leads the world in EV usage] what is it that EV charging customers want? Do they want to go into a store to buy a coffee? Do they want entertainment?

Do they want to be left alone to sit in their car and answer emails? The answer to that is ‘Yes.’ You have all of these customers … That means we need to change what we’re offering and how we’re offering it. Our store becomes way more than a store. It becomes a hospitality environment. It becomes an entertainment environment. We will be in a very different kind of business—in some amount of years—in some locations.”

Repsol, a company based in Spain, debuted a store concept where the store is in front of the forecourt. The store is sleek, modern and high-end. “It’s not gas station first, it’s experience and hospitality first, and by the way we also sell fuel somewhere over there,” Wohltmann said.

‘THEATER OF FUELING’ Hospitality and convenience are converging, and that convergence is gaining in momentum. Wohltmann talked about the “theater of fueling,” a way to add excitement to one of the most mundane tasks for vehicle owners— fueling up. “Consumers today want more and more in retail—not just buying a product, but getting an experience,” Wohltmann said.

“People are paying for experiences. What is your main product? It’s fuel. And what’s the most boring thing you sell? It’s fuel,” Wohltmann stated. “What can we do to keep the fueling customer? We give them something back.”

In Columbia, Terpel was the first brand to build locations specifically for motorcycle fueling, using special equipment that makes filling up a cleaner, easier experience. Why? In a country where 65% of the vehicle fleet is motorcycles, the company was able to tap

Convenience stores around the world are facing the same issues.”

FXQuadro/Shutterstock

into an underserved market and create an improved, special experience.

Motorcycle drivers enter the fueling station through a gateway that evokes a motorcycle race and that is too small for a car. “They’re the first ones to do something specific for their biggest target group … Now ask yourself the question: Who is your biggest customer group?” asked Wohltmann.

Looking to the Netherlands, Wohltmann pointed to Loogman. Drawing from its carwash experience, the company created an experience that has customers lining up and that Wohltmann called “totally nuts, completely bonkers.” The brand introduced a fueling experience where the car moves slowly forward on a conveyor belt with a moving fuel pump and attendant. “Does that make any sense? No. It makes absolutely no sense at all,” Wohltmann joked. Functionally, it’s just a normal fill-up. But the experience is the point, and it’s working.

IN-STORE HOSPITALITY Oil companies are also expanding into hospitality, transforming traditional petrol stations into multifunctional destinations offering food, beverages and entertainment. Companies like PTT Oil in Thailand and Shell have successfully ventured into foodservice, establishing coffee chains and standalone cafes. Wohltmann said the key to success lies in authenticity and maintaining quality offerings, as shown by PTT’s Cafe Amazon rising to become the sixth-largest coffee chain globally.

Shell also expanded into hospitality and is changing perceptions with Shell Café. The oil brand has launched standalone coffee shops around the world.

In Germany, where there are 14,000 gas stations and 40,000 bakeries, wholesaler Lana developed a bakery program for gas stations. Within the store, a gas station attendant and bakery shop server are separated by a wall, with completely different aesthetics on each side. Knowing Germans’ attitudes toward baked goods, the brand created an authentic, quality program to give consumers a more appealing experience at the gas station.

7-Eleven in Denmark makes more than 35% of in-store food and beverage sales from healthier-for-you options, showing that customers who say they want healthy options yet purchase the opposite may eventually find their way to healthier-for-you choices. In Spain, under the Spar brand are Spar Natural grocery stores, which have labels that list more than just allergen information, such as including what ingredients fight inflammation or have other health benefits. The staff is trained on the products and there is a consultation room to talk with experts.

“We are moving as an industry further and further away from being a gas station first and a convenience store second … we’ve already become way more than a convenince store that sells fuel,” said Wohltmann. “What we’re seeing around the world is a shift to where the industry becomes a hospitality and foodservice provider first that also sells convenience items and maybe has some fuel.”

Sustainability is also a factor shaping the future of convenience retailing. While Europe leads the way in sustainability initiatives, younger generations in the United States expect more sustainable practices from retailers.

Wohltmann shared that Spar grocery stores in Norway have solar panels on the wall and floors that create energy when walked on.

More importantly the retailer makes their sustainability efforts known: “They tell everyone how green they are,” said Wohltmann. “Make sure whatever initiative you have, you communicate it well for consumers.”

NACS JUNE 2024 81

CONSUMER CUSTOMIZATION WITH TECHNOLOGY AI-powered digital displays allow retailers to tailor advertising based on demographic and mood analysis, creating a more engaging shopping environment. In South Korea, GS25 convenience stores have a column in the store with digital screens on all four sides showing advertising. There are also 25 cameras on the ceiling that capture the current in-store demographic so that the screens will show targeted ads.

For example, if a woman enters the store, advertising for champagne may appear on the screens. Next, a man enters the store and beer advertisements launch. If it’s raining outside, perhaps an uplifting message plays, getting customers in a better mood. Technology that is available today can identify the demographic, establish moods and then customize advertising.

Amazon may have taken a step back on its Just Walk Out technology recently but Wohltmann says unmanned technology overall is on the rise. While it will not replace convenience stores completely, the experimentation is leading to hybrid models that have different store environments (staffed or unstaffed) during different parts of the day.

Poland’s Zabka is Europe’s largest operator of unmanned stores, operating 70 locations.

Consumers are looking for ultra-personalization, which is made possible through technology advancements. At Vita Mojo 82 JUNE 2024 convenience.org

URBAN DENSITY In the United States, the 1920 census marked the first time that a majority of the population lived in urban areas. Globally, a majority of the world’s population were city-dwellers starting in 2009. As c-stores evolve to meet this reality, new ideas are coming to the forefront for how to cater to customers who live in small housing units. “A really dense, urban population has different needs, but that’s where we’re headed towards,” said Wohltmann.

Wohltmann shared his experiences in Seoul, South Korea, where convenience stores are adding a few washer/dryer machines as a traffic driver. Some residents of the Korean mega-city lack full kitchens in their units, and c-stores are stepping up by offering more meals to go.

CU (a Korean convenience store chain) partnered with Hana Bank. “The bank realized, ‘hold on, we’re just doing online banking. We don’t have branches anymore. We’ve kind of lost our connection with our customer.’ The convenience store chain said, ‘well, what else can I do in my store to get my people in?’” The result was a location that combines a c-store and a mini-bank, which mainly consists of “a fancy ATM as well as some seating and an office. There’s only a bank person for about an hour a day … The rest of the time, the bank section is a seating area for the convenience store,” said Wohltmann.

Lisa King is the managing editor of NACS Magazine.

RNGV/Shutterstock

25 cameras on the ceiling … capture the current in-store demographic.”

restaurant in London, the self-ordering system allows customers to customize their meal ingredients and summarizes the macronutrients—not just the calories, but also the amount of fat, protein and carbohydrates. Then, a consumer can reduce the calorie amount if desired, and the system automatically adjusts the meal. The kitchen gets a list and exact measurements to make the personalized dish.

The Only Thing Predictable in the Fuels Market Is

Unpredict Volatility may come from the sky, whether human-made missiles or Mother Nature’s storms.

BY JEFF LENARD

W

hile “barrel counting” is a difficult task on a global level, all signs point toward continued strong demand for petroleum. Or, as Saudi Aramco CEO Amin Nasser Saudi said earlier in 2024, “We should abandon the fantasy of phasing out oil and gas.”

But that doesn’t mean that there won’t be wildcards that could disrupt the market, said Denton Cinquegrana, chief oil analyst for OPIS, in his NACS State of the Industry Summit presentation.

84 JUNE 2024 convenience.org

The refining cavalry is still several quarters away.”

~UserGI15994093/Getty Images

ability NACS JUNE 2024 85

Denton Cinquegrana, chief oil analyst, OPIS

86 JUNE 2024 convenience.org

An Aging Population: Drivers in 2022 (Thousands) 85 & Over 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 19 & Under 0

5,000

10,000 15,000 20,000

Love the wind/Shutterstock

On a global level, supply and demand are relatively steady.

SUPPLY Let’s start with supply. While the United States hasn’t built a new refinery in decades, massive expansion of existing refineries has pushed the country’s refining capacity to near-record highs.

More refining capacity is also coming from other countries. In some cases, “don’t believe the hype,” especially related to Mexico’s 340,000 barrel per day Dos Bocas refinery, “which has had something like 30 ribbon cuttings and is still not producing oil,” said Cinquegrana. Other major refineries are coming online soon in Kuwait, Saudi Arabia, Oman, China and Nigeria. However, soon is a relative term.

“It’s not like flipping a switch to bring a new refinery online—the refining cavalry is still several quarters away,” said Cinquegrana.

Gasoline supply is expected to be tight this summer because of lower inventories entering the second quarter. A storm-filled cold winter impacted refinery operations and made the normally routine maintenance season more complicated than usual, affecting output.

Meanwhile, the diesel market is rapidly shifting; renewable diesel refining capacity is already more than that of biodiesel—and growing, with California expected to be 100% renewable diesel within the decade.

The big questions related to renewable diesel will be usability in cold weather without gelling—and if growing demand will create another food vs. fuel fight with soy, similar to when corn-based ethanol was introduced.

DEMAND Global demand for petroleum products continues to grow, largely a function of a growing world population and emerging economies that require increased energy. However, demand has likely peaked in the United States.

That means that the fight for margins will become a fight for gallons and market share, said Cinquegrana.

While it’s generally assumed that electric vehicles are having a significant effect on demand, the growth of EVs likely accounts for only low single-digit demand destruction.

Instead, the bulk of lost demand over the past five years—75% to 80% of the total lost demand—has come from increased fuel efficiencies, with another 20% coming from the decrease in daily commutes related to hybrid work schedules becoming the norm. Cinquegrana estimated as much as 250,000 barrels a day of demand—the equivalent of a small refinery—has been lost in the United States based on the workforce commuting one day less per week on average.

Demand could further decrease over the next decade because of the aging population.

About 40% of all drivers in the United States are 55 and older. They drive less than the average driver and are nearing retirement, when they will drive even less than they currently do.

This summer’s hurricane season is predicted to be worse than average.

On a global level, supply and demand are relatively steady, so Cinquegrana doesn’t see retail margins contracting much. “Thirty cents—maybe even 40 (per gallon)—is the new 20 (from a decade or so ago),” said Cinquegrana. But while retail margins have expanded, so have costs; labor, real estate, interest rates, inflation and, of course, swipe fees, have cut into higher margins.

BOILING POINTS ARE A CONCERN If something significant happens anywhere in the world to disrupt supply, it will have an outsized effect on prices everywhere. And Cinquegrana said two big concerns for supply disruptions come from the sky.

First, geopolitics. “It’s not simmering, it’s boiling. Cook the pasta now,” said Cinquegrana about current global tensions and strife.

In Russia, Ukrainian drone strikes have taken away about 15% of the country’s refining capacity, including its third-largest refinery, which is 800 miles from the frontline.

Any decrease in refining capacity in Russia beyond that could put upward pressure on prices, and that’s not something that the Biden Administration wants, especially in an election year. That means there could be some behind-the-scenes talks with Ukraine about how to strike Russia without disabling any of the global refining infrastructure.

In addition, OPEC+, of which Russia is a member, also is carrying forward production cuts through at least the second quarter of 2024, which could continue to keep oil prices elevated in the $80 to $100 range.

The Israel-Hamas war also is a concern.

Attacks by Houthis in the Red Sea have cut off the area from refined product transit, rerouting 7 million barrels per day, or about 7% of the world’s oil supply. So far it’s not taking more barrels off the market, but rerouting adds time and shipping costs, and there are concerns that strikes could spread to the even more critical Strait of Hormuz. The recent Israeli strikes in Gaza have further put the markets on edge, with fears of a widening conflict that could also affect oil production in the region.

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The other threat from the sky is the weather. This summer’s hurricane season is predicted to be worse than average because of elevated ocean temperatures.

“If a cone of uncertainty for a Category 4 or 5 hurricane lands between the swath of land between Corpus Cristi, Texas, and Pascagoula, Mississippi, refinery operations and, in turn, product supplies can get very concerning,” said Cinquegrana.

The damage from a strong hurricane in the region also could permanently reduce supply, with refiners having to consider rebuilding as U.S. demand slowly decreases.

“When do these refineries become stranded assets?” he asked.

Hurricanes aren’t the only weather-based threat to refineries. Scorching summer temperatures also take their toll. Refineries were designed to operate in 100-degree weather—but what about 30 straight days of 100 degrees-plus?

“Refining and petroleum markets have become more vulnerable to extreme weather outside of hurricanes. Extreme winter weather has been responsible for the tightening gasoline supply situation. Maintenance cycles have become painful,” he said.

THE FORECAST REMAINS SOMEWHAT SUNNY Despite the challenges, Cinquegrana remains bullish on the petroleum industry. “Fossil fuels are not going away despite what you may see in the news. We can revisit this in 25 years,” but petroleum will continue to be an integral part of daily life.

North America is also a “privileged continent” in the broader petroleum industry, said Cinquegrana. It is the world’s largest producer of oil and natural gas with natural waterways to transport product and great engineers to increase efficiencies.

But, he cautioned, “Don’t underestimate the power of human behavior.” If supply is significantly disrupted and gas prices jump to $5 per gallon, it’s likely that behaviors would change much more rapidly than they currently have evolved.

Jeff Lenard is NACS vice president, strategic industry initiatives. You can reach him at jlenard@convenience.org.

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Future A Friction-Free

Convenience retail experts look at ways to transform the customer and employee experience through technology.

BY SHANNON CARROLL

Khanchit Khirisutchalual/Getty Images

P

icture this: a convenience store where artificial intelligence tells employees when an item needs to be restocked, monitors customer audio for potential scams, trains employees, cleans the floors and takes customers’ phone calls.

This isn’t a vision of the distant future—it’s the reality for retailers embracing the power of today’s technology.

“AI is more than ChatGPT,” said Conexxus Executive Director Gray Taylor at this year’s NACS State of the Industry Summit. Convenience retailers are quickly working to implement a host of far-reaching AI innovations in practical ways that show the future is here, said panelists during the “What Near-Term Technology Innovations Really Matter to Convenience Retailers?” session.

NACS JUNE 2024 91

Near-term technology and AI implementation don’t have to just focus on the customer experience. While there’s a lot of focus on how this kind of technology can help a retailer, it’s important to realize that prioritizing technology that can help employees is crucial, too. Making employees’ lives easier helps with retention issues and reduces recruitment and training expenses.

Sanjeev Satturu, the senior vice president/ chief information officer at Casey’s General Stores, said the retailer uses technology to make its stores smart and convenient, with a key focus on making things easier for its employees.

“In simple words, it’s about removing friction for our team members,” Satturu said.

“If you remove friction for the team members, dedicate more time to them and make their lives better, then you have an employee who’s retained.” At Casey’s, that looks like using technology to help team members run the register, to make it easy for them to know what product to put where at what time, to assist them with cleaning the store and to let them know what items need to be restocked.

“One of our core values is service,” Satturu said about the organization’s Casey’s CARES program, “so we have to serve our team members [too].”

Friendly Express recently implemented self-checkout “as a customer experience, not to replace labor hours,” said Amy Wood, the company’s director of enterprise IT. The retailer also uses technology to help its associates ensure the right products are out on display and to streamline the production planning process.

At the moment, Friendly Express is going through a testing process with the AI/computer vision the retailer has in one of its stores on the roller grill and grab-and-go areas.

The technology alerts someone in the kitchen area if half the roller grill is empty, for example. Wood said that sometimes employees “get busy preparing stuff for the hot bar and don’t realize that the roller grill has been depleted. They might not realize that a bus has come in and kids have wiped everything out,” so the alert is useful even for the 92 JUNE 2024 convenience.org

highest-performing teams. The AI technology also works for the sandwich and pizza areas to help employees stay on top of stock and not get overwhelmed.

“We’ve seen that [the technology] is going to be beneficial,” she said. “And it’s just a gentle reminder, ‘Hey, we’re getting low out there. It doesn’t wait until [an item is] completely out of stock [to alert someone], so we can actually address the issue before we have an out-of-stock situation.”

Satturu said Casey’s realized team members can often be overwhelmed by making pizzas while also having to take phone calls, so the retailer looked to AI for a solution: “How can we automate this voice assistant and provide [an experience] where guests who call get that same, consistent experience?” he said, adding that AI has the capability to upsell, too.

Even if you’re a smaller retailer, you should be thinking about “things that will help remove friction for your team members. You can use [AI] … to get out of that clutter,” said Satturu. “Focus more on what technologies are available that will help you improve productivity.”

Robert Hampton, the VP of technology services and innovation at Jacksons Food Stores, said the retailer makes it a point to ensure employees in the IT department know what employees in-store deal with. IT employees are required to spend time in the field, whether that’s working the register or riding with drivers doing fuel deliveries, “just so we can experience what’s going on.” Hampton

Hispanolistic/Getty Images

The retailer realized personalization is key.

credited the program for sparking “ideas to make us better.”

He said Jacksons puts a “bounty” on productivity: “We’ve got a plan to save $1 million in productivity in 2024,” he said, adding that the retailer is “well on [its] way” to reaching that goal.

Jacksons is implementing electronic data interchange (EDI) in small chunks with some of its distributors, which frees store employees to ensure shelves are stocked and bathrooms are clean and gives them more face time with customers.

“We’re really just trying to pull those tasks away from the store ops personnel so they’re not spending a lot of time checking in orders and things like that,” Hampton said. To that end, he recently went and checked out an autonomous floor scrubber another retailer uses to see if it’s something Jacksons might want to implement. “It takes that task away from the employees, frees them up to do other things, improves retention and things like that.”

NACS Vice President of Research and Education Lori Buss Stillman said after the session: “Every study we do shows us that employee retention and employee satisfaction with their job is so tightly linked to the training that we provide. And as we embrace new technology, providing opportunities to upskill our teams is super, super important.”

MOBILE APPS AND OTHER NEAR-TERM TECHNOLOGY Friendly Express recently revamped its mobile app and has been working to figure

out how to make it of value to its customers.

“Everyone has an app on their phone, but getting them to use it [can be challenging]. So we’ve had to use some of our data … to find out what’s useful for us.”

The retailer realized personalization is key: If it can give customers a discount on something they buy all the time instead of tell them about a deal on an item they’ve never purchased before, the retailer adds value.

Conexxus’ Taylor said, “I think the key here is that if you’re just throwing stuff at them, you become spam. If you’re throwing things that are relevant to them, you become a valuable partner.”

Casey’s has had success with personalized loyalty programs and with gamification such as its Scratch, Match & Win program. “All those little things really make sense. It’s not the clutter of just blasting [a customer] with promotions and offers. Making those promotions using the data to really personalize [the offers] for the guests makes a huge difference.”

Another area where technology can help convenience retailers? Friendly Express has partnered with a company to revamp its training program. The retailer heard from employees that the training sessions could be stressful and that team members were having trouble retaining information, so Friendly Express decided to act. Now, the training program is on a mobile app that includes video playlists. The videos are quick (several videos lasting a few minutes each instead of one that goes on for an hour or more), are easy to understand and can be looked at again at any point.

Jacksons has been using AI to monitor instore audio for about two years now and has it in two stores. One area where the technology is helping the retailer is by quashing common scams such as ones involving gift cards.

Hampton said the technology can hear some of those buzzwords and send an alert to the store employee that the phone call is a scam.

“Another great example is somebody walking in and saying, ‘Hey, I’d like to get an application. I want to work here.’ Wouldn’t it be great to know what the [person] behind the counter said?” said Hampton. Knowing whether the employee responded positively

I think culture is the most important part of what we do.”

NACS JUNE 2024 93

Having the ability to use the word ‘no’ with stakeholders is very, very important.” or negatively about their job could provide great insight for retailers.

Audio technology can help with training, too, because it can hear whether an employee tried to upsell a customer. “If you could track and put metrics behind all that and then gamify it to the employees and recognize the good behavior—maybe a $100 gift card for the person who does the most readings or offers the loyalty programs the most frequently— then you can take those audio snippets” and use them to train across the company.

The technology can show specific examples of real-life conversations with customers about offering a two-for-one promo deal and can point out how to approach resistance or can key in on what someone said that made them want to purchase another item.

“All of that kind of data is great,” Hampton said. “We can take it into a lot of training, which is important, and it really improves employee retention because now you’re rewarding the good behavior.”

TEST AND LEARN, FAIL FAST AND TAKE ACTION The SOI panelists also talked about the importance of a culture that values innovation to implement technology successfully.

“I think culture is the most important part of what we do,” Friendly Express’ Wood said, noting that it can initially be hard to get buy in from all stakeholders on a new technology.

“If you don’t have the support from [everyone], you’re never going to be successful with technology.”

Wood and her team champion the importance of new technology, starting by explaining how it will address specific issues the retailer is experiencing (such as with labor or customer experience). Then, she and her team 94 JUNE 2024 convenience.org

take things one step at a time and explain each step along the way.

Satturu added, “Culture is so important because we are in the business of convenience.

And in the business of convenience, you transform every day. Culture is the catalyst to allow you to transform.”

Casey’s prioritizes the “culture of tries,” but makes sure everyone has clarity on what it’s trying to do with technology—and why.

“When you have clarity, you focus on culture and technology. It’s fascinating how fast technology allows you to enable that culture and build a strong foundation,” said Satturu.

PRIORITIZATION IS KEY “Everybody wants to be the latest and greatest ... but you can’t do everything all at once,” said Wood.

Deciding where to start with technology can be tricky because, as Satturu put it, “Everything is our No. 1 priority, right?”

He said that’s why having crystal-clear clarity on an organization’s list of priorities— and their order—is crucial. When Casey’s rolled out its two-year strategic plan, it talked about removing friction. While the retailer knew it couldn’t remove all the friction, it looked at what it could do in three years for its employees and guests to make its stores smart and convenient.

But sometimes prioritization comes with challenges—such as saying no. Satturu said “no” needs to be in people’s vocabularies.

“It’s a powerful word, and it’s very liberating, as well. Being very clear and having the ability to use the word ‘no’ with stakeholders is very, very important.” He added, “Technology is really about focusing on: How can I immediately help the business be aligned to the business goals and be very clear what those business goals are, and then [think about] what needs to happen to go deliver to this business?”

Shannon Carroll is a contract writer/editor for NACS.

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Convenience used to own coffee and donuts, and now there are so many more players. Maybe breakfast never gets back to its heights, but there are a whole lot of opportunities in snacking— including snacking as replacement for full meals— and dinner.”

Chris Rapanick, guest editor 96 JUNE 2024 convenience.org

y a D

t r a p y

With fewer people following a traditional meal schedule, innovative offerings can cater to a wider selection of eating occasions.

Disruption

BY LEAH ASH

B

OwenJCSmith/Getty Images

reakfast, lunch and dinner mealtimes are being disrupted, David Portalatin, senior vice president and industry advisor of food and foodservice at Circana, said during his presentation at the State of the Industry Summit.

Routines have shifted, the workforce is changing and inflation has increased the price of food drastically—causing traffic shifts not only at c-stores but at QSRs and other restaurants as consumers look for meals that fit their evolving needs at an attractive price.

NACS JUNE 2024 97

THE FOODSERVICE CONSUMER Circana measured $3.2 trillion in consumer spending across consumer packaged goods, foodservice and general merchandise retail for 2023. While the firm didn’t capture the entire consumer wallet, Portalatin noted, it covered a vast portion of it.

Consumer spending increased 3.1% overall.

The category of complete food and beverage, which is Circana’s measurement of anything that you can eat or drink, whether it came from a grocery store, warehouse club, convenience store, QSR, a fine dining restaurant, school cafeteria, vending machine, etc., came in at around $1.6 trillion.

Average Consumer Monthly Spending Per Category in 2023 Food and Beverage Retail food and beverage

$1,642 +5.4% $995 +4.8% $648 +6.3%

Foodservice Home Fashion

$416 +2.8% $364 -3.5%

Entertainment

$195 / +1.4%

Tech

$150 / -5.6%

Tobacco

$84 / -0.5%

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In Q4 of 2023, “retail food and beverage was growing at 1.8% and foodservice grew at 4.8%. One of the things that’s going to happen throughout 2024 is that when you pick up The Wall Street Journal, or you read things the financial community has put out, or are talking to your board or investors, they’re all going to share the narrative that foodservice is gaining share of wallet—and it is,” Portalatin said.

Consumer behaviors are shifting in what they buy as they look to manage prices, Portalatin said, and consumers are trading down in what they buy from foodservice.

Less visits and channel shifts: Lower income consumers are visiting less often in general, with about five fewer foodservice visits in 2023 compared to 2021 for this part of the population. QSRs have gained 0.3 share points compared to a year ago, while all full-service restaurant channels showed decline.

Gravitating toward cheaper dayparts: Consumers are shifting toward the morning meal and P.M. snack because these dayparts have an average check $3-5 lower than lunch or dinner.

Fewer extras: Consumers are buying fewer extras. Attachment rates for sides, apps, desserts and so on are down slightly.

Cheaper items: Consumers are choosing to buy cheaper items at the same places. For example, Portalatin stated that buyer participation on the Chick-fil-A regular sandwich is up 3.1 points, while its deluxe sandwich (which has an 80 cent premium) declined 0.5 points.

Smaller sizes: To save money, consumers are choosing to buy smaller variations of the same item. For example, the Dairy Queen mini Blizzard gained one share point while the medium/large blizzard lost one share point. In the same vein, more adults are choosing to order kids meals for themselves.

“People are managing their portion sizes. They’re managing their price points,” Portalatin said at the Summit. However, he noted there are opportunities for operators to manage their costs.

Portalatin provided examples of what some operators have been doing, ranging from

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purchasing reduced portion sizes (7.5 oz beef patties instead of 8 oz), including delivery premiums, ordering cheaper items for their menu and reducing operational hours during slow days and dayparts.

MEALS IN FLUX As much as inflation has impacted how consumers purchase food, there are other factors that are disrupting traditional store visits.

According to data from Castle, Portalatin said, the estimated office occupancy rate is somewhere around 50%. That decreased in-office rate, along with Boomers continuing to exit the workforce and rise of nontraditional employment, means that daily routines have been disrupted.

“Ultimately, this means that the things that have been used to create our rhythms of the day—What time do we get up? What time is breakfast? When and what time is lunch?

How do we get home and make dinner? All of that is up for grabs,” Portalatin said.

C-Store Daypart Traffic Distribution 2023 Morning Meal

25%

Lunch

25%

Dinner P.M. Snack 100 JUNE 2024 convenience.org

17% 34%

P.M. Snack C-store traffic is down 7.5%, with the afternoon daypart period from 12 p.m. to 3 p.m. accounting for more than half of that loss.

Additionally, Portalatin noted, P.M. snack, what he called the most important daypart for convenience stores, declined in traffic by 2% in 2023 compared to 2022.

“C-stores currently dominate that P.M. snack daypart, but over the past year we’ve seen QSRs moving in that direction very, very heavily, growing 5% compared to last year,” Portalatin said, noting that this shows a potential stealing of visits. However, Portalatin also showed that food-forward c-stores experienced a gain in P.M. snack visits.

The real disruption with QSRs compared to convenience stores has been in the evening snack period. A large portion of QSR P.M. snack gains come from the evening hours and continuing into the early morning. In particular, QSRs experienced significant gains in the early morning hours.

This disruption to traffic is important to note for c-stores, as it’s a time of day that convenience stores traditionally do well in. “You’re the ones who own convenience.

You’re the ones that own hours of operations as an advantage, as a reason to be there for the consumer. QSRs have come after that,” Portalatin told the Summit audience.

Many traditional lunch and dinner QSRs have expanded into the snack market through innovation, Portalatin said: “Everybody’s getting in the snack game.

Devonyu/Getty Images

Over the past year we’ve seen QSRs moving in that direction very, very heavily.”

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new coffee and tea restaurants opened in the past year.

Subway is doing pretzels and cookies, Taco Bell is innovating around beverages … the Colonel [KFC] is doing brownies, and Potbelly is in cookies.”

C-stores should look to innovate, and rethink, their ideas of what a snack is. Portalatin asked the audience, “Who thinks of pizza as a snack?”

He continued, “But we’re talking about disruption. We’re talking about the emergence of new occasions with different foods. You wouldn’t traditionally think that, ‘Oh, that’s a snack.’ No, everything’s in play now. Because 102 JUNE 2024 convenience.org

Morning Meal The other big daypart for c-stores is the morning. According to Circana data, QSRs and c-stores both increased breakfast performance 2%. The challenge: QSRs gained 4% of traffic during the morning snack timeframe, while c-stores lost 2% of traffic compared to last year. At brunch, QSRs gained 9% compared to last year while convenience stores lost 4%.

“Brunch is where the disruption is. It’s not traditional breakfast,” Portalatin said. “When consumers talk about brunch, they’re talking about ‘Oh crap, I got busy today. I’m hungry. I have a meeting soon. I can’t wait for lunch.”

Where are QSRs exceeding the performance of c-stores? Specialty coffee is a huge one, accounting for 35% of “menu importance” for QSRs in the morning but only 7% for c-stores in the same metric. Importantly, more consumers are seeking these coffees out, with a 12% improvement in servings across all channels compared to a year ago during breakfast snack occasions.

Portalatin pointed out that while QSRs performed better than c-stores in coffee and

tashka2000/Getty Images

More than

for that person, maybe it’s not really a snack.

Maybe it’s a mini meal that suits their lifestyle more.”

Beverages, and beverages either as a snack or paired with snacks, are doing well right now. “We’ve seen beverage occasions grow, from retail beverage occasions to foodservice.

There has been a lot of innovation around beverages,” Portalatin said. “Beverage is a thing right now. It’s hydration, it’s energy, it’s indulgence, it’s a treat. Beverage innovation can deliver all of those things.”

More than 5,300 new coffee and tea restaurants opened in the past year, a 9% increase in unit count.

C-stores have a lot of opportunity with beverages, Portalatin said: “There’s still opportunities for growth, especially with coffee, during the P.M. snack daypart.” Additionally, Portalatin noted that cookies, frozen/slushy soft drinks, soft drinks, bottled water and juice are stars for c-stores during P.M. snack and merit further investment.

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breakfast sandwiches, convenience stores are still winning with donuts/sweet rolls and carbonated soft drinks.

Lunch Lunch, Portalatin said, may never recover to what it used to be for convenience stores.

The midday meal was the worst performing daypart for c-stores, losing 5% of traffic compared to last year. It should be noted that QSR lunch traffic was also not positive.

When it comes to choosing a place to go for lunch, the top two reasons consumers list as the reason for their visit are “I like it there” and “It’s in a convenient location.”

The convenient location is a c-store’s builtin, natural strength. However, the number of consumers who listed “convenient location” as the reason for visiting at lunch decreased 4% since 2022, while the number of consumers who said they chose a restaurant because they like it grew 2%.

With consumers at home during the middle of the day, convenient locations are not the same advantage for c-stores they used to be; deals can help get consumers in the door. “In this disruptive world where somebody may be sitting at home and has to get up and leave to go to lunch, what is the compelling reason to get them to get up and leave?” Portalatin asked the Summit audience.

“If they had to get up and leave before and you were a convenient location on the way, you could earn business based on that,” Portalatin continued. “Now, we’ve got to give them a reason to say ‘No, I’m hungry and I want to go to that store because they make the best taco around.’ That’s where we’ve got to win at lunch.”

A FOOD-FORWARD FOCUS Circana predicts that total restaurant dollars will increase 4% in 2024. The research firm predicts that traffic in the foodservice space will increase 1%, adding around 579.5 million visits, while the average eater check will increase by 2.9%.

Portalatin pointed out that the 1% traffic increase is not a c-store specific number. He challenged the audience to consider how they will get their fair share of the increased visits this year.

He then revisited the idea of the food-forward c-store. Portalatin said that “the share of dollars that are accounted for by food visits are about 10 percentage points higher for food-forward c-stores than traditional c-stores … That’s about a 10% gap for your top performing tier versus everybody else.”

“What would it look like?” Portalatin asked, “if as an industry you collectively closed that 10% gap?”

His answer: Circana believes that the industry would add an incremental $9 billion in sales in 2024 if all c-store locations could receive the same share of visits from food as food-forward c-stores do.

Leah Ash is an editor/writer at NACS. She can be reached at lash@convenience.org.

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Josef Mohyla/Getty Images

Brunch is where the disruption is.”

Possi 106 JUNE 2024 convenience.org

No one is coming to save you— so put on your own cape.

Surviving bilities a Time of

FotografieLink/Getty Images

BY SHANNON CARROLL

I

n her presentation at this year’s State of the Industry Summit, Crystal Washington, an author and futurist, said we’re in a renaissance, a time full of possibilities—but also one during which things that have historically worked well are breaking apart.

People today are living in a period that, generations from now, will be remembered as a pivotal point in history, Washington said.

NACS JUNE 2024 107

Her message: Time frames are compressing as the rate of change is rapidly increasing, so everyone needs to innovate. But companies must figure out what actually matters to their customers, rather than just innovating for the sake of innovation.

Business cycles are shrinking, so companies are having to reinvent themselves in an accelerated way. Technology innovation is accelerating. And humans are “stressed-out cyborgs,” affecting their ability to connect— she cited an annual study called “Stress in America” by the American Psychological Association, which found that 27% of adults in the U.S. report that, on most days, they’re too stressed to function properly.

Washington said this time of upheaval is “uncomfortable for everybody” but is showing people that they have an outsized opportunity to influence what is happening around them.

She added, “The ideas that we held, the systems that we use for support, we’re starting to see fractures, and people are waiting to be told what to do. My friends, no one is coming to save us. We have to put on our own capes.”

Hence her idea of futureproofing yourself.

“There are so many things in the future that we cannot control. But what we can do is not bury our heads in the sand.”

While looking toward the future is crucial, it doesn’t mean innovating willy-nilly, she said. Washington has seen a lot of companies innovating out of fear. They’re making updates and changes and innovations that don’t serve much of a purpose except for being able to be touted as innovation.

Instead, companies should relentlessly focus their innovation: Who is this going to help? What is this going to do? How is this going to be done?

We have not caught up biologically with the world we’re living in.”

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At the SOI Summit, Washington said that there’s no one big trend everyone can discover to be futureproofed but offered three goals for those in the convenience store industry: to diversify revenue streams beyond fuel and quick food, to make your store a destination where customers come because they want to be there and to use technology to improve the employee experience.

While c-stores are all about convenience, Washington said that if you want to be a destination, it’s “not about getting people in and out faster; you want them to feel comfortable in your stores.” She said she keeps accidentally ordering c-store food off food delivery apps and sees opportunities for diversification there.

C-store operators should think about where they’re seeing a need that isn’t being fulfilled.

That might require talking to your employees to know what’s happening in the day-to-day operations on the front end. “Listen to what challenges they’re having,” Washington said.

She said most companies already focus on improving the customer experience, so they should make it a priority to improve the employee experience. She has seen companies keep employees happy by, for instance, investing in apps for mental health and providing daily payments/microchecks.

Your frontline people have the data you need to make good decisions.”

As a whole, Washington thinks the c-store industry is in a good place.

“No one is better equipped to steer this industry in a new direction than those of you in this room,” she said. “You have the experience, you have the talent, and you have the passion for it.”

But that will require people looking for the “Easter eggs of the future.” Washington cited both Blockbuster and taxis as industries that didn’t listen to the people who had boots on the ground. “The problem is, Blockbuster listened to their c-suite. All they had to do was ask their cashiers,” Washington said. These frontline workers could have shared how frustrated customers were about not finding the videos they wanted and paying late fees.

“Your frontline people have the data you need to make good decisions,” she said. “You just have to be open to hearing it.”

To futureproof, she said, organizations should be scanning the horizon—reading industry publications and blogs; listening to podcasts and employees; and watching the world for trends or signals. “Signals are those little whispers. They’re not trends yet,” she explained.

Companies should also engage in scenario planning by identifying three unwanted future scenarios—for example, the CEO gets

ill, the world falls into a deep recession or another pandemic breaks out. Analyze how that affects your company and your employees. Then companies should map out three actions they can take now to be ready for each alternate future. “Three solutions for each of those scenarios. Three times three, you’re going to end up with nine solutions total,” she explained. The magic happens, Washington said, when you look at all those solutions and identify steps that would work across all those unwanted scenarios or that would be helpful to prepare for a range of possible situations. “Take action on that,” she said.

Maybe most importantly for futureproofing, companies need to take action—now—so they’re prepared against unwanted futures.

“Be kind to yourself and don’t hold yourself to an impossible standard,” Washington said.

“Surviving this period of constant change requires that you adopt that mentality of just being curious—‘Really? Why? How might this work?’” She recommended putting yourself in the mindset you had when you were eight years old and were open to any and all ideas.

People are inclined to resist change, Washington said. “The only reason any of us are here right now is because our ancestors’ brains evolved to recognize change as danger. … We have not caught up biologically with the world we’re living in now of constant change.”

She ended her session with a reminder to get frontline employees involved in discussions about innovation and to ask them, customers and clients open-ended questions.

“At the end of the day, you already have access to much of the data you need to make smart decisions about futureproofing yourself,” Washington said. “All it’s going to take is you being open and curious and ensuring that you maintain that childlike innocence.”

Shannon Carroll is a contract writer/editor for NACS.

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Brewing Up

PERFECT PARTNERSHIPS PAR RSHIPS Want to make coffee a destination driver?

Start by collaborating with your suppliers.

BY LAUREN SHANESY

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This article is brought to you by SEB Professional, a NACS Hunter Club Member.

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ANGHI/Getty Images

ood coffee is about more than the bean you grind or the machine you brew it in. Those things are important, of course, but for c-stores to compete with local shops, corporate chains or even just customers’ kitchens, they need to offer a best-in-class coffee experience.

Coffee should be a destination driver, and as such should be elevated in importance when developing a foodservice plan, said Jennie Jones, senior vice president of convenience and retail at equipment manufacturer SEB Professional.

As the coffee category evolves from selling a product to selling an experience, suppliers are—in addition to manufacturing state-ofthe-art equipment—emerging as category partners in the space, offering expertise, education and insights for retailers looking to elevate their c-store coffee.

“It’s competitive out there, and coffee has gotten more advanced. If you want people to spend more time and money in your store, you need to cater to higher expectations. So if you just put an expensive piece of equipment on the counter, it’s not going to do anything for you,” said Brad Duesler, founder and CEO of Food Concepts Inc. “A good equipment manufacturer can provide an array of solutions and really understand what a retailer is trying to accomplish, then diagnose the right equipment solution for that.”

MORE THAN A MANUFACTURER SEB doesn’t think of itself as just an equipment manufacturer or a supplier. It’s in the business of category management, and that means coming into a store with “the complete arsenal” of solutions, insights and data.

“For the 22 years I was a retailer, suppliers just sold equipment. But SEB isn’t here to just sell you machines. Retailers have such complex operations, and even if they excel at coffee, they can still benefit from fresh ideas and new perspectives,” said Jones. “Successful retailers have done their homework and understand their customer, but they’re also looking to their equipment manufacturers for

expertise, so helping our operators is a huge part of what we’re about as a company.”

It’s not always the right thing to sell a retailer your newest piece of equipment, she explained. “We’ve had many customers that wanted to add equipment to make a statement. Instead, we were able to evaluate their customer demographics and help them choose the right piece of equipment based on our technology and their data. Our goal is to improve coffee quality and availability and reduce labor,” she said.

SEB also evaluates every piece of equipment based on input from customers and looks to improve the machines for retailers.

“The original bean-to-cup machine was a huge success, and with the help of feedback from several key retailers, we recently introduced a new model that enhances the process and further maximizes efficiency and profitability,” Jones said.

Selecting the right equipment will always be retailer and store specific, as different stores will naturally have unique needs.

“A chain of small-box stores will probably not do a full café experience, because they might only have six feet of space to dedicate to it. They’re not going to go for all the bells and whistles,” said Duesler. “But if you have a 3,000-square-foot store, you can use 20 feet for coffee and will want to build it out.

It’s really about finding the right piece of equipment and the set up that will work for your space.”

Once some of these key decisions have been made and everything is in place, Jones said, “Then you need someone to help tell the story.”

Don’t think of your equipment supplier as someone who will just set something down on the counter.”

ENHANCING THE EXPERIENCE That’s where an expert like Duesler comes in.

With over 30 years of experience in creating foodservice displays and merchandising, Duesler’s company has conducted extensive research into consumer demand and perceptions of coffee—what they think makes a great coffee shop, what they look for in a “cafe experience,” and what will get them to go out of their way for a specific store.

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Listening About Labor

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“In one study, some of the top things survey respondents answered were having Wi-Fi in the store, superior hospitality and service, high quality product, drink variety and offering iced drinks and espresso drinks,” said Duesler. Consumers also appreciate upscale bakery items like pastries and muffins, soft music and lighting, loyalty programs and condiments for customizing drinks.

“These are all things they expect to see in a cafe, but not in a convenience store. But they’re elements that help move that client from going to the coffee shop down the street to your store instead because it has everything they need,” said Duesler.

Meeting that consumer demand means retailers need to “think about the overall story their coffee program is telling—not just looking at selling coffee, but at what subcategories support coffee,” said Jones. “That’s where the right display unit, the syrups, the condiments and all of those extra elements come into play.”

While retailers don’t necessarily sell condiments and the return-on-investment needs to come through the coffee itself, explained Duesler, add-ons are a critical component for attracting customers by letting them customize their drink with creamers, sugars or syrups.

Jones said she’s heard retailers express hesitation about providing free coffee condiments, especially after Covid, when an unfortunate trend emerged of customers taking them home. “But you really just can’t sell coffee well if you don’t offer them and put emphasis on the entire category.”

Even with data and expertise from manufacturers to back up decision making, retailers don’t always execute in the store, which could cause them to miss out on significant profits.

Iced coffee, a top-selling cold-dispense item in many stores, is a great example, said Jones.

“We still have retailers who aren’t doing iced coffee at all, and that is a really critical segment. One of our machines makes both hot and iced drinks, but we cannot get them to utilize the iced feature,” she said. “They are ignoring one of the components of our equipment that would make them a ton of money.

And we can really help them increase profit.”

You need to find the right equipment to find more profitability.”

Both Jones and Duesler would reiterate the same notion to retailers wary of change or implementing new elements into their coffee programs. As foodservice overall, which includes any sort of fresh coffee drink, continues to gain in-store profit share, the retailers that focus on it will excel—and the ones who don’t will get left behind.

“We are seeing more cups sold by the retailers who go all in than the ones who are only doing it halfway or not at all,” said Duesler. “As stores invest more in their coffee programs, the bar just keeps getting raised and everyone needs to do more to be competitive.”

Lauren Shanesy is a writer and editor at NACS, and has worked in business journalism for a decade.

She can be reached at lshanesy@convenience.org.

Zinkevych/Getty Images; Marina Kositsyna/Getty Images

To no one’s surprise, labor is one of the biggest challenges that Jennie Jones, senior vice president of convenience and retail at equipment manufacturer SEB Professional, hears about from her retailer customers.

“We listened to that, and designed a machine that cleans itself,” she said.

“And the product still appeals to the consumer, because the coffee is fresh and readily available, but the machine is doing a lot on its own,” Jones said.

“Retailers evaluate new programs with one of the major criteria being labor,” she continued. “Our continuing objective is around creating innovative products that address these challenges. It comes down to what a modern partnership between a manufacturer and a retailer really looks like. And for me it means we need to be better listeners.”

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t e t I L

EF Photography/Shutterstock

l l R Despite an increase in foodservice options, c-stores remain a haven for roller-grill aficionados.

BY TERRI ALLAN

W

hile many convenience stores continue to upscale their foodservice offerings—and garner raves from customers and shareholders alike—for some guests, nothing compares to classic c-store cuisine. “The roller grill remains an important part of c-store foodservice programs, and there remains a core consumer group who are roller-grill enthusiasts,” said Sandie D. Ray, vice president, foodservice marketing and data analytics at Ruiz Foods.

Indeed, according to a recent survey of 2,500 consumers by sausage and hot dog provider Johnsonville, 71% said roller grills in c-stores are “very important” or “extremely important,” said Kim Main, senior director and general manager, foodservice. When asked why, respondents said that they like that they can see the product in advance, pick the product they like best and customize it to their specifications. Moreover, according to Main, 40% of the respondents noted that “they can’t get the roller-grill experience anywhere else.”

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Ray added that there have been instances when c-stores have removed roller grills from their stores only to receive backlash from guests. “Sometimes, they’ve lost the core roller-grill consumer to a competitive location that offers products like Tornados taquitos,” she said.

According to Food Concepts, Inc., a marketer of roller grills and other foodservice equipment, as recently as 2019, well over two-thirds of all c-stores featured roller grills. And despite the interruption caused to foodservice sales by Covid, the segment remains an important contributor to c-stores’ bottom lines. Roller grills account for 14% of overall foodservice in c-stores, Main said, and Johnsonville is projecting channel sales to grow 5% from 2021 to 2024.

FOODSERVICE COMPLEMENT Ed Burcher, partner with the Business Accelerator Team (BA Team), which advises c-stores, conceded that some clients are pushing back on roller grills to concentrate on freshly prepared and made-to-order items. “I think that’s a missed opportunity,” he said, pointing to the emergence of popular grill items like Tornados and other globally inspired offerings that “have helped roller grills evolve. I’m still a huge believer in roller grills.”

Rather than competing with fresh food offerings, roller grills complement them, according to suppliers. Said Ruiz Foods’ Ray, “It’s been exciting to see the growth in the breadth of hot food offerings in c-stores, as well as the elevation of overall quality. … More and more c-stores are showing [that] they can compete with fast food and that they’re in the food retail business.”

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WIDE-RANGING CONSUMER One of the appealing dynamics of roller grills is the wide net they cast when it comes to consumer demographics. Ryan Boone, corporate chef at QuikTrip, which offers a wide array of products in the space, said, “There is no singular roller-grill customer. Our roller-grill customers are [composed] of skilled laborers, professionals, high school and college students.

Because roller grills serve up the ultimate convenience food, they’re perfect for guests who don’t have as much time to wait for hot food as does a made-to-order customer.”

robertsre/Getty Images

Roller grills make you more of a destination.”

The availability of both prepared foods and roller-grill items help differentiate c-stores from QSRs, Ray said. Erin Mueller, director of sales and marketing at Padrino Foods, which supplies tamales for roller grills to c-stores including RaceTrac, Pilot Flying J and OnCue, said that because roller grills—in addition to freshly prepared foods—widen choices for customers, they help drive traffic.

As an example, she pointed to a traveling couple—one who likes fresh sandwiches and salads and one who prefers roller-grill items.

“Roller grills make you more of a destination,” Mueller said. Padrino Foods’ business hasn’t been affected by advances in c-store foodservice, she said, pointing to the tamales’ “restaurant quality” and use of only fresh ingredients. “They’re the same tamales you’ll find in a suite at AT&T Stadium, home of the Dallas Cowboys,” Mueller said.

“Covid made it hard for roller grills,” Mueller said. “Some questioned whether the grill would survive.” Fortunately for Padrino Foods, its tamales are fully cooked and individually wrapped and arrive frozen at c-stores. (They go directly from the freezer to the roller grill, requiring about 30 minutes to heat through completely.) “Although the roller grill took a hit during the pandemic, our wrapped tamales were popular,” she said.

Moreover, according to Johnsonville’s Main, the pandemic shed a “halo” on the importance of cleanliness in c-stores, including at the roller grill. “People want to see that the area looks clean, that it’s sanitized and that there are wipes available to clean the tongs,” she said.

Mueller added that post-Covid, “We’re seeing an uptick in roller-grill sales as people are traveling again.”

At Duchess, the roller grill is a complement to deli and graband-go items.

We’re seeing an uptick Ranchero beef and cheese and cheesy pepper jack are among the top-selling flavors of in roller-grill sales as Tornados, while Ruiz Foods also offers a of options for the hot case, including people are traveling again.” variety El Monterey empanadas, mini tacos and of consumers want more Mexican variety.

But with the emergence and popularity of new roller-grill items—such as those with a global flair—the segment is becoming increasingly appealing to younger consumers.

Pointing to items such as taquitos, BA Team’s Burcher said, “The demographic is skewing down in age. These items are attracting a younger consumer.” Such movement bodes well for roller grills going forward.

As in other in-store food categories, one of the most common flavor trends for roller-grill items today is bold options. Rutter’s offers roller-grill items such as Tornados, egg rolls, hot dogs and chicken roller bites. “Hot and spicy choices are currently dominating the market,” said Philip Santini, senior director, advertising and food service at Rutter’s.

Mueller agreed. “C-store customers like hot and spicy [items],” she said, noting that Padrino’s habanero tamale is one of its most popular. At Johnsonville, meanwhile, a recently launched chipotle cheddar sausage is performing “fantastically,” Main said.

International items overall are trending. According to Ray, Mexican is the most desired ethnic cuisine in c-stores, and 50% 118 JUNE 2024 convenience.org

burritos. Johnsonville has witnessed the growth in flavors at the roller grill, too, and Main said that the company will likely have a Mexican-cuisine-inspired entry in the space soon.

C-store roller-grill sales skew toward the 10 a.m. to 2 p.m. daypart. While breakfast options are available, “Breakfast sales lag behind other dayparts,” said Ben Boyd, vice president, sales-convenience at Tyson Foods, which markets Jimmy Dean-, Ballpark- and Hillshire Farm-branded roller-grill items. He said part of the reason is because of a reduced selection in breakfast offerings. “The morning daypart isn’t fully back from Covid,” Boyd said.

SPEED AND VALUE QuikTrip’s Boone said, “For customers, roller grills are a way to access delicious food at good prices and at a convenience,” with a checkout speed that’s often faster than a drive-thru’s. Boyd added that particularly during these inflationary times, roller grills can provide a great value to consumers versus other areas of the store.

For retailers, a benefit of roller grills is savings on labor expenses.

6 delicious flavors from America’s #1 Sausage Brand,* each wrapped in a hearty, soft baked bread for the ultimate grab n go package. Ready to satisfy every craving?

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Roller grills are a According to Arnold, additional challenges way to access delicious with roller grills include a “lack of variety” in featured items, often limiting “the unique food at good prices offerings that a traditional hot merchandiser allow.” And at Love’s Travel Stops—whose and at a convenience.” can roller grills serve up hot dogs, sausages, Pa-

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WINNING PROMOTIONS To drive sales of roller-grill products, marketers recommend that retailers rely on many of the same tools that they use for other in-store categories—marketing at the pump, bundle offers, “two fors” and point-of-sale materials.

Some suppliers work with retailers on special, limited-time-only offers. At QuikTrip, LTOs satisfy customer interest for “new and fun” items, Boone said, pointing to products such as the recent jalapeño popper LTO, which was very popular. Burcher said roller-grill items can even be merchandised outside of the grill, such as in sleeves in warming units or as part of touch-screen menuing.

Tyson’s Boyd added that condiments and a fully stocked condiment bar can go a long way in helping to merchandise the roller grill.

“Some c-stores post signage on how to make a Chicago-style hot dog, for example,” and offer the needed ingredients, he said. “But the most important advice I give to retailers is to be sure the grill area, the prep area and the condiment area are clean. Those spaces must be constantly monitored.”

While roller grills have been a tried-andtrue offering at c-stores for years, retailers are still excited about the opportunity ahead.

The entry of new flavors will attract a wider audience, Santini said, while keeping the roller-grill menu fresh and exciting. Boone agreed that flavor innovation will spark consumer interest—“I believe roller grills will push the boundaries of c-store cuisine.”

Terri Allan is a New Jerseybased freelance writer, specializing in consumer products and retail channels.

She can be reached at terri4beer@aol.com.

GI15702993/Getty Images

“For operators, roller grills provide a hot food option that requires less hassle than other made-to-order or hot food items,” said Nathan Arnold, director of marketing at Englefield Oil Inc., operator of Duchess c-stores in Ohio and West Virginia. “[They complement] our deli and hot grab-and-go food items.” Sales of roller-grill items at the retailer continue to increase year over year, Arnold said, particularly at stores located near highways and construction sites that cater to “super quick service.”

Burcher said that beyond being labor savers, roller grills allow retailers to manage how they allocate labor costs around the service.

“Items can be prepared during downtimes, which takes pressure off the kitchen,” he explained. “You can manage the labor better with roller grills than you can for other foodservice operations.”

Among other benefits of roller grills, Mueller pointed to the opportunity for add-on sales. “Because a roller grill item isn’t a full meal, there’s a good chance a customer will buy something else,” such as a high-margin fountain drink or a candy bar, she said. At Rutter’s, roller grills “provide consistent cooking, ensuring that the quality and expectations of our products are maintained,” Santini said.

But there are certainly challenges with roller grills, too—retailers and suppliers cite waste and management as the most critical.

“In larger stores with extensive roller-grill programs, waste and product quality are major concerns,” Santini said. “The high volume of food prepared and displayed increases the risk of wastage, especially if items remain unsold for long periods, leading to potential spoilage.” In general, most roller-grill items remain fresh for about four hours.

“It’s important to be aware of demand,” Boone said. “If you have too much [product], it leads to waste. If you don’t have enough, it could result in a lost sale.”

drino’s tamales, Tornados and other items— supply chain disruptions can be a concern, according to Brian Street, manager, foodservice. Still, he called roller grills “high-demand options” and said they are being added to all new Love’s stores.

Fore

NACS Human Resources Forum provides insights on what’s next for HR professionals.

sight

BY JEFF LENARD

beast01/Getty Images

W

hich message is more effective for recruiting great frontline employees that will be the face of your business in stores every day?

• “Help wanted. Wages start at (fill in a number).”

• “Imagine helping lead a team that oversees a $10 million enterprise, and that includes learning public relations, customer service, inventory management, supplier relations and creating a unique customer experience.”

That is the fundamental question that NACS Vice President of Research and Education Lori Buss Stillman posed to attendees during the 2024 NACS Human Resources Forum, which took place March 18-20 in Jacksonville, Florida.

The first message essentially asks for “mirror foggers” to apply; the second encourages potential employees to think much bigger about how the convenience store industry can provide career skills that go beyond a paycheck, which is particularly important in a tight labor market.

During the Forum, Stillman laid out an action plan for how the industry can be an employer of choice, using the extensive research and polling data that was the basis of the recent NACS Coca-Cola Retailing Research Council plan. Her presentation was one of many that covered a wide range of topics that companies are facing—or will soon face—befitting the theme of the Forum, “Preparing for What’s Next.”

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So what’s next? How about what’s not next?

Lively group discussions during the breakout sessions generated both questions to consider and answers to some hot-button topics, including: • HR Handbooks: Why do you have them and when do you cover what’s in them? Is it just at the time of hire or on a regular basis?

More importantly, how often do you update them? Lawyers look for non-compliance in wrongful-dismissal lawsuits—and states may have different regulations and requirements with which to comply if you operate in multiple states.

• Increasing leave: Are you informed enough about business operations to see the imLori Buss Stillman, NACS vice president of research and education

Non-HR People: Read This (Please)

The NACS Human Resources Forum provided valuable connections for professionals to share solutions to their problems—and it also gave them a chance to network and see if some of their other HR-related concerns are widespread.

Many of them are, and that should be of concern for those who depend on HR to drive positive culture and deliver outstanding financial performance.

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plications of higher wages or benefits? For instance, a $1 million increase in expenses will require an extra $3 million in sales at a 30% margin. Make sure to do the overall calculations as you consider enhancements to salaries and benefits, especially where new laws require expanded leave.

• Return to office policies: Some people love working at home, others thrive with in-person environments, and some prefer a mix of both. But all employees hate when promises are broken or when treatment varies and feels inequitable across the organization. Meanwhile, remote work also expands the potential pool of applicants.

Look at all these factors in determining what works best for your organization. And while many businesses focus on monitoring if those working from home are putting in adequate hours, also make sure that employees aren’t working off the clock—because there may be potential wage-per-hour implications if they do.

• Pay transparency: Those that have been in the workforce for decades likely can’t imagine sharing their wage information with others—yet that is becoming more common with younger workers. They often share salary information and think this transparency promotes pay equity and

BURNOUT IS REAL More than two in three HR managers (68%) have thought about quitting, according to a recent survey conducted by the Society for Human Resources Professionals.

There are many reasons for this, and burnout is near the top of the list. HR managers are expected to handle the routine jobs related to payroll and basic operations, along with managing staffing and often culture—plus they are expected to be on call with answers around the clock. They tell others to take vacations and personal time off, yet often don’t follow that advice.

Make sure they do. “Who’s looking out for you?” asked HR Forum

moderator Julie Jackowski, retired chief legal officer and secretary for Ankeny, Iowa-based Casey’s.

ENGAGE THEM IN STRATEGY Often times, HR professionals are thought of as go-to team members when there’s an immediate issue—hiring, addressing poor performance or violations of policies. But that’s not fully utilizing their skills. “Talk to them when things are routine and going well,” advised Jackowksi. She said it’s important for organizations to involve them in their strategic conversations. “They have a lot of duties and are seemingly

Steve Seymour, director of personnel and training and development for United Refining Company/Country Fair Inc.

fairness. Pay transparency is becoming more common and can create some challenging dynamics in the workforce. Good news: The Equal Employment Opportunity Commission has great resources at eeoc.gov (look for the bulletins).

PROMOTE ME NOW Seventy-two percent of Generation Z workers (born between 1996 and 2010) expect to be promoted within 7 to 18 months of hire.

How do you manage these high expectations that are likely not realistic, asked NACS Research Manager Jayme Gough. Her answer: constant communication about what IS realistic and what is not, sharing the William Shakespeare quote, “Expectation is at the heart of all heartache.”

PAY MATTERS, BUT BE SMART You don’t have to be the highest payer in your market—you just have to be competitive. Regularly check what the competition is paying (a great assignment for interns), said Steve Seymour, director of personnel and training and development for United Refining Company/Country Fair Inc. in Erie, Pennsylvania, and author of the book 100 Ideas to Improve the Workplace. “Your competition extends beyond just c-stores; also look at QSRs, dollar stores

and even light manufacturing pay in your market,” he said. He noted that pay analysis should also include a review of benefits and time off.

BE SOCIAL ON SOCIAL MEDIA Employees love being the focus of social media posts. “A social media post highlighting the price of eggs may get a few likes; an employee doing something cool gets thousands,” said Ana Castillo, people and culture manager/retail at Parkland USA in Houston, Texas.

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strategic plans so they can help suggest resources.

responsible for everything. And that should include strategy,” said Jackowski. HR can play a critical role in providing the right resources to the organization when it has a seat at the table while strategy is defined—as opposed to only when it’s announced. Another suggestion: Have HR teams meet with departments on a regular basis to go through their

From left to right: Jenna Collard, NACS director of education engagement; Rayma Alexander, director of corporate communications and DEI at Wills Group; and Ana Castillo, people and culture manager/retail for Parkland USA.

THEY DESERVE THE SAME OPPORTUNITIES One frustration of many HR professionals is that they aren’t considered for other positions within the organization, often because they are only thought of as holding a “support” position rather than being true business partners.

In fact, HR professionals come from different backgrounds, work routinely with all aspects of the business, and are valued and dedicated team members. Spend time thinking about how you can

give them a meaningful career path—whether or not it is in HR. You don’t want to lose key HR team members who may not see advancement within their department. As an aside, several noted that HR departments are often overlooked in the realm of performance bonuses despite their valuable role in “getting the right butts in the right seats” so other departments can hit those goals.

Be sure to show the HR teams that you value their contribution.

(Note: These comments were solicited as part of a pre-planned sidebar. This group is generally a happy bunch—but don’t take that for granted either.)

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Julie Jackowski, retired chief legal officer and secretary for Casey’s, served as moderator for the Forum.

Investment That Keeps on Giving There were more than 100 attendees at this year’s HR Forum and a slight majority were first-time attendees (51%) attracted by positive word of mouth from peers in the industry. More impressive was that several companies brought multiple members of their HR teams. “It’s important to share our learnings and implement them together,” noted one attendee.

“It’s the networking that comes with this that makes it such an essential event for HR professionals,” said Jackowski. “HR in the convenience sector has many unique challenges. Being able to talk to others similarly situated helps HR teams leave with more focus on how to prioritize and tackle the challenging issues that arise,” Jackowski said. Notably, all attendees (unless they want to opt out) are included on a specific HR listserv to use throughout the year where they can share non-confidential information to get advice on resources and any other questions they might be facing. “It’s the ultimate HR-focused study group,” said Jackowski.

In addition, attendees are eligible for continuing education units (CEUs), which can help them reach their certification requirements with SHRM and HRCI. Sound interesting? Plan to attend the 2025 NACS HR Forum, which will take place March 24-26 in Nashville, Tennessee. And bring someone else from the team along!

REIMAGINE TRAINING Focused training has greatly enhanced Spicewood, Texas-based retailer TXB’s operations and reduced turnover. The week-long training covers different video and on-the-job training elements and gives clear expectations (reducing heartache!) of what jobs require, tying into the company’s overall mission of “Leave ’em Better,” said Abby Curlin, corporate recruiter and training developer at TXB. Specific days focus on the core elements of the business: TXB is friendly (an overview of hospitality), TXB is safe (the importance of food safety, ID verification and personal safety) and TXB is clean (the elements of cleaning the store).

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BE TRUSTWORTHY Fifty-eight percent of people say they trust strangers more than they trust their bosses.

And given that a relationship with a direct supervisor is the top reason someone quits a job, that should be a huge concern, said Hannah Ubl, co-founder of Good Company Consulting, in the appropriately titled presentation “Creating a Workplace that Doesn’t Suck.” In the interactive session, Ubl also had the group focus on how the generations approach work and communications differently.

FROM HR TO AR? Finally, pets are an up-and-coming issue.

Several companies now offer pet insurance discounts in their benefits packages. And with pets considered part of the family in many cases, so is providing time off to grieve when a pet dies. “Pet bereavement is coming,” said Rayma Alexandrer, director of corporate communications and diversity, equity and inclusion with the Wills Group in La Plata, Maryland. So how does that play out with goldfish and/or other pets beyond the traditional dogs or cats? And if you have 10 cats in your house…?

The three-day Forum hit upon a plethora of up-and-coming HR topics, with ideas flowing readily. “Strive to leave here with three ideas that you want to try at your company—making sure to build out a plan to demonstrate their value and return on investment,” said HR Forum moderator Julie Jackowski, retired chief legal officer and secretary for Ankeny, Iowa-based Casey’s.

With so much information and ideas flowing throughout the sessions, the HR professionals in attendance were encouraged to prioritize what works best for them. Great ideas and calls to action don’t all have to be done at once, though. “Better is a direction,” Jackowski noted.

Jeff Lenard is NACS vice president, strategic industry initiatives. You can reach him at jlenard@convenience.org.

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Unpacking the

Black Market Massachusetts and California provide a scary preview

O

n April 28, 2022, the U.S. Food and Drug Administration (FDA) announced a proposed rule that would ban the sale of menthol cigarettes and flavored cigars. The agency received over 175,000 comments in response to the proposal, many opposing the ban for both economic and public health reasons. The ban won’t be enacted at least until after the November election, but it still looms as a possibility.

“Criminalizing a $30 billion menthol marketplace will lead to serious consequences, including an illicit market and undermining of public health and underage tobacco prevention efforts,” said Davien Anderson, a spokesperson for Altria Group Inc.

128 JUNE 2024 convenience.org

francescoch/Getty Images

BY MELISSA VONDER HAAR

k of what happens during a menthol prohibition.

NACS JUNE 2024 129

Criminalizing a $30 billion menthol marketplace will lead to serious consequences.”

130 JUNE 2024 convenience.org

Here’s a look at the various forms of illicit menthol sales that have emerged in Massachusetts and California, as well as the consequences the black market has had on the states’ retailers, regulators and public health.

THE ‘RESISTANCE’ BLACK MARKET Like most tobacco regulations, the move to ban menthol began at the local level. More than 190 localities have banned menthol cigarettes to date. When menthol is banned locally, those smokers can simply drive to another city or county to purchase menthol.

Geoghegan described this phenomenon as the “resistance” market. It’s not technically illegal—the possession of menthol cigarettes by consumers has not been banned, just the sale—but is illicit in the sense that it’s a workaround of the law (and excise taxes).

This resistance market is quite prominent in Massachusetts, a relatively small state (190 miles east to west and 110 miles north to south) that’s surrounded by states where menthol has not been banned.

“You can see the pack sales come out of Massachusetts and start getting sold in New Hampshire or Rhode Island or other border states,” said Peter Brennan, executive director of New England Convenience Store and Energy Marketers (NECSEMA).

NECSEMA reports that in the 12 months following the 2020 ban, menthol sales grew by 78% in New Hampshire, 42.5% in Rhode Island, 10.5% in Vermont and 4.1% in Connecticut. New Hampshire stores bordering Massachusetts saw their menthol sales grow by over 100%.

“Aunt Martha can get in her car in Massachussetts and drive 20 miles down to Windsor, Connecticut, and buy three cartons of menthols without raising an eyebrow,” Geoghegan said. “It’s not illegal because there’s no resale or tax stamp violation.”

In Massachusetts, “the only real loser is the retailer,” said Matt Domingo, senior director of external relations at Reynolds American Inc. “Adult consumers have simply mobilized to neighboring states to find their desired products.”

Driving across state lines to purchase menthol cigarettes may not be illegal—but the tax disparities, as well as the number of menthol smokers in the state, has incentivized a resale market that is quite illegal, if

BAKERYLY/Getty Images

“

The menthol black market isn’t just a hypothetical concept: It’s a reality happening in Massachusetts and California, where menthol sales have been banned since 2020 and 2022, respectively.

“What we’ve seen generally across California is [that] an illicit marketplace of flavored e-vapor and menthol cigarette products has developed,” said Alessandra Magnasco, governmental affairs and regulatory director for California Fuels and Convenience Alliance (CFCA). “Our members are seeing it firsthand.”

But what exactly qualifies as a menthol black market? The answer is not so simple.

Dictionary.com defines “black market” as “the illicit buying and selling of goods in violation of legal price controls.” By that definition, a guy selling menthols from his trunk in a dark alley is engaging in black market activity … but technically, so is the old lady who drives across state lines to purchase her preferred brand in an area where menthol is legally sold.

“If we’re going to talk about a black market for menthols, let’s separate that from self-supply,” said John Geoghegan, a brand development consultant with over 30 years of experience in the tobacco space. “There are several levels to it, all the way up to organized racketeering.”

damon-lam/unsplash.jpg

not yet the most prevalent way Massachusetts smokers obtain menthol.

“Massachusetts already had somewhat of a black-market problem due to high tax rates— the flavor ban exacerbated that,” Brennan said. “The data on illegal product seizures shows that flavored tobacco products are being imported into Massachusetts regularly, via vehicles traveling to New Hampshire to get cartons of menthol cigarettes or people ordering pallets of illegal vapes from China.

The black market is thriving.”

A MORE DANGEROUS BLACK MARKET California provides a stark comparison with a more concerning threat. Unlike Massachusetts, California is 250 miles wide and 760 miles long with one side of the state completely bordered by water. While some cross-state menthol purchases are made, it’s much more difficult to do.

Which has opened the door to something more nefarious.

“Cross-border smuggling, theft and loosie sales, those are all part of California’s black market—but I think you have this other aspect that exists too,” said Anna Ready Blom, NACS director of government relations, noting reports that Mexican drug cartels are capable of producing and smuggling menthol cigarettes into the States. “It’s scary stuff.”

These concerns were echoed in a letter sent by the House Committee on Homeland Security Chairman Mark E. Green (R-TN) to Department of Homeland Security (DHS) Secretary Alejandro Mayorkas regarding FDA’s proposed menthol ban.

“CJNG and other Mexican cartels will have significant financial incentive to utilize their existing fentanyl and narcotics networks to push tobacco sales in the United States,” Green wrote.

Data indicates this is already happening.

In a study commissioned by Altria, the research firm WSPM Group analyzed 15,000 cigarette packs from trash cans throughout California. Analysis of the packs found: • 21.1% of cigarette packs were menthol or a “menthol work-around.”

• Only 41.2% of the packs found had a clear California tax stamp (indicating the majority of packs were from other states or smuggled in illegally).

• 27.6% were “non-domestic products”

meaning they were either sold at duty-free stores or were not produced in the United States at all.

• 5.1% of the packs found were Sheriff brand, one of the duty-free brands known to be trafficked by the cartels.

“It’s a duty-free product, so it is meant to go out of the United States,” Blom said about Sheriff. “Yet it’s making its way back in— meaning illicit, cross-border trafficking of these products already exists today.”

The incentive is huge: Geoghegan cited the CDC’s estimate that there are 740,000 menthol smokers in California.

“With 740,000 menthol smokers in California, there’s probably $192 million on the table for interstate racketeering,” he said.

“

Real world experience shows that a menthol prohibition doesn’t lead to quitting.”

BLACK MARKET CONSEQUENCES Whether it’s a resistance market, a cartel-fueled market or something in between, menthol bans have had fairly serious consequences—with little reward to show for it.

“Real world experience shows that a menthol prohibition doesn’t lead to quitting,” Domingo said. “Smokers simply switch or turn to the illicit market.”

The pack study suggested nearly the same rate of menthol consumption in California post-ban (21.1%) as before the ban (24%); and research published in JAMA Internal Medicine showed that in the year after the menthol ban, smoking rates of black women actually increased.

Meanwhile, retailers in prohibition states have felt the sting.

“In the year following the ban, Massachusetts lost over 33 million packs of cigarettes,” Brennan said. “Depending on the store location, tobacco can make up 20% to 30% of in-store revenue at Massachusetts stores.”

“It creates an economic disadvantage for those retailers where products are banned because not only are they losing the tobacco sale, they’re losing the sale of the entire basket,” Blom added.

“It’s not great,” Brennan surmised.

It’s not just retailers feeling the economic consequences: States that have banned menthol are facing consequences too. In the first year of the menthol ban, Brennan said Massachusetts lost roughly $127 million in tax revenue that went to neighboring states, and that tax revenue loss has continued unNACS JUNE 2024 131

“

Prohibition policies do not work.” abated. With the Altria study showing only 45% of packs bore a California tax stamp, it’s likely that state has lost even more money than Massachusetts.

And that’s not the only cost.

“There are also significant enforcement costs,” Brennan said. “Police, boards of health, people to confiscate illegal products, storage space for seized contraband, etc. In Massachusetts, the Department of Revenue is overwhelmed by this issue. States now have to dedicate enormous resources to this problem.”

Ironically, the biggest cost might be that of public health. Menthol bans often tout the goal of reducing harm and reducing youth smoking rates. But a robust black market does exactly the opposite.

Convenience retailers have invested millions of dollars in age verification training and practices. “That is completely eroded by a black market,” Blom said. “Illicit purveyors certainly aren’t checking age—they want to sell as many products as possible to whomever.”

Unlike FDA approved and controlled products sold legally in convenience stores, the non-domestic or cartel-produced cigarettes being sold on the black market have zero oversight.

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A FEDERAL BAN If the FDA goes through with a national menthol ban, that illicit market and all its negative consequences would shift entirely to the worst of the two options: a black market run by bad actors.

Retailers and manufacturers have been urging the administration to look at the evidence from Massachusetts and California.

“A ban on menthol flies in the face of proven science and is contrary to the FDA’s stated goal of reducing the health effects of tobacco use,” said Domingo of Reynolds. “[It] would fuel an extensive illicit market for unregulated and potentially more dangerous products and related crime.”

“Prohibition policies do not work,” said Magnasco of CFCA, adding that a federal menthol ban would result in a true national black market like what’s happened in her state of California. “This type of illicit market will lead to significant unintended consequences for retailers across the country, including having to compete against illicit cigarette traffickers who will supply illegal menthol products and don’t check IDs. The California experience provides further evidence that keeping these types of products legal and regulated is the best path forward.”

Melissa Vonder Haar is the marketing director for iSEE Store Innovations. Follow her on Twitter at @iSeeMelissaV.

peri-stojnic/unsplash.jpg

The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) has addressed this, stating, “counterfeit cigarettes often contain higher levels of tar, nicotine and carbon monoxide than genuine cigarettes, and may contain contaminants such as sand and packaging materials. Counterfeit cigarettes pose a greater health risk to consumers and cost taxpayers millions in lost revenue.”

“Products sold legally in the United States today have undergone FDA’s intense scrutiny,” Blom said. “Counterfeit products, often coming from outside of the United States, lack that scrutiny and are a greater danger.”

REDUCE OR

WITH BANK IN A BOX

­

X

­

­ ­

­

by Cash Depot

Smokeless tobacco was the only segment to have growth in the past year, increasing from 11% of tobacco sales two years ago to

14%

over the last 52-week period.

The cigarette category generated

$44,765

per store, per month for in-store merchandise sales.

POTENTIAL FUTURES T FOR THE BACKBAR

Source: NACS State of the Industry Report® of 2023 Data

With smoking down and future bans looming, retailers will have to reevaluate their tobacco assortment.

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obacco products have historically been at the heart of c-store inside sales. Even after years of decline, they remain a leading sales driver. Excluding foodservice, the cigarette category still ranks first for in-store sales, generating $44,765 per store, per month according to preliminary numbers from the NACS State of the Industry Report® of 2023 Data.

However, cigarettes’ long-held reign will eventually go up in smoke. Tobacco usage is declining as fewer Americans smoke, while looming FDA bans on menthols and flavored cigars—though in April, the Biden Administration again delayed a decision on the ban until at least after the November election—could cut billions of dollars of sales out of the tobacco market in just a few years. Cigarette sales in

This article is brought to you by Kretek International.

c-stores were down 4.3% over the last year, according to the latest NACS CSX data, while cigar sales were down 2.4%, according to NIQ. Smokeless tobacco was the only segment to have growth in the past year, increasing from 11% of tobacco sales two years ago to 14% over the last 52-week period, according to Kretek International, an importer and distributor of premium tobacco products. “There is a big shift in share of total tobacco dollars going from cigarettes to smokeless,” said Jorge Gonzalez, senior business intelligence specialist at Kretek.

If the FDA enacts its ban, it will further eliminate a huge chunk of already dwindling combustible product revenue. Menthol smokers make up 32.5% of all cigarette smokers, according to the CDC, and flavored cigars are 51% of the cigar segment, which includes cigars, cigarillos and filtered small cigars.

In dollars, it’s not small change. Eliminating these two products would cut almost $24 billion in sales from c-stores.

In the face of these two converging trends, retailers have a problem—how to optimize the backbar as tobacco usage evolves.

Kretek says retailers likely have three choices: 1) shrink the backbar to a smaller selection of higher velocity items; 2) expand the breadth of product choices to offer consumers a wider range of options; or 3) redesign the front of the store without the backbar.

“We aren’t saying we think one of these is necessarily the best way, but broadly, we foresee that one of these three options, or some hybrid of these three, will likely arise as the new standard going forward once the FDA puts policies into effect,” said Benjamin Winokur, brand manager of emerging brands at Kretek.

SHRINK THE TOBACCO SECTION An obvious answer to a reduction in usage and dwindling legal inventory will just be to downsize the tobacco section. “There’s going to be too much floor space for a shrinking tobacco-centric audience,” said John Geoghegan, a consultant for Kretek with over 30 years in the tobacco industry.

In a Kretek study, 56% of current menthol smokers said they would buy a non-nicotine menthol smoke if their current brand were banned.

Based on store photo audits and customer feedback, Geoghegan estimates that there will be around eight million slot facings to be filled, rearranged or reassigned. “That will be more new products than the FDA has time to give market authorizations for.”

Some retailers will try to fill those slots with slower moving items they otherwise wouldn’t have considered. “If I were a store owner, I wouldn’t want that. I would want the most bottom-line, velocity-driven tobacco section inventory that serves the most of my customers,” he said.

With up to half of cigars and cigarillos set to be removed under the flavor ban, focusing on products with better margins will also help bolster tobacco sales. “Moving flavored cigar smokers to a premium product could help recoup some sales—the cigars are better, the margins are better and when properly presented, they can help upgrade the overall customer experience,” said Albert Jose, senior vice president of sales and marketing at Kretek, which also imports Cuban Rounds premium cigars.

Persuading smokers of flavored machine-made cigars to upgrade will take some customer education and retail focus by marketers, but it’s a reset that “will be worth it,” Jose added.

EXPAND THE BREADTH OF PRODUCT CHOICES A menthol ban will likely lead to a 15% reduction in overall smoking, Georgetown University oncology professor David Levy predicted in 2021.

If Canada and Europe—which banned menthol cigarettes two years ago—can provide any insight into the potential outcomes of a ban, half of smokers might switch to other NACS JUNE 2024 135

“Moving flavored cigar smokers to a premium product offers c-stores a chance to recoup some sales lost to the flavor ban.” cigarettes. Of the other half, those who don’t quit will search for a menthol-flavored alternative. In consumer surveys conducted by Kretek, 59% of menthol smokers ranked taste as their motivating factor, compared to only 24% who said nicotine was most important.

For some menthol smokers left with a void, smokeless tobacco products and new nicotine-free flavored smokes will replace their menthol cigarettes, so retailers would benefit from expanding the inventory offered for these polyusers.

Mint and menthol flavors now account for 13% of moist snuff and snus smokeless products after a 62% year-over-year growth spike, further validating consumers’ loyalty to the flavor.

“It indicates that menthol smokers in California and Massachusetts [which have statewide menthol cigarette bans] are changing their source of menthol rather than switching to non-menthol cigarettes,” explained Geoghegan.

About 12% of smokers said a ban would prompt them to switch to e-cigarettes or other nicotine alternatives, according to an article in The New York Times. An independent Attitude & Usage study of 600 menthol smokers conducted for Kretek showed that 35% already use vape, cigars, nicotine pouches or snus. According to NACS CSX data, the OTP category (which includes smokeless tobacco, cigars, and alternative nicotine products such as pouches and vaping products) was up 6.9% for in-store merchandise sales and 7.9% for gross profit, driven entirely by smokeless tobacco.

For another segment of smokers, a non-combustible won’t replace their menthol cigarette as it doesn’t provide the same 136 JUNE 2024 convenience.org

ritual that the act of smoking does. It’s one of the reasons Kretek is coming up with nicotine-free, menthol and cooling-flavored smokes to fill this niche void. Based on the company’s research, around 20% of menthol smokers’ level of nicotine dependency was low enough to make the switch to a nicotine-free smoke.

“If I were a store owner facing 30 or 40 empty tobacco slots and I wanted to sustain my tobacco sales dollars, I would transition to premium cigars and smokeless products, and set up a small section for nicotine-free, non-tobacco smoking alternatives. Alternative nicotine would also be part of the mix, but longer term, these products are also on the FDA’s radar screen,” said Geoghegan.

REINVENT THE TOBACCO SECTION The third option would be to move the tobacco section to another area of the store.

“It won’t be right for everybody, but retailers in low-smoking areas could begin considering the idea,” said Geoghegan. Over the next three years, he said c-stores can expect another 10% decline in tobacco use.

Where licensing allows, the new section could be combined into a section with wine, beer and hard liquor, or moved to be adjacent to snacks or packaged beverages that align with tobacco purchases.

Moving the tobacco section wouldn’t come without challenges though. One is that retailers would need to dedicate an attendant to the section. Another is that the store might not have adequate square footage to create a store within a store for tobacco. Plus, the process of remodeling sections of the store could be disruptive and costly.

“No one is going to make any moves until their hand is forced, so which of these options is the right play is yet to be seen,” said Winokur, especially when there is no clear timeline on when the FDA will enact—and then enforce—its bans, which were first proposed over a decade ago. “There is plenty of time to get ready for this and figure out what to do.”

Lauren Shanesy is a writer and editor at NACS, and has worked in business journalism for a decade.

She can be reached at lshanesy@convenience.org.

Cool New Products Guide This advertorial-style guide of services and packaging appears monthly and is an information-packed tour of ideas and approaches that can change how consumers view your store or choose your brand. It spotlights the newest thinking in convenience and fuel retailing and gives you an advance look at ways of staying in front of industry trends.

Products are categorized the same way we organize the Cool New Products Preview Room at the NACS Show each year in October— New Design, New to the Industry, New Flavors, Health & Wellness, Green (EcoFriendly), New Services and New Technology.

Products are considered “new” this year if they’ve been introduced since October 2023.

The products featured here also can be seen in the Cool New Products Discovery Center at www.convenience.org/coolnewproducts.

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GAS STATION GOURMET

The Best Burger in Town

NFA Burger draws a line of customers from both near and far to the Dunwoody, Georgia, Chevron station.

BY AL HEBERT

T

here’s a gas station hamburger in Dunwoody, Georgia, that is getting a lot of attention. From regional media coverage to features in national magazines like Southern Living and Food and Wine magazine—which dubbed it the best burger in the state— NFA Burger is sizzlin’ in the spotlight.

Owner Billy Kramer’s story is inspirational. After growing tired and burnt out from his career in advertising, he started wondering if he could create a great version of a classic food everyone loves—a burger.

“It started out as stress relief for work … kind of a game in my head … could

I make a perfect burger?” he said. “If I could make the perfect burger for my family, could I do it again for my friends?

If I owned my own restaurant, could I do it over and over everyday? Just how high of a bar could I leap over?”

With that in mind, Kramer started watching videos, reading articles, buying cook books and “speaking with any cook or chef that would let me in their kitchen,” he said. “Every time I made a new batch of seasoning, I called my friends and they sprinted over for another taste test. One day, my friend Jeff told me that his wife, Caryn, would only eat my burger. That was a huge compliment.”

Kramer finally thought he was on to something. He started looking for restaurants where he could do pop up events for his burger, doing the first one in the spring of 2018.

“Pretty soon, I was building a solid reputation in Atlanta,” he said.

FROM POP-UP TO PERMANENT Oftentimes, the pairing of great food and gas stations is just meant to be.

“I reached out to Salim Thobani, the owner of a Chevron gas station near my house,” said Kramer. Within a few days, Thobani’s son visited one of Kramer’s pop ups, and “wound up telling his dad it was one of the best burgers he had ever had. Within three months, Thobani offered me the cafe space in his Dunwoody Chevron. He gave a guy with no restaurant experience a kitchen,” he recalled.

And thus, NFA Burger was born.

What does NFA stand for? Not Fool-

Billy Kramer (left) and Salim Thobani (right)

My motto is everything in every bite.”

142 JUNE 2024 convenience.org

ing Around, and Kramer means it. He opened NFA on December 3, 2019, and on the store’s first day he made three burgers. By day five, he had a line around the store.

“It’s been a good partnership. Thobani is not your typical landlord. When Covid hit on March 14, 2020, he called and said ‘Billy, do whatever you need to do.’ We only closed for three hours,” Kramer said.

The Chevron c-store and NFA naturally complement each other. The c-store sells drinks and it benefits from the long line of customers around the store.

And for Kramer, every customer is special … and no one is. Everyone has to wait their turn in line.

“We had a great traffic day this past Saturday. The line was around the building, and my wife ran into the store and said … ‘so and so is in line, what do I do?’ and I said, ‘Tell them I said hello.’

Top chefs, hip artists, athletes and CEOs … it doesn’t matter to me.”

BUILDING THE PERFECT BURGER BITE What makes NFA Burger the center of culinary attention?

The burger is painstakingly constructed. Kramer has a system and is meticulous about the assembly of Billy’s Classic, the burger that started it all and the restaurant’s staple menu item.

“My motto is everything in every bite.

Why have a special sauce that takes four bites to find? If mustard makes your burger better, why hide it?” said Kramer. “Strips of bacon don’t cover the entire burger, so we used diced bacon. I want my customers to enjoy the last bite as much as the first.”

DOWN TO A SCIENCE The burger cooking method, too, is precise. It starts by smashing the burger with the proper technique.

“It’s all about science. A properly executed smashed burger requires the grill

Perfection With Room for Error At NFA, Kramer would rather serve the perfect burger than have employees be too nervous to remake an item. “If they don’t think I’d eat it, they’re empowered to remake the burger,” he said.

“If we send out an imperfect burger, the customer will tell all their friends it was a bad burger. We know that person is not coming back. We don’t know who they will tell and how many people then won’t come in. Simply put, I look at failure as a marketing expense—other restaurants look at it as a food cost.”

If someone on the line makes a mistake, NFA packages up the food and gives it away.

The staff also eats for free while working, so there’s “no reason to purposely screw up a burger like they might have had to do at their last job,” just to score a free meal, he said. “We don’t play games in my kitchen.”

to be over 350 degrees so that the Maillard reaction takes place. By smashing a ball of meat into the grill at the correct temperature with the proper technique, you will get the perfect sear with crispy edges…or [what’s called] meat lace,” Kramer explained.

You have to admire Kramer’s focus on quality. In the current fast food, quick delivery world, he’s slowed things down to ensure perfection.

“There are no shortcuts to smashing burgers. My goal is not to serve you the quickest burger I can. My goal is to serve you the best burger you’ll ever have, in the quickest way I can. The difference with what we do is I want you to

NFA Burger sold three burgers its first day but now has lines of waiting customers.

have the best burger humanly possible,” said Kramer.

But the number one thing Kramer said makes his restaurant great is that he and his staff care. “The thing that makes us great is what makes every great restaurant great. When you enjoy a restaurant, it’s because the people who own it want you to enjoy it. We want people to have a perfect experience every time they eat there, and you have to care about the people who spend their money [on you].”

And success also comes down to having the right people with the right attitude.

“Employees are a reflection of their leader. The reality is very few employers empower their employees to be perfect,” said Kramer. “If I hire people who care, the customers should have an exceptional outcome most of the time, if not every time.”

Kramer shared that “When people go out to eat, I want them to enjoy restaurants for who [the restaurants] are, not what customers want them to be. If you expect us to do something that’s in your head, you’re coming for the wrong reason. We’re not everything to everybody.

Enjoy us for who we are. People say we’re nothing like Shake Shack, Culver’s or Freddy’s … good. Because they’re already there.”

Al Hebert is the Gas Station Gourmet, showcasing America’s hidden culinary treasures. Find him at www.GasStationGourmet.com.

NACS JUNE 2024 143

CATEGORY CLOSE-UP CANDY

On a Sugar High Candy continues to contribute to a healthy bottom line.

BY SARAH HAMAKER

Candy sales in nontraditional, novelty products are really up at our store.”

144 JUNE 2024 convenience.org

Industry Sales % of In-Store Sales

$4,178

Candy’s gross profit dollar contribution per store, per month.

Source: NACS State of the Industry Report® of 2023 Data

S

ince candy first appeared on c-store shelves, consumers have turned to convenience stores as the place to get trendy sweets as well as the tried-and-true staples.

“Candy is one of those quintessential c-store categories that is perfect for experimentation in flavors and trends, like premiumization of chocolate, gummy candy, retro candies, plant-based options and the popularity of candy-cutting ASMR on TikTok,” said Emma Tainter, NACS research analyst/writer.

This innovation is what’s been driving category sales at convenience stores, according to retailers like Richard Cashion, COO of Curby’s Express Market in Lubbock, Texas. “While traditional CPG candies are down some, candy sales in nontraditional, novelty products are really up at our store,” he said.

At EddieWorld in Yermo, California, candy sales have been consistent inside the convenience store. “We’re unique in that we bag our own candy in onepound bags,” said owner Alex Ringle.

“We sell a ton of candy, which makes up about 40% of our sales.”

At the two Wally’s locations in Fenton, Missouri, and Pontiac, Illinois, regular candy sales are up almost 12%, but novelties have jumped 144% from a year earlier. “Kids especially are excited about our novelty candy, like five-foot long gummy snakes and toy cars full of candy,” said Lute Cain, executive chef and store operations manager.

Overall, in 2023, candy sales grew 8.2% year over year, according to CSX data presented at the NACS 2024 State of the Industry Summit. In order of contribution, candy was number six in inside sales and the number five contributor to inside margin. Nearly every convenience store (99.9%) reporting to the NACS State of the Industry survey carried candy in 2022.

SOMETHING NEW To satisfy their sweet cravings, consumers, particularly millennials and Gen Z, are turning to candy with more complex textures and flavors. “We’ve also seen Gen Z consumers gravitate to unique fruity flavors,” said Yvette Fossum, vice president of sales, convenience stores at Ferrero.

Novelties often have the flavors and textures consumers crave. “We like to constantly innovate in our candy, and that includes bringing in the new novelties as quickly as possible,” said Cashion.

To meet this increased demand, Curby’s expanded its entire candy section in January 2024, dedicating more space to novelties. “As a result, we’ve turned the entire novelty section over nine times between January and late March,” Cashion said.

3.48% 3.61% 2022

2023

Avg. Sales/Store

$7,538 $8,183 2022

2023

Margin Contrib

ution

51.22% 51.06% 2022

2023

Source: NACS State of the Industry Report® of 2023 Data

NACS JUNE 2024 145

CATEGORY CLOSE-UP CANDY

Candy sales per store, per month Jan 2020-Dec 2023

n 2020

n 2021

n 2022

n 2023

SEP

OCT

NOV

$9,467

$10,000 $9,000 $8,000 $7,000 $6,000 $5,000 JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

DEC

Source: NACS CSX Convenience Benchmarking Database

CSX, the engine behind category metrics and NACS State of the Industry data, provides current and customizable tools for financial and operational reporting and analysis in the convenience industry.

Retailers can measure their company by any of the myriad metrics generated via our live database. Contact Chris Rapanick at (703) 518–4253 or crapanick@ convenience.org for a complimentary executive walkthrough.

Ringle has also experienced a rise in popularity for unusual and new candy at EddieWorld. “We’re seeing a huge trend in freeze-dried candy, such as Skittles, Jolly Ranchers, taffy, Fruit Roll-Ups and peach rings with freezedried options,” he said.

Freeze-dried candy has been popular at Wally’s as well. “It’s starting to really blow up, with flavors such as lemon, peach and taffy,” Cain said. “We also stock a lot of retro candy—like candy cigarettes and clove gum—that has done extremely well for us.”

Like EddieWorld, Wally’s has its own private-label line of bagged candy, including cotton candy and gummies.

“We’re continuing to expand our own bagged candy as we see this as an area of real growth for us,” said Andy Strom, chief experience officer for Wally’s.

SWEET GROWTH Retailers must keep a close eye on candy inventory to keep consumer interest high. “One challenge with this category is finding enough of the novelty candy to keep our shelves stocked,” said Cain.

“Some of the novelty candy companies weren’t prepared for their products to take off, so we’ve had some supply issues lately.”

146 JUNE 2024 convenience.org

We’re seeing a huge trend in freezedried candy.”

Also, retailers who consider how they merchandise candy can boost sales even more. “We had candy in nontraditional, four-way merchandisers but that was hindering our sales, so we changed to straight gondolas and saw a lift in candy sales,” Cashion said. “That showed us we must pay attention to the merchandising to keep sales up.”

SEASONAL SWEETS These retailers haven’t seen value in bringing in seasonal candy, such as products with Halloween- or Easter-themed packaging. “We’d rather put our attention on developing a candy shop feel to our candy section and experiment within the section than have holiday-themed candy,” Cashion said.

Marat Musabirov/Getty Images

The Power of CSX Data

CATEGORY CLOSE-UP CANDY

At EddieWorld, Ringle has devoted an entire section to sugar-free candies.

“While the prices for sugar-free candies are noticeably higher than regular candy, there is still a demand,” he said.

Ferrero’s Fossum pointed out that consumers also desire vegan and other dietary products in candy. “More and more people expect different dietary options in candy wherever they shop, including convenience stores,” she said.

148 JUNE 2024 convenience.org

SWEET WITHOUT SUGAR It might seem counterintuitive to offer sugar-free candy, but more consumers are searching for less sugary options, boosted by the overall trend toward a greater focus on health. “People are recognizing the benefits of controlling sugar intake for both mind and body,” said Joe Foguth, sales operations analyst for Gerrit J. Verburg Company, which recently released sugar-free options to its vintage gum. “We came out with these sugar-free alternatives because we wanted customers to have a product that aligns with their desire for healthier options.”

Sarah Hamaker is a freelance writer, NACS Magazine contributor and award-winning romantic suspense author based in Fairfax, Virginia. Visit her online at sarahhamakerfiction.com.

Marcia Nelsis/Getty Images

Americans will always look for treats as an affordable, accessible break, reward or indulgence.”

Ringle also eschewed seasonal candies. “I don’t want to get stuck with leftover holiday candy I then have to discount,” he said. “Instead, we sell some of the more popular seasonal candies, like candy corn, year-round.”

Wally’s doesn’t do seasonal candy either. “We do so many other seasonal items in our stores that we would rather continue to focus on building the general candy section than bother with holiday-specific candy,” Cain said.

THE FUTURE LOOKS SWEET Candy and convenience stores will continue to have a tight relationship as retailers bring customers the innovations and sweets they crave. “The smart players in this space will continue to innovate,” Curby’s Cashion said. “Those who don’t will see stagnant sales because consumers want to see the nextbest thing in candy on the shelves.”

Having a well-stocked candy section also provides opportunities for impulse purchases. “We believe that candy products will continue to have a strong presence in the convenience channel primarily due to their impulse-driven nature,” said Foguth with Gerrit J. Verburg Company. “Candy can brighten someone’s day.”

As Fossum pointed out, “Americans will always look for treats as an affordable, accessible break, reward or indulgence.”

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CATEGORY CLOSE-UP CANDY

ADVERTISER INDEX Contact Information

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Polar King International Inc............................................................. 63 (866) 576-7645 www.polarking.com www.polarleasing.com www.polarkingmobile.com

BIC Corporation...................................................................... 31 www.us.bic.com/en_us

Buzzballz, LLC...................................................................... 47, Outsert (972) 242-3777 www.buzzballz.com Calico Brands, Inc.............................................................................. 65 www.calicobrands.com

KeHE Distributors Holdings LLC dba KeHE Distributors..... 138 www.kehe.com Kretek International........................................................................ 137 www.kretek.com

Premier Manufacturing......................................................... 5, 55, 139 (636) 537-6800 www.gopremier.com SEB Professional North America..........................................113 www.partstown.com

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Stone Gate Foods............................................................................. 101 (952) 445-1350 www.stonegate-foods.com

Liggett Vector Brands LLC......................................................27 (919) 990-3500 www.liggettvectorbrands.com

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Mars Wrigley........................................................................... 19 www.mars.com/made-by-mars/mars-wrigley

Cenex (CHS Inc.).....................................................................53 www.cenex.com/chsinc/about-chs

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Swedish Match North America (Moist Snuff)...................... 89 (800) 367-3677 www.smna.com

Cash Depot............................................................................ 133 (800) 776-8834 sales@cdlatm.com www.cdlatm.com

Cool New Products Guide.........................................................138-140 www.convenience.org/Media/NACS-Magazine/Cool-New-Products

Coca-Cola Company...............................................................45 (800) 438-2653 www.coca-colacompany.com Darrell Lea Brands dba DL Distribution LLC.................................... 147 www.darrelllea.com Diageo Beer Company USA............................................................... 99 www.diageo.com Duro-Last............................................................................................67 (888) 380-0842 www.duro-last.com/products/accessories

150 JUNE 2024 convenience.org

Monster Energy Company................................................... 139 www.monsterenergy.com MOOSOO Corporation....................................................................... 127 www.moosoo.com NACS Data Archive.............................................................................141 www.convenience.org/Solutions/Store/Products/SOI-DataArchive-Supplier-10-Year NACS Convenience Matters Podcast................................................140 www.conveniencematters.com NACS Show 2024 Registration Open................................................. 41 www.nacsshow.com NACS SOI Talent Insights Dashboard................................................151 www.convenience.org/Research NACS Industry Advancements, THRIVR & TruAge............................ 15 www.convenience.org/THRIVR www.mytruage.org

Swedish Match North America LLC (ZYN).............................. 9 (800) 367-3677 www.smna.com Swisher International Inc............................Inside Back Cover www.swisher.com The Vita Coco Company....................................................... 149 (212) 206-0763 www.vitacoco.com Trion Industries....................................................................................7 (800) 444-4665 www.triononline.com TY INC................................................................................................. 59 www.ty.com Verifone Inc............................................................................43 www.verifone.com/en/us Xcaliber International............................................................ 61 (888) 4-XCALIBER www.xcaliberinternational.com

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BY THE NUMBERS

Is Your Sales Growth Outpacing Inflation?

3.1% 2023 Sales Increase

Source: NACS State of the Industry Report® of 2023 Data

152 JUNE 2024 convenience.org

wildpixel/Getty Images

2023 Sales Increase

2023 Convenience CPI

8.9% 9.0%

Foodservice

2023 Convenience CPI

5.7%

Merchandise

Inflation has been on the minds of (and affected the wallets of) every consumer over the last three years. Prices are influencing their decisions whether they are shopping for household groceries, paying utility bills or picking up lunch at their local convenience store. In this environment, the fear of sticker shock has become a reality.

The year 2022 ended with an inflation rate of 8.3%. The inflation rate fell almost a full five points in 2023 to 3.4%. While inflation fell, it still influenced convenience operators’ financial performance—especially inside the store.

To track the impact of inflation on convenience stores’ sales, NACS Research debuted the Convenience Consumer Price Index (CPI) at the 2023 State of the Industry Summit.

Since then, NACS has continued to track this metric to help businesses understand how their sales are stacking up after inflation-fed prices are considered. By comparing changes in the average price per unit to average units sold using NIQ data as well as the U.S. Bureau of Labor Statistics CPI data, NACS Research calculated the percentage of sales increase that convenience retailers need to meet to see true sales growth.

In 2023, that CPI was 5.7% for merchandise and 8.9% for foodservice, meaning if your company saw merchandise sales or foodservice sales less than this percentage, you were not outpacing inflation.

Nationally, foodservice sales barely outpaced inflation in 2023, increasing by 9.0% in 2023. Merchandise sales increased by only 3.1%, showing that merchandise did not see true growth in 2023. This could be the product of fewer units sold or a shift to items with lower prices in stores.

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