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W H AT ’ S N E X T I N C O N V E N I E N C E A N D F U E L R E TA I L I N G

Temperate Optimism

Convenience retailers, suppliers and distributors are upbeat about the coming year — with a few reservations.

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HOT & TASTY FOOD TRENDS FOR 2018

JANUARY 2018 CSNEWS.COM

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©2017 Altria Group Distribution Company | For Trade Purposes Only


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With a unique drive to constantly innovate in every aspect of AGDC, we bring the smartest strategies and comprehensive resources to retailers. We are committed to evolve with the latest industry trends and consumer insights so that we can help elevate your business.


VIEWPOINT

A Fresh Update on the Industry’s Favorite Magazine Our new look matches the continued evolution of the convenience retail market has been the leader in convenience retailing information for more than 40 years. As the c-store industry has evolved, CSNews has changed to stay at the forefront of industry developments. With this issue, we are excited to unveil the next step in that evolution with a fresh update to the look and feel of the magazine.

CONVENIENCE STORE NEWS MAGAZINE

Convenience Store News has always been a serious business magazine filled with information that helps our readers be more successful, and keeps them ahead of what’s next in convenience and fuel retailing. As the magazine of the c-store industry, we believe the industry’s magazine should be easy to read and navigate — i.e., it should be convenient to use. While the content of this magazine will maintain a newsworthy heft, the new layout and design now presents the information with a lighter touch. White space and air let dense articles breathe, while bright colors help connect the content to a new generation of readers. This fresh take on an industry leader guarantees that the look and feel of the magazine matches the continued evolution of the convenience retail market. What else can you expect from the new Convenience Store News magazine?

I’m sure you’ve noticed our logo remains the same, but now it’s living in an overlaid color bar and bleeds to the edges of the cover page — this gives the logo a fresh anchor to the top of the magazine that can stand out over any background. Our new Contents page is both simpler and bolder, and presents the information more clearly. The new look of our Industry Roundup news section is cleaner, with modern headers that make for easier navigation without crowding the pages. Larger margins give dense text some breathing room, and the information is presented with bold graphics that get the point across visually. Our content will continue to cover the broad swath of topics you’re accustomed to seeing — from our signature features like this issue’s Forecast Study (see page 30) to Foodservice, Fuels, Beverages, Candy & Snacks, Services, Technology, Operations and Small Operator coverage. There are more improvements in store this year, with the goal of remaining the c-store industry’s favorite magazine. Let me know what you think of our new look. For comments, please contact Don Longo, Editorial Director, at (201) 855-7606 or dlongo@ensembleiq.com.

EDITORIAL EXCELLENCE AWARDS (2013-2017)

2016 American Society of Business Press Editors, National Azbee Awards Gold, Best How-To Article, March 2015 Bronze, Best Original Research, June 2015 2016 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best How-To Article, March 2015 Silver, Best Original Research, June 2015

EDITORIAL ADVISORY BOARD

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

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

2015 American Society of Business Press Editors, National Azbee Awards Silver, Best Profile (long form), February 2014 2015 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best Special Supplement, November 2014 Silver, Best Profile (long form), February 2014

2017 Eddie Awards, Folio: magazine Winner, Business to Business, Retail, Single/Series of Articles, May 2017 Honorable Mention, Business to Business, Retail, Single/Series of Articles, June 2016

2013 American Society of Business Press Editors, Midwest Regional Azbee Awards Bronze, Best Editorial/Commentary, July 2012

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

2016 Trade Association Business Publications Intl. Tabbie Awards Silver, Front Cover Illustration, June 2015

4 Convenience Store News C S N E W S . c o m

2013 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2012

Brett Atherton Bolla Management

Jack Lewis GPM Midwest

Jon Bratta Core-Mark International Inc.

Danielle Mattiussi Maverik Inc.

Rick Crawford Green Valley Grocery Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Jim Hachtel Eby-Brown Co. Ray Johnson Speedee Mart Kirk Leff McLane Co. Inc.

Kyle McKeen Alon Brands Inc. Richard Mione GPM Southeast Jonathan Polonsky Plaid Pantries Inc. Greg Scriver Kwik Trip Inc. Roy Strasburger Convenience Management Services Inc.


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CONTENTS JAN 18

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62 DEPARTMENTS

30 COVER STORY 30 TEMPERATE OPTIMISM Convenience retailers, suppliers and distributors are upbeat about the coming year — with a few reservations. RETAILER FORECAST

32 RIDING A WAVE OF OPTIMISM C-store retailers look to grow store count in 2018 despite the good, the bad and the ugly. CATEGORY FORECAST

36 MOSTLY CLEAR SKIES AHEAD? Retailers’ product category projections for 2018 are largely favorable. SUPPLIER FORECAST

46 A HEALTHY SUPPLY OF HOPEFULNESS Convenience channel wholesalers and suppliers forecast a positive year ahead despite challenges.

6 Convenience Store News C S N E W S . c o m

VIEWPOINT

STORE SPOTLIGHT

4 A Fresh Update on the Industry’s Favorite Magazine Our new look matches the continued evolution of the convenience retail market.

62 A New Choice in Convenience Stores Convenience-grocery store hybrid Choice Market focuses on fresh, local and on-demand.

10 CSNews Online

NEW HORIZONS

24 New Products SMALL OPERATOR

26 Welcoming the New Year With Confidence Increasing store counts speak to small operator optimism for the year ahead.

26

66 Gender Equality Is Not a ‘Women’s Issue’ You will fail if you focus your gender diversity efforts solely on women. GETTING TO THE CORE

82 Does ‘Clean Label’ Resonate With C-store Shoppers? New research sheds light on demographic pockets of opportunity.


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CONTENTS JAN 18

VO LU ME 54 N UMB ER 01 8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631 (773) 992-4450 Fax: (773) 992-4455 www.csnews.com Direct Mailing Address for Convenience Store News: 11-43 Raymond Plaza West, 16th floor, Newark, NJ 07102 BRAND MANAGEMENT Vice President/Group Brand Director Paula Lashinsky (917) 446-4117 plashinsky@ensembleiq.com EDITORIAL Editorial Director (201) 855-7606

Don Longo dlongo@ensembleiq.com

Editor-in-Chief (201) 855-7608

Linda Lisanti llisanti@ensembleiq.com

Senior News Editor (201) 855-7618

Melissa Kress mkress@ensembleiq.com

Associate Editor (201) 855-7619

Angela Hanson ahanson@ensembleiq.com

Associate Managing Editor (201) 855-7604

Danielle Romano dromano@ensembleiq.com

Assistant Editor (201) 855-7614

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Chelsea Regan cregan@ensembleiq.com

Contributing Editor (303) 741-3377

Renée M. Covino reneek@aol.com

Contributing Editor (201) 280-2614

Tammy Mastroberte tmastroberte@gmail.com

ADVERTISING SALES & BUSINESS

INDUSTRY ROUNDUP

CATEGORY MANAGEMENT

12 GPM to Move Into Southwest With E-Z Mart Acquisition 14 Kwik Trip Investing $300M to Ease Growing Pains

FOODSERVICE

50 Hot & Tasty Trends for 2018 A new year brings new ways for convenience store foodservice programs to find success.

14 Fast Facts 16 Eye on Growth 18 Seen on Social Media 20 Supplier Tidbits 22 Stop Smoking Campaign Hits Convenience Channel

FUELS

58 How Future Cars Will Impact Future Fuels The fourth-annual Convenience Store News Alternative Fuels Summit addressed changes in technology and consumer behavior.

Associate Brand Director & Northeast Sales Manager (508) 385-2524

Rachel McGaffigan rmcgaffigan@ensembleiq.com

Associate Brand Director & Western Sales Manager (330) 840-9557

Ron Lowy rlowy@ensembleiq.com

Associate Publisher & Midwest Sales Manager Kelly Fischer (773) 992-4464 kfischer@ensembleiq.com Account Executive, Southwest (803) 315-0694

Cindy Deberry cdeberry@ensembleiq.com

Account Executive & Classified Advertising Terry Kanganis (201) 855-7615 tkanganis@ensembleiq.com Classified Production Manager Mary Beth Medley (856) 809-0050 marybeth@marybethmedley.com EVENTS Senior Vice President, Events & Conferences Maureen Macke (773) 992-4413 mmacke@ensembleiq.com CUSTOM MEDIA General Manager, Custom Media (224) 632-8244

Kathy Colwell kcolwell@ensembleiq.com

AUDIENCE DEVELOPMENT Director of Audience Development (224) 632-8214 List Rental (800) 529-9020

Gail Reboletti greboletti@ensembleiq.com The Information Refinery Brian Clotworthy

Subscriber Services/Single-Copy Purchases (978) 671-0449 EnsembleIQ@e-circ.net ART/PRODUCTION

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Director of Production (973) 358-4875 Creative Director (973) 607-1320 Advertising/Production Manager (314) 403-4753 Art Director (224) 632-8245

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

CORPORATE OFFICERS Executive Chairman Alan Glass Chief Operating Officer & Chief Brand Officer Rich Rivera Chief Business Development Officer Korry Stagnito President of Enterprise Solutions/ Chief Revenue Officer Ned Bardic President & Executive Director, P2Pi Mike McMahon Chief Digital Officer Joel Hughes Chief Human Resources Officer Jennifer Turner CONVENIENCE STORE NEWS AFFILIATIONS Premier Trade Press Exhibitor

The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations.

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631. Copyright © 2018 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Chicago, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

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CSNEWS ONLINE

ONLINE EXCLUSIVE

TOP 5 DAILY NEWS HEADLINES

1

U.S. Fuel Companies Rushing to Set Up Shop in Mexico

On Nov. 30, Mexico’s energy regulator announced the end of government-set fuel prices in the remaining central and southern regions where price caps were still being applied. Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell plc and BP plc are among the international companies investing in service stations in Mexico and now seeking to import fuel.

2

Wawa Says Hello to Washington, D.C.

Wawa’s first location in the nation’s capital officially opened its doors with a ribbon-cutting ceremony on Dec. 14. When guests walked in, they saw something they have never seen before: a 9,200-square-foot Wawa store — the retailer’s largest to date.

3

FDA Launches Adult Smoking Cessation Campaign at C-stores & Gas Stations

Titled “Every Try Counts,” the campaign targets smokers aged 25-54 who have made an unsuccessful attempt to quit smoking during the last year. It will kick off in 35 U.S. markets through print, digital, radio and out-of-home ads such as billboards, and run for two years.

4

Sheetz Testing Blue Light Restrooms to Deter Drug Use

The lights are intended to make it more difficult for drug users to inject intravenous drugs. The system was designed to help both customers and employees avoid dangerous situations, according to Adam Sheetz, associate vice president of store operations.

5

On the First Day of Christmas, My C-store Gave to Me...

With the holiday season in full swing, convenience store retailers across the U.S. made sure consumers were treating themselves to in-store promotions during the busy shopping season.

EXPERT VIEWPOINT: What You Can Do to Improve Employee Retention Your employees are your business. They greet and serve your customers, open and close the shop, handle the money, and work alongside you in your convenience store. Each night, they leave, and each morning, you hope they come back. There are a lot of other employers that would love to hire your employees. You’ve got to ensure that your employees are happy, or they might look elsewhere. John Waldmann of Homebase discusses the driving motivators for employees to change jobs, and what you can do to improve employee retention.

10 Convenience Store News C S N E W S . c o m

Women Find Ample Opportunities at BP’s ampm Brand Women continue to grapple with finding the right balance between career and family, and in the convenience and fuel retailing industry, which is still male dominated, the issue may be a little more pronounced. However, women at BP’s ampm retail division say they have found a home at the West Coast retailer that affords them the opportunity to fill all roles in their lives while still having ample room to grow professionally. “I choose to do what I do, but if I want to change, there is always that opportunity. It’s not just, this is where I am and this is where I will stay doing the same job — unless I choose to,” Terry Ohta, marketing programs specialist for ampm, told Convenience Store News. For more exclusive stories, visit the Special Features section of www.csnews.com.

MOST VIEWED NEW PRODUCT

NCR Outdoor EMV-Certified Solution NCR received certification for an outdoor EMV solution with Wayne Fueling Systems and its Wayne iX Pay payment platform. The certification covers NCR Epsilon, which enables credit and debit EMV transactions for the NCR RPOS and StorePoint POS solutions. By having a NCR outdoor EMV-certified solution, retailers who encounter high risk fraud and have locations subject to high fraud rules can implement EMV payments outdoors and help reduce their exposure to chargeback expenses, according to the company. The payment processing host certification testing was completed by NCR Epsilon last year, verifying that EMV cards are processed in accordance with the EMV brand specifications of Mastercard, American Express, Visa and Discover. NCR Corp. Duluth, Ga. (800) 262-7782 www.ncr.com


INDUSTRY ROUNDUP

GPM to Move Into Southwest With E-Z Mart Acquisition E-Z Mart CEO Sonja Yates Hubbard expects deal will accelerate growth for the chain

E-Z MART STORES INC. REACHED an agreement to sell its 273 convenience stores to GPM Investments LLC. The stores, located in Texas, Oklahoma, Louisiana and Arkansas, will extend GPM’s footprint into the Southwest United States.

“We have enjoyed serving our existing customers and are thrilled to begin serving customers in these new states as well,” said Arie Kotler, president and CEO of Richmond, Va.-based GPM. “We look forward to our expansion as we make these locations a new part of the GPM family.”

“The E-Z Mart store employees have long served customers with dedication and enthusiasm. We are eager to remain on the same path of service with passion and commitment.” — GPM Chief Operating Officer Chris Giacobone The acquisition is expected to close in the second quarter of 2018. The companies did not reveal the agreed-upon price tag. “In 1970, E-Z Mart began as the dream of our founders, Jim and FaEllen Yates, with the first store in Nashville, Ark. From those humble beginnings, and with a lot of hard work and dedication by generations of E-Z Mart asso-

12 Convenience Store News C S N E W S . c o m

ciates, our company has become one of the leading, privately owned convenience store chains in the U.S.,” said E-Z Mart CEO Sonja Yates Hubbard. “The significant investment in our store portfolio over the last decade has changed both our look and profitability, while also advancing the quality of service we provide our customers. “Endeavoring to escalate that rate of improvement and ensuring growth opportunities for our brand and team, we are excited that the combining of the E-Z Mart brand with GPM will exponentially accelerate that growth and preserve Jim Yates’ legacy,” she continued. Jim Yates was inducted into the Convenience Store News Hall of Fame in 1997. Hubbard became the first offspring to receive the same honor in 2010. Upon closing, Texarkana, Ark.-based E-Z Mart will move from being the 31st largest convenience store chain in the United States to being a part of the sixth largest chain, “securing a bright future for our stores and team,” according to Hubbard. “The E-Z Mart store employees have long served customers with dedication and enthusiasm. We are eager to remain on the same path of service with passion and commitment,” added Chris Giacobone, GPM chief operating officer. “Bringing the E-Z Mart employees into the GPM family was very important to our leadership team, and we look forward to our continued growth with these new stores.”


INDUSTRY ROUNDUP

Kwik Trip Investing $300M to Ease Growing Pains The retailer will enhance its production and manufacturing facilities in La Crosse, Wis. a $300-million capital investment project to help meet the needs of the growing company.

KWIK TRIP INC. IS EMBARKING ON

As part of its expansion plans, the convenience store retailer will invest $113 million in a new 200,000-square-foot bread and bun production facility, plus multimilliondollar expansions and improvements in its dairy manufacturing facility, kitchen operations, and transportation fleet. Construction of the new bakery is slated for completion by late fall 2018. The entire capital investment project is expected to create more than 300 jobs in the La Crosse, Wis., area over the next five years. “The multimillion-dollar capital expenditures in Kwik Trip’s bakery, dairy, kitchen and transportation facilities will generate a significant return on investment for the state of Wisconsin and the city of La Crosse in the form of new and expanded tax base, job opportunities for our co-workers, construction contractors, subcontractors and suppliers,” said John McHugh, director of corporate communications and leadership

development for Kwik Trip. “This will result in the purchase of additional fleet vehicles and the construction of more efficient production plants that will create higher capacity, productivity, and cost savings, which will allow Kwik Trip to better accommodate the needs of our guests in the 621 stores and numerous communities we currently serve,” he explained. The expenditures will support the family-owned company’s plans to open 40 to 50 new stores annually, including a significant number in Wisconsin. In order to reach this goal, the company said it needs to make significant investments in its buildings, equipment and employees at its La Crosse support center and production facilities. Without the investment, the company projects that its production facilities will run out of capacity over the next five years. Kwik Trip’s current production, distribution, transportation and corporate support facilities comprise more than 1 million square feet on the company campus of 120-plus acres.

FAST FACTS

51

%

Currently, 51 percent of retailers indicate they offer same-day delivery, up from 16 percent in 2016. Within the next two years, 65 percent plan to offer this service. BRP 2017 Digital Commerce Survey

Demand for vegan snack bars is rising as an estimated 8 million Americans follow a vegan diet and lifestyle. Technavio

Of the estimated 235 million vehicles on the road today, roughly 34 percent are manufacturerapproved to take E15 fuel. Renewable Fuels Association 

14 Convenience Store News C S N E W S . c o m


INDUSTRY ROUNDUP

Eye on Growth

Yesway is acquiring KAPS LLC, a five-store convenience chain, and adding the New Deal Travel Center of Texas to its network. The KAPS stores are located in Kansas.

The retailer began moving its banner Royal Farms opened its north with the first New Jersey locaopening of a Ridley Township, Pa., store tion, in Magnolia, in early November. The chain is set in early 2015. to open additional New Jersey stores in Bellmawr, Gloucester City, East Greenwich, Mount Laurel and Evesham over the next 18 months.

CrossAmerica Partners LP completed its acquisition of certain assets of Jet Pep for $72 million, plus working capital and closing costs. The assets consist of 101 commission-operated retail sites.

Enmarket Stations Inc. has taken over the operation of 35 Clyde’s Market convenience stores in southeast Georgia. Enmarket’s retail footprint now comprises 90 locations in Georgia, North Carolina and South Carolina. Love’s Hospitality and InterContinental Hotels Group (IHG) welcomed guests at three new Holiday Inn Express & Suites facilities. They are located in Prosser, Wash.; Brigham City, Utah; and South Hill, Va. Stewart’s Shops wrapped up 2017 with three store grand openings in December. In all, the chain’s investments for the year included the opening of two new-to-industry convenience stores, 12 replacement stores and 30 major remodels.


INDUSTRY ROUNDUP

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Wawa Inc., Wawa, Pa. With your help, The Wawa Foundation has donated $11.9 Million to 995 organizations this year in support of Health, Hunger, and Everyday Heroes. We thank you for your continued dedication to helping our community! To learn more about the Wawa Foundation and our efforts, visit: www.TheWawaFoundation.org.


INDUSTRY ROUNDUP

Supplier Tidbits

Campbell Soup Co. is buying Snyder’s Lance Inc. for $4.87 billion. Snyder’s-Lance will become part of Campbell’s Global Biscuits and Snacks division.

Budweiser is taking steps to be the King of Beers on Mars. Two barley experiments were part of SpaceX’s Dec. 4 cargo supply mission to the International Space Station. 22nd Century Group Inc. plans to discontinue U.S. sales of its Red Sun brand cigarettes. The move comes as the Food and Drug Administration shifts its tobacco policy to focus on nicotine.

Mars Inc. is taking a minority stake in KIND. KIND will continue to operate independently, led by its majority stakeholders, founder Daniel Lubetzky and the KIND team, with its existing headquarters in New York. The Food and Drug Administration accepted for review Reynolds American Inc.’s modified risk applications for six styles of Camel Snus. The agency is expected to complete a substantive review process within the year. Newcastle Brown Ale is reducing its number of SKUs under its new management, Five Points Trading Co. The brand is also debuting a new look on primary and secondary packaging.

McLane Co. Inc. held a ribbon-cutting ceremony for its new $150-million grocery distribution center in Findlay, Ohio, on Dec. 1. The 417,338-square-foot facility will employ 400 to 500 people.

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INDUSTRY ROUNDUP

Stop Smoking Campaign Hits Convenience Channel Food and Drug Administration initiative will run for two years at gas stations and c-stores THE FOOD AND DRUG ADMINISTRATION (FDA) launched

an adult smoking cessation campaign that will encourage cigarette smokers to quit. Messages of support that underscore the health benefits of quitting will be displayed in and around convenience stores and gas stations. Titled “Every Try Counts,” the campaign targets smokers aged 25 to 54 who have made an unsuccessful attempt to quit smoking during the

last year. The initiative will kick off in 35 U.S. markets through print, digital, radio and out-of-home ads such as billboards, and run for two years. According to FDA Commissioner Scott Gottlieb, the “Every Try Counts” campaign encourages smokers to rethink their next pack of cigarettes at the most critical of places — the point-of-sale. More than 55 percent of adult smokers attempted to quit in 2015, but only around 7 percent succeeded, according to the agency.

Ads will be placed at various locations around the point-of-sale, such as at gas pumps, and in other places in the retail environment, including the front door, cash register and shelves. Studies show that in-store displays and other tobacco advertisements can make quitting more difficult by triggering unplanned cigarette purchases, according to the FDA. Placing campaign ads in the same locations is intended to help disrupt the urge to purchase cigarettes and instead encourage another attempt to quit. CSN

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Coffee Blenders Functional Cold Brew Line

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NuZee is launching a readyto-drink (RTD), gourmet, functional cold brew coffee line under the Coffee Blenders brand. The company is providing direct-store delivery of the line in a Coffee Blenders-branded fleet of refrigerated trucks to ensure optimal freshness and flavor for the consumer. The beverages blend 100 percent Arabica dark roast Honduran coffee with clinically supported nutraceuticals designed to provide health benefits. Available in 10-ounce glass bottles (12 per case), the Coffee Blenders functional cold brew line includes: Lean Cup (for weight loss), Think Cup (for cognitive performance), Relax Cup (for stress reduction), and Nude Cup (100 percent Arabica coffee with no function). Steeped for 12 hours, the products are all-natural and certified kosher. They will initially be available at independent retailers and convenience stores throughout Southern California, with a national rollout expected over the next six to 12 months.

Schwan’s Food Service launched three new mini egg roll varieties for the roller grill: Bacon, Egg & Cheese; Sausage, Egg & Cheese; and Teriyaki Chicken. These new varieties will be added to the current channel offerings of Pork & Vegetable and Chicken & Vegetable mini egg rolls. The egg-based egg rolls are unique in the marketplace and add a fun, new hot food option for customers who traditionally purchase bakery goods at their favorite convenience stores in the mornings, according to the company. Schwan’s Food Service Marshall, Minn. (877) 302-7426 schwansfoodservice.com

NuZee Vista, Calif. (844) 696-8933 mynuzee.com

BirdShack Fried Chicken BirdShack, a new fresh fried chicken concept, is designed to be a solution for customers to deliver fresh fried chicken in-store for immediate consumption. BirdShack recently formed a relationship with Core-Mark to capture chains and independents seeking entrepreneurial ways to deliver an easy-to-prepare fried chicken experience, according to the company. Core-Mark, as BirdShack’s strategic partner, is targeting fresh fried chicken as a priority foodservice option for its customers and has exclusive rights to distribute and promote BirdShack products within its designated service area. Custom branded counters, menuboards, signage, uniforms, packaging and product are available to each operator. BirdShack Portland, Ore. birdshackchicken.com

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24 Convenience Store News C S N E W S . c o m

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SMALL OPERATOR

Welcoming the New Year With Confidence Increasing store counts speak to small operator optimism for the year ahead By Chelsea Regan HEADING INTO 2018, the convenience store industry’s small operators (those operating 10 stores or less) indicate that they are just about as optimistic about increasing their sales dollars per store this year as they were last year (71.3 percent vs. 73.3 percent). Though once again small operators have a slightly less positive outlook for the year ahead than their peers with a greater number of store locations, their plans for growth in 2018 underscore their confidence.

As part of its exclusive 2018 Forecast Study, Convenience Store News surveyed 125 U.S. retailers that are currently operating one to 10 convenience stores. The survey looked to gauge the overall mood of the small operators in the industry, and to understand both their reasons for optimism, as well as what might be causes for concern.

Reasons for Optimism High optimism among small operators about the overall U.S. economy in 2018 is translating into an upbeat outlook about their respective businesses. About 69 percent of respondents said they have a positive view of the U.S. economy heading into the new year, while just 13 percent have a negative view. Of the positive respondents, 23.4 percent indicate they are very positive, while 45.5 percent describe themselves as slightly positive.

Do you expect your 2018 average sales per store to: Increase

Decrease

Small Operators

5.2% 71.3%

Net change: +3.6%

A number of respondents agreed that trends toward healthy eating are a positive harbinger, in addition to trends in coffee and foodservice in general. One survey respondent said, “We have started to offer healthier grab-and go-options.” And another respondent pointed out, “Trends matter, but let’s not forget customer service at convenience stores.” Upgrading foodservice and tapping into emerging retail technology, unsurprisingly, are common themes among

Which will have the biggest impact on sales and profitability for your convenience store(s) in 2018? Small Operators

Total Respondents

19.7%

24.6% 4.1%

Stay the same

In addition to the economy, small operators pointed to reasons for optimism specific to their own stores and steps they are taking to stay competitive in the convenience and fuel retailing game. One respondent listed “emerging technology, trends toward healthy eating, and finding good business partners” as reasons for optimism in the year ahead.

75.1%

Net change: +3.9%

Source: Convenience Store News Market Research, 2018

26 Convenience Store News C S N E W S . c o m

Motor fuel prices Healthy eating trends Tobacco and e-cigarette regulations Labor issues/regulations Emerging technologies Brick-and-mortar competition Demographic changes Mobile commerce/marketing Ecommerce competition Other Multiple responses accepted Source: Convenience Store News Market Research, 2018

54.7% 48.0% 42.7% 34.7% 22.7% 20.0% 26.7% 17.3% 17.3% 20.0%

Total

55.7% 46.1% 45.2% 33.0% 24.3% 22.6% 21.7% 19.1% 18.3% 16.5%


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SMALL OPERATOR

How will your store count change in 2018? Small Operators

We plan to increase our store count We plan to decrease our store count Our store count will remain the same

38.6% 1.4% 60.0%

Total

52.3% 1.8% 45.9%

respondents’ planned initiatives for 2018 to increase both their sales and profitability. One small operator ranked “customer service, cleanliness and quality food at affordable prices” as their top three initiatives, while another noted that they will be looking to “offer more hot food choices in our deli and opening our drive-thru.”

Source: Convenience Store News Market Research, 2018

Causes for Concern How does your company view the overall conditions for the U.S. economy in 2018? Small Operators

Total

68.8% 18.2% 13.0%

73.6% 18.2% 8.2%

Positive Neutral Negative

While there is much to look forward to in 2018 for small operators, there are still a number of causes for concern. Many see cigarette taxes as having a significant negative impact on their bottom line this year (42.7 percent). While the alternative tobacco segment is growing, the sale of flavored tobacco products is being banned, and taxes are rising across the country. Many states are also increasing the legal age to buy tobacco products to 21.

Source: Convenience Store News Market Research, 2018

Do you expect 2018 cross-channel competition (including ecommerce) against the convenience store industry to: Increase

Decrease

Stay the same

Small Operators

41.9%

51.3%

Total Respondents

4.4%

Source: Convenience Store News Market Research, 2018

Which do you consider the biggest cross-channel competitive threats? Small Operators

Total

47.8%

50.9%

53.6%

50.0%

26.1% 5.8% 5.8% 14.5%

28.7% 6.5% 7.4% 12.0%

Amazon Grocery home delivery services (Walmart’s Jet.com, Target’s Restock, Amazon Fresh, etc.)

Convenience home delivery services (i.e. GoPuff)

Click-and-collect services Ride-share vending services (i.e. Cargo) Other Multiple responses accepted Source: Convenience Store News Market Research, 2018

On a scale of 1 to 5, how optimistic do you feel about your business in 2018? Small Operators

1 = Terrible, wake me when it’s over 2 3 4 5 = It’s going to be our best year ever! Source: Convenience Store News Market Research, 2018

28 Convenience Store News C S N E W S . c o m

0.0% 6.8% 39.7% 34.3% 19.2%

Nearly 55 percent of respondents told CSNews they believe motor fuel prices will have a big impact on sales and profitability, followed by 48 percent who cited healthy eating trends. “High fuel prices reduce consumption. Healthier eating trends challenge c-stores to upgrade their store categories, and many health-conscious consumers perceive c-store products as ‘junk food,’” explained one small operator.

36.0% 59.6%

6.8%

What other impacts on sales and profitability are small operators worried about?

Total

0.0% 5.3% 37.7% 36.8% 20.2%

Also of concern for 51.3 percent of respondents is an anticipated increase in cross-channel competition against the convenience store industry at large. Grocery home delivery is perceived as the biggest threat (at 53.6 percent), followed by the ever-growing e-retailer Amazon (47.8 percent). Interestingly, Amazon edges out grocery home delivery (50.9 percent vs. 50 percent) as the bigger perceived threat among the larger convenience store chains. One small operator ranked “dollar stores, Amazon and Uber/driverless cars” as the top three concerns for their business. Another listed “building repairs, theft, and employee turnover.”

More Optimism, More Stores Despite the various concerns of the c-store industry’s small operators, there is more optimism than pessimism for 2018. Most of the survey respondents rated their optimism a 3 or 4 out of 5 on a scale where 1 represents “Terrible, wake me up when it’s over” and 5 represents “It’s going to be our best year ever!” But perhaps the best indicator the CSNews survey provided of the genuinely high optimism for 2018 among small operators is that 38.6 percent of them plan to increase their store count this year. That’s a more than 10-point increase on last year’s 27.3 percent. Furthermore, only 1.4 percent are looking to downsize, compared to 9.1 percent in 2017. Most small operators (60 percent) plan to keep their store count the same for 2018. But who’s to say what 2019 will bring? CSN


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COVER STORY

Temperate Optimism

Convenience retailers, suppliers and distributors are upbeat about the coming year — with a few reservations A Convenience Store News Staff Report

THE CONVENIENCE STORE INDUSTRY’S FORECAST FOR 2018 could be described as mostly

sunny with a slight chance of clouds and rain. The channel’s retailers, suppliers and distributors are largely optimistic about the current state of the U.S. economy and their own business prospects in this new year, but there are some areas of concern dampening their confidence. Case in point: Last year, about 89 percent of the retailers surveyed in the annual Convenience Store News Forecast Study expected their total store sales to increase in 2017. None expected a decrease, while 11 percent expected their sales to stay the same year over year. This year, only 75 percent of retailers expect a sales increase in 2018, and there are some (5 percent) who are bracing for a decrease; the other 20 percent expect their sales to hold the line. Even among those who expect higher

30 Convenience Store News C S N E W S . c o m

sales, they don’t predict as much of a rise this year as they did last year. Heading into 2017, retailers projected a 4.6-percent increase in sales across the store. Heading into 2018, they project an overall 3.9-percent increase. As in years past, the 16th annual CSNews Forecast Study includes a Retailer Forecast and Supplier Forecast, both based on the results of surveys fielded in November 2017. Participants were asked to predict 2018 sales per store for a variety of product categories, as well as to share their opinions on overall business, economic and consumer trends. They were also asked to rate issues that are expected to have a major impact on their business, and share initiatives they are planning to increase sales and profitability. Retailers rank motor fuel prices, healthy eating trends, and tobacco regulation as the top


three factors that will impact their success in 2018. Among suppliers and distributors, the top three factors are new product development, consumer spending growth, and retailer unit consolidation. The CSNews Forecast Study also provides dollar and unit volume projections in key c-store product categories based on data from various sources, including Nielsen for category sales history; TDLinx for store counts; and government sources for motor fuel volume and pricing data. This year’s category standouts are predicted to be foodservice and alternative snacks. Conversely, 2018’s category strugglers are expected to be cigarettes and edible grocery, both of which were also ranked as the bottom two in last year’s Forecast Study. Turn the page to find out much more about what 2018 will bring for your business…

FORECAST 2018 SNAPSHOT Dollar Sales

Total Store Foodservice Alternative Snacks Salty Snacks Other Tobacco Products Packaged Beverages Beer Motor Fuels Candy Edible Grocery Cigarettes

+3.9% +6.0% +2.8% +2.3% +2.2% +2.1% +2.1% +1.7% +1.6% +1.4% +0.8%

Unit Volume

n/a +5.7% +2.6% +2.0% +1.9% +2.1% +2.0% +1.6% +1.7% +1.6% +0.3%

Source: Convenience Store News Market Research, 2018

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31


RETAILER FORECAST

Riding a Wave of Optimism C-store retailers look to grow store count in 2018 despite the good, the bad and the ugly By Melissa Kress WITH THE DAWNING OF 2018,

convenience store retailers are moving forward with a positive attitude — despite increased regulations, fluctuating fuel prices, weakened customer traffic, softer sales, and ever-changing consumer demands. Nearly three-quarters of the retailers surveyed as part of this year’s CSNews Forecast Study say their company views the overall state of the U.S. economy favorably. This leaves only 18.2 percent who are neutral and 8.2 percent who responded negatively. Of those who participated in the study, 35.8 percent are single-store operators, 25.5 percent operate two to 10 stores, 15.7 percent operate 11 to 50 stores, 10.3 percent operate 51 to 500 stores, and 12.7 percent operate more than 500 stores. On a scale of one to five — with five being the best year ever — 36.8 percent of retailers ranked the optimism for their business at a four, while 37.7 percent scored their optimism at a three. One in five said they expect 2018 to be the best year ever. On average, convenience store retailers expect their sales per store to increase 3.9 percent this year. As for specific categories, it’s no surprise they expect foodservice sales to rise the most, by 6 percent. Equally not surprising, retailers expect cigarettes to grow by an anemic 0.8 percent. The less-than-rosy outlook for cigarettes may have something to do with the uptick in tobacco regulations. Flavor bans, Tobacco 21 efforts and tobacco taxes have dominat-

ed agendas at the local legislative level, as the industry also grapples with the Food and Drug Administration’s new deeming rules. With all these changes having an effect on managing the backbar, it is to be expected that tobacco and electronic cigarette regulations rank third among retailers’ top concerns for their business this year — cited by 45.2 percent. Only motor fuel prices (55.7 percent) and healthy eating trends (46.1 percent) were mentioned more than tobacco issues as top concerns going into this new year. Still, there are other business concerns weighing on retailers’ minds: labor issues and regulations (cited by 33 percent), emerging technologies (24.3 percent), brick-and-mortar competition (22.6 percent), demographic changes (21.7 percent), mobile commerce/ marketing (19.1 percent), and ecommerce competition (18.3 percent). “Fuel pricing always affects sales inside [the store], and even though our sales in tobacco are decreasing, they still represent a large part of our business. Therefore, anything that affects fuel and tobacco impacts us far greater than regulations of other product categories,” one retailer commented in the CSNews Forecast Study. “Changing demographics will always affect business and unless you are preparing ahead of time, they will affect the business negatively,” this same retailer added. Another respondent noted the effect of regulations. “A minimum-wage increase of 22 percent will impact the industry in our business area, as will the increase in contraband product due to poor enforcement and increases in taxes and pricing,” the operator explained. Retailers are planning to meet these challenges with initiatives to drive business. All things mobile are on many to-do lists — from mobile coupons to mobile loyalty programs to mobile apps. Other widely mentioned initiatives include a focus on customer service, enhanced foodservice, healthier options, and the introduction of new products.

Don’t Turn the Channel For those hoping channel blurring would be a thing of the past, it seems they’re out of luck. According to the Forecast Study results, nearly

32 Convenience Store News C S N E W S . c o m

Do you expect your 2018 average sales per store to: Increase

Decrease

Stay the same

Net change: +3.9%

19.7% 5.2% 75.1%

Source: Convenience Store News Market Research, 2018

Which will have the biggest impact on sales and profitability for your convenience store(s) in 2018? Motor fuel prices 55.7% Healthy eating trends 46.1% Tobacco and e-cigarette regulations 45.2% Labor issues/regulations 33.0% Emerging technologies 24.3% Brick-and-mortar competition 22.6% Demographic changes 21.7% Mobile commerce/marketing 19.1% Ecommerce competition 18.3% Other 16.5% Multiple responses accepted Source: Convenience Store News Market Research, 2018

How does your company view the overall conditions for the U.S. economy in 2018?

Positive

73.6%

Neutral

18.2%

Source: Convenience Store News Market Research, 2018

Negative

8.2%


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RETAILER FORECAST

60 percent of retailers expect to face increased cross-channel competition — including from ecommerce — in 2018. At the top of the competitive threat list: Amazon. More than 50 percent of retailers put the ecommerce giant as No. 1 on their competitor list. Nearly the same number cite grocery home delivery services as their biggest competitive threat, followed by convenience home delivery services (cited by 28.7 percent), ride-share vending services like Cargo (7.4 percent), and click-and-collect services (6.5 percent) to round out the top five.

Yesway’s Take on the New Year

2018 will be the year of foodservice at this expanding Midwest convenience store chain Ask Brian Trout, senior vice president of operations for Yesway, what the new year has in store for the convenience store chain and you will get a definitive answer: foodservice. “Consumers are more and more accepting of, and actively seeking out, the foodservice offerings at convenience stores,” Trout explained. “It is a strategic pillar in our offering and we’ll be putting significant resources against expanding our foodservice offering in 2018.” Des Moines, Iowa-based Yesway also expects to see a big impact from its new loyalty program as it matures. Technology overall ranks high on Yesway’s 2018 to-do list — specifically, looking to technology for new ways to communicate with customers and to drive operational efficiencies. “There is a tremendous amount of efficiency to be found with process automation and using artificial intelligence in predicting consumer behavior. This technology is rapidly coming our way,” Trout explained. On the other side of the coin, he is worried about things that are not in the retailer’s

control, like increased labor costs. “I see rising labor costs coming at us; there’s been a grassroots initiative for raising the minimum wage and the market is starting to respond,” he explained. “There is great ubiquity in the convenience store arena, and people are going to be the differentiator — through community involvement, folks who care and have empathy and commitment to what’s going on around them. That’s where the separation is going to take place. This will affect keeping employees motivated, engaged and well trained.” Taking the good with the bad, Trout is optimistic about the convenience channel. “It will continue to grow and change. For us, it’s all about staying ahead of the curve,” he said. Yesway is the operating brand of BW Gas & Convenience and operates more than 70 c-stores. BW is a division of Beverly, Mass.-based Brookwood Financial Partners LLC.

Dollar stores are looming on the competitive landscape, too. “Dollar General is aggressively growing in our areas, with many crossover products. Should they begin offering fuel at more locations, they will be a significant threat to the convenience channel,” one retailer pointed out.

Keeping Good Company Despite all the challenges — both from within the convenience channel and outside — some respondents prefer to be glass-full operators. Their reasons why? Good economy, low fuel prices, good team members, new store

How will your store count change in 2018?

We plan to increase our store count 52.3% We plan to decrease our store count 1.8% Our store count will remain the same 45.9% Source: Convenience Store News Market Research, 2018

Do you expect 2018 cross-channel competition (including ecommerce) against the convenience store industry to: Increase

Decrease

36.0%

Stay the same

59.6%

4.4% Source: Convenience Store News Market Research, 2018

Which do you consider the biggest cross-channel competitive threats? Amazon 50.9% Grocery home delivery services (Walmart’s Jet.com, Target’s Restock, Amazon Fresh, etc.) 50.0% Convenience home delivery services (i.e., GoPuff) 28.7% Click-and-collect services 6.5% Ride-share vending services (i.e., Cargo) 7.4% Other 12.0% Multiple responses accepted Source: Convenience Store News Market Research, 2018

34 Convenience Store News C S N E W S . c o m

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openings, and strong customer and brand loyalty. For one c-store operator, increased merger and acquisition activity among the major players in the industry is giving them a reason to be optimistic. “Money is cheap. While the whales continue to buy each other, they are leaving an entire segment of America that is pretty ripe for growth because it does not necessarily fit their traffic pattern of choice. For companies our size, this is an enormous opportunity,” the retailer said. But interestingly, just as some retailers point to the economy and fuel prices as their reasons to be optimistic, these two things are top-ofmind worries for others.

When asked what could most hurt their sales and profitability in 2018, one retailer ticked off “fuel prices, stock market slump [and] rising interest rates” as concerns. The c-store industry has been experiencing a “Golden Age” of record sales and profits the past few years, but recently business appears to have gotten tougher for many retailers. Nevertheless, retailers say they are in it for the long haul. More than half of respondents plan to increase their store count in 2018, and 45.9 percent will maintain their existing location count. Only 1.8 percent are planning a reduction in store count in this new year.

All things mobile are on many to-do lists — from mobile coupons to mobile loyalty programs to mobile apps. On a scale of 1 to 5, how optimistic do you feel about your business in 2018? 1 = Terrible, wake me when it’s over 0.0% 2 5.3% 3 37.7% 4 36.8% 5 = It’s going to be our best year ever! 20.2% Source: Convenience Store News Market Research, 2018

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CATEGORY FORECAST

Mostly Clear Skies Ahead? Retailers’ product category projections for 2018 are largely favorable By Angela Hanson CONVENIENCE STORE OPERATORS expect another

year of growth in sales and profits from 2018, with the positives of a healthy industry outweighing the negatives. More than seven in 10 of the c-store retailers surveyed (73.6 percent) for this year’s CSNews Forecast Study said they view overall economic conditions for 2018 as positive, with more than a quarter falling into the “very positive” range. Additionally, more than half of respondents (52.3 percent) plan to increase their store counts this year. Expectations for in-store sales are similarly rosy, as three-quarters of retailers predict their average dollar sales per store will increase in 2018. Overall, retailers expect average dollar sales per store to rise 3.9 percent above last year’s sales. This optimism comes despite a moderation in dollar growth experienced by the U.S. convenience channel in the last 12 weeks of 2017, according to Nielsen channel data. The top trends retailers expect to have an impact on 2018 sales and profitability are a mix of new and old. As always, motor fuel prices (cited by 55.7 percent of the retailers polled) are expected to be a significant factor, along with healthy eating trends (mentioned by 46.1 percent of retailers) and tobacco and e-cigarette regulations (45.2 percent). Retailers see increased competition and regulation as challenges, too, but are prepared to face them head-on. Individual product category projections for 2018 according to retailers are:

Motor Fuels Although there is still optimism in the fuels category, last year’s upbeat attitude about fuel sales has dimmed somewhat. Less than half of c-store retailers (46.6 percent) expect their average gallons sold per store to increase in 2018, while just over half (52.4 percent) expect their average fuel dollar sales per store to increase. This is a notable slump from last year, when more than six in 10 operators expected their per-store fuel volume to rise in 2017. The higher percentage of retailers who expect their gallons sold to decrease compared to last year reflects the general feeling that Americans will drive less and use less fuel as

36 Convenience Store News C S N E W S . c o m

Motor Fuels Increase

Decrease

Dollar Sales

34.2%

Stay the same Gallons

37.2% 52.4%

13.4% Net change: +1.7%

46.6% 16.2% Net change: +1.6%

Source: Convenience Store News Market Research, 2018

more efficient cars hit the road and as young millennials eschew car ownership for ride-sharing services. Still, negative expectations are in the minority considering 37.2 percent of retailers expect their fuel gallons sold to stay the same and 34.2 percent expect fuel dollars to hold the line. Surveyed retailers most frequently cited price as a significant factor facing the motor fuels category in 2018. However, those who predict that both their fuel dollars and gallons will rise pointed to trends aside from price as having a big impact. For these operators, competitive pricing and the use of mobile apps to find the best price, increased travel and tourism, and new methods of payment are among the top trends they are anticipating. For those who expect a static performance this year, the factors they pointed to as likely to offset the category’s positives include the uncertainty of price fluctuations, increase in the num-

ber of fuel-efficient vehicles on the road, and challenges from alternative fuels. Taxes, too, are keeping many c-store operators from feeling overly optimistic about the fuels business. “In our markets, we do not expect any big changes. Alternative fuels have not taken hold in our areas as of yet,” said one retailer. “The factor that could cause this opinion to change would be if the Oklahoma budget deficit causes our legislature to impart large taxes to fuel.”

Foodservice Compared to fuels, c-store retailers show more enthusiasm for the foodservice category. A whopping 77.4 percent of surveyed retailers expect their average per-store foodservice volume — which includes prepared food and hot, cold and frozen dispensed beverages — to increase in 2018, and a matching 78 percent predict their average foodservice dollar sales per store will also increase. Only 2.2 percent expect a volume decline and 4.3 percent expect a dollar sales decline.


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Foodservice Increase

Decrease

Stay the same

Dollar Sales

4.3%

17.7%

Unit Volume

2.2%

20.4%

78.0%

77.4%

Net change: +6.0%

Net change: +5.7%

Source: Convenience Store News Market Research, 2018

The most repeated word when retailers discuss what will have the biggest impact on the foodservice category in 2018 is “healthy” — healthier products, healthier alternatives, and consumers’ health-conscious eating habits. Higher food quality, new flavors and menu additions are also expected to play sizeable roles as consumers seek out new food experiences. At the same time, retailers are clear that enhancing their foodservice programs means investing in more than the food itself. Today’s consumers demand convenience on their terms, which c-store operators see as expanded grab-and-go options, an increased online presence (including delivery and loyalty programs), and quick trips in and out of the store. “More people expect quick [service],” said one retailer. “They’re not wanting to wait.” Some c-store operators have more tempered expectations for the category, noting that strong competition from freestanding fast-casual restaurants and other c-stores can cut into profits even as the market expands. Consumers may also be less willing to try food at a single store than they would at a larger, established chain, according to some respondents. Overall, retailers expect to see foodservice category growth of 5.7 percent for volume and 6 percent for dollar sales this year.

Tobacco Long a stalwart of the c-store industry, the tobacco business is expected to be a mixed bag in 2018. Retailers did not come to a clear consensus on what the year will bring.

38 Convenience Store News C S N E W S . c o m

“A tensed and stressed-out society smokes more,” noted one retailer. Predictions for the cigarettes category are somewhat evenly divided: 37.8 percent of operators expect their cigarette volume per store to decrease, 34.5 percent expect it to stay the same and 27.7 percent expect it to increase. Retailers are less gloomy about dollar sales in the segment, as 26.1 percent expect a decline, 30.7 percent expect the same and 43.2 percent expect an increase. However, there’s no doubt that dollar increases will come from higher state and local taxes and manufacturer price hikes. Retailers express concern

over the growing trend across the nation of raising the legal smoking age to 21 on the city and state levels. Increased tobacco regulation and taxes are also affecting smokers, who may turn to alternative products or lessthan-legal options. “Contraband sales of tobacco continue to increase due to higher taxes and pricing,” one retailer commented. Operators see a rosier future for the other tobacco products (OTP) category, which includes cigars, smokeless, electronic cigarettes, vapor products and more. More than half of retailers expect both their OTP volume and dollar sales to increase in

Cigarettes Increase

Decrease

30.7%

Stay the same Unit Volume

Dollar Sales

43.2%

34.5%

27.7%

37.8%

26.1%

Net change: +0.3%

Net change: +0.8% Source: Convenience Store News Market Research, 2018

Other Tobacco Products Increase

Decrease

Dollar Sales

34.5%

Stay the same Unit Volume

38.7% 57.6%

7.9% Net change: +2.2% Source: Convenience Store News Market Research, 2018

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2018, at 53 percent and 57.6 percent, respectively. Less than 10 percent expect either to decline, while 38.7 percent expect volume to stay the same and 34.5 percent expect dollar sales to be the same. Overall, retailers expect OTP net growth to hover around 2 percent this year. “Consumers are moving to alternative tobacco products,” one store owner surmised. Heat-not-burn products and new entrants to the vaping marketplace are considered factors likely to have an impact on the business in the coming year. Cigars are also viewed as being on an upswing.

Beer Although the meteoric rise of craft beer has slowed in recent years, convenience store retailers still view it as a sales driver for the beer and malt beverages category, especially as changing demographics continue to shift consumer preferences. More than half of retailers (52.6 percent) expect their per-store beer volume to rise in 2018, while 42.1 percent expect it to stay the same. Dollar sales in the category are expected to fare slightly better, as 57.1 percent of operators expect a rise and 37.8 percent expect the same. Retailers project the category will see net sales growth of around 2 percent this year. Along with craft beer, which retailers say will continue to see more modest increases than in years past, other significant category trends include seasonal offerings and new flavors that answer the millennial generation’s desire for increased variety. In certain regions of the United States, regu-

latory changes are prompting increased foot traffic as consumers are now able to buy more types of alcoholic beverages in the convenience channel. Retailers also believe the way beer is merchandised in the store is a significant factor in sales and thus expect to see more locations add beer caves and growler stations. Potential stumbling blocks for the beer category include a consumer shift toward wine and liquor over beer. Craft beer may also suffer from oversaturation as it competes for limited shelf space, according to some retailers. “The market has been so saturated with craft beers — some not so good,” one retailer remarked. “I see that category dropping off a bit.”

Packaged Beverages Operators are bullish on the packaged beverage category’s prospects for 2018, citing a variety of factors contributing to a growth atmosphere. One such factor is the expanding variety of products available in the cold vault — new items and category innovation are driving sales. Increased foot traffic inside the store is also lifting overall packaged beverage volume.

Beer Increase

Decrease

57.1%

5.1%

Stay the same

Increase

Unit Volume

42.1%

Certain category trends, though, are expected to offset gains, to a degree. While carbonated soft drinks (CSDs) are still king of the cold vault in terms of volume, stagnant to declining CSD sales are a challenge and some retailers don’t expect interest in new items to offset that decline. Also, aspects of the category that bring positive effects — like variety — may likewise serve as stumbling blocks for stores that can’t accommodate the tastes of every customer. “A variety of beverages reach out to unique tastes. This is creating more variety and it’s

40 Convenience Store News C S N E W S . c o m

Stay the same

Dollar Sales

57.5%

52.6%

Net change: +2.0%

Source: Convenience Store News Market Research, 2018

Decrease

39.8%

5.3% Net change: +2.1%

Consumer demand for healthy or functional beverages is on the rise, retailers report. This includes beverages that are sugar-free or lower calorie, as well as enhanced water, energy drinks and coffee drinks for those in search of an extra boost.

Packaged Beverages

Dollar Sales

37.8%

The majority of retailers expect their packaged beverage business per store to go up this year, with 53.7 percent predicting an increase in volume and 57.5 percent predicting an increase in dollar sales. Overall, retailers project net growth of 2.1 percent in both metrics.

Unit Volume

42.7%

53.7%

3.6%

2.7% Net change: +2.1% Source: Convenience Store News Market Research, 2018

Net change: +2.1%


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CATEGORY FORECAST

Candy Increase

Decrease

Stay the same

Dollar Sales

Unit Volume

45.3%

47.2%

45.1%

7.5%

43.1%

11.8%

Net change: +1.6%

Net change: +1.7%

Source: Convenience Store News Market Research, 2018

harder to have everything consumers want,” acknowledged one retailer.

Candy The candy category remains a prime source of impulse purchases for the c-store industry, yet opinions are mixed on whether this will mean more sales or more of the same in 2018. A slightly higher percentage of c-store operators expect their candy volume per store to stay the same this year compared to the number who expect it to increase, 45.1 percent vs. 43.1 percent, respectively. The same goes for dollar sales per store, as 47.2 percent expect the same and 45.3 percent expect an increase. While a minority of retailers expect candy category performance to decline, they are more pessimistic about volume (11.8 percent) than dollar sales (7.5 percent). Similar to packaged beverages, new products are a major driver of candy sales, according to retailers. They also report that candy’s

Decrease

White chocolate, peanut butter, sour flavors and organic candy are among the trends listed by retailers as likely to boost the category in the year ahead. On the other hand, increased demand for healthy products and health-conscious eating habits may temper sales, operators say.

40.4% 55.8%

Net change: +2.3%

“Too many variations in sizes are confusing to customers,” one retailer noted. “Requires additional unsold inventory that will be replaced.”

Snacks

42.0%

Increase

Decrease

Dollar Sales

33.3%

53.0%

Net change: +2.0%

42 Convenience Store News C S N E W S . c o m

Overall, convenience store retailers’ projections for alternative snacks in 2018 are a volume increase of 2.6 percent and a dollar sales increase of 2.8 percent.

The increasing prevalence of on-the-go eating and snacking as a replacement for meals is having a positive effect on both the salty

Unit Volume

Source: Convenience Store News Market Research, 2018

When it comes to alternative snacks, c-store operators are even more enthusiastic. Nearly six in 10 (58.4 percent) expect the category’s volume per store to rise and 37.1 percent expect it to stay the same, while 62.2 percent expect dollar sales to rise and 33.3 percent expect the same.

Alternative Snacks

5.0%

3.8%

New products and increased variety, higher in-store traffic, and healthier products are among the trends expected to have the biggest impact on the salty snacks category.

Retailers also highlight the increased variety in packaging as being an issue, despite the intended convenience of giving consumers the choice of multiple formats.

Stay the same

Dollar Sales

Fifty-three percent of retailers expect their salty snacks volume per store to increase, and 55.8 percent expect dollar sales per store to increase. Forty-two percent anticipate volume to stay the same, while 40.4 percent expect dollar sales to stay the same. Overall, retailers project that volume will increase 2 percent and dollar sales will increase 2.3 percent this year.

“Once again, new items will drive the sales, but we hope to be able to increase some retails in the next year,” one retailer stated.

Salty Snacks Increase

snacks and alternative snacks categories, leading c-store operators to be optimistic that snack sales will maintain or grow in 2018.

presence near the checkout counter means that increased c-store traffic is likely to result in unplanned indulgence purchases, as does the number of young families, with millennials having children.

62.2%

4.5%

Stay the same Unit Volume

37.1%

58.4%

4.5% Net change: +2.8%

Source: Convenience Store News Market Research, 2018

Net change: +2.6%


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Major trends in alternative snacks are similar to those of salty snacks, with sales being driven by healthy products, new items, and protein content.

Edible Grocery Increase

“The general population is turning toward alternatives to candy,” said one retailer. Pricing could be a stumbling block for alternative snacks, however. “The meat snack bubble has burst — [they] priced themselves out of a nice run,” another retailer remarked. “Protein/energy bars have stalled as well.”

Decrease

Dollar Sales

Stay the same Unit Volume

28.2% 51.8%

30.1% 50.6%

20.0%

Net change: +1.4%

19.3%

Net change: +1.6%

Source: Convenience Store News Market Research, 2018

Edible Grocery C-stores may be able to pull business from grocery stores for certain products due to their quick checkout. One retailer cited “time-conscious generationals who don’t want to stand in grocery store lines” as a potential driver of unit volume and dollar sales growth this year. For now, retailers predict that unit volume per store in the edible grocery category will increase by a moderate 1.6 percent, while

dollar sales per store will increase 1.4 percent. Around half of c-store operators surveyed expect to see little change in this category in 2018: 50.6 percent believe volume per store will stay the same vs. 30.1 percent

Straight From the Retailer’s Mouth

Retailers sound off on the issues most likely to affect their bottom line in 2018 “People without money can’t spend. People need to feel comfortable and confident, which is happening. This is the biggest thing that will help our sales.” “Rising insurance costs year over year make it increasingly difficult to budget against sales. It seems as if we are paying more money, while being forced to offer our employees less. This doesn’t sit right in our conscience and [we] are working diligently to plan ahead. It would be nice if the road ahead wasn’t still moving.” “With unemployment numbers going down, it means prospective employees are getting more selective with their choice of jobs.”

“Dollar General is aggressively growing in our areas with many crossover products. Should they move to begin offering fuel at more locations, they will be a significant threat to the convenience channel.”

who expect an increase and 19.3 percent who expect a decrease. In regards to dollar sales, 51.8 percent predict a status-quo performance vs. 28.2 percent who expect a rise and 20 percent bracing for a decrease. As is the case across many categories this year, healthy eating and new products are considered the most impactful trends for the coming months. Delivery competition is expected to become a challenge as more retailers across retail channels add the option. Edible grocery also suffers from being less of an impulse category. Some c-stores have simply opted to prioritize other products for strategic reasons. “Our desire is to focus more on immediate consumption,” said one retailer.

“Money is cheap. While the whales continue to buy each other, they are leaving an entire segment of America that is pretty ripe for growth because it does not necessarily fit their traffic pattern of choice. For companies our size, this is an enormous possibility.”

Amazon’s investment in the grocery market might also cause sales to decrease, according to retailers, who discussed overall competition as a negative factor as well.

“Reaching out to millennials via social media is key.”

“I see center-of-the-store, nontax grocery trending down as competition continues to increase,” one operator explained. “Everyone’s getting a smaller piece of the pie.”

44 Convenience Store News C S N E W S . c o m

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SUPPLIER FORECAST

A Healthy Supply of Hopefulness Convenience channel wholesalers and suppliers forecast a positive year ahead despite challenges By Danielle Romano percent, mass merchandisers at 53.3 percent, and drugstores at 42.7 percent.

AMERICA MAY BE RADICALLY DIVIDED along political lines

in 2018, but the nation’s convenience store industry suppliers, wholesalers, distributors and brokers are remarkably aligned in their optimism for their prospects in the coming year. When asked to consider the business conditions for the upcoming year in their respective product categories, 83.4 percent of suppliers reported a positive outlook — a 2.4-percent increase compared to last year’s survey. Only 6.2 percent of respondents view the year ahead negatively, while 10.4 percent say they are neutral. Suppliers and wholesalers are also more bullish about the c-store industry than other channels they serve. A whopping 88.9 percent of those surveyed rate business conditions in the convenience channel positively, placing it ahead of grocery at 53.8

The rise in consumer spending, new product development, innovation, and a better economy are among the most cited reasons for respondents’ optimistic outlooks heading into 2018. Other drivers include the shift to fresh, quality ingredients; the expansion of technology, especially the embracing of mobile technology; and stronger employee teams. “2017 has been soft with challenging retailer traffic trends and unexplained shifts. However, trends have been improving over the past two periods, which would bode well for a 2018 start,” one supplier commented.

Positive

83.4%

Neutral

10.4%

Negative

6.2%

Source: Convenience Store News Market Research, 2018

For your particular product category, how do you view the upcoming year? Another noted, “Our products were created to deliver customized/personalized experiences, which is more relevant now than ever before.” Despite their optimism, c-store suppliers and wholesalers do have some reservations. Among their top-listed reasons for concern about business conditions in 2018 are consolidation, the Trump administration, government regulation, channel blurring and competition, especially from food delivery apps. Nearly 80 percent say they expect cross-channel competition against the

Rate conditions in each of the following retail channels your company works with: Positive 90

How does your company view the overall conditions for the U.S. economy in 2018?

Neutral

Negative

88.9%

Very positive Slightly positive Neutral Slightly negative Very negative

35.6% 48.6% 12.3% 2.8% 0.7%

Source: Convenience Store News Market Research, 2018

What do you believe will be the biggest factor in your company’s success in 2018? New product development Consumer spending growth Retail unit expansion Increasing regulation Retailer consolidation Raw materials costs Ecommerce Other

28.7% 25.2% 14.0% 6.3% 5.6% 4.9% 4.2% 11.2%

Source: Convenience Store News Market Research, 2018

80 70 60

53.8%

53.3%

50 40

35.4%

37.5%

42.7%

45.3%

Amazon Grocery home delivery services

30

(Walmart’s Jet.com, Target’s Restock, Amazon Fresh, etc.)

20 10

Which do you consider the biggest cross-channel competitive threats?

6.9%

10.8% 4.2%

12.0%

9.2%

0

Convenience

Grocery

Source: Convenience Store News Market Research, 2018

46 Convenience Store News C S N E W S . c o m

Mass Merchandiser

Drug

Convenience home delivery services (i.e., GoPuff) Click-and-collect services Ride-share vending services (i.e., Cargo) Other Source: Convenience Store News Market Research, 2018

62.3% 51.1% 20.3% 8.7% 7.3% 6.5%


SUPPLIER FORECAST

Do you expect 2018 cross-channel competition (including ecommerce) against the convenience store industry to: c-store industry, including ecommerce, to increase. Meanwhile, 18.3 percent expect it to stay the same and only 2.1 percent expect it to decrease.

Suppliers and wholesalers are more bullish about the c-store industry than other channels they serve.

Amazon (cited by 62.3 percent), grocery home delivery services like Walmart’s Jet.com and Target’s Restock (51.5 percent), and convenience home delivery services like GoPuff (20.3 percent) are the three biggest cross-channel competitive threats, according to respondents.

Increase

2.1%

Decrease

Stay the same

18.3%

79.6%

Source: Convenience Store News Market Research, 2018

Convenience Store News’ third-annual survey of suppliers and wholesalers also asked participants to weigh in on the key factors for their business’ success in 2018. New product development, an uptick in consumer spending, and growth in store count were the top three cited. Other factors include an increase in regulation, retailer consolidation, and the costs of raw materials. CSN

On a scale of 1 to 5, how optimistic do you feel about your business in 2018? 1 = Terrible, wake me when it’s over 0.0% 2 2.4% 3 26.4% 4 53.6% 5 = It’s going to be our best year ever! 17.6% Source: Convenience Store News Market Research, 2018

My 2018 Point-of-View Three suppliers in three different product categories offer their outlook

1

“In the first half of 2017, convenience retail traffic declined 2.4 percent, leading to sales declines. It’s likely that retailers will contend with the same issue in 2018 as all channels aim to provide a more convenient experience, ecommerce continues to impact store traffic, and more fuelefficient vehicles mean fewer stops to refuel. … Shopper solutions, especially those that digitize the path to purchase and deliver innovative experiences for consumers, will be a key way for retailers to convert consumers to make a purchase. This is even truer when looking at millennial consumers, who are 19 percent more likely than other shoppers to be motivated by a fun shopping experience.” Scott Tillman Director, Retail Channel Strategy & Commercialization The Coca-Cola Co., Atlanta

2

“We are optimistic for 2018 and in the continued growth in foodservice for convenience retailers. C-store operators continue to evolve their foodservice operations and offerings to respond to the demands of consumers. Retailers are raising the bar with more variety and flavorful, quality food options than ever before. They are building and remodeling stores to provide welcoming foodservice areas that will continue to expand their share of the market.” Nancy Todys Director, C-store and Vending, Channel Development Tyson Foods, Springdale, Ark.

3

“The biggest factors that will contribute to success in 2018 will be around customer partnerships and renewed focus around SKU rationalization to ensure that the top-selling SKUs have the proper days of supply to meet customer demand. Linking together shopper insights with retailer opportunities and pain points will allow for a win-win-win unlocking of success that will take a slightly different form at each chain to allow for overall success.” Josh Halpern Vice President Anheuser-Busch, St. Louis

48 Convenience Store News C S N E W S . c o m

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FOODSERVICE

Hot & Tasty Trends for 2018 A new year brings new ways for convenience store foodservice programs to find success By Angela Hanson THE MORE CONVENIENCE STORES MOVE into the foodservice space, the harder individual c-store operators have to work to stand out in the crowd, and due to the continually evolving tastes of consumers, the work never ends. Tapping into hot food trends can be a differentiation for a retailer so, with that in mind, Convenience Store News has examined the latest consumer research, spoken with a variety of suppliers and polled retailers to pinpoint the food trends that will most likely shape the convenience foodservice world in 2018.

Healthy & Ethical It’s a longtime dilemma for experienced c-store operators: consumers say they want to include healthier products in their diets, but frequently spend their money on items that taste great but don’t offer much nutrition. Finding the balance that works for a specific market is a challenge that every retailer faces, and the solution varies by market or even by store. But increasingly, it’s necessary to address the health issue, as savvy c-stores are not just answering the call for better-for-you items, but also using “healthy” to give themselves a competitive advantage. A relatively low-cost option is to incorporate healthier and better-foryou items into an existing foodservice line, such as lean turkey as

50 Convenience Store News C S N E W S . c o m

a hamburger option. York, Pa.-based Rutter’s added a turkey burger to its menu in October 2017 after customers requested a leaner option, according to Director of Foodservice Ryan Krebs. Because it can be substituted in any burger that normally uses ground beef as an ingredient, there was no need to create allnew healthy burger recipes. Other c-store retailers are jumping into the healthy arena with both feet, seeking to become a destination for hungry, health-conscious consumers. Last January, ENroute Market opened in Walnut Creek, Calif., with aspirations of redefining convenience by providing the healthiest versions of whatever consumers crave. While not all c-stores will go all-in on healthy to this degree, the demand for healthy exists, and store operators that overlook it may find it a struggle to catch up later on. Demand is also rising for clean-label products, or products made with natural and familiar ingredients instead of artificial or synthetic ingredients. Frequently, though not exclusively, this overlaps with healthy items, but the key with clean label is transparency. Consumers who care about clean label expect transparency and straightforward information, and will hand over their money to companies willing to provide it.

Cold Brew & High-Quality Coffee Coffee’s perception as a convenience store staple and the high profit margins it offers means that enhancing a coffee program is an obvious way to improve a c-store’s foodservice reputation. The current hot trend in coffee is actually cold — cold brew coffee. Cold brew involves infusing coffee with cold water and steeping it for a period of hours. The result is typically smoother than traditionally brewed coffee and less acidic. At the 2017 NACS Show, two brands of cold brew appeared in the top 10 list of products selected by attendees at the Cool New Products Preview Room. Based on total visitor scans, Heartland Food Products Group’s Java House Authentic Cold Brew Coffee secured the No. 1 spot, while SToK Cold Brew Coffee Bulk by DanoneWave Away From Home landed in the No. 5 spot.


Snack sales go great with beverage sales. And when it comes to baked sweet goods, Little Debbie products are the sales leader*. In fact, 4.7 million Little Debbie products are sold every day – that’s 55 every second. In a world where snacks and drinks go hand in hand, imagine what that can do for your business. To learn more, call (800) 315-6208 or visit LittleDebbieCStore.com. Little Debbie products are sold DSD by wholesale distributors. *Nielsen ScanTrack, Convenience Stores channel of trade, 52 weeks ending July 29, 2017.


FOODSERVICE

consumers choose c-stores in the first place. However, that concept is evolving over time. Many people have chosen their regular c-store based on its location, but now in today’s on-demand era, more consumers are asking for delivery — and more c-stores are willing to provide it. Third-party app-based programs make it easier than ever to offer delivery. Wawa began a pilot program at select locations in partnership with Grubhub, while fast-food competitor McDonald’s expanded its partnership with UberEATS last year, doubling its number of restaurants where delivery is available after a strong initial response.

Wawa began a delivery pilot program at select locations with Grubhub.

Industry-leading convenience foodservice retailers, such as Sheetz and Wawa, have added cold brew coffee as a permanent offering in their stores in the past year. Premium coffee is also on the rise. Singleorigin brews and bean-to-cup brewing on demand, which Pilot Flying J included in its current coffee platform upgrade, are gaining traction and tying into the more general desire for authenticity and freshness. It’s clear that set-it-and-forget-it coffee brewing is no longer acceptable if you want a standout hot beverage offering.

Delivery & Digital Convenience isn’t just a name; the concept of convenience is the underlying reason

Demand for delivery is likely to keep rising over time, as consumers under the age of 35 are above-average users of digital ordering for foodservice. Additionally, retail management consulting firm BRP noted in its 2017 Digital Commerce Survey that same-day delivery has tripled in the last year, officially surpassing the halfway point at 51 percent of retailers. Digital ordering for delivery offers a foothold in the dinnertime daypart especially, as market researcher The NPD Group found that half of all digital orders come during this time period. On-premise, digital can likewise help retailers draw consumers inside the store from the forecourt, or entice them to spend more during their in-store trips. At many locations, the same mobile apps customers use to place orders also incorporate the retailer’s loyalty program and highlight current deals and mobile coupons.

Our Foodservice Advisory Council DAVID BISHOP Managing Partner Balvor Inc. JOSEPH BONA President Bona Design Lab LLC

TOM COOK Principal King-Casey JACK W. CUSHMAN Foodservice Director Circle K (retired)

MATHEW MANDELTORT Vice President, Foodservice Insights Eby-Brown Co. LLC

ED BURCHER Vice President of Foodservice FriendShip Food Stores

CHAD DEWBERRY Category Manager McLane Co. Inc.

NANCY CALDAROLA General Manager The Food Training Group   JOSEPH CHIOVERA President, Innovation & Design and Emerging Channels  Buddy’s Kitchen Inc.

DEAN DIRKS CEO Dirks & Associates

MAURICE P. MINNO Principal The MPM Consulting Group TIM POWELL Vice President/Senior Analyst Q1 Consulting 

RYAN KREBS Director of Foodservice Rutter’s

WESLEY PRICE Category Supervisor, Fresh Foods and Beverages Murphy USA Inc. 

52 Convenience Store News C S N E W S . c o m

LARRY MILLER President Miller Management & Consulting Services Inc.


FOODSERVICE

QuickChek Corp. made digital more than a mobile offering at its Monroe, N.J., store that opened last summer. The prototype is explicitly designed to “redefine convenience” and includes cellphone and laptop charging stations, touchscreen ordering and Wi-Fi. The overall message from all corners is that while consumers’ use of technology may have initially been driven by millennials, it is not a generational quirk that can be set aside. Digital offerings are the new normal and a necessity for future success.

Signature Food At the 2017 NACS Show and in forecasts for this new year, suppliers and research firms have agreed: to get hungry consumers’ attention, c-stores must have foodservice offerings that stand out from the crowd. While the most popular product types are offered by most retailers, success will come from putting a unique spin on them, offering other unusual but appealing items, or focusing the program on a certain aspect, such as freshly made bread.

Cold brew coffee is finding its way into more c-store dispensed beverage programs.

“These brands will stand in sharp contrast to those who continue to offer the generic hodgepodge of food and beverage items,” Howland Blackiston, principal for retail branding and design firm King-Casey, said in the firm’s c-store industry predictions for 2018. While retailers need to stand out, this doesn’t mean they have to do it all on their own. Suppliers are standing ready to help retailers who want to differentiate, but don’t have a completely in-house foodservice program. On the NACS Show floor, Broaster Co. debuted its newly acquired Smokaroma Pressure Smoker alongside its Broaster Express branded program. The unit gives c-stores the opportunity to cook smoked meats using real wood chips in less than 90 minutes. At the Krispy Krunchy

Chicken booth, the company featured its new whole, cooked chicken menu item, which is designed to enhance the dinner daypart and is being tested at c-stores.

Menu Additions & Enhancements While not mega-trends themselves, industry insiders also identify a number of food aspects that are likely to have an increased presence this year. This list includes: • Premium products: C-stores may not be the go-to destination for high-end cuisine, but as consumers’ minimum expectations for convenience foodservice grow, so does the number of customers willing to pay a little more for premium menu items and products made with higher-quality ingredients. • Tropical and floral flavors: Makers of ready-to-drink and dispensed tea report more interest in this group of flavors, which is particularly relevant to retailers looking to add beverages perceived as healthy. • Licensed branded items in c-stores: Certain brands that would otherwise require investment in a franchise are now available on a smaller scale. Cinnabon is leading the way in the bakery case through a partnership with RaceTrac Petroleum Inc. that launched in 2016 and features fresh-baked and limited-time pastries. • Fresh-prepared food: This trend isn’t new, but the desire for authenticity and healthy items means that demand for fresh-prepared and made-to-order items is likely to grow. Retailers likewise need to convey to customers that grab-and-go items on the roller grill and in hot hold units were not placed there early and left out all day. Whether it’s expanding the menu, adding convenience or striving to change how a program is viewed, retailers should choose what trends to capitalize on based on their own strengths. It may not be a simple process, and is only likely to get more complicated. According to the summation of one retailer, everything in foodservice is about to get more complex. CSN

Many people have chosen their regular c-store based on its location, but now in today’s on-demand era, more consumers are asking for delivery — and more c-stores are willing to provide it.

54 Convenience Store News C S N E W S . c o m


SM

THIS IS

OUR WATCH WE I.D. TOBACCO PURCHASES


HELP KEEP TOBACCO OUT OF THE HANDS OF MINORS. I.D. ANYONE UNDER 27.

It’s up to us to protect our community from underage tobacco use. To help prevent sales to minors, FDA has created the “This Is Our Watch” program. Look for your materials in the mail. Learn more about federal tobacco regulations and order free materials at www.FDA.gov/ThisIsOurWatch.


FUELS

How Future Cars Will Impact Future Fuels The fourth-annual Convenience Store News Alternative Fuels Summit addressed changes in technology and consumer behavior By Don Longo will have a profound impact on fuel retailing in the next five to 10 years. Specifically, the increased adoption of alternative fuels, digitization of the driving experience, and changing consumer behavior will usher in a transportation industry that is very different to what we have here in America today, according to Prasad Satyavolu, chief digital officer for Cognizant, an international leader in providing information technology, digital technology and consulting services.

CHANGES IN AUTOMOTIVE TECHNOLOGY

Satyavolu was the keynote speaker at Convenience Store News’ fourth-annual Alternative Fuels Summit, sponsored by biofuel trade association Growth Energy. Among Satyavolu’s predictions to watch for are: • Emergence of automated and assisted driving, and eventually self-driving vehicles; • Vehicle sharing replacing individual car ownership; • Energy use moving more strongly to clean fuels; and • Need-based transportation growing. Because charging electric vehicles still take too long for most drivers (an average of 30 minutes), Satyavolu believes a move toward hybrid vehicles is imminent.

“We’re going to see a slow but steady adoption of alternative fuel vehicles,” he said. “But there will be no one source of energy. It will be a blend of different types of fuel.” He also discussed how the “notion of car ownership is undergoing a major shift,” noting that projections show an increased penetration of car-sharing services in the near future. The 2017 CSNews Alternative Fuels Summit was held in Paradise Valley, Ariz., on Dec. 7-8. Other speakers included Joel Hirschboeck, general manager of fuel procurement and marketing for Wisconsin-based Kwik Trip Inc.; and Mike O’Brien, vice president of market development for Growth Energy. Hirschboeck documented Kwik Trip’s experience selling up to nine different kinds of fuel at its 600 locations in Wisconsin, Minnesota and Iowa. Among the alternative fuels sold by Kwik Trip: compressed natural gas (CNG) at 34 sites, liquid natural gas (LNG) at one site, Unleaded 88 or E15 at 303 sites, E85 at 241 sites, diesel at 321 sites, biodiesel at 244 sites, and diesel exhaust fluid (DEF) at 111 sites. Kwik Trip’s strategy for its big E15 rollout focused on consumers’ perception of the alternative fuel. “We decided to keep it simple. Instead of headlines on all the differentiating benefits of the product, such as supporting American industry, cleaner air, renewable, etc., we focused on what the consumer understands: octane and price.” Kwik Trip called the fuel “Unleaded 88” (88 octane) and treated it as a standard fuel for standard vehicles. This strategy worked, as many customers saw Unleaded 88 as the best value for their money. While E15 has been a success, Hirschboeck said Kwik Trip is more cautious about other alternative fuels. “E85 has been a struggle. We don’t move a lot. Electric vehicles are highly popular, but with the current charging time, there doesn’t seem to be a market for them right now. And hydrogen has been on the market for the past two decades, but there’s still no infrastructure to get it to customers,” he said.

58 Convenience Store News C S N E W S . c o m


POLICY

TRADING

TAXES

INNOVATION

SERVICE

INSIGHT


FUELS

to get to the second billion,” said O’Brien. “Demand is growing.” He agreed with Kwik Trip’s marketing strategy, explaining that E15 is an industry term, not a consumer term. “Market it as just another fuel,” he said, noting that retailers have had success calling it Unleaded Plus or Unleaded 88. The key messages to convey are: “It’s a good choice for my car. It’s cleaner burning. It’s a little better for the environment. And it’s a better value,” O’Brien advised.

2017 Fuels Leader of the Year Lance Klatt (second from left) is congratulated by members of the Minnesota Service Station & Convenience Store Association and Growth Energy, the Summit’s sponsor.

O’Brien of Growth Energy reported on the extraordinary growth of E15 — to 1,075 sites now selling the fuel, compared to between just 400 and 500 a year ago. “It took five months to get to the first billion miles driven on E15, and only four months

60 Convenience Store News C S N E W S . c o m

The Alternative Fuels Summit kicked off with a dinner honoring CSNews’ 2017 Fuels Leader of the Year, Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association. In addition to the featured speakers, the Alternative Fuels Summit included moderated discussions about the future of fuel and the challenges faced by fuel retailers in today’s competitive environment. CSN


STORE SPOTLIGHT

A New Choice in Convenience Stores Convenience-grocery store hybrid Choice Market focuses on fresh, local and on-demand by Danielle Romano

Influenced by the design of modern markets, Choice Market boasts an industrial look and feel. The goal is: clean, light and bright.

At a Glance CHOICE MARKET Founder & CEO: Mike Fogarty Location: 1770 Broadway, Denver Size: 2,500 square feet Mission Statement: “Choose fresh. Choose local. Choose on-demand.”

IMAGINE IF THERE WAS a one-stop shop that combined the speed of a convenience store with the product selection of a grocery store. In this one store, you could tick off everything on your grocery list — from toothpaste to eggs to paper towels — before grabbing a freshly prepared meal for tomorrow’s dinner and sitting down to enjoy a hearty, healthy soup and sandwich for today’s lunch.

“I felt some hybrid of the two would be a good model given the way customers are changing in terms of grocery shopping,” he told Convenience Store News. “I started looking at the landscape out there, whether it’s convenience stores or grocery stores — because honestly, this is somewhere between the two — and there didn’t seem to be any good option. It seemed liked a really good opportunity to provide a kind of new style of c-store.”

Consumers, however, don’t need to use their imagination anymore because this kind of store now exists with the opening of Choice Market. The Denver convenience-grocery store hybrid is the brainchild of founder and CEO Mike Fogarty, who says his influences date back to childhood.

Setting Itself Apart

Fogarty — who has worked as a procurement supply chain professional and, most recently, with DanoneWave where he assisted in projects targeted at c-stores — grew up outside of Philadelphia, with the regional favorite Wawa breaking the barriers of traditional c-stores with its foodservice-focused concept driven by customization. Years later, Fogarty spent time in Europe, where he took notice of consumers’ shopping behaviors. European consumers shop small-format stores ranging in size from 5,000 to 10,000 square feet typically multiple times a week, spending less than 20 minutes in-store, and this “really appealed” to Fogarty, he recalled.

62 Convenience Store News C S N E W S . c o m

Three years in the making, Choice Market opened on Oct. 13, 2017. The concept focuses on three key differentiators: fresh, local and on-demand. “Choice is a new kind of convenience store. The way we’ve positioned ourselves is that we’re providing the transaction time, product diversity and operating hours of a traditional convenience store, but marrying that to a product selection more along the lines of consumers’ growing preference for fresh, local and organic,” Fogarty explained. In short, Fogarty explains Choice’s key differentiators as: • Fresh — Customers can get high-quality fresh food that’s prepared in-house. • Local — Choice supports local purveyors and is in the community actively looking for new ones, especially for key categories like milk, bread, coffee and cheese.


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STORE SPOTLIGHT

Choice’s core audience is consumers aged 18 to 36 who: make above-median income; typically work and live in densely populated urban areas; value premium and local food, and are willing to pay a premium for it; value health to some degree; and increasingly utilize digital channels. • On-Demand — Open 24 hours a day, customers can order in-store at self-serve kiosks, or receive help from staff. Customers also have the ability to order online and have the items delivered within an hour for a flat rate of $3.99 via Postmates. “However you want to experience Choice is your decision, but we’ll provide multiple options to interact with the brand and get the products that you need,” the chief executive noted. Influenced by the design of modern markets, Choice takes on an industrial look and feel that is clean, light and bright. The store features high ceilings, hanging shelves, floor-to-ceiling windows and custom-built merchandisers to create an experience for customers. “We know things are changing in the convenience landscape and just having gondolas going down the aisles really doesn’t appeal to consumers’ wants, needs and desires,” noted Fogarty.

High-quality, fresh food that’s prepared in-house and self-serve beer and wine for on-premise consumption are key points of differentiation.

Food preparation is also a large element of Choice’s overall proposition, to showcase its homemade offers. That is why the 30-foot by 80-foot kitchen is seamlessly integrated with the point-ofsale, creating an “experience” for consumers by giving them the ability to watch their food being made while they continue shopping the store. Choice’s made-to-order menu spans sandwiches, flatbreads, bowls and breakfast burritos. Grab-and-go makes up

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a large portion of the store’s business model as well, with the “sizeable” selection including side salads, small wraps and sandwiches, snack packs, and fresh fruit. The store offers local and seasonal products wherever possible. One unique feature at Choice is self-serve beer and wine for consumption on the premises. Because of Colorado’s “complicated” liquor laws, convenience stores cannot carry full-strength beer or wine, but can carry “near beer” or “3-2,” which is 3.2 percent alcohol by volume. According to Fogarty, the law is expected to change in January 2019, when c-stores will be permitted to carry fullstrength packaged beer, but not wine.

Quick Expansion Digital is a part of Choice’s go-to-market strategy as well. The retailer built a mobile app that is available now. The goal is to integrate its app with Postmates for a seamless, on-demand user experience, according to Fogarty. Choice’s mobile app provides a catalog of what customers can order online, alerts them with store communications, and allows them to gain rewards points. As Fogarty points out, the rewards program will incentivize and reward customers for using the app. Customers earn a point for every dollar spent. After a set amount of points, they receive a free product, like a coffee or a sandwich. After 500 points, they’ll earn a Choice gift card. Customers can track their points and order merchandise or swag from the store via the mobile app, too. When looking to the future, Fogarty said he built the Choice brand and model with the intent to expand quickly. Still, the focus for right now is to get the first store up and running, and get to know this business model because “what we’re undertaking is more complex, like making everything in-house and carrying fresh produce that all has different shelf lives,” he said. With overall sales increasing each week and positive feedback from customers, Fogarty is in discussions for more Choice stores in the Denver area, as well as other locations around the United States, specifically in the Midwest, which he said is underserved in terms of concepts like Choice. CSN


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NEW HORIZONS

Gender Equality Is Not a ‘Women’s Issue’ You will fail if you focus your gender diversity efforts solely on women in retail and consumer goods without the help of men is like attempting to ride a tandem bike alone: You might move forward a bit, but you’ll crash before you get very far.

ATTEMPTING TO CLOSE THE GENDER GAP

By Sarah Alter, President & CEO, Network of Executive Women

Even as they are enthusiastically rolled out, many companies’ gender diversity efforts are destined to fail — because they’re focused almost solely on women. Many times, men aren’t invited to participate in gender equality programs. Even if they are, they are often unsure how to be supportive. Some don’t recognize the value of genderdiverse leadership or view their own company’s leadership ranks as equally open to anyone who is talented and ambitious. Mike Gamson, senior vice president of global solutions at LinkedIn, was one of those men. “I used to think that the world is fair. That it was a meritocracy,” he told Michelle King of Women@Forbes. “I no longer believe that.

I think people who think it is an even playing field are probably like me — they have had it easy their whole life. They are probably a guy, they may be white, and they have likely been in the majority their whole life, and they assume that it is like that for everyone else.” A few years ago, at an annual LinkedIn global sales event, a woman on Gamson’s team pointed out that all of the speakers on stage were men. “I had a moment of realization. First of all, I hadn’t noticed and, second, the reason for the gender imbalance on stage was that there were only men in charge of the respective departments. My leadership team was not a reflection of our broader team. It was a reflection of myself.” Since then, Gamson launched LinkedIn’s Women’s Initiative to support women who want to advance. The effort has helped raise the percentage of women in senior roles in LinkedIn’s Global Solutions business from 6 percent to 30 percent.

Problem? What Problem? Many men don’t recognize gender inequality in the workplace, even when it’s staring them in the face. Nearly half of all men believe women are “well represented” in leadership in companies when only one in 10 senior leaders is a woman, according to the Women in the Workplace 2017 report, based on research by LeanIn.org and McKinsey & Co. Not only do men and women view gender inequality at work differently, but they also disagree on how company resources should be used to close the achievement gap. Boston Consulting Group (BCG) found companies spread their diversity investments evenly across five categories: recruitment, culture, leadership, retention and advancement. But only onefourth of women surveyed by BCG feel they’ve benefited from these investments. What’s more, men

66 Convenience Store News C S N E W S . c o m


identified recruitment as the biggest challenge for gender diversity in the workplace, while women cited advancement and retention.

Men Are the Solution The good news: When men are engaged in gender diversity efforts, change happens. Worldwide data from BCG shows that 96 percent of companies with men actively involved in gender diversity initiatives report progress at all levels, compared to only 30 percent of companies without men engaged.

“When men are engaged in gender diversity efforts, change happens.”

So, what’s a man to do? BCG recommends five ways for men to become more involved: 1. Support flexible work policies. Part-time and remote work, job sharing, parental leave and added unpaid vacation are the most effective ways to support a gender-balanced workplace, BCG reports. But these policies will be little used if male leaders don’t use them themselves in a public, transparent way. 2. Model the right behavior. Be conscious of the messages you send and the culture you help create. Don’t make assumptions about any woman’s career ambitions. 3. Communicate fairly. Don’t dominate discussions. Ensure everyone has a chance to speak, no one is talked over, and a good idea is credited to the person who originated it — not the person who talked the loudest or longest. If you’re giving feedback to a female employee, stick to feedback on actions and not personality traits. 4. Sponsor a high-potential woman. Invite her to high-level meetings, support her for a promotion, and ensure she gets the training and development opportunities she needs to advance. 5. Get involved in company-specific initiatives. Serve on a diversity and inclusion committee, attend a women’s leadership conference (more than 100 men attended our NEW Leadership Summit last fall) and use social media to spread the message: Women’s leadership is a powerful business strategy. Catalyst, which promotes male engagement in gender diversity through its Men Advocating Real Change initiative, offers strategies for women who want to promote men’s participa-

tion in creating gender equity. Among them: • Challenge your assumptions. Do you assume men are unwilling — or don’t know how — to act? • Invite men in. Would you attend a workplace meeting you weren’t invited to?

Convenience Store News is pleased to continue this series of exclusive educational columns by the Network of Executive Women (NEW), coinciding with the annual TOP WOMEN IN CSNews Top CONVENIENCE Women in Convenience awards given out each fall. Fifty female managers, executives and directors who work in the convenience store industry were honored in our 2017 program. In addition to being a presentation sponsor for the Top Women in Convenience program, NEW and CSNews have partnered to develop this series of columns directed at helping corporate leaders drive more inclusive company cultures. Founding & Presenting Sponsor:

• Mentor men. Help break down stereotypes and develop men’s awareness of gender dynamics.

Platinum Sponsors:

• Listen to the experience of men of color. Men of color can be strong allies in creating inclusion, which will not exist without engaging people of all ethnicities and races. CSN

Gold Sponsors:

Sarah Alter is president and CEO of the Network of Executive Women, Retail and Consumer Goods, a learning and leadership community representing more than 10,000 members, 950 companies, 100 corporate partners and 21 regional groups in the United States and Canada. Learn more at newonline.org.

Bag Sponsor:

Editor’s note: The opinions expressed in this article are the author’s and do not necessarily reflect the views of Convenience Store News.

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ATMs

General Merchandise

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Services

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ADINDEX Advance Pierre Foods ............................................................................. 83 Altria Group Distribution Company ................................................... 2-3 Anheuser-Busch ........................................................................................ 41 Bake’NJoy .................................................................................................... 13 Blu ECigs ...................................................................................................... 25 Cash Depot .................................................................................................. 22 Campbell’s ................................................................................................... 11 Convenience Distribution Marketplace ............................................. 68 Cookies United ........................................................................................... 17 E Alternative Solutions ........................................................................... 61 F.D.A. .............................................................................................................. 56-57 Forte Products ........................................................................................... 60 Heartland Ranch ........................................................................................ 16 Hershey’s ...................................................................................................... 7 Home Market Foods................................................................................. 21 Horizon/Nemo’s Fine Bakery Products ............................................ 55 Hunt Brothers Pizza ................................................................................. 37 Industrial Vacuum Systems ................................................................... 35 ITG Brands ................................................................................................... 19 J&J Snack Food ......................................................................................... 49 John Middleton .......................................................................................... 27 Kretek ............................................................................................................ 39 Liggett Vector Brands ............................................................................. 47 LSI .................................................................................................................. 18 McKee Foods/Little Debbie .................................................................. 51 OmegaFlex .................................................................................................. 20 Perfetti Van Melle ...................................................................................... 43 Premier Manufacturing, Inc. .................................................................. 15 Procter & Gamble...................................................................................... 29 Renewable Energy Group, Inc. ............................................................. 59 RJ Reynolds Tobacco Company.......................................................... 9 Seda International Packaging Group................................................. 5 Smart Food.................................................................................................. 65 Subway.......................................................................................................... 63 Swedish Match ........................................................................................... 33,84 Swisher International ............................................................................... 23 Tyson .............................................................................................................. 53 Universal Merchant Services ................................................................. Outsert White Castle ................................................................................................ 45

570 Lake Cook Road, Suite 310, Deerfield IL 60015 Phone (224) 632-8200 Fax (224) 632-8266 www.ensembleiq.com

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 8550 W, Bryn Mawr Chicago, Il 60631. Copyright © 2018 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

15 Convenience Store News | JANUARY 2014 | WWW.CSNEWS.COM

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GETTING TO THE CORE

Does ‘Clean Label’ Resonate With C-store Shoppers? New research sheds light on demographic pockets of opportunity

The “C” in c-store doesn’t stand for clean label — yet. EIQ Research Solutions, sister company of Convenience Store News, recently surveyed consumers who visit a convenience store at least once a month and found that although c-store shoppers overall are not seeking clean-label snacks today, there are some demographics with a higher interest and a higher likelihood to buy if such products were available at their local convenience store. Two of these demographics are females and millennials — both key targets for c-store operators looking to grow their customer base by attracting a new kind of clientele.

Do you seek out “clean label” snacks in convenience stores?

Which of the following do you associate with the term “clean label”?

For c-store shoppers aged

18-24, “clean label” foreRecognizable ingredients most means recognizable ingredients. However, for All-natural shoppers aged 25-34, it predominantly means Short ingredient lists all-natural. Organic I don’t know what the term “clean label” means

34.6% 33.2% 23.6% 22.4% 37.4%

Multiple responses accepted Base: Consumers who visit a convenience store at least once a month Source: EIQ Research Solutions

YES - 32.8% NO - 67.2% More than any other generation, Gen X seeks out clean label snacks when at c-stores.

39.6% The percentage of convenience store shoppers who say they very often or often read the ingredient labels for the snacks they purchase.

50.4% of urban c-store shoppers say they very often or often read the ingredient labels for the snacks they purchase — more than any other demographic tracked.

47% vs. 28% The percentage of male c-store shoppers vs. female c-store shoppers who say they don’t know what the term “clean label” means.

Base: Consumers who visit a convenience store at least once a month Source: EIQ Research Solutions

Would you buy snacks at convenience stores more often if a greater selection of snack-oriented “clean-label” products was offered? Yes No

Total

Male

Female

52.6% 47.4%

44.6% 55.4%

60.6% 39.4%

In addition to females, millennial c-store shoppers show a higher likelihood to buy clean-label products. Base: Consumers who visit a convenience store at least once a month Source: EIQ Research Solutions Want to collaborate and share expertise with your peers? The Council of Retail Experts (CORE) is an exclusive network of convenience store retail leaders who do just that. For more information on how to join CORE, please visit www.cvcoreinsights.com.

82 Convenience Store News C S N E W S . c o m

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


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