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VIEWPOINT By Don Longo, Editorial Director

Understanding C-store Consumers Convenience Store News’ market-leading research provides insights to grow your business

esearch has been one of the core pillars that has made Convenience Store News the c-store market media leader for nearly 50 years. Every year, CSNews does more original, proprietary retailer and consumer research than any other media brand in the convenience store industry. Original research like the CSNews Industry Forecast Study, the CSNews Industry Report, the CSNews Foodservice Study, the CSNews Top 100, the CSNews Technology Study, the CSNews Motor Fuels Study, the CSNews New Products Scorecard and the CSNews National Store Saturation Study helps retailers benchmark their operations against competitors and gives them the insights they need to stay ahead of evolving trends in the industry. In recent years, we’ve added new original studies like our Top 20 Growth Chains (coming in March) and our Tobacco Category Management Study (coming in April). This issue is another great example. Our Realities of the Aisle consumer research study was launched in 2010. Understanding consumer behavior, particularly consumers who shop at convenience stores, is of critical importance to understanding how they shop and what they buy. Over the past five years, Realities of the Aisle has tracked consumers as they’ve increased their food purchasing at c-stores (2011), as women became more important shoppers (2012), and as Millennials grew in importance (2013 and 2014).

CSNews has been recognized with more editorial awards, including the prestigious Jesse H. Neal Award for business journalism, in the past six years than any other industry publication. 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 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007

This year’s Realities of the Aisle report offers a new twist — daypart shopping. For comments, please contact Among the insights in this Don Longo, Editorial Director, year’s consumer report (startat (201) 855-7606 or ing on page 26) are that: dlongo@stagnitomail.com. • Morning shoppers are your most frequent shoppers; • Evening shoppers index higher as purchasers of a host of product categories including frozen and fountain drinks, candy, snacks and takeout food; and • Evening customers are also the most likely to consider a convenience store as a “destination” compared with morning and early afternoon customers who shop on the way to and from work, school or other errands. This year’s study also includes more information on how convenience store customers shop by gender, age, income and the presence of children in the household. For the second consecutive year, Realities of the Aisle is powered by Carbonview Research, a custom, primary market research and analysis firm. Carbonview is owned by CSNews’ parent company Stagnito Business Information. With Carbonview, as well as partnerships with other research providers including Nielsen, Technomic, The NPD Group and Mintel, CSNews will continue to provide the most comprehensive menu of researchbased content to help retailers shape their strategy. CSN

2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2013 2013 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2012 2011 Silver Eddie Award, Folio: magazine Business to Business, Retail, Full Issue, October 2010 2011 Silver Eddie Award, Folio: magazine Business to Business, Retail, Best Single Article, October 2010 2009 Gold Ozzie Award, Folio: magazine Best Use of Illustration, October 2008 2009 Silver Eddie Award, Folio: magazine Business to Business, Retail, Full Issue, October 2008 2009 Bronze Eddie Award, Folio: magazine Business to Business, Retail, Website

2013 American Society of Business Publication Editors, Midwest Regional Bronze Azbee Award Best Editorial/Commentary, July 2012 2010 American Society of Business Publication Editors, Northeast Regional Silver Azbee Award Feature Article Design, November 2010 2010 Trade Association Business Publications Intl. Tabbie Awards Honorable Mention, Front Cover Illustration, October 2009 2009 Trade Association Business Publications Intl. Tabbie Awards Gold, Front Cover Illustration, February 2008 Honorable Mention, Best Single Issue, October 2008

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 3

CONTENTS FEBRUARY 2015

VOLUME 51/NUMBER 2

26 | COVER STORY The Time for Convenience

Our exclusive consumer study reveals who’s shopping c-stores when and what they’re buying.

HOW TO DO WORLD-CLASS FOODSERVICE 50 | The Best Equipment to Use for Different Foodservice Programs 52 | Call to Action: Foodservice 101 54 | Call to Action: Foodservice 201 56 | Call to Action: Foodservice 301

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by Stagnito Business Information, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright © 2015 by Stagnito Business Information. 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.

4 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

©2015 REDD’S BREWING COMPANY, MILWAUKEE, WI *Nielsen Ttl US XAOC/Conv Latest 52 weeks vs. YA Thru week ending 12/6/14**Reach +77% more customer purchase intent by offering Green Apple, Apple, and Strawberry, versus 68% with Apple and Strawberry alone; Tragon consumer liquid test, January, 2014

Satisfy even more customer tastes with NEW MANGO FLAVOR * AVAILABLE IN MARCH * Reach +33.6% more customer purchase intent by offering both Redd’s Wicked Apple and Redd’s Wicked Mango, versus 60% with Redd’s Wicked Apple alone. Nielsen Scantrack – xAOC/Conv – 52 wks ending 7/05/14. Tragon consumer liquid test, January, 2014

CONTENTS 111 Town Square Place, Suite 400, Jersey City, NJ 07310 (201) 855-7600 Fax: (201) 855-7373 www.csnews.com

BRAND MANAGEMENT Chief Brand Officer (224) 632-8171

Korry Stagnito korrystagnito@stagnitomail.com

EDITORIAL

62 64 FEATURES FUELS & TECH SUMMIT

46 | Big Data Has a Big Future Inaugural CSNews Fuels & Tech Summit tackles a host of trending topics.

CATEGORY MANAGEMENT FOODSERVICE

58 | Spotlight on Snacking There is a clear opportunity for c-stores to strengthen their foodservice snack programs. FOODSERVICE

Editorial Director (201) 855-7606 Editor-in-Chief (201) 855-7608 Managing Editor (201) 855-7614 Senior Editor (201) 855-7618 Field Editor (201) 855-7619 Assistant Editor (201) 855-7604 Contributing Editor (303) 741-3377 Contributing Editor (201) 280-2614 Art Director (224) 632-8245 Director of Market Research (201) 855-7605

Don Longo dlongo@stagnitomail.com Linda Lisanti llisanti@stagnitomail.com Brian Berk bberk@stagnitomail.com Melissa Kress mkress@stagnitomail.com Angela Hanson ahanson@stagnitomail.com Danielle Romano dromano@stagnitomail.com Renée M. Covino reneek@aol.com Tammy Mastroberte tmastroberte@gmail.com Michael Escobedo mescobedo@stagnitomail.com Debra Chanil dchanil@stagnitomail.com

MARKETING & PROMOTION Audience Development Manager Shelly Patton (646) 217-1045 spatton@stagnitomail.com List Rental The Information Refinery (800) 529-9020 Brian Clotworthy Reprints and Licensing Wright’s Media (877) 652-5295 sales@wrightsmedia.com Subscriber Services/Single-Copy Purchases (978) 671-0449 Stagnito@e-circ.net

62 | Designed for Foodservice Success People eat with their eyes before they eat with their mouth.

DEPARTMENTS VIEWPOINT

3 | Understanding C-store Consumers Convenience Store News’ market-leading research provides insights to grow your business. 8 | CSNews Online 24 | New Products

President & CEO Harry Stagnito Chief Information Officer Kollin Stagnito Vice President & CFO Kyle Stagnito Senior Vice President, Partner Ned Bardic Chief Brand Officer Korry Stagnito Vice President/Custom Media Division Pierce Hollingsworth (224) 632-8229 phollingsworth@stagnitomail.com Production Manager Anngail Norris Human Resources Manager Sandy Berndt Strategic Marketing Director Bruce Hendrickson (224) 632-8214 bhendrickson@stagnitomail.com Vice President, Events John Failla (914) 574-5709 jfailla@stagnitomail.com Director of Digital Media John Callanan (203) 295-7058 jcallanan@stagnitomail.com

CONVENIENCE STORE NEWS AFFILIATIONS STORE SPOTLIGHT

64 | Convenience Cubed A new drive-thru concept offers high-end coffee, fresh food and beverages. OUT & ABOUT

68 | Changing the Game The e-cig/vapor industry tracks its progress at second-annual Wells Fargo E-Cig Conference. OUT & ABOUT

70 | The Liability Shift Is Coming EMV adoption was top of mind among NRF Show attendees. 6 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

Premier Trade Press Exhibitor

EDITORIAL ADVISORY BOARD Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Kyle McKeen Alon Brands Inc.

Richard Mione GPM Southeast Rick Crawford Green Valley Grocery

Ian Johnstone Cenex Zip Trip

Matt Paduano Nice N Easy Grocery Shoppes

Jon Urbanik CST Brands Inc.

Jonathan Polonsky Plaid Pantries Inc.

Roy Strasburger Convenience Management Services Inc. Joe Hamza Tedeschi Food Shops Jack Lewis Village Pantry LLC

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.

THE ORIGINAL

click

squeeze

change

PREMIUM MENTHOL VOLUME GROWTH LEADER

5 Y EAR S RU NNI NG

CARRY ALL FOUR STYLES

CIGARETTES

*Distributor Shipment to Retail data provided by MSAi, 2010-2014

CSNEWS.COM TOP 5 Daily News Headlines

ONLINE EXCLUSIVE

The most viewed articles online. 1 | New Study Analyzes What Well-Loved C-stores Do Well Friendly service, good food and fair prices all play a role in making a convenience store a favorite among U.S. consumers, according to a new study conducted by retail design firm King Retail Solutions. When shoppers were asked what they appreciate most in their favorite c-store, 43 percent replied friendly staff, 35 percent said fresh prepared food, and 33 percent said low prices. 2 | CITGO Sale Scrapped for Now The on-again, off-again sale of CITGO is off again. CITGO Petroleum Corp. — which is owned by Venezuelan state oil company Petróleos de Venezuela S.A. — has taken itself off the sales block, opting instead to raise funds for its home country through a debt sale. 3 | CST Brands Could Be Takeover Target Could San Antonio-based CST Brands Inc. be the first major acquisition target of 2015? Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, raised the possibility. “We believe CST’s ownership of an MLP [master limited partnership] has made it an attractive acquisition candidate,” Herzog wrote in a research note. 4 | Wawa CEO Among 50 Most Powerful People in Foodservice Wawa Inc.’s focus on becoming a convenience restaurant, not just a convenience store, has garnered recognition for its leader. Wawa President and CEO Chris Gheysens was named to the Nation’s Restaurant News Power List 2015 as one of the top 50 influential foodservice leaders in the United States.

POLL

5 | Four C-store Brands Make Franchise 500 List 7-Eleven Inc. once again ranks among the top bets for entrepreneurs looking to break into the franchise business. The c-store chain landed at No. 10 on Entrepreneur magazine’s 36th Annual Franchise 500 list, which reveals the impact of the newest trends and the industries poised for growth.

RaceTrac President Well Prepped for New Role

Jan. 1 brought a leadership change to RaceTrac Petroleum Inc., and the company’s newly named President Billy Milam knows full well he has big shoes to fill. For approximately 12 of his 18 years at the company, his predecessor Max Lenker was Milam’s direct supervisor and the two developed a close relationship. “He has always been a very good friend of mine. He has always done a really good job of letting me know what his role and responsibilities entailed, and bringing me along with it,” Milam told CSNews Online. “That’s been in place for quite some time.” For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT The most viewed New Product online.

OREO Churros

J&J Snack Foods Corp., in partnership with Mondelez International, introduced OREO Churros. With a crispy exterior, warm soft interior and real OREO cookie pieces in every bite, OREO Churros have a “just-baked” OREO cookie taste. They are available in traditional churro sticks, double-twisted churros and bite-size churros, and can be served with OREO cookie creme dip or rolled in sugar. J&J Snack Foods Corp. Pennsauken, N.J. (888) 557-6225 www.jjsnackfoodservice.com

Even-steven

Heading into 2015, how would you describe your outlook?

17%

Positive

68%

8 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

Negative

15%

INDUSTRYROUNDUP FAST FACT

Supreme Court Denies Swipe Fee Challenge Judges’ decision not to hear the appeal keeps the 21-cent cap in place When asked how satisfied they were with their last purchase, 89 percent of convenience store hot beverage buyers, 93 percent of fountain buyers and 83 percent of prepared food buyers said “extremely” or “very” satisfied. — Convenience Store News 2015 Realities of the Aisle Study (page 26)

QUOTABLES

“Mobile payments are here to stay; everything is moving in that direction. There are so many players in this space and it has a lot of momentum.” — Pat Lewis, Oasis Stop ‘N Go LLC (page 46)

he U.S. Supreme Court rejected a challenge from retailers who claim the Federal Reserve allows banks to charge businesses too much for handling debit card transactions. The court’s decision on NACS, fka National Association of Convenience Stores v. Board of Governors of the Federal Reserve System lets stand a federal appeals court ruling that upheld the Fed’s cap of 21 cents per transaction on debit card swipe fees. The cap has been in effect since Oct. 1, 2011. “It is unfortunate that the Supreme Court would not hear about the legal problems with the Federal Reserve’s debit swipe fee rules,” Lyle Beckwith, senior vice president of government relations for NACS, the Association for Convenience & Fuel Retailing, told Convenience Store News. “Banks should not be allowed to use centrally pricefixed fees to make margins of 500 to 1,000 percent or more on debit swipe fees. “The Supreme Court would have recognized that those fees are not consistent with the reforms passed by Congress and it’s unfortunate they won’t have the chance to make that decision,” he continued. “Nonetheless, the Fed should now see the error of its ways and revise its rules to correct the gross deficiencies in them.” In August, NACS, along with several other merchant associations and retailer

12 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

companies, filed a writ of certiorari with the Supreme Court, asking the court to hear their appeal of the D.C. Circuit Court of Appeals ruling that upheld the Federal Reserve’s debit swipe fee rules. This legal battle over swipe fees has gone several rounds up to this point, with the retailers winning some and the Fed winning others. NACS, the National Retail Federation, National Restaurant Association and other groups sued the Fed in 2011. A U.S. district court in July 2013 sided with the retailers and ordered the Fed to retool the fees. However, the Fed appealed and a three-judge appeals panel in March reversed the lower court’s decision and upheld the Fed’s rules. That ruling set up the possible showdown in the U.S. Supreme Court.

Kids are missing milk’s nutrition. You can help. Feeding America food banks provide nourishment to more than 46 million Americans. But milk is almost never available to them because it is rarely donated. The Great American Milk Drive aims to change that. In 2014, the program provided over 280,000 donated gallons to local food banks. This year, we can do even more with your help.

Grow your dairy category. In addition to assisting families in need in your local community, our customized turnkey program will: • Invigorate your milk sales • Convert new customers • Strengthen your community presence

It’s easy to participate. The Great American Milk Drive provides an easy-to-implement retail program with: • FREE MilkPEP marketing materials and support • National media investment to drive awareness out-of-store

To learn more, visit gotmilksales.org/drive or contact us: 800-945-MILK or retailers@milkpep.org.

INDUSTRYROUNDUP

eye on growth n Empire Petroleum Partners LLC and

n Venezuelan state oil company Petróleos de Venezuela

Atlas Oil Co. are joining their retail dealer businesses. The combined entity will service 1,350 accounts in 29 states and distribute nearly one billion gallons of fuel annually.

S.A. has taken CITGO Petroleum Corp. off the sales block, opting to raise $2.5 billion in debt instead. n Wawa Inc. will build at least 30

n Global Partners LP

completed its acquisition of Warren Equities Inc. for $387 million. The deal included 147 company-operated Xtra Mart convenience stores and related fuel operations. n Western Refining Inc. acquired 31

stores in southern Arizona from Reay’s Ranch Investors. The sites will fall under Western’s Giant brand.

stores in South Florida and may expand into Miami-Dade County by 2017 or 2018. The retailer plans to have 109 stores in Florida by the end of next year. n Energy Transfer Partners LP (ETP) agreed to merge

with Regency Energy Partners LP in an $18-billion transaction. The deal is expected to close in the second quarter. This merger will make ETP, the Dallasbased parent company of both Sunoco Inc. and Susser Holding Corp., the second-largest master limited partnership in the United States.

“ THE EASIEST DOLLAR YOU WILL EVER MAKE IS ONE THAT YOU SAVE! ” GRADY ROSIER

CEO, McLANE COMPANY, INC.

WHAT IF YOU COULD SAVE UP TO

$41,000 PER STORE, PER YEAR?

14 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

retailer tidbits n Family Express complet-

n 7-Eleven Inc. is offering 7-Select GO!Smart, its first

ed a $1.5-million expansion of its bakery, nearly tripling production capacity from 17,000 baked goods a day to now 50,000.

private-label banner for the better-for-you category. The first product, GO!Smart yogurt-drizzled fruit and nut bars, come in two varieties: Cranberry Cashew, and Pistachio and Mixed Berries. n Miller Oil Co., operator of more than 50 fuel centers/

n Sheetz Inc. will begin installing E15 at some North

Carolina stores early this year. Sixty locations are expected to sell the alternative fuel by spring 2016. n Cumberland Farms

Inc.’s SmartPay CheckLink payment program has saved customers $20 million on gas since its launch in January 2013. Enrollments in the program increased 30 percent in the past six months.

convenience stores in Virginia, has retained CBX to update the graphic identity of its network. n QuickChek Corp. was named one of the

Best Places to Work in New York State for the third consecutive year. The chain has 13 locations in the Empire State. n Kangaroo Express joined with PNC Financial

Services Group to expand PNC’s ATM network at 51 Kangaroo Express stores in North Carolina and 12 in South Carolina.

FOR A 100-STORE CHAIN, THAT WOULD TOTAL $4,100,000! We did the math and a c-store could save up to $41,000/store per year by using just 3 of our 20 easy-to-implement, easy-to-use technology solutions—Virtual Trade Show, Direct Store Delivery application and Customer Managed Inventory application. McLane is committed to developing and providing technology solutions that bring efciencies to your operations and save you big bucks along the way. To fnd out how you can start saving, go to mclaneco.com/goto/savings

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 15

INDUSTRYROUNDUP

supplier tidbits n Heineken USA is doubling its investment in

8.5-ounce slim cans. Marketing support for its slim cans will include out-of-home advertising, traffic-stopping in-store point of sale and a new 24-pack. n 22nd Century Group Inc.’s new Trade Partners

Program provides retailers and distributors the opportunity to receive shares of 22nd Century Group common stock as a rebate for purchases of RED SUN brand cigarettes.

chance to win prizes. The promo runs through the end of March. n 5-hour Energy got a product

line-wide flavor overhaul for 2015. A national advertising campaign for the flavor overhaul kicked off Feb. 2. n Wayne Fueling Systems will offer the inOvation-

TV media platform at no charge and no hidden fees to any fuel retailer that purchases its Wayne Ovation2 fuel dispensers.

n AdvancePierre Foods will acquire the wholesale and

manufacturing operations of sandwich products manufacturer Landshire Inc. n Dos Equis launched the “Marks the Spot” promo-

tion featuring a daily virtual treasure hunt that urges consumers to locate the Dos Equis brand’s XXs for a

n Both The Coca-Cola Co. and

PepsiCo Inc. are pushing 7.5ounce “mini cans” and 8-ounce and 8.5-ounce glass and aluminum bottles. The little cans can cost consumers more than twice as much per ounce.

competitive watch n The shareholders of Family Dollar

Stores Inc. voted to approve the company’s $8.5-billion merger with Dollar Tree Inc. The merger remains subject to approval by the Federal Trade Commission. The transaction could close as soon as March. n Target Corp. is

seeking lease deals in the Center City and University Center sections of Philadelphia. The retailer could open as many as four Target Express locations in the city. n U.S. franchisees of Dunkin’ Brands

Group Inc. opened a total of 422 net new Dunkin’ Donuts and Baskin-Robbins locations in 2014.

16 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

INDUSTRYROUNDUP

marketing moves n Wawa Inc. launched the

n Chevron Corp.

Wawa Mobile App and Wawa Rewards program in January. Customers can pay for in-store purchases through the app. n CST Brands Inc.’s Corner Store chain dropped gas

prices to $1.59 per gallon for three hours on Jan. 8 to celebrate the grand opening of its newest store in Frisco, Texas. n More than 1,200 vet-

erans have entered 7-Eleven Inc.’s “Operation: Take Command” contest. The winner will receive a waiver of the franchise fee, valued at up to $190,000.

crowned Jennifer Daskevich the winner of its Chevron Game Day Chef Challenge grand finale cookoff. She won $25,000 in Chevron promotional cards for her Cashew Fried Chicken Sliders with Rootbeer Bacon Jam recipe. n VP Racing Fuels Inc. will be the offi-

cial fuel of the National Muscle Car Association (NMCA) Flowmaster Muscle Car Nationals Series and the required spec fuel for most NMCA head’s up classes this year. n Clipper Petroleum Inc. partnered with OpenStore by

GasBuddy to launch a new mobile app and redesign of its website.

ph: 800-776-8834 | fax: 920-432-1918 | www.cdlatm.com 18 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

If your customers haven’t tried 5-hour ENERGY lately, they’re in for a big surprise. ®

That's because 5-hour ENERGY shots have new improved taste. We’re talking every favor: Berry, Orange, Pomegranate, Pink Lemonade, Grape, Citrus Lime and Citrus Decaf. Plus, Extra Strength favors like Sour Apple, Berry, Grape and new Strawberry Watermelon. Want to keep your customers coming back again and again? Give ‘em the new improved taste of 5-hour ENERGY – available in 11 mouth-watering favors. ®

Call 866-960-1700 w w w. 5 h o u r e n e r g y. c o m / t r a d e † These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease.

INDUSTRYROUNDUP

legislative corner n The U.S. House of Representatives approved the Save

n State legislators across the United States are consider-

American Workers Act by a 252-172 vote. The measure restores the 40-hour workweek definition under the Affordable Care Act. President Barack Obama has threatened to veto the move.

ing raising fuel taxes to fund road and bridge repairs. States considering an increase include South Dakota, Iowa, Utah and New Jersey. n NACS, the Association for Convenience & Fuel

n The U.S. House of Representatives passed a

bill authorizing the construction of the Keystone XL Pipeline by a 266-153 vote. The pipeline would carry 800,000 barrels of crude oil per day from Canada to refineries along the Texas Gulf Coast.

Retailing, has become a founding member of the United for Patent Reform coalition. Other members include the National Retail Federation, National Restaurant Association, and the Coalition for Patent Fairness. n New York Gov. Andrew Cuomo is

making a push to include electronic cigarettes in the stateâ&#x20AC;&#x2122;s indoor smoking bans, and block the sale of flavored solutions and advertisements targeted at children.

20 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

NEWPRODUCTS Coca-Cola Freestyle 7000 Mid-Volume Dispenser This new model of the Coca-Cola Freestyle machine offers roughly 80 brand options. It has the same elements that made the original Freestyle popular with consumers and valuable to retailers, including high quality, connectivity and an engaging experience, The Coca-Cola Co. said. However, the newest Freestyle model fits on countertops, providing a new option for small-footprint retailers. It is set to launch in mid-2015. The Coca-Cola Co. Atlanta (800) 438-2653 www.thecoca-colacompany.com

Expanded Kona Brewing Co. Distribution The “Liquid Aloha” experience is going national as Kona Brewing Co. expands into the final nine states that have not had distribution until now. These states are Arkansas, Iowa, Kansas, Louisiana, Nebraska, North Dakota, South Dakota, Oklahoma and West Virginia. With the expanded distribution, the move makes Kona one of the few craft beer brands available in all 50 states during the prime season of 2015. Kona Brewing Co. Kailua-Kona, Hawaii (800) 334-2739 konabrewingco.com

Master-Bilt Vertical & Horizontal Open-Air Merchandisers Master-Bilt introduced a new line of open-air merchandisers: the vertical VOAM series and the horizontal HOAM series. All 16 models offer significant energy savings over legacy models and already meet 2017 Department of Energy standards. The VOAM models offer greater pack-out thanks to multiple tiers of 18-inch deep, two-position cantilever shelving. The HOAM models feature an adjustable shelf and have a full-length, 10-inch-wide metal top. The contemporary-styled HOAM/ VOAM series also have sloping glass sides that effectively showcase products and are designed to hold a constant temperature, even in demanding environments. Master-Bilt New Albany, Miss. (800) 647-1284 sales@master-bilt.com www.master-bilt.com

Three-Compartment Container Anchor Packaging Inc. added a three-compartment, 9-inch container to its Gourmet Classics line of hinged RPET containers. Perfect for prepackaged salads with the protein and toppings in their own sections, this new container keeps the food looking fresh and appealing while segregating flavors until the customer is ready to eat. The unique cold temperature anti-fog technology in the RPET lid maintains maximum visibility while on display, giving the food that “just made” appearance. Plus, the leak-resistant lid eliminates messy spills with an audible quick-snap closure. The new 9-inch, three-compartment container joins the one-compartment 6-inch, 7.5-inch and 9-inch deep and shallow packages from 14 ounces to 40 ounces, sized perfectly for small and larger portion sizes, the company reported. Anchor Packaging Inc. St. Louis (800) 467-3900 www.anchorpac.com

BelVita Bites BelVita Bites breakfast biscuits join the existing belVita crunchy lineup in two flavors: Chocolate and Mixed Berry. Each 50-gram serving of belVita Bites contains 230 calories, 20 grams of whole grain and 4 grams of fiber. The bites should be enjoyed with a serving of fruit and low-fat or nonfat dairy for a balanced breakfast, according to the maker. BelVita Bites are available nationwide for a suggested retail price of $3.69 per box. Mondelez International Deerfield, Ill. (855) 535-5648 mondelezinternational.com

24 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

26 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

Time for Convenience

The

COVER STORY

A Convenience Store News Staff Report

Our exclusive consumer study reveals who’s shopping c-stores when and what they’re buying

onsumers are shopping at convenience stores more often, especially in the morning for a wide variety of reasons, from purchasing hot beverages and lottery sumers shop c-stores. tickets to filling up their gas tanks for the day ahead. Although 55 percent of surveyed shoppers said they In fact, findings from the exclusive Convenience visit c-stores between the hours of 6 a.m. and 11 a.m., Store News 2015 Realities of the Aisle consumer 53 percent of respondents said they shop between 11 research study reveal that morning customers just a.m. and 4 p.m., and 64 percent shop between the might be the most important customers for convehours of 4 p.m. and 10 p.m. So clearly, there are also nience store retailers to please. Consumers who shop at convenience stores between opportunities for c-stores to increase their business during other dayparts besides the morning hours. the hours of 6 a.m. and 9 a.m.: Evening shoppers (between 7 p.m. and 10 p.m.), for • Shop c-stores more frequently than shoppers at example, shop a c-store more frequently than the averany other time of the day; age c-store shopper, according to the study. Evening • Typically shop for beverages and gasoline; shoppers also purchase more beverages, particularly • Are among the most likely daypart shoppers to cold and frozen dispensed drinks, cigarettes, prepared buy prepared food at a c-store; and food, candy and gum, and snacks than the average • Typically shop c-stores while traveling to/from c-store purchaser. work or running errands. Let’s look deeper at how consumers responded to For the second consecutive year, the annual CSNews Realities of the Aisle consumer research study CSNews’ 2015 Realities of the Aisle survey: was conducted by Carbonview Research, a custom, primary market research and analysis firm Do You Typically Shop at the Same owned by CSNews’ parent company Stagnito Convenience Store Each Time? Business Information. n NO n YES Electronic interviews were conducted with 1,500 Leading characteristics: Leading characteristics: consumers who shop at a convenience store at least • 49% typically shop c-stores • 58% typically shop c-stores 4 p.m.-6 p.m. 4 p.m.-6 p.m. once a month. The survey asked c-store shoppers • 58.4% male shoppers • 59.3% male shoppers 31% how often they shopped, why they shopped, when • Average age: 41.7 yrs • Average age: 42.9 yrs • Average income: $59,727 • Average income: $65,536 they shopped, what they purchased and how much • 53.1% shop while traveling • 68.8% shop while traveling they spent. to/from work or school for pleasure • 66.7% purchased gasoline • 84.5% purchased gasoline In addition to demographic information high69% from c-store in last 30 days from c-store in last 30 days lighting shopping behavior by gender, income, presence of children in the household, region of the country and age, this year’s study also breaks Base: 1,500 total respondents Source: Convenience Store News Realities of the Aisle Study, 2015 out key insights related to the time of day con-

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 27

COVER STORY How Often Do You Shop at a Convenience Store? When it comes to income, 22 percent of shoppers earning 7% $75,000 to $99,999 a year said $ tthey shop a c-store almost every 19% 11% day. This figure is the highest d of all the income segments. o n 2-3 TIMES A WEEK n 2-3 TIMES A MONTH Leading characteristics: Leading characteristics: More frequent c-store • 55% typically shop c-stores 4 p.m.-6 p.m. • 47% typically shop c-stores shoppers also tend to have • 60.5% male shoppers 4 p.m.-6 p.m. • Average age: 41.8 yrs • 53.8% male shoppers children c in the household. 25% • Average income: $60,669 • Average age: 43.9 yrs Sixty-nine S percent of shop• 51.5% have no children • Average income: $60,095 • 72.2% have no children pers p with children went to a 38% n ONCE A WEEK c-store c several times a week. Leading characteristics: • 47% typically shop c-stores 4 p.m.-6 p.m. Forty-three percent of shoppers F • 47.5% female shoppers (highest female %) with children went to a c-store • Average age: 42.5 yrs Base: 11,500 500 total respo respondents • Average income: $61,643 • 66.9% have no children two or three times a week. Source: Convenience Store News Realities of the Aisle Study, 2015 By age, 68 percent of shoppers aged 25-34 said they shopped several times a n How Often Do You Shop at a Convenience Store? week, compared with 65 percent of those aged 35-44 On average, 57 percent of surveyed shoppers said they visit a c-store several times a week. That figure goes up and 61 percent of those aged 45-54. Almost half of all shoppers (48.5 percent) aged 18-25 said they to 61 percent for male shoppers, compared to 52 pershopped several times a week at a c-store. cent for female shoppers. Almost one out of five said they shop a c-store n Do You Typically Shop at the Same Convenience almost every day, an increase from 11 percent a year Store Each Time? ago. Shopping frequency among those who shop two Almost seven out of 10 respondents said they are loyal or three times a week also jumped, increasing to 38 to a particular c-store. That loyalty is lowest, though, percent from 31 percent in 2014. Meanwhile, the peramong higher income consumers — only 60 percent of centage of less frequent shoppers (two or three times shoppers making $100,000 or more per year said they a month, about once a month and less than once a typically shop the same c-store each time. month) declined across the board. n For What Reasons Do You Typically Shop a Men are more likely to shop c-stores almost every day Convenience Store? than women (22 percent vs. 15 percent, respectively). The top two reasons to visit a c-store are for beverages Thirty-nine percent of men said they shop c-stores two and gasoline. Typically, 73 percent are shopping at a or three times a week, comconvenience store for beverages and 69 percent shop at pared with 36 percent of convenience stores to buy gasoline. women shoppers. Forty-one percent cited a fountain or frozen dispensed beverage. Thirty-nine percent cited Morning a packaged beverage like a soda or Customers Are fruit drink, and 35 percent said they went for a hot beverage like coffee. 6 a.m. - 8:59 a.m. On what occasions do you typically shop at a c-store? Buying beverages is a particular strong motivation for shoppers To and from work aged 25-34, with 83 percent of this age group Total citing beverages as Later than 10 p.m. their reason for shopSpecial trips ping a c-store. 11 a.m. - 1:59 p.m. from home n On What Occasions While running errands Do You Typically Shop Total a Convenience Store? About 45 percent of n ALMOST EVERY DAY

Leading characteristics: • 58% typically shop c-stores 4 p.m.-6 p.m. • 67.7% male shoppers • Average age: 39.7 yrs • Average income: $63,847 • 58.2% have children

n ABOUT ONCE A MONTH

Leading characteristics: • 43% typically shop c-stores 4 p.m.-6 p.m. • 58.1% male shoppers • Average age: 44.5 yrs • Average income: $61,169

On-The-Go

83%

66%

Base: 1,500 total respondents Source: Convenience Store News Realities of the Aisle Study, 2015

55% Total

28 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

55%

71%

45%

+ plus

COVER STORY

c-store shoppers said they typically make special trips to the convenience store from home. That’s almost as many as those who say they shop c-stores while running other errands (55 percent), while traveling to and from work or school (55 percent), and while traveling for pleasure (51 percent). Women (59 percent) are more likely than men (53 percent) to shop at a convenience store while running errands. Lower income consumers (62 percent) are also more likely to shop at a convenience store while running errands. Higher income consumers (67 percent) are most likely to shop while traveling to/from work or school. From a daypart perspective, evening shoppers between 7 p.m. and 10 p.m. (63 percent) were most likely to make special trips to the c-store compared with those who shop at other times of the day (35 percent). n At What Times of Day Do You Typically Shop at Convenience Stores? The most popular three-hour shopping period for c-store consumers overall is the 4 p.m. to 6:59 p.m. dinner time (cited by 52 percent of surveyed shoppers). Other popular shopping periods are 2 p.m. to 3:59 p.m. and 11 a.m. to 1:59 p.m. (both at 35 percent), and late night from 7 p.m. to 10 p.m. and early morning from 6 a.m. to 8:59 a.m. (at 34 percent each). Men were the chief shoppers from 6 a.m. to 8:59 a.m., while women and younger shoppers (aged 18-24) were dominant from 2 p.m. to 3:59 p.m. n Which Products Have You Purchased at a Convenience Morning Customers Are Store in the Past Most Frequent Customers Month? How often do you shop at a convenience store? After gasoline (purchased by 79 percent of shoppers), the mostAlmost every day often purchased products in the past month were candy/gum (67 percent), Total 6 a.m. – 8:59 a.m. prepared food (61 percent), canned/bottled soda 2-3 times a week (52 percent), salty snacks (46 percent), hot bever6 a.m. – 8:59 a.m. Total age (41 percent), beer (40 percent), lottery tickets (39 percent), cigarettes (38 percent), fountain drink Base: 1,500 total respondents (37 percent), bottled water Source: Convenience Store News Realities of the

28% 19%

44% 38%

Aisle Study, 2015

30 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

COVER STORY

85%

Why Do You Typically Shop at a C-store? TO BUY

Beverages (net) Fountain/frozen beverages Packaged beverages Hot beverages Gasoline Snacks Lottery tickets Candy/gum Prepared food Cigarettes Food to eat later Use restroom

73%

41% 39% 35%

41% 40% 37% 24% 23%

Multiple responses accepted Base: 1,500 total respondents Source: Convenience Store News Realities of the Aisle Study, 2015

32%

55%

of early morning customers shop to buy beverages

63%

of late-night customers shop to buy packaged beverages

78%

69%

54% of evening

customers – after 7 p.m. – shop for candy/gum

(36 percent) and packaged sweet snacks (33 percent). n Which Elements Influenced Your Decision to Visit a Convenience Store? While word-of-mouth was cited most often by consumers (15 percent), an equal percentage of consumers cited radio/ television advertising or a coupon (both 11 percent). Social media sites such as Facebook and Twitter

customers shop for prepared food

were cited by only 8 percent of shoppers. However, younger shoppers cited social media at a much higher rate than the average. For example, 13 percent of 18- to 24 year-olds, 17 percent of 25- to 34-year-olds, and even 10 percent of 35- to 44-yearolds cited social media as the reason they visited a convenience store.

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MOTOR FUELS MOTOR FUELS

nce considered a male activity, female consumers are now more likely than men to pump fuel at a convenience store. A total of 82 percent of the women surveyed by CSNews said they bought fuel at a c-store in the past month vs. 77 percent of men. The top concern for women in their fueling decisions is price, with 70 percent of females saying this is extremely important vs. 64 percent of men. Convenience is also top of mind for women, with 53 percent citing this factor as extremely important, compared to 41 percent of men. Conversely, fuel branding is less important for women, as only 23 percent cited this factor as extremely important vs. 21 percent of men. Women and men also show their differences when it comes to loyalty to a particular c-store. Females are much more willing to shop around to find fuel at desired prices. More women purchase fuel from gas-only locations, supercenter/mass merchandisers, supermarkets and truck stop plazas than their male counterparts. The big question for c-store operators remains: Are gas station visits turning into subsequent in-store merchandise purchases at a higher rate? The answer is a resounding â&#x20AC;&#x153;yes.â&#x20AC;? More than 84 percent of respondents overGasoline/Motor Fuel Purchased all said they purchase in-store merchandise at a C-store in Past Month when they stop for gas at a convenience store. Yes No Men are more likely to make the jaunt from TOTAL MALE FEMALE the gas pump to the c-store, with 87 percent saying they do so at least some of the time, 17.9% vs. 83 percent of women. In fact, 9 percent of 20.9% 23.0% men said they purchase in-store merchandise at c-stores all of the time, one percentage point higher than women. 79.1% 79 1 82.1% 82 1% 77.0% 77 Promotional efforts are beginning to pay off in the conversion of fuelers to shoppers. A solid Base: 1,500 total respondents Source: Convenience Store News Realities of the Aisle Study, 2015 43 percent of all respondents said a promotional activity influenced his or her decision to purFrequency of In-Store Merchandise Purchased chase in-store merchandise following a trip to While Stopping for Gas at a C-store purchase gas. Frequent buyer/loyalty programs Every time Almost every time Some of the time Rarely Never were cited as the most influential, followed by TOTAL MALE FEMALE pumptoppers, promotional signage, banners/ 2.6% 1.6% 2.2% window signs, gasoline nozzle/display ads and 8.8% 9.3% 8.2% car wash promotions, respectively. 11.8% 13.4%

Morning rush: Itâ&#x20AC;&#x2122;s no surprise that convenience is more important to those who purchase gas at c-stores from 6 a.m.-9 a.m. Late morning shoppers are more likely to be swayed by price.

14.7%

24.3% 2

51.3%

23.6% 2

49.8%

Base: 1,109 respondents who purchased gasoline in the past month Source: Convenience Store News Realities of the Aisle Study, 2015

34 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

25.2% 2

53.2%

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FOODSERVICE FOODSERVICE

t appears the movement of c-store retailers to upgrade the quality and variety of their foodservice offerings is gaining traction with consumers who certainly are not lacking for dining choices. More than six in 10 consumers surveyed for this year’s Realities of the Aisle study said they purchased prepared food at a convenience store in the past month. This is an encouraging increase compared to last year when 55 percent of consumers said the same. And it’s not only prepared food that more consumers are embracing at c-stores. Nearly 41 percent of respondents this year, vs. 36 percent last year, said they purchased a hot beverage (coffee, cappuccino, tea, etc.) in the past month at a convenience store. Likewise, 37 percent this year, vs. 31 percent the prior year, bought a cold dispensed drink. What’s driving these positive numbers? High satisfaction levels among purchasers of c-store Foodservice Products Purchased at a prepared food and dispensed beverages are sureC-store in Past Month ly working in the category’s favor. When asked PrEPArEd FOOd 60.8% Total how satisfied they were with their last purchase, 63.0% Male 89 percent of hot beverage buyers, 93 percent of 57.7% Female 74.7% Children in household fountain buyers and 83 percent of prepared food 50.5% No children in household buyers said “extremely” or “very” satisfied. HOT disPEnsEd bEvErAgEs These satisfaction levels are particularly good 40.7% Total 39.2% Male news for c-stores given the fact that consumers 42.9% Female 47.7% now cite food quality as the most important attriChildren in household 35.6% No children in household bute in their decision-making. Whereas last year, COLd disPEnsEd bEvErAgEs price/value and food quality tied for the top spot, Total 37.4% this year food quality has risen to No. 1. Taste, Male 35.7% Female 39.8% freshness and convenience/on-the-go round out 45.1% Children in household the top five most important attributes. 34.8% No children in household Among the 61 percent of surveyed consumBase: Respondents who purchased prepared food (912), hot dispensed beverages (611) and cold dispensed beverages (561) at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015 ers who said they purchased prepared food at a c-store in the past month, the mean number of Satisfaction With Last Foodservice times they did so was 4.62 and the mean amount Purchase at a C-store they spent for the month was $44.93, which Extremely satisfied Very satisfied Somewhat satisfied would average out to roughly $9.72 per buy. Not very satisfied Not at all satisfied Hot dogs, breakfast sandwiches, deli/sandwiches, pizza and other breakfast foods (e.g. PrEPArEd FOOd HOT disPEnsEd COLd disPEnsEd bEvErAgEs bEvErAgEs fresh muffins, biscuits and bagels) were cited as 0.8% 0.9% the five most-purchased types of prepared food. 7.4% 9.9% Interestingly, although consumers say they want 16.7% 32.2% 3 to eat healthier, neither salads, fresh-cut fruit, 44.3% 4 fresh fruit/veggie smoothies nor fresh-cut veg51.0% 5 41.7% etables cracked the top 10. 44.9% %

EvEryonE’s a CritiC (LatE night Edition): Shoppers who purchase prepared food later than 10 p.m. are more likely to cite food quality as the most important attribute than shoppers at any other time of day.

50.4% %

Base: Respondents who purchased prepared food (912), hot dispensed beverages (611) and cold dispensed beverages (561) at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015

36 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

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th s! i w s r la Bars r a e B m o a u l s Gran nks, then o d n e n r o a aked Layer fruit chuhocolate, r C G e v d cts, Bear cNhocolate yo Double C i e t r c e A ® Lay e of produnuts and vors: Nutt p U h la in Fuelr Nakef thde Bear rNaankoelda tlo!pApveadilwabitle in two f ber o elicious g pic taste m e Bena tm f d latey e ay! ewes ayer o co od ®

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TOBACCO TOBACCO

here is much debate about keeping cigarettes out of the hands of young consumers. Survey after survey, study after study, highlights the increased use of tobacco products by today’s youth. However, CSNews’ Realities of the Aisle study found the reality is older consumers are buying cigarettes in the convenience channel. Overall, 38 percent of respondents said they purchased cigarettes at a c-store in the past month, far outpacing electronic cigarettes (8 percent) and cigars/snuff/chewing tobacco (7 percent). And the numbers point to repeat visits: 22 percent made cigarette purchases between five and nine times a month, while 18 percent made such purchases 15 times or more. The study also points to cigarettes as a key driver of in-store traffic at convenience stores. Of consumers who shop a c-store almost every day, 58 percent purchase cigarettes. Likewise, 45 percent of consumers who visit a c-store two or three times a week buy cigarettes. The likelihood of buying cigarettes decreases as the number of visits decreases. Taking a closer look at the impact of age on the segment, consumers aged 25-34 are more likely to make a cigarette purchase when they shop at a c-store (48 percent). The likelihood declines as age increases past this point: 42 percent of 35- to 44-year-olds, 38 percent of 45- to 54-year-olds and 31 percent of Number of Times Cigarettes Purchased consumers 55 years old and up. Also interesting, the at a C-store in Past Month income group most often making that c-store trip for a pack of smokes earns less than $35,000 a year. 1 time 2 times 3 times 4 times 5-9 times (net) 10-14 times (net) 15 times or more (net) Despite retailers’ push to find revenue streams to TOTAL MALE FEMALE make up for declining cigarette sales, adult smokers are still making frequent trips to c-stores to buy cigarettes. 8.7% 7.5% 10.3% 17.7% 16.4% 19.6% Specifically, 28 percent of consumers aged 35 to 44 9.3% 14.5% 18.0% make the trip between five and nine times a month, 11.8% 13.1% 9.8% 12.1% 1 while 20 percent of those aged 45 to 54 say they make 110.8% 9.8% 9 the trip between 10 and 14 times a month. 12.6% 12 22.0% 19.0% 14.6% 26.2% 16.1% In fact, a fair share of consumers in each age group (at least 16 percent), spanning from 18 to older than Base: 519 respondents who purchased cigarettes at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015 55, told CSNews they bought cigarettes at a c-store more than 15 times in the past month.

CrEaturEs of habit: Cigarette shoppers who are in c-stores from 4 p.m.-6 p.m. most often report always buying the same brand.

Satisfaction With Last Cigarette Purchase at a C-store

Tobacco Products Purchased at a C-store in Past Month

ExTrEMELy/vEry sATisFiEd

85.0% 79.3%

81.6%

83.3%

84.0%

37.8%

70.9% 8.4%

Total

Income less than $35,000

Income $35,000 to $49,999

Income $50,000 to $74,999

Income $75,000 to $99,999

Base: 523 respondents who purchased cigarettes at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015

38 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

Income $100,000 or more

Cigarettes

Electronic cigarettes

Base: 1,500 total respondents Source: Convenience Store News Realities of the Aisle Study, 2015

6.8% Cigars/snuff/ chewing tobacco

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COLD VAULT COLD VAULT

ven as some categories exist in a state of flux, the cold vault remains a top destination for convenience store customers. Survey respondents frequently cited “to buy beverages” as a top reason they shop at c-stores, but the specifics of what they stop in for remain varied. Carbonated soft drinks (CSDs) are the top draw, with more than half of consumers reporting a purchase (52 percent), followed by bottled water (36 percent) and energy drinks (23 percent). While women are more likely than men to buy CSDs, bottled water and fruit juice, around 23 percent of both genders buy energy drinks, indicating the segment is not as male-dominated as many believe. The majority of shoppers purchase packaged beverages at a c-store multiple times per month, with 22.5 percent making two purchases a month and 20 percent making five to nine purchases. Only 16 percent of survey respondents made one purchase only. Despite the high number of purchases, consumers aren’t spending big at the cold vault: 24 percent spent $5 to $9 in a month, with nearly as many spending less than $5. Not surprisingly, lower income customers were more likely to spend less than high income, and vice versa. Only 40 percent of consumers said they bought beer or malt beverages at a c-store in the last month, likely reflecting the varying state restrictions on alcohol sales. Men were by 10 percentage points more likely than women to make a c-store beer/malt beverage purchase. Number of Times Packaged Beverages Consumers buy beer and malt beverages Purchased at a C-store in Past Month at c-stores with similar frequency to nonMean Median alcoholic beverages, with 24 percent making 6.17 two purchases, 17 percent making five to nine 5.65 5.05 4.52 4.26 4.83 purchases and 17 percent making only one 4.00 4.00 purchase. Men tended to make more purchases 3.00 3.00 3.00 3.00 than women, and were significantly more likely to make five to nine purchases (20 percent Age 18-24 Age 25-34 Age 35-44 Age 45-54 Age 55+ Total vs. 13 percent). Base: Respondents who purchased packaged beverages at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015 Reflecting the higher price of alcohol, consumers who bought beer and malt beverages Amount Spent on Beer/Malt Beverages at a c-store were most likely to spend $50 to at a C-store in Past Month $99 (18 percent), $30 to $49 (17.2 percent) or Mean Median $20 to $24 (13 percent) in a month. Those who $59 earn $100,000 or more in income each year still $48 $46 $44 $40 kept their spending moderate. Consumers at the $34 $30 $30 $28 $25 second-highest income level were significantly $20 $20 more likely to spend $25 to $29 or $50 to $54 each month. Income Income Income Income Income Total

hEy, big spEndErs: Beer/malt beverage purchasers who shop from 4 p.m.- 6.59 p.m. spend more than those at other times of day. For packaged beverage purchasers, the biggest spenders shop in the late morning (9 a.m.-10:59 a.m.).

less than $35,000

$35,000 to $49,999

$50,000 to $74,999

$75,000 to $99,999

Base: Respondents who purchased beer/malt beverages at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015

40 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

$100,000 or more

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CANDY CANDY

o matter how popular better-for-you treats become with today’s consumers, candy remains a strong seller in the convenience marketplace. Men and women of every age, income level and geographic region indulge themselves — but as with any category, different demographic groups have differing preferences that retailers should consider. While more than 65 percent of all surveyed consumers said they bought candy or gum from a c-store in the last month, women were more likely to make this purchase than men, at 74 percent compared to 62 percent, respectively. Also, the younger consumers are, the more likely they are to buy candy, with more than 80 percent of those aged 18-24 doing so in the past month. This percentage declines as customer age increases — yet even 46 percent of those aged 55 and older reported making a c-store candy purchase. The average frequency of purchase seems to demonstrate that consumers agree with the candy industry’s stated belief that confections are fine as an occasional indulgence. Approximately half of all respondents said they bought candy or gum at a c-store one or two times in the past month. Interestingly, while the percentage of consumers who made c-store candy purchases declined as the number of purchases increased, a larger amount made Number of Times Candy/Gum Purchased five to nine purchases (16.5 percent) than three at a C-store in Past Month or four purchases (14 percent and 13 percent, 1 time 2 times 3 times 4 times 5-9 times (net) respectively.) Consumers with children are more 10-14 times (net) 15 times or more (net) likely to make multiple purchases in one month CHiLdrEn in nO CHiLdrEn TOTAL HOusEHOLd in HOusEHOLd than those without kids. 3.9% 7.4% Unsurprisingly, consumers who go to 10.7% 17.8% 12.7% 21.8% c-stores for an occasional sweet treat spend 25.9% 16.5% relatively little doing so in a one-month period, 20.1% 12.5% with 39 percent spending less than $5 and 27 23.8% 2 12.6% 12.3% % percent spending $5 to $9. However, twice as 28.7% 28. 12.7% 32.6% 13.7% many people reported spending $20 to $49 15.0% than $10 to $14. Base: Respondents who purchased candy/gum at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015 Lower-income consumers who make less than $35,000 a year were most likely to watch their Amount Spent on Candy/Gum at a wallets and spend less. However, those who C-store in Past Month make $100,000 or more were the group second Mean Median most likely to spend only $5 or less per month $17.87 $16.79 on candy. At the same time, more affluent con$12.25 sumers were also more willing to spend in the $10.66 $9.78 $8.05 $20-$24 range.

dEssErt aftEr dinnEr: Candy shoppers at c-stores from 7 p.m.-10 p.m. spent more on candy than those shopping for sweets at any other time of day.

$5.00

Total

$5.00

Income less than $35,000

$5.00

Income $35,000 to $49,999

$5.00

Income $50,000 to $74,999

$5.00

Income $75,000 to $99,999

Base: Respondents who purchased candy/gum at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2015

42 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

$5.00

Income $100,000 or more

SNACKS SNACKS

nacking remains popular among U.S. consumers, with salty snacks like potato chips and pretzels in the shopping basket of more than half of all c-store shoppers. Of the total respondents surveyed, 46 percent bought packaged salty snacks, 33 percent purchased packaged sweet snacks, 20 percent purchased meat snacks, and 11 percent bought energy or nutrition bars in the past month. This order of preference held true across all customer subsegments, including gender, income, region and age. For example, 42 percent of males and 53 percent of females picked up a salty snack, while 48 percent of consumers in the Midwest made a similar purchase. Females were just as likely to add a meat snack to their basket as males, both at roughly 20 percent of respondents indicating they made such a purchase in the past month. By region, consumers in the West bought meat snacks the most — at 23 percent. Not surprisingly, c-store consumers who have children make more snack purchases than those without kids. Specifically, 51 percent of those with children bought salty snacks in the past month, 40 percent sweet snacks, 31 percent meat snacks and 16 percent energy or nutrition bars. This compares to 43 percent of those without children who bought salty snacks, 28 percent sweet snacks, 13 percent meat snacks and 8 percent energy or nutrition bars. The real differences in snacking, though, seem to come with age. According to CSNews’ research, the older you get, the less likely you are to buy snacks. Notably, 55 percent of 18- to 24-year-olds bought a c-store salty snack vs. 36 percent of consumers Snacks Purchased at a C-store in Past Month aged 55 or older. Packaged salty snacks Packaged sweet snacks Meat snacks Energy/nutrition bars The pattern is repeated down the 55.2% line: 42 percent of 18- to 24-year51.2% 50.3% 47.2% 46.4% olds bought a sweet snack, 25 per43.6% 41.8% cent bought a meat snack and 10 35.7% 35.5% 32.9% percent bought an energy or nutri29.6% 29.0% 27.5% 24.7% 23.2% tion bar. On the other end of the 20.4% 18.5% 17.0% 16.4% age spectrum, only 23 percent of 11.1% 10.3% 8.2% 7.1% consumers aged 55 or older bought a 4.7% sweet snack, 8 percent bought a meat Age 18-24 Age 25-34 Age 35-44 Age 45-54 Age 55+ Total snack, and about 5 percent bought Base: 1,500 total respondents Source: Convenience Store News Realities of the Aisle Study, 2015 an energy or nutrition bar. CSN

LatE night MunChiEs: All snack categories are more likely to be purchased later than 10 p.m. — except for energy/nutrition bars (we suspect those shoppers are already asleep).

44 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

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Big Data Has a Big Future

Inaugural CSNews Fuels & Tech Summit tackles a host of trending topics

For the adopters, however, efficiencies gained from technologies have saved the c-store industry billions of dollars, and the four hot technologies outlined should save plenty more dollars and time in the future, stressed Lewis, who is also CEO of Twin Falls, Idaho-based KickBack Rewards Systems, a loyalty and rewards program provider. Of the four technologies, the hottest one for the future is big data. “Data-driven decisions are a buzzword now,” he told Summit attendGrowth Energy’s Mike O’Brien (left) discusses fuel trends with Mike Lorenz of Sheetz and ees. “Big data allows for complex Jennifer Forbess of Murphy USA. queries and instant feedback. It also By Brian Berk & Don Longo links many powerful servers together at one time.” Hence, the quantity of data is getting massive and will continue to grow. “Over 90 percent of data in existence loud computing, near field communicatoday was created in the past two years,” he added. tion (NFC) and Bluetooth technologies, To emphasize how big data can be put to good use the Internet of Things and big data are for c-store retailers, Lewis shared an Oasis Stop ‘N Go the four hottest technological trends right example. The retailer’s challenge was to grow its fuel now, according to Pat Lewis, CEO of convenience loyalty program. Information derived from big data store chain Oasis Stop ‘N Go LLC. allowed the chain to develop advertising campaigns Lewis was the keynote speaker during the inaugutargeted to specific demographics. ral Convenience Store News Fuels & Tech Summit, “For example, big data allowed us to tailor a cama two-day event that took place Dec. 8-9 at the Palm paign aimed at reaching females, ages 25-35, who have Beach Marriott Singer Island Beach Resort & Spa in a job,” he said. “It worked out very well.” Florida. In his presentation entitled “Future Trends in Technology and Fuel, and How They Will Impact Convenience Stores,” Lewis said the convenience store IN THE CLOUD industry is still lagging behind in technological adopDiscussing cloud computing, Lewis predicted that tion compared to other industries, and there are multhe introduction of more managed solutions and tiple reasons why. point-of-sale products will lead to better mobile pay“We have a bifurcated industry with a lot of singlement systems, many of which are NFC-based. NFC store operators,” he said. “There are also a lot of and Bluetooth technologies provide many marketing family-owned businesses where people don’t want to advantages for c-store operators. change what has worked in the past.” “Mobile payments are here to stay; everything is

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Celebrating Leaders moving in that direction,” he observed. “There are so many players in this space and it has a lot of momentum.” Geofencing and smart digital signage are other hot technologies, although few retailers know what they are doing and why when attempting to attract new customers. “Our biggest opportunity remains [those] customers fueling at our locations, but not coming into our stores,” stated Lewis. “The reverse is also true as some customers only come inside the store and don’t fuel with us.” The final hot technology for the future is what Lewis referred to as the Internet of Things, referencing the apps that allow c-store operators to monitor multiple facets of their business in real-time, no matter where they are located in the world at that moment. Although technological advancements at c-stores have not progressed to the level Lewis would like, he is decidedly optimistic about the future of the industry. FUELING UP

Shifting to the fuel portion of the Summit, CSNews Editorial Director Don Longo moderated a roundtable discussion to determine current challenges in the marketplace. Among the topics discussed were: • Increasing complexities of the business; • Government policies, particularly the untended negative consequences of government regulatory actions; • Uncertainty of the future market and how far gas prices will fall; • Government mandated CAFE and ethanol standards; • Growing needs for capital spending, particularly on new technologies like near field communication and mobile payment platform CurrentC, in the first half of this year; • Competition hurting independent dealers; • Cost of installing EMV (Europay, MasterCard and Visa) ready devices in the fuel equipment infrastructure; • Government now looking at a gas tax increase; • Competing for a shrinking pie in regards to fuel sales; • Converting fuel customers to purchasers inside the stores; • Pipeline expenses growing on the supply side; and • A possible lack of understanding by government officials about the various alternative fuels, such as natural gas, which could adversely affect their rate of adoption.

During the opening night of the Convenience Store News Fuels & Tech Summit, awards were presented to four worthy recipients, two for excellence in the technology field and two for outstanding work in the fuel segment of the convenience store industry. The award winners honored were: • Alon USA Director of Marketing Technology Avsha Klachuk was named Technology Executive of the Year. In his 14 years at the company, he’s developed and implemented leading-edge fuels and point-of-sale terminals for Alon and is currently incorporating radio frequency identification and cellular-based mobile commerce. • The Technology Implementation of the Year award went to Flash Foods Inc. for its successful implementation of the GoBlue mobile app. • Zarco USA President Scott Zaremba was presented with the Alternative Fuels Leader of the Year award. Zaremba was the first U.S. retailer to sell E15 at the pump. • Kwik Trip Inc. won the award for Fuels Innovator of the Year for its pioneering efforts to sell compressed natural gas to both fleets and the public.

Energy, noted during his presentation at the Summit. As of Dec. 9, there were 104 E15 locations in the United States. Retailers such as Murphy USA Inc., MAPCO Express Inc., Protec Fuels Inc. and Minnoco, the sponsored brand of the Minnesota Service Station and Convenience Store Association (MSSA), all have plans to open more E15 stations, he said. Despite some opinions to the contrary, O’Brien stressed that consumer impressions of E15 have been overwhelmingly positive thus far, especially in the Twin Cities region of Minnesota.

E15 IN THE SWEET SPOT

The future of E15 — a blend of 15-percent ethanol and 85-percent gasoline — is bright, Mike O’Brien, vice president of market development for Growth

CSNews Editorial Director Don Longo (left) presents the Technology Implementation of the Year award to Jenny Bullard and Jeannie Amerson of Flash Foods.

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 47

Kwik Trip’s Joel Hirschboeck (right) accepts the Fuels Innovator of the Year award.

Pat Lewis of Oasis Stop ‘N Go discussed four hot technological trends in his keynote speech.

Lance Klatt, executive director of the MSSA, pointed out during O’Brien’s presentation that Minnoco retailers have had tremendous success selling E15 as “Unleaded Plus” gasoline. All pumps selling Unleaded Plus have a sticker affixed notifying consumers that they must have a 2001 or newer car to fill up with the alternative fuel. “Education is everything,” said Klatt. “Retailers have been asking customers: ‘How would you like to save 5 cents’ [by filling up with Unleaded Plus]? This approach has worked very well.” Looking ahead, O’Brien said an E15 nationwide survey is ongoing. The survey will be statistically significant and perhaps ready as early as February, he stated. EMV IN FOCUS

Throughout the CSNews Summit, the fuels and technology tracks were presented at the same time in separate rooms at Zarco USA’s Scott Zaremba thanks the the Palm Beach Marriott. audience after receiving Alternative Fuels Concurrent to O’Brien’s Leader of the Year honors. presentation was Dennis Jensen’s presentation of hot topics and industry trends in the technology industry. The senior director of sales for Acumera Inc. led a discussion covering everything from EMV and PCI 3.0 to connectivity and security. Data breaches were a big concern among attendees, as more and more prominent retailers are making headlines for falling victim to hackers. Some key strategies for preventing a breach include using network segmentation, conducting penetration testing, and eliminating persistent connections with vendors.

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Alon USA’s Avsha Klachuk receives the Technology Executive of the Year award.

The tech group also looked at the importance of broadband. According to Jensen, connectivity is getting to be as important as electricity for convenience store operators since transactions, accounting and fuel automation, video verification, and operations and device monitoring all rely on bandwidth. More retailers are starting to use WAN failover and proactive support resources to prevent or minimize network downtime, which can save a lot of money in the long run. CSN

Convenience Store News Fuels & Tech Summit The inaugural Convenience Store News Fuels & Tech Summit brought together convenience store retailers and suppliers from the across the nation. The event took place Dec. 8-9 at the Palm Beach Marriott Singer Island Beach Resort & Spa in Riviera Beach, Fla. RETAILER ATTENDEES Jeannie Amerson, Flash Foods Inc. Jenny Bullard, Flash Foods Inc. David Caudill, Thorntons Inc. Ed Collupy, The Pantry Inc. Ed Crawford, Crawford Oil Co. Jennifer Forbess, Murphy USA Inc. Joel Hirshboeck, Kwik Trip Inc. Avsha Klachuk, Alon USA Inc. Mike Lorenz, Sheetz Inc. Derrick Louis, RaceTrac Petroleum Inc. Randy Meyer, Kum & Go LC Jeremie Myhren, Road Ranger LLC Gabe Olives, Rutter’s Farm Stores Jonathan Polonsky, Plaid Pantries Inc. Cory Schneider, Ricker Oil Co. Phil Schwartz, Valero Energy Corp. Greg Smith, Lassus Bros. Oil Steve Walker, Protec Fuels Inc. Scott Zaremba, Zarco USA Inc.

PRESENTERS Dennis Jensen, Acumera Inc. Pat Lewis, Oasis Stop ‘N Go LLC Larry Miller, Miller Management & Consulting Services Mike O’Brien, Growth Energy SPONSORS

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

HOW TO

The Best Equipment to Use for Different Foodservice Programs By Maureen Azzato

he number of foodservice programs convenience store operators can develop and execute are endless, and there are just as many pieces of equipment to support their preparation, cooking and merchandising. Well-designed foodservice programs, however, should optimize space and costs, utilizing the most correct equipment that ideally has uses across multiple programs. In the case of foodservice equipment, less is more, according to the Convenience Store News How To Crew panel of foodservice experts. For example, an impinger oven can be used for pizza, hot sub sandwiches and breakfast sandwiches, while a high-speed oven can be used for finger foods, pre-fried foods, bakery and even hot sandwiches, although the amount of food that can be cooked at one time is limited. “Finding an oven that can bake pizza, cookies, doughnuts, entrees and other items, that all come out perfect, is a huge plus,” one How To Crew expert said. While the menu should drive the type of equipment operators select (not the other way around), it’s some-

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times difficult not to be dazzled by new equipment and cooking technologies that emerge on the market. The key is making sure the equipment purchased serves an existing need or gap in your overall foodservice program. “If the store gets to the level where it is doing enough food programs that it has multiple pieces of equipment for each program filling up the kitchen area, then it’s time to evaluate and try to upgrade/consolidate into a better piece of equipment to save space and time,” another expert noted. Before expanding the type and caliber of equipment being used, Tim Powell –– a foodservice consultant with THINK Marketing and a member of the CSNews How To Crew –– said program demand should drive equipment purchases and upgrades. “Suppliers who are truly partners with c-stores will understand the retailer’s menu and positioning, and provide ideas for offering ready-to-cook or ready-to-eat items using existing equipment, or financial assistance to get new equipment,” he said. While most experts are not fans of purchasing a

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

piece of equipment that can be used for only one program or one type of menu item, Mathew Mandeltort –– corporate foodservice manager for convenience distributor Eby-Brown Co. and a fellow expert on the CSNews How To Crew –– emphasized that one size never fits all operators. “If food quality, throughput, consistency and maintenance are being negatively impacted by the piece of equipment you’re using, it’s probably time to evaluate getting different equipment,” he said. “Fryers are a good example. They’re versatile in the sense that a lot of different foods can be fried in them. However, if everything you prepare has to be deep fried, there is a distinct possibility that during certain dayparts that fryer is going to get bottlenecked and cause speed of service to suffer, or worse yet, food quality will suffer.” MOST/LEAST USEFUL EQUIPMENT

When asked what are the most useful and versatile pieces of foodservice equipment in convenience stores today, CSNews’ experts nearly unanimously named the ageless microwave, although most acknowledge it damages food quality. Other highly mentioned pieces of equipment included high-speed ovens, the ubiquitous roller grill, and heated holding cabinets. “Fryers and conveyer ovens are also important … and the high-speed oven is ostensibly a growing critical piece of equipment needed for versatility, speed and a competitive requirement against other segments,” said Powell. Fryers received high praise. “Even though they can only fry food, there are virtually endless varieties of things that can be fried,” Foodservice 101 said Mandeltort. If you are won• The menu should drive equipment dering which pieces decisions (not the other way around). of equipment the • Invest in equipment that can be used experts believe for multiple foodservice programs are least useful or across the dayparts. past their prime, • If equipment is leased or provided the top responses by vendors, try not to lock into longwere bag-in-theterm deals. “Most of the time it saves box tea urns (to money upfront, but costs margin in be replaced with the future,” one retailer said. fresh tea brewers) • Focus on versatility and pragmatism and panini grills/ — make sure the equipment is easy to presses. One How operate, clean and maintain, and has To Crew retailer, robust vendor support and training. who noted the

CALL TO ACTION:

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microwave as both a “most useful” and “least useful” piece of equipment, said his chain is close to eliminating microwaves, replacing them with highspeed convection ovens. “There is a huge difference in food quality,” he said. For Mandeltort, a piece of equipment outlives its usefulness when one of several things happen: It is only capable of producing one type of food one way; is complicated to operate and requires extensive training; breaks down frequently; is difficult to clean and maintain; and/or has poor vendor support. Clearly illustrating that one person’s indispensable piece of equipment is the bane of another’s existence, Mandeltort is a fan of panini presses such as the ones heavily used by Panera Bread to execute its warm sandwich program. “Like high-speed ovens, they combine heating methods to deliver hot food quickly,” he said. “The only real downside is cost –– about $12,000 each –– so you better be really committed to running a grilled panini-style sandwich program.” In terms of new trends and/or technologies emerging that are improving foodservice equipment, several experts pointed to hot holding equipment, espresso/ cappuccino machines and fountain machines. At the 2014 NACS Show, one retailer observed high-quality hot holding equipment for finished products as well as hot drawers to keep the components of sandwiches hot for fast assembly. “I believe this is the future, and thankfully many manufacturers have come to the table with high-quality performing equipment,” he said. Meanwhile, espresso-type coffee machines “are getting better and better each year,” another retailer said. “The main issues still seem to be getting one that can make larger-size cups since the 24-ounce is our topselling coffee size. Most espresso machines are built for 16-ounce sizes or smaller.”

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Fountain machines are also getting a boost of innovation thanks to The CocaCola Co.’s new Freestyle machine that allows retailers to offer a countless number and combination of beverages. “Coke’s Freestyle machine has made other manufacturers learn that if they don’t innovate, they could lose a lot of market share,” the same retailer noted. Merry Chef’s high-speed smart oven from late 2012 is still innovative, according to several experts on the How To Crew. “It provides ROI, which is key and also touts energy efficiency, which is becoming extremely important to operators as it lowers operating costs over the long term,” Powell said. “Energy efficiency was not a [criterion] as little as five years ago.” MUST-HAVE VS. NICE-TO-HAVE EQUIPMENT

With all that being said, the CSNews How To Crew experts have some clear ideas about the most necessary foodservice equipment that most convenience stores should have, based on the types of programs they have or want to execute. Below is a summary of the top recommended equipment to execute the most popular foodservice programs in convenience stores. Custom-made cold sandwiches. The must-have equipment for a cold sandwich program is a refrigerated sandwich-making table, Foodservice 201 a display case, and a cooler and freezer • Look deeply into your program in unit. Nice-to-have terms of what you are doing currently equipment includes and where you think your programs a high-speed oven, are headed. “Look for equipment that full-service and selfwill take care of your current program, service cases, and but will also allow you to prepare a deli slicer. “You items you haven’t even thought of can use pre-sliced yet,” one retailer said. meats, but going • Search for backroom equipment all Jersey Mike’sand storage units that can serve style and slicing multiple purposes. meats and cheeses • Begin looking beyond the basics. to order takes it to “Develop a pizza program, a hot appethe next level,” said tizers program, and then go out and Mandeltort. “People get the equipment to deliver,” said love the show and it one How To Crew member. strongly supports a

CALL TO ACTION:

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fresh message.” The high-speed oven enables operators to offer toasted sub sandwiches, pizza and even quesadillas, one retail expert said, while another noted that while upscale-looking display cases show off the product nicely, “sometimes the ROI doesn’t allow for it.” Custom-made hot sandwiches. Hands down, the must-have equipment for a hot sandwich program includes hot holding drawers or a steam table, a hot display case and oven. Nice-to-have equipment includes a high-speed oven, walk-in cooler and freezer, and a panini press, “which is a great way to take sandwiches to the next level, making paninis, Cuban sandwiches, Mexican tortas, grilled cheese, etc.,” Mandeltort said. Hot sandwiches can’t be done without hot holding drawers, which accelerate speed of service and allow the addition of many menu options,” one retail expert said. Meanwhile, walk-in coolers and freezers are not only more convenient, “they allow the store to rotate inventory more easily and quickly, and they help the in-stock rate,” another retail expert said. Pizza. A pizza oven and/or impinger oven –– as well as warming display units for full-serve and selfservice –– were the top equipment pieces named by the experts to execute a pizza program. Nice-to-have equipment includes a high-speed oven or a brick pizza oven. While a speed oven can cook pizza in half the time of a conventional pizza oven, it does not yield the best quality pizza, one retail expert said, noting that because pizza is so competitive it’s imperative to make the best quality product possible. Meanwhile, Mandeltort said brick pizza ovens could be a real differentiator. “Not only does it bring an artisan element to pizza production, it’s a complete

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

game changer in the channel.” Hot finger food. Wings, chicken fingers, chicken nuggets, jalapeño poppers, potato wedges and other fried finger foods are a staple offering on most c-store hot food menus. Essential equipment includes a deep fryer and/ or high-speed oven and warming display cases for self- and/or full-service. In terms of product quality, several experts recommend fryers over highspeed ovens. “There are ovens that can prepare these items, but there is just no shortcut when it comes to fried foods,” one expert noted. “There is no way to do fried foods without frying them!” Ventless, fully enclosed and automated deep fryers are recommended for small operators who might not have the volume to justify traditional deep fryers. “The ventless systems are great because they are completely self-contained, fit on a counter, have no exposed oil to mess with and are automated, which means all associates have to do is fill the hopper, press the button and voilá, fried food appears out of the discharge chute,” Mandeltort said. Nice-to-have equipment could include “a fry dump if the store is very high volume,” another expert recommended. Entrees and steam-table meals. While few c-stores have successfully Foodservice 301 ventured into the • Adding equipment that can increase dinner daypart, production or save time is a big plus. several have strong • Look to “play with the big boys,” entrée lunch proincluding quick-service restaurants grams. The equipand fast-casual restaurants and note ment cornerstone of the equipment they use. “To do that, these programs is you need equipment that can deliver good holding equipconsistently high-quality food that is ment to keep food on trend,” one retail expert said. moist, a convection oven and a steam table. Nice-to-have equipment could include a fryer, and a walk-in cooler and freezer for food storage and rotation. Grab-and-go foods. Hands down, open-air merchandisers (island or wall units) are the must-have equipment to properly display salads, sandwiches, desserts, sides and other grab-and-go foods, according to the How To Crew panel. “Doors on the merchandisers

CALL TO ACTION:

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are a deterrent to sales,” one retailer said emphatically. Coffee, tea and hot chocolate. Glass pots are out and urns are in as the must-have equipment for this category. Other essential equipment, of course, includes coffee brewers, a water filtration system to enhance coffee quality, cappuccino machine, hot water dispenser, a bulk creamer unit and a hot beverage condiment rack or island. Nice-to-have equipment could include a coffee grinder for the everyday house blend. “Whether soft heat or not, urns will give your product extended shelf life,” one retailer said. “And fresh ground coffee still carries some visual price value and does yield a higher quality product.” Fountain beverages. No real surprises in this category about the essential recommended equipment: a multiple-value fountain machine, frozen beverage machine, an ice machine and a good water filtration system. “The old six- to eight-valve fountain machines just won’t cut it anymore,” one retailer said. Another noted: “Where volume and space allow, the more heads of fountain and frozen beverages, the more cups the store will sell.” A nice-to-have option, according to one expert, could be brewed tea equipment depending upon the popularity of hot and iced tea in the market. Fresh bakery. Not to be overlooked, bakery programs require a convection oven for bread, cookies, muffins and other breakfast pastries, and/or a fryer for doughnuts. Depending on the depth of the program, dough proofing equipment, bakery racks and self-serve bakery merchandising cases might also be required. “Baking onsite makes your store smell amazing, not to mention it creates a great dining experience,” said Mandeltort. “You can also bake pizza, entrees, etc., in the oven.” CSN

THIS IS MY

INSPIRATION. We’re serious about foodservice, so I go where the foodservice pros go. My new challenges are ones the restaurant industry has been tackling for years, right here.

This is my future.

THIS IS MY

SHOW.

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And if you’re in retail foodservice, this is your Show too. For 96 years, NRA Show® is where the restaurant and foodservice industry has gathered to discover the latest advancements, ingredients, concepts and know-how that keep operations proﬁtable and keep customers coming back for more. And these days our industry has grown to include convenience store operators like you. Food safety, inventory management, culinary techniques, commercial equipment and supplies—you’re in the restaurant business now. Welcome to your Show.

FOODSERVICE Category Trends + Insights from

TRENDSIGHTS

Spotlight on Snacking There is a clear opportunity for c-stores to strengthen their foodservice snack programs Changes in Snacking Behavior in Past Two Years

Base: 1,500 consumers aged 18-plus (consumers were not allowed to choose both “more” and “less” frequently) Source: The Snacking Occasion Consumer Trend Report, Technomic, 2014

Where Patrons Purchase Their Snacks

Base: 1,500 consumers aged 18-plus Source: The Snacking Occasion Consumer Trend Report, Technomic, 2014

Base: 1,486 consumers aged 18-plus who purchase snacks from retail locations Source: The Snacking Occasion Consumer Trend Report, Technomic, 2014

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atrons today are foregoing the standard three-mealsa-day routine in favor of meals punctuated by snacks. According to Technomic’s 2014 Snacking Occasion Consumer Trend Report, almost a third of customers surveyed are snacking more now than they were two years ago. Most customers purchase their snacks from a retail location By Donna Hood Crecca Senior Director, like a conveTechnomic Inc. nience store or dcrecca@technomic.com supermarket. However, only 30 percent of these snacks come from stores’ preparedfood sections, showing there is a clear opportunity for c-stores to strengthen their foodservice snack programs and draw patrons to their proprietary snacks. One way c-stores can attract more patrons to their prepared snacks is by offering healthier choices. According to the report, 42 percent of females and 37 percent of males said they are snacking on healthier food items more than they were two years ago. Operators can attract healthminded patrons by promoting fresh produce. In August, Tedeschi Food Shops launched a program in which fresh produce is delivered to its stores three times a week. Options offered chainwide include

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bananas, apples and oranges, while larger-volume stores carry seasonal options such as blueberries, mini watermelons and pumpkins. That’s not to say customers aren’t craving sweet snacks as well. Thirteen percent of customers

surveyed in the Technomic snacking report said they’re eating more sweet items than they were two years ago. C-stores can appeal to patrons with a sweet tooth by featuring treats with seasonal sweet flavors. For instance, Wawa intro-

Percentage of Customers Who Replace Lunch With Snacks

Base: 2,158 consumers aged 18-plus (includes terminate data) Source: The Lunch Consumer Trend Report, Technomic, 2014

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duced pumpkin cannoli chips & dip for the fall, and 7-Eleven added limited-time mini Cinnabon cinnamon rolls in November. C-stores should also consider menuing unique snack options to differentiate their snack selection from other c-stores and limitedservice restaurants. In the last few months, Corner Store added savory puff pies in varieties like Sriracha Club and Spinach and Feta. Other recent distinctive snack options include QuickChek’s fried pickles with ranch, and Sheetz’s potato tots available with toppings like cheese and chili. Furthermore, according to Technomic’s 2014 Lunch Consumer Trend Report, 38 percent of consumers skip lunch once or twice a week and eat snacks instead. These consumers are likely replacing lunch with savory options rather than sweet snacks, underscoring the opportunity for c-stores to offer unique savory items in their foodservice programs. CSN

FOODSERVICE

EXPERT’S VIEW

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Designed for Foodservice Success People eat with their eyes before they eat with their mouth

icture a steak — beautiful, medium-rare filet with grilled asparagus. Can you smell it? Now picture it on a paper plate on your desk as you read this. Not as appetizing? That steak will taste differently depending on where you are and how it’s presented. Your environment has an effect on how you perceive food — a huge effect. McDonald’s former CEO Don Thompson explained, “If you have a restaurant that is appealing, contemporary and relevant from both the street and the interior, the food tastes better.” By Dave Weinberger, With foodservice emerging as one of CBX the biggest trends in convenience, many retailers are reexamining many aspects of their brand and business. The type of consumer we are target-

62 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

ing has changed to include females, families and Millennials. Chefs are being consulted and culinary trends are being analyzed. With a focus on food, internal capabilities such as health, operations and purchasing are being affected. What’s not always obvious is that design plays a huge part in the success of a foodservice offering. Design wasn’t always critical. Convenience stores were a place to buy stuff: cokes, smokes, chips and lottery tickets. Stores needed to be clean and bright. In order to differentiate between other stores, over-the-top branding was used. You know, the “Xtreme Mountain Fountain Zone” type of thing. Well, times are changing. Convenience stores have long been moving away from highly disruptive graphics toward restaurant cues. Many top c-store chains compete with the Dunkin’ Donuts and quick-service restaurants (QSRs) of the world on a regular basis. Casey’s pizzas, Wawa’s hoagies and Stripes’ Laredo tacos are all credible alternatives. It’s important to look to restaurants for design cues. Warm colors, specialty lighting and non-industrial flooring are a start. These elements go a long way toward helping consumers feel that you’re in the food business. New formats from Wawa and Cumberland Farms employ outdoor seating, and these seating options are an advertisement for fresh food. There are many ways to design for food and not every store has to be cookie-cutter to be successful. Neighbours, a concept designed for Petro-Canada more than 10 years ago, made waves in the convenience industry with a more

restaurant-inspired look and feel. Former senior director of foodservice at PetroCanada Ed Burcher noted, “We needed the guest to think ‘FOOD’ from the time they pulled into the parking lot to when they entered the store. The colors, textures and design had to reinforce the food purchase. We were able to do this and people thought of Neighbours as a restaurant and coffee shop, not a c-store. Our competition for the food occasion was Tim Hortons and McDonald’s, not other gas stations.” Neighbours’ exterior was made of stone, while dark, earthy colors covered the interior. The atmosphere was rounded out by specialty lighting, imported glass tile in the bathroom, a barista and an open kitchen with chef-inspired uniforms. In the first year, the first 10 stores sold more coffee than the rest of the network. Was the offer better? Of course it was. But it looked like a place to buy coffee, not a place to buy motor oil and toilet paper that happened to sell coffee. It was a successful design that showcased food on a pedestal. This aesthetic has become an industry paradigm, borrowed and imitated for nearly a decade. But what’s happened now is that everyone is chasing it and only looking inside the industry for design inspiration. We’ve seen new stores across the nation from different convenience retailers sporting similar details. It makes you want to be in the stone, red awning and gooseneck lighting business. To be with and even ahead of the times, you need to look inside and outside of the category. Where are people buying food? Grocery stores, drugstores and QSRs are only a few channels that have become competition. Interestingly, about two years ago, top QSRs started adapting a more European approach to design. McDonald’s, Wendy’s and Burger King were all updated. Bold, solid colors, liberal use of wood and geometric architecture have all been seen in new store offerings. Inside, they are experimenting with multiple chair types and specialty lighting. They look like dining rooms, not bathrooms. (Look at your store to see if the flooring, lighting and wall colors are the same inside the bathroom as in the foodservice area. If they are, it might be time to reconsider.) Food presentation is also key. Even if you sell hot dogs, you have to be willing to overstock in order to show abundance and

appetite appeal. You have to invest in foodservice. If you are set on waiting until the last hot dog is sold off the roller grill, then you should get out of the business. No one wants that last dog. A little food theater can go a long way. We are seeing more open kitchens, fresh produce areas and eye-catching equipment like the tap-style Unicorn soda dispenser from Lancer. Customers will respond to your efforts. They will associate the design of your store with a place to come for fresh food and beverages. People eat with their eyes before they eat with their mouths. Design is an amazing thing. It lives. It evolves. It changes people’s emotions. It comforts. It excites … and it sells food. CSN Dave Weinberger is vice president and director of engagement at CBX, the brand agency and retail design consultancy. He can be reached at dave@cbx.com. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 63

STORESPOTLIGHT The Cube

Convenience Cubed The new drive-thru concept offers high-end coffee, fresh food and beverages By Tammy Mastroberte

any convenience stores today have added a drive-thru option for customers in an effort to become even more convenient, but what about a store that is a drive-thru and nothing more? That is the concept behind The Cube. The 2,500-square-foot store opened Dec. 6 in Norman, Okla., and rather than call it a convenience store, the owners have dubbed it a “neighborhood concierge.” “We looked at c-stores that offer a drive-thru and many seemed inconvenient,” Jake Sharp, one of the owners of The Cube, told Convenience Store News. “Often the same person working inside the store is also working the drive-thru, and that isn’t offering good customer service inside or outside. Also, the few that offered the option were limited in terms of products you could get through the drive-thru.” At The Cube, customers can pull up to the window and get a white mocha latte, fresh-squeezed lemonade,

The Cube’s owners refer to their concept as a “neighborhood concierge.”

64 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

a French toast breakfast sandwich, a turkey BLT wrap for lunch, diapers for their child and cat food for their pet without ever getting out of the car. If stopping on the way home from work, they can pick up a fresh pizza for dinner, stock up on eggs, bread and deodorant, and be on their way. Products available include a variety of fresh foods, health and beauty care, household products, cold and flu medicine, vitamins, gum, candy, chips, coffee, cold beverages and fountain drinks. The idea sparked when Sharp, who opened two drive-thru tobacco shops five years ago, began adding convenience items to the mix as his shops were seeing between 800 and 1,000 people per day. The shops added fountain drinks, coffee, beer, chips and snacks, and the demand continued to grow with customers asking them to stock more products. “We started as just tobacco and saw the customer base changing and wanting more convenience items,” he explained. “Then, we had beer companies telling us how much of the beer business we were taking over compared to convenience stores in the area.” Sharp decided to partner with Joe Lawrence, now CEO, and another owner to “reinvent convenience” and create a new drive-thru concept with The Cube, which is open from 6 a.m. to 10 p.m. seven days a week. Customers can pull up to any one of

STORESPOTLIGHT The Cube

The Cube’s four windows and order what they need, or they can place an order ahead of time via the company’s website or app and just drive up to the front door and have someone bring their order to their car. “Our technology is proprietary and we have perpetual inventory, so someone won’t order something that is out of stock,” Sharp said. “We want to incorporate RFID technology next where we will give customers a tag to put into their car so we will know when they are outside, and we can bring their order right to the car when they pull up. It will also help us track what you buy, so if you want your usual — maybe a mocha and a breakfast parfait — we can see you four cars back and have it ready for you.”

High-quality coffee is one of The Cube’s focal points.

Making it Fresh

In deciding what they wanted to offer at The Cube, the partners started with where they think many convenience stores are lacking. The first item that came to mind was coffee, as traditionally c-store customers are limited to “prepackaged coffee or powdered cappuccino,” according to Sharp. Lawrence did the research, sourced coffee beans from overseas, and had a roast created exclusively for The Cube so it can’t be found anywhere else in the country. “We have a barista just like you would find at your neighborhood coffee shop,” Sharp said. “The next important thing after coffee was food offerings.” When they originally came up with the concept for The Cube, the owners didn’t think they would offer food because they doubted they could keep the quality high while making items quickly to support the drive-thru concept. But after hiring an executive chef who trained in France and owned restaurants in the past, the owners realized they would be able to get the window time cus-

tomers expected, without compromising the food quality. “Now, our food is what our concept is centered around,” Sharp said. “Our barista and our food will become our anchor. People come for coffee and food and while they are there, they can get tobacco, beer and groceries.” The kitchen is small, but utilizes two turbo convection ovens to cook more quickly, and everything is made on the premises. While the menu is limited because they couldn’t maintain the timeframe for service if the menu became too large, all menu items — breakfast, lunch and dinner — can be purchased at any time of day so someone can pull up and pick up both breakfast and lunch before work, Sharp noted. “Everything is made fresh, even the pizza. We cut the meats and cook the sausage at the store,” he explained. “We don’t have fryers, microwaves or grease, and we can take the pizza dough, Boar’s Head cheese and Italian sausages, and have it ready for you in four minutes.” Expansion plans

The owners plan to open 25 more locations in oklahoma.

66 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

The first store in Norman will serve as the company’s prototype, and the owners have a plan in place to open 25 more stores in Oklahoma. They may even look into franchising at some point. One of the advantages of not needing such a large space is that the company has more real estate options open to them, according to Lawrence. “There are a lot of old-fashioned gas stations going under, and with c-stores getting bigger and bigger today, they find the lots are too small. But we can take [those lots] and use them for our concept,” he said. Csn

OUTABOUT &

Spotlighting major industry events

Changing the Game The e-cig/vapor industry tracks its progress at second-annual Wells Fargo E-Cig Conference By Angela Hanson

ne fact was clear to attendees of the second-annual Wells Fargo Securities E-Cig Conference: Although innovation in this segment of the tobacco industry is still young, electronic cigarette and vapor products are evolving rapidly. “This industry has staying power and will continue to be disruptive to the tobacco industry,” Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, said during her opening remarks at the Nov. 20 event in New York. Growth of e-products can be seen in the size of the U.S. vapor market alone — which grew from approximately $1.8 billion to $2.6 billion over the last year — and through events such as “vape” being chosen as the word of the year for 2014. Wells Fargo While the e-products industry Securities E-Cig remains fragmented and conConference solidation is likely to continue, Nov. 20, 2014 Herzog posed a big question to New York the audience: With e-cigarettes seeing such rapid growth, is this the beginning of the end for combustible cigarettes? Numerous e-cigarette and vapor companies participated, including Altria Group Inc./Nu Mark LLC.; Ballantyne Brands LLC/Mistic ECigs; International Vapor Group; Johnson Creek Enterprises LLC; Logic Technology Development; NJOY Inc.; Reynolds American Inc./VUSE; VMR Products LLC/V2 Cigs; and XEO International Ltd. Consumer response to e-products is what sets this segment of the tobacco industry apart, according to Joe Murillo, president and general manager of Altria’s Nu Mark. “I have never seen consumers adopt or be interested in new products the way they’re interested in e-vapor,” he said. NJOY CEO Craig Weiss expressed similar optimistic and ambitious sentiments, noting that his company is on a mission to obsolete combustible cigarettes.

68 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

The conference also included two expert panel discussions. During the Public Health Panel, Dave Dobbins, chief operating officer of the American Legacy Foundation, discussed the concept of absolute safety vs. relative safety, and how people should consider all potential harms and benefits. There may be some harm in inhaling e-liquids, but much less than in smoking combustible cigarettes, he said, and while e-cigarettes may not be safe, they are safer. Public perception, however, is changing as a growing percentage of people perceive e-cigarettes as more harmful than the data shows, according to Dobbins. During the Emerging Issues in the E-Cig/Vapor Regulatory Landscape Panel, Clive Bates of Counterfactual Consulting and Advocacy spoke out against new regulation. “Just about every idea so far will actually make things worse for the health of the marketplace,” he said. “Proposals on the table so far are worse than doing nothing because not much is wrong.” If vaping is largely banned, Bates said it could do net harm because the risk to bystanders is extremely low, but the harm reduction when switching from combustible cigarettes to e-cigarettes is high. If the value proposition of e-cigarettes is lost, smokers will face further harm. Panelists generally agreed that some regulation is necessary, but that the “sweet spot” must be found between no regulation and over-regulation. CSN

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OUTABOUT &

Spotlighting major industry events

The Liability Shift Is Coming EMV adoption was top of mind among NRF Show attendees By Brian Berk

he coming EMV liability shift for point-of-sale (POS) transactions in-store, set for Oct. 1, was a main focal point of conversation for retailers and exhibitors alike at the 104th annual National Retail Federation (NRF) Convention & Expo, dubbed Retail’s Big Show. A number of exhibitors displayed EMV chip technologies, as well as related security offerings at the trade show, which took place at the Jacob K. Javits Approximately 33,000 attendees made their way to New York City to participate in the NRF Convention & Expo. Convention Center in New York. EMV — an acronym for Europay, American Express, Discover, MasterCard or Visa card MasterCard and Visa — was also a primary focus of to a retail terminal meant only to accept swipe cards, educational sessions during the convention, includthe merchant is responsible if fraud subsequently occurs. ing one session entitled “EMV Currently, credit-card issuers are responsible. Liability Shift Demystified!” NRF 104th Annual Additionally, merchants are responsible for lost or stopresented by Heartland Payment Convention & Expo len chip-based cards presented to a magnetic stripe POS in Systems Inc. executives David Jan. 11-13, 2015 all cases expect Visa, which will continue to accept responHogan, executive director, and New York sibility itself, explained Hogan. Retailers are also responJohn South, chief security officer. sible if a chip-and-PIN debit or credit card is presented to a Retailers are not required by terminal only upgraded to accept chip-and-signature cards. law to upgrade to an EMV-ready POS by Oct. 1, but Of course, any retailer making the proper upgrade convenience store retailers do need to upgrade their to an EMV-capable POS will have no responsibility for devices if they want to avoid responsibility for fraudufraudulent or lost/stolen card transactions. C-store retailers lent or lost/stolen debit and credit card transactions in need to determine if an upgrade to EMV-ready terminals certain instances. is worth the cost. As of Oct. 1, if a consumer presents a chip-based “Take a look at your chargeback rates. If the average ticket is less than $10, some retailers may make the decision not to upgrade,” said Hogan. “If you do not upgrade to EMV, I recommend you have end-to-end encryption and tokenization. These take a lot of risk out of the [equation] right away.” Heartland’s executive director added that although just 5 percent of U.S. credit and debit cards featured a chip at the end of 2014, these cards will become omnipresent this year. In fact, according to the Aite Group, 70 percent of U.S. credit cards and 41 percent of debit A wide variety of products were exhibited at the trade show, including cards will be EMV enabled by the end of 2015. CSN EMV chip technologies.

70 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

HOTPRODUCTS Special Advertising Section

Car Wash Program

Vape Products

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 71

HOTPRODUCTS General Merchandise

Payroll Check Cashing

72 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

CLASSIFIED POS/Equipment/Supplies

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 73

CLASSIFIED ATMâ&#x20AC;&#x2122;s/Wireless

74 Convenience Store News |FEBRUARY 2015 | WWW.CSNEWS.COM

CLASSIFIED Credit Card Processing / Merchant Services

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 75

CLASSIFIED Air Vacs

Pre-Paid/Cellular Products

76 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

CLASSIFIED Pos/Supplies

ATMâ&#x20AC;&#x2122;s

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 77

CLASSIFIED Age Verifier

Plastics

78 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

Services

Equipment and Supplies

CLASSIFIED Air Vacs

Age Verifer / POS

1-800-542-3336 Back Offce Software

Desserts

WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 79

CLASSIFIED Financial Services

General Merchandise

Scales

DAVY CROCKETT HATS SELL BY THE TENS OF THOUSANDS AT $3.50 EACH. Silver Fox tails are a good seller!

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

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of retailers

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

Terry Kanganis at Stagnito Media at 201-855-7615 for more details. 80 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

IF YOU HAVE A ADVERTISE IT HERE!! Terry Kanganis: 201-855-7615

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WWW.CSNEWS.COM | FEBRUARY 2015 | Convenience Store News 81

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

Harry Stagnito President and CEO 224-632-8217 hstagnito@stagnitomail.com Kollin Stagnito Chief Operating Officer 224-632-8226 kollinstagnito@stagnitomail.com Ned Bardic Senior Vice President/Partner 224-632-8244 nbardic@stagnitomail.com Korry Stagnito Chief Brand Officer 224-632-8171 kstagnito@stagnitomail.com Terry Kanganis Account Executive & Classified Advertising 201-855-7615 tkanganis@stagnitomail.com Kevin McKay Western Regional Sales Manager 847-49-9519 kmkay@stagnitomail.com Kim Hansen Midwestern Regional Sales Manager 847-726-1590 khansen@stagnitomail.com Rachel McGaffigan Northeast Regional Sales Manager 508-385-2524 rmcgaffgan@stagnitomail.com Christina Bear Associate Brand Director 224-632-8182 cbear@stagnitomail.com

Acumera

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Anchor Packaging

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Altria Group Distribution Company/Numark

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Ballantyne Brands LLC

www misticecigs com

82 Convenience Store News | FEBRUARY 2015 | WWW.CSNEWS.COM

83 & Supplement 35

Boston Beer Company

Cash Depot

www cashdepotplus com

CB Distributors

www 21stCenturySmoke com

Coca Cola

www cokesolutions com

Commonwealth- Altadis Inc

1 800 440 5797

Devault Foods

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Durasmoke

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Ferrero

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Global Tobacco LLC

888 597 6653

Supplement 21,49 55 Supplement 9 29 & Supplement

Heineken

www enjoyheinekenresponsibly com

67 Regional

Home Market Foods

www rollerbites com

Supplement

Imageworks

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Innovative Control Systems

www icsCarWashSystems com

J&J Snack Foods

www jjsnackfoodservice com

Kelloggâ&#x20AC;&#x2122;s

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Supplement 37

Keurig

www keurig com/convenience-store

Liggett Vector Brands

877 415 4100

Living Essentials

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Logic

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MarsUSA

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McLane Co Inc

www mclaneco com

19 CV1, 10-11 25,43 14-15 & Supplement

Milk Pep

1 800 945 MILK

MillerCoors

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Motion Technology

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National Restaurant Association

www restaurant org/Show

National Tobacco

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Papa Johns

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Perfetti van Melle

www airheads com

R J Reynolds Tobacco Company

www engagetradepartners com

R J Reynolds Tobacco Company/Santa Fe Tobacco

www engagetradepartners com

Red Bull

57 Supplement 60 Supplement 7 & Supplement Supplement 41 31

Save-A-Lot

www save-a-lot com

Subway

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Swedish Match/Game Leaf

customerservice@smna com

Swisher International

www swisher com

Thansi Foods

Stagnito Business Information brands also produces:

84 2 & Supplement

Blu eCigs/Lorrilard

Rubbermaid

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Supplement

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Universal Merchant

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EDITOR’S NOTE

The Next

20 Years

Category management is changing to meet new consumer needs

his special edition of Convenience Store News provides retailers with comprehensive convenience storespecific category data from Nielsen and The NPD Group, trend analysis from our team of experienced retail editors, and how-to information on optimizing every major c-store product category from leading suppliers in each segment. With the year 2014 barely in the books, the CSNews Guide to Category Management also provides the first early look at convenience store sales performance last year. For the past 20 years, category management has been a critical discipline for modern retailers looking to offer their customers the right product assortment to maximize category sales and prof-

THANKS TO OUR DATA PARTNERS The Convenience Store News Guide to Category Management contains data and insights provided by The Nielsen Co. and The NPD Group. Category data provided by Nielsen includes sales and unit data from its Convenience database through November 2014, and corresponding data for supermarkets (with $2 million or more in sales) and drugstores (with $1 million or more in sales). Additional data for the foodservice category is provided by NPD’s CREST foodservice market research and Convenience Store Monitor. CREST, NPD’s flagship foodservice market research service, has been monitoring all aspects of how consumers use restaurants and foodservice since 1981. The Convenience Store Monitor helps manufacturers and retailers understand what is selling and who’s buying at convenience stores. Its detail includes the unique characteristics of convenience store shoppers, profiles of product categories and insights into specific chains’ strengths and weaknesses — all of which can be analyzed by dayparts, regions, key channel and demographic metrics. Please note that totals for some data may not be equal due to rounding.

its. And retailers agree category management is just as important today. But what about the future? We are honored to feature commentaries from two of the leading thinkers on category management about the future of For comments, please contact this marketing and merDon Longo, Editorial Director, chandising discipline. at (201) 855-7606 or First, we’ve got Gordon dlongo@stagnitomail.com. Wade — often thought of as the father of category management — with a discussion on how category management started, what it’s achieved and what needs to change in response to the consumer changes that have occurred over the past 20 years and especially the past five years. Wade, senior vice president of category management best practices for the Category Management Association, says a digitally-empowered consumer, intense omnichannel competition and a “tsunami of new data” require a change in thinking by both retailers and suppliers (see page 31). Then, we have Sue Nicholls, president of the Category Management Knowledge Group. Nicholls also notes that data has become bigger, the retail industry more competitive and consolidated, and the shopper more educated and complex. “New” category management must include a laser focus on this more knowledgeable shopper, she says (see page 33). One thing I know for sure is that category management in the future will need to involve greater cooperation and data sharing between retailers and suppliers so that both can better serve their ultimate consumer. CSN

WWW.CSNEWS.COM | Guide to Category Management 3

CONTENTS

EDITORâ&#x20AC;&#x2122;S NOTE

3 | The Next 20 Years

Category management is changing to meet new consumer needs. FEATURE

6 | Selling by the Seasons

Opportunities abound for c-store retailers in winter, spring, summer or fall. CATEGORY SNAPSHOTS

31 | CatMan at 20: Looking to the Future The next fve years may see as many changes as the frst 20 years of category management.

33 | The New Shopper-Centric Category Management

Consideration for the shopper needs to be infused into every step of the process.

4 Guide to Category Management | WWW.CSNEWS.COM

THE ORIGINAL

click

squeeze

change

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5 YE AR S R UN NI NG

CARRY ALL FOUR STYLES

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SEASONAL

Selling by

the Seasons Opportunities abound for c-store retailers in winter, spring, summer or fall By Renée M. Covino

o every season, there is a sales opportunity and more so than what many convenience stores have honed, although it is improving, according to top distributors and other category management experts who recently weighed in on the topic with Convenience Store News. In the past two years especially, the convenience channel has “improved significantly” in taking advantage of seasonal opportunities, “yet there is still room for improvement,” said Cassandra Matos, product director, confection and snacks for McLane Co. Inc. Retailers are realizing the biggest plus — incremental sales opportunities — however, the challenge with seasonal can be finding the best items for each event, as well as for the specific retail consumer base. “In addition, many suppliers’ optimal order dates for forecasting and committing to seasonal product occurs four months or so in advance of the season, which is an adjustment for some retailers,” Matos acknowledged. Overall, the convenience channel right now is “hit and miss” on seasonal sales, the way Core-Mark Holding Co. Inc. sees it. “Stores that dedicate an endcap or full-size display to seasonal

do well,” said Carla Boyington, director of category management for the convenience industry distributor. She added that the majority of seasonal sales are made within 24 hours of the event. “C-stores are in a prime position to catch the last-minute shopper looking for a convenient solution, but the store has to establish a quality variety and be consistent with the four major holidays so the consumer can trust that they can find what they need.” Candy is perhaps one of the most obvious and easiest seasonal product categories for c-stores to highlight, but there is work to be done there overall, according to Mars Chocolate North America. “The convenience channel is significantly under-leveraged in seasonal chocolate sales,” Larry Lupo, the candy company’s vice president of sales, reported to CSNews. “In 2013, c-stores sold 24 percent of non-seasonally wrapped chocolate, yet the channel sold only 5 percent of seasonally wrapped chocolate. There’s a huge opportunity for growth.” Novelty candy is another under-leveraged seasonal opportunity in c-store confections, particularly movierelated items with hot titles including “The Avengers” and “Star Wars,” according to CandyRific. Beyond movie titles, the primary selling opportunities for novelty candy are back-to-school, Halloween, Christmas, Easter and very strong summer sales, advised Larry Lindenbaum, vice president of sales for CandyRific. The Main evenTs

When it comes to the traditional holidays, “Easter is our biggest season in the c-store channel, followed by Christmas, Halloween and Valentine’s Day,” shared

6 Guide to Category Management | WWW.CSNEWS.COM

93%

household penetration1

want some refreshing news?

most frequently purchased beverage category 1

30%

$1,121

per store, per week, which is the

4th highest VPO 5

of population drinking an SSD daily3

3.2 billion

15.2%

of millennials’ trips included the purchase 7 of an SSD

trips made to convenience stores per year that include SSD, or about

1 in every 5 trips made to C-Stores7

in the CR channel, Coca-Cola® is

585

million servings per day 2

up 6.5% in

immediate consumption and leads sparkling beverage growth6

sparkling is the

2nd most expandable

consumption category in the store4

for more information visit

cokesolutions.com/retail

1 Nielsen Homescan Panel, Total U.S. 52 weeks ending 3.29.14 2 Beverage Digest 2014 3 B-cubed Consumer Survey, Total U.S. Population Ages 13–64, 12 MMT Mar. 2014 4 Kantar Retail Shopper Genetics, April 2012 5 Nielsen Homescan Panel, Total U.S. Small Stores, 52 weeks ending 3.29.14 6 Nielsen Databank Total U.S. CR – YTD thru Aug. 2014; performance measured as dollar sales % change vs YAG 7 Coca-Cola iSHOP Study 2014, Total U.S. Population Ages 16–75, Monthly+ Grocery Shoppers, 12 ME Sep. 2014

SEASONAL

The Day-After Blues

Sales & Volume

Seasonal merchandise, which Nielsen classifies as softener salt, charcoal/ logs, lawn and garden, ice chests, etc., grew by an impressive 24 percent in c-store dollar sales. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Seasonal

$173.5

% change

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

24.2%

29.1

18.1%

*Seasonal is a subcategory under general merchandise. Source: The Nielsen Co., 2015

Lupo of Mars Chocolate. Halloween is getting a lot of good growth press from associations like the National Retail Federation, which pegged total estimated spending for 2014 at a whopping $7.4 billion with 162 million people celebrating the spooky holiday. The National Confectioners Association reported in its 2014 Halloween US Confectionery Performance and Consumption Review that 70 percent of those 162 million consumers agreed it is OK to indulge in seasonal candy. McLane, which views summer as an additional primary incremental sales opportunity for c-stores, said it doesn’t stop with those five aforementioned holidays. “There are retailers with the right geographic profile that also do very well with other events such as Mother’s Day,” said Matos. Beer and malt beverage companies likewise identify football and the Super Bowl as events that can generate seasonal business for the convenience channel. Matos encourages c-stores to “start early with review and don’t be afraid to get the product out to the stores early.” She also advises retailers to “ask questions throughout the process. The goal is to make the most of the event with the highest incremental sales possible.” McLane works with the top seasonal suppliers to determine “well in advance” their optimal order date for the coming season. It then identifies a range of topselling seasonal items and display options, which are made available for pre-book on its Virtual Trade Show. Lupo agrees with “the earlier, the better” strategy. “Distributors should be out at least 120 days with prebooks in order to be able to get product in on the first ship date for the season so there can be maximum sellthrough for the season,” he explained. Just as important as getting in early is getting out with an exit strategy. Core-Mark’s Boyington believes this is a crucial component to seasonal success. “In 2014, we offered four multi-vendor seasonal displays with an average of 20 candy items,” she told

8 Guide to Category Management | WWW.CSNEWS.COM

What are the top missed seasonal selling opportunities in the convenience channel? Simply not doing anything. “Suppliers such as Hershey, Mars, Nestlé and others really do a great job offering proven bestsellers in varied display options for each seasonal event,” according to Cassandra Matos, product director, confection and snacks for McLane Co. Inc. “We work closely with our sales team and customers to ensure they have the information on these items timely.” Missing the value of clearance. “Having a large variety attracts consumers, creates an event and will increase sales significantly. Not all items will sell out before the event, which is a good thing because to have greater sales, you need the added product right through the event,” said Carla Boyington, director of category management for Core-Mark Holding Co. Inc. Regarding the clearance seasonal items, she said not only can retailers still make money on the items, but they can also create a second event around the clearance that again attracts consumers. Not creating space for a dedicated seasonal section. “This area is ideal for not only the traditional holiday seasons, but also [it] can merchandise themes like football, baseball and summer,” advised Larry Lupo, vice president of sales, convenience and drug channels for Mars Chocolate North America. To fit this need, Mars’ 2015 Everyday Display Program features themes centered on “key moments” including the Super Bowl and NASCAR.

CSNews. “Selling it was not an issue — getting retailers to clearance the remaining items did not happen. Without an exit strategy at retail, it’s cost prohibitive

Competitive Channel Share

The convenience channel holds the dominant share in seasonal merchandise sales vs. supermarkets and drugstores. Convenience DOLLAR SALES

52 weeks ending 11/22/14 (in millions)

8.3%

Supermarket

Drug UNIT VOLUME

52 weeks ending 11/22/14 (in millions)

13.3% 52.8% 5

26.4% 65.4% 65

Source: The Nielsen Co., 2015

33.9%

“ ”

THE EASIEST DOLLAR YOU WILL EVER MAKE IS ONE THAT YOU SAVE! GRADY ROSIER

CEO, McLANE COMPANY, INC.

WHAT IF YOU COULD SAVE UP TO

$41,000 PER STORE, PER YEAR?

SEASONAL

• Bring in candy, novelty and gifts together — establish a dedicated section. CoMpeTiTive WaTChdog

Sales & Volume by Region

Convenience stores in the Midwest sell the most seasonal merchandise. However, sales in the Northeast posted the largest growth at 51 percent. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Northeast South Midwest West

$34.4 51.4 69.1 16.5

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

51.3% 20.6 19.3 10.2

% change

5.7 7.6 13.2 2.1

46.9% 13.9 13.6 0.6

Source: The Nielsen Co., 2015

to do a guaranteed program and without a guarantee, most retailers will only buy a few boxes of the bestsellers.” This is not ideal and not how c-stores should make a seasonal statement, she said. Other best-practice seasonal selling techniques include: • Display seasonal products in high-traffic locations using secondary displays for “points of interruption.” Hot spots include near the register, cold vault, foodservice/deli and fountain drinks. • Take advantage of seasonal displays and counter units at the checkout to attract customer attention and generate suggestive selling. • Offer a healthy variety of items.

Keeping an eye on competitive channels is another way c-stores can become more seasonally savvy. Ever walk into Target before Halloween, Christmas, Valentine’s Day, Easter and/or Back-to-School and catch the overhead entryway banners, colorful dangling ceiling signs, shelf talkers, endcaps and checkout displays that all remind customers to grab in-themoment seasonal goodies? Customers can’t miss which season it is from the moment they walk in the store. Or how about the seasonal sections and prominent displays at neighborhood drug chains like Walgreens and CVS — perhaps in more direct competition with the convenience channel. “The drug channel is a great example to c-stores of how to create a presence for a seasonal event,” Boyington relayed. Drugstores also typically utilize a lot of secondary displays, “which are key to grabbing shoppers’ attention,” Lupo added. From McLane’s perspective, the dollar store channel, along with the drug channel, both typically do a very good job of planning early, buying according to consumers’ preference, getting the product into the store at the beginning of the selling period, and having seasonal products in multiple locations within the store. CSN

Seasonality for All Categories Percent change in dollar sales by month

n Cigarettes n Packaged beverages n Beer n OTP n Candy n Salty snacks n Packaged sweet snacks n Alternative snacks n Seasonal

Aside from seasonal merchandise, which not surprisingly has significant swings throughout the year, most other c-store product categories see an uptick around February and March. 60 50 40 30 20 10 0 -10 -20

Source: The Nielsen Co., 2015

10 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

01/18/14

12/21/13

11/23/13

10/26/13

09/28/13

08/31/13

08/03/13

07/06/13

06/08/13

05/11/13

4/13/13

3/16/13

2/16/13

-40

1/19/13

-30

FOODSERVICE

Daypart Trends

C-store retailers appear to finally be making inroads in the dinner daypart. Supper traffic at c-stores increased by 17 percent in 2014 vs. 2013, although it is still the smallest daypart. COnVEnIEnCE STORES Share of traffic Traffic (in millions) 2013 2014 2013 2014

Morning meal Lunch Supper PM snack TOTAL dAyPARTS

33% 19 6 42 100%

34% 18 7 41 100%

1,518.6 866.8 274.4 1,912.5 4,572.3

% change

1,600.9 851.9 320.5 1,913.8 4,687.1

5% -2 17 0 3%

TRAdITIOnAL QSRs Share of traffic Traffic (in millions) 2013 2014 2013 2014

22% 35 29 14 100%

23% 35 29 14 100%

8,252.5 13,015.7 10,786.0 5,062.3 37,116.5

% change

8,397.0 12,966.1 10,664.4 5,089.1 37,116.6

2% 0 -1 1 0%

Traditional QSRs = Fast food (excludes fast casual and retail foodservice) Convenience Stores = Foodservice visits (foods/beverages for immediate consumption) Source: CREST/The NPD Group

Share of Traffic

Percent change vs. year ago While the overall quick-service restaurant segment (excluding retail and fast casual) has been experiencing flat or declining traffic since 2009, convenience stores have been steadily ticking up their share of foodservice visits over the past five years.

n Total QSR Segment n Total QSR excluding Retail, Fast Casual n Convenience Stores n Fast Casual

10 8 6 4

Demographic Profile

Convenience store foodservice eaters and traditional QSR eaters have some key differences. For instance, QSRs attract more of the youngest and oldest consumers, while 45 percent of c-store eaters are aged 25-49. C-stores attract more men whereas QSRs attract more women, and c-stores appeal most to lower-income consumers (those earning less than $45,000).

SHARE OF TRAFFIC C-stores Traditional QSRs

0 -2 -4

2009

2010

2011

2012

2013

2014

Traditional QSRs = Fast food (excludes fast casual and retail foodservice) Convenience Stores = Foodservice visits (foods/beverages for immediate consumption) Source: CREST/The NPD Group

Buyer Share by Category

Between 2011 and 2014, while most other categories were flat or declined in purchase incidence among c-store shoppers, fresh food prepared on-site posted the largest gain by far. Beverage â&#x20AC;&#x201D; Non-Alcoholic Cigarettes/Tobacco Salty Snack Lottery Tickets Candy/Gum Sweet Snack Fresh Food Prepared On-site Beverage â&#x20AC;&#x201D; Alcoholic Single Serve, Pre-Packaged Food Grocery Foods All Other Categories TOTAL

2011

2014

57.3% 21.1 12.6 11.5 11.2 9.9 7.2 5.9 4.0 3.7 17.9 100.0%

55.2% 20.3 13.0 11.9 10.9 10.6 8.9 5.7 4.8 4.0 18.7 100.0%

Source: Convenience Store Monitor/The NPD Group

12 Guide to Category Management | WWW.CSNEWS.COM

% change

-2.1% -0.8 0.4 0.4 -0.3 0.7 1.7 -0.2 0.8 0.3 0.8

Total AgE OF EATER: Under 18 18-24 25-34 35-49 50-64 65 and over gEndER OF EATER: Male Female ETHnICITy OF EATER: Caucasian, non-Hispanic African American, non-Hispanic Other, non-Hispanic Hispanic InCOmE OF EATER: Under $25,000 $25,000-44,999 $45,000-74,999 $75,000-99,999 $100,000 and more

100%

15% 13 22 23 20 7

21% 10 14 20 21 14

54% 46

48% 52

63% 14 4 19

65% 12 6 17

29% 23 22 10 17

17% 19 24 14 26

Includes year ending December 2014 Traditional QSRs = Fast food (excludes fast casual and retail foodservice) Convenience Stores = Foodservice visits (foods/beverages for immediate consumption) Source: CREST/The NPD Group

TOP TIPS

to Optimize Foodservice

One kind of prepared food program does not fit all convenience stores, nor does one kind of hot beverage program or one kind of fountain drink program. This can make the foodservice category challenging for retailers to manage. C-stores, though, can continue outpacing the restaurant industry in foodservice growth by following these recommendations.

n Take a page from food-forward convenience stores, which are driving the channel’s increased share of foodservice traffic. These stores focus on high quality, wide variety and encouraging visits from Millennials. Both younger millennials (aged 18-24) and older Millennials (aged 25-34) are increasing their usage of c-store foodservice, according to Bonnie Riggs, restaurant industry analyst for The NPD Group. n Increase your check average by enticing consumers with deals, such as bundling, buy-one-get-one free offers, strong loyalty programs and 99-cent menu items. The average check for c-stores on deal is $4.21, compared to $3.39 not on deal, said

14 Guide to Category Management | WWW.CSNEWS.COM

Penny Anderson, convenience store industry analyst at The NPD Group.

n While Millennials care about deals and are cutting back on restaurant visits because they say it’s too expensive, members of this generation more so want to get what they pay for from an overall experience standpoint. According to Riggs, the restaurant industry is not successfully delivering against this “experience” element right now. “It’s all about fresh, good quality at what they consider to be the best prices,” she said. n Business hours now take place at all hours of the day. Operators should consider stocking their top-selling lunch products during the traditional breakfast hours of 6-9 a.m., said Kevin Miller, senior marketing manager for Tyson Convenience Foodservice. During this time, when the warmer is full of breakfast sandwiches, keep bestselling lunch sandwiches stocked in the grab–and–go cooler. n Foodservice items need to be made a destination within the store. A simple reconfiguration of equipment and store layout can be highly effective. Operators should evaluate their current foodservice layout to ensure their branded foodservice offerings are visible from the entrance, items can be easily accessed and the space where the items are located is inviting. Branded products, particularly when it comes to hot foods, can help customers feel confident about a foodservice operation, Miller said. n The afternoon snack time can offer incremental sales opportuni-

ties by positioning prepared food snacks bundled with popular afternoon beverage options, Miller cited. Operators can capitalize on this impulse purchase by strategically placing sweet snacks at destinations like the register and beverage bar.

n The bakery case is an underutilized space that can continue to drive sales in the afternoon and evening. Don’t forget to consider limited-time-offer flavors and varieties that may connect especially well during certain times of the year (holidays, seasons, etc.). n More so today than ever before, there is a strong correlation between a successful hot beverage program and a successful food offering. “No matter if the foodservice is a full-scale hot, madeto-order or ready-to-eat offering, retailers must be perceived by the customer as completely engaged in the foodservice business to optimize either the hot beverage or foodservice program,” said Jennie Jones, vice president of sales and marketing for the convenience store division of S&D Coffee & Tea. n Optimize the hot beverage side of the foodservice equation with a full-scale coffee offering based on data-driven decisions. Today’s customer has a broad taste preference, an elevated awareness of coffee and tea, and appreciates consistency but is quite open to change, according to Jones. Analyzing data — demographics, taste profiles, competitive offerings (from all areas, QSR to c-store) and trends — is the only way to create a market and not just exist within the marketplace.

Cigarettes

Sales & Volume

The cigarettes category notched another 52-week period with decreased dollar sales and unit volume. Sub-generic/private label and fourth-tier brands took the biggest hit, but the good news is that both account for only a small portion of the category. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Premium Branded discount Sub-generic/private label Fourth tier Imports TOTAL

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$40,355.2 7,264.7 2,386.9 217.2 1.5 $50,225.5

-0.2% -0.6 -3.1 -5.8 -10.7 -0.4%

% change

6,297.7 1,340.1 446.3 38.4 0.2 8,122.8

-1.7% -1.8 -5.1 -3.2 -10.3 -1.9%

Source: The Nielsen Co., 2015

Competitive Channel Share

A large number of adult consumers are still making the trip to the local convenience store for their cigarettes. Drugstores have lost some ground, decreasing to 6.2 percent in unit volume, possibly as a result of CVS Health Corp. exiting the tobacco business.

Sales & Volume by Region

Convenience

The South and West regions are the bright spots for the cigarettes category, with dollar sales ticking up 1.4 percent out west and remaining stable in the southern states. Unit volume, however, dipped throughout the nation. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Midwest Northeast South West

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$13,219.6 9,534.8 21,025.1 6,317.4

-0.8% -2.2 0.0 1.4

Supermarket

DOLLAR SALES

Drug UNIT VOLUME

52 weeks ending 11/22/14 (in millions)

6.2% 5.8%

6.6% 6.7%

% change

2,081.2 1,250.4 3,747.1 1,030.6

-3.1% -4.0 -0.9 -0.3

8 88.1%

86.7%

Source: The Nielsen Co., 2015 Source: The Nielsen Co., 2015

Seasonality

Percent change in dollar sales by month Sales of cigarettes mostly run on an even keel throughout the year, although imports appear to be on a rollercoaster. One noticeable swing shows imports falling 29.3 percent in June 2013, only to soar 19.6 percent two months later. Oddly, 2014 numbers indicate an opposite swing. n Premium n Branded discount n Sub-generic/private label n Fourth tier n Imports

20 15 10 5 0 -5 -10 -15 -20

Source: The Nielsen Co., 2015

16 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

01/18/14

12/21/13

11/23/13

10/26/13

09/28/13

08/31/13

08/03/13

07/06/13

06/08/13

05/11/13

4/13/13

3/16/13

2/16/13

-30

1/19/13

-25

ÂŠ2015 SFNTC (1)

To learn more about all of our products, please call us at 1-800-982-7454, or if you have a login, please visit us at www.EngageTradePartners.com

OTHER TOBACCO PRODUCTS

Sales & Volume

Overall, the category delivered decent single-digit growth. The segment seeing the most movement was electronic cigarettes, with a 17.6-percent increase in dollar sales and 21.6-percent increase in unit volume. However, smokeless still owns the lionâ&#x20AC;&#x2122;s share of OTP sales. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Smokeless Cigars E-cigarettes Papers Pipe, cigarette tobacco TOTAL

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$4,648.6 2,149.0 608.6 198.4 90.9 $7,695.4

5.0% 0.6 17.6 -2.4 -4.7 4.3%

% change

1,085.9 1,354.9 57.7 119.8 17.3 2,635.6

0.6% 5.3 21.6 -4.4 -9.5 3.0%

Source: The Nielsen Co., 2015

Competitive Channel Share

Despite all the talk of channel blurring, convenience stores are still the go-to place for OTP. Convenience dollar share dominated at 93 percent and unit share reached 94.8 percent. Convenience

Sales & Volume by Region

Northeast South Midwest West

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$1,132.2 3,653.9 1,777.1 1,114.6

5.7% 3.1 4.9 5.3

Drug UNIT VOLUME

52 weeks ending 11/22/14 (in millions)

The South leads the way in OTP with $3.65 billion in dollar sales. The category is making gains in other regions, too, notably the Northeast, where dollar sales jumped 5.7 percent. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Supermarket

DOLLAR SALES

52 weeks ending 11/22/14 (in millions)

5.2% 1.8%

4.0% 1.2%

% change

327.4 1,402.5 566.1 332.0

2.1% 2.5 2.7 7.7

93%

94.8%

Source: The Nielsen Co., 2015 Source: The Nielsen Co., 2015

Seasonality

Percent change in dollar sales by month Purchases of OTP remain pretty constant no matter the season. However, e-cigarette sales spike around the New Year, having increased 28.8 percent in January 2013 and 14.2 percent in January 2014 â&#x20AC;&#x201D; perhaps indicating consumers are making the switch as part of their resolutions. 30

n Smokeless n Cigars n E-cigarettes n Papers n Pipe, cigarette tobacco

25 20 15 10 5 0 -5

Source: The Nielsen Co., 2015

18 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

01/18/14

12/21/13

11/23/13

10/26/13

09/28/13

08/31/13

08/03/13

07/06/13

06/08/13

05/11/13

4/13/13

3/16/13

2/16/13

-15

1/19/13

-10

TOP TIPS

to Optimize Cigarettes When it comes to inside sales at convenience stores, cigarettes continue to be a leading category. At the same time, it remains a challenged category for many retailers. Here are a few tips operators can put into practice that may help overcome the hurdles.

n Inventory: Minimizing out-ofstocks is crucial. “Our research has shown us that about 50 percent of adult smokers will go to another store if their regular brand is not available,” said Brian May, senior manager of communications for The Altria Group Inc. “Not only is it a lost cigarette sale, but it could be a lost sale of an ancillary item as well.” to Richard Smith, a spokesman for Reynolds American Inc., adult tobacco consumers drive regular foot traffic, thus providing an opportunity to build the basket across categories. “Successful retailers understand

n Promotions: More than half of adult smokers check for price promotions, deals or coupons for their regular brand, according to Altria research. This means c-store retailers and their trade partners need to work together to ensure promotions are visible to the adult tobacco consumers in the stores. Doing so will generate excitement and traffic, May said.

smoker is the customer and because the category is new, it needs visibility of a top-down fixture,” he said. Making the most of limited back-bar space is also important, according to The Altria Group. “We try to make sure the retailers get the most out of each space — leading brands in the No. 1 position in each category; promos, brand news and new product offerings clearly communicated,” said May.

Maurici, senior vice president of sales and distribution for NJOY. “It’s less about the exact number and more about ensuring you have proper products that satisfy the evolving needs in the disposable, rechargeable and open-system vape segments,” he explained. Likewise, product assortment is one of the top reasons why an adult moist snuff tobacco consumer chooses a store, May pointed out.

n Assortment: Retailers looking for the proper assortment need to carry the brands that sell nationally and have an 80- to 90-percent satisfaction rate, Martin advised. Brands that offer the highest margin to the retailer are also key to any mix, he said. There is no ideal number when it comes to brands, said Vito

n The Right Partner: Retailers

n Be a Destination: According

TOP TIPS

to Optimize OTP “Build it and they will come” is a great line for a movie, but in real life, it takes a little more effort than that. When it comes to optimizing the OTP category, some leading suppliers in the field offered c-store retailers these best practices to live by.

n Merchandising: Retailers that have a top-down fixture do 20 to 30 percent more e-cigarette volume than those who put it below OTP, according to Miguel Martin, president of Logic Technology Development. “Clearly an adult

20 Guide to Category Management | WWW.CSNEWS.COM

the importance of being recognized as the ‘go-to’ destination for key categories like tobacco,” he said. “Traditional cigarettes still draw major foot traffic into c-store locations each day and we believe that they will continue to do so.”

should look for companies that have the financial wherewithal to stand behind their products, Martin said. That means “guaranteeing it, taking returns on out-of-date products, no questions asked, and having the financial wherewithal to get through the FDA [Food and Drug Administration] process.”

PACKAGED BEVERAGES

Sales & Volume

Carbonated soft drinks continue to be the largest packaged beverages segment, even though both dollar sales and unit volume were essentially flat vs. a year ago. Unit volume posted a 0.2-percent decrease, while price increases boosted dollar sales by 1.1 percent. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Carbonated soft drinks Alternative Sports drinks Bottled water Juice/juice drinks Iced tea (ready-to-drink) Enhanced water Other packaged beverages TOTAL

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$8,308.3 6,310.6 2,446.5 2,439.9 2,129.5 1,383.8 731.9 1,366.9 $25,117.5

1.1% 6.3 6.6 6.8 1.5 7.6 7.3 12.5 4.6%

% change

5,192.16 2,580.3 1,375.8 1,582.5 1,284.0 1,019.9 407.1 570.2 14,011.8

-0.2% 6.8 4.5 3.4 -0.1 4.9 5.5 10.1 2.8%

Source: The Nielsen Co., 2015

Competitive Channel Share

Although supermarkets still beat out c-stores for the largest channel share, convenienceâ&#x20AC;&#x2122;s share increased slightly in 2014 for both dollar sales and unit volume. Drugstores saw little change.

Sales & Volume by Region

Convenience

Growth of packaged beverages sales differed strongly depending on region, with the largest percent increases occurring in the West. Sales were relatively flat in the Northeast, with dollar sales increasing 1.8 percent and unit volume increasing only 0.8 percent. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Northeast South Midwest West

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$3,656.9 11,396.6 5,282.5 4,880.7

1.8% 5.0 3.3 7.5

Drug UNIT VOLUME

52 weeks ending 11/22/14 (in millions)

5.2%

% change

1,978.9 6,526.9 2,973.5 2,584.0

Supermarket

DOLLAR SALES

42.6%

0.8% 3.1 1.7 5.7

52.2%

47.9%

46.9%

Source: The Nielsen Co., 2015 Source: The Nielsen Co., 2015

Seasonality

Percent change in dollar sales by month

n Carbonated soft drinks n Alternative n Sports drinks n Bottled water n Juice/juice drinks n Iced tea (ready-to-drink) n Enhanced water n Other packaged beverages

Sports drinks see the largest seasonal swings, predictably rising in warm months and falling as the weather grows colder. Alternative beverages remain fairly steady throughout the year. 25 20 15 10 5 0 -5 -10 -15

Source: The Nielsen Co., 2015

22 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

01/18/14

12/21/13

11/23/13

10/26/13

09/28/13

08/31/13

08/03/13

07/06/13

06/08/13

05/11/13

4/13/13

3/16/13

2/16/13

-25

1/19/13

-20

MALT BEVERAGES

Sales & Volume

Microbrews had another stellar year in both dollar sales and unit volume, while super premium and flavored malt brews saw solid growth as well. However, budget, popular and premium beer all declined compared to one year ago. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Premium Imports Budget Popular Flavored malt Micro Super premium Malt liquor Non-alcoholic beer TOTAL

% change

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

-0.9% 12.9 -6.3 -3.0 19.7 24.5 17.5 5.1 0.3 2.7%

1,424.5 296.6 353.3 326.2 407.4 88.7 77.8 191.5 1.6 3,167.6

-1.4% 11.0 -6.6 -6.0 17.9 23.6 26.9 4.0 -2.8 2.2%

$8,690.7 1,983.6 1,603.7 1,460.4 1,297.9 633.5 602.2 382.9 8.8 $16,663.7

Source: The Nielsen Co., 2015

Competitive Channel Share

The market share of convenience stores and their competitors saw little change in 2014. C-stores continue to dominate in unit volume and lead in dollar sales as well, with both seeing very slight year-over-year increases.

Sales & Volume by Region

Convenience

The Northeast saw a nearly 5-percent uptick in unit volume, but promotional prices held the dollar sales increase to less than 1 percent. A nearly opposite scenario occurred in the South, where unit volume saw a slight drop but higher prices boosted dollar sales. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Northeast South Midwest West

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$1,628.7 9,219.6 2,975.2 2,867.7

0.8% 1.9 2.8 6.8

Supermarket

DOLLAR SALES

52 weeks ending 11/22/14 (in millions)

3.5%

4.8% 26.2%

% change

285.1 1,792.9 509.4 580.3

Drug UNIT VOLUME

4.8% -0.2 4.4 7.4

35.7% 59.5% 5

70.3% 70

Source: The Nielsen Co., 2015 Source: The Nielsen Co., 2015

Seasonality

Percent change in dollar sales by month Non-alcoholic beer and import brews saw some of the most extreme shifts from season to season, while premium beer spiked last March before establishing a general downward trajectory.

n Premium n Imports n Budget n Popular n Flavored malt n Micro n Super premium n Malt liquor n Non-alcoholic beer

25 20 15 10 5 0 -5 -10

Source: The Nielsen Co., 2015

24 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

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-15

TOP TIPS

Top Tips

to Optimize Packaged Beverages Even with the right mix of products, placement and signage can make a critical difference in the cold vault. Leading suppliers offered this advice for convenience store operators.

n Place products based on data, not supplier contracts or gut feeling. “We try to help customers find better solutions by looking at the facts, so that we are putting the right products in the right place at the right time,” said Clint McKinney, The Coca-Cola Co.’s director of convenience retail category advisory and space strategy.

have the opportunity to creatively offer solutions/combinations along the path back to the cashier.”

n Streamline the path to purchase.

zone” placement strategy. “The key element to remember is that all flavor brands need to be in the strike zone,” said Ivan Alvarado, Dr Pepper Snapple Group’s director of category management. “Placing just one manufacturer in the strike zone will not maximize the opportunity.”

The energy drinks section is often particularly crowded, but shoppers know what they want. “It is their destination item,” said John Showalter, director of business insights for Red Bull North America. “Once they have their planned item in hand, then retailers

Top Tips

to Optimize Malt Beverages C-stores remain a popular destination for malt beverages purchases, but a few adjustments will help retailers get the best results from their product mix.

n Rethink what kind of beer gets the most shelf space. “Import beer is growing faster than the category and drives volume more efficiently than craft [beer],” said Nick Lake, senior director of category development for Heineken USA. Imports also have a fast-growing multicultural consumer base. n Focus on products that drive

incrementality, which measures how much an item grows the category instead of cannibalizing other brands.

n Avoid stocking too much or too little. Adding unique and differentiated items does more than just add SKUs, but a minimum of five beer doors with 110 items is optimal.

n Make it easy to check the cost. Research shows many c-stores lack clearly-marked pricing, and shoppers are less likely to make a purchase without it. n Consider adopting a “flavor

n Offer single bottles and/or cans. “Singles can help drive traffic with a margin that is usually 10 points higher than the category average,” said Tim Gossett, vice president, national retail sales — category leadership, at Anheuser-Busch. n Develop the product assortment based on who your shoppers are, how they shop, what occasions they shop for, and what segments and brands they buy. Optimizing assortment and flow can determine whether a sale is made or lost. n Keep four days’ worth of supply to ensure key items stay in stock.

WWW.CSNEWS.COM | Guide to Category Management 25

CANDY

Sales & Volume

The total candy/gum category expanded by about 3 percent in dollars last year on flat unit growth. Bagged or repacked pegged candy, along with seasonal novelty candy, drove both dollar and unit count increases in the category. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Chocolate bars, packs Bagged/repacked peg candy Gum Novelties, seasonal Non-chocolate bars, packs Candy rolls, mints, drops TOTAL

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

$1,777.8 1,567.2 984.1 583.6 367.5 322.0 $5,602.3

-2.7% 15.8 -3.1 7.9 -3.9 -1.0 2.9%

% change

1,196.9 956.0 744.1 520.3 341.9 218.5 3,977.8

-5.2% 9.7 -3.3 3.5 -3.3 -5.0 -0.3%

Source: The Nielsen Co., 2015

Competitive Channel Share

Supermarkets command a slightly higher dollar share of the entire candy/gum market, but c-stores have a 10-point lead in unit share among the three major retail channels. Convenience

Sales & Volume by Region

Northeast South Midwest West

$809.2 2,445.6 1,289.1 1,068.6

1.6% 3.3 2.2 3.7

52 weeks ending 11/22/14 (in millions)

21.9%

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

20.7%

% change

576.4 1,762.4 899.9 744.5

Drug UNIT VOLUME

52 weeks ending 11/22/14 (in millions)

The South is the largest region for candy/gum sales, but the West region registered a slightly better percentage increase in dollar sales last year. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Supermarket

DOLLAR SALES

38.9% 3

-1.0% 0.6 -2.2 0.3

44.7% 39.2%

34.6%

Source: The Nielsen Co., 2015 Source: The Nielsen Co., 2015

Seasonality

Percent change in dollar sales by month As would be expected, seasonal novelty candy has experienced the widest swings in sales the past two years among all the candy/gum subcategories. 25 20

n Chocolate bars, packs n Bagged/repacked peg candy n Gum n Novelties, seasonal n Non-chocolate bars, packs n Candy rolls, mints, drops

15 10 5 0 -5 -10 -15

Source: The Nielsen Co., 2015

26 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

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AirheadsÂŽ is the 3rd largest brand

in front-end non-chocolate*

top selling item in all c-store regions!

strong repeat rates & short purchase cycles for AirheadsÂŽ bites indicate that consumers want more.

introducing...

King size items are driving the growth up +27%

Non-Chocolate Peg Bags increasing in dollars & share year-after-year Shipping April 1st 2015 *IRI Scan Data Current 24 weeks ending December 21, 2014, MULO+C **IRI Scan Data, Total US C-Store, current 24 weeks ending December 21, 2014

SNACKS

Sales & Volume

Packaged sweet snacks and alternative snacks outpaced the growth of salty snacks last year. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Potato chips Tortilla/corn chips Other salty snacks Nuts/seeds All other TOTAL SALTY SNACKS Muffins/doughnuts Snacks/pastries/desserts Cookies TOTAL SWEET SNACKS Meat snacks Health/energy/protein bars Other alternative snacks Granola/yogurt bars TOTAL ALTERNATIVE SNACKS

% change

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

6.2% 9.9 6.4 6.7 3.6 6.2% 7.3 18.4 7.2 10.3% 11.5 3.9 15.1 8.3 9.3%

890.5 550.9 590.8 649.1 991.9 3,673.2 839.0 523.0 577.9 1,939.9 510.6 341.8 59.6 125.8 1,037.9

4.1% 7.4 4.2 1.9 1.6 3.5% 2.8 8.9 6.6 5.5% 6.0 2.1 12.9 6.4 5.1%

$1,434.4 1,002.1 941.2 793.3 1552.4 $5,723.4 1,209.1 732.3 629.0 $2,570.3 1,286.7 595.3 159.6 112.8 $2,154.3

Source: The Nielsen Co., 2015

Competitive Channel Share Sales & Volume by Region

The most salty snacks sold were in the South by a wide margin last year. However, the West was as big a story, with dollar sales rising 8 percent and unit volume rising 6.2 percent. DOLLAR SALES 52 weeks ending 11/22/14 (in millions)

Northeast South Midwest West

$833.8 2,535.8 1,174.3 1,191.2

4.2% 6.3 5.3 8.0

Convenience

Supermarket

DOLLAR SALES

500.0 1,755.2 708.0 713.3

52 weeks ending 11/22/14 (in millions)

5.3%

5.2%

% change

1.7% 3.2 2.9 6.2

Drug UNIT VOLUME

52 weeks ending 11/22/14 (in millions)

UNIT VOLUME 52 weeks ending 11/22/14 (in millions)

% change

Convenience stores continue to take more salty snacks share from the grocery and drug channels. C-stores now sell nearly one-quarter of the category in terms of dollar sales, while attaining more than one-third of the unit volume.

24.3%

35%

Source: The Nielsen Co., 2015

60%

70.5%

Seasonality

Source: The Nielsen Co., 2015

Percent change in dollar sales by month

While salty snacks and packaged sweet snacks tend to have steady sales regardless of the time of year, alternative snacks showed some wild swings in 2014. Sales skyrocketed in the spring months, but bottomed out in November. 20 n Salty snacks n Packaged sweet snacks n Alternative snacks

15 10 5 0 -5

Source: The Nielsen Co., 2015

28 Guide to Category Management | WWW.CSNEWS.COM

11/22/14

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TOP TIPS

Top Tips

to Optimize Snacks There are two common mistakes when selling snacks, according to industry experts. One is carrying too much variety, causing retailers to underinventory the top-selling SKUs, leading to lower profitability. The other is not organizing snack sections by consumer need states and, whenever possible, by daypart. Here are some tips to improve snack sales.

n “We recommend retailers establish clear criteria for space allocation and use those criteria when determining which products to remove, typically those that are not earning their shelf space,” said Kevin Vivian, senior vice president for PepsiCo Inc.’s Frito-Lay division. “We also recommend that retailers make sure the section is across from the cold vault or in a highly visible, high-traffic aisle.” n “Create a variety snack destination that includes the right assortment, the right space and the right adjacencies,” advised ConAgra Foods’ Terry Hancock, field manager

20 percent of candy, mint and gum category sales, it should get 20 percent of the rack space.

Top Tips

to Optimize Candy Leading suppliers have several tips for maximizing sales and profits in the confection category. Here are some best practices that will have c-stores on the sweet side rather than the sour.

n It is imperative for c-stores — because of their small footprint — to be disciplined with their space allocation, according to Joey Hendrix, senior manager of c-store category insights for The Hershey Co. Space should always be aligned with sales. For example, if gum is

30 Guide to Category Management | WWW.CSNEWS.COM

n Create vertical stripes of chocolate and non-chocolate products, with gum and mints running horizontally on the top shelves. “Having a section of chocolate with gum and mints on top encourages shoppers to buy multiple categories,” Hendrix said, noting that basket analysis shows candy is rarely purchased alone. “Within each stripe of chocolate or non-chocolate, it’s important to brand block, which eases the shopping experience for those looking for a particular item.” n Two-for-$3 and similar promotions help build baskets. Entice shoppers to participate with signage and shelf plates through the candy/mint/gum racks and throughout the stores. Gain more impulse sales by placing a confection end-

of category leadership, and Kristen Kessler, senior manager, brand. “Variety snacks include meat snacks; snack mixes; snack nuts/seeds; trail mix; microwave, ready-to-eat and kernel popcorn; canister and natural/ organic chips; and rice cakes.”

n “To maximize the shopping experience and make it easier for shoppers to find what they are looking for, it is important to merchandise like-type categories together,” noted Kelly Fulford, category development manager for General Mills Convenience & Foodservice. “One example is pulling together the salty [snacks] category.”

cap at the front of the candy aisle.

n Leverage seasonal chocolate

sales. It’s a huge growth opportunity for c-stores, according to Larry Lupo, vice president of sales for the convenience and drug channels for Mars Chocolate North America. Dedicate a part of the store to seasonal displays.

n Place secondary displays in hightraffic locations. Shoppers move through the store and make buying decisions quickly, so second, third and fourth interruption points are a big opportunity for a larger, more profitable ring, Lupo explained. Hot spots include: near the register, cold vault, foodservice/deli and fountain drinks. n Offer larger bags alongside immediate-consumption sizes to capitalize on fill-in trips. Items in stand-up pouches can fulfill this shopper need.

Expert’s View

CatMan at 20: Looking to the Future The next five years may see as many changes as the first 20 years of category management

ategory management is now 20 years old. The discipline that emerged from a shared vision of the consumer packaged goods (CPG) industry leadership has become the principal language with which retailers and manufacturers communicate. Why has category management been adopted so broadly? Because it works. CatMan has proven to be a superior approach that enables retailers and manufacturers to meet the needs of their common shopper in a more efficient and effective manner. All of the achievements of category manBy Gordon Wade, Category Management agement have grown Association from the original vision of collaborating to meet shopper needs. But it is a different world today. The industry needs “category management 2.0,” a coherent response to the changes occurring over the past 20 years and especially the past five years. What are those changes to which the industry must respond? We see four major trends that have occurred and will continue to affect the CPG environment: 1. The empowerment of the shopper via vastly improved real-time digital communication. 2. The growth of cross-channel competition. 3. The explosion of data, creating the rise of big data. 4. Improved analytical techniques complemented by ever-improving software tools. The DigiTally empowereD Shopper

Today’s shoppers are infinitely better informed about their choices than was the case 20 years ago. They

can gather information at the click of a mouse from retailers, from manufacturers and equally as important from their fellow shoppers. Retailers and manufacturers can now communicate directly and personally with the shoppers to influence their decisions at critical moments on the path to purchase. inTenSe CroSS-Channel (omniChannel) CompeTiTion

This panoply of new information enables shoppers to assess how each channel meets their needs. As a result, cross-channel competition is at unprecedented levels. One result is the retailer’s intensely felt desire to localize its merchandising efforts, especially item assortment on a neighborhood by neighborhood basis — an especially

WWW.CSNEWS.COM | Guide to Category Management 31

Expert’s View

important consideration in the convenience channel. Twenty years ago when category management was developed, this need was not so intensely felt nor was the solution possible. Today, everything is different. The TSunami of new DaTa

The past two decades have seen the development of the Internet and social media, which in turn have become a wellspring of insights about shopper attitudes and behaviors. Indeed, unfiltered access to the experiences of millions of their fellow shoppers is one of the more important influences on shopper behavior. Everyone is struggling to connect the dots of these disparate data points to create a recognizable mosaic of shopper attitudes and behaviors. improveD analyTiCS & SofTware ToolS

Today’s CPG environment is infinitely more analytically sophisticated than it was 20 years ago. This is the result of all the new data points, but also the growth of powerful predictive analytics software in combination with ever-more sophisticated merchandising planning tools such as JDA’s “Planogram Generator.” Today’s analytics allow trading partners to vary assortment down to the level of each store, and the planogram software facilitates the creation of thousands of planograms at a speed undreamed of as recently as five years ago. CaTegory managemenT in 2020

So, what will category management look like five years from now in the year 2020? One thing is certain: The sharing of data among trading partners will continue to grow in importance. That is because developing powerful shopper insights requires significant data sharing. The biggest challenge for the category management discipline will be to develop the people who can meet the challenge. For the retailer, tomorrow’s challenge is to develop people who can: • Integrate all the disparate data sources from the manufacturers and various internal data sources into a coherent “Voice of the Shopper” for the category; • Identify various tactical success models in assortment, pricing, merchandising and promotion that drive the business; • Leverage the new digital communication capabilities to drive shoppers along the path to purchase; and • Understand how to use the new data sources and analytics to drive category volume and profit.

32 Guide to Category Management | WWW.CSNEWS.COM

Speaking of data, it will grow in types and in quantity. For example, category managers will have brand switching data across formats, price elasticity by format and account, promotion response by shopper segmentation and account, total store space optimization effect on company categories by retail format, account and clusters within accounts, and more! In analytics and software, the category manager in 2020 should expect: • Path-to-purchase ROI optimization by shopper segment, format and brand; • Price elasticity optimization by shopper type and format, in-store product location and adjacency; and • The ability to incentivize shoppers in real-time by aisle and by store. Category managers in 2020 will also have new skills. They will be active promoters of strategic interchange between trading partners and internal functions. They will also be major contributors to an improved shopping experience. From a company culture and business process standpoint, the category manager of 2020 will: • Own responsibility for all in-store response analytics on the category; • Be responsible for deploying insights at retail; and • Be the pivotal communication link between marketing and sales, logistics and store. The next five years may see as many changes as the first 20 years of category management. What we need now is a new generation of practitioners up to the task of utilizing the new data and the new tools for the benefit of the shopper. And, of course, we need category management 2.0 to make sense out of all of this. CSN Gordon Wade is senior vice president, category management best practices, for the Category Management Association (CMA). Founded in 2004, CMA is a global category management community that enables professionals to connect with peers around the world and further their careers with the latest in best practices and certification. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

Expert’s View

The New Shopper-Centric Category Management Consideration for the shopper needs to be infused into every step of the process

ategory management has been around for 20 years and, like many things, has evolved with changes in the convenience channel. The biggest changes? The data has become bigger and software faster; the industry has become more competitive and consolidated; and most importantly, the shopper has become more educated and complex. Traditional category management needs to be updated to include a laser focus on the shopper. Retailers, suppliers and manufacturers in the convenience channel need to take advantage of the evolving data, software tools and expertise available today to create better and differentiated By Sue Nicholls, Category Management shopper experiences. This is the Knowledge Group “new” category management. Focusing on the shopper starts with a true understanding of who the shopper is and what attracts them to specific stores. This shopper understanding needs to be the common thread that links all of the organization’s departments and processes together. Understanding the shopper in the convenience channel requires consideration of customers who live, work, study and/or drive through a store’s trading area. Today, many retail organizations are far less shopper-centric than they claim to be. The opportunity is for retailers to collaborate with their trusted vendor partners to better understand their shoppers and what motivates them along the path to purchase. These shopper insights will help retailers and vendors jointly develop more targeted and higher impact tactical plans to meet their needs.

This focus on the shopper affects all parts of category management, starting with retail store clustering. Variables like store size, store type, store sales, and shopper demographics and psychographics need to be included in store clustering. Each of these considerations affect choices that category managers take across the tactics. In the past, retailers have had limited ability to cluster stores due to data storage and analytic limitations, as well as a limited understanding of the shopper demographics and psychographics. Improvements in technology and more information on the shopper, coupled with NACS (The Association for Convenience & Fuel Retailing) store format and store type definitions, give convenience store retailers the foundations for creating a solid clustering strategy. Once the clusters are established, the retailer needs to have the systems and processes in place to manage its clusters and then incorporate them into all category management processes. Incorporation of the store clusters

Guide to Category Management 33

Expert’s View

into the category management process starts with category definitions. In the convenience channel, NACS has done much of the preliminary work for retailers by developing (and maintaining) industry standard category definitions for the convenience channel that consider market research and consumer decision trees. These definitions can be used as a guideline as retailers define their own internal categories based on their unique store clusters. For example, in smaller squarefootage stores, they may have a category called Total Snacks, whereas larger stores may have both Salty Snacks and Alternative Snacks categories. Category roles and strategies are also important to define as part of a retailer’s overall strategies. For each category in the store, retailers need to make some strategic decisions, including the purpose, location and tactics (including shelving, product assortment, promotion and pricing). Assigning category roles to each category helps retailers to strategically address these choices. NACS has identified the category roles (Destination Driver, Staple, Niche, Occasional/Seasonal and Fill-In) and strategies (Cash Flow Generator, Image Enhancer, Transaction Builder, Profit Generator and Traffic Builder) specific to the convenience channel. These are a great starting point as retailers assign roles and strategies to their categories (including by store cluster where required), and the associated tactics and guidelines associated with each of them. When category managers develop their category plans, they need to consider the definition, roles and strategies that have been assigned to the category. An

34 Guide to Category Management | WWW.CSNEWS.COM

in-depth assessment of the category needs to consider market, retailer and shopper perspectives, as well as category trends. With today’s data and tools, retailers can complete in-depth analysis at the cluster level to identify key opportunities vs. the market and competition; key tactical drivers and an understanding of how they impact segment performance; the gaps between goals and current performance; and an understanding of the shopper and how to meet their needs within specific categories. The biggest challenge — and opportunity — is for retailers, suppliers and manufacturers to become more sophisticated in accessing and leveraging big data, ultimately developing shopper-centric solutions. Consideration for the shopper needs to be infused into every step of the category management process. To enable shopper-focused category management, retailers need to change their traditional category management approach. It starts with collaborating with supplier/manufacturer partners in a more strategic way to develop joint shopper research and business plans. This approach allows retailer and supplier/manufacturer partners to work together to determine their biggest areas of mutual opportunity and then determine who will work on the research, analytics, tactics and executional components required to optimize time and resources for both partners. Cross-functional alignment is required both internally and externally, including the development of skills to match the requirements of the new approach. Regardless of whether you are a large convenience store chain with a central headquarters or a small localized chain, you need to start improving your strategies and approaches to your business with more focus on your shopper. The only difference will be the depth to which you can do this based on access to data, resources available and the level of collaboration with your supplier/manufacturer partners. CSN Sue Nicholls is president of the Category Management Knowledge Group (CMKG). Founded in 2002, the global training organization is based in Canada and offers training solutions accredited by the Category Management Association that meet or exceed accreditation standards across a full range of topics. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.