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VIEWPOINT By Don Longo, Editorial Director
North by Southeast Pantry acquisition propels Canada’s Couche-Tard to the head of CSNews’ 2016 Top 20 Growth Chains list
hen Alain Bouchard, then chairman/president/CEO of Alimentation Couche-Tard Inc., was inducted into the Convenience Store News Hall of Fame in December 2007, he said the convenience store industry was too fragmented. To prosper and compete effectively, he believed the industry needed three or four operators with large market shares. If these large companies could control about 30 percent of the total market, the industry would have greater power and influence to create efficiencies in the supply chain, he said. As of last year, the top four c-store industry operators (Couche-Tard included) comprised about 15 percent of the total c-store count in the United States. So, in less than a decade, the industry is about halfFor comments, please contact way to Bouchard’s goal. Don Longo, Editorial Director, Since its beginning, the Laval, at (201) 855-7606 or Quebec-based retailer has grown firstname.lastname@example.org. through a series of acquisitions, first in its home nation of Canada and then in the U.S. — most prominently, its purchase of the Circle K network in 2003. In 2014, Bouchard handed the company’s president/CEO title off to Brian Hannasch, a respected, long-time Circle K executive, who said at the time: “Couche-Tard is a great ship and I assure you there
will be no sudden change in direction.” At that point, Couche-Tard operated 6,221 c-stores in North America. It also operated 2,263 European stores. Since then, Hannasch has steered the company along the same growth-by-acquisition path. As of this past October, Couche-Tard’s network included 8,006 c-stores in North America, spread out among 15 decentralized, regional business units. Couche-Tard added roughly 1,500 U.S. stores when it closed on its acquisition of The Pantry Inc., based in Cary, N.C. The March 2015 deal expanded its presence in 13 states in the Southeast. It also added another dozen or so c-stores in Indiana and Kentucky. With these acquisitions, Couche-Tard easily led the industry in net new store count in the U.S. last year (see page 22). Presently, Hannasch and his team are working on bringing all these acquisitions, both in the U.S. and abroad, together under a new global Circle K banner. For years, the company’s decentralized operating structure has been dissected and debated by outsiders. But that system has been key to the company’s growth. Now, as Couche-Tard enters yet another period of evolution, the company is not abandoning that decentralized structure, but it will “bring its scale to bear where it makes sense,” Hannasch told CSNews Senior Editor Melissa Kress, whether that means taking its best and brightest and focusing them on differentiating Circle K’s products or on improving customer service. It will certainly be interesting to watch Circle K develop into a truly global brand.
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 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
2015 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2014 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013 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
4 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
2015 American Society of Business Publication Editors, National Silver Azbee Award Best Profile (long form), February 2014 2015 American Society of Business Publication Editors, Midwest Regional Gold Azbee Award Best Special Supplement, November 2014 2015 American Society of Business Publication Editors, Midwest Regional Silver Azbee Award Best Profile (long form), February 2014 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
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CONTENTS MARCH 2016
Couche-Tard directors (L to R): Brian Hannasch, Richard Fortin, Réal Plourde and Alain Bouchard.
VOLUME 52/NUMBER 3
22 | COVER STORY Growth Spurt
Alimentation Couche-Tard is planting a new Circle K banner across the globe. 28 | A Perfect Storm With low interest rates and record margins, there’s more sellers than ever before and this year’s Top 20 Growth Chains are capitalizing.
INDUSTRY ROUNDUP 14 | Murphy USA Embarks on Independent Growth Strategy 16 | MACS Founder Re-Enters the C-store Business 18 | Eye on Growth 18 | People on the Move 19 | Retailer Tidbits 19 | Supplier Tidbits
HOW TO DO WORLD-CLASS FOODSERVICE 52 | How to Keep Your Roller Grill Sales Rolling 52 | Call to Action: Foodservice 101 56 | Call to Action: Foodservice 201 57 | 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 © 2016 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.
6 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
ÂŠ2016 Goya Foods, Inc.
* Nielsen Strategic Planner, Total U.S. (unit and dollar sales), 52 weeks ending 12/19/15
CONTENTS FEATURES 40 | A Decade of Dominance Retiring Casey’s CEO Robert Myers reflects on his career with the Midwest c-store chain.
CATEGORY MANAGEMENT MOTOR FUELS
48 | Striving for More Alon expands its carbon-neutral fuel offering, with plans for further growth. FOODSERVICE
58 | Eating Patterns in America: The State of the Consumer Household changes will continue to shape the future of eating for years to come.
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Don Longo firstname.lastname@example.org Linda Lisanti email@example.com Brian Berk firstname.lastname@example.org Melissa Kress email@example.com Angela Hanson firstname.lastname@example.org Danielle Romano email@example.com Renée M. Covino firstname.lastname@example.org Tammy Mastroberte email@example.com Michael Escobedo firstname.lastname@example.org
62 | Spotlight on Smokeless Where there’s no smoke, there is still industry fire around the smokeless segment. COLD VAULT
66 | Difference in Opinion C-store retailers and wholesalers think differently about the pending merger of Anheuser-Busch and SABMiller. CANDY & SNACKS
68 | Snackification & the Millennial Consumer Three of today’s major snacking trends are largely influenced by this generation.
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3 | North by Southeast Pantry acquisition propels Canada’s Couche-Tard to the head of CSNews’ 2016 Top 20 Growth Chains list.
Vice President & CFO
12 | CSNews Online
CONVENIENCE STORE NEWS AFFILIATIONS
20 | New Products STORE SPOTLIGHT
72 | Putting the ‘&’ in Kum & Go The chain debuts a prototype store that brings to life its brand slogan. 90 | Getting to the Core
Chief Revenue Officer Chief Brand Officer
Premier Trade Press Exhibitor EDITORIAL ADVISORY BOARD Brett L. Atherton Bolla Management Rick Crawford Green Valley Grocery Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Ray Johnson Speedee Mart
Jack Lewis Village Pantry LLC
Jonathan Polonsky Plaid Pantries Inc.
Kyle McKeen Alon Brands Inc.
Roy Strasburger Convenience Management Services Inc.
Richard Mione GPM Southeast Matt Paduano Nice N Easy Grocery Shoppes
Jon Urbanik CST Brands Inc.
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.
8 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
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CSNEWS.COM TOP 5 Daily News Headlines
The most viewed articles online.
A Rallying Cry for C-store Foodservice Growth
Checkers Drive-In Restaurants Inc., parent company of Checkers and Rally’s drive-thru restaurants, is planning to rally around the convenience channel as the company nears its 30th anniversary. While c-store Checkers/Rally’s locations currently remain a minority, with the oldest one opening around a decade ago, the company has “definitely seen a surge in proposed sites and is aggressively going after that as a [growth] channel,” Senior Vice President and Chief Development Officer Jennifer Durham told CSNews Online. Rather than focus on building up its c-store presence in specific geographic regions of the country, the company is pursuing a fill-in strategy whereby it hopes to add more c-store franchises in areas where the brand is well known but the population density is unlikely to support a standalone restaurant.
1 | Eight High-Ranking Pilot Flying J Employees Indicted Former Pilot Flying J President Mark Hazelwood was among eight high-ranking company executives indicted last month in connection with an alleged fuel rebate scheme. All eight are accused of participating in a “scheme and artifice to defraud certain interstate trucking companies, and for obtaining money from certain interstate trucking companies by means of materially false and fraudulent pretenses, representatives and promises.” 2 | Walmart Plans to Build as Many Gas Stations as Possible Wal-Mart Stores Inc. plans to build as many gas stations as it can in an effort to boost profits, as well as encourage customers to enter its brick-and-mortar stores and purchase higher-margin items. Walmart has decided to develop its own proprietary gasoline program for its supercenters that are not currently supplied by its convenience store partner, Murphy USA Inc.
For more exclusive stories, visit the Special Features section of www.csnews.com.
3 | PHOTO GALLERY: Corner Store Is Reborn Corner Store convenience stores are embarking on an era of change. As part of parent company CST Brands Inc.’s 2020 strategic plan, the Corner Store brand is getting an overhaul starting in its hometown of San Antonio and spreading outward. The new initiative focuses on growth in food choices and in-store sales.
PRODUCT HIGHLIGHT The most viewed New Product online.
Henry’s Hard Soda
4 | GPM Acquires Gas-Mart USA Stores in Midwest GPM Investments LLC is continuing its role as a key mergers and acquisitions player in the convenience channel. The retailer announced in February that it is boosting its Midwest portfolio with the purchase of 21 locations in Illinois, Iowa and Nebraska from Gas-Mart USA Inc. and its affiliates.
Crafted for beer and non-beer drinkers alike, with a 4.2-percent alcohol by volume, Henry’s Hard Soda puts a playful spin on familiar flavors, according to maker MillerCoors. The smooth, moderate-body beverage offering comes in Ginger Ale and Orange Soda. The Hard Ginger Ale has a balance of fresh ginger flavor and herbal notes, while the Hard Orange Soda balances sweetness with a pop of tangy citrus flavor. Henry’s Hard Soda is available nationwide in six-packs of 12-ounce bottles, and in 16-ounce single cans. MillerCoors Chicago www.henryshardsoda.com
5 | Hess-Branded Stores Make Their Final Exit Speedway LLC completed the conversion of all 1,245 Hess Retail locations it acquired along the East Coast and in the Southeast, which put it well ahead of schedule, Gary Heminger, president and CEO of parent Marathon Petroleum Corp. (MPC), announced during the company’s 2015 fiscal fourth-quarter earnings call. “The acquisition of these retail locations has exceeded our expectations and has been a tremendous value driver for MPC,” he said.
How would you describe your business outlook for 2016?
12 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
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INDUSTRYROUNDUP FAST FACT
Murphy USA Embarks on Independent Growth Strategy Retailer implements “Plan B” after Walmart’s decision to go it alone with gas By Brian Berk
Single-person households in the United States are 38 million strong and growing — the highest in history — with 55 percent being adult only. Source: The NPD Group (page 58)
“This has been a great company for such a long time. My task was to make it even a little bit better, which I think we have.” — Robert Myers, Casey’s General Stores Inc. (page 40)
ollowing Wal-Mart Stores Inc.’s decision to develop its own proprietary gasoline program for its supercenters not currently supplied by Murphy USA Inc., the convenience store retailer will shift to “Plan B,” a new independent growth strategy, President and CEO Andrew Clyde said during a conference call with Wall Street analysts in late January. “It’s been an eventful and exciting past few days that generated plenty of interest,” Clyde said of Walmart’s decision announced Jan. 25. “We’ve seen this fork in the road coming. This decision did not surprise us.” Murphy USA’s Plan B entails organic growth of 60 to 80 new convenience stores per year for 2016 and 2017, some of which will be larger-format stores. Murphy USA’s larger locations span 3,500 square feet — much bigger than the chain’s 1,200-squarefoot legacy locations — and feature a greatly expanded product mix, although they do not incorporate a made-to-order foodservice operation, according to Clyde. Murphy USA’s larger sites have been very successful so far in Arkansas, Colorado and Louisiana, the chief executive noted. The company plans to begin operating in three additional states in 2016: Nebraska, Nevada and Utah. As of Dec. 31, the end of its latest reported quarter,
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Murphy USA operated 1,335 c-stores and gas stations in 24 states, comprising 1,111 Murphy USA sites and 224 Murphy Express locations. The El Dorado, Ark.-based c-store operator will also repurchase as much as $500 million worth of its stock over the next couple of years. Regarding Walmart, Clyde revealed that Murphy USA made a “compelling offer” to continue developing sites with the big-box chain, but Walmart decided to go in another direction. He insisted, however, that there was “no breakdown in negotiations” and the two companies continue to have a strong relationship. Murphy USA will continue to run the more than 1,000 gas stations it has already built near Walmart stores. “Nothing happened to deteriorate our relationship and we don’t want to let anything happen to deteriorate it,” he stated. While Clyde said he does not know Walmart’s future intentions, he acknowledged the big-box operator could build its own gas stations and perhaps even convenience stores in the future, some of which may compete with Murphy USA locations. However, he said Murphy USA is ready for any competitive challenge, as it has already faced the likes of QuikTrip, Sheetz and Wawa.
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© 2016 McLane Company, Inc. All rights reserved.
MACS Founder Re-Enters the C-store Business Steven Uphoff’s company will operate the Dion brand in South Florida By Melissa Kress
lorida is once again the site of convenience store action. This time, it brings industry veteran Steven Uphoff back to the channel. His company, Uphoff Ventures, based in Chesterfield, Va., closed on an acquisition of Dion Oil Co., of Key West and Homestead, Fla. “First and foremost, Dion Oil is a first-rate, efficiently run company, with a strong family tradition. The quality of its assets and attractive locations are also something that made a lot of sense to us in an industry we are very familiar with,” Uphoff told Convenience Store News. Through the Dion Oil acquisition, Uphoff Ventures adds 11 operating convenience stores to its portfolio, including one new site currently under construction in Key West. The locations are branded Dion Quik Mart convenience stores and one Dion grocery store. Both the stores and the oil company will remain under the Dion brand. The deal also included the acquisition of various dealer-served fuel sites, and a CITGO bulk oil and lubes business. Uphoff Ventures also assumed the wholesale fuel supply contracts with ExxonMobil, CITGO, Marathon and Chevron from Dion Oil. “Dion Oil Co. fits perfectly into one of Uphoff Ventures’ core businesses. We have a lot of experience in the oil and gas industry and it has been the focus of my entire professional life,” Uphoff told CSNews. Uphoff was the founder and former CEO of MidAtlantic Convenience Stores (MACS). The company was ExxonMobil’s largest U.S. branded fuel distributor in 2010. Uphoff in 1998 originally founded Southside Oil,
16 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
which operated 78 Uppy’s convenience stores and served 229 ExxonMobil and BP dealer gas stations in Virginia and Maryland. Uppy’s was acquired by the newly formed investment platform MACS in June 2010. MACS, which was backed by private equity firm Catterton Partners, was then sold to Sunoco LP in October 2013. “We are extremely pleased that Uphoff Ventures is moving forward with this transaction, which continues the legacy of my parents,” said Dion Oil CEO Suzanne Dion Banks. “Customers of Dion retail sites will be pleased to know that our world-famous ‘Quik Chik’ fried chicken will become more widely available through Uphoff Ventures beyond
the Florida Keys and South Miami-Dade.” Banks will serve as an advisor during the transition of Dion Oil to Uphoff Ventures. Uphoff Ventures owns other c-store properties, but does not currently operate any of the sites except for the newly acquired Dion locations. Asked if he considers this his re-entry into the convenience channel, Uphoff told CSNews: “Yes, the business is in our blood and we think we’re good at it.”
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eye on growth n Alimentation Couche-Tard Inc.
closed on its acquisition of Topaz Energy Group Ltd. of Ireland. The deal included 464 stations across the Emerald Isle. n CST Brands Inc. completed its pur-
chase of the Flash Foods convenience store network from The Jones Co. and its affiliates. With this transaction, CST added 164 convenience stores in Georgia and Florida to its portfolio. n GPM Investments LLC has agreed to purchase 21
locations in Illinois, Iowa and Nebraska from GasMart USA Inc. and its affiliates. The deal is expected to close this quarter. Gas-Mart USA filed for Chapter 11 bankruptcy in July 2015. n Love’s Travel Stops & Country Stores Inc. is in the
process of acquiring Trillium CNG, which delivers
more than 55 million gallons of compressed natural gas per year. Trillium’s client base mostly consists of transit authorities, school districts, airport fleets and the general motoring public. The purchase will include 37 public-access CNG sites. n Pilot Flying J opened three new
travel center locations to start the new year. The retailer welcomed customers in Marion, N.C.; Schulenburg, Texas; and Whitecourt, Alberta, Canada. n On the Move Corp. wants to
have 50 c-store locations in Florida by the end of this year. The company currently has locations in Jupiter, Wellington and Boynton Beach.
people on the move hristopher Gheysens of Wawa Inc. and Rodney McMullen of The Kroger Co. were named CEOs of the Year by Retail Leader, a sister publication of Convenience Store News published by Stagnito Business Information + Edgell Communications. Retail Leader’s annual feature honors company chiefs in the consumer packaged goods retail sector who have exhibited exemplary leadership, inspiring their teams and companies to innovate and improve. Gheysens, who became CEO of the Pennsylvania-based Wawa Christopher Gheysens convenience store chain in 2012, oversaw one of the boldest moves in Wawa’s 50-year history when it leapfrogged down the U.S. East Coast and opened its first Florida store in July 2012 in Orlando. It now has more than 85 stores in Central Florida and more than 700 units in total. The successful execution of this expansion strategy was cited
18 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
by Retail Leader in naming Gheysens its co-CEO of the Year for 2015. McMullen, who became CEO of grocery and convenience giant Kroger in 2014, has kept his company on a winning path. Kroger’s last quarterly report marked its 47th consecutive quarter of growth. Same-store sales (excluding fuel) rose 5.3 percent and net income rose 24.8 percent. According to Retail Leader, McMullen’s tenure at the helm has been marked by both imaginative competency at carrying on the strategies that led to past Rodney McMullen success and an embrace of new strategies to deal with the trends that are shaking up modern food retailing. Kroger operates 786 convenience stores in 19 states under six banners: Kwik Shop, Loaf N’ Jug, Quik Stop Markets, Tom Thumb Food Stores, Turkey Hill Minit Markets and Smith’s Express.
retailer tidbits n Sunoco LP will lay off 161 Stripes LLC employees
beginning April 1. Sunoco acquired Corpus Christi, Texas-based Stripes in April 2014. The company has decided to bring certain leadership roles and support functions to its Dallas headquarters. n Exxon Mobil Corp. will integrate
Apple Pay into its Speedpass+ app. Exxon and Mobil customers will be able to use their iPhones to pay directly for fuel at the pump.
Chamber of Commerce in New York State. The award recognizes a business for positive contributions to economic growth. n Parker’s Convenience Stores won
the Greater Bluffton Chamber of Commerce’s 2016 Regional Economic Impact Award. The honor was presented at the inaugural Bluffton Business Awards, held Jan. 8 in South Carolina. n Sheetz Inc. changed the name of its
n QuickChek Corp. was named one
of the Best Companies to Work For in New York State. This is the fourth consecutive year the chain has received this honor. n Stewart’s Shops received the Industry of the Year
Award from the Fulton Montgomery Regional
employee-run, nonprofit charity from Sheetz Family Charities to Sheetz for the Kidz. The convenience store retailer, which founded the charity 23 years ago, said the new name more accurately reflects the charity’s mission to provide support, hope, joy and happiness to children in need in the communities where Sheetz operates.
supplier tidbits n The Altria Group Inc. unveiled a new productivity
initiative that will result in approximately $300 million in annual savings by the end of 2017. The savings will come from a leaner organization and reduced spending. n The Manitowoc Co. Inc.’s board of directors approved
the separation of its foodservice segment. The new company will be known as Manitowoc Foodservice Inc. n MillerCoors is reaching out to female beer drinkers with
its new “Climb On” campaign. A TV ad debuted during the Jan. 31 ESPN broadcast of the Winter X Games. n Growth Energy, which represents the producers and
supporters of ethanol, debuted a six-figure advertising campaign to promote the renewable fuel’s benefits. The campaign featuring Iowa farmer and “The Bachelor” star Chris Soules is appearing nationwide on Fox News, CNN and MSNBC.
n Diet Coke is now available
in millions of unique package designs thanks to the launch of the “It’s Mine” program. The initiative launched Feb. 1 and is a continuation of the brand’s “Get A Taste” campaign. n Acosta Sales & Marketing acquired
two Midwest agencies, St. Louis Park, Minn.-based Baldwin & Mattson Inc. and Farmington, Mich.-based Neher Sales & Marketing. These two acquisitions expand Acosta’s Fresh division, which provides integrated sales and marketing solutions combined with in-store execution for all perimeter categories including meat, seafood, produce, deli and bakery. n Cig2o and Vapage maker Spark
Industries LLC signed a global licensing pact for the use of vapor technologyrelated patents controlled by Fontem Ventures. The agreement covers the United States and international markets.
WWW.CSNEWS.COM | MARCH 2016 | Convenience Store News 19
NEWPRODUCTS Good to Go Single-Serve Organic Milks
C-Store Savings Cost Reduction Program
Good to Go single-serve milks from Organic Valley come in convenient, ready-to-drink, on-the-go, 11-ounce bottles. Available in two varieties, 1% Lowfat White or 1% Lowfat Chocolate, each serving contains 11 grams of protein, 40 percent of the recommended daily value for calcium, and 35 percent of the daily value for vitamin D, according to the maker. The milks do not contain antibiotics, GMOs, synthetic hormones, pesticides or artificial flavoring.
C-Store Savings, a new cost reduction program from Alliance Cost Containment (ACC), offers convenience store chains with 10 or more locations two distinct ways to reduce day-to-day operating costs. The Group Savings option provides pre-negotiated savings on more than 30 expense areas, including energy, waste disposal, credit/debit card processing and pest control. The discounts are available for no out-of-pocket cost; all fees are covered by participating suppliers. Savings typically amount to 10 percent to 25 percent compared to clients’ current prices, according to the company. The Custom Cost Reduction option offers bidding events for specific expense areas. Savings typically total in the 15-percent to 40-percent range; the client company and ACC share savings accrued over a 24-month period, the company said.
Organic Valley La Farge, Wis. (888) 444-6455 firstname.lastname@example.org organicvalley.coop
Swisher Sweets Encore Edition The Swisher Sweets Encore Edition cigarillo line brings back the Wild Rush variety and introduces a White Grape variety in newly designed packaging. Wild Rush — originally a limited-edition product introduced in August 2015 — is a flavorful blend of fruits and watermelon. White Grape is a new taste that has been re-blended for a bolder, fruity taste. Encore Edition cigarillos are available in three price points: 2 for 99 cents, 2 for $1.49 and Save on 2. Swisher International Inc. Jacksonville, Fla. (800) 874-9720 swisher.com
Alliance Cost Containment LLC Louisville, Ky. (502) 805-0975 c-storesavingsbyacc.com
Nestlé CoolPro Dispenser Cold beverages are made refreshingly simple with the Nestlé CoolPro dispenser. Convenience store operators can deliver consistently great-tasting, freshly chilled drinks from this easy-to-use, two-drink dispenser, according to manufacturer Nestlé Professional. Its small footprint and shelfstable concentrate uses minimal counter and storage space. Nestlé Professional Rogers, Minn. (800) 288-8682 nestleprofessional.us/beveragesolutions
LEX12 Temptation & Red Krush Little Cigars Adding to its LEX12 line of little cigars, S&M Brands introduces Temptation (Apple) and Red Krush (Cherry) flavor profiles to the market. Developed over the past two years, these new varieties are pleasantly aromatic and delicious handcrafted blends, the company said. The addition of Temptation and Red Krush adds eight new retail SKUs to the 113 SKUs in the entire LEX12 brand line. Both new flavor profiles are available in regular and wides. All LEX12 cigars come in 12-count premium embossed tins or convenient, grab-and-go four-count packs. S&M Brands Inc. Keysville, Va. (800) 766-5342 smbrands.com
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Growth By Melissa Kress
hirty-six years after opening its first retail store, Alimentation Couche-Tard Inc. is poised to take over the convenience channel one country at a time. Along its storied timeline, 2015 may go down as one of its busiest years. In March 2015, the Laval, Quebec-based retailer closed on its acquisition of The Pantry Inc. The deal included approximately 1,500 c-stores that the Cary, N.C.-based parent of Kangaroo Express owned throughout the Southeast. This one move propelled Couche-Tard to the No. 1 spot on this year’s Convenience Store News Top 20 Growth Chains list. However, that was not the only major deal the company inked during the eventful 12 months of the past year. Also last March, Couche-Tard built up its international presence with the acquisition of Shell’s marketing operations in Denmark. This agreement with A/S Dansk Shell comprised 315 sites, including 225 full-service stations, 75 automated fuel stations and 15 truck stops. Of the 315 sites, 140 were owned
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by Shell, 115 were leased from third parties, and 60 were dealer-owned. As the year wound down, Couche-Tard made headlines once again with news it was acquiring the majority share capital of both Topaz Energy Group Ltd. and Resource Property Investment Fund plc, together with the entire share capital of Esso Ireland Ltd. Topaz is the leading convenience and fuel retailer in Ireland, made up of 464 stations across the country, including its recently acquired Esso station network. Of these stations, 162 were owned by Topaz and 302 were owned by dealers. This deal officially closed early this year. And all this growth has come as the company notched another year of record financial results, a testament to the employees, according to Brian Hannasch, president and CEO. “Our people achieved a lot this year,” he told Convenience Store News. “They continue to focus on executing. Despite us doing acquisitions, integrations and rebranding, the focus on executing with the cus-
Spurt tomer each and every day has been very consistent.” Stocking itS Pantry
The Pantry deal and Kangaroo Express stores’ ensuing integration into Couche-Tard’s Circle K family undoubtedly was one of the Top Growth Chain’s most significant achievements of 2015. Over the years, Couche-Tard looked at The Pantry a number of times, according to Hannasch, who noted it was a fellow public company and “kind of in Circle K’s backyard.” When The Pantry’s board of directors decided to look at alternatives, engaged bankers and began to put out feelers for prospective buyers, Couche-Tard took an even closer look. “We were happy when we did take a closer look. We were surprised. We found a lot of great people both running and supporting the stores. There had been some periods of distress in The Pantry over the years, so we were very pleasantly surprised at that,” Hannasch explained.
Alimentation Couche-Tard is planting a new Circle K banner across the globe Photos provided by Circle K/Terje Borud Foto
Not all the stores in the network had received the investments they needed over the years to compete effectively and deliver the right experience to the customer. While not all the stores are keepers for CoucheTard, the overall portfolio was “a very good strategic fit,” the CEO said. “The Sunbelt has been a very strong market for us and The Pantry is a great geographic fit on top of our network,” Hannasch added. Interestingly, even though both Circle K and The Pantry had a strong presence in the Southeast, there was very little overlap in their footprints. For example, while both had a large number of stores in Florida, Circle K’s concentration was in the southwest part of the state, while The Pantry’s locations are in the northern part, like Jacksonville and Gainesville. The acquisition made sense to others in the industry, as well. “Couche-Tard’s acquisition of The Pantry did not come as a surprise. They like to find economic opportunities. The Pantry was in trouble; everyone knew they were in trouble,” said Terry Monroe,
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founder and president of American Business Brokers & Advisors. “They were big enough and Couche-Tard saw a financial opportunity to get in there — and they were very sharp financially — to buy some performing assets at an underperforming price.” “They’re smart,” Monroe continued. “Look at all the stores they got in one big swoop.” The acquisition carried a total enterprise value of approximately $1.7 billion, including debt assumed. Time will tell how the deal stacks up. “First and foremost, it’s about creating shareholder value, and I say history will be the judge of that. We have a track record of being a disciplined acquirer,” Hannasch told CSNews. “Every deal is different based on the performance of the network, the people, and the synergies we think are available. When you combine all these factors in this deal, we believe we paid a fair price for The Pantry.” the one-year Mark
With the merger nearing the one-year anniversary of its closing, Couche-Tard is making progress on its integration plan. It is infusing key programs from its Circle K brand into the newly acquired stores and ramping up the rebranding of the stores and their fuel offer. “We’ll be rebranding almost 1,100 fuel brands in
“It’s not about store count for us — although we may get branded that way a little bit. It’s about delivering a great customer experience and strong returns for our stakeholders.” — President & CEO Brian Hannasch
the next six months, and we started on the stores in January. Our intentions are to have that network complete over the next 12 months. A lot of activity, but overall we are right on target with our synergy plans,” Hannasch detailed. The retailer has had to make some tough decisions, too, like which stores to keep and which to close. Couche-Tard constantly analyzes its mix of sites and their performance. As a result, it did close some of The Pantry locations where “we didn’t think we would be willing to invest in the site to give it the consumer experience we needed for the brand, or that didn’t have the upside we thought we needed for financial return on the investment,” he said. “That’s just what we do. It’s not about store count for us — although we may get branded that way
The New GlobAl CIrCle K brANd The new Circle K logo was created to be clean, fresh and relevant, and to incorporate the many great assets of Couche-Tard’s existing brands, according to the retailer. The all-capital letters in the wordmark denote solidity, stability and competence, while flat, clean forms ensure the logo will remain fresh and current.
The orange color comes from the Statoil brand. It accents, underlines and brings distinctiveness to lift the color scheme above the ordinary.
The warm colors in the scheme merge and become reminiscent of the sunrise — inspiring, every day.
Ensuring the circle is open and not exclusive, one leg of the K intersects the circle, welcoming customers and communities.
Includes circles in both the symbol and the wordmark (or text-based element), illustrating wholeness, unity and teams. The strong red color harkens back to the Couche-Tard, Mac’s and Kangaroo Express logos. Red has long been recognized as a color associated with convenience retail.
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a little bit,” the chief executive acknowledged. “It’s about delivering a great customer experience and strong returns for our stakeholders.” off to the eMerald iSle
Undoubtedly, Couche-Tard has experienced enormous growth in North America. But that continent is not its only focus. In December, it inked a deal to move into a new country with the Topaz acquisition. The move has been in Couche-Tard’s sights for some time. According to Hannasch, Couche-Tard actually started looking at Topaz before it even entered Europe with the acquisition of Statoil Fuel & Retail ASA in Norway. Topaz was active in NACS, the Association for Convenience & Fuel Retailing, and Couche-Tard got to know some of its management team, talked to some of the owners and toured the sites. “We had an interest; we expressed that interest. The financial crisis hit, and the Irish economy really took it on the chin and we couldn’t get anything done at that point,” he recalled. “The Irish people, I think, are real-
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ly just incredible. They buckled down and made some hard decisions, and their economy is very much on the rebound. We thought it was a good time to approach them and we were fortunate enough to get a deal done with the current owners.” circling the globe
Although Couche-Tard shows no signs of slowing down its growth, Hannasch believes now is the right time for the company, which had “a very decentralized model in the past,” to launch a new global Circle K brand. “We were faced with becoming a company of companies, which is a viable alternative. And if we delayed that decision, which we have done in the past, it would continue to be a bigger question for us,” he explained as to why the decision was made now. The process of rolling out a new global Circle K brand has been in the works for more than two years and from the start, it has been more than just a capital or sign exercise. The efforts behind the global brand are meant to create a strong “preferred brand” over a
period of time. Not only was a new Circle K logo developed, but Couche-Tard also has “laid out a plan guiding our activities, our focus over the next three to five years, and how we turn that brand into something more than it is today,” said Hannasch. “How do we get in the heads, the hearts of the consumers and truly make that brand preferred?” A global brand does come with some upsides. Branding expert Joe Bona, president couche-tard directors (from l to r) — brian hannasch, richard fortin, réal Plourde and alain bouchard — show their support for the new circle k logo. of Moseley Bona Retail, said it creates efficiencies in communicating around just one brand, and brings simplicity with one type of signage, in the market for many years? one website and one consolidated workforce. Even so, Couche-Tard is confident in its decision On the other hand, there are several factors that and as the retailer moves forward in introducing the come into play when moving to a global brand. For world to its new global Circle K brand, it intends to instance, Bona said questions will now arise, such as: remain focused on delivering three key areas for its When you buy local or regional companies, what kind continually growing family of Circle K customers: of equity do these companies bring to the table? Did fast and friendly service; easy visits; and products for you buy a chain with a loyal following that has been people on the go, Hannasch said. CSN
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With low interest rates and record margins, there’s more sellers than ever before and this year’s Top 20 Growth Chains are capitalizing
By Tammy Mastroberte
he convenience store industry has been consolidating for a number of years now, with small and mid-sized chains selling their stores to larger companies. In the past year or two, however, the industry has seen a sizeable increase in the number of companies exiting the business altogether, with some of these being larger chains. Just in the last year, two big sales included CST Brands Inc., based in San Antonio, Texas, acquiring Flash Foods Inc.’s 164 convenience stores for $425 million (the deal was announced in November and closed this February); and Dallas-based 7-Eleven Inc.’s purchase of all 180 Tedeschi Food Shops in the New England area. “In the last 18 to 24 months, there has been a dramatic increase in acquisitions and companies selling their assets,” Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC in Chicago, told Convenience Store News. He explained that master limited partnerships
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(MLPs), such as Global Partners LP and Energy Transfer Partners LP, have been aggressive in growing their companies and can pay more because they have tax advantages. Also, traditional larger companies such as 7-Eleven and Circle K Stores Inc., and even private equity firms, are in purchase mode. This trend is certainly reflected in this year’s Convenience Store News Top 20 Growth Chains ranking, our fifth-annual rundown of the convenience store chains that added the most net new stores year over year. Topping the list for 2016 are such formidable industry acquirers as Circle K parent Alimentation Couche-Tard Inc. (in the No. 1 spot), Speedway parent Marathon Petroleum Corp. (No. 2) and 7-Eleven (No. 3). This year’s listing also includes some industry acquirers that are newer to the acquisition game, but no less aggressive than long-time players. Such companies include United Pacific (at No. 4), GPM Investments LLC (No. 5) and TravelCenters of America (No. 6).
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Overall, this year’s Top 20 Growth Chains added a net 3,159 stores to their portfolios between January 2015 and January 2016, equating to a 12.3-percent increase
for the year. Not surprisingly, in view of the impressive increase in acquisitions lately, this represents 689 more stores than what last year’s Top 20 Growth Chains
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So, why are long-standing, large convenience store industry companies suddenly selling off their assets? According to NRC’s Ruben, it’s the “perfect storm of circumstances.” “There are low gas prices, but also record margins. People are seeing margins they have not seen in a long time on fuel, so they are making more money. Customers are also spending more money in the store because gas prices are so low,” he said.
“Big players are now saying we want to see every deal, big or small. They are looking at deals they didn’t before because it makes sense to buy defensive.” l • Exceptiona r fo es iv nt ce in e nc convenie . store owners
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— Dennis Ruben, NRC Realty & Capital Advisors
This has piqued the interest of buyers — and not just those in the c-store industry — and hence, large amounts of money are on the table. Companies that were thinking about selling in the past have realized with interest rates as low as they are, the offers coming in now for their businesses will not last forever. “With the numbers being presented, it would be foolish not to think about it,” said Ruben. “People are looking at the market and the numbers, and are not sure it will be like this again. Interest rates will go up soon, so the time couldn’t be better to sell.” Also, statistics show 10,000 baby
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boomers are retiring every day and that includes some c-store owners. Operators contemplating retirement are taking the opportunity to get out sooner rather than later, noted Terry Monroe of American Business Brokers & Advisors, based in Effingham, Ill. “They are now seeing they can get more money for their chains than they ever thought possible,” he said. Sellers are getting offers higher than they have seen in years, particularly as large private equity firms are acquiring more c-store industry assets than in the past. One example is Fortress Investment Group Inc., which owned United Oil Co. and purchased Pacific Convenience & Fuels in June of last year to form the new United Pacific. “Right now, money is cheap, and it will never get this cheap again,” Monroe explained. “We are getting a lot of calls from real estate equity companies and
All figures are as of Jan. 1 for both years, unless otherwise noted.
Alimentation Couche-Tard Inc. Tempe, Ariz. (U.S. headquarters) 2016 store count: 5,338 2015 store count: 3,828 Increase: 1,510 (39.4%) About the company’s growth: Alimentation CoucheTard added roughly 1,500 stores to its U.S. footprint when it closed on the acquisition of The Pantry Inc., parent of Kangaroo Express, in March 2015. This deal grew the Circle K operator’s presence in 13 Southeast states. Couche-Tard also added more than a dozen convenience stores in Indiana and Kentucky when its Mac’s Convenience Stores LLC unit purchased Fast Max Convenience Stores.
Marathon Petroleum Corp. Findlay, Ohio 2016 store count: 4,312 2015 store count: 3,987 Increase: 325 (8.2%) About the company’s growth: Speedway LLC, a Marathon Petroleum subsidiary, owns and operates approximately 2,760 c-stores in 22 states. Additionally, Marathon-brand gasoline is sold through approximately
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financial buyers that want to invest in a cash business that is still growing and can give great returns. The c-store business fits that [criteria].” The BuyerS
These days, the headline on the buyer side would read: The Big Are Getting Bigger. The majority of buyers scooping up small and mid-sized chains are the largest convenience store chains and private equity firms. These groups have the cash to spend and are outbidding midsized chains as a result. “Major industry players are going into new markets and expanding rapidly, and someone with only 50 stores can’t afford to pay what they can,” said Ruben. “A mid-size chain can’t just write a check, compared to big chains who are able to bid a lot of money and
5,600 independently owned retail outlets across 19 states. Speedway’s 2014 acquisition of Hess Corp.’s retail operations has continued to be transformational, expanding its retail presence throughout the East Coast and Southeast and thus providing a significant growth platform for Speedway. Its nearly $400-million capital budget for 2016 is focused on store remodels, particularly remodels of its recently converted Hess stores along the East Coast, and building new locations in the chain’s core markets.
7-Eleven Inc. Dallas 2016 store count: 8,331 2015 store count: 8,129 Increase: 202 (2.5%) About the company’s growth: Two big acquisitions contributed to 7-Eleven’s footprint explosion in the past year. In August, the nation’s largest c-store chain closed on its purchase of Tedeschi Food Shops Inc., adding 180 stores to its existing portfolio of 7-Eleven convenience stores in the greater Boston and southern New Hampshire regions. Then in November, 7-Eleven, through its wholly owned subsidiary SEI Fuel Services Inc., bought 101 Florida gasoline station locations from Biscayne Petroleum LLC and Everglades Petroleum LLC.
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don’t need any financing. It’s the same eight or 10 people bidding, because they are the ones who can just write a check and can compete with the prices.” John Flippen Jr., managing director of Petroleum Capital & Real Estate LLC, says this all started with the major oil divestures in 2008 and 2009. Ever since then, sales have been happening at an increased rate. Now, it’s about the rise of the MLPs and the larger regional players. Of the past 28 deals facilitated by his firm, MLPs purchased 19 of them and private equity firms bought two, according to Flippen.
“Chains like CST Brands, Sunoco, Couche-Tard and 7-Eleven are buying whatever large chains they can find because they need to scale,” he said, pointing to 7-Eleven’s recent acquisition of more than 100 stores in South Florida and its purchase of Tedeschi Food Shops. Buyers are looking for three things, according to Monroe. Cash flow is No. 1, followed by high-quality assets and the right locations. He finds buyers generally want city stores first, then suburbs and then rural, as cities usually bring in the most money. Additionally, chains looking to sell need to be ready
2015 store count: 275 Increase: 172 (62.5%) About the company’s growth: Acquisitions in the convenience channel were one of three key growth strategies for TravelCenters of America in 2015, along with internal growth and ground-up development. The company made numerous purchases throughout the year, including the Stop-A-Sec and Stop’n Go chains. It also focused on rebranding acquired stores to its Minit Mart c-store banner and refreshing them through remodels with new amenities added.
United Pacific Gardena, Calif. 2016 store count: 263 2015 store count: 71 Increase: 192 (270.4%) About the company’s growth: United Pacific started out 2015 as United Oil Co. with a portfolio of less than 100 convenience stores. But then it acquired Pacific Convenience & Fuels midyear, picking up 251 c-stores and gas stations operated under the My Goods Market and Circle K brands, and primarily offering 76- and Conoco-branded motor fuels. The properties are located in California, Nevada, Oregon, Washington and Colorado. Upon the completion of this deal, the company changed its name to United Pacific.
GPM Investments LLC Richmond, Va. 2016 store count: 668 2015 store count: 481 Increase: 187 (38.9%) About the company’s growth: GPM Investments kicked off 2015 by purchasing VPS Convenience Store Group Inc.’s Midwest division, which included 161 c-stores with gasoline sales in Indiana, Ohio, Michigan and Illinois. GPM also took ownership of 42 Road Ranger stores with gas and one Subway location in Illinois, Iowa and Kentucky. The company shows no signs of slowing down; its fuel-focused master limited partnership GPM Petroleum LP filed for a $100-million initial public offering.
TravelCenters of America LLC Westlake, Ohio 2016 store count: 447
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Sunoco LP Dallas 2016 store count: 2,875 2015 store count: 2,772 Increase: 103 (3.7%) About the company’s growth: To say Sunoco LP had a busy year would be quite the understatement. Its growth activity included the July dropdown of Stripes LLC parent company Susser Holdings Corp. to Sunoco LP from sister company Energy Transfer Partners LP (ETP). Stripes will now be the master limited partnership’s top retail growth platform. Since the dropdown was completed, Sunoco LP ramped up organic growth at Stripes, opening 44 new stores, primarily in Texas. It expects to open 40 or more new Stripes locations this year. As of Jan. 1 this year, ETP also executed a transaction to drop down Sunoco Inc. and its 438 company-operated convenience stores under the Sunoco and APlus banners. ETP no longer has any retail locations; Sunoco LP now operates all convenience stores under the Sunoco, APlus, Stripes, Tigermarket, Mid-Atlantic Convenience Stores and Aloha Petroleum banners.
Alliance Energy Corp. Waltham, Ma. 2016 store count: 244 2015 store count: 148 Increase: 96 (64.9%) About the company’s growth: Alliance Energy, an independently operating division of Global Partners LP, continued its growth mode in 2015 with the acquisition of Capitol Petroleum Group for $156 million. The deal, which closed June 2, consisted primarily of Mobil- and Exxon-branded owned or leased gas stations, including 51 retail locations and seven dealer supply accounts in New York City, and 46 retail locations in Prince George’s County, Md. “The Capitol portfolio increases our penetration in two important East Coast markets,” said Eric Slifka, president and CEO of Global Partners. “Completing this transaction strengthens our growing Gasoline Distribution and Station Operations business and further integrates our midstream and downstream assets.”
CrossAmerica Partners LP Allentown. Pa. 2016 store count: 389 2015 store count: 309 Increase: 80 (25.9%) About the company’s growth: CrossAmerica Partners had an active year in partnership with sister company CST Brands Inc. Early in 2015, the partners closed on the acquisition of Timewise convenience stores from Landmark Industries Inc., followed by the acquisition of Erickson Oil Products Inc. and its Freedom Valu c-stores in February. In June, the master limited partnership was back in action, acquiring Charleston, W.Va.-based One Stop. Currently, CrossAmerica has a very diverse portfolio. The company told CSNews it has: 416 sites operated by independent dealers; 21 sites owned by CrossAmerica and operated by CST; 200 sites owned or leased by CrossAmerica and operated by Lehigh GasOhio LLC, a related party; 274 sites owned or leased by CrossAmerica and operated by lessee dealers; 76 sites owned or leased by CrossAmerica and operated by commission agents; 87 sites owned or leased and operated by CrossAmerica; and 17 sub-wholesalers selling to commercial and residential customers.
Wawa Inc. (tie) Wawa, Pa.
2016 store count: 726 2015 store count: 683 Increase: 43 (6.3%) About the company’s growth: Wawa celebrated the opening of its 700th store in 2015, and the year also saw the chain hold three store grand openings in Virginia on the same day — the first time the retailer pulled off a trifecta in the state. A major focus of growth for Wawa remains the state of Florida, where the retailer has opened more than 80 stores to date. It plans to move further into the Sunshine State with a 120-store expansion in South Florida slated to take place between 2017 and 2022.
Casey’s General Stores Inc. (tie) Ankeny, Iowa 2016 store count: 1,908 2015 store count: 1,865* Increase: 43 (2.3%) About the company’s growth: Casey’s continued to grow in the last year primarily through new builds, all of which sport the new store design the chain’s used for several years now. Casey’s particularly strengthened its presence in Oklahoma, where it went from two stores to 10. Positioning itself for even more growth, Casey’s opened a second distribution center this February in Terra Haute, Ind., which is meant to open up new territories and states. *As of December 2014
Kwik Trip Inc. La Crosse, Wis. 2016 store count: 487 2015 store count: 445 Increase: 42 (9.4%) About the company’s growth: Organic growth continues to drive up Kwik Trip’s store count, which increased by 42 units in the past year. The company’s game plan is to add approximately 40 stores per year to its existing portfolio in Wisconsin, Minnesota and Iowa. As part of its upcoming expansion efforts, Kwik Trip intends to increase its store count in southeastern Wisconsin. New Kwik Trip stores are planned over the next five years for Pleasant Prairie, Kenosha, Racine, Oak Creek, New Berlin, Sussex, Menomonee Falls, West Bend, Mukwonago, Saukville, Sheboygan and Waukesha, Wis. The retailer additionally plans to open three Kwik Star convenience stores with gas stations in Iowa’s Quad Cities.
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when it comes to attracting a buyer. “If I have a qualified financial buyer for a 20-store chain, but then I find out the books and operations are a mess and some of the stores are rundown, then it shows they are not prepared,” Monroe noted. Today’s buyers are looking for quality assets in strong markets with good real estate and significant market share. They also prefer to own the real estate rather than lease, according to Ruben, who cited Flash Foods as an example of this. “The deals that have brought in the highest price are large deals that move the needle for a company, where they can get instant presence in a market,” he said. However, buyers are not only looking at large chains. Those previously limiting their transactions to
chains with 50 or more stores are now expanding their scope to look at everything available in hopes of beating out the competition. “Big players are now saying we want to see every deal, big or small. They are looking at deals they didn’t before because it makes sense to buy defensive,” Ruben said.
Murphy USA Inc. El Dorado, Ark. 2016 store count: 274 2015 store count: 244 Increase: 30 (12.3%) About the company’s growth: Murphy USA continued to focus on organic growth as its method of expansion during 2015. “We added stores at our fastest pace since 2006,” said President and CEO Andrew Clyde. Its new larger-format locations have been particularly successful in Arkansas, Colorado and Louisiana. The retailer also continued its refresh program for renovating existing stores. In 2016, Murphy USA plans to enter three new states — Nebraska, Nevada and Utah — as it strives for a growth goal of opening 60 to 80 new stores.
Sheetz Inc. Altoona, Pa. 2016 store count: 517 2015 store count: 489 Increase: 28 (5.7%) About the company’s growth: Sheetz opened its 500th convenience store in 2015 and company executives say they are now on a journey toward 1,000 stores and beyond. “We could double our size within the geographic area we are in now. There are still a lot of opportunities out there and for now, we plan on growing our talented team and continuing to expand within the states we have a presence in,” Sheetz President and CEO Joe Sheetz told CSNews.
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The multiples that sites have been commanding in terms of price hit a peak in mid-2015. There is still a lot of activity and high bids happening now, Flippen said, but he doesn’t see prices going any higher than they are now. So, while the industry will continue to consolidate, eventually interest rates will increase and
Love’s Travel Stops & Country Stores Inc. Oklahoma City, Okla. 2016 store count: 364 2015 store count: 337 Increase: 27 (8%) About the company’s growth: Throughout 2015, Love’s opened 27 new locations and added more than 2,000 truck parking spaces — the most in the company’s history. The chain plans to keep the records going this year by opening more than 40 new locations across 28 states, which will be the most opened in a given year in its history. In addition to expanding along interstates, Love’s is set to open more than 20 locations along state and federal highways.
Blarney Castle Oil Co. Bear Lake, Mich. 2016 store count: 117 2015 store count: 93 Increase: 24 (25.8%) About the company’s growth: Blarney Castle Oil posted a strong year in terms of growth, passing the century mark in number of stores. The company, which primarily operates under the EZ Mart banner, sells BP, Clark, Marathon, Shell and Mobil fuels, with all 117 of its stores located in Michigan. In 2015, Blarney Castle added 24 net stores, good for a nearly 26-percent store count increase year over year. The c-store retailer and oil and propane provider is known for its Java Mountain coffee, Lucky Louie’s pizza, and Bill & Will’s all-beef gourmet hot dogs.
things will slow down a bit. “The price of oil has dropped and margins have expanded, so there is a lot of cash and capital available to purchase assets,” said Flippen. “This won’t continue forever, but the consolidation isn’t going to end.” The “feverish” trend of buying is projected to continue for at least another six months before tapering off, according to Ruben. Eventually, the majority of the c-store industry will be comprised of very large chains on one end and lots of single-store owners on the other end. “We will see increasing consolidation, where six or eight companies control one-third of the c-stores,” he concluded. CSN
Pilot Flying J Knoxville, Tenn. 2016 store count: 626* 2015 store count: 610* Increase: 16 (2.6%) About the company’s growth: The past year saw Pilot Flying J’s owner, the Haslam family, increase its holding in the company by acquiring all of private equity firm CVC Capital Partners Ltd.’s shares. The firm reportedly made more than four times the money it invested in North America’s largest operator of travel centers and travel plazas. Growing its network further remains a priority for Pilot Flying J as indicated by the fact that the chain kicked off 2016 with the opening of three new locations, including Pilot Travel Centers in Marion, N.C., and Schulenburg, Texas, and a Flying J Travel Plaza in Whitecourt, Alberta, Canada.
*Numbers reflect December 2015 and December 2014
Tri Star Energy LLC Nashville, Tenn. 2016 store count: 85 2015 store count: 70 Increase: 15 (21.4%) About the company’s growth: Tri Star Energy not only expanded its portfolio of Daily’s and Twice Daily convenience stores, but also boosted the stores’ consumer appeal by investing in foodservice. The chain now offers made-to-order items through new “Dash” kiosks, which are scheduled to be in place at all stores with room for them by the end of 2016.
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The Convenience Store News Top 20 Growth Chains report is based on store count figures provided by TDLinx, a service of Nielsen. This is the fifth year that CSNews has partnered with TDLinx to identify the c-store retailers that added the most convenience stores in the past year. Wherever possible, the TDLinx numbers were confirmed by the companies. TDLinx defines a convenience store as a store that includes a broad merchandising mix, extended hours of operation and a minimum of 500 SKUs. Fueling stations with small kiosk stores do not meet the official definition of a c-store and thus are not reflected in TDLinx’s store count figures.
Jacksons Food Stores (tie) Meridian, Idaho 2016 store count: 230 2015 store count: 218 Increase: 12 (5.5%) About the company’s growth: A 15-store acquisition from Utah-based Premium Oil Co. helped Jacksons expand its portfolio. The company also recently announced that it has increased its employee count by more than 1,000 associates in the past year and began expanding its home office by 50 percent, or 34,000 square feet, in order to accommodate this growth.
QuikTrip Corp. (tie) Tulsa, Okla. 2016 store count: 726 2015 store count: 714 Increase: 12 (1.7%) About the company’s growth: QuikTrip added 12 new stores year over year. The new units further leverage its reputation as a retail industry innovator and a quality foodservice destination. QuikTrip was awarded the 2015 Best Prepared Foods Innovator award by CSNews for the chainwide rollout of its new QT Kitchens made-to-order fresh food concept.
Go to the Special Features section of CSNews.com for additional bonus content, including more insights from our interview with Couche-Tard chief Brian Hannasch, and an analysis of how the supply side of the convenience channel is being impacted by the increasing industry consolidation.
Dominance Retiring Casey’s CEO Robert Myers reflects on his career with the Midwest c-store chain
By Brian Berk
hen it comes to 10-year performance, there are few in the convenience store industry — or in Standard & Poor’s 500 index, for that matter — that could match Casey’s General Stores Inc., which has seen its stock price increase more than fivefold over the past decade.
Robert Myers never expected to be CEO of Casey’s, but his organizational background in the U.S. Army provided the necessary skills to take on more responsibilities.
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At the helm during this entire time, steering the Ankeny, Iowa-based convenience store chain’s continuous growth, has been Robert J. Myers, the company’s chairman and CEO, who will retire on April 30 at the age of 69. He will leave behind quite a legacy for incoming Casey’s CEO and current President and Chief Operating Officer Terry Handley to follow. In a recent interview with Convenience Store News, Myers reflected on how Casey’s has evolved over the course of his time as chief executive. Same-store sales at the chain have been tremendous across the board, and Myers pointed to the retailer’s foodservice operations, high fuel margins and strong pizza-delivery sales as just some of the things the 1,900-plus convenience store operator is doing well. Store conversions to 24-hour locations has been yet another home run. “It wasn’t that long ago when we only operated from 6 [a.m.] to 11 [p.m.],” Myers recalled. “We learned through our acquisitions that a lot was going on after 11 at night. For the vast majority of our stores, 24-hour operations made sense. You also don’t have a lot of capital investment when you convert to a 24-hour location, so it was a pretty easy thing for us to do. There’s still runway left for us to expand these kinds of programs.” Along with extending store hours, Casey’s is extending the products and services it offers its customers in 14 states throughout the Midwest. One new service Myers is particularly excited about is online food ordering, which became available at all Casey’s stores as of Dec. 31. Through the new Casey’s App, customers are able to order pizza, made-to-order sub sandwiches and appetizers quickly and easily using their mobile devices.
The Coca-Cola Company honors Robert J. Myers, Chairman and CEO for Caseyâ€™s General Stores, on his retirement! We appreciate your leadership and dedication to the convenience store industry.
ÂŠ 2016 The Coca-Cola Company
“Now that we have online ordering at all of our stores, we are looking at the data. We are very pleased with what we are seeing,” Myers said of the chain’s latest innovation. At the same time, Casey’s is continuing its rigorous store remodel program, which has proven to be another strong contributor to earnings, Myers noted. These major remodels enable the retailer to add its popular made-to-order sub sandwich program to more stores. Casey’s has found this menu item to be a perfect complement to its wellestablished pizza menu. The remodels also include considerable enhancements to the stores’ coffee and fountain offerings. While top-notch in-store operations has been a key driver in the retailer’s success, so too has constant portfolio growth. As of late January, Casey’s operated 1911 c-stores, and the chain just opened its second distribution center on Feb. 6 in Terre Haute, Ind., which will allow for further geographic expansion of the Casey’s brand, including into new states.
truly is a combination of both.” As he prepares to leave his post, Myers agrees that it’s a good time to be Casey’s — and a good time to be a convenience store operator overall. “I won’t say we are immune to a downturn in the economy, but people still need gasoline and their milk and bread,” he explained. “For us, selling a slice of pizza has been very important. As an industry, I think we’ve weathered the downturn in the economy during the past eight years quite well. I think this is a good business to be in.” A COLLECTIVE EFFORT
Although Myers told CSNews he certainly didn’t pick his retirement date based on the performance of the company, he says it’s nice to be able to exit when things are good. “I also fully recognize that not one individual is responsible for the great performance of this company. This is a collective effort,” he emphasized. “There are gifted individuals here that all have the same ideology regarding where we want to take the company, what we want Casey’s opened its second to do and how we want to do it. distribution center in Terre Haute, Ind., last month. I’m fully confident our success will continue.” Myers has viewed his chief job as CEO as creating an environment that empowers others to succeed at what they are good at doing. Success has involved getting staff — all the way down to the store managers and associates — to buy into the company’s philosophy, and enhancing the quality of leadership at every level of the company. “That has paid back in ways that Myers called the Terre Haute distribution center a are indescribable,” he said. “beautiful facility” and said the company expects to Case in point: The next leader to take the helm see plenty of future expansion occurring within a 500will be Handley, a long-time Casey’s employee. Myers mile radius of this locale. said he’s known Handley for many years and the two In recent times, Casey’s has focused more on organ- constantly talk, with the current CEO learning plenty ic growth than acquisitions because of the higher mulfrom the COO, and vice versa. tiples being sought by sellers in this highly profitable “We often go out for a 25-minute walk every c-store environment. morning. In the winter months, we get a brisk walk “The acquisition environment peaks and falls based in at our [Ankeny] complex. In the summer months, upon the profitability of our industry,” said Myers. we get really busy and it can be tougher,” Myers “Right now, convenience stores are a profitable busisaid. “There is a great exchange of information along ness, and gasoline prices are down but margins remain those walks.” strong. Given that, our reliance will be on organic Handley told CSNews he has known Myers since growth rather than acquisitions. But [our philosophy] he first arrived at Casey’s more than 25 years ago,
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and the two have worked together directly over the past 13 years. “Bob has always been a strong advocate of leadership and recognizing within people those qualities necessary to be an effective leader. Bob promotes the empowerment of leaders taking responsibility for their decisions in the best interest of the company,” Handley said. “His enthusiasm and pride for Casey’s is genuine and he shares that energy with everyone.” Handley believes one of the keys to the c-store retailer’s success during Myers’ tenure as CEO has been the commitment to a strong five-year strategic plan. “A five-year strategic plan is shared with our board of directors every year and has proven quite beneficial
serving his country in Vietnam, Saudi Arabia, Germany and Kuwait. “I look back on my life and I’ve been immensely blessed,” Myers said. “I was drafted out of high school and was very fortunate. It was a matter of timing. There was a six-month window in 1966 when they allowed kids to go to OCS [Officer Candidate School] without having gone to college. I was one of those. When I was 20 years old, I was commissioned and sent to jump school and then on to join the great 101st Airborne Division of Fort Campbell, [Ky.]. I was there six months before being deployed to Vietnam and then Saudi Arabia, Germany and Kuwait. I was able to get all of my education along the way. I was very lucky and very blessed to have the opportunity.” After retiring from the Army at age 41, Myers found himself joining Casey’s on Jan. 1, 1989 as corporate headquarters facility manager. He knew the convenience store chain well as he grew up in the same Iowa neighborhood as Don Lamberti, who founded Casey’s in 1968. “I was quite familiar with the old Casey’s has recently focused on organic family store [Lamberti] had, which growth due to higher multiples being was a forerunner to a convenience sought by sellers. store. It was three blocks from my home. Don had three friends as witnessed by the company’s growth and the current when he was growing up, and I happened to work for stock price,” Handley said. “We are on the right path one of those through my high school years,” recalled and everyone associated with the company is excited Myers. “I knew Don and I knew I just couldn’t retire about the future. I fully intend to maintain our present [at 41 years old]. My goal was to simply make enough course into the near future.” money to offset my military retired pay vs. the active As for the legacy he hopes to leave, Handley duty pay.” responded: “I will leave that for others to decide once When Myers found out that Casey’s was about to my career is complete. I am blessed to be a part of this build a new corporate headquarters, a friend encourgreat organization and to have worked beside so many aged him to apply for a job there. “I was very fortunate wonderful people. I only wish to be a good steward to be interviewed by and hired by Ron Lamb (Casey’s during my tenure as CEO and continue the good work CEO from 1998 to 2006). I am certainly forever thankalready accomplished. While Casey’s is recognized as ful to Ron and Don Lamberti for the opportunity to being one of the best in our industry, we will continue come in and be part of this great organization.” to strive toward innovation and improvement.” From that initial facility manager position, Myers began rising through the ranks. He was promoted to vice president of property support in 1992; senior vice SECOND TIME’S A CHARM Myers already knows something about retirement president/chief operating officer in 2003 with a probecause this is not his first time retiring from an orga- motion to president/chief operating officer soon after nization. He previously retired in 1988 after serving that. Finally, in September 2006, he assumed the top as a second lieutenant in the U.S. Army for 22 years. position of president and CEO. “I never expected to be CEO. I wanted to be low Through that experience, he got to see the world while
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key,” revealed Myers. “But as time went on, I took on more and more. I also had the organizational background and skills that I acquired in the military that allowed me to do a bunch of different things.”
But it’s the people at Casey’s, according to Myers, that he will miss the most when he retires. “Honestly, if I had the ability to know something about everyone at this company regarding their
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family and background, I would,” he said. “That’s not possible [with more than 33,000 employees], but I certainly know as many people as possible.” When asked to share his all-time best Casey’s moment, Myers told CSNews there have been so many great moments in his 27-plus-year career that he can’t narrow it down to just one. “This has been a great company for such a long time. My task was to make it even a little bit better, which I think we have,” he said. “We are a company that cares about the communities that we are in. It is important for us to give back to those communities. We do so in many ways.” Casey’s is also a company that maintains high standards for its level of performance, and Myers is confident the full potential of the company will be reached. “I think our shareholders have to be pleased with what we are doing and how we are doing it. Likewise, I believe all of our many customers are satisfied with how we are doing our work as well,” he said. “If we can take care of the employees, they will take care of customers and shareholders.” Despite his retirement, Myers plans to remain active. For starters, he will stay on as chairman of Casey’s. He also intends to keep busy with his many civic responsibilities. “Some people [at these civic organizations] are happy I am retiring as they want me to work harder on those projects,” he joked. In his free time, he looks forward to enjoying his two favorite activities: bass fishing and golf. “I have a lot of hobbies,” he said. “I want to get my golf game back in shape. I used to be decent golfer and I want to be a competitive golfer once more.” CSN
MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric
Striving for More Alon expands its carbon-neutral fuel offering, with plans for further growth By Brian Berk
arbon-neutral fuel is certainly not having a neutral effect for Alon Brands Inc. Alon, the largest 7-Eleven licensee in the United States, is so pleased with its introduction of the Strive Reduced Emissions Fuel Program from GreenPrint LLC that the convenience store chain
expects to expand the program to many more markets this year. Alon first introduced the Strive program in June in Albuquerque, N.M., at 122 pumps spanning 23 stores. Then in November, it more than doubled its commitment to the program — to 312 pumps at 36 stores. Dallas-based Alon Brands is a division of Alon USA Energy Inc. “We’ve expanded the program in Albuquerque and are in discussions with GreenPrint about moving the program to other markets as well,” Jonathan Ketchum, senior vice president of retail for Alon Brands, told Convenience Store News in an exclusive interview. “We don’t just see it as an Albuquerque-centric program. We’d like to expand this to all 309 of our locations and integrate this into our overall marketing program.”
“Consumers are definitely aware
of the program, like the program and are making purchase decisions based on the program, so we are very happy with it.”
— Jonathan Ketchum, Alon Brands Inc.
Company executives and community members came out in force to celebrate Alon’s introduction of the Strive Reduced Emissions Fuel Program in Albuquerque.
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Atlanta-based GreenPrint’s Strive Reduced Emissions Fuel Program calculates per gallon of gasoline sold a consumer’s tailpipe emissions and then plants trees and invests in other projects to lower those emissions in the atmosphere. On the retailer end, the program allows convenience store operators to sell an environmentally friendly fuel, which can help increase customer loyalty and better the local community.
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“We kind of had a soft launch of the product. We will make a bigger splash. 2016 is going to be a very exciting year for us to engage the communities even more,” Ketchum said. Alon wanted to become involved in GreenPrint’s program because the carbon-neutral movement is becoming increasingly important, according to the executive. “What attracted us to the program was to really differentiate ourselves and give back to the community,” he said. Based on both pre- and post-launch surveys conducted by Alon and GreenPrint, Alon’s involvement in the Strive program holds a lot of weight with customers. “What was really telling to us is twice as many people since we launched the program have said they make their decision to buy gas based upon the Strive fuel program,” Ketchum noted. “Before, the consumers we surveyed went to Alon stations 6.5 out of every 10 trips. Since the launch of the program, we’ve got that up to eight out of every 10 trips. We are seeing increased loyalty and I think that’s what we were really after, in addition to the corporate social responsibility.
“The main benefit the Strive program
brings is [that] it’s applicable to 100 percent of consumers today. Consumers can drive their current vehicles and pump gas from the existing infrastructure and be green without making a choice to buy an electric or hybrid vehicle.” — Peter Davis, GreenPrint LLC
“Consumers are definitely aware of the program, like the program and are making purchase decisions based on the program, so we are very happy with it,” he continued. Alon picked the Albuquerque market for the launch because the company sees it as one of the more ecofriendly markets in the United States and it played really well into its “green” footprint. The retailer has become much more involved in the community since introducing the Strive program, too, including joining forces with Tree New Mexico and the Arbor Day Foundation. “We’ve planted more than 1,000 trees in the metro
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GreenPrint’s Strive program calculates tailpipe emissions and then plants trees and invests in other projects to offset those emissions.
Albuquerque area,” Ketchum said. “We’ve had two tree-planting events. They have been fun for our employees and have really gotten us more involved in the local community.” A SYNERGISTIC RELATIONSHIP
Although scientists differ in opinion on the extent of motor-fuel carbon dioxide emissions, most believe they are, at a minimum, bad for the environment and can cause problems such as global warming, smog and pollution. In addition to carbon-neutral fueling, alternative fuels are touted as more environmentally friendly than traditional petroleum. But Peter Davis, co-founder and CEO of GreenPrint, stressed that his company is not competing with alternative fuels. Instead, he maintains GreenPrint has a “synergistic relationship” with such fuels. “The main benefit the Strive program brings is [that] it’s applicable to 100 percent of consumers today,” Davis said. “Consumers can drive their current vehicles and pump gas from the existing infrastructure and be green without making a choice to buy an electric or hybrid vehicle.” For the c-store/gas station operator, Strive provides a similar benefit in that they don’t need to install new tanks, pumps or dispensers, as must be done when introducing alternative fuels. “One day, everyone could be driving a low-emission vehicle. But nobody has a crystal ball,” Davis said. “This is the perfect stopgap solution for the next 30 to 50 years so that people can be green immediately without changing their behavior tremendously.” GreenPrint’s Strive Reduced Emissions Fuel Program is also being utilized by Ricker Oil Co., FleetCor/ Comdata, as well as 800 corporate fleets. CSN
FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
How to Keep Your Roller Grill Sales Rolling By Bob Phillips
onvenience stores are always looking for points of differentiation in today’s everchanging retail landscape, and a key differentiator being used by many c-stores as part of their foodservice operations is Foodservice 101 the roller grill. Long thought of as the • Keep your roller grill in clear line of exclusive domain sight to the sales counter so there of hot dogs, today’s can be no excuse for the area to be roller grill can be less than perfectly merchandised, much, much more clean and stocked. for the enterprising • Sample new flavors on a regular basis c-store operator. during slower business hours. The first step is to • Use hourly build-to sheets to deteridentify the average mine when sales growth occurs so roller grill customer. you can keep everything fresh while Members of the managing waste. Convenience Store
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News How To Crew of foodservice experts are unanimous in identifying the primary consumer of roller grill products as men. “Based on in-store observations, roller grills are primarily utilized by male customers,” said How To Crew expert Larry Miller, president and founder of Sanford, Fla.-based Miller Management & Consulting Services. Drilling down further, most of these male customers are blue-collar workers. “Construction workers, truck drivers, students, landscaping crews and others,” he continued. Also within this demographic, fellow How To Crew expert Tim Powell, vice president of consulting for the Chicago-based retail consulting firm Q1 Productions’ Food and Beverage Practice, identifies male millennials aged 18-34 as the heaviest users. “In the past, the roller grill was often viewed as offering carnival or gas station food,” Powell noted. “But this current generation wasn’t even alive when c-stores began their slow, upward move into QSR-style
ambiance and food.” At Pennsylvania convenience store chain Rutter’s Farm Stores, the retailer has found its roller grill customers to be “on-the-go consumers — more than likely, long-time c-store customers,” relayed How To Crew retailer Ryan Krebs, foodservice director at Rutter’s. “They are, for the most part, cost-sensitive males who are habitual in their choices.” Still, the roller grill may be gaining favor among other shoppers, too. “The core customer is still mainly the blue-collar worker, but as food becomes more and more accepted in c-stores, we are drawing in more women and younger shoppers,” added Chad Prast, another retailer member of our How To Crew who serves as Murphy USA Inc.’s senior category manager of fresh foods and dispensed beverages. all HaIl tHE DOg
While the primary roller grill consumer may be male, this demo includes many subsets in terms of ethnicity, race and other cultural variances. Because of this, the roller grill has evolved over the years to include a variety of ethnic offerings. “The more the variety and size, the better,” explained How To Crew panelist Dean Dirks, founder of consultancy Dirks & Associates and a consulting partner at Lake Forest, Ill.-based b2b Solutions LLC. “Every roller grill should offer at least four different flavors.” Depending on the ethnic makeup of a store’s surrounding area, several different flavor profiles can be offered on the same roller grill — Hispanic, Asian, Tex-Mex, etc. “Thai flavors, taco dogs, taquitos, Tornados and tamales are finding their way to the roller grill,” noted Murphy USA’s Prast. This is in obvious response to the always-evolving cultural landscape in today’s retail environment. “In many markets, Hispanic customers come in more often and are very loyal. Having the varieties of products and condiments they prefer is key. We added a tamale on the roller grill last year in certain markets and it has done very well.” Many ethnic sausages (bratwurst, Italian sausage and Polish sausage) have become mainstream — certainly in neighborhoods in which these products are staples to the local clientele. “There is still a vast universe of sausages that remain untapped in our world, including Chorizo (Mexican), Loukaniko (Greek), Boudin (Cajun) and Andouille (Creole),” according to How To Crew expert Mathew Mandeltort, director of
foodservice at convenience distributor Eby-Brown Co. And yet, even with the evolving portfolio of products found on c-store roller grills these days, there can be no debate as to who the “top dog” is: the hot dog. The latest Convenience Store News Foodservice Study, published last year, showed hot dog sales totaled nearly $3.6 billion in the convenience channel in 2014, a 7.1-percent increase year over year. “Plain hot dogs will always exist because they are a piece of Americana in c-stores,” said Q1 Productions’ Powell. “As c-stores expand menus, I think more options will lead to a higher basket ring as there are more choices for patrons. But I don’t think items cannibalize the hot dog.” Not all our How To Crew panelists, however, are in agreement about the cannibalization issue. Dirks feels that in the growing world of convenience foodservice, other products and categories do in fact encroach on roller grill sales. “The development of other foodservice has really cannibalized roller grills rather than grow sales,” he stated. Roller grills are no longer the one foodservice staple that can found in c-stores across the nation. “Sandwiches are now a staple in most c-stores, be it packaged or fresh made,” said Prast. In order to be very strong at the roller grill and challenge the best performers, a store has to have a lot of variety, which usually requires a lot of space. “You can be successful with one grill, but overall, multiple grills let the customer know you are really in the business,” added Prast. Make no mistake, though: Hot dogs remain a constant in the world of convenience foodservice. “Particularly a quality, all-beef offering that the consumer considers a quality product with an affordable price point,” noted Rutter’s Krebs. And Miller cited that the demographics and product movement analysis show hot dogs still outsell other handheld, manufactured tubular foods, such as corn dogs, egg rolls, tamales, burritos and Tornados (a trademarked item of Ruiz Foods). According to CSNews research, hot dogs are the No. 2 foodservice item in convenience stores, accounting for 17 percent of overall foodservice sales, second only to sandwiches (25.7 percent). Ethnic items on the roller grill fall into the “all other prepared food” category, which accounts for 9.8 percent of sales. Despite hot dogs’ continuing roller grill regime, that certainly doesn’t mean other roller grill products are of lesser importance — particularly in c-stores
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
serving ethnic clientele. “Encased meats can be found in virtually every culture,” noted Eby-Brown’s Mandeltort. Indeed, the options are virtually endless for what may be offered on the grill, and that has stretched its importance into what would be considered non-traditional roller grill dayparts. “Today, you find all sorts of items on the grill, including breakfasttype items with eggs, sausage and bacon, as well as other savory flavors like pepperoni pizza, and there’s new items that fit the sweet or dessert categories,” according to Miller. BEyOnD tHE DOg
Hot dogs will likely rule the roller grill roost for the foreseeable future, but on a going-forward basis, there is little doubt that products, flavors, spices, condiments, etc., will continue to evolve in the roller grill universe. “That’s true,” said Krebs. “The roller grill consumer is looking beyond the dog. Chicken and turkey products are being sought out in addition to beef.” Krebs pointed to the vast array of flavors a c-store might consider adding to their grill offering, if they haven’t done so already. “Outsidethe-box flavors — including Thai chili, Foodservice 201 chorizo, andouille, buffalo chicken • Offer creative mustards and hot — are trendsauces. If you have the ability, ing upward,” he grilled onions are a great addition observed. “Though for your toppings bar and can be a not declining, some real differentiator. standard offerings • Play to your strengths. If sales are such as smoked or really high from 11 a.m. to 1 p.m., add breakfast sausage an extra roller grill that you can move are leveling off as in during the rush and then clean and the more aggressive store it during slower periods. This flavors steal some of will help you avoid out-of-stocks. their sales.” • Learn to embrace waste; it’s going Our How To to happen. If you think that you can Crew panelists run a successful foodservice program believe there are without throwing out food, don’t go many ways to create into foodservice. variety in your roller
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grill operation without negatively impacting your overall foodservice sales. “Smaller, bitesize items are higher margin items and give consumers the sense of greater value,” said Powell. “Taquitos by firms such as Don Miguel and innovative Rollerbites by Home Market Foods have helped c-stores maximize the potential of the grill.” While no single SKU is expected to overthrow the classic hot dog, the category is definitely evolving. “As manufacturers become more creative (meatball rollers, cheeseburger rollers, chicken and turkey, stuffed and wrapped), sales are going to other SKUs as well,” Krebs explained. “I believe this is capturing a new roller grill crowd beyond the faithful hot dog consumer. They still want value and speed, but desire more creative options.” Indeed, giving your customers a variety of selections may well be the differentiator in setting your roller grill operation apart from the crowd. “Choice is a primary factor,” agreed Powell. “Over the past several years, roller grill items have evolved from plain hot dogs to jalapeño and chipotle-flavored dogs, to various sizes. The products have also expanded to include premium sausages, Mexican-style taquitos and bite-sized items.” At the same time, the roller grill has found a way into new dayparts, such as in breakfast sausages and cheeseburger dogs. “The primary consumer group likes this choice and has responded well to it,” said Powell. “Stewart’s Shops, for example, returned the [roller] grill to its stores after it saw demand and product innovation spike.” How To Crew retailer Ed Burcher, the new chief operating officer of Coen Markets, a regional convenience store chain with stores in southwestern Pennsylvania, eastern Ohio and northern West Virginia, goes so far as to call today’s roller grill options “bold and adventurous.” “This includes ethnic offerings,” said Burcher. “This trend is pushing both the flavor of the products, as well as the range of toppings forward.” He points out that by offering a variety of flavors,
hot dog sales will not be encroached upon by other products; rather, more flavors should enhance sales. “While a great, all-beef hot dog can satisfy most age groups, the use of flavors like sriracha are now becoming as commonplace as ketchup used to be,” said Burcher. tHE 24/7 gRIll
The natural result of this growing portfolio of products and condiments is the expansion of roller grill item availability throughout a c-store’s 24/7 operating hours. “One of the great things about the roller grill is its adaptability to different dayparts,” said Mandeltort. “Offerings can be customized to meet the dining needs of consumers regardless of time of day. Snacking remains a great opportunity for the roller grill. Items are portable, portion-size appropriate for snacking and can be bundled with other offerings to make a great value proposition.” With virtual nonstop usage in many locations, it’s natural that c-store operators expect the hardware required to operate the grill to run without a lot of maintenance. “The shelf life of a grill is very important,” explained Prast. “A lot of manufacturers have great grills, but some don’t hold up over the long run.” Retailers should look for equipment that heats evenly and can be controlled to prevent the burning or degradation of products, our How To Crew panelists advise. It is very important that retailers avoid the temptation to cut corners. It may be an old adage, but “being penny wise and pound foolish” could ultimately lead to a roller grill program’s failure. “That has always been a problem,” acknowledged Miller. “Some retailers seem to believe that if the manufacturer recommends holding hot dogs for two hours on the grill, then surely they would be good for three hours. And what the heck, stretch it to four hours. Now the whole program is in jeopardy because the products are dried out and quality is poor.” There should be no shortcuts at all when cooking and merchandising roller grill products or any food products for several reasons — the most important being food quality and liability (i.e. avoiding foodborne illnesses). “If a retailer allows greed or laziness to interfere with best practices and minimum standards, it can cost him everything,” continued Miller. As profitable as hot dogs may be to the typical
Call tO aCtIOn: Foodservice 301
• Learn to cross-merchandise. For example, if you have a cheese dispenser for nachos, allow customers to use it for putting melted cheese on their roller grill items. • Consider pairing your grill with other high-margin categories and promoting these pairings at the pump. For instance, use your roller grill to promote dispensed beverages. • If sales are booming and you have trouble keeping your roller grills stocked, consider investing in a Prince Castle or Duke Manufacturing holding unit, or a heat-and-hold drawer made by Nemco. This will allow you to heat and hold all of your products at the correct temperature and moisture content so that you never run out.
c-store operator ($23,901 in per-store sales in 2014, according to CSNews research), there are many factors a c-store operator must stay in front of when operating a roller grill. These include issues associated with selling food to the public, including health code standards that vary from locale to locale, as well as maintaining equipment (grills and warmers) that will consistently perform to maximum efficiency. “Retailers need to realize that this is a piece of cooking equipment that is actively producing food,” said Mandeltort. “It’s not like a Ronco Rotisserie that you can ‘set it and forget it.’” To further illustrate his point, Mandeltort offers the analogy of grilling hot dogs on the Fourth of July and then leaving them on the grill for eight hours. “If you’re not willing to eat the food you produce, what makes you think your guests would want to?” he asked rhetorically. CSn
Our How To Crew David Bishop — Balvor LLC Ed Burcher — Coen Markets Joseph Chiovera — XS Foodservice & Marketing Tom Cook — King-Casey Jack W. Cushman — CST Brands Inc. Dean Dirks — Dirks & Associates Eric Giandelone — Mintel Foodservice Ryan Krebs — Rutter’s Farm Stores Mathew Mandeltort — Eby-Brown Co. LLC Larry Miller — Miller Management & Consulting Services Tim Powell — Q1 Productions Chad Prast — Murphy USA Inc.
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FOODSERVICE Category Trends + Insights from
Eating Patterns in America: The State of the Consumer Household changes will continue to shape the future of eating for years to come
he “typical” U.S. consumer and the households in which they live look very different today than they did 20 years ago. These changes are reflected across the spectrum of eating patterns in America today — who, what, when, where, how and why — and will continue to shape the future of eating in the years to come. SmAllER hOuSEhOlDS hAVE wIDE-RAngIng ImplICAtIOnS
Single-person households in the United States are 38 million strong and growing — the highest in history — with 55 percent being adult only. The typical size of an American family is 2.5 persons per household, with more than one-quarter of By Bonnie Riggs Restaurant Industry Analyst, American households with children The NPD Group headed by single moms. www.npd.com Smaller households, in many cases, are a long-term choice with many adults choosing not to be married and/or have fewer children. This change in household composition has wide-ranging implications for retailers and manufacturers in terms of marketing, merchandising, new product development, packaging and positioning.
71 percent of U.S. households are childless (>18 years of age) – the highest in history.
Source: U.S. Census Bureau
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A multICultuRAl mOSAIC
By 2044, the U.S. Census Bureau projects more than half of all Americans will belong to a minority group, and by 2060, nearly one in five of the nation’s total population is projected to be foreign-born. The Hispanic population has surpassed 50 million and accounted for more than half of the 27-million U.S. population increase in the last decade. Hispanics
There are wide-ranging implications for retailers, like convenience stores, in terms of marketing, merchandising, new product development, packaging and positioning.
FOODSERVICE Category Trends + Insights from
currently represent 18 percent of the total U.S. population. While Hispanics will be a very large and growing group, Asians are one of the fastest-growing ethnic populations, currently representing 8 percent of the U.S. population. Further, the millennial generation is more diverse than the generations that preceded them, with 44 percent being part of a minority race or ethnic group.
If past trends continue to hold, it’s unlikely that recovery from the Great Recession will lead to a rebound in the share of adults in middle-income households. Since the middle class has historically fueled spending on everything from housing to cars to food purchasing, a smaller middle class has wide-ranging impact on the economy. Even more diverse than millennials are the youngest Americans — those younger than five years of age. In 2014, this group became majority-minority for the first time, with 50 percent being part of a minority race or ethnic group. ShRInkIng mIDDlE ClASS IS pARt OF thE nEw ECOnOmIC nORm
The share of the American population that is considered middle income has been shrinking over the last four decades. In the past, those in the middle income group typically moved up into higher income levels, but the opposite is true now. Declining or stagnant wages coupled with a growing income gap during the past 15 years has resulted in many families slipping out of the middle class. If past trends continue to hold, it’s unlikely that recovery from the Great Recession will lead to a rebound in the share of adults in middle-income households. Since the middle class has historically fueled spending on everything from housing to cars to food purchasing, a smaller middle class has wideranging impact on the economy.
ShIFtIng ChAngES CREAtE OppORtunItIES
This overview presents just a few of the changing consumer dynamics that will shape the retail marketplace in the future — both near and long term. Convenience store operators need to be aware of changes in consumer behaviors in order to modify their marketing tactics and strategies, and meet the needs and wants of today’s consumers. CSn
y 2044, the U.S. Census Bureau projects more than half of all Americans will belong to a minority group. The Hispanic population has surpassed 55 million and accounted for more than half of the last decade’s population increase. Asians are one of the fastest-growing groups and currently represent 8 percent of the U.S. population.
Source: U.S. Census Bureau
Shrinking Middle Class The share of adults who live in middle-income households has eroded over time from 61 percent in 1970 to 51 percent in 2013, according to a Pew Research Center study. Stagnant wages and a growing income gap during the past 15 years have caused many families to slip out of the middle class.
Source: Pew Research Center
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TOBACCO Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP
Spotlight on Smokeless Where there’s no smoke, there is still industry fire around the smokeless segment By Renée M. Covino
hen it comes to the data, the smokeless tobacco segment — chew, dip, snuff, moist, snus, etc. — is still fairly “steady as she goes.” But beyond the data, there is some fire. Smokeless tobacco continues to lead the other tobacco products (OTP) category for convenience stores with a smokin’ 60.6-percent share of dollar sales, according to recent industry figures. Dubbed “the little train that could” by c-store industry analyst David Bishop, managing partner at Barrington, Ill.-based sales and marketing firm Balvor LLC, the smokeless tobacco segment still appears to be benefiting and moving forward in direct contrast to some of the negative press surrounding combustibles. As Bishop has stated at several industry events, “the headwind for combustibles becomes the tailwind for smokeless.” Looking at the just-completed year, stats from the MSAi database and OTP supplier Swisher International Inc. reveal that moist snuff continued to grow at a steady rate of approximately 2 percent and was on trend to reach 1.5 billion cans sold for 2015. “Top-performing moist retailers are seeing growth in the category and continue to dedicate more shelf space to it to meet customer needs,” even in light of growth in other
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segments of OTP such as electronic cigarettes and vapor products, stated Jeff Rossi, senior director of category management and trade marketing for Swisher International. On a similar trajectory, Wells Fargo Securities LLC recently reported that overall smokeless volume for the fourth quarter of last year moderated to about 3.1-percent growth, and it is forecasting that volume will be up 3.5 percent for fiscal 2016. Beyond the numbers, there’s also news that is putting smokeless in the spotlight. Here’s a look at some of the latest headlines concerning this non-combustible segment that still has a progressive fire burning. MOre YOung AdulTs swiTChing TO sMOkeless?
The smoking rate among U.S. adults aged 18-29 has declined 12 percentage points to 22 percent over the past decade, a steeper decrease than any other age group, according to the annual Gallup-Healthways Well-Being Index, fielded Jan. 2 through Oct. 8 of last year. Researchers believe the decline in the smoking rate could be related to young adults switching to non-cigarette tobacco alternatives, including smokeless tobacco, which are utilized by 5.4 percent of adults aged 18-29, also higher than any other age group. Gallup and Healthways, a well-being improvement company, only started asking tobacco product users to specify whether they use cigarettes, cigars, pipe tobacco or smokeless tobacco in 2014. While the limited trend does not allow researchers to determine whether the use of non-cigarette tobacco products has inversed over time, the data does show young adults are more likely than other age groups to use all types of non-cigarette alternatives. Gallup found that 20.4 percent of Americans use two or more forms of tobacco products, while 2.5 percent use three or more
RESULTS OF THE COLLABORATION BETWEEN TWO GREAT COMPANIES
TOBACCO Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP
types. Among adults aged 18-29, 23 percent reported using at least two forms and 4.9 percent reported using three or more, again indicating a higher likelihood that the younger age group uses non-cigarette tobacco alternatives. As for what’s leading young adults to use alternative tobacco products, Gallup and Healthways cited curiosity, appealing flavors, peer influences, high cigarette taxes and smoking bans. suPPOrT FOr MOdiFied-risk snus lABel
Regulatory matters are also making headlines in the smokeless universe. For instance, Swedish Match North America (SMNA) is still seeking Food and Drug Administration (FDA) approval of its Modified Risk Tobacco Product application (MRTP) for its General snus products that were launched more than a year ago. The FDA’s Tobacco Products Scientific Advisory Committee last spring recommended that the products should not carry a modified-risk label. “Modified risk” means tobacco products that are sold, distributed or marketed with a claim to reduce harm or the risk of tobacco-related disease. But Swedish Match CEO Lars Dahlgren said the company remains “cautiously optimistic” about eventually being able to market its snus in the United States with a MRTP claim. The Tobacco Control Act establishes rigorous scientific criteria an applicant’s tobacco product must meet before the FDA can allow the applicant to sell that product with a MRTP claim. At the end of last year, Swedish Match got some support for its modified-risk application in the form of a journal article published by a well-known health expert. Featured in the Journal of Nicotine and Tobacco Research, a late 2015 study by University of Louisville Professor Brad Rodu, co-authored by a university colleague, a University of Vermont psychiatrist and a Swedish tobacco/nicotine researcher, found that tobacco users who view “proposed relative-risk labels are more likely to perceive snus as less harmful than cigarettes and may be more likely to use and buy snus.” Rodu’s study analyzed a SMNA-funded, premarket online survey of more than 13,000 respondents to measure perceptions of proposed product warning labels vs. the current warning labels on Swedish Match snus packages, which state: this product can cause mouth cancer; this product can cause gum disease and tooth loss; this product is addictive; and this product is not a safe alternative to cigarettes.” In its
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MRTP application, the supplier seeks to drop the first two warnings, retain the third, and have the fourth replaced with a label stating: “No tobacco product is safe, but this product presents substantially lower risks to health than cigarettes.” Compared with the current not-a-safe-alternative warning, Rodu’s research showed smokers who viewed the proposed new labels were significantly more likely to use or buy snus, and the same held true for smokeless users and other tobacco users who viewed the substantially-lower-risk label. These results, Rodu said, indicate that the proposed new labels “could foster a transition from cigarettes and other combustible products to snus, a result that would represent a significant health advantage for individual smokers and public health generally.” FdA gives snus A PreMArkeT win
Before 2015 came to a close, the FDA did give Swedish Match a favorable ruling — but not related to its MRTP application, which is still “pending.” Instead, eight new snus products from SMNA will be allowed on the U.S. market following a landmark ruling by the agency. The FDA announced in November that it issued its first product marketing orders through the Premarket Tobacco Application (PMTA) pathway for the eight SMNA snus products under the General brand name. The agency said this decision does not constitute an authorization for these items to be sold as modified-risk tobacco products, but rather “reflects evidence showing that these products, marketed as described in the manufacturer’s application, would result in a low likelihood of new initiation, delayed cessation or relapse” and “would likely provide less toxic options if current adult smokeless tobacco users used them exclusively.” The PMTA marketing order allows the products to be sold in the United States, but does not mean they are safe or “FDA approved,” the agency said, reiterating that a separate MRTP approval is required for a company to market a product with claims of reduced exposure or reduced risk. What this basically means to U.S. consumers who purchase the eight affected General snus products is that they can now buy the 2015 versions of these products, not the 2011 versions. The eight General snus products affected are: General Original Portion, General White Portion, General Loose, General Wintergreen, General Mint, General Mini Mint, General Nordic Mint, and General Classic Blend. Csn
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Difference in Opinion C-store retailers and wholesalers think differently about the pending merger of Anheuser-Busch and SABMiller By Brian Berk
xperts disagree on whether a national recession has begun. Corporate earnings in many cases have started to decline and wage growth is stagnant, leading some to believe a recession is on the way. Others just believe lower oil prices have caused a stock market correction. But one thing is certain: Alcoholic beverages are about as close to a recession-proof commodity as there is. In fact, some people turn to these libations even more in downtimes. The largest worldwide brewer, Anheuser-Busch InBev (A-B), has positioned itself as a benefactor in economic downturns in the past, and that may hold true even more so this time as the Belgium-based beer company recently announced it will merge with the world’s No. 2 brewer, United Kingdom-based SABMiller plc. The transaction, pending regulatory approvals, is valued at $105 billion, with the combined company boasting annual revenues of $64 billion. If and when the deal — announced in November and set to close in the second half of this year — is completed, the new combined company will control a number of top beer brands, including Budweiser, Corona, Stella Artois and Foster’s. The deal should also give A-B the opportunity to enter untapped regions of the world, such as Africa, creating what A-B calls the “first truly global beer company.” Also as part of the transaction, Molson Coors has agreed to purchase from A-B, SABMiller’s 58-percent stake in the MillerCoors joint venture
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and the global rights to both Miller and Coors legacy brands. In addition, Japan’s Asahi Group Holdings Ltd. announced on Feb. 10 a bid of $2.9 billion for the Peroni, Grolsch and Meantime brands, as well as the Italian, Dutch and British companies of SABMiller that manufacture and distribute these brands. In the convenience channel, the foremost question right now about the merger is: How will it affect convenience store retailers and wholesalers? Will their business change at all? On the retailer end, many c-store operators expect to maintain the status quo post-merger. Brian Sullenger, customer benefits manager for Maverik Inc., told Convenience Store News that he believes the merger will change little at the North Salt Lake City, Utahbased chain of 275-plus c-stores. “From my understanding, this will not affect the U.S. market,” he said. Tim Cote, vice president of marketing for Plaid Pantry Inc., a 107store chain based in Beaverton, Ore., holds a similar sentiment. Although he stated the merger should not make a major difference for Plaid Pantry’s beer business, he did acknowledge the beer market could be slightly affected by the aftermath of the merger — namely, the sale of the MillerCoors joint venture to Molson Coors Brewing Co. “If the Molson Coors purchase of the MillerCoors joint venture goes through as planned, I would assume that it would be business as usual in the short term. In the longer term, I would expect some philosophy changes in go-to-market [strategy] since there would be different leadership. But nothing too radical in
nature,” said Cote. Also in agreement that business would go on as usual should the merger be approved is Damian Wyatt, beverage category manager for Brentwood, Tenn.-based MAPCO Express Inc., operator of 373 convenience stores in eight states under various banners. In fact, Wyatt sees the potential for benefits stemming from this transaction. “From an execution standpoint, I don’t believe we will incur any change in our day-to-day business. The product will still be distributed by our current houses, and we don’t believe our customers will experience any change with the merger,” he said. “In regards to promotional periods and planning, I believe this merger could prove to be beneficial. The merger has the potential to institute easier execution and implementation, as a one-call point system could prove to be representing a stronger unified and more diverse portfolio,” he explained. “This would make it easier on us as buyers and category managers as this would lessen conflicting competition and competing priorities as well as hidden competitive agendas.” WHOLESALE CHANGES
Although c-store retailers will probably not see any momentous changes post-merger, the story is believed to be much different for beer industry wholesalers. In fact, Craig Purser, president and CEO of the National Beverage Wholesalers Association (NBWA), testified in December before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights about the subject. It’s important to note, however, that the decision on whether the United States approves the merger does not rest with this Senate subcommittee, but rather the U.S. Justice Department. NBWA’s leader testified that the proposed merger could have an adverse effect on: the American independent beer distribution system; today’s competitive marketplace; and the vast choice and variety of beers available to consumers. “If the proposed deal closes, 57 percent of the world’s global beer profit would fall within the A-B and SAB combination. By comparison, Heineken, the next largest global competitor, is at 11 percent and Molson Coors, the largest U.S. competitor to A-BSABMiller, would be just under 3 percent of that same global profit pool,” Purser testified. “The resulting concentration could upset the equilibrium of the current U.S. beer market,” he continued, “which today can be fairly characterized as a ‘con-
sumer pull’ marketplace, where the consumer possesses the power to create market demand for popular beer brands. Through coordination with local retailers and local, independent beer distributors, the market responds to that demand.” These merger transactions could disrupt a critical component to the success of the industry: the combination of an open and independent distribution system with a state-based regulatory system that has worked so well for so many over the years, according to Purser.
“The resulting concentration could upset the equilibrium of the current U.S. beer market, which today can be fairly characterized as a ‘consumer pull’ marketplace, where the consumer possesses the power to create market demand for popular beer brands.” — Craig Purser, National Beverage Wholesalers Association
“The U.S. beer market is thriving because of a robust and competitive system of independent distribution that reduces barriers to entry, reduces brewer and consumer costs, and fosters the explosion of choice and variety desired by consumers,” he stated. During the hearing, Purser’s concerns resonated with several of the lawmakers on the subcommittee. “Nobody wants to take a seat at a bar and discover their only choices are a Bud and a Miller,” remarked Sen. Chris Coons (D-Del.). Added Sen. Richard Blumenthal (D-Conn.): “What we’ve seen over the past years is a trend toward mammoth beer behemoths in our market and the result has not been a happy one for many consumers. I would urge the Department of Justice to think beyond the divestiture that has been proposed.” He went even further by asking Anheuser-Busch InBev CEO Carlos Brito to pledge that he would not terminate wholesalers or put the squeeze on small craft brewers. “I can commit, as a result of this transaction, there will be no such thing,” Brito responded during the hearing. “This transaction is really about the rest of the world. It’s not about the U.S.” CSN
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CANDY & SNACKS EXPERT’S VIEW
Chocolate + Non-Chocolate + Gum + Salty Snacks
Snackifcation & the Millennial Consumer Three of today’s major snacking trends are largely influenced by this generation
onsumers in the United States and around the world continue to snack more and more every day, with less room for traditional meals. While this trend is influenced by many factors, the key demographic driving it is millennials, the generation of Americans born roughly between 1977 and 1995. Some of the key millennial values influencing their food and beverage choices include authenticity, transparency, lack of formalized boundaries/greater creativity, and convenience — not to mention the technology-driven world that guides so much of the decision-making in their lives. Some of the main trends impacting the By David Hyland, snacking world today are largely influDaymon Worldwide enced by the millennial generation. WELLNESS
Research shows that younger consumers are more likely than older consumers to embrace “healthier” snacks. Nutrient Density — According to Nielsen, almost half of all consumers globally admit to using snacks to replace a main meal. As consumers are skipping more traditional meals, they are still looking for the nutrition and energy to sustain them through the day. Snacks that can fill the nutrient void traditionally met by breakfast, lunch or dinner are seeing strong growth. This includes categories that are inherently nutri-
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ent dense (i.e., nuts), as well as categories that are able to authentically deliver nutrients with product formula changes (i.e., protein bars). Additional categories in this space that have shown very strong growth in recent years include seaweed snacks and kale chips. Organic — According to the Organic Trade Association, organic snacking has grown by more than 15 percent per year since 2011, well ahead of the total organic market at 11 percent. Within organic snacking, salty snacks account for more than half of all organic snack dollar sales and grew 17 percent in 2014. While organic may not be as developed in the convenience channel, we look for this trend to stick and to continue to expand into this channel. SNACKIFICATION
Categories traditionally not related to snacking are now seeing significant growth behind snack usage. Yogurt — Historically used as a breakfast food primarily, yogurt is increasingly being eaten throughout the day as a snack. According to Datamonitor, this category has experienced the largest growth of any food category in the American diet from 2004 to 2014. Also, 25 percent of Americans who skip breakfast will snack on yogurt later in the day. Vegetables — Consumers want to eat healthy, but they will not give up taste. Manufacturers have caught on to this trend and created new products
CANDY & SNACKS Chocolate + Non-Chocolate + Gum + Salty Snacks
to fill the opportunity. U.S. brand Way Better Snacks launched a Sweet Potato Corn Tortilla Chip, which has been emulated by other national brands as well as retailer private brands. For example, Giant Eagle just launched a fall Nature’s Basket Sweet Potato Pumpkin Tortilla Chip. Additionally, brands like Mamma Chia Squeeze and Plum have introduced on-the-go snack pouches targeting adults. Beverages — A professor of nutrition at Purdue University, Richard Mattes noted that U.S. consumers’ daily intake of calorierich beverages now accounts for up to 50 percent of the calories we consume outside of meals. A recent study by the manufacturer FONA also found that 57 percent of millennial consumers are
Some of the key millennial values influencing their food and beverage choices include authenticity, transparency, lack of formalized boundaries/ greater creativity, and convenience — not to mention the technology-driven world that guides so much of the decision-making in their lives. drinking health-oriented, functional beverages including sports drinks, weight loss drinks and meal replacements, and much of this consumption is serving as a snack. This study also found millennials are the group most likely to consume one or more functional beverages per day. MULTI-SENSORY SNACKING
Millennials are more racially and ethnically diverse than any previous generation, and that’s having a profound effect on their snacking habits. Global Inspiration — Food producers are adding flavors and ingredients with local flair and going
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deeper into regional taste profiles. Rather than adding a generic “Asian” flavor or ingredient, manufacturers are providing authentic tastes from Korea, Thailand, Indonesia, the Philippines and other Asian countries. For example, Tom Yum, a traditional soup from Thailand, is now appearing as a flavor profile in salty snacks. The millennial consumer is particularly open to trying these new global flavors. Flavor Adventure — Many flavors are moving from obscurity just a few years ago into the U.S. mainstream today. This includes such flavors as sriracha, maple, ginger and coconut. For example, 7-Eleven in 2015 introduced new premium popcorn under its sub-brand 7-Select GO!Yum. The air-popped, gluten-free, no-preservative popcorn flavors include Sriracha, Bacon Ranch, Jalapeño Cheddar and Cinnamon Sugar. 7-Eleven also recently introduced GO!Smart sprouted tortilla chips in flavors including Sweet Chili, Sriracha and Sweet Potato. The world of snacking will continue to evolve over the coming years, but all indications show it will be driven most profoundly by the millennial consumer and the key trends of wellness, “snackification” of categories and multi-sensory/experiential snacking. CSN David Hyland is CPG Leader, Brand Management, Strategy & Consulting, Retail Engagement, for Daymon Worldwide. Daymon teams work directly with the world’s leading suppliers and retailers to create and market ownable, differentiated brands in the marketplace that deliver exceptional value, drive consumer loyalty and profitable sales growth, and improve people’s lives. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.
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STORESPOTLIGHT Kum & Go
Putting the ‘&’ in Kum & Go the chain debuts a prototype store that brings to life its brand slogan By Danielle Romano
mmediately upon entering Kum & Go LC’s new prototype store in Johnston, Iowa, it is clear to customers that this is not the convenience store they remember from their childhood. The 6,000-square-foot razed-and-rebuilt store — located at 5225 NW 86th St. — is the largest location in the West Des Moines, Iowa-based convenience store operator’s portfolio to date and borders on the look and feel of a contemporary hotel, Mark Hastings, chief operating officer of Kum & Go, told Convenience Store News during its recent visit to the prototype. Combining modern design with functionality, the new store concept emphasizes Kum & Go’s foodservice offerings and brings to life the brand’s slogan: “Where & Means More.” “The Marketplace design is the next evolution of a store design built to meet our customers’ needs,” explained Chris Jones, senior vice president of marketing. “We wanted to create a store experience that, in line with our brand promise, delivers more than our customers expect.”
Starting a revolution
Developed over the course of two years, the Marketplace design is a “labor of love,” according to
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Hastings, and was conceptualized to “create a much more exciting [customer] experience.” To bring this distinctive concept to fruition, Kum & Go partnered with New York City-based branding firm CBX, as well as BRR, an architecture firm based in Kansas City, Kan. Ensuring a strategic alignment process from beginning to end was paramount to CBX. The firm immersed itself in the Kum & Go brand to truly understand how to connect the c-store operator’s core values, passion for excellent service and heritage to the development of a new store design and experience that would be a true extension of the brand, Todd Maute, a partner at CBX who worked with Kum & Go on the project, explained to CSNews. “Our collective goal was to bring consumer touchpoints together within the store under one brand and enhance consumers’ shopping experience,” Maute said. “Our core desire was to have the store become an extension of the brand [Kum & Go team members] have worked so hard to build, while supporting the core values and services that make it such
STORESPOTLIGHT Kum & Go
through the store,” Maute commented. “From a distance, you can tell this is something new.” the FoodService connection
unique features of this store include an enhanced go Fresh Market offer, including a made-to-order sandwich station.
a great retailer.” When it came time for execution, this meant elevating the “physicality” of the store. The Marketplace prototype’s fuel canopy and store exterior are a far departure from Kum & Go’s previous stores. “The design signals ‘change’ from the street all the way
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The Johnston store officially opened for business on Feb. 18 and got cooking. With an emphasis on Kum & Go’s foodservice offerings and its “Go Fresh Market” fresh food program, customers are immediately greeted in the Marketplace store design by a fresh pizza and made-to-order sandwich station directly ahead of them. “We had food [positioned] to the side for years and people weren’t making the connection. Now, it’s as soon as they walk in the door,” Hastings noted. To draw even more attention, an oversized red ampersand is mounted over the station, where pizza and sandwich makers are clad in their new uniforms: chefs’ jackets and caps. The station backdrop is white subway title, which also can be found outside at the fueling stations. Other unique foodservice-related features of this store are: upscale bakery offerings, including fresh bread baked on the premises and Kum & Go’s signature product, ampersand doughnuts; 42-inch menu boards displaying real pictures of Kum & Go’s food, not generic images; a cold dispensed beverage station boasting 30-plus options and featuring flavor shot dispensers so customers can amp up their drinks; a crushed ice dispenser that uses filtration technology Starbucks helped Kum & Go create; a toppings bar of condiments; and a special toppings bar for coffee and other hot beverages, designed with millennials in mind. Throughout the sales area, lowered gondola fixtures create greater visibility to engage customers and make it easier for them to shop. At the same time, snack quads in diagonally positioned aisles give customers the opportunity to seek out their favorite snacks or discover something new. The Johnston site is also the chain’s first to feature indoor seating in order to create a social environment — including a five-seat community table similar to Starbucks, according to Hastings. The new prototype also debuts Kum & Go’s first-ever growler station, which sells local, domestic and craft beers during peak business hours. A recently passed Iowa law now permits retailers in the state to sell take-home beer in growlers. Some additional unique features of the Marketplace design are: • A quick-service checkout station that doesn’t allow tobacco or lottery sales;
Truly eliminates odors and leaves a light fresh scent.
STORESPOTLIGHT Kum & Go
• Patio seating complete with overhead heaters for availability during three seasons; • Complimentary Wi-Fi and charging stations; • An expansive beer cave and separate fridge for singles; • Music playing throughout the store; • Touchless restrooms; • E15, E85 and unleaded fuel options; • LED lighting in-store and at all fueling stations; • LEED certification (chain has more than 110 LEED-certified stores); and • Clutter-free counters, which coincidentally mirrored a recent CSNews story on why it’s important to keep your counters clean, according to Hastings. Where & MeanS More
Beyond just what it sells, the next-generation store is a physical representation of Kum & Go’s core values, which include passion, integrity, teamwork, caring and excellence. Playing off the retailer’s slogan, the ampersand symbol plays an integral role in the prototype store design. Displayed both strategically Kum & go’s first-ever growler station sells local, domestic and craft brews and whimsically throughout the Marketplace during peak business hours. concept, the ampersand emphasizes that at Kum & Go, you always get more. the “guinea pig” of the Marketplace concept, and comIn fact, because the ampersand is integral to the pany executives are already toying around with ideas company’s branding, a piece of artwork was specifithey would like to bring to future Marketplace stores. cally commissioned for the Johnston site. An 8-footThese ideas include: electronic trash compactors to tall by 7-foot-wide, handmade ampersand sits on eliminate garbage bag usage and reduce waste; cabinets the north side of the building as a that will retrofit supplies like boxes for cups and lids to tribute to Kum & Go’s slogan. save space and keep storage areas well-maintained and Designed and produced by organized; and faucets over the cold dispensed beverDes Moines art studio age slots to keep drainage areas easily maintained and Sticks, the artwork honcleaned, thus saving employees time from having to take ors the community of the slots to the back room to wash. Johnston with keywords Kum & Go’s next location to feature the and images that reflect Marketplace design and enhanced Go Fresh Market the area’s attractions and foodservice offering will be in Joplin, Miss. This store sayings on one side, will likewise have its own unique ampersand artwork, while the other side paying homage to the catastrophic tornado that struck showcases Kum & the city in 2011. Go’s core values Before the end of this year, the retailer plans to and culture. open a total of 28 locations featuring the Marketplace As Hastings design in Iowa, Colorado, Oklahoma, Wyoming, shared with Missouri and Arkansas. Kum & Go currently operates CSNews, the 430 convenience stores in 11 states. CSN Johnston location is
76 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
BW Gas & Convenience We are a well-established gas station and convenience store company looking to expand our portfolio in the following states:
• Iowa • Nebraska • Colorado • Illinois • Indiana • Kansas
• Minnesota • Missouri • Wisconsin
I you are interested in selling your stores or i you know o potentially interested sellers, please contact Greg Gardner at 1-800-277-6300 or email@example.com.
HOTPRODUCTS Special Advertising Section
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HOTPRODUCTS Gourmet Pet Treats
Outdoor Merchandising Services
Special Advertising Section
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CLASSIFIED Credit Card Processing / Merchant Services
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CLASSIFIED Pre-Paid/Cellular Products
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CLASSIFIED Air Vacs
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CLASSIFIED Help Wanted
OUR STARTER PACK 12 Dozen Sunglasses, FREE Display & Shipping
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DAVY CROCKETT HATS SELL BY THE TENS OF THOUSANDS AT $4.00 EACH. Silver Fox tails are a good seller!
You Can Scan We have: Red Fox tails, Coyote tails, White tails, Racoon tails, etc.
Leopard Rabbit Skin
Rabbit skins come in White, Natural colors, Cheetah, Tiger, Leopard, Ocelot and Black.
LARGEST FUR TAIL DEALER WITH OVER A MILLION TAILS AT LOW WHOLESALE ONLY PRICES. $100 MIN. FREE PRICE LIST.
Strips Inc. Tel.: (718) 786-3381 Fax: (718) 786-0203 http://stripsinc.tripod.com 86 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
CLASSIFIED Age Verifier / POS
Pre Paid Kiosks
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FOR ALL YOUR NEW PRODUCTS AND SERVICES ADVERTISE IN
Check Guarantee Services
Equipment / Supplies
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HOTPRODUCTS Special Advertising Section
Advance Pierre .......................................... 92 ...................................www.advancepierre.com Alon Brands ...............................................45 ....................................www.alonbrands.com Altria Group Distribution Company ........2,3 ...................................www.insightsc3m.com BakeNJoy ....................................................47 ....................................www.bakenjoy.com
570 Lake Cook Road, Suite 310, Deerfield IL 60015 Phone (224) 632-8200 Fax (224) 632-8266 www.stagnitobusinessinformation.com
Brookwood Financial................................77 Regional....................800.277.6300 Cash Depot.................................................27 ....................................www.cdlatm.com Coca Cola ...................................................41 Del Monte ...................................................13 ....................................www.freshdelmonte.com Fazoliâ€™s ........................................................30 ....................................www.ownafazolis.com General Mills..............................................17.....................................www.generalmillsconvenience.com Goya Foods.................................................7 ......................................firstname.lastname@example.org Growth Energy ..........................................51 ....................................www.ethanolretailer.com Heineken ....................................................5,59.................................www.enjoyheinekenresponsibly.com Home Market Foods ..................................54-55..............................www.rollerbites.com Hussmann ..................................................73 ....................................www.hussmann.com Iowa Rotocaster.........................................91 ....................................www.irpinc.com KT&G...........................................................37,39 ..............................877.580.5506 Logic Technologies ...................................CV1, 10-11 .....................www.logicecig.com McLane Co. ................................................15 ....................................www.mclaneco.com National Confectioners Association ........69 ....................................www.sweetandsnacks.com
Harry Stagnito President and CEO 224-632-8217 email@example.com Kollin Stagnito Chief Operating Officer 224-632-8226 firstname.lastname@example.org Ned Bardic Senior Vice President/Partner 224-632-8244 email@example.com Korry Stagnito Chief Brand Officer 224-632-8171 firstname.lastname@example.org
National Restaurant Association .............19A ..................................www.restaurant.org Paytronix ....................................................25 ....................................www.paytronix.com Phillips 66 ..................................................49 ....................................www.video.76.com Procter & Gamble ......................................75
Ron Lowy Group Brand Director 330-840-9557 email@example.com
R.J. Reynolds Tobacco Company ............9 ......................................www.engagetradepartners.com Red Bull ......................................................33 Rubbermaid ...............................................61 Save-A-Lot .................................................35A .................................www.save-a-lot.com
Michael Hatherill Business Development Manager 201-855-7610 firstname.lastname@example.org
SignArt/Evolocity ......................................46 ....................................www.evolocityad.com Subway.......................................................29 ....................................www.subway.com Swedish Match ..........................................43 ....................................email@example.com Swisher International...............................63,65 ..............................www.swishersweets.com
Steve Lichtenstein Vice President/Southeast Regional Manager 201-855-7613 firstname.lastname@example.org
Tillamook Country Smoker ......................71 ....................................www.tcsjerky.com Tyson Foods ...............................................21 ....................................www.tysonconvenience.com U.S. Smokeless Tobacco ...........................3 Universal Merchant...................................Outsert ............................www.nynab.com
Terry Kanganis Account Executive & Classified Advertising 201-855-7615 email@example.com Rachel McGaffigan Northeast Regional Sales Manager 508-385-2524 firstname.lastname@example.org Roz Gilman Ad Manager 314-403-4753 email@example.com
Stagnito Business Information U.S. brands: 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 ÂŠ 2016 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.
WWW.CSNEWS.COM| |JANUARY MARCH 2016 WWW.CSNEWS.COM 2014 || Convenience Convenience Store Store News News 89 13
C-stores need to step up their emphasis on “healthy” to meet consumer needs
he convenience store industry has been making an effort to add healthy offerings to the product mix, and new research shows that’s the right move. Among a sample of 589 c-store shoppers recently surveyed by Carbonview Research, a sister company of Convenience Store News, only 9.5 percent said they are not influenced at all by product labels like low/no fat or gluten-free. What makes this even more important is slightly more than half of these consumers say they buy food or beverages at a c-store at least two to three times a week.
When shopping at a convenience store, which one of the following best describes your experience? TOTAL
I try to purchase healthy food products, and they are usually available at the convenience store(s) where I shop. I try to purchase healthy food products, but they are not usually available at the convenience store(s) where I shop. Purchasing healthy food products is not a priority for me.
Convenience store shoppers who say they try to maintain a healthy diet and lifestyle are especially label-conscious. Only 6.9 percent of such shoppers say product labels have no effect on their buying habits.
BY HOw iMpORTANT iT is TO MAiNTAiN A HEALTHY DiET & LiFEsTYLE: iMpORTANT NEuTRAL NOT iMpORTANT
46.2% 48.8% 13.2% 41.9% 42.3
Less than half of consumers who say maintaining a healthy diet and lifestyle is important to them agree that convenience stores are meeting their needs.
Base: 589 c-store shoppers
Would seeing calorie counts on a menu have any effect on your decision to make a purchase? Yes No
BY AGE: 18-24
Male and female shoppers don’t really differ when it comes to paying attention to product labels. The exceptions are labels promoting non-GMO or no artificial ingredients, both of which are more likely to sway a female customer.
Base: 589 c-store shoppers
Displayed calorie counts would push roughly three-quarters of respondents aged 18 to 44 one way or another when making a purchase. The effect is far less with older consumers.
Want to collaborate and share expertise with your peers? The Council of Retail Experts (CORE) is an exclusive network of convenience store retail leaders who do just that. For more information on how to join CORE, please visit www.cvcoreinsights.com.
90 Convenience Store News | MARCH 2016 | WWW.CSNEWS.COM
Have any of the following labels influenced your decision to purchase a product? TOTAL
Fresh No artificial ingredients Non-GMO Low/no sugar Low/no fat Low/no calorie Better for you Trans fat-free Gluten-free Dairy-free Soy-free None of the above
Base: 589 c-store shoppers
51.6% 47.4 39.2 38.9 33.8 30.7 28.0 26.3 17.8 12.6 7.1 9.5
BY GENDER: MALE
49.6% 38.9 35.3 38.1 34.5 30.2 29.0 26.2 18.7 10.7 7.5 13.9
53.1% 53.7 42.1 39.5 33.2 31.2 27.3 26.4 17.2 13.9 6.8 6.2
ISSUE ONE, VOLUME FIVE
A Bond of Brothers
Tom (left), Tim and Paul Freeman have seen big results in small towns throughout Michigan.
A BOND OF BROTHERS Save-A-Lot Store Snapshot OPERATOR: Freeman Family Enterprises NUMBER OF STORES: 24 LOCATIONS: Michigan FIRST STORE OPENING: December 1999
The Freeman brothers are no strangers to togetherness. As teenagers, they all bagged groceries, stocked shelves and sorted bottles in the family’s Gaylord, Mich., grocery store. As young men, they all earned the same degree (business management) from the same college (Oral Roberts University in Tulsa, Okla.). So in 1999, when they went into business together as Save-A-Lot owners and operators, well, it just seemed like the way things should be. The third-generation grocers started out by creating Freeman Family Enterprises and purchased Save-A-Lot stores in Alpena, Cadillac and Tawas, Mich., from their family’s business, Glen’s Markets. Today the brothers—company president Tim Freeman, vice president Tom Freeman and chief fnancial offcer Paul Freeman—operate 24 Save-A-Lots throughout Michigan, with their newest store opening in February 2016 in Rogers PHOTOS BY A&M PHOTOGRAPHY
From left: Tom, Tim and Paul Freeman say partnering with Save-A-Lot gives them a competitive edge.
ISSUE 1, VOL. 5
City, Mich., on the site of a long-empty independent IGA grocery. Big results in small towns Most of the Freeman brothers’ Save-A-Lot stores—which tend to measure between 15,000 and 18,000 square feet— are in towns of 2,500 or fewer, although some serve entire counties with populations of 15,000 or more. Their biggest store is in Traverse City, which has a surrounding population of close to 100,000. “We’ve been growing pretty consistently,” says Tim Freeman. “We purchased some existing stores, but mostly opened our own.” The key to developing in these kinds of small markets, says Tim Freeman, is fnding a suitable available building. “First, we look at the competition in town,” he says. “We were already familiar with northern Michigan, so we knew where the Save-A-Lot model would ft into that market.” It’s also important to investigate whether the location will support a discount grocer, says Paul Freeman. “We look at the current competitors, how much EBT [Electronic Benefts Transfer] is available in the county and the location of the building.” The Freemans own three of their locations, and a separate realty company bought the land for the others and leases the buildings to Freeman Family Enterprises. “When you open a new store, the advantage if you lease the building is that your investment is a lot less, sometimes 50 percent less,” says Tim Freeman. “As we have grown over the years, leasing more of our buildings has freed up capital to invest in our growth.” Beefing up business
opening new stores. They also assist with training new associates,” says Tom Freeman. “After the store is opened, Save-A-Lot will continue to assist us in advertising, competitive price checks, and updated plan-o-grams for every department, along with merchandising recommendations each month. This allows us to spend more time managing our business and taking care of our customers.”
The Save-A-Lot model attracts customers looking for good value, but that’s not the only important consideration, the brothers say. “We have a very good meat image,” says Paul Freeman. “We take pride in that.” “We feel that if people buy your meat at your store, they’ll buy a lot of other things too,” adds Tim Freeman. “We cut all our meat in our own stores. We have our own butchers, and we do custom cuts.”
The brothers say they appreciate the benefts of Save-ALot as a supplier as well.
As a partner, Save-A-Lot fts right into the brothers’ business model of mutual support, the Freemans say.
“Save-A-Lot makes it very easy to order for our stores because all departments can be ordered on one truck,” says Tom Freeman. “Our distribution center here has always been very accommodating with special orders, along with sending additional trucks to ensure that we are ready for business every day.”
“Save-A-Lot partners with us in researching future locations, store design, store setup and merchandising in
“Save-A-Lot has developed a lot of effciencies that enable us to be competitive,” adds Tim Freeman. GE
One for all, all for one
ISSUE 1, VOL. 5
With a proven hard discount, carefully selected-assortment business model, Save-A-Lot offers entrepreneurs the ability to compete effectively in today’s ever-changing grocery industry. And there’s never been a better time to be a Save-A-Lot licensee: Save-A-Lot is now offering a Licensed Store Incentive Program for all new and converted licensed stores. The amount of the incentive for each store will depend on the specific terms and financial considerations of each project, but will be a minimum of $200,000 per new store. If you have a proven track record of successful experience in grocery or other retail management, Save-A-Lot would like to talk to you about becoming a store owner. Here’s how you can take the next step toward a rewarding entrepreneurial opportunity as a Save-A-Lot licensee: ✱ Contact Eric Hunn, Save-A-Lot License Development, at firstname.lastname@example.org or at (314) 592-9446. ✱ Visit the Save-A-Lot website at www.save-a-lot.com/own for more detailed information about becoming a Save-A-Lot owner.
The Save-A-Lot support advantage
Save-A-Lot by the numbers
✱ More than 1,300 stores nationwide ✱ 70% of locations owned and operated by independent licensed retailers ✱ Target neighborhoods with annual household income under $50,000 ✱ Average store size: 15,000 square feet ✱ Fewer than 3,000 SKUs per store ✱ 17 distribution centers across the country ✱ Prices up to 30% lower than conventional supermarkets
ISSUE 1, VOL. 5
✱ Market and consumer research ✱ Site selection and development assistance ✱ Owner, manager and associate training programs ✱ Advertising, public relations and information technology support programs ✱ Store opening assistance and ongoing operations support ✱ Integrated distribution center system