CSN - March 2017

BRIAN W. QUIGLEY PRESIDENT & CEO

Dear Valued Trade Partner: Thank you for your help during the recent voluntary recall of some of U.S. Smokeless Tobacco Company’s products. Together, we were able to remove over 99% of the products within 7 business days.

I know this was disruptive, but we felt it was in the best interest of our consumers, our brands and you, our valued trade partners.

Our manufacturing team has been working around the clock, and I am proud to say that we are now almost done replenishing retail and wholesale inventories with new product.

On behalf of all our employees and sales force representatives, thank you very much for your patience and we appreciate your continued partnership.

Thank you,

Brian Quigley

ALTRIA HEADQUARTERS ANNEX

Š U.S. Smokeless Tobacco Brands Inc. 2017| For Trade Purposes Only

6603 WEST BROAD ST. RICHMOND, VA 23230

©2017 Altria Group Distribution Company | For Trade Purposes Only

VIEWPOINT

By Don Longo, Editorial Director

For Growth’s Sake CSNews’ Top 20 Growth Chains set the pace for industry expansion

L

egendary former Notre Dame football coach Lou Holtz is credited with saying, “In this world, you’re either growing or you’re dying, so get in motion and grow.”

The same sentiment can be applied to the business of convenience and fuel retailing.

The retailers on our Top 20 Growth Chains list (see page 28) certainly get the message.

Now in its sixth year, the annual Convenience Store News Top 20 Growth Chains ranking has recognized the industry’s fastest-growing chains since 2012.

Here’s a little recent history: • In 2014, the then-undisputed c-store giant 7-Eleven and GPM Investments, the Richmond, Va.-based company formed from the merger of Fas Mart, Village Pantry, Scotchman, Shore Stop and some smaller chains, led the Top 20 Growth Chains list, adding 258 and 256 net new units, respectively. Growing from a smaller base, GPM notably had the largest percentage storecount gain that year. Canada-based Alimentation Couche-Tard was third in U.S. store count growth.

• 2015 was the year Speedway raced up the list. Fueled by its For comments, please contact Don Longo, Editorial Director, acquisition of Hess, the Marathon at (201) 855-7606 or Petroleum subsidiary led all dlongo@ensembleiq.com. c-store chains in store growth that year, with 1,268 net new units — almost five times the number of stores opened by the previous year’s Top Growth Chain. At No. 2 was

a newcomer to the Top 20 Growth Chains list, Western Refining, which purchased a stake in SuperAmerica parent Northern Tier Energy that year. Couche-Tard ranked third again following a couple of acquisitions through its Circle K and Mac’s U.S. divisions.

• In 2016, Couche-Tard exceeded the previous year’s Top Growth Chain by adding 1,510 net new stores, mostly through its acquisition of The Pantry, which increased Circle K’s presence in 13 Southeast states.

Marathon Petroleum was the second-fastest grower with 325 net new stores, a figure that would have topped the list in 2014. Steady-growing 7-Eleven maintained its overall U.S. store count lead by adding 202 net new stores.

Which brings us to this year’s surprise leader: Texas-based Western Refining, which grew by nearly 120 percent by adding 295 stores to its portfolio as of January 2017. GPM is also back near the top of the list this year, with 177 net new stores (a more than 23-percent increase). And another industry aggregator, Sunoco, is third with 123 new units.

But, lest you think that the only way to grow in this business is via acquisition, I must point out the consistent, mostly organic growth exhibited by outstanding regional retailers that have ranked among the Top 20 Growth Chains in each of the past four years: Casey’s General Stores (No. 4, 6, 11, 17, respectively), QuikTrip (No. 6, 13, 20, 20), Wawa (No. 7, 14, 10, 19), Sheetz (No. 10, 19, 14, 17), and Kwik Trip (No. 19, 12, 12, 5).

Congratulations to all of our 2017 Top 20 Growth Chains.

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

EDITORIAL ADVISORY BOARD

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

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

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

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

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

Š2017 Goya Foods, Inc. *Top selling coconut water SKU (in Grocery outlets) Source: Nielsen Strategic Planner, Total US (unit sales), 52 weeks ending 12/17/16

CONTENTS MARCH 2017

VOLUME 53/NUMBER 3

28 | COVER STORY A New Angle for Growth

Smaller fish were the targets of this year’s CSNews Top 20 Growth Chains.

FEATURES 42 | In a League of Their Own These winning suppliers helped retailers grow category profits in the past year.

INDUSTRY ROUNDUP

2017

14 | Tesoro & Western Refining Move Toward Integration 16 | Another Record Growth Year for U.S. Convenience Channel 18 | Eye on Growth 19 | Retailer Tidbits 19 | Supplier Tidbits

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

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

Our new $55MM campaign is our biggest ever. $55MMfimfirkfififingfifipfindfionfififibrfind-nfiwficfimpfifign fi8fiwfifikfifioffifififi-nfiwficommfircfififififionfinfififionfififiTV MofififiFSIfififivfir–8fifihroughoufififihfififiyfifir In-fifiorfifidfifipfifiyfi,fibfififibofirdfi,fiprfinfififidfi,fidfigfifififififindfifiR Dfirficfififififififififindfimfirchfindfififingfifiupporfi

Call your W∑nderful Sales Repr

©fififi7fifiondfirfufififififififichfiofifi&fiAfimondfifiLLCfifiAfififiRfighfififiRfififirvfidfififiONDERFUL,fiGETfiCRACKIN’,fifihfifififickfigfifiDfififignfifindfificcompfinyfingfifiogofififirfififirfidfimfifirkfifioffifiondfirfufififififififichfiofifi&fiAfimondfifiLLCfiorfififififififfififififififififififififififififi

CONTENTS

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

BRAND MANAGEMENT Group Brand Director (330) 840-9557

CATEGORY MANAGEMENT MOTOR FUELS

58 | What’s Forthcoming for Fuels?

Convenience Store News Alternative Fuels Summit talks market demand, innovation.

FOODSERVICE

64 | Equipped for Anything Fresh food necessitates well-maintained equipment to cook, present and hold products.

Ron Lowy rlowy@ensembleiq.com

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

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

TOBACCO

ADVERTISING SALES & BUSINESS

70 | Green Pastures Ahead?

Legal cannabis states are multiplying and it’s catching the c-store industry’s attention.

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

DEPARTMENTS VIEWPOINT

4 | For Growth’s Sake CSNews’ Top 20 Growth Chains set the pace for industry expansion.

CUSTOM MEDIA

10 | CSNews Online

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

20 | New Products

MARKETING

SMALL OPERATOR

Strategic Marketing Director (224) 632-8214 Director of Market Research (201) 855-7605

24 | Beating the Big Guys on Customer Service CSNews asked c-store shoppers about the pros and cons of small operators vs. chains.

STORE SPOTLIGHT

76 | A Fresh Beginning R.H. Foster’s new c-store prototype is step one in a five-year plan focused on foodservice.

Bruce Hendrickson bhendrickson@ensembleiq.com Debra Chanil dchanil@ensembleiq.com

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

ART/PRODUCTION

80 | Make Single Moms Your Secret Weapon Five ways to unleash their full potential.

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

OUT & ABOUT

CORPORATE OFFICERS

84 | Zeroing In on the Backbar Tobacco Plus Expo 2017 takes a close look at tobacco in the convenience channel.

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

EXPERT’S VIEW

98 | Getting to the Core

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

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

Premier Trade Press Exhibitor

©2017 R.J. REYNOLDS TOBACCO CO. (1Q)

Welcome

to the World of Turkish

The Smoother Side of Camel CIGARETTES

CSNEWS.COM TOP 5 Daily News Headlines

ONLINE EXCLUSIVE

The most viewed articles online.

1 | Altria Assembles Team for iQOS Commercialization Altria Group Inc. continues its innovation journey as it assembles a team to work on the commercialization of iQOS in the United States. The company is working with Philip Morris International to bring the heat-not-burn product to the U.S. In early December, it submitted a Modified Risk Tobacco Product application for the electronically heated tobacco product with the Food and Drug Administration’s Center for Tobacco Products.

2 | Walmart Testing Another New C-store Concept The 2,500-square-foot fuel station and convenience store combo features an expanded selection of food and drinks, and is located at the entrance of a Walmart Supercenter. The store replaces a previous kiosk at the existing fuel station, which was manned by one employee and offered a small selection of c-store staples like candy, chips and soft drinks.

3 | Rutter’s New Way to Put Snack Sales in the Bag Rutter’s Farm Stores is rolling out a new strategy of “attacking snacking” with the introduction of a new grab-and-go pouch for hot fresh-food items. Developed with a company that offers state-of-the-art packaging, the Rutter’s-branded bag is breathable, microwavable and resealable, holds heat well, and has a handle for optimum convenience and freshness.

4 | Wawa Reportedly Secures Tug Barge for Fuel Transport Wawa Inc. will take delivery of an articulated tug barge from Fincantieri Bay Shipbuilding in order to transport gasoline from the Gulf Coast to Florida. This will facilitate Wawa’s plans to expand its presence in Florida, which relies primarily on seaborne fuel shipments due to lack of pipeline access.

5 | More Than 100 Sunoco LP Properties Up for Sale Sunoco LP has placed a collective for-sale sign on more than 100 real estate assets, including company-owned locations and undeveloped greenfield sites. The properties are located in Florida, Louisiana, Massachusetts, Michigan, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Texas and Virginia.

How Market 24 Saw a Sharp Decrease in Shrink

Market 24, a 20-store western Pennsylvania convenience store chain, has seen a sharp decrease in shrink, as well as more efficient store operations, since instituting a new loss prevention analytics system this past July. Loss Prevention Analytics is part of a suite of technology solutions from Pittsburgh-based Petrosoft Inc. Since installing Loss Prevention Analytics, Market 24 has seen its shrink ratio reduced from 1.2 percent of sales to 0.6 percent.

For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT The most viewed New Product online.

Swisher Sweets Banana Smash

Joining the Swisher Sweets limited-edition lineup is the brand’s new Banana Smash cigarillos. According to maker Swisher International, Banana Smash provides the perfect bold, yet sweet blend of banana and strawberry. Swisher Sweets Banana Smash cigarillos are now available to ship to stores nationwide in a resealable two-count pouch with the “Sealed Fresh” guarantee. The product comes in “2 for 99¢,” “Save on 2,” and “2 for $1.49” price options. This fruity blend will be available for a limited time only.

Swisher International Inc. Darien, Conn.

(800) 874-9720 www.swishersweets.com

EXPERT VIEWPOINT: Five Considerations When Designing a Rewards Program Rewards programs can invigorate your brand, increase revenue, and improve profitability, according to Lee Barnes of Paytronix. By enticing customers to visit more often and spend more with each visit, a rewards program can deliver outstanding financial returns.

Regardless of the concept, any rewards program has two goals: drive members to visit more often; and spend more when they visit. Your customers have choices about where they shop. Make your convenience store their favorite destination with an enticing program that inspires regular visits and cultivates a long-term connection.

10 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

dedicated to making america’s best smoked meat snacks.

We at Tillamook Country Smoker are commited to helping you succeed with The Right Support and the The Right Programs.

Tillamook Country Smoker, Inc., P.O. Box 3120 Bay City, Tillamook County, OR 97107 - 800-325-2220 general@tcsjerky.com

INDUSTRYROUNDUP FAST FACT The presence of children in the household seems to have the greatest influence over whether convenience store shoppers choose to visit a small operator or a chain. Shoppers sans kids at home show a striking preference for small operators: 67.7 percent vs.

56.9 percent.

Source: Convenience Store News 2017 Realities of the Aisle Study (page 24)

QUOTABLES

Tesoro & Western Refining Move Toward Integration Federal Trade Commission request for more information could push back merger

T

“…Where you are going to see more acquisitions is in the small to mid-sized companies. There is going to be increasing pressure on the guys who have 25 to 75 stores. It’s going to be more difficult for them to compete with these very large players.”

— Dennis Ruben, NRC Realty & Capital Advisors LLC (page 28)

he pending multi-billion dollar merger between Tesoro Corp. and Western Refining Inc. could face a delay following a request for more information by the Federal Trade Commission (FTC).

The inquiry could extend the merger review for up to 30 days starting from the time both companies file their answers.

“We and Western have been cooperating with the FTC staff since shortly after the announcement of the merger agreement and are continuing to cooperate with the FTC staff in its review of the transactions contemplated by the merger agreement,” Blane Peery, vice president and controller for Tesoro, wrote in a filing with the U.S. Securities and Exchange Commission. “We continue to expect the acquisition to be completed in the first half of 2017.”

The companies are also facing two classaction lawsuits — one brought against Tesoro by a group of its shareholders and another by Western Refining stockholders.

During Tesoro’s earnings call on Feb. 7

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

Gregory Goff, chairman, president and CEO of Tesoro, said the company is committed to delivering $350 million to $425 million in annual synergies from operational improvements, value-chain optimization and corporate initiatives, with a run rate to achieve by the end of the second year.

“The acquisition is expected to create a premier and highly integrated geographically diversified refining, marketing and logistics company, and provide a strong platform for earnings growth and cash flow generation,” Goff said.

Both sides have begun working together to create a combined 3,000-plus station operation, he added.

“We are confident in our ability to achieve these targets given our solid track record of integrating operations and delivering results,” the CEO said. “Integration planning is well underway and a planning team with representatives from both companies was established in December to ensure an effective and efficient transition.”

INDUSTRYROUNDUP

Another Record Growth Year for U.S. Convenience Channel Texas leads the way with 15,671 convenience stores

T

he U.S. convenience store count has hit a record number. According to the 2017 NACS/Nielsen Convenience Industry Store Count, there were 154,535 c-stores as of Dec. 31, a 0.2-percent increase from the year prior.

The industry store count has increased by 63 percent over the last three decades. At year-end 1986, the industry count was 95,000 stores; at year-end 1996, it was 104,600 stores; and at year-end 2006, the count stood at 145,119 stores.

“Nielsen data shows that the U.S. convenience store channel continues to be an industry of opportunity,” said Rob Hill, executive vice president of retail services at Nielsen. “The current consumer climate has created favorable conditions for c-store sales growth, contributing to a positive long-term outlook.”

The convenience retailing industry continues to be

dominated by single-store operators, which account for 63.1 percent of all locations (97,504 stores total). Single stores also accounted for 42.6 percent of the store growth year over year.

Among the states, Texas leads the way with 15,671 stores — more than one in 10 U.S. c-stores is located in the Lone Star State. The rest of the top 10 states for convenience stores are: California (11,774 stores), Florida (9,930), New York (8,570), Georgia (6,761), North Carolina (6,306), Ohio (5,635), Michigan (4,833), Pennsylvania (4,787) and Illinois (4,737).

With overall store count growth in the convenience channel fairly small during 2016, 23 states experienced declines in store count from the prior year. The bottom three states in terms of store count are: Alaska (217 stores), Delaware (348) and Wyoming (354).

Industry Leader in Dough Manufacturing The choice of c-Store operations across the country!

“We increased to over a MiLLioN Slices with Deiorios” • Specializing in Independent and Regional Operators • 90+ Years in the dough manufacturing business • Exceptional service and training • Custom programs to meet your needs • Organic Certified • Dough Ball Program • Sub Rolls & Breads • Par-baked Shells & Pizza • Cheesy Bread Sticks

800-649-7612

DeIorio Foods Inc. Utica, NY 13501 • www.deiorios.com 16 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

YOUR KEY BUSINESS DRIVERS JUST A CLICK AWAY

The McLane Link online portal allows you to access key information, such as order activity and operational metric data, all from the comfort of your computer or tablet. Quickly access the exact information you are looking for, customize reports and resolve issues without ever calling your sales rep! This fast, simple and easy tool improves efficiencies, saves time and drives your business forward.

Visit mclaneco.com/goto/link for more information.

Š 2017 McLane Company, Inc. All rights reserved.

INDUSTRYROUNDUP

eye on growth The Best Record for the Fuels of Today and Tomorrow!

n Marathon Petroleum Corp. earmarked

$380 million for Speedway LLC in its 2017 capital investment plan. The investment will be used primarily to build new stores, and remodel and rebuild existing locations in its core markets. n GPM Investments LLC is buying 92

Roadrunner Market locations from Mountain Empire Oil Co. Inc. The assets, which include seven quick-service restaurants, are in North Carolina, South Carolina, Tennessee and Virginia. n Stinker Stores Inc. closed its acquisition

of Bradley Petroleum Inc. and Sav-OMat Inc. The transaction included 40 convenience stores in Colorado and one in Wyoming. n Casey’s General Stores Inc. had 84 sites

near Dayton, Ohio, under contract for its purchase as of December. In addition to building new stores in Tipp City and Jackson Center, Ohio, it plans to buy existing stores.

30 Year Warranty!

• 316L stainless steel primary pipe; traceable underground • Compatible with current fuels or ANY potential future additives • Only fuel pipe to pass 2 hour fire test for UST or AST applications • Double wall pipe and fittings for continuous monitoring • Easy to install: no gluing, no welding = No Weather Delays • DoubleTrac warranty is not affected by contaminated surroundings • No polyethylene = no expansion or contraction issues ASK ABOUT OUR NEW 100% STAINLESS STEEL FLEX CONNECTORS ™

MEMBER

971A LISTED

doubletrac.net © Copyright Omegaflex, Inc 2016

Omega Flex, Inc. 451 Creamery Way Exton, PA 19341-2509 Tel: 1-610-524-7272 Fax: 1-610-524-6484 Toll Free: 1-800-355-1039 DBT-197 / REV 06/16

n Gate Petroleum Co. is pre-

paring for the launch of its Gate Express Carwash venture this spring. The company has acquired six sites for the initial push into the standalone car wash market.

Another 11 sites are in various stages of review. n Cato Inc. and its affiliates

bought four high-volume retail sites from J. William Gordy Fuel Co. The stores are Exxonbranded and feature beer caves and Subway or Hardee’s quick-service restaurants. n The Cigarette Store Corp., which does business as

Smoker Friendly, is adding to its tobacco store portfolio by acquiring Cigars on 6th in Denver. The premium tobacconist and cigar store will continue to operate as Cigars on 6th; however, Smoker Friendly will introduce its brand family of cigars into the store.

retailer tidbits n GPM Investments LLC received

an investment boost as Harvest Partners SCF LP completed the acquisition of a $62.5-million minority ownership position in the retailer. The two will work to find and assess acquisition opportunities.

n 7-Eleven Inc. selected Deutsch as its new lead creative

agency. Deutsch will be responsible for collaborating on marketing strategy, brand positioning and creative campaigns to promote its proprietary products. n Stewart’s Shops recently made a

n The Kroger Co. inked a service agreement

with convenience distributor McLane Co. Inc. The pact covers all of Kroger’s 787 convenience stores across 18 states.

$10.5-million contribution to its Employee Stock Ownership Plan, an increase of $500,000 over last year. This contribution equaled approximately 15 percent of its employees’ pay in 2016.

n Parker’s Convenience Stores

reopened the doors to a remodeled Parker’s Market Urban Gourmet, its flagship location in Savannah, Ga. New foodservice additions include: a full-service chopped salad bar; hot panini press with a selection of specialty flatbread sandwiches; and expanded pastry case. The renovation was completed in only 12 days.

n Ricker’s Convenience Stores is

extending Replenish, a reduced emissions fuel program powered by GreenPrint. The extension is for two years. Every time a customer pumps any grade of fuel at Ricker’s, the Replenish program invests in projects that offset carbon from the atmosphere.

supplier tidbits n Kellogg Co. is exiting its direct-

store delivery (DSD) network in the second quarter of this year, transitioning the DSD-distributed portion of the company’s U.S. snacks business to the warehouse model. Warehouse distribution is already used for 75 percent of Kellogg’s U.S. sales. n PFSbrands completed the sale of 100 percent of

the company to its employees through an employee stock ownership plan (ESOP). PFSbrands is the parent company of the Champs Chicken and Cooper’s Express brands. n Eby-Brown Co. LLC and Rich’s Foodservice, a division

of Rich Products Corp., are offering c-store operators a free dispenser with the purchase of a case of Rich’s mytop whipped topping. The deal runs through Dec. 31, 2017. n Manitowoc Foodservice Inc. rebranded to Welbilt Inc.

The change, which includes a new logo and brand

identity, follows its March 2016 spinoff from former parent company The Manitowoc Co. n U.S. Smokeless Tobacco Co. vol-

untarily recalled certain smokeless tobacco products manufactured at its facility in Franklin Park, Ill. The recall was triggered by consumer complaints of foreign metal objects found in select cans. n Nestlé USA, a subsidiary of Nestlé S.A.,

will transition its corporate headquarters to Arlington County, Va., starting later this year. The move is expected to be completed by the end of 2018. The company will bring about 750 jobs to the Washington, D.C., area. n H.T. Hackney Co. is adding its first warehouse

and distribution facility in West Virginia. The 246,000-square-foot facility in Milton is expected to create an estimated 70 jobs.

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 19

NEWPRODUCTS New MTN Dew Kickstart Flavors

Dole Go Berries!

Two new flavors join Mountain Dew’s MTN DEW Kickstart line of sparkling juice beverages. Raspberry Citrus is available in a 12-ounce can, while Mango Lime comes in a 16-ounce can. All MTN DEW Kickstart beverages combine the great taste of DEW with real fruit juice and caffeine, according to the brand. The two new flavor additions are available nationwide and have a suggested retail price of $1.99 per can.

Dole Go Berries! make enjoying strawberries on-the-go easier than ever, according to the company. Dole Go Berries! come in a three-pack of snap-off clamshells, each containing 4 ounces of fresh Dole strawberries. The proprietary package is the first to provide “snap-rinse-go” convenience, noted Dole. The new product began hitting shelves in midFebruary in select U.S. cities. Dole expects to roll out other Go Berries! varieties, including blueberries, raspberries and blackberries.

PepsiCo Inc. Purchase, N.Y. (800) 433-2652 pepsico.com

Dole Packaged Foods LLC Westlake Village, Calif.

(800) 723-9868 dolefoodservice.com

Lost Art Liquids Strawberry Strike Strawberry Strike was born out of a new partnership between Lost Art Liquids and Next Generation Labs. It is the first brand from Lost Art Liquids that is crafted using TFN Nicotine.

According to the company, TFN Nicotine is a non-tobaccoderived synthetic nicotine that is virtually odorless and tasteless, allowing for better flavors for adult vape consumers. Strawberry Strike comes in zero milligram (mg), 3mg, 6mg or 12mg nicotine strengths per 120-milliliter bottle.

Lost Art Liquids Los Angeles (213) 816-2988 info@lostartliquids.com lostartliquids.com

Verifone M400 Payment Device The newest member of the Verifone Engage family, the Verifone M400, is a sleek and intuitive multilane payment device that boasts investment protection and consumer engagement capabilities. According to Verifone, merchants will benefit from using the M400 because it accepts any payment type; is safe and secure; is designed for consumers; doubles as a marketing machine; has in-store targeting; and provides backwards compatibility and retail readiness.

A seamless transition makes it easy to integrate the M400 with other Verifone products, the company stated.

Verifone San Jose, Calif.

(800) 837-4366 verifone.com

Daelmans Chocolate-Caramel Stroopwafel Daelmans, a leading baker of the popular Dutch treat, stroopwafels, is bringing a fourth stroopwafel variety to the U.S. market. Daelmans Chocolate-Caramel Stroopwafel will be available in the United States this spring. The product consists of soft, toasted chocolate waffles that are filled with caramel, cinnamon, and bourbon vanilla. Daelmans ChocolateCaramel Stroopwafel has a deep, rich, chocolate flavor that comes from real chocolate and only natural ingredients baked into the dough, according to the company. All Daelmans Stroopwafels contain no artificial flavors, colors, preservatives or trans-fat. The other varieties are caramel, honey and maple.

Daelmans Stroopwafels New York (212) 315-2343 daelmansstroopwafels.com

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

INTENSELY COLD. UNMISTAKABLY COOL. Ultra Menthol The addition to the Djarum Black line combines the unmistakable taste and aroma of a premium aged tobacco with an intensely cold blast of menthol.

No wonder more smokers than ever are asking for Djarum by name.

www.djarumcigar.com Ask your Kretek representative for details at salesinfo@kretek.com

WARNING: Smoking cigars causes lung cancer, heart disease, and emphysema, and may complicate pregnancy. This product contains chemicals known to the State of California to cause cancer and birth defects and other reproductive harm.

NEWPRODUCTS High Brew Cold-Brew Coffee

Gushers Sour & Gushers Flavor Mixers

High Brew Cold-Brew Coffee is a new line of all-natural, ready-to-drink cold-brew coffee beverages from High Brew Coffee. Using 100-percent Fair Trade Arabica beans and slow roasting them, High Brew ColdBrew Coffee beverages have twice the caffeine and none of the acidic backlash of hot-brew coffee, according to the maker. Flavors currently offered include Double Espresso, Mexican Vanilla, Salted Caramel, Dark Chocolate Mocha, and Black & Bold. Also launching soon will be Creamy Cappuccino + Protein, which provides 12 grams of protein and 3 grams of fiber per serving.

General Mills Convenience rolls out two new Gushers brand products, Gushers Sour and Gushers Flavor Mixers, to convenience stores nationwide.

Gushers have a chewy outer shell that, when bitten into, provides a “gush� of flavor.

Gushers Sour flavors include apple, cherry and grape. Gushers Flavor Mixers, which feature one flavor on the outside and another on the inside, include strawberry-peach, orange-cherry and raspberry-lemonade flavor pairings. Both products come in a 4.25-ounce bag for a suggested retail price of $2.19.

High Brew Coffee Austin, Texas (844) 265-3278 info@highbrewcoffee.com highbrewcoffee.com

Java Master Retail Roaster The Java Master retail roaster enables in-store roasting, giving retailers a leg-up in the coffee category, according to the company. The fully automated, on-site roaster not only gives customers better-tasting coffee, but roasting on-site provides stores with the aroma of freshly roasted beans. Coffee is best enjoyed between four and 14 days after being roasted. The electrically powered Java Master unit, which uses convection technology, can roast one- to 5-pound batches of coffee in less than 10 minutes. The company also notes that retailers can save money by purchasing the lower-cost green beans that have a shelf life 40 times longer than pre-roasted coffee. The Java Master retail roaster measures 17 inches in width, 25 inches in diameter, and 70 inches in height. It comes with a lifetime warranty.

Java Master Wixom, Mich.

(248) 669-1060 service@javamasters.com javamasters.com

General Mills Convenience Minneapolis (800) 767-5404 generalmillscf.com

Strongbow Orange Blossom Hard Cider To celebrate the spring season, Strongbow Hard Apple Ciders is introducing Strongbow Orange Blossom. The new flavor delivers a fresh, spring-like, orange blossom aroma with a touch of sweetness and a juicy apple finish, according to the company. Strongbow Orange Blossom contains no artificial flavors or colors, and is gluten-free. During the month of March, Strongbow Orange Blossom will launch in six-packs, as well as limited-edition mini can four-packs. It will also replace Strongbow Ginger in the 12-bottle Strongbow Variety Pack, joining Strongbow Gold Apple, Strongbow Honey, and Strongbow Cherry Blossom.

Heineken USA White Plains, N.Y. (914) 681-4100 heineken.com

Smart Choice Whole-Grain Orange Pineapple Muffin Now made with white whole-grain flour, the Smart Choice Whole-Grain Orange Pineapple Muffin is better than ever, according to its maker, J.S.B. Industries. The Smart Choice line of whole-grain bakery products is designed to provide healthy, nutritious and delicious options. Each 3.6-ounce muffin provides two grain equivalents under nutritional standards. Because of the white whole-grain flour, the new Smart Choice Whole-Grain Orange Pineapple Muffin offers the same visual appeal and taste of traditional muffins, the company noted. They come individually wrapped and frozen, packed 48 to a case.

J.S.B. Industries Chelsea, Mass.

(617) 846-1565 customerservice@muffintown.com muffintown.com 22 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

SMALLOPERATOR

Beating the Big Guys on Customer Service CSNews asked c-store shoppers about the pros and cons of small operators vs. chains

By Linda Lisanti

W

ith nearly 155,000 convenience stores spread out through the United States, consumers are certainly not at a loss for options, and the decision to stop at one store vs. the other across the street can often be a choice between doing business with a chain or a small operator.

Convenience Store News, in partnership with its sister company Carbonview Research, recently surveyed 1,505 consumers who shop at a convenience store at least once a month for its eighth-annual Realities of the Aisle consumer study. The sample of respondents was obtained from a national panel, representing the total population based on gender, age, region, income, and presence of children in the household. The yearly survey essentially asks respondents the who, what, when, where, why and how of their shopping habits.

This year, as part of the study, CSNews and

DEMOGRAPHIC PROFILE TOTAL

RESPONDENTS WHO TYPICALLY SHOP: SMALL OPERATOR CHAIN LOCATION

62.1% The percentage of female chain shoppers who rate their usual convenience store as excellent/very good in variety of products offered.

47.1% The percentage of female small-operator shoppers who rate their usual convenience store as excellent/very good in variety of products offered.

Carbonview Research delved into the demographic profile of c-store shoppers who typically shop at small operators (10 stores or less) vs. chains (11-plus stores), and what they find most appealing about each.

THE SHOPPER PROFILE

Gender:

Male Female

58.4% 41.6

56.1% 43.9

58.6% 41.4

Children in Household: Yes No

42.0% 58.0

32.3% 67.7

43.1% 56.9

Shopper Frequency: Frequent Infrequent

64.4% 35.6

61.9% 38.1

64.7% 35.3

Frequent shopper defined as visiting daily or weekly Source: Convenience Store News Market Research, 2017

24 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Interestingly, the presence of children in the household seems to have the greatest influence over whether c-store shoppers choose to visit a small operator or a chain. Among the 42 percent of c-store shoppers with children living in their household, more typically shop at chains (43.1 percent) than at small operators (32.3 percent).

Shoppers sans kids under the age of 18 at home (a majority of shoppers at 58 percent of the total) show a striking preference for small operators: cited by 67.7 percent as their typical choice, compared to 56.9 percent who typically shop at a chain location.

By gender, men — who are more likely to shop at

New Perspectives on Consumers’ Eating and Drinking Behavior September 12-13, 2017 Donald E. Stephens Conference Center & Ballroom, North Ballroom, Rosemont, IL

The ONLY Foodservice & Beverage Event for Convenience Store Category Managers and Executives The 2017 Convenience Foodservice & Beverage Exchange will look at today’s hottest food and beverage trends and what they mean for the future of c-store retailing.

Key topics that will be addressed are: • Developing tactics and strategies to overcome consumer bias of c-store foodservice • Placing priority on food safety procedures • Achieving restaurant margins within the c-store menu constraints • Managing increased labor, spoilage and marketing costs • Understanding the importance of beverage selection of build foodservice sales • Analyzing sales and customer counts by daypart • Trends in beverages and convenience dining PLUS valuable time set aside for meeting with solution providers and peer networking.

For more information: Retailers, please contact: Don Longo dlongo@ensembleIQ.com Produced by:

Sponsors, please contact: Ron Lowy rlowy@ensembleIQ.com

SMALLOPERATOR RATINGS OF C-STORE TYPICALLY SHOPPED

c-stores overall than women — appear to slightly RESPONDENTS WHO TYPICALLY SHOP: favor shopping at chains vs. small operators SMALL OPERATOR CHAIN LOCATION (58.6 percent vs. 56.1 percent, respectively).

Convenience 84.5% 83.5% The reverse is true for women (41.6 percent of Customer service 66.5% 61.5% whom shop at c-stores). Females are slightly Variety of products offered 48.4% 56.9% more drawn to small operators than chains Price 45.8% 49.4% (43.9 percent vs. 41.4 percent).

Quality of prepared food 41.9% 47.6% Frequent convenience store shoppers — Fun to shop 34.8% 37.8% those in c-stores on a daily or weekly basis — Percent who rated the c-store they typically shop as excellent/very good on each attribute are more likely to shop at chains (64.7 percent) Source: Convenience Store News Market Research, 2017 than small operators (61.9 percent). Infrequent shoppers — those in c-stores less than once a week — are more likely to be found at small-operator pronounced among frequent convenience store shopstores when they do visit (38.1 percent, vs. 35.3 percent pers (those who shop at a c-store daily or weekly). typically shopping at chains).

Within this group, 74 percent of frequent shoppers who favor small operators rated their usual c-store as excellent/very good at customer service. Only 65.2 perTHE APPEAL cent of frequent shoppers who favor chains gave their In the good news column for small operators, they store such a rating. win out on customer service.

Other demographic groups showing a marked Respondents were given a list of attributes and difference in customer-service rating between smallasked to rate the store they typically shop at on those operator shoppers and chain shoppers are females, and attributes. In the area of customer service, 66.5 perrespondents with no children in the household. Within cent of those who shop at small operators rated their both of these groups, small-operator shoppers gave a usual store as excellent/very good. This compares to more favorable customer-service rating to their usual 61.5 percent of chain shoppers who said the same c-store than chain shoppers did. about their usual c-store’s customer service.

Also in the good news column for small operators, The difference in customer-service rating between they earn a higher rating on convenience, but by a very small-operator shoppers and chain shoppers is most slim margin: 84.5 percent of those who shop at small operators rated their store as excellent/very good on convenience, one point higher than chain shoppers at 83.5 percent.

The Attribute The bad news for small operators, however, is that of Convenience customer service and convenience are the only attriAmong small-operator shoppers, butes where they win out. Conversely, more chain 84.5 percent rate their usual shoppers than small-operator shoppers rate their usual convenience store as excellent/ c-store as excellent/very good in the areas of variety of very good on the attribute products offered, price, quality of prepared food, and of convenience. fun to shop. The two attributes where small operators lag chains most are variety of products offered, and quality of prepared food.

Among female shoppers especially, there is a noticeable difference between small-operator shoppers and chain shoppers in rating their usual store’s variety of products. About 62 percent of female chain shoppers rated their store as excellent/very good in variety offered. This figure dropped to only 47 percent among female small-operator shoppers. CSN

26 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

SELLING BRANDS!

DAY AND NIGHT RELIEF IS HERE!

POWERFUL NON-DROWSY 6-SYMPTOM COLD & FLU RELIEF.

POWERFUL 6-SYMPTOM COLD & FLU RELIEF FOR NIGHT.

TRY THE NEW VICKS VAPOINHALER. ALSO AVAILABLE IN A CLIP STRIP!

SLEEP SOUNDLY. WAKE REFRESHED.

cover story

A New Angle

for Growth Smaller fish were the targets of this year’s CSNews Top 20 Growth Chains

By Melissa Kress & Angela Hanson

I

n 2014, it was GPM Investments LLC and its 120-percent store count increase, mostly driven by its acquisition of VPS Convenience Store Group’s Southeast division. In 2015, it was Speedway LLC and its 86-percent growth spurt on the heels of purchasing Hess Corp.’s retail network. In 2016, it was Alimentation Couche-Tard Inc. with a 39.4-percent boost to its U.S. footprint following its takeover of The Pantry Inc., parent of the Kangaroo Express chain.

This year, Western Refining Inc. joins the ranks atop the Convenience Store News Top 20 Growth Chains list. Between January 2016 and January 2017, the El Paso, Texas-based company saw its convenience store portfolio jump 119.4 percent, adding 295 net new stores for a total store count of 542. This accomplishment was largely driven by the company’s acquisition of Northern Tier Energy LP. The deal, which closed in June, added 170 Midwest c-stores to Western Refining’s footprint — primarily carrying the SuperAmerica banner — and another 114 franchised locations supported by Northern Tier under the SuperAmerica trademark.

Nearly two months after the closing, Western Refining CEO Jeff Stevens reported that the newly

28 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 29

cover story

merged company was excited to grow its retail operations on the heels of a tremendous second quarter in the division. But then, in a turn of events, Western Refining found itself an acquisition target. In November, Tesoro Corp. finalized a definitive agreement to acquire Western Refining for $4.1 billion. The move will create a leading multi-brand marketing and convenience store portfolio in growing geographies with more than 3,000 combined branded retail sites.

Western Refining declined to speak to CSNews about its 2016 growth or its future under Tesoro, citing the pending deal. The transaction is on pace to close in the first half of this year.

The quick turnaround of Western Refining from buyer to seller did not really take convenience channel merger and acquisition (M&A) experts by surprise. As Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, explained, Tesoro has been on an acquisition course since buying the retail assets of BP — a deal that closed in 2013.

Couche-Tard, 2016’s Top Growth Chain, added 1,510 stores just on its own — more than all of this year’s growth chains combined.

“Tesoro has been the exception to the rule. Most of the oil companies have been on a divesture kick over the past several years, but Tesoro has been one of the exceptions that has been acquisitive,” Ruben said.

Terry Monroe, founder and president of American Business Brokers & Advisors, added that “in the world of mergers and acquisitions, especially when dealing with publicly traded companies, their main focus is increasing shareholder value for their stockholders.”

He pointed to the pending sale of CST Brands Inc. to Couche-Tard, and Marathon Petroleum Corp. launching a strategic review of Speedway. “Whenever

No. 2 GPM Investments LLC Richmond, Va.

No.1 Western Refining Inc. El Paso, Texas

2017 Store Count: 542 2016 Store Count: 247 Increase: 295 (119.4%) About the company’s growth: Western Refining more than doubled its presence in the convenience channel last year, largely due to its acquisition of Northern Tier Energy LP in late June. The transaction added 170 Midwest convenience stores, primarily under the SuperAmerica banner, to Western Refining’s 230 Giant, Mustang, Sundial and Howdy’s stores in the Southwest. Northern Tier also supported 114 franchised locations primarily in Minnesota and Wisconsin under the SuperAmerica trademark. Western Refining now finds itself on the other end of the equation: Tesoro Corp. is set to close its acquisition of the company in the first half of 2017.

•••••••••••••••

2017 Store Count: 849 2016 Store Count: 672 Increase: 177 (26.3%) About the company’s growth: GPM continues to take the convenience channel by storm, scooping up one regional chain at a time. In 2016, the company closed on several small and mid-sized deals, including 137 convenience stores with fuel and 33 discount tobacco shops in Michigan and Indiana from Admiral Petroleum Co.; the purchase of nearly 70 Apple Market locations in Virginia and Kentucky from Fuel USA LLC; and acquiring 17 locations in Illinois and Missouri from Jiffi Stop Stores.

•••••••••••••••

No. 3 Sunoco LP Dallas

2017 Store Count: 2,998 2016 Store Count: 2,875 Increase: 123 (4.3%) About the company’s growth: Sunoco LP, through wholly owned subsidiar-

30 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

ies, completed the acquisitions of 18 Valentine Stores locations in upstate New York from Valentine Stores Inc.; and 14 Rattlers c-stores and wholesale fuel supply contracts from Navasota, Texas-based Kolkhorst Petroleum Inc. Sunoco LP then followed these moves by purchasing the c-store assets and wholesale fuel business of Nacogdoches, Texas-based Denny Oil for approximately $53 million. The deal included Denny Oil’s Check Point chain that operates throughout East Texas and West Louisiana, its network of company-owned and dealer-operated convenience stores, a commercial fuels and lubricants business, and 126 dealer accounts to which the company supplied branded and unbranded fuel.

•••••••••••••••

No. 4 CST Brands Inc. San Antonio

2017 Store Count: 1,167 2016 Store Count: 1,049 Increase: 118 (11.2%) About the company’s growth: CST Brands began 2016 by closing on its planned acquisition of the Flash Foods retail network from

Go Fastest way to fresh. Attract today’s

health-conscious eaters with premium quality whole

and fresh cut fruit and vegetables from Del Monte—

the brand consumers trust on the go. The consistent quality of our smart fresh snack options gives you a fast way to rev up revenue.

The Nature of the Best

freshdelmonte.com | 1-800-950-3683 | fruits.com

© 2017 Del Monte Fresh Produce N.A., Inc.

/DelMonteFreshProduce

@DelMonteFresh

/DelMonteFresh

DelMonteFresh

cover story

you have a publicly traded company and the focus is on quarterly results, it is hard to keep raising sales to meet the earnings call,” Monroe said. “But if you can do an acquisition, there is an immediate boost to the stock price and then the company will spend the next year or two growing their new acquisition.”

INCHING UP THE RANKS

While Western Refining’s jump to Top Growth Chain was sealed when it more than doubled its size thanks to Northern Tier, the other convenience store chains on this year’s Top 20 Growth Chains ranking practically inched their way onto the list, when comparing this year’s numbers to the growth tracked by CSNews in prior years.

The annual ranking, now in its sixth year, is based on store count figures provided by TDLinx, a service

Waycross, Ga.-based The Jones Co. and its affiliates. The $425-million transaction added 165 convenience stores in Georgia and Florida to the CST portfolio. The company has been on an expansion path ever since it was spun off from Valero Energy Corp., but the growth has come at a price.

CST came under shareholder scrutiny in early 2016 and is now set to be acquired by Alimentation Couche-Tard Inc. •••••••••••••••

No. 5 Kwik Trip Inc. La Crosse, Wis.

2017 Store Count: 553 2016 Store Count: 487 Increase: 66 (13.6%) About the company’s growth: Aggressive expansion into Minnesota with a $40-million investment accounted for a significant portion of Kwik Trip’s growth in 2016. Director of Real Estate Hans Zietlow pointed to the “dynamic arteries” that connect across the state as something that made growth in the St. Cloud region a logical step for the company. Over the next few years, Kwik Trip plans to expand its “express” venture, which includes Kwik Trip Express and Kwik Star Express stores, with a goal of having 100 locations in operation. This initiative is

of Nielsen. The period analyzed was January 2016 to January 2017. 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 and thus are not reflected in TDLinx’s store count figures.

Behind Western Refining, in the No. 2 spot, is GPM Investments with 177 net new stores added for a 26.3-percent increase. Sunoco LP’s addition of 123 stores (a 4.3-percent increase) was good enough to snag third, while CST Brands Inc.’s 118-unit jump (an 11.2-percent increase) places it fourth. Rounding out the top five is Kwik Trip Inc., which added 66 stores to see a 13.6-percent lift.

Now, consider that Couche-Tard, 2016’s Top Growth Chain, added 1,510 stores just on its own

currently in Wisconsin and Iowa, but could potentially move into Minnesota.

•••••••••••••••

No. 6 7-Eleven Inc. Irving, Texas

2017 Store Count: 8,396 2016 Store Count: 8,331 Increase: 65 (0.8%) About the company’s growth: 7-Eleven and its wholly owned subsidiary, SEI Fuel Services Inc., purchased 79 convenience stores in the California and Wyoming markets from CST Brands Inc. for $408 million in July. Seventysix of the stores are in California, with the remaining three in Wyoming. 7-Eleven sold off the three Wyoming sites, citing a lack of other holdings in the state. But continued growth is on the horizon: Parent company Seven & i Holdings Co. revealed plans to increase its North America footprint to 10,000 c-stores by fiscal year 2019.

•••••••••••••••

No. 7 Croton Holding Co. Pittsburgh

2017 Store Count: 95 2016 Store Count: 33 Increase: 62 (187.9%) About the company’s growth: In April 2016,

32 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Croton Holding acquired Par Mar Oil Co. The deal included 56 convenience stores, several car washes and 16 quick-service restaurants. Croton’s retail operations now span southwestern Pennsylvania, eastern Ohio, northern Kentucky and West Virginia.

The company has said it plans to rebrand its existing retail facilities in western Pennsylvania under the Par Mar Stores banner now that the acquisition is completed.

•••••••••••••••

No. 8 C.A.R. Enterprises Inc. Upland, Calif.

2017 Store Count: 97 2016 Store Count: 41 Increase: 56 (136.6%) About the company’s growth: Anabi Oil Corp.’s C.A.R. Enterprises acquired all of the retail outlets of Rebel Oil Co., which included locations throughout Nevada, including Las Vegas, Henderson, Beatty, Boulder City, Pahrump, Searchlight and Tonopah. These convenience stores and gas stations joined the company’s existing network of retail locations in Alaska, Northern California and Southern California. Following the deal, Anabi selected Tesoro Corp.’s Tesoro Refining & Marketing Co. LLC division to sell fuel at the newly acquired sites.

ADVERTI SEMEN T

Take your customer experience to the next level with four energy saving upgrades When you use less energy, you do more than save on your energy bills. You grow your business by improving your bottom line and creating a better customer experience.

Upgrade to LED lighting in parking areas or lighted canopies

Replace fluorescent lighting with LEDs inside the store

LED lighting lasts up to five times longer than metal halide lights, which reduces maintenance. And the bright, clean light from LEDs makes customers feel more safe and secure during nighttime hours.

Lighting accounts for nearly 20% of energy usage in convenience stores. LED tubes use up to 50% less energy than fluorescent tubes and put products and displays in their best light, enticing customers to spend more.

Install ENERGY STAR® refrigeration and cooling equipment Refrigeration and cooling account for nearly 50% of convenience stores’ energy use. ENERGY STAR models use up to 40% less energy and require less maintenance, adding even more to your bottom-line savings.

Start with a no-cost energy assessment Let the experts help you identify energy saving opportunities. Putting a plan into action can be a lot easier than you think. And here’s the best part: National Grid covers up to 60%* of the installation of equipment costs. See how far your budget can take you toward new energy saving upgrades.

Visit ngrid.com/smallbusiness to learn how you can get started today

*Restrictions apply. See website for details. Projects must be completed by December 31, 2017. ©2017 National Grid

cover story

— more than all of this year’s growth chains combined. Overall, the 2017 CSNews Top 20 Growth Chains added a net 1,396 stores to their portfolios between January 2016 and January 2017, equating to a 5.9-percent increase for the year. That’s 1,763 stores less than what last year’s Top 20 Growth Chains added (3,159 stores for a 12.3-percent increase).

This may be the new normal, according to Monroe.

The Top 100 convenience store chains in the United States feature a few big retailers, like 7-Eleven Inc. and Couche-Tard, but then it falls off into the 500 or below number as far as store count goes.

“Look at Yesway. They came into the marketplace saying they were going to have 1,000 stores in no time and be a big player. They are having a hard time getting to first base because there are not that many chains of stores to acquire,” said Monroe.

Ruben echoed this insight, pointing out “there are fewer deals, fewer big companies out there.” From his

No. 9 Pilot Flying J Knoxville, Tenn.

2017 Store Count: 652 2016 Store Count: 598 Increase: 54 (9%) About the company’s growth: Pilot Flying J achieved its 2016 growth through a combination of new builds and acquisitions, opening 17 new travel centers and buying 41 Wilco/Speedway locations that were then rebranded as Pilot or Flying J locations. The company plans to continue with this two-part growth strategy in 2017 in order to increase the size of its overall footprint. At the same time, it is launching a five-year, $500-million investment in a chainwide “reimagining” that will modernize locations by updating location exteriors and other features.

•••••••••••••••

No. 10 Love’s Travel Stops & Country Stores Inc.

Oklahoma City

2017 Store Count: 416 2016 Store Count: 364 Increase: 52 (14.3%) About the company’s growth: Love’s

perspective, there are two factors at play: People are still making pretty good money in their stores and not looking to sell; and continued M&A activity is shrinking the pool of potential buyers in the market.

“Take the Couche-Tard acquisition of CST; they will also wind up owning the general partner of CrossAmerica Partners. That really takes a potential large buyer out of the game. You had CST and CrossAmerica bidding on these deals and, all of a sudden with Couche-Tard, it’s going to be one company,” Ruben explained.

“What we believe is where you are going to see more acquisitions is in the small to mid-sized companies. There is going to be increasing pressure on the guys who have 25 to 75 stores,” he continued. “It’s going to be more difficult for them to compete with these very large players.”

So, the question then becomes how can a mid-sized operator grow — unless they can negotiate a deal with

achieved its goal of opening at least 40 new locations in 2016 and then some, marking its largest growth year in the company’s history. In addition to opening new travel stops along interstates, Love’s opened stores on state and federal highways to offer service to more areas. The company also expanded its services and amenities in 2016 by adding more than 20 Love’s Truck Tire Care facilities and introducing three new restaurant concepts.

This year, Love’s plans to beat its own record by opening 50 new locations and entering its 41st state with a travel stop in Hardin, Mont.

•••••••••••••••

No. 11 TravelCenters of America LLC

Westlake, Ohio 2017 Store Count: 488 2016 Store Count: 447 Increase: 41 (9.2%) About the company’s growth: Thomas O’Brien, CEO of TravelCenters of America (TA), spoke out against large acquisitions in 2016, citing overly high prices, but the company achieved considerable growth

through smaller ones. Its convenience store purchases ranged in size from four stores to 17, and included a buyout of Quality State Oil Co.’s convenience business. Acquired c-stores were rebranded under TA’s Minit Mart brand.

•••••••••••••••

No. 12 Casey’s General Stores Inc.

Ankeny, Iowa 2017 Store Count: 1,947 2016 Store Count: 1,908 Increase: 39 (2%) About the company’s growth: The April 2016 opening of Casey’s second distribution center in Terre Haute., Ind., has allowed the chain to make plans for expansion into new markets, including entrance into its 15th state with a store in Ohio, where it plans to purchase c-stores in small towns. In the past year, Casey’s also made a number of acquisitions, including the five-store Guppy’s chain in Cedar Rapids, Iowa; opened multiple new builds and replacement stores; completed major remodels; and transitioned more stores to a 24-hour format.

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 35

cover story

No. 13 Nouria Energy Corp.

Worcester, Mass.

2017 Store Count: 116 2016 Store Count: 82 Increase: 34 (41.5%) About the company’s growth: Last year, Nouria Energy experienced its most growth ever in total units for one year, according to Chief Operating Officer Joe Hamza. Two acquisitions drove the increase. In April, the company purchased eight Xpress Stop convenience stores with fuel, two Express Lube auto service stations, three car wash locations, a wholesale fuel supply division, and a transport logistics business from Manchester, Maine-based J&S Oil Inc. Then, in October, Nouria acquired Springfield, Mass.-based F.L. Roberts & Inc., gaining 26 convenience store locations with fuel, including two truck stops, 22 Golden Nozzle car washes, and a diner.

•••••••••••••••

36 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

“At the end of the day, when you get down to the final round, it’s the same five or six or 10 big players who can write the biggest checks.”

someone who is in their backyard? And even then, “if there is a deal on the street for sale, it’s going to be hard for a small — Dennis Ruben, NRC Realty & Capital Advisors LLC or mid-sized company to compete with larger operators,” Ruben added. “Larger operators have a cheaper cost of capital; they don’t need financing. It’s going to become more challenging for those smaller guys to grow through acquisition.”

NRC has been involved in several deals where multiple companies have been interested, but “at the end of the day, when you get down to the final round, it’s the same five or six or 10 big players who can write the biggest checks, and they don’t have financial contingencies in their offers,” according to Ruben.

Cheap money has fueled a lot of the recent acquisition activity, Monroe said, cautioning that “we will never see money this cheap.” He also noted it’s a great time to be a seller because that cheap money has increased the value of convenience stores.

Similarly, cheap money has made it a great time to be a buyer because they can get more for their money and not have a huge debt

cover story

No. 14 Wallis Companies

service, allowing a buyer to pocket the interest savings and reduce its debt before interest rates rise again, explained Monroe.

As the industry started to see over this past year, opportunities are more plentiful in the smaller ponds. Monroe agrees that more acquisitions are going to be of smaller chains. “The chains that are family owned or have family involved, and generally have professional management, will not sell,” he said. “They have everything in place and will continue to grow their companies.”

Cuba, Mo.

2017 Store Count: 66 2016 Store Count: 34 Increase: 32 (94.1%) About the company’s growth: Wallis Cos. was just two stores shy of seeing a 100-percent increase in store count over the past year. The chain made two acquisitions to grow its footprint by such a sizeable amount. In April, Wallis made a deal with the Schnucks supermarket chain to purchase its Schnucks Express stores in Champaign, Urbana and Savoy, Ill. A few months later, in September, Wallis acquired 13 Dirt Cheap convenience stores, 19 U-Gas convenience stores, one commissary operation, and one undeveloped parcel for future store development from Fenton, Mo.-based U-Gas Holdings Inc. “This is a major milestone in Wallis Cos.’ 48-year history,” President and CEO Lynn Wallis said of the U-Gas transaction.

•••••••••••••••

SUCH A THING AS TOO BIG?

The challenge for all these growth chains making acquisitions is ultimately realizing that not all the stores work or make sense for their business, Ruben responded when asked if there is any danger of a chain getting too large in the convenience store industry.

“We are doing a 100-store sale for Sunoco. That’s a perfect case. We think a lot of the larger companies that have done big acquisitions need to prune their portfolios of stores that don’t make sense — some stores are too small; they don’t work; they end up doing an acquisition across the street from another store they already have,” he reasoned.

NRC likewise handled five separate sales for 7-Eleven. The stores sold were too far from its distribution center, too small, didn’t fit

Have an ATM machine installed by Cash Depot.

Placement - Rental - Merchant We’ll do the rest. Just sit back, relax, and earn more... more money, more love for your customer, more industry support, more technology, and more up-time with Cash Depot than with the other guys.

Our Pledge: We are proudly U.S. based, owned, and operated.

Who do you want to do business with?

Visit us: cdlatm.com 1-800-776-8834 38 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Cheers to smooth sipping Good food to go. 24/7.

For more information about Chobani, please contact us via email at sales@chobani.com. *Than other yogurt drinks. Drink Chobani™ beverage: 22g sugar; other adult yogurt drinks: average 33g sugar per 10oz serving.

Š2017 Chobani, LLC

cover story

METHODOLOGY their model or, “quite frankly, didn’t make sense for 7-Eleven but would make a great deal of sense for some smaller operator,” Ruben said.

With roughly 154,000 c-stores in the United States, too big in the convenience channel is hardly possible, Monroe pointed out. “The biggest chain is less than 10,000 stores. We don’t have a McDonald’s and a Burger King and a Wendy’s yet — meaning we don’t have a national convenience store chain that is dominating all of the markets,” he said. “The convenience store industry is still a very fractured industry and very regional.” CSN

No. 15 Exxon Mobil Corp. (tie) Irving, Texas

2017 Store Count: 3,365 2016 Store Count: 3,335 Increase: 30 (0.9%) About the company’s growth: Along with an increase in locations, ExxonMobil’s 2016 growth included an expansion of services, including the rollout of Synergy Gasoline, its “most advanced” fuel gasoline manufactured to date, which uses a proprietary additive formulation with seven ingredients that help remove intake valve deposits and improve gas mileage. Exxon’s U.S. network also rolled out mobile payment through its Speepdass+ app that integrates loyalty points through the Plenti coalition program with mobile payments, including Apple Pay. •••••••••••••••

No. 15 Mirabito Energy Products (tie)

Binghamton, N.Y. 2017 Store Count: 102 2016 Store Count: 72 Increase: 30 (41.7%) About the company’s growth: In August 2016, Mirabito picked up 30 convenience stores and gas stations in New York and Pennsylvania from Global Partners LP. The $40-million transaction included long-term supply contracts for branded and unbranded gasoline and other petroleum products. Concentrated largely in Central New York, Mirabito now owns and operates Mirabito Convenience

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 sixth 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 and thus are not reflected in TDLinx’s store count figures.

Stores and Convenience Express locations in two states.

•••••••••••••••

No. 17 Sheetz Inc. Altoona, Pa.

2017 Store Count: 542 2016 Store Count: 514 Increase: 28 (5.4%) About the company’s growth: Although Sheetz has expanded beyond its traditional borders, notably heading southbound to North Carolina, the retailer continued to boost its presence in its home state of Pennsylvania in 2016. During the month of December alone, Sheetz opened three new stores in central Pennsylvania: Manheim, Hummelstown-Derry Township, and York.

The chain is also making inroads with a new demographic, college students, as it brings its non-gas, fresh food-focused Sheetz Café concept to more university campuses.

•••••••••••••••

nine other states in the northern tier region of the United States: Minnesota, Wisconsin, Michigan, North Dakota, Montana, Wyoming, Idaho, Washington and Alaska.

•••••••••••••••

No. 18 Wawa Inc. (tie) Wawa, Pa.

2017 Store Count: 748 2016 Store Count: 721 Increase: 27 (3.7%) About the company’s growth: Continuing to focus on growth in Florida, Wawa celebrated a milestone with the grand opening of its 100th Sunshine State store in Brandon in November. Wawa plans to open 25 to 30 new stores every year throughout Florida for the next several years. To accommodate Southeast Florida store openings, Wawa recently launched a major hiring campaign looking to fill 400 jobs. In 2016, the chain also opened its 500th fuel store.

•••••••••••••••

No. 18 Holiday Cos. Inc. (tie)

No. 20 QuikTrip Corp.

2017 Store Count: 524 2016 Store Count: 497 Increase: 27 (5.4%) About the company’s growth: Holiday Cos.’ Holiday Stationstores banner grew its footprint in Rapid City, S.D., in 2016 with the opening of a new c-store and gas station at Rushmore Crossing. In all, Holiday Stationstores now has 15 locations in South Dakota, with the majority located in the Sioux Falls area. In addition to South Dakota, Holiday operates in

2017 Store Count: 746 2016 Store Count: 726 Increase: 20 (2.8%) About the company’s growth: QuikTrip finds itself in the No. 20 spot on the CSNews Top 20 Growth Chains ranking for the second consecutive year. The retailer added 20 net new stores year over year. In 2016, QuikTrip debuted its first convenience store sans fuel in Atlanta, as well as piloted a drive-thru featuring QT Kitchens at a Tulsa location.

Minneapolis

40 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Tulsa, Okla.

ADD SOMETHING

FRESH &

INNOVATIVE

Visit us at

Learn about our exciting line of bakery quality snacks!

1-800-645-9048 • w w w.cookiesunited.com

ADD SOMETHING

FRESH & INNOVATIVE

BAKE SHOP BITES

TM

Visit us at Bak shopbit s.com

Fr Bake esh d Sn a ck s

Grab and G o!

C o nv e n ie n t T win Pack s!

2017

In a League of Their Own

THESE WINNING SUPPLIERS HELPED RETAILERS GROW CATEGORY PROFITS IN THE PAST YEAR

By Susan Durtschi, Past Times Marketing

W

ant to build a bigger basket? Want to create a kick-ass loyalty promotion that will exceed expectations? Want to have the right products on your shelves with the right space, inventory allocation, and pricing? Then, work with a Category Captain.

Category Captains are experts at gathering consumer intelligence and using that data to grow a retailer’s sales and profits for an entire category. Far from being solely focused on their own items in the set, they strive to help a retailer meet its overall financial goals.

The 12 suppliers recognized this year as Convenience Store News Category Captains in 13 product categories have earned convenience store retailers’ trust. They also make sure a retailer’s strategy is not driven by a single supplier’s agenda. Instead, these companies work with the retailer to ensure that the category’s product assortment and pricing meet the needs of that retailer’s target shoppers.

42 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Now in its fourth year, the CSNews Category Captains awards program applauds the outstanding category management initiatives implemented in the convenience channel over the past 12 months. All entries were judged by product development experts at consumer research firm Past Times Marketing based on information supplied by participating companies.

Entries were judged on product innovation; creativity in merchandising, marketing, promotion and advertising; use of consumer insights; innovation and dynamic category management tools; demonstrated commitment to meeting retail customers’ specific needs; effectiveness at lifting sales for a brand’s products in the category; effectiveness at lifting an entire category’s sales for a retailer or retailers; and fact-based evidence of marketspecific or account-specific sales results.

These 2017 CSNews Category Captains demonstrate their understanding of retailers’ needs to address shopper demands, and the execution of solutions.

THIS BUD’S FOR YOU. © 2016 ANHEUSER-BUSCH, BUDWEISER® BEER, ST. LOUIS, MO

2017

ALTERNATIVE SNACKS:

General Mills Convenience

T

he alternative snacks category is one of the biggest opportunities for retailers and has seen strong growth over the past several years. General Mills Convenience is working to make the alternative snacks category easier to shop; putting more energy and space toward breakfast and nutrition; and increasing the space allocated for this emerging category.

There continues to be an opportunity to try new cookie, cracker and bar sets — putting crackers with salty, creating a separate sweet section, creating a breakfast/nutrition section, etc. With shoppers spending on average less than three minutes in the store, retailers need to make it easier for consumers to find what they are looking for.

Here are some highlights from the past 12 months of how General Mills Convenience helped enhance “shopability” and increase conversion in alternative snacks:

GRAIN BARS: • Worked with a leading national customer that has smaller sets to optimize its limited footprint.

By leveraging a Nielsen incrementality study, General Mills Convenience was able to optimize the core, and place only items that added the most monetary value and incrementality to these small sets. As a result, this customer grew the category by 19 percent over the last 52 weeks, which is significantly faster than the total U.S. • Worked with a large regional customer to emphasize the importance and growth opportunities in nutrition bars. This customer agreed to give this category a more prominent location in its stores and also give the category placement near the front door of its new stores to maximize foot traffic by the section. The result has been 9-percent growth over the last 52 weeks, which is twice the growth of its comp market.

• Worked with another large regional customer to create high and low nutrition indexing planograms to maximize sales in its urban stores and rural stores. The recommended assortment for urban stores is much different than for rural, lower-income areas. As a result, this customer is growing their category by 11 percent and also significantly reducing stale rates.

OTHER BARS: • Influenced a major wholesale distributor to move granola bars from the protein/nutrition category to the breakfast category by accenting the declines of both segments and sharing proprietary consumer insight studies. This shift has resulted in an increase of 6 percent over the past six months within the granola segment.

44 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

• Aided a large distributor in allocating the correct amount of space across multiple categories, segments and subsegments. This work led to incremental SKU gains of approximately 15 SKUs across the distributor’s snacking categories, with an estimated 7,500 new points of distribution.

Additionally, retailers that have worked with General Mills to break out breakfast and nutrition have experienced double-digit growth. The breakfast/nutrition area may include cup cereal, pastries, granola bars and energy bars. A separate afternoon/ indulgent section may include crackers, cookies, bakery items and treat bars organized by segment and brand.

General Mills is seeing great success with retailers that are dedicating more than 4 feet of space to the bar section in their stores. Retailers should examine their designated bar locations and test their planogram accordingly, according to the Category Captain.

•••••••••••••

BEER/MALT BEVERAGES:

Anheuser-Busch

A

nheuser-Busch figured out how to help c-store retailers win at holiday time by educating convenience store consumers to “Buy More” during those periods when c-stores typically under-perform against other destination-type channels.

The beer category produces more than $18.7 billion in annual revenue with consistent year-over-year growth, evidenced by a five-year compounded annual growth rate of 3.65 percent. With the convenience channel making up more than 55 percent of total U.S. off-premise beer sales, and beer generating almost 13 percent of convenience sales, mutual performance is crucial to overall success within the industry. However, the convenience channel significantly under-indexes its fair share (94 index) of key holiday weeks, with volume shifting to larger-format retailers during the largest beerselling weeks of the year. Generating strategies to support the convenience channel in achieving its fair share of off-premise in just seven key holiday periods equates to 1.6-percent annual growth for the total beer business, or a $290-million opportunity.

During the holidays, beer sales and volume both increase.

Consumers spend 7.8 percent more per unit; the pack sizes are larger by 6.8 percent; the dollars per basket increase 11.1 percent; and one in every 10 consumers buys an incremental unit per trip. While it was clear to Anheuser-Busch that consumers “Buy More” during these key holidays, they did so in the larger-format destination-type shopping formats that

RESULTS OF THE COLLABORATION BETWEEN TWO GREAT COMPANIES

2017

carry larger pack-size assortments and provide more marketing around pricing and promotions.

Convenience is at a disadvantage during these holiday periods due to lack of ad circulars, less interaction with loyalty programs and digital applications, and less consumer loyalty to a store/banner. Therefore, c-store retailers need to maximize the purchase occasion while the customer is in the store, and utilize traffic-driving categories to support roles within the store.

Anheuser-Busch helped c-store retailers identify opportunities to offer consumers what they want, communicate it to them consistently, while profitably growing beer category revenue above the market average. By offering consistent “Buy More” promotions — defined as promotions provoking consumers to purchase incremental units — c-store retailers increased consumer purchase rate on that trip while raising the overall price per unit for that item.

Among the “Buy More” promotions c-stores could utilize were: “2 for” pricing, “Buy One, Get One for X% off,” and “Buy 2, Get 1 Free.” The new era of “Buy More” promotions are geared toward larger packs for different occasions, teaching consumers the convenience channel is an option for all beer occasions.

The true driver of success has been “Buy 2, Get 1 Free” promotions on medium packages during key holiday periods. The combination of consistent promotional communication and unique promotions targeting key shopper communication targeting largeformat trips has proven to deliver convenience channel growth above other formats such as grocery, mass, drug and dollar.

Convenience chains that have implemented the “Buy More” promotions are outpacing the entire beer industry. During the summer holiday periods, they gained 0.35 share of market, on average, which equates to a 1-percent trend gap vs. the industry. C-store retailers saw packages in the “B2G1 Free” promotional package average a 30-percent increase, which is three times greater than those who ran an EDLP strategy. At the same time, these retailers doubled their profitability and maintained mix to grow overall category profitability.

•••••••••••••

CANDY: The Hershey Co.

H

ershey formed a task force in 2015 to reverse a decline in the huge standard-size candy bar category at convenience stores. Standard-size candy bars account for $1.4 billion in annual sales, comprising 23 percent of total confectionery category sales in the c-store channel, according to the company.

That figure is larger than the entire gum and mints segment.

Through shopper card data, Hershey discovered that 24 percent to 29 percent of c-store shoppers will only purchase a standard-size candy bar and will not switch to another pack size (32 percent-37 percent purchase king-size only, and 37 percent-42 percent purchase both sizes). Using shopper and

46 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

consumer research, the Hershey team built a category growth-driving strategy to improve standard-size bar performance while still providing king-size customers what they need.

The strategy focuses on three areas: • Innovation: Over the past several years, innovation has been primarily focused on the king-size pack type and not catering to the one-third of consumers who only purchase standard-size bars. Hence, it was not delivering excitement in the category for all consumers. To address this moving forward, all priority innovation launches from Hershey have equal focus on both standard-size and king-size. By focusing on both pack types, innovation will reach more consumers, increasing trial and repeat purchases, and leading to more sustainable innovation.

• Promotional merchandising vehicles: The increased focus on king-size innovation and increased king-size display activity caused decreases in units sold on promotion and display of standard-size bars in the convenience channel. Hershey developed a new, innovative display vehicle that incorporates both king-size and standard-size bars into one display. This display vehicle hit stores in July 2016 and quickly saw a 79-percent increase in households making purchases vs. previous launches.

• Primary aisle merchandising: With almost 70 percent of confection sales coming from the primary aisle in the convenience channel, Hershey took a very close look at what changed over the past several years that would impact sales of standard-size bars. This evaluation uncovered some eyeopening facts around the positioning of items on the set.

The current gold standard planogram layout recommends horizontal merchandising by pack type, with king-size placed above standard-size bars. This merchandising strategy made sense in 2009, when both core king-size and core standard-size bars were able to be merchandised on the most-shopped shelves on the set, also known as the “Strike Zone.” However, with the influx of king-size innovation to the set over the past several years, top-ranked and volumedriving core standard-size bars were pushed down to lower shelves and out of the Strike Zone, making them harder for consumers to find. With this key finding, Hershey set out to rethink how it merchandises the aisle, with the goal of better positioning standard-size bars back in the Strike Zone without impacting the performance of king-size bars.

With respect for its past and an eye towards the future, the Optimo Cigarillo puts a modern twist on a classic cigar brand.

Boost your profits with four unique blends.

NOW AVAILABLE IN 2 FOR 99¢ AND SAVE ON 2.

800.874.9720

OPTIMOCIGARS.COM

2017

Working with an independent research agency, Hershey then developed multiple test layouts that improved positioning of standard-size bars and tested them in the market with several retailers to prove out what the best possible layout would be for total category sales and shopper satisfaction. The supplier was very methodical in developing a best-in-class testing strategy/environment. Test and control stores were used, and the results showed lifts measured against performance in the control stores.

The layout that delivered the very best results for standardsize bars and the total category was vertical merchandising by pack type. This allows for the core, volume-driving brands and items in each pack type to be positioned in the Strike Zone, easy for the shopper to locate.

With the average shopping time in the confection aisle being less than 30 seconds, positioning the items shoppers are looking for in the prime location on the set drove increases in conversion. Retailers that have adopted or tested this new approach have consistently seen strong double-digit growth in standard-size bars, no impact to king-size sales, and mid-singledigit growth for total instant consumable bars. This was a winning combination to grow the category.

•••••••••••••

EDIBLE GROCERY:

Kellogg Co.

T

eens want to create their own cool experiences; they just need a fun, novel product as their springboard. The “Add More Fun to Your Slurpee” celebration with Pop-Tarts capitalized on the synergies between 7-Eleven’s iconic frozen dispensed beverage and Kellogg’s popular pastry treat. Created for the 50th birthday of Slurpee, the program targeted the Pop-Tart core customer (teens and young adults, aged 14-24) with the Slurpee core customer (Gen Z, aged 16-19).

Kellogg created an exclusive limited-time-offer on two top-selling flavors of Pop-Tarts, Frosted Strawberry and Frosted Blueberry, with “printed fun on frosting” that leveraged Pop-Tarts and Slurpee characters with birthday message callouts. The pastry treats were packaged in c-store printed pouches, with a tray and shipper offering consumers a Text-toWin contest through an interactive digital mobile game. Also included was a 7-Eleven exclusive floor shipper that was ordered through the customer pre-book process.

Among the results of the partnership: • The pastry category in 7-Eleven increased 13.6 percent compared to a year ago; • During the promo window, the Pop-Tarts limited-time offer

48 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

delivered $105 million in sales, up 7.6 percent vs. a year ago; • Kellogg shipped 7,054 shippers to 7-Eleven’s U.S. store network; • The Text-to-Win program generated 50 percent consumer engagement, exceeding a benchmark of 11 percent; and • Volume, anticipated to be 95,000 units, exceeded 421,000.

The program also earned 22.4 million media impressions, and a press release about it was picked up by more than 210 media outlets. The Text-to-Win contest even won a 2016 Mobile Web Award from the Web Marketing Association for “outstanding achievement in mobile application development.”

•••••••••••••

FOODSERVICE/COLD & FROZEN BEVERAGES:

f’real foods

f

’real foods is a frozen beverage company with its brand located in more than 17,000 retail establishments in North America. It is the leading milkshake brand in convenience stores. The company prides itself on innovation; not only in equipment, but products as well.

Limited-time flavors of f’real frozen beverages are presented throughout the year. This past year saw a significant increase in smoothie sales as the company put research in place to refresh the flavors of the brand with an emphasis on texture.

In 2016, seeing the incremental sales in the smoothie category, f’real also introduced a yogurt-based smoothie flavor, Berry Yogurt. Made with real Greek yogurt, it targets customers who are looking for a refreshing treat with more protein than the average smoothie. f’real has slowly seen some movement toward consumers looking for items that are in the healthier halo space. With the release of Berry Yogurt, the company has seen positive sales and looks forward to more innovation in the smoothie category.

•••••••••••••

FOODSERVICE/LICENSED OR FRANCHISED: Hot Stuff Pizza

H

ot Stuff Pizza was the first provider of highquality pizza in c-stores and has perfected the prepared foodservice model over the last 30 years. With both a national and global presence, Hot Stuff Pizza provides menu items to cover all dayparts, including breakfast, lunch, dinner and snacks, to maximize sales in a retailer’s foodservice operation.

Hot Stuff is a one-stop solution providing everything from customized layout and design to foodservice training, ongoing

2017

support visits, and national and local marketing all delivered directly to the retailer’s door through its own delivery system.

The program includes ongoing innovation to keep offerings fresh and engaging for customers. It’s the only grab-and-go program backed by exclusive iGnG technology. This software tells the retailer what products to offer at what time, ultimately optimizing waste and driving more sales in the category. The technology involves Wi-Fi enabled traffic counts and handheld scanners.

“Holiday Stationstores has iGnG in 11 Hot Stuff Pizza branded stores and we’ve found the platform to be easy to use, with the technology piece being very intuitive,” noted Tara Anderson, foodservice director for convenience store chain Holiday Stationstores.

“We are able to make simple changes to the items we select to bake and when we bake them based off of data, including customer counts and sales history that gives instant gratification in both sales and margin improvements. The system also greatly improves scan accuracy and offers time of day information for both sales and sales by SKU.” •••••••••••••

FOODSERVICE/PREPARED FOOD:

Tyson Convenience

T

yson Convenience recognizes that finding new opportunities for retailers requires understanding what is at the center of the customers’ needs. The Tyson Convenience team offers specialized products and support to help retailers meet their specific needs and grow better together. The innovation demonstrated in new hot snacking products paid off this year with basket builds.

Innovation and opportunity was on the minds of the Tyson Convenience team when it brought out five new hot snacks in 2016. No less than 94 percent of Americans snack each day and 50 percent snack two to three times a day.

Tyson Convenience expanded its hot grab-and-go program with additional brands and in-store support, including equipment and accessories, to help retailers enter or expand their assortment in the hot snacking category, including a tabletop oven.

The Bosco Sticks Stuffed Breadsticks “Roll in the Dough” summer promotion ran from June 1 through Sept. 30, 2016, and packed special pricing, rebates, merchandising and more into an easy-to-execute special promo. All promotional elements and incentives were only offered to retailers and brokers. Tyson Convenience grew its weekly Bosco Sticks sales volume by 67

50 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

percent during the period of the promotion. Not only was Tyson Convenience able to help retailers promote hot snacking to consumers, but the company was also able to introduce Bosco Sticks Stuffed Breadsticks to retailers as a new product offering.

Tyson Convenience works with retailers to provide product knowledge and solutions, as well as programs, to reach its targets based on learnings. The company also provides sales and marketing suggestions from across the food industry through insight partnerships and proprietary studies.

•••••••••••••

HEALTH & BEAUTY CARE:

Lil’ Drug Store Products

E

ach year, millions of consumers purchase health and beauty care (HBC) products in convenience stores that provide fast relief for a variety of ailments. The health and beauty care category generates high margins for convenience retailers, but with a variety of products and sometimes limited space, it can be a difficult segment to manage.

Lil’ Drug Store Products uses a unique, holistic approach to category management. Utilizing national syndicated data, HBC industry trends, pricing analyses, and proprietary consumer research and insights to analyze the products, pricing and merchandising of all items in a HBC set, Lil’ Drug provides unbiased recommendations to maximize sales and profits for convenience retailers and wholesalers.

One recent example: Lil’ Drug saw an opportunity to optimize the eye care segment in the convenience HBC set. In all other channels, lens solutions and dry eye care products are the leaders in dollar sales in the category, but the two subsegments are underdeveloped in convenience. Because of an exclusive partnership with Alcon, Lil’ Drug Store Products recently brought the top lens solution brand Opti-Free Puremoist Multi-Purpose Disinfecting Solution and the top dry eye drop brand Systane Ultra Lubricant to the convenience channel.

A number of wholesalers and retailers have chosen to partner with Lil’ Drug to help manage their HBC sets and achieve results for the total category. Retailers who partnered with Lil’ Drug increased HBC sales at a rate 82 percent higher than total c-store HBC growth, according to Nielsen data for the 52 weeks ended Feb. 20, 2016. Another recent success story comes from Kum & Go, which named Lil’ Drug Store Products its 2016 Category Manager of the Year for excellent customer service and an above-average category growth rate in the past year.

Snack sales go great with beverage sales.

And when it comes to baked sweet goods, Little Debbie products are the sales leader*. In fact, 4.7 million Little Debbie products are sold every day – that’s 55 every second. In a world where snacks and drinks go hand in hand, imagine what that can do for your business.

To learn more, call (800) 315-6208 or visit LittleDebbieCStore.com.

Little Debbie products are sold DSD by wholesale distributors. *Nielsen ScanTrack, Convenience Stores channel of trade, 52 weeks ending July 30, 2016.

2017

OTHER TOBACCO PRODUCTS:

PACKAGED BEVERAGES:

O

E

Swisher International

n Aug. 8, 2016, the Food and Drug Administration (FDA) began regulating the other tobacco products (OTP) category, including large cigars, premium cigars and vapor. As with any new regulation, retailers had many questions on how this will impact their business and what will be the best practices to get through the process with minimal disruption.

Swisher decided that merely creating a process would not be enough to give leadership and guidance to the retailer. In addition to changing product assortment, FDA regulations included compliance dates, manufacturing and packaging standards (warning labels), and sampling restrictions. To meet compliance standards and the needs of its customers, Swisher developed a FDA Deeming Regulations Compliance Sheet. This allowed Swisher’s category management teams to be at the table for many retailers’ long-term planning discussions.

Swisher’s objective was to provide its customers with the best possible product and sales experience, while also providing needed expertise in specific market dynamics. Utilizing MSAi insights, programs and planograms were customized to meet specific customer goals and adult consumer demands. The Partners in Profit program is a perfect example of the execution of the strategy. Swisher provided partners with revenue-generating products and promotions in all of its OTP lines, with the objective to grow not only Swisher sales, but the full OTP category in every store. In 2016, customers that signed up with the Partners in Profit chain program have increased volume by 17 percent in the large cigar category.

Last year, Swisher also incorporated both a detailed and high-level approach to assist its retailers in analyzing adult consumer preferences and purchase patterns. By utilizing MSAi distributor-to-retailer data, Swisher was able to develop specific, tailored analytics for its retail partners. Additionally, Swisher has employed MSAi to integrate these analytics into automated yet relevant business reviews. The company also reorganized its National Account Team to provide more focus and time to each of its customers, and to grow the OTP category using best-inclass category management practices.

The OTP market is characterized by multiplying SKUs and squeezed by tight margins and tax compliance. It is a challenge for even the savviest marketers. However, Swisher is seeing rewarding results from its focus on quality products and category management. Based on the MSAi database, Swisher continues to outpace the industry.

52 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

The Coca-Cola Co.

ven as foodservice, snacking and freshto-go sales continue to grow in convenience retail, 78 percent of convenience purchases include beverages only, creating an opportunity for retailers to grow sales by encouraging snack and meal add-ons via bundled offers. The Coca-Cola Co. saw the opportunity to help its retailer customers leverage the synergy between food and beverages and, in doing so, increase sales across multiple categories.

Multi-category solutions appeal especially to millennials, who are 63 percent more likely to buy a meal or snack to eat right away than other age groups, according to the company.

Considering that millennials are the largest shopper group in the American economy, numbering approximately 75 million shoppers, their preference for grab-and-go shopping trips is a significant trend.

The foodservice, fill-in and impulse zones present particularly strong opportunities to sell bundled food and beverage items.

Collectively, these three zones are visited in 38 percent of shopping trips and generate 41 percent of total store revenue.

A recent Nielsen analysis found that retailers who executed “points of inspiration,” such as snacking bundles, beverage racks and other similar merchandising programs, in these zones of the store achieved increased average sales per store and a stronger annual performance.

Coca-Cola tested several food- and snack-based bundles in 2016, including an impulse zone-based activation for one convenience retail customer. This retailer had a new store format featuring more than 6,000 square feet of expanded foodservice offerings, but beverages were separated from the area in the opposite, back side of the store. Coca-Cola identified an opportunity to capture sales and provide a solution to satisfy both hunger and thirst by placing merchandising units in the impulse zone that brought together beverages and food items.

Specific offerings included pairing snack items with smartwater, Sprite, Coca-Cola, Coke Zero, Diet Coke, and Monster energy drinks; and pairing breakfast items with Minute Maid juices, Simply Orange, Core Power and Monster Java. These snack- and breakfast-themed bundle activations have driven strong results.

Since being introduced, the retailer has experienced a 29-percent increase in sales volume of all items featured in the merchandising units — averaging an incremental $63 in total margin dollars per store each week. Beverages and food items have shown average year-over-year increases of 15 percent and 43 percent, respectively, since the initial installation — averaging

2017

$37 and $26 in incremental margin dollars per store each week.

Across the entire chain, the retailer has a total incremental profit potential of $1.4 million.

This year, the merchandisers will be updated with stronger occasion-based messaging and may incorporate digital displays as they continue to be placed in additional stores.

•••••••••••••

PACKAGED SWEET SNACKS:

McKee Foods

M

cKee Foods has made a concerted effort to help its retail partners grow their baked sweet goods (BSG) category through targeted shopper marketing programs. The supplier’s focus has been on listening to its retail partners’ needs and working with them to grow incremental sales by targeting customers who do not currently purchase from the category, or by targeting customers who previously purchased in the category but no longer do.

A common request from category managers is to help build bigger overall basket sizes by bringing customers into the highly impulsive BSG category.

In one program, McKee partnered with four Kroger Convenience Store Division banners to get customers into the habit of adding a Little Debbie Honey Bun or Sunbelt Bakery Granola Bar to their coffee purchase.

They did this by giving away one of those products to each customer who purchased a large coffee for one month. In the eight weeks following the promotion, there was a positive sustained lift for the Honey Bun and a double-digit lift for the Sunbelt Bakery Granola Bar in Kroger c-stores.

Another common request from category managers is asking to support retailers’ efforts to drive customers into the stores. Through the use of a retailer’s loyalty card, McKee is able to send out digital coupons to customers who previously shopped the category but no longer do. In one such partnership with Thorntons, the retailer sent out a free Coffee House Café item to loyal customers who had purchased the category previously but not in the past 30 days. This targeted program had a redemption rate of upwards of 12 percent.

In the past year, McKee also participated in national dessert holidays and weekends where retailers sent digital coupons and text messages to their loyalty card holders and offered them the corresponding item to the holiday. Twice Daily created a Peanut Butter Weekend where loyalty card holders had all weekend to visit the store and redeem their coupon for a free Peanut Butter Crème Pie, P.B. Richie, or Nutty Buddy. Another retailer, FiveStar, used its robust Facebook following to celebrate National Peanut Butter Cookie Day by giving away the PB Crème

54 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Pie, and celebrated National Pumpkin Spice Day by giving away a Coffee House Café Pumpkin Spice Cake.

McKee has used seasonal items such as Christmas Tree Cakes to help grow the category, too. It partnered with MAPCO to grow both single-serve and take-home family pack Christmas Tree Cakes by funding in-store competitions. The competition provided a double-digit lift in both single-serve and family-pack Christmas Tree Cakes over the previous year.

In addition to these shopper marketing efforts, McKee has invested in the data visualization software Tableau to help retailers more clearly see their data and the opportunities the data presents. Through Tableau, retailers are easily able to review the category by brands and segments and determine which brands and segments are driving growth and where there are opportunities to improve sales. Customized Tableau category scorecards are sent out on a monthly, quarterly or biannual basis, depending on what the retailer requests of McKee Foods’ category insights team. In one category review, Tableau helped the category manager easily see the growth opportunity for its breakfast cake and cake segment. A planogram was developed that ensured the proper Coffee House Café items were part of the category to help grow those segments. The planogram implementation has resulted in double-digit growth for the retailer.

•••••••••••••

SALTY SNACKS:

General Mills Convenience

W

ith the increase of snacking and away-from-home consumption, General Mills Convenience works with retailers to maximize the assortment and merchandising of the salty snacks category, leading to increased sales and profits. General Mills’ “Category First” management team leverages key learnings and insights from multiple sources.

These sources include several proprietary studies, such as a salty consumer segmentation study, an in-store shelving audit, and pricing and incrementality studies. The team also has access to multiple sources of data including syndicated data across multiple channels and MSA. Additionally, the team has a proprietary assortment tool called SETMAX that allows retailers to understand SKU-level performance by comparing the retailer’s performance against their competitive market. This tool also allows for the evaluation of key metrics, including unit and dollar sales vs. last year, turns, profit and distribution.

Highlights from the past 12 months include: • Working with a major nationwide c-store retailer this past year, General Mills Convenience’s category management efforts resulted in substantial incremental SKU gains, new

2017

points of distribution (2,800) and significant dollar sales increases ($10.7 million).

• General Mills Convenience also worked with a large c-store customer to move crackers from the cookie bar to the warehouse salty set by leveraging Nielsen audit info. This research showed that merchandising crackers with other salty items is beneficial to the category. This move resulted in growth of both the cracker segment, up 13 percent, and the overall warehouse salty category, up 6 percent — both above comp market trends — and led to market share gains for this retailer.

• By leveraging space-to-sales analysis, General Mills Convenience showed a customer that it had some segments and brands in the warehouse salty category that were not justifying their current shelf space. By reducing these segments and brands and by simultaneously increasing segments and brands that deserved more space, this customer was able to optimize its assortment significantly. The customer showed the work to other manufacturers and it was referenced as best-in-class. The result was 10-percent growth, which was over twice the rate of the retailer’s comp market.

• General Mills Convenience aided a large distributor in allocating the correct amount of space across multiple categories, segments and subsegments. The company armed the distributor’s leadership team with the analytics, tools and custom recommendations that led them to making significant changes to their sets for optimal growth. This work has led to incremental SKU gains of approximately 15 SKUs across their snacking categories, with an estimated 7,500 new points of distribution.

Overall, to help retailers meet the distinct needs of c-store shoppers looking for a salty snack, General Mills’ main focus this past year has been on increased distribution of core items.

Across the total U.S., the top 25 salty snack items still only have an average distribution of 82 percent. General Mills has partnered with both retailers and distributors to develop gap-fill programs to target core gaps across the top salty snack products.

General Mills Convenience’s Category First team also worked with a few select retailer partners to leverage its Virtual Store capability. This allowed the retail partners to instantly see the visual impact of decisions in a virtual store, including creating the right adjacencies across the DSD salty, warehouse salty, nuts/seeds, and meat snacks segments.

•••••••••••••

WINE & LIQUOR: E. & J. Gallo Winery

E

. & J. Gallo demonstrated its category leadership through a partnership with Wawa, the 700-plus c-store chain based in Pennsylvania. Working with Gallo, the retailer took an entire-

56 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

ly different approach to the convenience wine category when expanding into the Florida market.

For many years, the wine category in the convenience channel has been stagnant.

Research shows that 38 percent of c-store customers buy wine somewhere, but only 4 percent of them buy within the convenience channel. This low conversion rate results in a potential loss of total wine business, but also misses a large generation of millennials, who in January 2016 surpassed baby boomers as the largest generational group over the age of 21.

In 2016, Wawa opened 50 new locations in Florida. The retailer challenged the norms by providing a clean store format and best-in-class merchandising. Within the wine category, this new approach means a limited but thoughtful selection with innovative merchandising strategies, including alternative packaging to capture the young, on-the-go beverage alcohol customer.

Gallo research found price to be the most important factor to 53 percent of millennial drinkers when selecting a wine. So, the focus was on creating a limited assortment at the right price. In addition, research showed that 55 percent of wine drinkers are unaware that convenience stores sell wine so the stores merchandised a single cold shelf of wine accompanied by a one-case program rack of their best-selling SKU, Apothic Red, within high traffic areas to generate awareness and trial. Additionally, this year, Wawa has expanded to include a 24-inch rack with red wine and 1.5-liter bottles.

Alternative packaging helped drive overall growth, as well.

The Liberty Creek Tetra (500ml) item sold 109 percent more cases than its next largest new item introduction for the chain in 2016. This item is selling out so fast from the cold box that the teams are looking at potentially adding extra stock of this product to the dry shelf.

Lastly, Gallo incorporated moscato wines in all of Wawa’s cold shelves because research shows 9 percent of millennials state they drink this wine most often.

These innovative, category management methods are working, as Wawa is seeing incredible growth in its wine category.

Wine sales are up 49 percent in comparable stores, outpacing the overall Florida market, which was up only 5 percent in dollar growth for wine, according to IRI. Additionally, Wawa has been able to successfully target the millennial customer with this approach. Millennials now represent 20 percent of Wawa’s Florida customers, larger than any other age group. CSN

MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric

HOW TO

What’s Forthcoming for Fuels?

Convenience Store News Alternative Fuels Summit talks market demand, innovation

By Angela Hanson & Don Longo

T

he future looks bright for alternative fuels, but to capitalize on the available opportunities, suppliers and retailers alike need to keep a close eye on market conditions and consumer demands. This was just one of the issues discussed at the third-annual Convenience Store News Alternative Fuels Summit, held Dec. 6-7 in North Carolina.

The event, sponsored by Growth Energy, included tours of the Richard Childress Racing Museum and the NASCAR Sprint Cup Shop, and brought together convenience store retailers from across the country that offer alternative fuels for a roundtable discussion.

During the keynote presentation on the future of fuels, speaker Van Tarver, former CEO of Kroger Convenience Stores, noted that following a period of negative growth in fuel demand, the past four years have seen an increase in demand — even reaching all-time highs — and gross margins per gallon are also up.

He cited research from Lundberg that projects fuel demand growth for the foreseeable future — barring severe recession or extreme crude oil price increases. Factors driving

58 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

the demand are job growth, an expanded motorist pool, and rising sales of trucks, vans and SUVs. Additionally, Tarver pointed to data from the United States Census showing that the number of Americans in their peak driving years will increase between 2015 and 2030.

There are other factors, however, that could dampen demand, such as lifestyle changes by millennials who practice ride-sharing, downtown living and telecommuting; senior citizens cutting back on driving; pump price increases; and moves by the U.S. Energy Information Administration.

“Which assumptions are right, and what is the future?” Tarver posed to the group.

His take is that everyone in the fuel retailing industry must stay flexible and monitor the market in regards to where customers are going and what they want. Today, competitors in the market have considerably increased access to analytics that cover customer data, generational trends, and how customers get and pay for what they do want.

Discussing specific alternatives to traditional gasoline, Tarver stated that: • Compressed natural gas (CNG) and hydrogen face major equipment challenges.

• Electric vehicles are not likely to be a game changer for at least 10 years due to price, range, recharge time and other factors. Disruptors in this segment include the small share vehicle population; the federally-backed electric vehicle charging network; and Elon Musk, who is trying to redefine transportation both on Earth and in space.

• E15 is more likely to do well because it is profitable and many consumers see using it as a way to

MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric

save money and do something better for the environment.

Well over 4,000 outlets in the United States are already selling E15, a blend of 15 percent ethanol and 85 percent gasoline that’s approved for use in 2001 or newer cars.

“You see some companies that are visionaries in this industry,” Tarver noted.

If looked at in isolation, significant growth is also still happening The third-annual Convenience Store News Alternative Fuels Summit brought together c-store in E85 (15 percent gasoline and retailers from across the country that offer alternative fuels for a roundtable discussion.

85 percent ethanol), electricity and hydrogen, he continued. Despite the equipment challenges for CNG/NGH, there are 1,200 RaceTrac Petroleum, and Family Express. fueling locations for fleets; and the federal Corporate As of December 2016, more than 4,000 E85/E15 Average Fuel Economy standards are pushing for dispensers were installed in 28 states, and O’Brien hydrogen to reach 58 miles per gallon by 2020. said he expects a minimum of 1,000 retailer sites sellTarver urged attendees of the Alternative Fuels ing E15 to be in place by May 2017. Currently, most Summit to do their part in carbon mitiga- of the sites selling E15 are located in a large swath tion, noting that consumer driving emits of the central United States stretching from the upper 1.2 billion metric tons of carbon Midwest to the South. dioxide equivalent per year; retail There are several reasons why innovative retailers are petroleum is commoditized, adding E15, according to O’Brien. “E15 is usually about with the buying decision 3 cents to 10 cents a gallon less expensive than regular driven by price and convegas,” he explained. He also noted that some retailers are nience; and carbon-neubenefitting from trading RINs (also known as renewtrality regulation is a real able identification numbers) under the Environmental threat to growth and profit Protection Agency’s Renewable Fuel Standard. in the U.S. and abroad.

Consumer concerns about engine failure from using The carbon-dioxide higher ethanol blends have diminished greatly as E15 emissions of consumer and use has grown, he added. Consumers “have driven fleet vehicles can be neutralmore than 500 million miles on E15 without a single ized through proportionate investreported incident,” O’Brien pointed out. ments in audited and certified carbon offset projects Growth Energy, a trade association composed of and local tree-planting projects. The net result is ethanol makers, has helped educate the consumer improved customer and employee engagement, retenabout ethanol. “Our research shows that the more tion, revenue and margin, according to the former consumers know about ethanol, the more favorably Kroger executive. they view it,” he said.

One best-practice education example is hiring “brand ambassadors” to work at the fuel dispensE15 IN CONVENIENCE ers and tell customers it’s OK to use E15 and E85.

Expanding on the topic of E15, Mike O’Brien, vice Retailers like Murphy USA and Kum & Go have expepresident of market development for Growth Energy, rienced increases of between 88 percent and 93 percent provided participants with an update on the adopin ethanol sales from utilizing brand ambassadors, tion of E15 in the convenience channel. In addition to according to O’Brien. hundreds of single-store owners, several larger chains Other retailers have drawn attention to the envihave become early innovators in selling higher blends ronmentally “clean” aspect of E15 while supporting of ethanol fuel. Among them, he reported, are Kum another good cause. In October, Sheetz, Murphy USA, & Go, Sheetz, MAPCO, Murphy USA, Thorntons,

60 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric

Protec and Minnoco participated in the “Pink Out” promotion through which 2 cents for every gallon of E15 sold was donated to breast cancer research.

TURNING CHALLENGES INTO OPPORTUNITIES

During the Summit’s open discussion period, attendees talked about the various challenges faced by companies that offer alternative fuels, and how these can be overcome or reframed.

“What we’ve looked at is making those challenges opportunities,” said one attendee.

The group agreed that historically, ethanol has struggled with its public perception, but that fuels with ethanol have existed safely long enough that suppliers and retailers now have an opportunity to successfully educate the public.

“I think E15 presents the biggest opportunity that I see right now,” said another participant.

Coupons were heralded as a good way to get consumers to try alternative fuels — even more so than they are for general c-store products. One attendee

Currently, most of the sites selling E15 are located in a large swath of the central United States stretching from the upper Midwest to the South. pointed out that as alternative fuels are regularly cheaper than standard gasoline, once customers have tried an alternative fuel and have seen that it does not harm their vehicles, they are likely to continue purchasing it to make use of the ongoing savings, incorporating it into their regular buying patterns.

Other ways to encourage the trial of alternative fuels are social media and the use of pumptopper video advertisements. However, attendees cautioned against the delivery of too many messages, which could ultimately result in mental clutter for consumers. CSN

An exclusive invitation-only networking and education event designed by and for retail dietitians

June 3-5, 2017 Hyatt Regency Orange County Anaheim, CA The symposium is three days of valuable content, continuing education credits, interaction and invaluable peer networking.

This year’s event will include: • NEW: Training session presented by RDBA • NEW: Partnership with IDDBA. Free admission to the IDDBA for a guided trade show floor tour • Networking functions • Keynotes & valuable content • Roundtable discussions

www.progressivegrocer.com/retaildietitian2017

62 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Qualified retail dietitians and nutritionists can request their invitation to attend. Conatct Joan Driggs at JDriggs@ensembleiq.com or at 224-632-8211.

Sponsorship packages are available.

Contact Maggie Kaeppel at MKaeppel@ensembleiq.com or at 630-364-2150.

TM

va p o r s y s t e m

V aping . M ade S iMple . ™

WHY CHOOSE CUE™ VAPOR SYSTEM? Revolutionary, patent-pending technology. The carefully crafted, premium-quality Closed Tank Vapor System encompasses vape shop performance without the complexity. lexity EASY FOR TRADE > Multi-Million Dollar TV Campaign > Recurring Revenue Stream > Positioned to meet FDA Regulations EASY FOR CONSUMERS > Pre-filled disposable cartridges es > Easy to use Click and Vape technology echnology > Full customer service support

TO LEARN MORE, CONTACT CUSTOMER SERVICE AT (800) 628-4675 OR VISIT cuevapor.com/business ©2017 E-Alternative Solutions | Cue™, Cue logo, and Vaping. Made Simple.™ are trademarks of Digirettes, Inc. cuevapor.com Keep out of reach of Children. UNDERAGE SALE PROHIBITED. | WARNING: This product contains nicotine. Nicotine is an addictive chemical.

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Equipped for Anything Fresh food necessitates well-maintained equipment to cook, present and hold products

By Bob Phillips

A

t the core of any convenience store retailer’s foodservice operation is the equipment used to prepare and present the menu items to consumers. From roller grills to coffee stations to fast-cook ovens, there is no question that foodservice equipment is an important piece of the profitability puzzle for convenience store operators.

“Convenience retailers are looking at ways to increase their foodservice offerings and, just as importantly, they’re looking at ways to lower costs and increase margins,” said Brad Parrish, president of Dallas-based BK Parris LLC, which represents Nemco Food Equipment Ltd. Nemco is a foodservice equipment supplier based in Hicksville, Ohio. “That’s where manufacturers come in, partnering with their retail clients to help control costs.”

According to Parrish, c-store retailers are typically looking for units that can cook food fast, and handle multiple tasks. The latter function cannot be understated.

“Typically, you’re seeing TurboChef, MerryChef, or something similar. Those companies offering quick cooking solutions that can handle multiple products,” he continued. “And that’s what you need — a piece of equipment that can handle multiple tasks.”

A convenience store’s equipment can be a crucial differentiator, noted Rich Green, foodservice director for Maverik Inc., a western U.S. convenience store chain with more than 275 units based in downtown Salt Lake City.

“There are certain pieces of equipment that are ubiquitous throughout the industry,” said Green.

“Speed ovens will facilitate a lot of what you do. We use TurboChef ovens. But then we use the NU-VU — another popular oven used throughout the foodservice

64 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

industry — as well. Those are pretty standard. But when your program starts to get unique, you need other pieces of equipment to facilitate that differentiation.”

As an example, Green points to a piece of equipment used by Maverik to cook raw corn tortillas for tacos. “They basically go in as corn dough and come out really nice,” he explained. “Then, we have a special piece of equipment for our Neapolitan pizzas. And we have a unique prep table for our taco program.”

Equipment that controls the food’s environment correctly is imperative to extending the life of the ingredients in a retailer’s offering.

“We have steam tables that maintain the life of our hot ingredients for longer than we need to move them through, and that’s very helpful,” said Green. “Holding food under the right conditions is a big part of it.”

CONTROLLING COSTS

When a retailer designs a new foodservice program, it’s imperative to account for shrinkage and spoilage up front, advised Lynn Hochberg, director of product

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Cost savings are paramount for both big and small retailers: “The savings come after you have a successful program ... It’s about how much you’re selling and where the opportunities are.”

— Lynn Hochberg, Wawa

“Don’t assume you’re always getting the best price. Constantly check your vendors and what they offer ... food costs get out of control quickly.”

— Richard Speckman, The Corner Deli & Grill

fully finished items to bring into the store. Those items are very expensive, and the gross margin tends to be relatively lean. But if you’re willing to bring in foodservice-grade equipment and to work with components, you will create quite a bit more gross margin for your bottom line,” continued Leising.

Retailers must constantly compare the costs of their vendors, according to Richard Speckman, proprietor of The Corner Deli & Grill in West Los Angeles. It should be a daily job.

“Don’t assume you’re always getting the best price.

Constantly check your vendors and what they offer vis-à-vis the competition,” Speckman urged. “If you don’t watch your food costs daily, it can get out of control quickly.”

KEEP IT CLEAN

development for Pennsylvania-based Wawa Inc., operator of 700-plus convenience stores in Florida and the Mid-Atlantic.

“The cost savings come after you have a successful program,” Hochberg said. “We’re in so many different businesses, it’s hard to generalize. I do think it’s about how much you’re selling and where the opportunities are, vs. something small that might not be as big an opportunity. You have to grow into opportunities to effect cost savings.”

It’s very important that a c-store chain has consistency in its equipment across its stores as well.

As Green pointed out, this helps drive costs down in terms of purchasing the equipment, as well as the amount of time and energy it takes to train personnel on how to utilize the equipment.

TurboChef is one of the more popular speed ovens used in c-stores and quick-service restaurants. Steve Crellin, TurboChef’s regional sales director for the Northeast U.S./Canada, said the oven’s programmability is key in controlling costs. “You will have less food waste because you won’t have to recook something that wasn’t cooked correctly the first time,” he said.

Preparing food items in-store as opposed to purchasing them fully prepared can also be a huge costcutter. “When you’re not buying something that’s fully finished, and you can do some or most of the culinary prep work on-site, you will save a substantial amount,” explained Steve Leising, convenience channel marketing manager at Buffalo, N.Y.-based Rich Products Corp. Rich’s is a supplier to the c-store, foodservice, in-store bakery, and retail marketplaces.

“There are companies that specialize in creating

66 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Keeping your foodservice equipment clean is imperative to present your food to customers in the safest, freshest manner, while making sure you adhere to state and local regulations.

Food safety is paramount at RaceTrac Petroleum Inc., an Atlanta-based chain of more than 600 company-owned and third-party, contract-operated convenience stores under the RaceTrac and RaceWay names in 12 Southern U.S. states.

“We are definitely a food safety culture,” said Chef Bob Derian, director of food and beverage innovation at RaceTrac. “When I came to the company eight years ago, we had two people who were ServSafe certified. Now, we have at least two or three in every single store. The entire executive team, all of category management, and all of the leadership of operations are ServSafe certified. Food safety is paramount in

NETWORKING BEGINS HERE Arnold Schwarzenegger

Giada De Laurentiis

Doug Rauch

Jim Belushi

Celebrity Chef

California’s 38th Governor

Former President of Trader Joe’s

and The Board of Comedy

9,000 PROFESSIONALS

TOP SPEAKERS

700 EXHIBITORS

SALES OPPORTUNITIES

NEW PRODUCTS

EXPERT ADVICE

TRENDS RESEARCH

RETAIL TAKEAWAYS

This is the essential networking event for dairy, deli, bakery and foodservice professionals. Innovative products, merchandising, plus sales opportunities - all in one three-day show!

REGISTER TODAY!

IDDBA.ORG 608.310.5000

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

everything we do.”

If you hope to have a successful operation, you have to make food safety your No. 1 priority. “Because if it’s not and someone gets sick, not just RaceTrac gets stained, but the entire industry gets stained,” Derian said. “I’ve seen the Wawa’s and Sheetz’s of the world heavily into food safety for the right reasons.”

Indeed, Wawa does a safety and sanitation review before any new piece of equipment is introduced.

“That’s accompanied by a cleaning procedure review,” said Hochberg.

For TurboChef’s Crellin, the most important factor to ensure efficiency in the operation of his company’s fast-cook ovens is keeping them clean, he states.

“We are definitely a food safety culture. When I came to [RaceTrac] eight years ago, we had two people who were ServSafe certified. Now, we have at least two or three in every store.”

— Bob Derian, RaceTrac Petroleum

“Our ovens are designed around airflow, and we have impingement plates in the oven,” he said, explaining that impingement plates contain holes that allow for high-velocity heated air to speed the cooking process; the air can heat up to 500 degrees travelling up to 60 miles an hour. “If you keep the holes in the plates clean and the oven free of debris, you won’t have any problems.”

It’s very much like keeping your car maintained, Crellin reasoned. “If you change your oil every 3,000 to 5,000 miles and keep your engine clean, you’re going to get a lot more mileage out of it than you would if you abuse the car,” he said.

HIGH-TECH ADVANCES

Technology plays a huge role in how a c-store chain purchases and uses its equipment, too.

“Our touchscreen ovens are Wi-Fi connected,” said Crellin. That means a chain of convenience stores using TurboChef ovens can upgrade the menu chainwide by downloading information to all of their ovens from one central location.

“It’s amazing how technology is affecting the world of cooking,” he added. “A soufflé that would normally take 18-29 minutes can be cooked in our oven in a

68 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

minute and 10 seconds.”

Robin Gabriel, co-proprietor of Hinsdale Shell, a single store in Hinsdale, Ill., agrees that technology has gone full throttle.

“Originally, we had a combi oven, which was about as high-tech as we got,” she said. “We’ve since replaced that unit, and being able to program your equipment — just push a button and go — is a huge time saver. And it’s great for the customer because things get done consistently.”

C-stores, of course, are typically tight on space, so retailers are often challenged with how to fit the foodservice equipment they need, without taking space away from other products. But there are always creative solutions if you look for them.

“Our regular ovens can be stacked two high, and our conveyor ovens can be stacked three high, which obviously gives you more counter space,” said TurboChef’s Crellin. “We have some stores that had no foodservice before they purchased an oven [and] then [they] actually create a menu around the oven once it’s installed.”

At RaceTrac, a time-motion study is conducted to determine which products will come into the store and, most importantly, where they will go once in the store.

“We have an exercise designed to determine what it’s going to take to make and package this item,” said Derian. “Then, we procure equipment that fits into that model so a person can stand in one spot and everything is within reach. There’s no running back and forth.”

Questions asked during this exercise include: What has to be stored? Is it all on the top level? What has to be put on a shelf, and what’s the best shelf to put it on?

“It’s all been vetted. We do a good job of looking at the overall need of our employees, who we want to put products out as quickly and efficiently as possible,” he said.

Still, given the general lack of space, when do you reach the point of too much equipment?

“You have to edit. You can’t just keep adding,” acknowledged Wawa’s Hochberg. “It’s an evolution.

Certainly stacking and having equipment take up as little space as possible is key.”

Undeniably, when all is said and done, it comes down to speed. Customers want to walk into a c-store, get what they want, check out, and be back in their cars in a matter of minutes.

“Manufactures need to be proactive in this area — and to bring their expertise and knowledge to the convenience channel,” said Nemco’s Parrish. CSN

NEW

~

AVAILABLE IN ORIGINAL, SPICY JALAPENO AND TERIYAKI

•100% ORGANIC GRASSFED BEEF •4-5G OF PROTEIN PER BEEF STICK •CLEAN INGREDIENT LIST •PALEO-FRIENDLY, NUT FREE, GLUTEN FREE

Contact your Mighty Salesperson or call 608-625-6328 * SPINS, Total US Natural, 52 weeks ending 10/30/2016 www.mightyorganic.com

©Organic Prairie 2017-10016

BEEF SNACK CATEGORY IS BOOMING!*

TOBACCO Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP

Green Pastures Ahead?

Legal cannabis states are multiplying and it’s catching the c-store industry’s attention

By Renée M. Covino

Y

ou can find a cannabis store selling gas (Gas & Grass in Colorado Springs, for one), but so far, not the other way around. Is it only a matter of time?

To be clear, Denver, Colo.-based dispensary business Native Roots now has three Gas & Grass locations in the Colorado Springs area, but it maintains a separate entrance for the dispensary business at these locations, which are medical marijuana sales only. While the gas station sections are open to the public, the Gas & Grass dispensaries must follow the same rules and restrictions that apply to all other medical marijuana stores in Colorado.

The combination has certainly attracted the attention of the convenience store industry, which is among many watching with interest as the country’s pastures turn “greener.”

Evidence of marijuana’s move to a more mainstream position includes: • A growing number of states have moved toward marijuana reform; four additional states voted in favor of marijuana legalization in the 2016 election, including California, the largest market for the industry.

• More than 60 percent of Americans now live in medical or adult-use cannabis states, according to the National Cannabis Industry Association (NCIA).

• Before the election, a Gallup poll showed that 60 percent of Americans support legal cannabis use.

That is the largest percentage of support for legalization in the recorded 47 years of studies conducted, with support increasing among all age groups.

• The cannabis industry entered 2017 with 2,966 medical dispensaries, 3,973 retailers across the

70 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

country, and more than 4,200 cannabis cultivators, according to a recent published report on cannabis licenses conducted by research firm Cannabiz Media.

Now that California has legalized marijuana, the recreational and medicinal marijuana market is forecasted to grow from $7 billion in 2016 to $22 billion by 2020, according to projections from The Arcview Group, a market research company. “This is the vote heard round the world,” Arcview CEO Troy Dayton said in a recent New York Times article. “What we’ve seen before has been tiny compared to what we are going to see in California.”

This past July, even before the election turned the number of recreationally legal marijuana states in the United States from four into eight, one tobacco analyst predicted a federally legal marijuana country was not that far off. “We could be heading toward legalization sooner rather than later,” said Nik Modi, managing director of RBC Capital Markets, who added it could

TOBACCO Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP

be just five to seven years down the road for cannabis to be legal in the U.S. Modi cited some state benefits since legalizing marijuana, such as: • Colorado generated $444 million in tax revenue related to marijuana in 2014 and $60 million through June 2015.

• Washington State generated $65 million in marijuana tax revenue last year.

Immediately after the election, Cowen and Co. tobacco analyst Vivien Azer evaluated cannabis as “an emerging industry” that is “subject to regulatory headwinds.”

While she noted that more than 50 percent of the population is in favor of legalization, the fact that only a few states have thus far legalized it for recreational use, and the fact that it remains illegal at the federal level, still makes it “a cautious prospect” in her view.

“Looking forward, much work and change still needs to occur in order for this industry to realize its full potential,” Azer stated.

CORE CATEGORY THREAT

Full potential or not, trickle-down changes are starting to take place and affecting core categories in convenience stores. Recent Cowen and Co. research showed that in states where cannabis has been made legal recreationally, the beer market has been underperforming.

More specifically, the equity research company examined Nielsen data on beer category trends in Colorado, Washington

72 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

and Oregon. “While these markets have collectively underperformed the overall U.S. beer market over the last two years, the magnitude of the underperformance has increased notably,” Azer said. The research shows that mainstream beers are experiencing the biggest drag, while craft is also slowing. Imports look to be the most immune.

Moreover, Bloomberg Intelligence’s Kenneth Shea recently spoke out on the marijuana industry, saying that legalization of the drug in North America over the next few years could pose a threat to tobacco and alcohol beverage companies because there has been some evidence of a substitution effect. This is even more reason for the convenience store industry to keep a close watch on cannabis trends.

THE TRUMP CARD

And what about the new administration and its effect on cannabis moving forward?

The results of a Jan. 1 report by Marijuana Business Daily, which surveyed “cannabis thought leaders” including consultants, CEOs and three members of Congress, suggest that for the most part, experts all think we will see a continuation of some form of the status quo, according to Editor Chris Walsh. “Maybe there will be some efforts to crack down here and there, but the consensus is that a widespread crackdown will be difficult,” he said.

Other industry players have gone on record to say they don’t think federal legalization of marijuana will move at the same speed as it would have under a Democratic administration.

Timothy Taggert, CEO of American Growth Fund Series Two (reportedly the only cannabis mutual fund in the U.S.), believes that under the Trump administration, “at least the medical end of [cannabis] will sur-

ADD

Critical Insight Into Your Store Data Turn your data into actionable information with ADD eStore® and Atlas Reporting®. ADD Systems® offers the best back office software solution, with Business Intelligence tools for tracking, analyzing and managing sales, purchases, inventory and more to help you maximize your profitability.

1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101 1010101010101010101010101010101010101

To ADD more to your Convenience Store business, contact us at 800.922.0972 www.addsys.com

TOBACCO Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP

vive.” He also noted President Donald Trump made a pre-election statement that cannabis belongs at the state level, which Taggert ultimately agrees with.

Yet, Taggert and others say the biggest hurdle in the short-term for existing and new cannabis businesses right now is that legalization is only on a state level. Pot-legal stores in any state are in direct conflict with the federal government, particularly the Drug Enforcement Administration (DEA), which last summer reaffirmed that marijuana was still a Schedule 1 drug, the same category as heroin. While the federal government announced in 2013 that it would not prosecute states for legalizing marijuana under certain conditions, it is still a federal headache for cannabis businesses, which have trouble opening bank accounts and accepting credit cards.

This is the reason why one savvy tobacco-outlet business operating in Colorado — even a closer match to the cannabis industry than convenience stores are — recently decided against making the leap into cannabis sales, at least for now.

“If we are breaking the law federally, what might that do to our liquor licenses and tobacco licenses?” asked Terry Gallagher Jr., managing partner of Boulder, Colo.-based Smoker Friendly. “As long as it is not legal federally, we can’t take that risk with our core business today. So, while the category is still very attractive to us, we haven’t moved that way at this point.”

Instead, Smoker Friendly has approached the cannabis business from an accessories stance: the tobacco chain has a “glass” business under the name Glass Werx.

STILL CHARGING AHEAD

Efforts are ongoing to move forward to a new era of marijuana policy. The National Cannabis Industry Association has three priorities for congressional action on cannabis policy: • Protecting public safety and increasing transparency by opening up banking access for state-compliant marijuana businesses; • Ending the “crippling effect” of federal tax code Section 280E, which the NCIA says was “intended for criminals, but taxes legitimate marijuana businesses at triple the effective rate” applied

74 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Cannabis Legality in the U.S. States Where Cannabis Is Legal (recreational and medicinal):

Alaska California Colorado District of Columbia

Maine Massachusetts Nevada Oregon Washington

States Where Medicinal Cannabis Is Legal: Arizona Arkansas

Louisiana Maryland

New Mexico New York

Connecticut Delaware Florida Hawaii Illinois

Michigan Minnesota Montana New Hampshire New Jersey

North Dakota Ohio Pennsylvania Rhode Island Vermont

States Where All Cannabis Is Illegal: Idaho Indiana

Kansas South Dakota

West Virginia

The remaining states have varying degrees of cannabis decriminalization and/or allow cannabidiol/CBD oil only, but not medicinal marijuana.

to other business; and • De-scheduling marijuana — removing it from the Controlled Substances Act, which would allow states to set their cannabis policies without interference from the federal government, much as they currently do with alcohol.

The new 115th Congress is expected to introduce a large number of bills aimed at reforming various aspects of federal marijuana policy — from reducing interference with state laws, to allowing the use of banking services by marijuana businesses, to providing medical cannabis access to military veterans. Two members of Congress, one a Republican and the other a Democrat, have formed a Cannabis Caucus intended to improve the odds of passing bipartisan federal cannabis reform bills. CSN

White Castle Original Sliders

®

We Offer something for everyone!

The Original taste of White Castle Sliders has been satisfying cravers since 1921.

And with fve delicious varieties, we can satisfy the tastes of all of your customers.

Now available for your freezer case, Jalapeño Cheeseburger 6-packs and Chicken Breast Sandwich 4-packs!

For more information about White Castle; contact Steve Ording at 614-559-2473 or ordings@whitecastle.com

© 2015 White Castle Food Products, LLC

NEW!

NEW!

STORESPOTLIGHT Freshies

A

Beginning

R.H. Foster’s new c-store prototype is step one in a five-year plan focused on foodservice

By Danielle Romano

I

f you’ve ever questioned what an energy company knows about foodservice innovation, R.H. Foster Energy LLC has the answer with its new convenience store prototype in Ellsworth, Maine: “More than you’d expect.”

Opened for business on July 21 and located on the corner of Elm and High streets in Ellsworth, this prototype store not only ushers in a new c-store design for the Hampden, Maine-based company, but also a whole new brand for its convenience stores — Freshies.

This moniker was previously reserved only for R.H. Foster’s deli concept. The foodservice-focused Freshies prototype in Ellsworth is the first location to be completely branded as Freshies — and is step No. 1 in a new five-year plan for R.H. Foster, Brenda Gerow, the company’s executive manager, told Convenience Store News.

As the U.S. convenience store landscape began shifting its focus from tobacco and gas as primary staples, R.H. Foster recognized it had to make changes in order to adapt. Thus, the company came up with a five-year plan to put foodservice in all of its c-stores.

“Our goal is to reinvent ourselves today for the customers of the future,” Gerow explained.

FRESH LOOK, FRESH OFFERINGS

Many of R.H. Foster’s existing On the Move c-stores already offer foodservice, so the company wasn’t looking

76 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

The Freshies brand, previously reserved for R.H. Foster’s deli concept, will serve as the overall store moniker for all the chain’s future new stores.

STORESPOTLIGHT Freshies

An additional feature of the hands-free Freshies store is its modified beer cave. Chilled to the ideal temperature, the beer cave was designed with extra lighting and open glass to accommodate R.H. Foster’s female customers. The company found that without these simple adjustments, female customers shy away from entering its stores’ beer caves because they feel uncomfortable and intimidated, according to Gerow.

THE FUTURE OF FRESHIES

A proprietary-branded coffee bar is part of the prototype store’s foodservice focus.

to completely reinvent the wheel. Instead, it identified foodservice as an area of opportunity to put fresh and healthy at the helm of customers’ want states.

“We recognize the customer today is different than the customer from yesterday,” said Gerow. “Innovation is part of bringing new customers to the store.”

To arrive at its new prototype, R.H. Foster researched a number of different store designs by traveling the country and studying the marketplace.

Armed with its findings, coupled with an understanding of what its customers are looking for, the resulting Freshies store makes a connection with the local community through a fresh look and fresh offerings.

At 4,179 square feet, the new store is a dramatic turnaround from the previous 954-square-foot store that was torn down on the same site earlier in 2016.

Now, the larger, upgraded model features indoor bathrooms — unlike the old store, where the bathrooms were located outside — and its décor includes a backdrop of the area’s Union River.

Deviating from customary c-store fare, Freshies’ customers can craft their own healthy smoothies with kale, goji berries and flax seeds, and customize gourmet, made-to-order pizzas like fig and prosciutto, or brie and spinach. Those crunched for time can choose from Freshies’ selection of fresh grab-and-go sandwiches and salads, or they can go the more traditional route and pick up a breakfast sandwich or a whoopie pie.

Playing homage to R.H. Foster’s home state of Maine, Freshies also features a selection of local jams, jellies, honey, maple syrup and wines — a one-of-akind offering in its area.

“Ellsworth is really different and really unique,” noted Gerow. “We played with the wine cabinet to really blend in the wine to truly test if people will purchase Maine products in c-stores.”

78 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

To draw in new and returning customers alike to the Ellsworth Freshies store, R.H. Foster held a VIP preview party, which invited the local community to get a special look at the new-to-market model. The company used digital marketing and social media site Facebook to invite community members, recognizing that many of its customers are millennials who spend a lot of time online.

R.H. Foster plans to continue broadening its digital marketing efforts and bringing such events to life by inviting customers to future Freshies store openings.

The Ellsworth store will serve as the model for future store replacements and store renovations. A second Freshies store is expected to open this fall at the corner of State Street and Broadway in Bangor, Maine. All future new stores will be branded as Freshies.

Although not part of R.H. Foster’s five-year plan, the company additionally is looking to add a Freshies location near a university. It will be the first to offer seating, Gerow shared. “[We’re] just trying to listen to what customers are telling us and be innovative,” she said. “We’re a bestkept secret. We’re a great company with great people, and are working toward the best c-stores to offer experiences customers won’t get anywhere else.” CSN

The beer cave was designed with extra lighting and open glass to better accommodate female customers.

EXPERT’SVIEW NEW Horizons

Make Single Moms Your Secret Weapon Five ways to unleash their full potential

W

hen Dr. Carol Greidner, a single mother and molecular biologist at John Hopkins School of Medicine, received the call that she had won the Nobel Prize, she was folding laundry.

Later, when asked what she would do with her prize money, she said: “Right

By Nancy Krawczyk, now, my kids are in school and I have to Network of make them lunches and dinners. All that Executive Women will keep me grounded.”

Greidner’s response resonated with all working mothers, but especially with often-underestimated single working moms.

Consider these eye-opening stats: • More than 10 million U.S. families are led by single mothers.

• About two-thirds of single mothers work outside the home — that’s slightly greater than married mothers.

• The median income for families led by single mothers was about $26,000 in 2013 (the latest figures available). That’s about one-third of the

Convenience Store News is pleased to continue this series of exclusive educational columns by the Network of Executive Women (NEW), coinciding with the annual CSNews TOP WOMEN IN Top Women in Convenience CONVENIENCE awards given out each fall.

More than 60 female managers, executives and directors who work in the convenience store industry were honored in our 2016 program. In addition to being a presentation sponsor for the Top Women in Convenience program, NEW

80 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

median income for married couples.

Yet despite these challenges, single moms — often the family’s sole breadwinner and caretaker — are some of the most committed, productive and career-minded employees the convenience store industry has.

In response, farsighted companies in the retail and consumer goods industry are changing their workplace policies and talent development strategies to better support their single-parent employees.

Here are five ways the most progressive companies support single working moms:

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

Sponsored by:

Looking for ways o differen ia e your offerings in he crowded marke place?

Put yourself in the center of the whole treating and snacking world Discover more new innovations, items, solutions and trends at the Sweets & Snacks Expo than anywhere else. With access to the most candy & snack people and products, you’ll gain a real competitive edge and grow your business.

Your “center” is here.

Register Now sweetsandsnacks.com Benefi from wo shows!

The National Restaurant Association’s NRA Show 2017 takes place May 20 - 23. *Separate registration required at: show.restaurant.org

EXPERT’SVIEW NEW Horizons

1. PAID LEAVE & FLEX WORK

Each year, Working Mother magazine honors the Best Companies for Working Mothers. The benefits these organizations offer continue to improve, helping single moms in the workplace.

At the 100 companies recognized last year, including 11 NEW corporate partners, paid leave rose from an average of eight to nine fully paid weeks. Maternity leave at L’Oreal USA is now set at 14 fully paid weeks.

More parents are also taking advantage of flexible work arrangements — such as working from home, working four 10-hour days, or job sharing — that help employees better juggle family and other commitments.

The percentage of the 2016 Best Companies’ employees using flextime (80 percent), telecommuting (59 percent) and compressed work schedules (22 percent) all saw healthy increases.

2. CHILDCARE ASSISTANCE

The average annual cost of childcare in a center is $9,589. At-home care averages a whopping $28,354 per year, according to Care.com’s Care Index 2016.

Fortunately, more companies are responding with childcare options, either on- or offsite.

If you want single mothers — and all parents — to be successful in the workplace, follow the industry leaders and reconsider your workplace policies, redirect resources to family-friendly programs, and advocate for change.

Colgate-Palmolive, for example, offers onsite childcare, and Danone offers an online support resource called CareAdvantage to access backup childcare.

3. EDUCATIONAL SUPPORT

The more education a single mom has, the less likely she’ll struggle financially. While 51 percent of lowincome, single working moms (earning less than twice the federal poverty line) have some education beyond high school, 77 percent of higher-income single working mothers (making more than 200 percent of the poverty line) do, according to the Population Reference Bureau. The good news is that more companies are providing tuition assistance. Among them:

82 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Procter & Gamble, Best Buy and Starbucks.

4. WORK/LIFE PROGRAMS

With work/life support in mind, some companies are getting creative, offering programs or classes during lunch hour instead of after work, when childcare is an issue. They are developing programs that benefit families like financial counseling, college coaching, free legal and financial counseling, and free work/ life counseling.

Johnson & Johnson, for instance, offers employees access to six on-site daycare facilities, health and lifestyle coaching, and free college counseling. Others are providing onsite gyms, allowing single moms — and all employees — to get in a destressing workout during the workday.

5. ADVOCATING FOR EMPLOYEE-FRIENDLY POLICIES

Legislation like the Family and Medical Leave Act makes life less stressful and more economically stable for parents. In some cases, companies are actively supporting and advocating for legislation that helps level the playing field for single working moms, including those that raise wages, protect paid sick days, subsidize childcare and early education, lower college costs, and enable more parents to save for their children’s college.

If you want single mothers — and all parents — to be successful in the workplace, follow the industry leaders and reconsider your workplace policies, redirect resources to family-friendly programs, and advocate for change. CSN Nancy Krawczyk is vice president, corporate partnerships and engagement, for the Network of Executive Women, Retail and Consumer Goods, a learning and leadership community representing 10,000 members, 950 companies, more than 100 corporate partners and 20 regional groups in the United States and Canada. Learn more at newonline.org.

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

Delicious soft pretzels filled and topped, perfect for any daypart!

New www.jjsnackfoodservice.com 800.989.9534 X6140

OUTABOUT &

Spotlighting major industry events

Zeroing In on the Backbar Tobacco Plus Expo 2017 takes a close look at tobacco in the convenience channel

By Melissa Kress

A

fter experiencing some high points in 2015, the cigarettes business is back to its historical deceleration rates. Yet even with its challenges, cigarettes — and the tobacco category as a whole — still ranks at the top of the convenience channel’s in-store categories.

Tobacco’s performance in convenience stores was a topic of discussion at the recent Tobacco Plus Expo (TPE) 2017, held Jan. 25-26 at the Las Vegas Convention Center.

Backbar offerings account for a large part of CSNews Editorial Director Don Longo (from left) discusses tobacco category the business at Cumberland Farms stores. During trends with Anne Flint of Cumberland Farms, John Wiesehan Jr. of Mistic a panel session, Anne Flint, E-Cigs, and Ray Johnson of Speedee Mart. senior category manager at tions manager for the c-store chain, pointed out that Tobacco Plus Expo the Framingham, Mass.-based tobacco was 40 percent of sales when he entered the chain, shared that Cumberland Jan. 25-26, 2017 convenience business in 1979 and it’s still 40 percent Farms’ approximately 550 Las Vegas of sales today. c-stores total $1 billion in “I have always felt without tobacco, there would be annual revenue, and tobacco no convenience stores,” he said, explaining that when comprises about 45 percent of you factor in the other items a tobacco consumer buys, the business on the revenue side. that percentage-of-sales figure jumps to 50 percent.

Of that, the combustible segment generates approximately 40 percent to 45 percent of the revenue. “The tobacco customer is very important.”

Breaking down his segments, Johnson said cigaCumberland Farms saw a 4-percent increase in the combustible segment in 2015, and a 1-percent increase rettes were up 2 percent last year; smokeless climbed 10 percent; and cigars and vapor products each in 2016 — two very good years, Flint noted, adding: jumped 25 percent.

“I spend a lot of time on combustible.”

“The trends are going in the right way,” he said.

She did acknowledge, however, that “it’s a little Looking at the backbar from the other angle — the concerning, the last three months of the year [2016] supplier angle — John Wiesehan Jr., CEO of Mistic were not as good as the beginning of the year.” While E-Cigs, said when it comes to the convenience channel, Flint expects cigarettes, in general, to return to its supplier companies can find success with products that normal decline of 3 percent to 4 percent for 2017, she are easy to use and have the right price point. said she doesn’t “expect Cumberland Farms will be As the regulations set forth in the Food and Drug down that much.” And as for other tobacco products, Administration’s final deeming rule settle in, vape smokeless has experienced some “very good increasshops — a chief competitor to c-stores in the vapor es,” she reported, also noting that the chain saw some space — are under “arduous constraints,” Wiesehan gains in alternative tobacco products when it added said. “A lot of them may not make it, and I think them to the mix. those customers will migrate to traditional channels,” Las Vegas-based Speedee Mart is also finding sucincluding c-stores, he predicted. CSN cess with its backbar offerings. Ray Johnson, opera-

84 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

HOTPRODUCTS Special Advertising Section

Cash Registers/Scanning Items

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

HOTPRODUCTS Special Advertising Section

Financial Services

Gourmet Pet Treats

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 87

HOTPRODUCTS Special Advertising Section

Car Wash Solutions

Skimming Prevention

FOR ALL YOUR NEW PRODUCTS AND SERVICES ADVERTISE IN

CSN

HOT PRODUCTS

CALL

TERRY KANGANIS

201.855.7615

88 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

CLASSIFIED Credit Card Processing / Merchant Services

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 89

CLASSIFIED Pet Treats

Why not?...

50% of your customers own a dog.

Gross profit margins average 40%.

Our retail prices are 30-50% below the big box pet stores.

Our product variety and quality offers a selection for any type of dog.

Our wooden display case is handmade in our Michigan workshop and brings attention to itself.

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

It pays to be Different.

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

90 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

3302 Associates Dr. Burton, MI 48529

CLASSIFIED General Merchandise

ATMs

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 91

CLASSIFIED Pre-Paid/Cellular Products

Air Vacs

92 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

CLASSIFIED Plastics

Age Verifier

Petroleum/Equiment

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 93

CLASSIFIED Air Vacs

Age Verifier

94 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Financial Services

CLASSIFIED ATM’s

Age Verifier / POS

Services

86

%

of retailers

who read Convenience Store News do so because they want to find out about new products.

Reach those important hard to reach retailers by advertising here in the Hot Products Section of Convenience Store News by contacting:

Terry Kanganis EnsembleIQ at:

.

201-855-7615 for more details WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 95

CLASSIFIED Financial Services

Check Guarantee Services

Equipment / Supplies

Sunglasses

Equipment / Supplies

Wholesale Refrigeration

96 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

CLASSIFIED Scales

General Merchandise

FUR TAILS FROM $2-$15 DAVY CROCKETT HATS $5.00 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 and Ivory for $2.00 and Leopard for $8.00

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

ADINDEX Add Systems .......................................................................................73 Advance Pierre ...................................................................................55,57 Altria Group Distribution Company .................................................2-3 Anheuser-Busch.................................................................................43 BakenJoy.............................................................................................37 Cash Depot..........................................................................................38 Cheyenne International ....................................................................61 Chobani ...............................................................................................39 Cookies United ...................................................................................41 Del Monte Fresh Produce..................................................................31 DeIorio’s ..............................................................................................16 E-Alternative Solutions .....................................................................63 EJ Gallo Wines....................................................................................53 Forte Products.....................................................................................36 Goya ....................................................................................................5 Heineken.............................................................................................15,77 Hershey ...............................................................................................100 Home Market Foods ...........................................................................65 Hunt Brothers Pizza ...........................................................................99 IDDBA ..................................................................................................67 ITG .......................................................................................................71 J&J Snack Foods Corp. ......................................................................83 John Middleton...................................................................................25 JT International U.S.A,Inc. ................................................................85 Kretek ..................................................................................................21 Liggett Vector Brands ........................................................................33 Logic Technologies ............................................................................12-13 Mars Chocolate North America.........................................................23 McKee/Little Debbie ..........................................................................51 McLane Company...............................................................................17 National Confectioners Association.................................................81 National Grid.......................................................................................34 Regional National Restaurant Association......................................................19A Omega Flex .........................................................................................18 Organic Valley ....................................................................................69 Perfetti Van Melle...............................................................................79 Procter & Gamble...............................................................................27 REG Renewable Energy Group........................................................59 RJ Reynolds Tobacco Company .......................................................9 Save-A-Lot..........................................................................................35A Regional Swisher International Inc. ................................................................45,47 Tillamook Country Smoker, Inc........................................................11 Tyson ...................................................................................................49 Universal Merchant Services............................................................Outsert White Castle .......................................................................................75 The Wonderful Company/Pistacios .................................................7

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

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

Copyright © 2017 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

WWW.CSNEWS.COM | MARCH 2017 | Convenience Store News 97

GETTINGTOTHECORE

Are Convenience Stores Trendy?

Most c-store shoppers see themselves as middle of the road in adopting new trends

When asked about the best new product or service they have tried at a convenience store in the past year, 17 percent of respondents mentioned some type of beverage.

M

ore than two in three convenience store shoppers think the channel is effective at keeping up with the latest trends, and that’s fortunate since only a very small portion of c-store shoppers consider themselves “traditionalists,” liking what they like and not interested in trying anything new. Carbonview Research, sister company of Convenience Store News, recently surveyed roughly 500 U.S. consumers who shopped at a convenience store in the past month to learn about their attitudes and purchasing behavior around new trends, products and services.

When it comes to new trends, products and services, which of the following best describes your attitude?

Early adapter – I love to try new things Middle of the road – I like to wait and see Traditionalist – I like what I’ve always liked, no need to try anything new

Interestingly, it’s not the youngest c-store shoppers who are most apt to refer to themselves as early adapters. It’s those aged 35-44.

TOTAL

BY AGE: 18-34

35-44

45-54

55-64

65+

32.7% 60.6%

35.7% 58.8%

37.4% 56.6%

26.7% 68.6%

31.1% 58.9%

25.8% 61.3%

6.7%

5.5%

6.0%

4.7%

10.0%

12.9%

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

Machines offering customizable beverages are attracting the attention of c-store shoppers.

Several respondents expressed enthusiasm for self-service milkshake and smoothie makers, and fountain machines where they can mix and match options for a truly personalized drink.

How effective do you think convenience stores are in keeping up with the latest trends?

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.

Survey respondents sourced via ProdegeMR, a leading provider of data collection solutions for the research industry.

Visit www.prodegemr.com for more info.

98 Convenience Store News | MARCH 2017 | WWW.CSNEWS.COM

Effective (net) Extremely effective Somewhat effective Neither effective nor ineffective Ineffective (net) Somewhat ineffective Not at all effective

TOTAL

BY GENDER: MALE

FEMALE

68.4% 13.7% 54.7% 22.3% 9.3% 8.2% 1.2%

65.4% 15.6% 49.8% 25.9% 8.7% 7.6% 1.1%

71.7% 11.7% 60.0% 18.3% 10.0% 8.8% 1.3%

Base: 503 respondents who shopped at a convenience store in the past month Source: Convenience Store News Market Research, 2017

A higher percentage of females than males think convenience stores are keeping pace with the latest trends.

93% OF AMERICANS EAT PIZZA EVERY MONTH *

Your customers have spoken, and they’re asking for pizza. We can help—Hunt Brothers® Pizza is America’s #1 c-store pizza brand because of industry-leading customer service, an easy to prepare menu and delicious tasting product that delivers high profit margins. You only need 59 sq. ft. of space and most store owners pay off their initial investment in less than nine months.

LEARN MORE

Download our Pizza Success Guide HuntBrothersPizza.com/CSN

* Source: Pizza.com

We’re made to serve.

by

DRIVING CATEGORY GROWTH

Trusted iconic brands and expert category management delivering sustainable growth.

hersheysconvenience.com