CSN - May 2015

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VIEWPOINT By Don Longo, Editorial Director

Unique Perspectives on Serving Great Food Foodservice Summit inspires retailers to expand their foodservice horizons


his year’s Convenience Store News Foodservice Summit provided c-store foodservice executives with two unique opportunities. The first was spending a day with Chef Rick Bayless visiting the Master Chef’s favorite Chicago neighborhood eateries and experiencing great food served by passionate people. The second was our new Concept Development Activity, where millennial-aged graduates of Kendall College’s culinary arts school participated with the retailers in exploring “A New Foodservice Frontier.” After an ideation session in the morning, the former culinary students returned in the afternoon and presented their ideas and solutions to the challenges and issues raised by the retailers earlier in the day. Sponsored by Tyson Convenience Foodservice, the Foodservice Summit also provided an opportunity for convenience store operators from all over the country to share ideas and learn from one another in an interactive and intimate setting at Kendall College. I believe the Taste of Chicago Tour was a first for the convenience store industry. We put together 13 of the industry’s top foodservice executives with one of the most celebrated, award-winning culinary experts in the world — Chef Bayless (see page 36). “I think the day spent with Rick Bayless was phenomenal … it allowed me to take some time to think about food differently,” enthused one attendee, Greg Tornberg of Kum & Go.

CSNews has been recognized with more editorial awards, including the prestigious Jesse H. Neal Award for business journalism, in the past six years than any other industry publication. 2013 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2012 2013 Jesse H. Neal National Business Journalism Award Finalist, Best Profile, August 2012 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007

“It really felt like we saw people who have a passion for the art of creating good food,” noted Rich Green of Maverik. For comments, please contact Don Longo, Editorial Director, The concepts presented by at (201) 855-7606 or the millennial graduates also dlongo@stagnitomail.com. opened the eyes of our retailer attendees. Several saw immediate application of some of the ideas — such as the H2O Flavor Station, Craft Beer and Growler section, and make-your-own ramen noodle bar — and some with future application — like the sustainable Green Thing fuel and food station, edible flavored utensils, heat/cold activated containers and checkout-less checkout (see page 28). “My key takeaway from the millennials’ presentations was how they are not only redefining convenience, but also it’s really clear that social responsibility is important as well as integrating technology into the solution,” observed Kelly Buckley of 7-Eleven. Convenience store foodservice has come a long way, but an event like the CSNews Foodservice Summit really gets the mind and heart racing about the future of c-stores and food. We are proud to produce the Foodservice Summit each year with Tyson Convenience Foodservice, and we hope this special foodservice issue inspires you to take your foodservice programs to greater heights. CSN

2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013

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

2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2013

2010 American Society of Business Publication Editors, Northeast Regional Silver Azbee Award Feature Article Design, November 2010

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

2010 Trade Association Business Publications Intl. Tabbie Awards Honorable Mention, Front Cover Illustration, October 2009 2009 Trade Association Business Publications Intl. Tabbie Awards Gold, Front Cover Illustration, February 2008 Honorable Mention, Best Single Issue, October 2008

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



28 | COVER STORY Food Forward

Edible packaging? A make-your-own ramen bar? There are no limits to what convenience foodservice could look like 10 years from now. 36 | A Master of Inspiration “Top Chef Masters” winner Rick Bayless gives c-store retailers a taste of Chicago. 40 | What’s in a Name? Conveying quality is key when naming your foodservice operation. 46 | The Power of Partnerships A QSR franchise can increase traffic and sales without the expense and education needed for a proprietary offering. 52 | A Menu to Increase Food & Beverage Sales Menuboard optimization is a c-store’s most powerful sales tool.

INDUSTRY ROUNDUP HOW TO DO WORLD-CLASS FOODSERVICE 58 | Successful Menu Offerings for the Snacking Daypart

12 | Delek US to Take Stake in Alon USA 16 | No Resting for CSTCrossAmerica Partnership 19 | Eye on Growth

58 | Call to Action: Foodservice 101

19 | Competitive Watch

60 | Call to Action: Foodservice 201

20 | People on the Move

66 | Call to Action: Foodservice 301

22 | Retailer Tidbits 22 | Supplier Tidbits

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by Stagnito Business Information, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright © 2015 by Stagnito Business Information. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

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


Consumer-led innovation delivering the

INCREMENTAL CATEGORY GROWTH you’re looking for. Another way we’re committed to creating shared success every day. SUCCESS IS AN EVERYDAY THING.


Join us at the NCA Sweets & Snacks Expo, Booth 1505.

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




Chief Brand Officer (224) 632-8171

70 | A Bevy of Levies So far this year, at least 14 states have introduced electronic cigarette tax bills. COLD VAULT

72 | Energy Spikes C-store retailers remain bullish on energy drinks amidst their renewed popularity. CANDY & SNACKS

74 | Destination: Snacking Success C-stores can improve their packaged snack sales with new merchandising strategies. IN-STORE MERCHANDISING

78 | Cold Treats, Hot Opportunity C-store sales growth in ice cream-related categories is outpacing other channels.


3 | Unique Perspectives on Serving Great Food Foodservice Summit inspires retailers to expand their foodservice horizons. 8 | CSNews Online

24 | New Products


79 | Honoring a Legacy The Wawa store in Toms River, N.J., shows off the chain’s remodel initiative. EXPERT’S VIEW

82 | Can Anything Cool Down M&A in the C-store Industry? External events or market forces could slow pace, lower multiples. OUT & ABOUT

88 | Listening Is Key in 7-Eleven’s Store-Brand Success Retailer shares lessons at Store Brands 2015 Innovation & Marketing Summit.

Korry Stagnito korrystagnito@stagnitomail.com

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

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

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

EVENTS • MEDIA • RESEARCH • INFORMATION UNITED STATES MARKETS Convenience • Grocery/Drug/Mass Store Brands • Specialty Gourmet Multicultural • Green

CANADIAN MARKETS Convenience Pharmacy Foodservice

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


89 | S. Abraham & Sons Gets Retailers Ready for Spring Convenience distributor’s 2015 trade show drew more than 200 vendors. 90 | Under the Influence of Demographics NACS State of the Industry Summit highlights multiple changes in nation’s makeup.

6 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

Premier Trade Press Exhibitor

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

Richard Mione GPM Southeast Rick Crawford Green Valley Grocery

Ian Johnstone Cenex Zip Trip

Matt Paduano Nice N Easy Grocery Shoppes

Jon Urbanik CST Brands Inc.

Jonathan Polonsky Plaid Pantries Inc.

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

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



America’s best wintergreen line-up just got better. Grizzly Dark Wintergreen is 100% dark-fred tobacco that delivers richer favor in both long cut and pouches. This can’t-miss can gives your customers another premium option in the fastest-growing moist snuff favor category in the country*.



WARNING: This product can cause gum disease and tooth loss. © 2015 American Snuff Company, LLC.

*MSAi Retail Sales (Marlin) Share of Market FY 2014.



TOP 5 Daily News Headlines The most viewed articles online. 1 | 7-Eleven Grows Zero Franchise Fee Initiative 7-Eleven Inc. boosted the number of stores under its Zero Franchise Fee Initiative to approximately 310 locations. The program could save an operator up to $80,000. 7-Eleven President and CEO Joe DePinto first introduced the initiative in February at the 7-Eleven Experience in Las Vegas, the company’s annual franchisee convention. 2 | Walgreens Closing 200 Stores in Cost-Saving Move There will be fewer street corners with a Walgreens drugstore now that the company is moving forward with plans to close approximately 200 locations in the United States. In addition to the store closings, Walgreens will focus on significant areas including plans to reorganize corporate and field operations; drive operating efficiencies; and streamline information technology and other functions. 3 | Couche-Tard & The Pantry Close Merger Deal The “K” in Circle K can now stand for Kangaroo Express. Four months after announcing a merger agreement, Kangaroo Express parent The Pantry Inc. and Circle K parent Alimentation Couche-Tard Inc. closed the deal. Canada-based Couche-Tard acquired Cary, N.C.-based The Pantry for a total enterprise value of approximately $1.7 billion including debt assumed. 4 | Global Partners to Acquire Capitol Petroleum Portfolio for $156M Global Partners LP agreed to acquire Capitol Petroleum Group. The $156-million deal includes 97 Mobil- and Exxon-branded retail gas stations and seven dealer supply contracts in New York City and Prince George’s County, Md. 5 | Circle K Southwest Division Acquires Tiger Tote Stores, Dealer Sites Alimentation Couche-Tard’s Circle K U.S. division purchased 21 c-stores, 151 dealer fuel supply agreements and five development properties from Cinco J Inc. (d.b.a. Johnson Oil Co.), Tiger Tote Food Stores and their affiliates. The transaction is expected to close by July 19, after which all 21 stores will be rebranded Circle K and operated by Circle K’s Southwest Division.

Farm Stores Talks Franchising, Food & More

Farm Stores, a convenience drive-thru chain operating 70 locations throughout Florida for nearly 60 years, announced plans to franchise nationwide, with the initial investment cost of one store ranging from $200,000 to $500,000. “We are just now launching a national franchise rollout, and have a national distribution and sustainable building concept, which is pre-fabricated and modular,” said Maurice Bared, chief operating officer of the hybrid grocery store, bakery, quick-service restaurant and convenience store operator. For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT The most viewed New Product online.

Angry Orchard Hop’n Mad Apple & Summer Honey

The new spring/summer seasonal Angry Orchard Summer Honey will be available through August, while the new dry-hopped Angry Orchard Hop’n Mad Apple will be available year-round. Summer Honey has a bright apple sweetness. Hop’n Mad Apple features a juicy apple flavor and subtle hoppiness. Both brews are gluten-free and contain a 5-percent ABV. They will be available in six-packs for $7.99 to $9.99. Summer Honey will also be available in variety 12-packs with other Angry Orchard styles. Angry Orchard Cider Co. Cincinnati (800) 362-7110 www.angryorchard.com


Who iS your biggeSt Competitor iN the foodServiCe Category?

45% Quick-service restaurants (McDonald’s, Burger King, etc.)

24% Other convenience stores

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




Fast-casual restaurants (Chipotle, Panera, etc.)

Grocery stores

Coffee shops (Starbucks, Dunkin’ Donuts, etc.)

want some refreshing news?

93% household penetration

most frequently purchased beverage category 1




of population drinking an SSD daily

3.2 billion




per store, per week, which is the

of millennials’ trips included the purchase of an SSD

4th highest VPO

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

1 in every 5 trips made to C-Stores




in the CR channel,

Coca-Cola is up 6.5% in



million servings per day

immediate consumption and leads sparkling beverage growth



sparkling is the

2nd most expandable consumption category in the store

for more information visit


© 2015 The Coca-Cola Company


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

INDUSTRYROUNDUP FAST FACT It’s important for convenience store operators to capitalize on packaged ice cream, frozen novelties and related items during the summer, as May through August are consistently the strongest months for sales. In 2014, the four-week period that ended July 7 was the most important period across the full year. Source: The Nielsen Co. (page 78)


“The prevalence, prominence and importance of the millennial shopper is becoming more and more evident in all areas of spending, but especially so for food consumed away from home. It is a group of shoppers more interested in eating away from home with customization, quality and value top of mind.” — David Mills, Mills Consulting Group (page 28)

Delek US to Take Stake in Alon USA MAPCO Express parent agrees to acquire 48 percent of the 7-Eleven licensee’s shares


hat didn’t take long. Less than a month after industry chatter put Delek US Holdings Inc. and Alon USA Energy Inc. at the negotiation table, Delek US revealed on April 14 it is purchasing roughly 48 percent of Alon USA shares from parent company Alon Israel Oil Co. Ltd. According to the definitive stock purchase agreement with Alon Israel, Delek US will acquire approximately 33.7 million shares of Alon USA common stock owned by Alon Israel. The approximate value of the transaction consideration is $572.4 million, based upon the closing price of $37.90 per share of Delek US common stock on April 14. The transaction is expected to close by the end of May. “We are excited about this opportunity to invest in Alon USA as it broadens our asset diversity while offering future growth opportunities,” said Uzi Yemin, chairman, president and CEO of Delek US. “We would like to thank Alon Israel’s management team for their support and efforts in

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

this transaction, and we look forward to working with Alon USA’s board of directors and management team to create further value together in the future.” Prior to beginning negotiations with Alon Israel, Delek US entered into a stockholder agreement with Alon USA. During the first year following the closing of this transaction, Delek US can acquire up to 49.99 percent of the outstanding shares of Alon USA at its discretion, with additional ownership above this threshold subject to approval of Alon USA’s board of directors. Bank of America, Merrill Lynch and Barclays acted as financial advisors to Delek US in connection with the transaction. Brentwood, Tenn.-based Delek US’ retail segment consists of about 365 company-operated convenience stores operated under the MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart banners. Dallas-based Alon USA is the largest 7-Eleven licensee in the U.S., with roughly 300 stores.

INTRODUCING McLANE KITCHEN Our foodservice solution is not one size fts all. McLane Kitchen provides customized food and equipment programs designed to ft each retailer’s unique foodservice at retail objectives. Learn more about McLane’s Kitchen on a Mission by checking out our ofering menu and educational chef videos at mclanekitchen.com.

© 2015 McLane Company, Inc. All rights reserved.

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No Resting for CST-CrossAmerica Partnership The companies are targeting up to $200 million in third-party buys per year


fter a very active 2014 in the mergers and acquisitions (M&A) market, CST Brands Inc. and its partner CrossAmerica Partners LP are far from done making moves. CST and CrossAmerica have a “long runway” of M&A opportunities, with “up to 20 deals in the pipeline,” according to a recent research note authored by Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC. During late March meetings with both CST Brands — including CEO Kim Lubel and Chief Financial Officer Clay Killinger — and CrossAmerica Partners — including outgoing CEO Joe Topper and incoming President Jeremy Bergeron — Wells Fargo Securities learned that the companies are targeting $150-$200 million in third-party acquisitions per year. Ideally, CST is looking to acquire convenience store chains with the following: • $50-million to $100-million price range; • Fifty to 70 stores with real property owned; • Three thousand to 4,000 square feet in space; • Potential for stronger fuel volumes; and • Located in geographic areas boasting strong

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

economies. Regarding potential locations for future acquisitions, CST told Wells Fargo that it seeks diversification in the upper Midwest and Canada. CrossAmerica, a master limited partnership (MLP), would be responsible for two-thirds to three-quarters of the price tag of any such transaction. “CST remains committed to establishing its reputation as an acquirer of choice and leveraging the ‘personal connection’ and shared cultures of CST and small regional chains,” Herzog wrote. In the research note, she also revealed that CST plans to have approximately 40 of the 64 convenience stores it officially acquired on Feb. 18 from Erickson Oil Products Inc. become core CST locations. These stores are in Minnesota, Michigan, Wisconsin and South Dakota. After meeting with CST and CrossAmerica management, Wells Fargo came away “incrementally more positive” about the future of both companies. “The partnership has created a stronger, more efficient capital structure to accelerate acquisitive and organic growth, feeding the virtuous circle of growth via the MLP,” Herzog concluded.


eye on growth n Sunoco LP added eight Texas

convenience stores to its holdings. The San Antonio-area stores, purchased from Westex Capital Ltd. and an affiliate, will be leased to and operated by Stripes LLC, the Texas-based retail chain owned by Sunoco LP’s parent company, Energy Transfer Partners LP. The Pico locations will be converted to the Stripes banner and purchase all fuel from Sunoco LP. n Royal Dutch Shell plc struck a

deal to acquire BG Group for $70 billion. If completed, the oil company will become the world’s larg-

sale distribution rights of DeKalb Petroleum 1 LLC for an undisclosed sum. The deal includes 58 accounts, all but two of which are in Georgia, primarily in the northern part of the state, specifically the Atlanta area and surrounding communities. The transaction is expected to close in mid-May. n California’s Quick

Mart chain opened its first franchise in Los Angeles. The retailer is eyeing as many as 25 new locations in Southern California by the end of this year. n Kramer Oil Co. bought a second

est producer of liquefied natural gas. BG is known for its natural gas holdings in Australia, as well as its oil fields in Brazil. n Cary, N.C.-based Cary Oil Co.

Inc. will acquire all of the whole-

convenience store in its hometown of Marysville, Kan. The Trails N Rails store, on the west side of town, will reopen under the name CJ Express. In addition to its two c-stores, Kramer Oil has unattended cardlock facilities, leased cardlocks and bulk plants.

competitive watch n McDonald’s Corp. began testing an

all-day breakfast program at some San Diego restaurants in April. The partial menu features a number of McDonald’s breakfast sandwiches and hash browns. The test is a response to customer requests for breakfast items past the current cutoff time of 10:30 a.m. n Dollar Tree Inc. expects to close

340 stores as a condition of its merger with Family Dollar Stores

Inc. All or most of the divestures will be Family Dollar locations. n Dunkin’ Donuts added Google

Wallet as a payment option at its U.S. locations. Consumers can use the mobile payment platform to load and reload their Dunkin’ Donuts cards within the Dunkin’ mobile app.

WWW.CSNEWS.COM | MAY 2015 | Convenience Store News 19


people on the move n CrossAmerica Partners LP

President and CEO Joe Topper will retire on Sept. 30 and be replaced by Jeremy Bergeron, who currently serves as senior vice president Joe Topper Jeremy Bergeron of integration and development operations at CST Brands Inc. CST owns the general partner of CrossAmerica Partners. Topper will continue day-to-day management of CrossAmerica until Sept. 30, but resigned as president effective March 27 to ensure a smooth leadership transition. In the meantime, Bergeron will report to Topper. n SIGMA: America’s Leading Fuel Marketers,

the national association of fuel marketers and convenience store chain retailers, appointed Ryan McNutt as its new CEO. He previously served on SIGMA’s legislative committee and board of directors.

Ryan McNutt

n The New York Association of Convenience Stores wel-

comed three new members to the New York Convenience Store Hall of Fame: Terry Pier of Swisher International Inc., Mike Siwik of Lorillard Tobacco Co., and the Byrne family of Byrne Dairy Inc. n Ann Seki, formerly of Chevron Corp., and

Ann Dozier, formerly of The Coca-Cola Co., were inducted into the Conexxus Technology Hall of Fame on April 27 during the 2015 Conexxus Annual Conference. Seki helped create the trade group’s Data Security Ann Dozier Committee, while Dozier developed a suite of electronic business-to-business document exchange standards that helped reduce supply chain costs. n Kwik Trip Inc. President and CEO Don

Zietlow and his family were honored at the Salvation Army’s seventh-annual Civic Event in La Crosse, Wis., for the role they play in supporting their local community. They received the Community Red Shield Award.

Don Zietlow



For Trade Purposes Only ©2015 ALTADIS U.S.A. INC.


retailer tidbits n Getty Realty Corp. is selling six operating and non-

operating gasoline stations, as well as 27 commercial and retail sites, in Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania and Rhode Island. n Wawa Inc. plans to open its

first store with indoor seating in the Center City section of Philadelphia later this year. Work on the store at South Broad and Walnut streets should begin in May and be finished in time for a Thanksgiving opening. n Par Petroleum Corp. is putting together a new brand-

ing strategy for its Hawaii assets. The company recently acquired 116 convenience stores and gas stations in the state. n Sheetz Inc. and Shell gasoline were

among the Brands of the Year named in the 2015 Harris Poll EquiTrend study. The annual study is based on consumer assessments and honors brands that rank highest in brand equity, which is based on familiarity, quality and consideration. n Marathon Petroleum Corp. earned the No. 3 spot on

Forbes’ America’s Best Employers 2015 list. Other

c-store industry retailers on the list include Kwik Trip Inc./Kwik Star Inc., ConocoPhillips, Chevron Corp., Sheetz Inc., Valero Energy Corp., Wawa Inc., QuikTrip Corp., Royal Dutch Shell plc and BP plc. n Ricker Oil Co. partnered with Nissan Motor Co. Ltd.

to install fast-charging stations for electric vehicles at nine Ricker’s convenience stores across central Indiana. n QuikTrip Corp. launched a new breakfast

pizza on April 1 by celebrating “April Food’s Day.” The chain gave away free samples throughout the month. The pizza is made of sausage, bacon, scrambled eggs and melted cheddar jack cheese on top of a crispy crust. n TravelCenters of America LLC added liquefied natu-

ral gas fueling “super lanes” to its TA locations in Baytown, Texas, and Lafayette, La. n The Army & Air Force Exchange Service (AAFES)

is replacing 6,000 point-of-sale terminals with NCR Corp.’s RealPOS 72XRT systems. The new technology will replace non-NCR terminals at AAFES retail and foodservice locations. The system features the EZ-Glide Blade System and provides tool-free access to components, enabling fast and easy services and upgrades, according to NCR.

supplier tidbits n H.J. Heinz Co. will merge with Kraft Foods Group

Inc., creating the third-largest food and beverage company in North America and the fifth-largest in the world. Kraft shareholders will own a 49-percent stake in the combined company, while existing Heinz shareholders will own 51 percent.

n The Food and Drug Administration’s Tobacco Products

Scientific Advisory Committee came out against Swedish Match’s application to classify its General snus products as less harmful than cigarettes. The FDA is not required to follow the advice of the panel. n The management team of PDI joined with Luminate

n Nu Mark, an operating

company of The Altria Group Inc., has gone live with a website, www. vaperrights.com, for adult vapers who are interested in information and advocacy on public policy issues related to e-vapor products.

22 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

Capital Partners to purchase PDI from McLane Co. Inc. The current team will continue to lead the newly independent company. n MillerCoors is partnering with

Strike Ten Entertainment, the marketing arm and sponsorship division of the bowling industry, in a two-year deal to be the “Official Beer Partner of Bowling.”


Commitment, Proft, Programs and Support than ever before.






NEWPRODUCTS Special K Snack Bars

blu PLUS+ Xpress Kit

The Kellogg Co. added new Special K Snack Bars to its portfolio with flavors including Berry Medley, Salted Caramel Chocolate and Salted Pretzel Chocolate. The snack bars are made with fruit, chocolate pieces, oats, rice crisps and pretzels. They deliver a combination of chewy and crispy textures, according to the maker.

Lorillard Technologies Inc.’s blu eCigs brand now offers the blu PLUS+ Xpress Kit, which includes the blu PLUS+ electronic cigarette without the recharging pack to offer consumers a lower price point. The kit includes two blu tanks in the classic tobacco flavor, one PLUS+ battery and one USB charger for a suggested retail price of $14.99.

The Kellogg Co. Battle Creek, Mich. (269) 961-2000 www.kelloggcompany.com

Spearmint Mix Tic Tac Mints Ferrero USA Inc.’s Tic Tac brand introduced its newest mint flavor since the introduction of Powermint Tic Tac mints in 2010. The new Spearmint Mix Tic Tac mints is the first-ever dual-pill offering of spearmint flavors in a single pack, the company noted. The unique blend combines smooth and mild light green pills with intense and refreshing dark green pills. Ferrero USA Inc. Somerset, N.J. (732) 764-9300 www.tictacusa.com

Lorillard Technologies Inc. Greensboro, N.C. (877) 703-0386 www.lorillard.com

Breakfast Fritters AdvancePierre Foods offers a unique twist to breakfast foods with the launch of Breakfast Fritters, a proteinpacked “comfort food,” according to the company. The 1-ounce Breakfast Fritters are designed to satisfy on-the-go and casual diners. The raw, breaded strips have a prep time of less than five minutes and are available in two varieties: Chicken Waffle Breakfast Fritter, a tender, all-white meat chicken strip with a maple sugar, butter and vanillaflavored waffle coating; and Pork Sausage Hash Brown Breakfast Fritter, an all-meat pork sausage seasoned with sage and crushed red pepper with a golden hash brown coating featuring visible pieces of real potato. Breakfast Fritters can be served as an entrée, side dish or a hearty addition to a breakfast bar, according to the maker. AdvancePierre Foods Cincinnati (800) 969-2747 www.advancepierre.com

Ice Breakers Cool Blasts Chews Ice Breakers Cool Blasts Chews is a new alternative to traditional breath fresheners that rapidly dissolves and releases a cool blast of instant freshness. The newest product from The Hershey Co. is available in a 0.8-ounce slide pack and comes in spearmint and peppermint flavors. The quickdissolving chews are available at retailers nationwide for a suggested retail price of $2.09. The Hershey Co. Hershey, Pa. (800) 468-1714 www.thehersheycompany.com

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

NEWPRODUCTS Warheads Worms

Hunt Brothers Chicken Bacon Ranch Pizza

Known for its sour candies, Impact Confections’ Warheads brand is introducing Warheads Worms to its portfolio. The sour gummy worms come in 5-ounce and 8-ounce peg bags with a suggested retail price of $1.29 to $1.89. Each bag of Warheads Worms contains three flavor combinations. The company chose worm-shaped gummies for its new addition because it was voted the No. 1 shape for sour gummies and the No. 1 preferred shape by kids.

Chicken Bacon Ranch Pizza is the newest addition to the limited-time offers available at participating Hunt Brothers Pizza locations nationally. The new variety is made with Hunt Brothers Pizza’s original rising fresh crust and covered with a creamy ranch sauce and all-natural, white chicken breast meat. It is then topped with a blend of 100-percent mozzarella and cheddar cheeses, bacon and Hunt Brothers Pizza’s signature Just Rite Spice. The Chicken Bacon Ranch Pizza is the latest limited-time offer to launch since the return of Buffalo Chicken Pizza in June 2014.

Impact Confections Inc. Littleton, Colo. (303) 626-2222 info@impactconfections.com www.impactconfections.com

Hunt Brothers Pizza LLC Nashville, Tenn. (800) 453-3675 www.huntbrotherspizza.com

NCR SelfServ 90 Checkout Solution The NCR SelfServ 90 is the latest addition to NCR Corp.’s FastLane SelfServ Checkout solutions. The SelfServ 90 can be used as a freestanding self-checkout kiosk, installed on a countertop or mounted on a wall. It is ideal for high-volume stores with many shoppers checking out small baskets and using credit or debit cards, according to the company. Key features include an EMV (Europay, MasterCard and Visa) card reader with contactless capacity; a zero-bezel display that supports multi-touch and gesture interactions; 2D imaging scanner; and integrated receipt printer and coupon bin. NCR Corp. Duluth, Ga. (800) 225-5627 www.ncr.com

Sprite LeBron’s Mix Sprite LeBron’s Mix is a limited-edition Sprite flavor that is an evolved look and name from The Coca-Cola Co.’s 2014 release of Sprite 6 Mix by LeBron James. Sprite LeBron’s Mix combines the refreshing taste of traditional Sprite with a splash of natural cherry and orange flavors. The new packaging features a bold red color base with James’ initials in the background. Crown iconography and dashes of gold symbolize James’ most popular nickname — King James. Sprite LeBron’s Mix is now available in 20-ounce and 2-liter bottles, as well as 16-ounce cans. The Coca-Cola Co. Atlanta (800) 438-2653 www.thecoca-colacompany.com

Strongbow Red Berries & Strongbow Ginger Strongbow Hard Apple Ciders unveiled two new flavors, Strongbow Red Berries and Strongbow Ginger, as part of a new variety pack launch. The variety pack, which also features Strongbow Gold Apple and Strongbow Honey, includes three bottles of each flavor and will be sold nationally year-round. Strongbow Red Berries blends sweet, tangy mixed berries with subtle lemon notes and has a crisp apple finish. Strongbow Ginger combines the taste of fresh-sliced ginger with muscato notes. All flavors in the new variety pack are gluten-free and sold in 11.2-ounce bottles. Strongbow Red Berries and Strongbow Ginger both have a 4.5-percent ABV. A new national campaign featuring a commercial spot starring legendary actor Sir Patrick Stewart highlights why Strongbow over ice is the “bestest” cider experience. Bulmers Cider Co. White Plains, N.Y. (855) 787-2437 Strongbow@QualityCustomerCare.com www.strongbow.com 26 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM







% + vs. YAG


% + vs. YAG







©2015 Cervezas Mexicanas, New York, NY

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Edible packaging? A make-your-own ramen bar? There are no limits to what convenience foodservice could look like 10 years from now By Linda Lisanti


ood forward” is quickly becoming a mantra of the convenience store industry’s top retailers. Simply put, it means putting fresh, high-quality foodservice items forward in convenience stores so when customers walk in, that’s the first thing they see and the first impression they get. Food forward also means tending to the foodservice needs of today’s consumers while looking ahead and preparing to meet the evolving needs of consumers well into the future. Ten years from now, in the year 2025, convenience store customers will be more knowledgeaable about the foods and beverages they buy and where they buy them from; have more choices than ever before; be more demanding b aand maintain higher sstandards; crave an eexperience rather than jjust a transaction; and fface an even greater llack of time than they do today, according to d the c-store retailers in th attendance at the recent at Convenience Store News C

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Foodservice Summit. The 2015 Foodservice Summit, held March 10-11 at Kendall College in Chicago, marked the fourth consecutive year that Convenience Store News and Tyson Convenience Foodservice partnered to bring convenience store foodservice professionals together to discuss the latest trends in the category, exchange best practices and tackle common challenges. This year’s event took on a decidedly futuristic feel. In fact, much of the roundtable discussions and activities revolved around the idea of convenience foodservice in 2025. A special “concept development” presentation created live by Kendall College culinary arts alumni under the supervision of consultant David Mills went so far as to illustrate what c-store foodservice 10 years from now will be in terms of offer, presentation, packaging, value, marketing, etc. Using insights gained from a consumer focus group held the night before, as well as morning input from the c-store professionals as to where they see convenience foodservice headed, the “idea team” was tasked with bringing blue-sky ideas to the group that same afternoon. Asked to finish the phrase, “In 2025, convenience stores will be…,” retailers said: • More willing to take risks. • No longer reliant on gas pumps as the

Illustrations by Michael Werner

WWW.CSNEWS.COM | MAY 2015 | Convenience Store News 29

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destination driver. • Food forward instead of fuel forward. • Moving from transactions to interactions. • Breaking out from their quick-service restaurant (QSR) competitors.

• Being leaders instead of fast followers. “Today, c-stores are almost as good but not as good as the destination [like Starbucks for coffee or Chipotle for quick Mexican fare]. In 2025, we’re not going to do half-measures. We’re going to decide

Staying on the Leading Edge Foodservice is far from a one-size-fits-all proposition, but there is one thing that unifies all the convenience store retailers that lead in this category: an unrelenting focus on doing better. The retailers participating in the 2015 Convenience Store News Foodservice Summit shared new initiatives they’re working on to meet the needs of today’s customers, as well as tomorrow’s. 7-Eleven — The nation’s largest convenience store chain is focusing its innovation work on platforms of foods and not just individual new items. Because food is typically purchased and consumed with a beverage, 7-Eleven is examining the food occasion as a whole. The company recently rolled out its MELT sandwiches as part of a hot-sandwich platform, which is gaining customer acceptance. And 7-Eleven continues to introduce beverages that are exclusive offerings from manufacturers or part of the company’s proprietary line. Country Fair — The Pennsylvania-based chain recently introduced three store remodels that put fresh food front and center and have the checkout area further back. The retailer is also utilizing new foodservice equipment, including Ovention ovens, Electrolux combi ovens for proofing and baking, and the Curtis IntelliFresh system for its coffee program. Holiday Stationstores — Operating through a commissary system, the upper Midwest chain recently asked itself: “How do we get it into our customers’ minds that we have a quality product?”

The retailer’s answer was to focus on improving the quality — and perceived quality — of its breakfast components. For instance, Holiday changed from a scrambled egg to a homestyle natural egg; heavily marketed its use of Jimmy Dean sausages; and executed heavy marketing and a sampling program aimed at informing customers about the quality of its product. This summer, the chain will be taking a similar approach with its lunch program. Kum & Go — The Iowabased chain has been doing a lot of work around the basics, including developing a sustainable training program, strengthening its data warehouses to allow for faster and more granular data, and increasing customer awareness about its food and the freshness of the offer. Kum & Go features an “open kitchen platform” in 145 stores currently. Maverik — In addition to coming out with several new products such as a quesadilla line, the Utah-based chain plans to begin testing PlayerLync, a tablet-based system that Chipotle uses for its operations. Originally developed for the National Football League, the system can house all of

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Maverik’s proprietary recipes and deliver employee training information via videos. RaceTrac — The Atlanta-based retailer introduced its first made-to-order concept called The Speedy Avocado Southwest Grill, available in six stores. RaceTrac also recently rebranded and relaunched its fresh food offering, providing guests with a wider selection of quality sandwiches, wraps and salads delivered fresh daily. Newly remodeled RaceTrac stores will continue to introduce innovative food concepts and offerings. Rutter’s — Finally cracking the dinner daypart after five years of trying, Rutter’s has been successful with its launch of basket meals. These packaged meals utilize existing menu items that have relevance at dinnertime as well, such as chicken wings, short ribs and shrimp. Thorntons — In the past year, Thorntons’ foodservice team has been working to analyze the profitability of each product in its offer. In doing so, it’s been able to impact growth in units in a positive way. Wawa — An aggressive chainwide store remodel program is a focus at Wawa. The retailer is looking to bring key elements of its larger, food-centric Florida design to its Mid-Atlantic stores to deliver a consistent brand experience.

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what we want to be and be that,” one retailer at the Summit remarked. THE BIG IDEAS

A special “concept development” presentation created live by Kendall College culinary arts alumni under the supervision of consultant David Mills envisioned what convenience store foodservice in 2025 could be in terms of offer, presentation, packaging, value, marketing, etc. The “idea team” consisted of five millennial-aged alumni: Steve Lee, Jaime Mestan, Ivette Aguirre, Dundee Reyes and Karmela Galicia.

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The millennial generation will play a major role in the future of convenience foodservice and therefore the “idea team” was asked to heavily consider millennials (those currently aged 18-34) when coming up with their ideas for new flavors, new forms and new functions. “The prevalence, prominence and importance of the millennial shopper is becoming more and more evident in all areas of spending, but especially so for food consumed away from home. It is a group of shoppers more interested in eating away from home with customization, quality and value top of mind,” Mills said. “With increased competition from improved quality offerings at QSRs and the significant growth of an all-new format of on-the-go foodservice — fast-casual restaurants — convenience stores have to position themselves with products, service and messages that not only communicate but also connect in a brand-new way with this group of individuals.” Based on what they’re seeing in their stores today, the retailers said millennials in the future will be most influenced by technology (particularly how technology plays into the overall store experience); personalization (the next step up from customization); transparency around food (they want to know the journey of the ingredients they’re consuming); snacking (not just between meals but in place of meals); and mindfulness (serving a greater purpose). So, taking all of this into consideration, what did the “idea team” dream up for c-store foodservice in 2025? A lot actually. Among the big ideas they presented to the group were: • H20 Flavor Station — A fountain program for flavored waters. • “Craft” Section — A section of the convenience store that focuses on small-batch items. Merchandise would be rotated regularly to ensure a steady stream of new products. • “The Green Thing” — An overall focus on green practices would include all LEED-certified buildings, use of solar and wind energy, and a hydroponic

Great brands to serve you better.


©/® 2015 Tyson Foods, Inc. Registered trademarks are owned by Tyson Foods, Inc. or its subsidiaries or used under license.

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garden for on-site growing of fruits and vegetables that could then be sold whole, cut or used in foodservice recipes. • “Welcome Dundee” — By leveraging the technology built into smartphones, c-store retailers could recognize and give a personalized welcome to each customer as they enter the store. While shoppers navigate the aisles, a notification could go out inviting them to a food sampling taking place at the time, where they can give instant feedback and be rewarded with a coupon for a free item. As they exit the store, a personalized “thank you” message would complete their visit. • Ramen Station — A make-your-own bar where guests can choose their ramen noodles, broth and condiments. The customization-focused concept could be extended to a food truck.

• Snack Lottery — A pick-your-own section where customers could choose from a variety of nuts, fruits, grains, proteins and dips. The pricing could be set at four choices for $5. • Multi-Faceted Packaging — This could include seed-infused packaging that if not put into a receptacle, would be biodegradable and serve a greater purpose. Other options: edible utensils, packaging that can infuse flavor into food, and a heat-activation sticker for coffee cups.

Convenience Store News 2015 Foodservice Summit The fourth-annual Convenience Store News Foodservice Summit, sponsored by Tyson Convenience Foodservice, was held March 10-11 at Kendall College in Chicago. Through a mix of presentations and group discussions, as well as a special “Taste of Chicago” tour and a live concept development activity, retailer attendees examined the current state of foodservice at convenience stores and where the category is headed in the next 10 years.

• “Shotgun” Packaging — Designed especially for customers who like to eat in their vehicles or dine while driving, this packaging would fit securely in the passenger seat and have easy-toaccess openings for your food, beverage, condiments, utensils, napkins, etc. No more having to dig around in bags. • Checkout by Sensor — The next innovation in self-checkout. This system would allow shoppers to put all their items on a pad where a sensor would automatically read and register the complete purchase at once. Shoppers would then pay using mobile payment.

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Attendees Jon Bratta, The Pantry Inc. (formerly) Kelly Buckley, 7-Eleven Inc. Rich Green, Maverik Inc. Lisa Luben, Country Fair Inc. Barbara Nova, ampm Melina Patterson, Thorntons Inc. Steve Schoessow, Holiday Stationstores Inc. Mike Sherlock, Wawa Inc. Greg Tornberg, Kum & Go LC Steven Turner, RaceTrac Petroleum Inc. Jerry Weiner, Rutter’s Farm Stores Presenters Chef Rick Bayless Don Longo, Convenience Store News Kevin Miller, Tyson Convenience Foodservice David Mills, Mills Consulting Group sPonsor

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A Master of


“Top Chef Masters” winner Rick Bayless gives c-store retailers a taste of Chicago

By Linda Lisanti


hat you’re going to see today is the stuff that has inspired me forever.” With those words, celebrity chef Rick Bayless kicked off the Taste of Chicago Tour at the 2015 Convenience Store News Foodservice Summit held March 10-11 in partnership with Tyson Convenience Foodservice. The exclusive trolley tour, led by Bayless, featured stops at six eateries — all with an eye on learning for the convenience foodservice executives in attendance. Bayless may be best known Chef Rick Bayless maintained running commentary and interaction with the c-store retailers at for winning Bravo’s “Top Chef every stop of the Taste of Chicago Tour. Masters” competition with his been making food for years,” Bayless explained as the authentic Mexican cuisine. He has eight cookbooks trolley made its way to the neighborhood of Pilsen, and operates several award-winning restaurants in considered the port of entry for many Mexican immiChicago, including the casual Frontera Grill, the fourgrants to the Windy City. star Toplobampo, the fast-casual Xoco, and the quickThe six destinations on the tour included: service Tortas Frontera that has changed the face of • Don Pedro Carnitas — C-store retailers got a foodservice at O’Hare International Airport. view of the front and back of the house of this “None of the places we’re going today use the word family-owned restaurant known for its authentic ‘concept.’ They just make food like their families have

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Mexican cooking and warm customer service. • Birrieria Reyes de Ocotlan Restaurant — A quickstop “joint” known for its juicy and flavorful goat. • Restaurant La Casa del Pueblo — A grocery store plus food stop. • El Popocatepetl — A tortilla factory known to aficionados as “El Popo” that has expanded from a hidden gem of the city’s restaurant industry to a popular local spot. • Lao Sze Chuan — A cool and edgy Asian restaurant unique for its high-energy atmosphere. • Xoco — Bayless’ own restaurant famous for its golden churros and bean-to-cup hot chocolate. On the way to each destination, Bayless treated the convenience foodservice executives to stories of how he discovered each spot and why they stand out in his mind. And, of course, keeping with the tour’s “Taste of Chicago” title, attendees were served a biteful at each stop personally picked by Bayless.

The Taste of Chicago Tour included stops at six eateries personally chosen by Chef Bayless. At one stop, the convenience foodservice executives got a lesson in making bean-to-cup hot chocolate. At another stop, Bayless took the retailers into the back of the house to explain the restaurant’s use of giant cauldrons for cooking its meats.

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What’s In a Name? Conveying quality is key when naming your foodservice operation


ore convenience store retailers are adding custom-made food operations to their stores. New food options bring additional revenue and traffic, and they make life more convenient for shoppers. But adding custom-made food raises important questions for retailers. Given shopper concerns about the freshness of “gas station” food, what should the new operation be named? Will including the name of the c-store dissuade shoppers from trusting the quality of the food? To find the answers, General Mills Convenience decided to ask shoppers what names are most appealing for a fresh, custom-made food program. As By Christopher Quam, General Mills you’ll see, there was a bit of a surprise Convenience & along the way. Foodservice

Unexpected Shopper Feedback

We surveyed 795 shoppers who had purchased food, snacks or beverages from one of four major c-store retailers. We specifically chose retailers that are known for being great convenience stores, but are not widely known for custom-made food. We showed shoppers a picture of a custom-made food operation complete with menu boards, bakery cases and prep area. We described what each operation would carry in fresh food items, such as sandwiches, salads, wraps or pizza, and asked shoppers to imagine it in their store. Then, shoppers were given three names to choose from. We asked them the degree to which each name would motivate them to purchase items from each of the differently named c-store operations. (For the purposes of illustration, I’ll use a made-up retailer brand in the examples below: Speedy Run Stores. In the survey, shoppers saw names based on the actual c-store they visit most often.) Option 1: A name that directly incorporated the retailer’s brand (e.g. Speedy Run Foods).

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Option 2: A playfully branded name, using a stylish derivation of the retailer’s brand (e.g. SR Kitchens). Option 3: A generic name that abandoned the retailer’s brand altogether (e.g. Fast, Fresh Shop). We asked shoppers how much each name would motivate them to purchase, and which name they preferred. What did they tell us? Overall, they preferred the generic name (e.g. Fast, Fresh Shop). Really? That was surprising. Could a convenience store’s brand really dissuade shoppers that much? It didn’t seem possible that it would be such a turnoff. What was going on? clUeS to the Shopper’S MindSet

We also asked shoppers to tell us why they chose the name they did. Their responses were illuminating. Here are some actual quotes from shoppers who preferred the name Fast, Fresh Shop: • “It gives the customer the impression that they have fresh food that is very fast and convenient.” • “Sounds a bit classier.” • “It sounds the most appetizing.” • “Fresh is appealing.” • “Everyone likes fresh food that is fast.” The shoppers’ responses revealed that the issue


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was not that they disliked seeing the name of the convenience store brand. Rather, it was that they really preferred the descriptive words “fast” and especially “fresh” in the name. In other words, the name we thought was bland and generic was not generic at all. It was actually a benefit-oriented name that conveyed the quality of the food shoppers would find there. So, we wondered: What would happen if shoppers had been given a different option, one that combined the retailer’s brand and a benefit-oriented name? We ran a follow-up study to find out. conFirMing the hypotheSiS

We recruited 800 new shoppers, again from the same four major c-store retailers. As before, we showed them a picture of a fresh, custom-made food section and asked them to imagine that operation in their c-store. This time we gave them four options to choose from: Option 1: A tightly branded name (e.g. Speedy

The name of a custom-made food operation should suggest to shoppers that they’ll fnd quality foods there. Words like “fresh” or “fast” reassure them about the value they’ll be getting. Run Foods). Option 2: A playfully branded name (e.g. SR Kitchens). Option 3: A benefit-oriented name that excluded the retailer’s brand (e.g. Fast ‘n Fresh Café). Option 4: A benefit-oriented name that included the name of the retailer (e.g. Speedy Run Fast ‘n Fresh Café). The results validated our suspicion: The two benefit-oriented names (the ones that mentioned Fast ‘n Fresh Café) were more motivating to shoppers. But the name that was most motivating also incorporated the c-store’s brand. What was it about the retailer’s brand that appealed to shoppers? For many, adding the retailer’s brand actually built trust in the food. As one shopper said, “To me, it makes a statement that they stand by it 100 percent.” Here’s how another put it: “This has the [retailer’s] name on it, which I trust, and it also describes that the cafe has fresh food and is fast.” key learning

Here’s the important lesson from this research: The name of a custom-made food operation should suggest to shoppers that they’ll find quality foods there. Words like “fresh” or “fast” reassure them about the value they’ll be getting. Is a c-store brand a dissuader? We didn’t see any evidence of that. If your shoppers like and trust your store, their affinity will carry over to your custommade food operation. In fact, many shoppers prefer that you include your store’s brand. It tells them that you stand behind the quality of your food, just as you stand behind every element of the store experience. Christopher Quam is a consumer insights manager at General Mills Convenience & Foodservice. He focuses exclusively on studying consumer behavior and trends in convenience stores. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

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The Power of


A QSR franchise can increase traffic and sales without the expense and education needed for a proprietary offering

By Tammy Mastroberte


onvenience store operators today have more options available to them than ever before not only to create their own foodservice products, but also to partner with established quick-service restaurant (QSR) brands to do the heavy lifting. In fact, more and more QSR brands are looking to c-stores as franchisees because they understand the growing popularity of the convenience channel for freshly prepared food.

Sandwich franchise Which Wich is currently in four c-stores. Leiszler Oil Co. opened the first Which Wich in Kansas, and is very happy with the numbers so far.

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“Legacy QSR retailers realize c-stores are stealing customers so it’s either become a c-store or license to them to get a share of the market,” said Steven Johnson, consultant and Grocerant Guru at Foodservice Solutions in Tacoma, Wash. “For c-stores, acquiring a branded product is the easiest way to improve foodservice skills and consumer adoption without a huge investment in training, development and research.” Whether it’s sandwiches, pizza, chicken or burgers, there are a multitude of QSR franchise options available to c-stores. When making the decision on which one to partner with, operators should look at surrounding competition, demographics and location, said Johnson, who recommends analyzing what brands are already in the area; what brands are not yet populated there; what would be the most profitable; and where the location is, such as a downtown city or a major highway. “C-stores need to do their research and get the right people helping them,” agreed Alison Leiszler-Bridges, executive vice president of Leiszler Oil Co., the operator of 16 convenience stores based in Clay Center, Kan. Leiszler Oil offers a variety of branded foodservice depending on the location, including Papa John’s Pizza, currently at one location, but expanding into another this summer; Which Wich at one location; Hunt Brothers Pizza in seven stores; and Champs Chicken in one store. The chain also operates a standalone Dunkin’ Donuts location, along with another Dunkin’ Donuts within a c-store. “We have to do something to strengthen our offering in the marketplace, and foodservice is a good way to do that,” Leiszler-Bridges explained.






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1. Nielsen Scantrack, Total Convenience, latest 52 weeks ending 2/28/15 2. Nielsen Scantrack, Total FDCM+, latest 4 weeks ending 3/21/15 vs. 1 year ago

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Expanding OptiOnS

The good news for c-stores is there are more QSR franchise options available today than ever before. Some brands have been present in the convenience channel for years, such as Subway, which has been offering franchising to c-stores for more than 20 years and has just shy of 4,400 c-store locations worldwide, or Champs Chicken, which has been licensing to c-stores for 16 years and is in more than 300 c-stores in 35 states. Then, there are other QSRs previously unavailable to c-stores — or those that have not made the segment a major focus until now — that are becoming available. Checkers Drive In Restaurants Inc., offering burgers, fries, chicken and more, began increasing its focus on c-store opportunities last year, and has just under a dozen locations with four in the pipeline for 2015, according to Jennifer Durham, vice president of franchising. In its freestanding locations, 80 percent of sales are via the drivethru, so a c-store would need a drive-thru to qualify. This year, the chain is offering an incentive to new franchisees: If an operator can open the restaurant within six to nine months, they can receive six months of half-price royal-

Elliott Oil Co. recently tore down an older store and put up a new 4,200-squarefoot store with a pita pit inside. there are currently five pita pit units in c-stores.

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ties. Also, anyone who opens two or more locations within a year is invited on a cruise. “Not including rent, the profit in one year is almost $300,000 with our franchise, which is a 71-percent return on investment and the biggest motivation for our franchisees so far,” Durham noted. Subway also offers an incentive to qualifying operators. If the chain is a dealer or franchisee of a branded c-store or gasoline retailer in good standing, they may be eligible to pay half of the full franchise fee, said Allison Morrow, assistant director of new business development at Subway. “The reduced fee is typically half of the standard fee. In the U.S. for qualified franchisees, the reduced initial franchise fee is $7,500, whereas the standard initial franchise fee is $15,000,” she explained. Another sandwich franchise now available to c-stores is Which Wich, based in Dallas and operating more than 300 locations in eight countries and 39 states. Which Wich is currently franchised in four c-stores, with two more under development for 2015, reported Dustin Griffiths, real estate manager for the company. Leiszler Oil opened a Which Wich at one of its Kansas stores — the first Which Wich in the state. The retailer is very happy with how well it is doing and has received great feedback from the community, said Leiszler-Bridges. The chain recently sponsored Kansas State University’s men’s basketball team and gave out coupons for Which Wich. “We have been pleasantly surprised with the numbers, and everyone is really happy with it,” Leiszler-Bridges said. “…“The national advertising of known brands is the biggest benefit for us, and also the experienced team of people to show you how to operate it is great.” Leiszler Oil also brought in Papa John’s at one of its stores, which is another QSR company making c-stores more of a focus in the last three years, according to Joe Smith, vice president of global development at Papa John’s. The pizza company is currently franchised with 15 c-stores throughout the U.S. While the chain had been working with five or six c-stores in the past, it was a case of the c-stores approaching them. Now, Papa John’s has started reaching out to c-stores itself. “I saw an advertisement in one of the magazines for Papa John’s and contacted them,” recalled LeiszlerBridges. The business opened last April and takes up approximately 800 feet in the middle of one of the company’s strongest stores. “We had roller grill in the past, but it was not as successful as it should be for the

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strength of that store, so we thought we had to come in into strip malls and standalone locations in the near with a bigger brand.” future, according to CEO Shawn Burcham. Since opening, the response has been great. The “To get started in a business-within-a-business locastore competes against other pizza brands, including tion, like a convenience store, the cost ranges from Gambino’s and Pizza Hut, but has not seen that affect $10,000 up to $75,000 per location,” Burcham said. sales at all. In fact, sales continue to increase and the “Unlike traditional franchises, we don’t have a franretailer is thinking about expanding into delivery. chise fee and we don’t take royalties. We also have “Our customer count hour by hour has gone up, marketing development funds where we rebate operaand we have a drive-thru window where customers tors with money back on the purchases they get from can get their pizza along with anything in the store,” us. The fund builds every 28 days, and then we also Leiszler-Bridges said. have annual volume incentive rebates based on the volAlso new to the convenience ume the stores purchase.” channel within the last Jernigan Oil Co., based in Ahoskie, N.C., discouple of years is Pita Pit, covered Champs Chicken through its wholesaler, with five units currently Southco Distributing Co., when attending one of open in c-stores. The its trade shows. The company operates 46 Duck concept only needs 300 Thru convenience stores and offers Champs at square feet of space nine locations. up front because the “We were looking for programs without the food is cooked on a 10-percent franchisee fees, and it grill in front of customwas also a lower investment ers, and the majority to get into business,” said For the QSR is just reheated, said Bill Jernigan Oil President companies, c-stores Wilfong, vice president of Michael Harrell. are ideal because they can increase their franchise development. The Duck Thru chain exposure, and capitalize “We also allow for flexibility on the point-of-sale also offers Hot Stuff Pizza on the traffic and added system so customers don’t have to make at 12 locations, and has sales the segment two stops. They can just go pay at one been with that company provides. For the register in the front for everything,” since 1997. In 2001, it added c-stores, the benefits he noted. “Our total equipment Sub Express to eight locations, include brand recognition, package runs from $75,000 to another concept signed onto through ongoing marketing $150,000 on the high end.” Southco Distributing. Many of its locations also support, product development, training and Elliott Oil Co., based in offer proprietary foodservice products through access to their QSR Ottumwa, Iowa, and operatthe chain’s Duck Food Deli concept. partner’s foodservice ing 17 c-stores, recently tore “If we have the branded concept in the expertise. down an older location to build a store, most of them will offer Champs Chicken, 4,200-square-foot store with a Pita Sub Express and Hot Stuff Pizza side by side in Pit. Andrew Woodward, vice president and a food court concept, and we are continually adding general manager at Elliott Oil, was familiar with the Champs to more locations,” Harrell explained. brand and so was his foodservice supervisor. There Duck Thru stores are spread out geographically, so was also nothing like it in the area. the chain wanted a program it could follow to remain “We called Pita Pit, introduced ourselves and it all consistent at each location. Company leaders also came together pretty quick,” said Woodward. “We wanted the added assistance you get with a franchise wanted to have something different than [the] other operation, according to Harrell. c-stores and also fast-food chains in the area because “We wanted help making our foodservice consistent that is also our competition.” and correct at every location,” he said. “In the past, For those operators looking to incorporate a brand- if we were eating proprietary chicken at Store 20 and ed chicken option, Champs Chicken offers a lower then went down the road to Store 25, it was all good, cost of entry, and while it’s available in 300 convebut it didn’t taste the same. We were looking for connience stores to date, the company will be expanding sistency across the board.”

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50 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

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A Menu to Increase Food & Beverage Sales Menuboard optimization is a c-store’s most powerful sales tool


he menuboard is a convenience store’s most powerful sales tool when it comes to foodservice. A menuboard that has been optimized and strategically designed gets customers to spend more. An optimized menuboard can also shave precious seconds off the customer’s order time, resulting in increased throughput and customer satisfaction. But before you decide what goes on your menuboard, where items will be placed and long before you decide what the menuboard will look like, By Tom Cook, King-Casey you need to create a menu strategy. THE MISSING LINK

lyze inputs such as: market needs, competition, economic climate, technology, operations and regulations. As to regulations, all c-stores must clearly understand and consider the new regulation put forth by the U.S. Food and Drug Administration taking effect in December 2015. This rule requires calorie information to be listed on menuboards in chain restaurants, similar retail food establishments and vending machines with 20 or more locations. A sound menu strategy begins by deciding what business objectives you want to accomplish from your menu and establishing specific targets and metrics for each objective. The next step is to identify and prioritize your food and beverage platforms. This step will require a thorough understanding of where your sales and profits are coming from now and where underleveraged opportunities lie. These opportunities are things you can leverage to help achieve your menu’s business

A menu strategy is the missing link to menuboard optimization and maximizing food and beverage sales and profits. Many c-stores, as well as quick-service and fast-casual chains, Menuboard Optimization Starts with don’t have a cohesive and wellthe Creation of a Menu Strategy documented menu strategy linked to specific business objectives. As a result, strategy is not guiding what products are offered, their priorities and how the menuboard should be designed to get the desired business results. Creating a menu strategy is the critical first step in developing strong and effective menuboards. A sound menu strategy results from following a disciplined process. Before starting to work out the details of your new or enhanced menu strategy, there are businesscentric inputs that need to be taken into consideration. You need to anaSource: King-Casey

52 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

cover story

objectives. What differentiates you from your competitors? These should be heightened to your advantage. Conversely, identifying weaknesses in your menu will also positively impact your business results. Lastly, identify threats and risks. These are the outside forces that could prevent you from reaching your business objectives. You need to clearly understand these as they may ultimately impact your menu strategy. THE SEVEN ABSOLUTES OF MENUBOARD OPTIMIZATION

Having a well-thought-out menu strategy paves the way to optimized menuboards. There are seven critical strategies and tactics that collectively result in best practice menuboard strategy and design. These are universal absolutes for achieving meaningful and measurable business results. Absolute 1: Leverage Hot Spots Years of research has revealed consumers tend to look at certain “zones” of the menuboard first and more frequently. These are the menuboard’s hot spots. They must be capitalized on to increase sales and speed throughput.

Identify where the hot spots are on your menuboard (they vary based on your customer flow and order process). Are your bestselling, highest-margin offerings taking advantage of the hot spots? Reposition menu items with this in mind to increase sales of high-priority and high-margin products. Absolute 2: Real Estate by the Numbers Your bestselling, highest-margin items need to be more impactful than low-selling, low-margin items. This will help customers readily find these businessdriver menu items and, in turn, speed throughput while increasing desirable sales. The key is the optimum allocation of menuboard real estate based on a thorough space-to-sales analysis. Absolute 3: Location, Location, Location All c-store and restaurant chains track food and beverage sales, but it is surprising how few use this data as an input to strategic menuboard design. After all, some of your menu items are much better sellers than others. Some contribute more to your bottom line. It is necessary to understand where your sales are coming from. This will enable you to decide where to position and how to prioritize items on your


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cover story

menuboard. It will also help identify which items should probably be eliminated altogether from your menuboard to free up space for new items or to devote more space to those items driving the business. Absolute 4: Launch, Sustain, Core The concept of launch, sustain, core is a key element of an ongoing menuboard management plan. It is a strategy for dealing with the continuous changes to menuboard content. This is a strategy that takes the guesswork out of how to handle new and promotional items on your menuboard. Absolute 5: Think Like a Customer Learning to think like a customer will help you optimize the ease and speed of navigating your menuboard. The menuboard’s design should be in sync with how customers order. Finding out how a customer orders is critical. What do they order first, second, third? Absolute 6: Brand It Branding of the menuboard is often overlooked. Many brands do little to integrate their brand positioning and identity into their menuboard design. Integrating key branding elements into your menuboard will clearly communicate and reinforce the proprietary attributes and nature of your food and beverage items. Absolute 7: Metrics Matter It is vitally important to objectively measure the success of your menuboard optimization efforts vs. key metrics and decision criteria. These include: sales, check and margin increases, improved throughput and customer satisfaction. In addition to metrics, make sure what you have come up with resonates with your customers. Conduct quantitative and/or qualitative research among your customers to evaluate and validate your new menu strategy and optimized menuboard design. See what is working well and what needs to be reworked based on the customer’s perspective. Finally, it is important to remember that no element of the marketing mix is as overlooked or as underestimated in its ability to increase sales and return on investment as your menuboard. Optimize it utilizing this proven process and you will see the benefits with positive business results. CSN Tom Cook is principal of King-Casey, where his primary responsibility is to oversee and direct the strategic and operations management of the retail consulting and design firm. This entails King-Casey’s core business processes: client service delivery, client business development, design and implementation delivery, new service development and new business development. Cook’s expertise in branding, marketing and strategic retail design spans a broad range of clients and industries. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.


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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages


Successful Menu Offerings for the Snacking Daypart By Maureen Azzato

Call tO aCtIOn: Foodservice 101

• Follow the leader and keep freshness in mind. Never deliver substandard quality. • Be very careful going after afternoon and night snackers — spoilage and labor can eat into profits quickly if you do not have high foot traffic. • Consider fresh-baked cookie programs that are high margin, low labor and have a longer shelf life than other warm/hot foods. • Perfect and expand your beverage offering since many mid-morning and afternoon snackers often seek liquid refreshment that might be a little indulgent (i.e., smoothies, cappuccinos and milkshakes).


ust as beauty is in the eye of the beholder, one customer’s snack could be another’s meal. The fact remains that American consumers are snacking more frequently for a variety of reasons, and convenience stores are well positioned to deliver lots of options to meet the needs of this growing population of grazers. Without question, consumers are eating smaller meals/snacks more often. The snacking trend is burgeoning, and most of the Convenience Store News How To Crew experts believe it will continue as consumers’ lifestyles are more hectic and time-pressed than ever before, leading them to seek maximum flexibility and alternatives to fulfill their food needs. “In the convenience store channel, the snacking occasion is now equivalent in importance in terms of sales, customer counts and profits to the breakfast daypart,” said Maurice Minno, principal of MPM Consulting Group and a member of the How To Crew. Forty-nine percent of consumers are snacking at least twice a day, and they are likely to purchase those snacks instead of bring them from home, according to recent research from Technomic. In fact, 40 percent of Americans prefer to snack throughout the day than eat the traditional three meals. More than three-quarters of consumers surveyed by Technomic said they indulge in snack foods for lunch, while 55 percent said they reach for a snack in lieu of dinner.

58 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Another study by Acosta Sales & Marketing titled “The Evolution of Eating” confirmed the importance of snacking to the c-store industry. The study found that more than half of consumers surveyed snack during the day, with 25 percent reporting they have a snack once each day and another 25 percent reporting they have two to three snacks each day. “Typical consumer snacking purchases at c-stores occur throughout the day, with the majority of these purchases happening in the morning and during the afternoon,” said Minno. “The overwhelming majority of these snacks are bundled purchases that include a beverage, thus increasing the basket size and average spend per customer.” lEVERagIng thE OppORtunIty

In addition to busy lifestyles, weight management, the need for energy boosters during the day, growing demand for ethnic foods, and the desire for small indulgent treats (in some cases, the quest for more healthy options) are driving the growing snacking trend. But how can convenience stores do an even better job of capturing these snack occasions to boost sales and profits? While some How To Crew experts recommend offering all menu items, such as breakfast and hot-case snacks, all day long, others contend this strategy might only work in select stores with a certain mix of customers and high foot traffic during snack times. “Serving breakfast all day is an idea that comes and goes,” said Foodservice 201 one How To Crew • Focus on variety and line extensions, retailer. “The but think creatively about menu reality is people additions so existing ingredients rarely blur dayparts are leveraged and you do not overunless they work expand inventory. odd shifts. If you • Capture the mid-morning and aftercan blur the daypnoon snackers first since those snack art line and deliver occasions are near the busiest meal quality, that’s great. dayparts in c-stores when labor is on It has its place in hand and food is being prepared. select locations, but • Begin adding more hot snacks to the I don’t see it unimix, ultimately shooting for a 70/30 split versally applied.” of hot vs. cold snack menu items. Another How To Crew retailer,

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60 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

however, believes that “one person’s breakfast is another’s dinner, so we offer the full menu during all hours of operation.” He and most experts agree that adding smaller portion appetizer-type items, such as jalapeno bites, mozzarella sticks, chicken wings and/or chicken fingers, to the menu is one way to boost sales. “We see all appetizer items selling through the day, so there is no special item for special times, but keep it small in portion size — 2 to 4 ounces — and keep it under $2 in price, if possible,” he added. “That is the key and they will buy one, two or more items at a time depending on their hunger and time of day.” This retailer’s chain has identified three distinct snacking time slots: from 2 p.m. to 5 p.m., from 8 p.m. to 10 p.m., and from 10 p.m. to 5 a.m. “There are peaks and valleys within these time slots, but all are growing segments,” he explained. For c-stores to capitalize on the growing importance of snacking, they should consider conducting a “path to purchase” analysis to understand how customers journey through their stores at different dayparts and over a full week,” which might reveal different patterns on some days vs. others. “This analysis work will position retailers for how best to re-merchandise their stores with planograms that encourage consumerbundled snack purchases, said Minno, who favors providing a “core” all-day snack offering that includes an appropriate mix of ambient and refrigerated snack options, as well as specialty proprietary-branded hot snacks that are unique to the retailer. As is true of all prepared foods, freshness and

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

inventory replenishment make snack foods more appealing to customers. “Making the merchandising cases look inviting and fresh all the time is the key,” one How To Crew expert emphasized. “When it comes to hot snacks, focus on smallbatch runs and a trained staff that can meet the need 24/7.” MEal REplaCEMEnt SnaCkIng

Just as many consumers graze on foods in the appetizer sections of restaurant menus for their meals, the small-plate trend is gaining traction in c-stores, too. “It’s important to remember that snacks can also function as a meal replacement,” said How To Crew member Mathew Mandeltort, corporate foodservice manager for distributor Eby-Brown Co. “In those instances, the snacks can be more substantial or paired with another component to make a small meal.” And keep in mind that customer need states vary throughout

the day, so “simply offering everything you have all day long does not a snacking program make,” he added. When it comes to the balance between hot and cold snack offerings, the general rule of thumb should be 70 percent hot and 30 percent cold, according to Mandeltort. “People tend to find hot food more appealing than cold food. Just ask anyone who has ever put out a buffet,” he said. Clearly, an operator’s foodservice equipment and existing menu will dictate what type of snack program can be executed. To get operators thinking about some of the snacking opportunities during the day and the different menu options available, the CSNews How To Crew offered the following ideas: For mid-morning snackers: Add highly flavorful, light items that have lower calories to appeal to those seeking more healthful alternatives or a little something to bridge them to lunch. Popcorn snack-size items, such as popcorn chicken, potato wedges, pizza bites, etc., could entice.

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

“In the convenience store channel, the snacking occasion is now equivalent in importance in terms of sales, customer counts and profits to the breakfast daypart.” — Maurice Minno, MPM Consulting Group

“One of the biggest mistakes operators make is putting food out there and assuming people will figure it out on their own. Let them know what you have and that it’s OK to have something for a snack, and that they’ll feel better if they have a snack.” — Mathew Mandeltort, Eby-Brown Co.

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

“Consider anything that customers can grab a quick cup or bag of that doesn’t feel like a full meal,” one retailer said. On the cold-chill side, fresh fruit, yogurt parfaits, small cheese plates/boxes and boiled eggs or egg salad could be added to grab-and-go merchandisers. For mid-afternoon snackers: Consumers seem inclined to purchase more indulgent, higher-calorie treats in the afternoon, such as fresh-baked cookies or brownies, trail mixes and nuts to perhaps accompany that mid-afternoon cappuccino, smoothie or fountain beverage pick-me-up. Be sure to also have warm small-meal offerings for those who eat late lunches or are just tiding over to dinner. “Just be careful that the items are not real

labor intensive and can stay fresh during a slower time of the day,” one retailer cautioned. For late evening snackers: Flavor and spice rule this snacking segment because it’s typically a younger demographic, How To Crew experts agree. “The food has to be good, hot and fresh. Don’t think this customer will continue to return if you offer substandard items,” one expert said. Indulgent sweet snacks can also sell well, and don’t ignore cold snacks if you have lower-volume foot traffic at this time of day. Pizza, roller grill items and hot appetizers that can be cooked in small batches in a speed oven can work in certain stores, too. “Since we do not have a strong

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

dinner business, I have always found the late evening and overnight snacker the hardest to serve,” said one retailer. “You need items that can be prepared ahead of time and on display. I have always found that items like cookies, brownies, bakery pastries or cold snacks are good. However, hot food items have not done well for us during this timeframe.” Every store is different, though, and so much depends on the surrounding community, events, nightlife and area businesses. How To Crew members are quick to remind operators that one size does not fit all. gEt thE WORD Out

For stores with customers that have a more upscale and sophisticated palate, Minno recommends studying what Starbucks has been doing with its all-day snack menu that includes a range of ambient snacks, chilled snacks and warm savory snacks. Starbucks’ Bistro Boxes — packed with a hardboiled peeled egg, red grapes, sliced apple wedges, cheese wedges and a few crackers — and its fresh and heated-to-order savory snacks branded under the La Boulange Bakery — which include three savory croissants Tomato & Cheese, Wheat Spinach and Ham & Cheese — are all doing well, he said. Minno encourages c-store retailers to look both inside and outside the industry for inspiration. Other retailers to study include Target and Trader Joe’s, he noted. Promotions and marketing is another important ingredient to rolling out a new snack program or new snack menu items. “One of the biggest mistakes operators make is putting food out there and assuming people

Call tO aCtIOn: Foodservice 301

• Now is the time to be a leader and create a point of differentiation with unique branded and/or signature snack items. • Conduct path-to-purchase observational research to understand how customers navigate through your stores so you can re-merchandise to better capture the multitude of snack occasions. • At this level, you can selectively go after night and overnight snackers in certain stores that fit the profile and have the customer traffic to support it. • Grab-and-go items at the register boost impulse sales and make it easy for employees to suggestively sell them.


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will figure it out on their own,” Mandeltort said. “Let them know what you have and that it’s OK to have something for a snack, and that they’ll feel better if they have a snack. Think Snickers’ ‘You’re not you when you’re hungry’ campaign.” The How To Crew experts encourage operators to use all marketing platforms available, especially social media such as Facebook and Twitter, to communicate snack time to customers. Mandeltort pointed to BakerTweet (www.bakertweet.com) as a new creative marketing example. “BakerTweet is a way for busy bakers to tell the world that something hot and fresh has just come out of the oven,” the BakerTweet website states. “It’s as simple as turning the dial and hitting the button. All of the baker’s followers get a Twitter alert telling them that it’s bun time. Or bread time. Or whatever.” The first BakerTweet device was installed at the Albion Cafe on Boundary Street in Shoreditch, London. Mandeltort mused: “Why can’t there be a C-Tweet?” CSN

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

Our How To Crew David Bishop — Balvor LLC Ed Burcher — Burcher Consulting Joseph Chiovera — XS Foodservice & Marketing Tom Cook — King-Casey Jack W. Cushman — Nice N Easy Grocery Shoppes Dean Dirks — b2b Solutions Eric Giandelone — Mintel Foodservice Kane Kulas — CSM Bakery Products Mathew Mandeltort — Eby-Brown Co. LLC Larry Miller — Miller Management & Consulting Services Maurice Minno — MPM Consulting Group Paul Pierce — Pure Plates Tim Powell — THINK Marketing Chad Prast — Murphy USA Inc. Bonnie Riggs — The NPD Group Jennifer Vespole — QuickChek Corp. Jerry Weiner — Rutter’s Farm Stores

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A Bevy of Levies So far this year, at least 14 states have introduced electronic cigarette tax bills By Melissa Kress


cross the United States, tobacco consumers have become accustomed to possible hikes in cigarette excise taxes on a state level every year. However, this year, the states are turning a taxing eye toward electronic cigarettes. At least 14 states have introduced electronic cigarette tax bills this year, according to Tom Briant, executive director of the National Association of Tobacco Outlets (NATO). These states include Hawaii, Arkansas, Nevada, New Hampshire, Kentucky and Ohio. Not every state is looking at taxing the segment in the same way, though. Eight of the states want to tax e-cigarettes like other tobacco products (OTP); some want to apply the current cigarette tax rate; and four states want to tax the nicotine liquid, Briant told attendees of the recent AWMA Marketplace & Solutions Expo, which took place Feb. 24-26 in Las Vegas. Currently, only two states tax electronic cigarettes: Minnesota and North Carolina. Minnesota applies a 95-percent tax rate that increases the retail price of an e-cigarette to between $12.99 and $15.99 — almost double the price of an e-cigarette in other states. North Carolina, on the other hand, applies a 5-cent-per-milliliter tax on the nicotine liquid, which only adds between 5 cents and 10 cents per disposable electronic cigarette. “It is significantly less to tax on a per-milliliter basis than OTP,” Briant said. Both state legislatures have since introduced measures to amend their levies. Minnesota State Senate Bill 2025 and House Bill 2182 would change the tax on e-cigarettes and nicotine liquid from 95 percent of the wholesale price to 30 cents per milliliter of liquid nicotine solution. In North Carolina, Senate Bill 407 was modified to tax vapor products at the rate of 3 cents multiplied by the percent of nicotine concentration in the consumable product and by the volume of the consumable product in milliliters, according to NATO. States are looking at increases in their cigarette

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

excise levies, too. The NATO chief noted that at least 18 states have introduced bills to raise taxes on cigarettes and/or tobacco, including North Dakota, Oklahoma, Pennsylvania, West Virginia and Wyoming. Increases are not guaranteed. In 2014, 22 states introduced measures to increase cigarette and tobacco taxes, but only Vermont passed an increase, according to Briant. As the economy improves, states no longer need to look toward cigarette tax hikes to fill budget deficits, plus 2014 was an election year when legislators usually shy away from tax increases. And there is another reason. “Taxing cigarettes and tobacco is reaching a point of diminishing returns,” Briant pointed out. Federal lawmakers are also tackling tobacco tax issues. For example, a tax parity bill was introduced in the U.S. Senate and President Barack Obama has proposed increasing the federal excise tax on cigarettes and OTP for a consecutive year. The president’s proposal would fund health insurance and pre-kindergarten programs. However, like the past two years, Briant does not see these proposals gaining traction because Obama, a Democrat, is up against a Republican-controlled U.S. Congress. CSN

COLD VAULT Beer + Wine + CSDs + Energy + Water + Sports + Juice + Dairy

Energy Spikes C-store retailers remain bullish on energy drinks amidst their renewed popularity By Renée M. Covino


onvenience stores and their customers continue to be amped up over energy drinks. The convenience channel remains the primary energy drink purchasing spot, attributed to its onthe-go convenience and varied single-serve offerings. While the segment peaked in 2011-2012 with double-digit sales growth and was then followed by stalled growth in 2013 due to safety concerns and lawsuits, “renewed popularity” buoyed energy drink sales again in 2014, with continued strong growth forecasted

The PluSeS •Strong new items •Punch-based drinks •Lower gas prices •Red Bull/Monster promotions on 24-ounce cans •Package size changes for Red Bull •More aggressive price promotions •Two-fer offers on top-selling items •Loyalty promotions •Better in-stock conditions from beverage companies because of better weather •Secondary cold and ambient displays •No vendor contracts leading to better cost and promotion due to competition

The MiNuSeS •Not enough space and too many items deserving of that space •insufficient schematic support •Out-of-stocks, particularly on DSD items such as Monster and Red Bull •Multipacks continuing to decline •inconsistency of service, execution and delivery in parts of the country •Pricing pushing the envelope beyond satisfactory value •Line proliferation •health concerns •Negative press •Consumption pressure

Source: Beverage Buzz retailer survey, Wells Fargo Securities LLC

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through 2019, according to Mintel, which is estimating a gain of 41 percent from 2014 through 2019. Here’s a look at some of the recent spikes reenergizing energy drinks’ performance: GAs PriCes DOwn, enerGy Drinks UP

This year’s significantly lower gas prices have had a positive impact on energy drinks. “We believe the energy category was one of the largest beneficiaries of the recent drop in gas prices at the pump,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC. The gas price drop “bottomed out” after the fourweek period that ended Feb. 14, 2015, according to Herzog. During that four-week period, Wells Fargo recorded the energy category as having strong dollar sales growth in the c-store channel of 15.4 percent “driven by continued solid results” from Monster and Red Bull. On its own, Monster generated “very strong” dollar sales growth of 16.8 percent for those four weeks, driven by 18.1-percent equivalent unit volume growth and a 1.1-percent average equivalent pricing decline. Comparatively, Red Bull had dollar sales growth in the convenience channel of 15 percent during the same period, driven by a 9.9-percent equivalent unit volume gain and 4.7-percent average equivalent pricing “as its new pricing went into effect at the beginning of January,” Herzog explained. “Monster gained solid dollar/unit share this period, which we believe partially reflects consumers reacting to Red Bull’s pricing growth.” Another issue very much in play is the transition already underway of nearly half of Monster’s distribution from the Anheuser-Busch system to the Coca-Cola system in the first half of this year. More than 50 percent of retailers recently surveyed by Wells Fargo’s Beverage Buzz indicated they expect some level of disruption or potential challenges during this phase.

However, the majority of retailers suggested these would be “normal transition disruptions” and the “bumps should not be big,” according to the Beverage Buzz survey findings. InnovatIon Churns

Turning a challenge into an opportunity, “health and ingredient safety concerns are creating new avenues for innovation that address factors hindering some consumers from consumption [of energy drinks],” noted Elizabeth Sisel, beverage analyst for Mintel. Although the controversy over energy drink ingredient safety of 2012 and 2013 has significantly decreased, health is still top of mind with some consumers concerned about sugar content and other negative information surrounding energy drink effects. Some brands have already launched sugar-free and allnatural energy drink options to better compete. Energy drink innovation around new and “exotic” flavors is also on the rise and continuously being tested at retailers such as Minute Market with 13 stores in

Medford, Ore., which is constantly shifting around its two-door planogram of energy drinks to make room for the latest newcomers, according to Cliff Simpler, operations manager. The secret, he said, is to not be influenced by personal taste and not get bullied by manufacturer contracts. the Beverage equIvalent of san DIego

It has been said that San Diego has some of the best weather in the United States — and consistently temperate, sunny days also means there is virtually no seasonality. The same could be said for energy drinks. Of all packaged beverages, the alternative beverages segment (comprised mostly of energy drinks) remains fairly steady, with no real seasonal sales swings throughout the year, according to research from The Nielsen Co., as reported in the Convenience Store News 2015 Guide to Category Management (published in February). This means convenience retailers can enjoy robust sales of alternative beverages and energy drinks throughout the year. Csn

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CANDY & SNACKS Chocolate + Non-Chocolate + Gum + Salty Snacks

Destination: Snacking Success C-stores can improve their packaged snack sales with new merchandising strategies By Angela Hanson


he fact that snacking is on the rise is good news for convenience store owners, but as more consumers visit c-stores for a snack, retailers will have to work harder to properly merchandise packaged snacks, give consumers what they want and win their loyalty for the next trip. There are numerous ways to accomplish this — from leveraging dayparts to creating “variety” destinations to going category by category and designing the best arrangement. The method, or combination of methods, that works best will depend on the individual situation of a store, but step one is to understand what customers are thinking. “Operators need to consider the consumers’ ‘need state,’ or frame of mind at the time of purchase,” Kelly Fulford, senior category development manager for General Mills Convenience, told Convenience Store News. “Why is the consumer coming into the store? Is the consumer looking for something sweet or salty? By understanding and marketing to the mission of the consumer, retailers can capture impulse sales and increase the basket ring.”

Where & WheN

Location is a key consideration, both outside and within the store. “Is the store near a school where candy and chips do well? Or is the store near a highway where coffee and breakfast bars do well on a heavy morning commute?” posed Jennifer Miller, merchandising category manager, center of store, for Chevron Corp.’s ExtraMile chain. These aspects help determine what snacks to offer,

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

and once c-store operators decide how much of their packaged snack offering to devote to certain products, they must then decide how much space in the store that category gets. “It’s all about the ratio between space to sales,” said Miller. “Think about how much packaged sweet snacks contribute to your sales vs. other center-ofstore categories. It’s important to keep the appropriate amount of space dedicated to the snack category, whether it’s a salty or sweet product.” Once retailers know what and how much to offer, they can arrange things to appeal to their customer base. Even then, though, they should keep in mind that time of day affects navigation. Healthier snacks are more popular in the morning hours, while demand for indulgent treats increases later in the day. Fulford recommends an organization structure based on key need states and dayparts rather than a merchandising strategy by category. “For key categories, we leverage consumer behavior and purchase drivers to influence how we organize the

CANDY & SNACKS Chocolate + Non-Chocolate + Gum + Salty Snacks

set,” Fulford said. “In general, we recommend merchandising each category by product segments, brands and lastly, bridge by flavors when possible.”

gettiNg it together

There’s a simple way to create groupings of snack products that fit together and make appropriate snack destinations: look at what customers tend to purchase together and make it easier for them to do so. For instance, cup cereal, breakfast bars, pastries and Pop-Tarts fit together as a breakfast combination, so Chevron ExtraMile places packaged sweet snacks near its coffee. “We have found that coffee and packaged sweet snacks are typically purchased together,” said Miller. “We therefore try to make it as easy as possible for our customers to complete their related-item purchases so they can be on their way.” Adjacencies also help increase the overall basket size. “At Rutter’s, we merchandise packaged snacks to adjacencies as much as possible,” said Robert Perkins, vice president of marketing for York, Pa.based Rutter’s Farm Stores. This strategy is designed to increase the basket size with add-on items. “We try to maximize the customer flow and queuing space to entice add-ons.” Other pointers include: • The best-selling salty snacks do well with multiple points of distribution inside a store.

BETTER TOGETHER Placement of snacks based on daypart or a particular need state increases add-on purchases and promotes a larger basket size.

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If possible, at least one salty option should be placed near cold beverages as a related-item purchase opportunity. Instead of looking at brand first, customers purchase bars based on what type it is (such as energy, protein or treat bars) and the benefits it provides. If retailers only have one section for bars, rather than placing them in a daypart or purchase-type set, they should still organize that single set by attribute instead of brand. For sweet snacks, non-chocolate items should be grouped together, then transition to bakery items and finally into chocolate and more indulgent snacks.

LooKiNg AheAD

Just when c-store operators have a merchandising plan set for their packaged snacks, it will be time to reevaluate everything. Consumer preferences are always in flux, so savvy retailers should keep an eye on trends that will affect their market. It’s important for retailers to look at consumer data while trusting their own expertise. For instance, betterfor-you snacks have long been on the rise, but c-store retailers know health isn’t always the top priority for their customers. “The consumer is more aware of healthy options, but may not purchase using the same thought process,” Perkins said. “They want something ‘perceived’ to be healthy while also tasting good and satisfying.” In general, industry insiders agree product variety and new flavors keep consumers interested and offer new merchandising opportunities, though the current flavors in vogue will change over time. Continued innovation in convenient packaging for on-the-go customers is also a draw. CSN




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Cold Treats, Hot Opportunity C-store sales growth in ice cream-related categories is outpacing other channels By Angela Hanson


hile many consumers habitually stop at convenience stores for a snack or beverage, more are visiting to buy a frozen treat than one may expect. According to new data and analysis provided to Convenience Store News from Nielsen, 42 percent of U.S. consumers ate ice cream in the last 30 days, with residents of the South being the biggest consumers. “Whereas the overall consumer marketplace for CPG [consumer packaged goods] items is growing approximately 2 percent in dollar sales in early 2015, ice cream-related categories represent a significant growth opportunity for convenience stores and are outpacing sales across total food, drug and mass,” said James Russo, senior vice president, global consumer insights, at Nielsen. It’s important for c-store operators to capitalize on ice cream and related items during the summer, as May through August are consistently the strongest months for sales. In 2014, the four-week period that ended July 7 was the most important period during the full year. Based on the 52 weeks that ended March 14, frozen novelties and premium ice cream are enjoying a turnaround, with dollar sales increasing by nearly the same percentage that they declined the previous 52 weeks. However, unit volume only grew 1 percent for novelties and declined by 0.4 percent for premium during the same time, indicating price increases may have driven the dollar growth. Frozen yogurt saw the biggest swing of all the catego-

ry’s segments in dollar sales and unit volume when comparing the two years’ worth of Nielsen data, dropping considerably in both metrics. However, the sizeable swing may actually be due to its small size as a segment. Overall, dollar sales in the packaged ice cream and novelties category went from decreasing 2.7 percent two years ago to increasing 2.8 percent in the 52 weeks ended March 14, while unit volume went from a 3-percent decrease to a 0.6-percent increase. Dollar sales at food/drug/mass stores meanwhile increased by just 0.44 percent comparatively. Residents of the South are the biggest consumers of frozen treats, making up 35.8 percent of dollar sales and 39.9 percent of unit volume during the year that ended March 14. This is likely due to longer periods of warm temperatures in this region of the country. The Northeast comes in second despite difficult winters, possibly due to greater population density. All regions, though, saw little change in category share in the last year compared to the previous year. On a month-by-month basis, while dollar sales of packaged ice cream and novelties swung predictably up and down depending on the season at both convenience stores and food/drug/mass-merchandise stores, c-stores saw slightly higher highs and lower lows. CSN

Sales & Units 03/14/2015 (in millions)

Frozen novelties Premium ice cream Ice cream Frozen yogurt, sherbet, sorbet TOTAL

DOLLAR SALES FOR 52 WEEKS ENDING % change 03/15/2014 vs. year ago (in millions)

% change vs. year ago

03/14/2015 (in millions)

UNIT VOLUME FOR 52 WEEKS ENDING % change 03/15/2014 vs. year ago (in millions)

% change vs. year ago

$669.9 447.8 71.0

2.8% 3.6 -0.6

$651.6 432.1 71.5

-2.7% -3.5 0.7

332.2 104.2 20.6

1.0% -0.4 1.2

329.0 104.6 20.4

-3.8% -1.4 4.3

11.0 $1,199.7

-9.2 2.8%

12.1 $1,167.3

10.1 -2.7%

2.8 459.8

-11.5 0.6%

3.2 457.2

-18.3 -3.0%

Source: The Nielsen Co.

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Honoring a Legacy The Wawa store in Toms River, N.J., shows off the chain’s remodel initiative By Melissa Kress


n early February, Wawa Inc. revealed it was embarking on an ambitious journey to remodel its legacy stores and older fuel stores. More specifically, the remodeling program is aimed at 50 stores this year — the most remodels to occur in one year in Wawa’s history. With each new remodel, the retailer is investing $1 million to bring its latest store design, technology and foodservice offerings to its older locations. Within just days of the announcement, the first of the convenience stores in the initiative closed their doors for a three-week overhaul. During week one, the stores were gutted; week two, new walls, equipment, floors and tiles were placed; and week three, the merchandise arrived and the stores were stocked. The end result is legacy stores that now mirror the Wawa experience found in newer locations — from top to bottom. (All associates are relocated to nearby Wawa stores during their store’s remodel period.) One of the first locations to debut the refreshed look was the Wawa at 1600 Route 37 East and River Drive in Toms River, N.J. It closed Feb. 16 and reopened March 9. The c-store sits on a stretch of road that connects Toms River to the Garden State Parkway, where motorists often experience bumper-to-bumper traffic while traveling to the Seaside Heights, N.J., beach and boardwalk during the summer. A newer standalone Wawa with fuel is just about a mile up the road, while this non-gas store anchors a strip mall that also features a pizzeria, hair salon and laundromat. Stepping inside pre-remodel, customers found the products and services Wawa has become known for: touchscreen kiosks to order its famous hoagies, a coffee section and an open grab-and-go display. The store added a f’real milkshake machine in the past few years, but the décor lacked the inviting splash that welcomes customers in newer Wawa stores.

Wawa will remodel 50 stores this year. With each remodel, the retailer is investing $1 million to bring its latest store design, technology and foodservice offerings to its older locations.

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


Stepping inside post-remodel, that’s all changed. The warm hues and new store graphics now welcome customers into a space that looks and feels bigger despite being the same footprint. In addition to a fresh look, the c-store now features an enhanced coffee bar and foodservice offerings, with customers able to get made-to-order milkshakes and Flurricanes — an option that first debuted in Wawa’s Florida stores. The remodeled store also boasts a Coca-Cola Freestyle fountain machine in a newly upgraded dispensed beverage section. According to the retailer, the remodel initiative takes Wawa’s commitment to “fulfilling customers’ lives every day” to the next level. The changes bring the most current Wawa experience to all locations and customers. Some things, though, will never change, the company said, like the Wawa associates and their connection to their customers; the company’s promise “to refresh, reinvest and reinvigorate;” and its values in action: embracing change and delighting customers. CSN

An Aggressive Timetable With 50 stores to remodel before the end of this year, Wawa is wasting no time. The projected remodel schedule for legacy stores in New Jersey and Pennsylvania includes: • 83 Limekiln Pike, Glenside, Pa., will close May 11 and reopen June 4 • 55 North Fork Landing Road, Maple Shade, N.J., will close May 18 and reopen June 12 • 1522 Route 38, Lumberton, N.J., will close May 27 and reopen June 18 • 6506 Frankford Ave. in Philadelphia will close June 1 and reopen July 2 • 1501 West Gordon St., Allentown, Pa., will close June 8 and reopen July 2 • 104 Hickory Corner Road, Hightstown, N.J., will close June 15 and reopen July 2 • 201 South Bryn Mawr Ave., Bryn Mawr, Pa., will close June 22 and reopen July 17 *This is a partial list

80 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

As part of each remodel, stores get a Coca-Cola Freestyle fountain machine, an enhanced coffee bar, new graphics, and more. According to Wawa, the goal of the remodel initiative is to take Wawa’s commitment to “fulfilling customers’ lives every day” to the next level.



2014 Convenience Store News Winner for the Best Original Design: Kangaroo Express, Fayetteville, N.C.

2014 CSNews for the Single Store Owner Winner for the Best Original Design: Warrior Fuel, Santa Ana, N.M.


Best Original Store Design (a new-build) Best Interior Design (a new-build) Best “Green” Design Best Low Cost Remodel (less than $100,000) Best Mid-Budget Remodel ($100,000- $250,000) “The Sky’s the Limit” Remodel (more than $250,000)

Take pride in the new features of your store and gain industry recognition! Winners receive a beautiful plaque to hang in their store and are featured in Convenience Store News or Convenience Store News for the Single Store Owner.


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Can Anything Cool Down M&A in the C-store Industry? External events or market forces could slow pace, lower multiples


he merger and acquisition (M&A) market in the convenience and gas station (C&G) industry is showing no signs of slowing down and the level of transactional activity in the first quarter of 2015 started where 2014 ended — red hot. In the first quarter of 2015, several new acquisitions were announced or closed by some of the most active consolidators in the industry, such as: By John C. Flippen Jr. & John Sartory, • GPM Investments’ Petroleum Capital & Real Estate LLC plan to purchase the 163 sites remaining in Sun Capital’s convenience store portfolio; • CrossAmerica Partners LP acquisition of Erickson Oil Products Inc.’s 64 retail sites; • Petroleum Marketing Group Inc.’s purchase of Mid-Atlantic Petroleum Properties LLC’s retail assets in the metropolitan Washington, D.C. area; • TravelCenters of America’s acquisition of 26 retail sites from Best Oil; and • Alimentation Couche-Tard’s announcement of two new acquisitions in the United States shortly after finalizing its mega-merger with The Pantry. The public announcements and post-closing industry analysis concerning these acquisitions contained the following themes: • The buyer was already an active, experienced and major player in the industry and M&A market. • The seller made the decision to exit the industry because of the “lofty” EBITDA purchase multiples currently being offered by some buyers (i.e., the purchase price was just “too good to turn down”).

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• The major players in the M&A market are still on the lookout for additional acquisition opportunities. While all the market forces that have been fueling the merger mania in the industry over the past several years certainly still appear to be in place, we would like to use our crystal ball to briefly highlight several external events or market forces that could potentially slow down or severely inhibit the current pace of consolidation within the C&G industry and/or lower the purchase multiples. These are a few of the items that our crystal ball produced when asked the question: What could potentially slow down this hot M&A market within the C&G industry? INTEREST RATES RISE

Fed Chairwoman Janet Yellen ended the Fed’s two-day policy meeting in March by announcing the Federal Reserve was finally removing the “patient” wording from its official policy statement and was willing to consider raising short-term interest rates. Most market experts now expect the Fed to raise its target federal funds rate for the first time in approximately seven years by no later than the third quarter of this year. The ultimate goal of the Fed will be to push interest rates higher across the market spectrum, from debt obligations maturing in 30 days to 30 years, to avoid the possibility of its current zero interest rate policy fueling economic and market bubbles throughout the economy. The Fed believes the economy is getting closer to where it can grow at a sustainable rate without the added incentive provided by historically low borrowing costs. This low interest rate environment has certainly

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EXPERT’SVIEW helped fuel the growth of M&A activity in the C&G industry. As the cost of capital starts to rise in 2015, this should have a suppressing impact on market multiplies that the major consolidators and master limited partnerships (MLPs) have been willing to pay for C&G assets. In addition, as the overall level of interest rates start to rise in the bond market, the ability of MLPs and real estate investment trusts (REITs) to quickly raise the capital needed to continue expanding could be negatively impacted. As rates continue to rise, fixed income investors that typically purchase bonds normally become less interested in higher risk/higher dividend paying classes of investments such as MLPs. While most capital market participants are currently assuming the Fed will make all the correct policy adjustments over the next several years that are needed to wean the United States off this unprecedented period of accommodative monetary policy, not everyone is sure it can be done without triggering a sharp downturn in GDP and/ or causing major convulsions in the capital markets. Ray Dalio, founder of the $165-billion hedge fund group Bridgewater Associates and one of the most powerful and respected managers on Wall Street, recently warned his clients that the Fed’s actions run the risk of causing a 1937-style stock market slump and other dramatic unintended consequences. Any major decline in share prices and the corresponding P/E (price to earnings) multiples of the most active public players in the M&A marketplace should reduce the purchase multiples this group of consolidators has been recently willing to pay for attractive C&G assets. In addition, if the Fed’s actions cause the U.S. economy to significantly slow down or slip into a recession, this will normally cause a company to pull back on its level and pace of acquisition activity. SELLER EXPECTATIONS

As we mentioned in our earlier article (Convenience Store News, March 2015), most market experts are predicting the C&G industry will continue to consolidate for the foreseeable future and the marketplace will include a sufficient supply of petroleum distribu-

84 Convenience Store News | MAY 2015 | WWW.CSNEWS.COM

tors that are still willing to sell their businesses and exit the industry. However, the terms of a potential sale and the purchase price expectations of many sellers may be becoming too aggressive even for the largest and most active buyers. Multiples are not the same in every market: Most sellers seem to believe any retail network should trade for approximately the same market multiple no matter where the retail assets are located from a geographic standpoint and/or the overall level of competitiveness of the network. Any rational buyer, no matter its size, has to take into consideration these market factors before making an offer and all acquisitions certainly do not offer the same potential upside opportunities and risks to a buyer. Pro-forma EBITDA: Many businesses in the industry are now being marketed with numerous and, at times, very aggressive upside pro-forma adjustments to existing or “as-is” site-level EBITDA. As the M&A market in the C&G industry has become more dominated by public companies and as private equity players have also become active in the industry, this movement to a pro-forma EBITDA model commonly used for Wall Street-driven acquisitions is not unexpected. However, for a fairly conservative industry that until recently had been historically dominated by private and family-operated companies, this movement in market expectations or pricing has caught many potential buyers by surprise. When a member of our firm meets with most privately held companies, the dominant view within senior management is still fairly universal: any rational buyer should not pay the seller for the acquisition’s upside EBITDA potential; the upside is the buyer’s incentive or risk premium for completing the transaction. This type of reasoning certainly makes economic sense from a conservative buyer’s standpoint, but if seller expectations continue to shift to assume upside EBITDA potential will always be included in the final purchase price, this mismatch in expectations will make it harder to complete many transactions. Misinterpreted public information: Sellers may misinterpret the high multiples paid by buyers based

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EXPERT’SVIEW on historical EBITDA as reported in the media and apply them to their businesses. Buyers are not the same in every market: Unless a seller’s assets are extremely attractive, such as the Hess Corp. retail network that was recently purchased by Speedway LLC, a seller cannot expect the final purchase multiple will be driven upward by the MLPs and other public consolidators. Unfortunately, most sellers initially assume their retail assets will attract the most aggressive market bidders and as such, their business will trade for a premium. If the perception does not turn into reality for many sellers, could the overall supply of potential sellers start to decline for the first time in many years? A deal gone bad: How quickly has everyone forgotten about the Great Recession and the C&G companies that tried to grow too quickly before the economy turned sharply downward and as a result, failed during that stressful period of time. It could happen again. History normally repeats itself.

Many of the larger consolidators in the industry are certainly experiencing some growing pains and a few of them have recently slowed down their pace of acquisitions. One of these players could run into financial trouble, or a highly visible C&G acquisition may turn out to be a major disappointment from a financial standpoint. If the overall perceived risk profile for the C&G industry increases within the capital markets, this will typically result in higher interest rates on loans, stricter loan covenants and less capital allocation — and at the end, lower transactional volume. CSN John C. Flippen Jr. and John Sartory are managing directors of Petroleum Capital and Real Estate LLC (www.PetroCapRE.com). The firm provides buy-side acquisition, refinancing, capital restructuring and select sell-side advisory services in the convenience and gas station industry. PetroCapRE has assisted clients in completing transactions valued at more than $1.3 billion. Flippen can be reached at jflippen@PetroCapRE.com. Sartory can be reached at jsartory@PetroCapRE.com. Editor’s note: The opinions expressed in this column are the authors’ and do not necessarily reflect the views of Convenience Store News.

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Spotlighting major industry events

Listening Is Key in 7-Eleven’s Store-Brand Success Retailer shares lessons at Store Brands 2015 Innovation & Marketing Summit By Randy Hofbauer


t takes time to develop a successful store-brand program, but listening both internally and externally has helped 7-Eleven Inc. develop what is now its largest innovation product pipeline ever — and position itself to launch almost 200 store-brand SKUs in 2015. Sean Thompson, senior director of private brands for Dallas-based 7-Eleven, was a presenter during the Store Brands 2015 Innovation & Marketing Summit, held Feb. 25-27 in Rosemont, Ill. Store Brands is a sister publication of Convenience Store News. In terms of internal listening, Thompson explained that when his team began developing its innovation pipeline, he approached 7-Eleven in Japan, which is Sean Thompson renowned for its private brand products. He was seeking to understand what private brands mean in Japan, how 7-Eleven develops them and how they are different from the store brands at 7-Eleven outlets in the United States. He was astonished by how 7-Eleven in Japan constantly invents and rolls out new items, focusing on everything from product quality to the amount of space items take up on the shelf (as real estate in Japan is very expensive). One particularly unique item he cited is the rice ball. Not commonly found in stores or restaurants, the rice ball traditionally is made at home, typically wrapped in seaweed and containing fish, plum or another filling. It quickly became one of 7-Eleven Japan’s most successful items, selling about 2.4 million rice balls a day across the country. 7-Eleven Japan continues to refine the product. “What’s really crazy is that they will alter this several

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times a year,” Thompson said, noting the company modifies the packaging to make it easier to open, consumable without having to touch it directly, develops unique fillings, etc.

Store Brands Innovation & Marketing Summit Feb. 25-27, 2015 Rosemont, Ill.

LeaRnIngS FRoM outSIde

As for external listening, Thompson said he began calling U.S. and Canadian retailers across various channels to learn best practices for developing a great team structure, creating and executing a recipe for success, and more. He found many willing to share. His team also traveled to various cities across the country to speak with thousands of customers to learn what 7-Eleven does well — and not so well — in the store-brand sector. The team learned that customers have a huge level of trust for 7-Eleven and its private brands. They also learned that store-brand packaging rated well compared to competing brands. However, store-brand products needed to work harder at “breaking through,” Thompson explained. By listening to what shoppers said, his team discovered that 7-Eleven’s brands needed to be more relevant to women and Millennials. Responding in two categories of opportunity, 7-Eleven developed the 7-Select Go Smart! brand for better-for-you items and the 7-Select Go Yum! brand for premium, indulgent products. An interesting example of customer-centric product development is the latter brand’s sea salt caramels: Thompson’s team, understanding that 7-Eleven patrons tend to have a “saltier palate” than others, specified to its manufacturer partner that it wanted the chocolate-covered caramels to be topped with “just a little bit more salt” than usual. CSN

S. Abraham & Sons Gets Retailers Ready for Spring Convenience distributor’s 2015 trade show drew more than 200 vendors By Angela Hanson


he winter air was frigid on Feb. 26, the first day of the S. Abraham & Sons (SAS) 2015 Vendor Exhibit and Trade Show, but SAS President Alan Abraham had warm months on his mind. “Spring is right around the corner,” he said, noting that most of the distributor’s client base is located in the upper Midwest and was still grappling with winter weather. “We try to get them to see all the new things and the old standbys that sell in the summertime, and get their stores ready for the spring and summer business. It’s kind of like a chance to hope for a good summer.” More than 200 vendors exhibited their wares to convenience store chains and single-store owners at the show, held Feb. 26-27 at DeVos Place S. Abraham & Sons Convention Center in Vendor Exhibit & Grand Rapids, Mich. The Trade Show event’s Hollywood theme Feb. 26-27, 2015 invited attendees to “celGrand Rapids, Mich. ebrate the stars of convenience retailing” and cast a spotlight on new items at the 21st Century Convenience Store and Food Court showcase. On the show floor, numerous suppliers highlighted variations on existing favorites. The Kellogg Co. featured peanut butter-based Pop Tarts Gone Nutty, which c-stores are encouraged to place alongside coffee to promote as a bundled purchase, and single-serve Pringles with attached dip. For c-stores that want to offer upscale treats, Calico Cottage demonstrated a fudge retailing program that

lets retailers make their own fudge in-store using butter, water and Calico’s fudge mix. With two hours of work, a store can create enough fudge slabs in multiple flavors to fill an entire display. Among exhibiting foodservice vendors, AdvancePierre Foods aimed to stand out with a hybrid cheeseburger roller grill hot dog, while Green Chile Food Co. differentiated itself as a maker of premium “microbatch” burritos. SAS itself plans to make foodservice one of its main focuses in 2015, Alan Abraham told Convenience Store News. Several suppliers agreed that “spicy” is a growing flavor trend on the savory side, while salted caramel is increasingly popular in sweet products. Retailers in attendance, meanwhile, listed betterfor-you products and new electronic cigarette offerings among their most sought-out items at the SAS show. Grand Rapids-based S. Abraham & Sons serves convenience, grocery, drug and campus retail stores in Michigan, Indiana, Ohio, Pennsylvania, Kentucky, Illinois, Wisconsin, Iowa and Missouri. CSN

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Spotlighting major industry events

Under the Influence of Demographics NACS State of the Industry Summit highlights multiple changes in nation’s makeup By Don Longo & Debra Chanil


peakers at this year’s NACS State of the Industry Summit focused on several topics of keen interest to convenience store retailers. The national economy. Drivers of fuel demand. Health and wellness. Managing people. The payments landscape. Channel blurring and energy pricing. But the key message across most of the speaker programs was how the nation’s changing demographics will impact business. Aging baby boomers, digitallyconnected millennials and a larger multicultural population will have a profound effect on c-stores. Most agreed the industry is well-positioned — with a few tweaks — to benefit from these demographic changes. In NACS State of the particular, the rise of the multiIndustry Summit cultural population and millenniApril 14-16, 2015 als have created more consumers Chicago who are predisposed to shop at c-stores more so than the older baby boomer generation. In a speech entitled “Disruptive Demographics,” Dr. James H. Johnson, a professor at the University of North Carolina, Chapel Hill, listed six “disruptions” with major business implications: The South Rises Again. The South is the fastestgrowing region of the United States. Led by four states — Texas, Florida, Georgia and North Carolina — the southern region of the U.S. has accounted for half of the total population growth in the nation since 1970. The Browning of America. Ninety-two percent of the net population growth from 2000 to 2010 was non-white; 55.5 percent was Hispanic. Marrying Out Is In. Marrying someone of a different ethnic or racial group is a growing trend. Since 1980, inter-marriages have increased from 6.7 percent to 14.7 percent of all newly married couples. The biggest share is among Hispanic-White (41 per-

1. 2. 3.

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cent), followed by Asian-White (15 percent). The Silver Tsunami. “Every day for the next several years, 8,000 more baby boomers will turn 65,” said Johnson, adding that elder care will become a huge concern. “It’s a $40-billion-a-year problem in terms of lost productivity,” he noted. The End of Man? Women are about to surpass men as a numerical majority in the workplace. The inability of males to keep up with females in education is particularly troublesome. “We can’t have stable communities when there is such an imbalance,” said Johnson. Cooling Water from Grandma’s Well, and Grandpa’s Too. Not only are more millennials moving in with their parents for financial reasons, but there is also an increase in children living with their grandparents. Businesses should not put all their eggs in the millennial generation basket, Dr. Johnson concluded. Of course, millennials are not to be overlooked. Clint McKinney, group director, Category Advisory Services, for The Coca-Cola Co., advised retailers to “think like a millennial.” This involves providing easy, ready-to-go meals and snacks; catering to their impulsive shopping behavior; offering “on-trend” and “onbudget” products; and creating a digital relationship and experiences that millennials will want to share with others. CSN

4. 5. 6.

HOTPRODUCTS Special Advertising Section


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HOTPRODUCTS Special Advertising Section


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HOTPRODUCTS Special Advertising Section


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

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HOTPRODUCTS Special Advertising Section

Pizza Program

Payroll Check Cashing

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CLASSIFIED POS/Equipment/Supplies

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CLASSIFIED Credit Card Processing / Merchant Services

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CLASSIFIED General Merchandise

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Air Curtain


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

Leopard Rabbit Skin

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

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

Harry Stagnito President and CEO 224-632-8217 hstagnito@stagnitomail.com Kollin Stagnito Chief Operating Officer 224-632-8226 kollinstagnito@stagnitomail.com

ADINDEX AdvancePierre Foods

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Altria Group Distribution CompanyNuMark

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Anheuser- Busch

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Bake N Joy

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BLU ecigs Cash Depot


CB Distributors

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Coca Cola

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Commonwealth- Altadis Inc

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DelMonte Fresh Produce Inc

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Global Tobacco LLC

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www logicecig com www csnews com/awards-and-events/logictechwebinar

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McKee/Little Debbie

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McLane Co Inc

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Motion Technology Inc

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Orion Food Systems

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Papa Johns International



ProFoods/Champs Chicken

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R J Reynolds Tobacco Company

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Subway The Hershey Company

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Roz Gilman Ad Manager 224-632-8243 rgilman@stagnitomail.com


Thanasi/Dukes Meats

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Tillamook Country Smoker Inc

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www drinktrimino com

Tyson Convenience Food Service

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73 33,35

Universal Merchant

www nynab com

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White Castle

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TO WORK HARD FOR YOU. The King of Beers is an asset on C-Store shelves. In fact, Budweiser accounts sell over $1.5 billion annually, meaning two cases of Budweiser are sold from small-format stores every second. It’s a brand with so much stopping power that 54% of shoppers can recall seeing Budweiser on display.* Contact your local distributor to get your Budweiser Brewed The Hard Way signage today.

* Sources: iri total convenience and drug, last 52 weeks IRI MULO, last 52 weeks ©2015 Anheuser-Busch, Budweiser® Beer, St. Louis, MO

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