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VIEWPOINT By Don Longo, Editorial Director

Hall of Fame Lineup: Honoring Three Heavy-Hitters Kwik Trip’s Zietlow, Coke’s Ard and Speedway’s Kenney to be recognized at 28th annual CSNews Hall of Fame event

T

hree convenience store industry leaders — Don Zietlow, Jay Ard and Tony Kenney — will be honored Nov. 10 at a banquet and Hall of Fame induction ceremony in La Crosse, Wis., hometown of Kwik Trip Inc., the 450-unit Midwest convenience store chain that is celebrating its 50th anniversary this year. This invitation-only gala is one of the highlights of the c-store industry events calendar. I’m so pleased to finally be able to induct Zietlow, Kwik Trip’s president and CEO, into the Convenience Store News Hall of Fame. Don is so modest, so selfeffacing — he’s actually asked us to take his name off the Hall of Fame ballot in past years because he didn’t want to divert recognition of Kwik Trip’s enormous success away from the retailer’s 14,000 “co-workers.” This is a long-overdue honor for one of the nicest gentlemen to work in the convenience store industry. This year’s supplier honoree, who like Zietlow was voted into the Hall of Fame by a blue-chip panel of more than 50 industry leaders, is Ard, vice president of national sales, convenience retail for The Coca-Cola Co. Jay is the second executive from Coca-Cola to be inducted into the Hall of Fame, following in the footsteps of the irrepressible Joe Burke, who entered the supplier wing of the Hall of Fame in 2003. In addition to Zietlow and Ard, Speedway LLC President Tony Kenney was voted as winner of this

year’s Retailer Executive of the Year award. While the Hall of Fame honors people for their lifetime of service to the industry, the Retailer Executive of the Year award recognizes a current retailer executive for exceptional leadership, business acumen For comments, please contact and dedication to the indusDon Longo, Editorial Director, try over the past year. Through at (201) 855-7606 or acquisitions and organic dlongo@stagnitomail.com. growth, Speedway is now the second-largest company-owned and -operated c-store chain in the nation. The CSNews Hall of Fame, launched in 1987, has recognized convenience store industry pioneers and innovators from retailer and supplier firms of all sizes. “I love attending the CSNews Hall of Fame events because there is such a wonderful duality; celebrating with dear friends and recognizing the business acumen and accomplishments of these industry leaders,” said E-Z Mart CEO Sonja Yates Hubbard, herself a 2010 Hall of Fame inductee. “The venue allows a glimpse deeper inside the retailer’s home and business, and the platform gives our suppliers a deserved spotlight that they rarely receive for their contributions to our industry’s success.”

CSNews has been recognized with more editorial awards, including the prestigious Jesse H. Neal Award for business journalism, in the past six years than any other industry publication. 2013 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2012 2013 Jesse H. Neal National Business Journalism Award Finalist, Best Profile, August 2012 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007 2010 Trade Association Business Publications Intl. Tabbie Awards Honorable Mention, Front Cover Illustration, October 2009 2009 Trade Association Business Publications Intl. Tabbie Awards Gold, Front Cover Illustration, February 2008 Honorable Mention, Best Single Issue, October 2008

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

2015 American Society of Business Publication Editors, National Silver Azbee Award Best Profile (long form), February 2014 2015 American Society of Business Publication Editors, Midwest Regional Gold Azbee Award Best Special Supplement, November 2014 2015 American Society of Business Publication Editors, Midwest Regional Silver Azbee Award Best Profile (long form), February 2014 2013 American Society of Business Publication Editors, Midwest Regional Bronze Azbee Award Best Editorial/Commentary, July 2012 2010 American Society of Business Publication Editors, Northeast Regional Silver Azbee Award Feature Article Design, November 2010

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


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CONTENTS SEPTEMBER 2015

VOLUME 51/NUMBER 9

28 | COVER STORY Delivering Convenience — Literally In today’s on-demand society, grocery and foodservice delivery is on the rise, and quickly becoming a necessity to stay competitive. EXPERT’S VIEW

35 | The Cloud Transforms Delivery is just one opportunity cloud solutions opens up for convenience stores.

INDUSTRY ROUNDUP 14 | TravelCenters of America Builds Up C-store Footprint 16 | Delek US Delays Acquiring All of Alon USA 18 | Eye on Growth 18 | In Memoriam 19 | Retailer Tidbits 19 | Supplier Tidbits 20 | Competitive Watch 20 | Marketing Moves

DEPARTMENTS VIEWPOINT

STORE SPOTLIGHT

3 | Hall of Fame Lineup: Honoring Three Heavy-Hitters Kwik Trip’s Zietlow, Coke’s Ard and Speedway’s Kenney to be recognized at 28th annual CSNews Hall of Fame event.

108 | Wisening Up to Fresh Food’s Potential Fresh & Easy is reintroducing itself to customers as the “Smarter Market.”

10 | CSNews Online 22 | New Products

118 | Customer Mapping: A Road to Insights Prioritizing shoppers can turn information into something actionable. OUT & ABOUT

EXPERT’S VIEW

114 | The Case for Making Women Happy Everyone benefits from a female-friendly workplace.

122 | Fun Vibe, Serious Purpose Second-annual Vapor Expo International takes on the burning issues around vapor.

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.

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


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CONTENTS FEATURES 38 | Positioned for Future Growth Sales increases have slowed over this latest challenging year, but expanded fresh programs and improvements in technology bode well for the top wholesalers. TECHNOLOGY

100 | Excellence in All He Does Phil Schwartz takes the road less traveled to become Technology Executive of the Year. 104 | New & Improved In its 42nd year, the NACS Show looks to reinvent itself.

CATEGORY MANAGEMENT FOODSERVICE

46 | How to Navigate Packaging Options This component of c-store foodservice is perhaps the most overlooked and underappreciated of all. 58 | 40 Years in Foodservice Rutter’s Jerry Weiner retires, leaving a legacy of innovation.

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

BRAND MANAGEMENT Group Brand Director (330) 840-9557

Ron Lowy rlowy@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 (646) 217-1045 List Rental (800) 529-9020 Reprints and Licensing (877) 652-5295 Subscriber Services/Single-Copy Purchases

TOBACCO

66 | At a Minimum This year, 12 states introduced bills to raise the legal age to buy tobacco. COLD VAULT

72 | Liquid Gold Beverages prove to be sales boosters for all convenience store categories. 82 | An Exercise in Sports Drinks C-store retailers can be a good sport by following these top segment trends. CANDY & SNACKS

86 | A Not-So-Sticky Situation Gum is staging a comeback thanks to the coordinated efforts of retailers and suppliers.

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

96 | Houston, We Have a Generation Gap The picture developing of millennials is worrying for fuel marketers.

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

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 Director of Events Ken Romeo (203) 295-7058 kromeo@stagnitomail.com Director of Digital Strategy Matt McGuire (224) 632-8180 mmcguire@stagnitomail.com

CONVENIENCE STORE NEWS AFFILIATIONS Premier Trade Press Exhibitor

MOTOR FUELS

90 | Not a Fleeting Opportunity Kwik Trip sees continued potential to expand its CNG offer.

Shelly Patton spatton@stagnitomail.com The Information Refinery Brian Clotworthy Wright’s Media sales@wrightsmedia.com (978) 671-0449 Stagnito@e-circ.net

EDITORIAL ADVISORY BOARD Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Rick Crawford Green Valley Grocery

Kyle McKeen Alon Brands Inc. Richard Mione GPM Southeast

Joe Hamza Tedeschi Food Shops

Matt Paduano Nice N Easy Grocery Shoppes

Jack Lewis Village Pantry LLC

Jonathan Polonsky Plaid Pantries Inc.

Roy Strasburger Convenience Management Services Inc. Jon Urbanik CST Brands Inc.

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


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CSNEWS.COM TOP 5 Daily News Headlines

ONLINE EXCLUSIVE

The most viewed articles online. 1 | RaceWay Puts 30 C-stores Up for Sale RaceWay has placed 30 convenience stores on the sales block. The portfolio includes nine locations in Tennessee, five each in Alabama and Florida, four in South Carolina, three in Georgia, two in Texas, and one each in Arkansas and Mississippi. 2 | Speedway Converts More Than Half of Acquired Hess Sites Marathon Petroleum Corp. (MPC) has converted more than 650 of the convenience stores in the East Coast and Southeast it acquired last year from Hess Corp. to the Speedway brand. “We continue to make great strides, with more than half of the total retail sites converted to the Speedway brand since the acquisition last September,” MPC President and CEO Gary Heminger stated during its 2015 fiscal second-quarter earnings call. 3 | Gas Prices May Make Another Run to $2 a Gallon In early August, gas prices hit the lowest average price for that time of year since 2009, and AAA is predicting prices could fall to $2 a gallon in many parts of the country by the end of the year. Cheaper oil costs and the resolution of some refinery issues were the key drivers behind the declining prices at the pump in early August. 4 | Phillips 66 to Roll Out New Brand Images Phillips 66 decided in 2013 to implement Experience 66, an effort that focuses on operational excellence and site quality at the 7,100 branded independent sites throughout the country that operate under its three banners. The result has been a new Phillips 66 Shield image and 76 Wave image, which debuted as a test late in 2014 with a full-scale rollout to commence shortly. 5 | Couche-Tard Works to Get Sales Hopping at Pantry Stores Alimentation Couche-Tard Inc.’s $850-million acquisition of The Pantry Inc. has “impressive contribution potential to our company’s growth,” Brian Hannasch, president and CEO, said during the retailer’s 2015 fiscal fourth-quarter earnings call. The company expects to grow fuel volumes at the approximately 1,500 stores it acquired from The Pantry.

Fuel USA Has More Acquisitions in Sight There was no summer vacation for industry newcomer Fuel USA LLC. Fresh on the heels of making its first move into the convenience channel with the acquisition of Workman Oil Co., Fuel USA is already eyeing several other opportunities, according to President Jeffrey D. Dykstra. “Outside of our current Virginia/Kentucky footprint, we are looking at larger deals that will support a regional operation and in our existing markets, we are looking at deals of all sizes using the new Fuel USA operating platform,” he told CSNews Online. For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT The most viewed New Product online.

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POLL

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Click-and-collect programs by grocers

Click-and-collect programs by mass merchants

10 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM


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INDUSTRYROUNDUP FAST FACT

In 2016, Hawaii will become the first state to set the legal age to buy tobacco at 21. Other states where bills have been introduced are California, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Utah, Vermont and Washington. Source: National Association of Tobacco Outlets (page 66)

QUOTABLES

“Time is the true commodity and only Amazon really gets that. They are taking the whole shopping trip off the table and will drop it off on your porch. C-stores need to start testing things like delivery to see what works.” — Lee Peterson, WD Partners (page 28)

TravelCenters of America Builds Up C-store Footprint The retailer is spending $226 million to acquire 123 locations in 11 states

K

nown for its travel centers as the company’s name suggests, TravelCenters of America LLC (TA) is taking a huge leap into the convenience channel, entering into six transactions to acquire 123 standalone convenience stores. TA has acquired or agreed to acquire the 123 stores for approximately $230 million in six separate transactions, according to CEO Tom O’Brien. The news came during the Westlake, Ohio-based company’s second-quarter 2015 earnings call on Aug. 6. “In addition to our rebranding of these stores as Minit Marts, we expect to add prepared on-site food offerings at many of these stores and rebrand the gasoline at about half of them,” he explained. “Our capital improvement plans for these are not expected to be as extensive, on average, as our efforts at the 45 stores acquired during the first half of 2015.” Assuming all the acquisitions close, TA’s convenience store portfolio will grow from 34 locations principally in one state at the beginning of this year to more than 200

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

locations in 11 principally Midwest states, O’Brien said. “Our expansion into the standalone c-store space leverages our experience operating large, modern convenience stores, and I continue to believe we’re investing at attractive, stabilized multiples for acquired sites,” he stated. “Moreover, I believe we have also leveraged the growth in our convenience store portfolio to deepen our relationships with a number of existing and new fuel suppliers.” The company also continues to rebrand its travel center stores to the Minit Mart banner, with two stores completed so far and an additional 15 underway or in the planning stage. As for its portfolio of travel centers, TA has acquired or agreed to acquire three sites to date this year. New-build travel center activities in South Carolina, Texas and Tennessee are expected to deliver in the first quarter of 2016. A new location in Illinois is expected to deliver during the first half of 2016 and one in Arizona will follow by year-end 2016, the CEO detailed.


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INDUSTRYROUNDUP

Delek US Delays Acquiring All of Alon USA The company will wait for more favorable market conditions

A

lthough Delek US Holdings Inc. is “not in the business” of only owning 48 percent of any publicly traded company, it will remain patient in terms of valuation and synergies before it purchases the remaining 52 percent of Alon USA Energy Inc. it doesn’t already own, Delek US Chairman, President and CEO Uzi Yemin said. His comments came during Delek US’ 2015 fiscal second-quarter earnings call Aug. 4. Earlier this year, Brentwood, Tenn.-based Delek US struck an agreement with Alon Israel Oil to acquire approximately 48 percent of the outstanding shares of Alon USA. This transaction closed May 14. The approximate value of the transaction consideration was $564.5 million based upon a closing price of $36.59 per share of Delek US common stock on May 13. Delek US used cash on hand

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

and a credit facility to pay for the 48-percent stake. As part of the deal, five seats on the 11-member Alon USA board of directors previously held by Alon Israel representatives have been filled by representatives from Delek US. This includes Yemin, who was named chairman of the Alon USA board. “We are willing to move as quickly as needed [in terms of purchasing the remainder of Alon],” Yemin said. “But we are patient, long-term investors and will do what’s best for our shareholders.” When questioned about a timeline for purchasing the remainder of Alon USA, Yemin said he expects it would occur in less than four years, but could not speculate further. Regarding its current holdings in Alon USA — the largest 7-Eleven licensee in the United States — Yemin stressed that Delek US took “an exciting step forward,” is “very pleased with the acquisition” and “very happy with the company.” Dallas-based Alon USA operates more than 300 convenience stores and gas stations in New Mexico and Texas. In August, the company boosted its footprint in Albuquerque, N.M., by acquiring 14 c-stores from Roberts Oil Co. All Roberts Oil and Pump-N Save locations will be converted to ALON/7-Eleven stores. The chief exec added that Delek US will also look into other acquisition possibilities, with opportunities particularly opening up in logistics assets owned by master limited partnerships. Delek US’ large-format convenience stores continue to drive its retail division, according to Yemin. The company is so pleased with these stores that it plans to open six more large-format stores in the second half of 2015. Currently, Delek US has 64 large-format convenience stores among its 360 company-operated c-stores that operate under the MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart brands.


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INDUSTRYROUNDUP

eye on growth n Sunoco LP completed its acquisi-

tion of Susser Holdings Corp. from ETP Holdco Corp. and Heritage Holdings Inc., wholly owned subsidiaries of Energy Transfer Partners LP. The dropdown transaction was valued at approximately $1.93 billion.

n 7-Eleven Inc. signed a master

franchise agreement with Seven System Vietnam Co. Ltd. to develop and operate stores in Vietnam. This marks the company’s first expansion into the Pacific Rim since 2009.

n Alon Brands acquired 14

stores in Albuquerque, N.M., from Roberts Oil Co. All Roberts Oil and Pump-N Save locations will be converted to ALON/7-Eleven stores. The deal boosts Alon’s area footprint to 38 convenience stores.

n Alimentation Couche-Tard

Inc., through its subsidiary Circle K Stores Inc., signed an agreement with Comercializadora Círculo CCK to rebrand more than 700 Extra convenience stores in Mexico to the Circle K brand by August 2017.

n Quality Oil Co. purchased

the assets of GOGAS Corp. The deal includes 20 high-volume retail motor fuel outlets in southeastern North Carolina. Quality Oil also acquired the GOGAS brand. n Kum & Go LC bought

three Gasby’s convenience stores in the Iowa CityCoralville, Iowa, area. Two stores were rebranded and began operations immediately as Kum & Go stores. The third will be closed, demolished and rebuilt.

in memoriam I

an Johnstone, general manager of Cenex Zip Trip, passed away Aug. 19. He was 54. Johnstone served on the Convenience Store News Editorial Advisory Board. His passing came the day before the local Salvation Army in Spokane, Wash., held its backto-school backpack distribution, an event that counted Johnstone as one its biggest supporters, according to

18 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM

n Susser Petroleum Property Co. LLC,

which has since become part of Sunoco LP, was the winning bidder for Aziz Convenience Stores LLC. The 28-store deal carried a $41.6-million price tag plus inventory and merchandise. n 7-Eleven Inc. completed its previ-

ously announced acquisition of approximately 180 Tedeschi Food Shops locations on Aug. 24. This adds to its existing portfolio of 150 7-Eleven convenience stores in the greater Boston and southern New Hampshire region. Tedeschi store employees and most non-store personnel received job offers from 7-Eleven.

The Spokesman-Review. This was the sixth year Johnstone, employees and customers of Cenex Zip Trip, as well as its vendors and suppliers, raised money for the backpack distribution, according to the news report. “I would say this was probably his No. 1 charity,” said Rick Bates, CEO and acting general manager of Cenex Zip Trip. “Wednesday [Aug. 19] was a really, really long day for us.” He is survived by his wife, Angela, and children, Chance and Olivia.


retailer tidbits n CST Brands Inc. will

introduce 300 new grocery offerings to 50 stores in Texas this quarter. It also plans to test new foodservice offerings at five new-to-industry Corner Stores in the San Antonio area.

each in Colorado, Illinois, Texas and West Virginia; two each in Florida and Missouri; and one each in Nevada, New York and South Carolina. n Speedway LLC joined the U.S.

n Tesoro Corp. has transitioned from company-owned

operations to a multi-site operator model. The move combines its wholesale and retail operations into one segment, now referred to as marketing. n Aloha Petroleum Ltd. is piloting the

Choose Healthy Now program at its Aloha Island Mart Kahala and Waianae locations, with plans to eventually expand to stores statewide. The pilot stores currently offer a green (“Go!”) section of 17 healthy items. n 7-Eleven Inc. is selling 25 convenience stores in 10

states. Six of the sites are located in Virginia; three

Army’s Partnership for Youth Success (PaYS) job program, which launched in 2000 to help veterans transition from military service to a civilian career. Approximately 500 veterans are already employed at Speedway. n Circle K Stores Inc. was slated to

sell 26 convenience store properties at an auction in August. The sites are located in Illinois, Indiana, Kentucky and Missouri. Circle K retained Williams & Williams to conduct the auction.

supplier tidbits n The Kraft Heinz Co. cut 2,500 jobs

across its facilities in the United States and Canada, including 700 workers at the Kraft corporate headquarters in Northfield, Ill. The move came one month after the merger of Kraft Foods Group and H.J. Heinz Co. n Dr Pepper Snapple Group is investing $20 million for

an 11.7-percent stake in BA Sports Nutrition, owner of the BODYARMOR brand. n PepsiCo Inc. launched aspartame-free Diet Pepsi in

August. It also kicked off an integrated marketing effort that included sampling, advertising, coupons, retail promotions and social media activations.

n Rita’s Italian Ice entered the

convenience and gas channel for the first time. The Italian ice concept’s first c-store unit opened in June at a Chevron ExtraMile store in Newbury Park, Calif. Sixty more c-store units are planned to open by 2025. n Hunt Brothers Pizza awarded

six winners professional-grade Exmark mowers in its inaugural “Mow Like a Pro” sweepstakes. The grand-prize winner received a 2015 Exmark Lazer Z X-Series Riding Mower, valued at $12,000.

n Reynolds American Inc. redesigned its corporate

website, incorporating the company’s new corporate branding following its acquisition of Lorillard Inc. The change also reflects the addition of the Newport brand to the product portfolio of subsidiary R.J. Reynolds Tobacco Co.

n Kellogg Co. is celebrating 40 years of

Famous Amos cookies with a crosschannel promotion. Through December, consumers have the chance to win a Famous Amos collector cookie jar.

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


INDUSTRYROUNDUP

competitive watch n Amazon.com Inc. unveiled

plans to pilot a drive-thru retail store in Sunnyvale, Calif. Customers will be able to place their order online and pick up their items at the designated location during a 15-minute to twohour timeframe. n In August, Dunkin’ Donuts locations launched a test

of Merchant Customer Exchange’s CurrentC mobile payment solution. A full-scale rollout is scheduled for the fall. n The first 365 by Whole Foods

Market store will open in the Silver Lake neighborhood of Los Angeles. The retailer also announced leases for 365 by Whole Foods Market stores in Bellevue, Wash.; Houston; Portland, Ore.; and Santa Monica, Calif.

n Target Corp. is eliminating the CityTarget and

TargetExpress banners to avoid customer confusion. All these stores will be rebranded Target beginning this fall. n McDonald’s Corp. debuted a mobile app in mid-

August, beginning in San Diego. The McDonald’s app features a loyalty program centered on the chain’s McCafe beverage offerings. Users can earn a free beverage after five purchases of McCafe drinks like coffees and shakes. The app will roll out nationally in October. n Starbucks Corp. began selling

wine and beer, along with small plates of food, at two dozen more locations as part of the company’s “Evenings” program. Many of these stores are located in the Denver, Miami, Orlando, Fla., and northern California markets.

marketing moves n Speedee Mart Inc. launched a mobile

rewards program through the Epoxy app as of Aug. 1. The Las Vegas-area retailer plans to provide special offers on products such as milk and services like car washes. n Chevron U.S.A. Inc. kicked off its second-annual

Chevron Game Day Chef Challenge. Recipe submissions must include one or more ingredients purchased at a Chevron or Texaco station.

n Wawa Inc. is teaming up

with the Philadelphia Eagles as a “proud partner” and the “Official Hoagie of the Philadelphia Eagles.” As part of the multi-year partnership, the two sides will pair on a number of promotions throughout the year. n Sheetz Inc. celebrated National Root Beer

Float Day by offering loyalty card holders its new Barq’s Root Beer Float for just $1.99 at all locations. The treat normally costs $3.29.

n Marathon Petroleum Corp. joined the National Mobile

Network by iSIGN Media Solutions Inc. The company’s stores will use the iSIGN Smart Antenna to deliver targeted messaging, offers and loyalty perks to consumers. n Pilot Flying J, Kangaroo Express and RaceTrac

offered promos to mark National Hot Dog Day on July 23. Deals ranged from discounted items to a month-long celebration.

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

n CITGO Petroleum Corp.

marketer Francois Oil Co. marked its 75th anniversary with a celebration of food and fun on Aug. 1. Attendees were given the chance to win a $75 CITGO gift card when downloading the Club CITGO mobile app.


NEWPRODUCTS Cheez-It Crunch’d

Beers of Mexico Fall Variety Pack

Cheez-It Crunch’d is the firstever crunchy puff from The Kellogg Co.’s Cheez-It brand. The new line extension comes in two bold flavors, Hot & Spicy and Cheddar Cheese, both of which are made with 100-percent real cheese, according to the company. Cheez-It Crunch’d joins the salty snacks category among the brand’s other products: Cheez-It Grooves, Cheez-It Baked Snack Mixes and Cheez-It Duoz.

The Beers of Mexico variety pack from Heineken USA is back and this time, it features the limitededition Dos Equis Roja. The brew — a distinctive red lager crafted with Mexican malted barley and hops — joins Heineken’s other Mexican beers Dos Equis Lager, Tecate and Sol in the new fall Fiesta Pack. The latest version of Beers of Mexico is available in both 12- and 24-pack options through Dec. 15.

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

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

Hershey’s & PayDay Snack Bites The Hershey Co. is launching Snack Bites in two varieties: Hershey’s Milk Chocolate with Almonds and PayDay. Both varieties feature a concentration of crunchy nuts in every bite, the company stated. Hershey’s Milk Chocolate with Almonds Snack Bites and PayDay Snack Bites will be available in a portioncontrolled, 2.5-ounce tube pack for a suggested retail price of $1.99. These bite-size treats are perfect for on-the-go snacking, the maker noted. The Hershey Co. Hershey, Pa. (800) 468-1714 www.thehersheycompany.com

DaVinci Gourmet Invigorators DaVinci Gourmet Invigorators, made with green coffee extract, is a concentrate that gives fruit-flavored beverages a healthy boost for afternoon pickme-ups, according to the maker. Available in a pump-or-pour preparation, the concentrate contains only 70 calories per 16-ounce serving. Three flavors are available: Kiwi Lime, Orange Melon and Raspberry Pomegranate. DaVinci Gourmet Ltd. Seattle (800) 640-6779 DaVinciGourmet@Kerry.com www.davincigourmet.com

Schulstad Mini Pastry Signature Selection Lantmännen Unibake, provider of European bakery products to the foodservice industry, introduced the Schulstad Mini Signature Selection of artisanal MiniMania pastries. The rich, flaky, textured Royal Danish Pastries are pre-proofed and can go from freezer to oven in just 15 minutes. Available in a 120-count case, the pastries come in five varieties: Cherry Chocolate Coronet, Toasted Coconut Swirl, Salted Caramel Braid, Strawberry Shortcake Crown and Lemon Cheesecake Lattice. Lantmännen Unibake Lisle, Ill. (630) 963-4781 schulstadusa.com

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


Š2015 Goya Foods, Inc.

* Nielsen Strategic Planner, Total U.S. (unit and dollar sales), 52 weeks ending 3/14/15


NEWPRODUCTS BPI Sports Nutrition Supplements

German Pretzel Breads

Convenience Valet and BPI Sports have teamed up to introduce a new line of sports nutrition supplements for fitness enthusiasts and those looking for products that promote healthy living. The new BPI Sports line extensions include: 24/7 Protein w/ Energy Shot Berry Punch, a 3-ounce shot featuring 15 grams of protein per bottle; 24/7 Carnitine Burn Shot Orange Twist, a 2-ounce shot with 2 grams of L-carnitine to support the conversion of food to energy; and Relax PM Shot Berry Punch, a 2-ounce shot with 3 milligrams of melatonin to promote relaxation and REM sleep. The new products broaden Convenience Valet’s BPI supplement lineup and portfolio of wellness brands.

Euro-Bake brings pretzel breads to market just in time for Oktoberfest. Imported directly from Germany and crafted using the traditional lye process, these expertly crafted breads come in various forms including pretzel sticks, rolls, buns and croissants. Additionally, EuroBake has added a softer, less-dense burger bun and a Kaiser roll to its pretzel bread line. Fully baked for minimal preparation, simply thaw and serve, or warm in the oven.

Convenience Valet Melrose Park, Ill. (800) 351-2000 www.cvalet.com

TOP Cigarette Paper Collectible Tins Republic Tobacco introduced new limited-edition collectible tins in an art deco style for its TOP Cigarette Paper. Measuring 7 inches wide by 7-1/4 inches high, the tin has a footprint that easily fits on the counter or a shelf, the company noted. Tins hold 100 booklets of cigarette paper. Republic Tobacco Glenview, Ill. (847) 832-9700 www.ocb.net

Euro-Bake Lisle, Ill. (630) 963-4781 www.eurobakeusa.com

Blendtec EZ 600 The Blendtec EZ 600 features nine pre-programmed blend cycles and pulse options, 3.0 peak horsepower and a 1600-watt direct-drive motor. The blender also features Blendtec’s patented FourSide jar and comes in five colors. There is a one-year warranty available with purchase, and the EZ 600 is eligible for the ServicePlus program. With the EZ 600, operators can conveniently serve up to 60 patrons a day with consistency, according to the company. Blendtec Orem, Utah (800) 253-6383 www.blendtec.com

OmniSensr Sensing Technology OmniSensr, a new sensing platform from VideoMining Corp., is optimized specifically for anonymous shopper tracking and was developed with retail environments in mind. The integrated hardware package combines video, Wi-Fi and beacon technologies to generate deep behavior analytics from storewide tracking to detailed shelf-level interactions with demographic segmentation. All processing is carried out on-board in real time, eliminating the need for large, elaborate hardware in stores. The resulting cost-effective solution can be deployed in a scalable way in stores of any format, according to the company. Employing an Internet-of-Things (IoT) architecture, the sensor’s outputs can be seamlessly integrated in a cloud environment with transaction data and other data sources, including store map, product layout and promotions. Key advantages include: the ability to provide repeat visitor analytics; more robust storewide tracking (compared to any single-technology based approach); trip-type analysis; and brand-level behavior analysis. The technology also enables mobile location-based marketing solutions. VideoMining Corp. State College, Pa. (800) 898-9950 info@VideoMining.com; www.videomining.com 24 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM


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Cover Story

Delivering Convenience — Literally In today’s on-demand socIety, grocery and foodservIce delIvery Is on the rIse, and quIckly becomIng a necessIty to stay competItIve

By Tammy Mastroberte

F

or years, convenience stores have lived up to their title, providing accessibility, ease and speed to time-starved customers. Pay-at-thepump made buying gas faster and easier. Point-of-sale systems decreased wait time on the checkout line. In today’s on-demand world, however, the definition of “convenience” is changing and, without question, convenience stores need to evolve along with it. “Consumers’ habits and preferences are changing. With Netflix, people can watch movies on demand rather than go to the movie theater, and even bingewatch a full season of a television show on demand,” said Prahar Shah, business development manager at DoorDash, an on-demand food delivery company. “Consumers can get so many things with a touch of their fingertips. It’s really an emerging trend.” Supermarkets have been offering grocery delivery direct to customers’ doors for years, and according to a recent CSNews Online poll, 27 percent of respondents feel home delivery by grocers is the biggest threat to traditional convenience stores. Foodservice is an evolving delivery trend as well, with new on-demand delivery companies popping up every day. AppCrawlr, an app discovery engine, recently showed 270 food delivery apps available that cater to the $67-billion takeout market. Even Uber, known for its on-demand car service, launched UberEATS this year in Chicago, New York,

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

Toronto and Barcelona. Originally launched as uberFRESH in Los Angeles last summer, customers use the Uber app to view menus and place an order, and a driver delivers the order within minutes, according to a spokesperson. The company also offers courier service UberRUSH in New York, which is still in a testing phase. “The proliferation of apps and the on-demand economy make it easier than ever for customers to get what they want at the push of a button, and businesses are working harder than ever to meet the needs of their customers,” explained Katie Bynes, spokesperson for Caviar, a restaurant delivery service based in San Francisco. Convenience stores are just beginning to dive into delivery. 7-Eleven Inc. recently announced a partnership with Postmates, an on-demand delivery service based in San Francisco, to deliver hot foods, snacks, beverages and other store items from select locations in San Francisco and Oakland, Calif., as well as 36 locations in Austin, Texas. On Sept. 1, 7-Eleven also launched a partnership with DoorDash, another on-demand delivery service, to provide delivery from participating 7-Eleven stores in five major metropolitan markets across the United States. Customers in New York, Los Angeles and Chicago can now order products from their local 7-Eleven stores for delivery, with service following in Washington, D.C., and Boston in the coming months. Additionally, Casey’s General Stores Inc. is adding


Starting Sept. 1, 7-Eleven became DoorDash’s first partnership outside of restaurant delivery.

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


Cover Story

online ordering to 300 stores per month, with the goal of having all 1,878 of its c-stores offering the option by the end of 2015. Pizza, subs and related products are the primary items customers can order online. Several Casey’s stores also allow customers to arrange pizza home delivery online, which the company reported in June 2015 is performing extremely well. Casey’s plans to convert an additional 100 stores to offer pizza delivery in its 2016 fiscal year. “We feel confident having online ordering in all stores,” said Bill Walljasper, Casey’s chief financial officer. “We are reaching a customer we haven’t reached before. Like pay-at-the-pump years ago, there are customers who are demanding this service.” thE AmAzOn EffEct

Amazon.com Inc. is continually changing the way consumers think of online shopping and delivery, and has become a major competitor to all retailers, including convenience stores, according to Lee Peterson, executive vice president of brand, strategy and design at WD Partners, a retail consulting company based in Dublin, Ohio. “Everyone is waking up to the fact that Amazon is everybody’s competitor,” Peterson explained. “Amazon is all about convenience.”

a Prime member, and we offer one-hour delivery for $7.99 or two-hour delivery for free,” said Kelly Cheeseman, spokesperson for Amazon, explaining customers can place their orders through a mobile app. “They can search through tens of thousands of items — from daily essentials like bottled water and paper towels; to electronics including a big-screen television, Bose headsets; and a select amount of food items in New York and in San francisco and Austin, Indianapolis, including some 7-Eleven customers can place frozen and chilled items.” a delivery order using the Postmates app. Amazon can accomplish this through its more than 50 fulfillment centers across the United States, along with dedicated teams working on Prime Now orders. As a customer purchases an item and places an order, a map pops up in the app so they can watch their courier as he or she makes their way to them, Cheeseman said, noting the company continues to hear from customers about how they love the speed of delivery. “Time is the true commodity and only Amazon really gets that,” said Peterson. “They are taking the whole shopping trip off the table and will drop it off on your porch. C-stores need to start testing things like delivery to see what works. It’s not even just about making money. They need to try it to find out as much information as possible.” OutSOurcing DElivEry

Amazon Prime now offers one-hour delivery of tens of thousands of items, from household essentials to electronics.

The company launched Amazon Prime, a yearly subscription that offers consumers free two-day delivery on a wide variety of products. Then in December 2014, Amazon Prime Now launched in Manhattan. Today, the service is available in Miami, Baltimore, Atlanta, Dallas, Austin, Indianapolis, Chicago, Seattle and London. “Amazon Prime Now is one of the benefits of being

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

When it comes to delivery, most convenience stores don’t have the logistics in place to offer the service themselves, and many may not be interested in taking on such a large venture. That is where delivery services like Postmates, DoorDash and Caviar come into play. “7-Eleven doesn’t have delivery trucks and coolers ready to do delivery, so it’s about finding partners that are willing to help,” said Peterson. 7-Eleven chose Postmates as one of its partners. To place an order, customers download and use the Postmates app for iOS or Android, as well as using the Postmates website. An order is accepted by one of the delivery workers in the area, and the food is prepared,


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Cover Story

through a new partnership with DoorDash, 7-Eleven now offers on-demand delivery in new york city, los Angeles and chicago.

picked up at a 7-Eleven location and delivered to the consumer within an hour. “In San Francisco and Austin, we have a full catalog in the app,” Holger Luedorf, senior vice president of business development at Postmates, said about the 7-Eleven partnership. “Customers are able to browse 7-Eleven products. We work directly with 7-Eleven to make sure they are the most up-to-date as possible. When a Postmate goes into the store, they grab the desired items, pay with a prepaid debit card and are on their way.” Delivery is 24/7, and the company charges a delivery and service fee. 7-Eleven is the first convenience store chain Postmates has partnered with, but the company will continue to evaluate other retail partnerships across multiple verticals, and will also be expanding the 7-Eleven service to more cities in the coming months, according to Leudorf. “7-Eleven’s founder, Joe C. Thompson Jr., used to say 7-Eleven’s mission was to ‘give customers what they want, when and where they want it,’” said Raja Doddala, 7-Eleven’s vice president of innovation and omnichannel strategy. “Through the modern-day technology that Postmates provides, we can fulfill that promise in a way we haven’t done before.” Postmates also currently works with Starbucks, Chipotle and Apple, and surpassed 2.5 million deliveries since launching in 2012. Demand continues to grow, and the company continues to add new cities to its model — currently in 28 major metropolitan markets and nearly 13,000 Postmates delivering on the platform. “With Starbucks, we are delivering coffee through

32 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM

the Postmates app. The integration with Starbucks won’t go live inside their app until early fall,” Leudorf explained. “The average delivery time for a cup of coffee is seven minutes. Because there are so many Starbucks locations, we’re able to deliver quickly.” 7-Eleven’s partnership with DoorDash, meanwhile, will include in-store marketing, local promotions and the availability of “Convenience Packs,” groups of products that make purchasing common items from 7-Eleven stores more convenient. For a limited time, the delivery service fee is $2.99. “By working with DoorDash, we can bring ondemand delivery to more people and more places,” said Doddala. “This partnership between the world’s largest convenience store chain and a leading ondemand delivery startup can redefine convenience. DoorDash’s technology, data analytics and commitment to the customer experience impresses us and makes them a great match for 7-Eleven’s omnichannel initiatives.”

casey’s general Stores is adding online ordering to 300 stores per month and plans to offer pizza delivery at 100 additional locations.

To get started with 7-Eleven delivery, users download the DoorDash app for iOS or Android, or visit www.doordash.com. “We’re proud to launch our first expansion beyond restaurants with 7-Eleven,” said Tony Xu, CEO and co-founder of the Silicon Valley-based DoorDash. “7-Eleven has shown a true commitment to learning the ins and outs of delivery and even went dashing with our team to see DoorDash in action. We’ve worked closely throughout the testing process to ensure that their products — from convenience goods to fresh and prepared foods — are well suited for delivery.” DoorDash’s restaurant delivery partners include


New merchandising solutions

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$1.2 $1.0 $0.8

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2011 2012

2013

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$0.6 $0.4 $0.2 $0.0 $ Vol ($B)

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owth r g s ’ k n i L Jack +

% 7 . 7 3 UPfrom 2011-2014

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Cover Story

grocers have been offering delivery for years. Peapod is a food-delivery service owned by the parent company of Stop & Shop.

Yum! Brands, parent organization of Taco Bell, which recently announced a partnership with DoorDash to offer delivery at more than 200 Taco Bell restaurants in more than 90 cities throughout Los Angeles, Orange County, the San Francisco Bay area and Dallas regions. “Delivery was the No. 1 request from our consumers,” said Lawrence Kim, director of digital commerce and on-demand at Taco Bell. “Taco Bell has always

“time is the true commodity and only amazon really gets that. they are taking the whole shopping trip off the table and will drop it off on your porch. c-stores need to start testing things like delivery to see what works.”

at where their “dashers,” or delivery employees, are where an order comes in and how long it will take the restaurant to prepare the meal in order to determine who gets the assignment so the food is delivered within the 45-minute timeframe. “For example, if it’s an order from California Pizza Kitchen, it could take 15 to 20 minutes to prepare vs. Taco Bell, which is only five minutes. The closest dasher to Taco Bell will get the assignment, whereas for California Pizza Kitchen, someone who is 20 minutes away would be better to take that order,” Shah explained. The consumer pays for their order via the app, and there is a delivery fee associated with every order. On the restaurant or merchant side, DoorDash takes a commission from each order. The biggest benefit to the restaurant or merchant is the incremental traffic they may not have had without the delivery service, he said. “Delivery is a huge new revenue stream that is impacting the bottom line, and it’s an extension of the restaurant’s brand,” Shah added. “Right now, 80 percent of restaurants don’t deliver.”

uber, known for its on-demand car service, launched restaurant delivery this year.

— Lee Peterson, WD Partners

been about value and convenience. As those definitions evolve with our consumers, it’s important our business evolves with it.” The company is excited about the initial results of delivery; the response from consumers has been “overwhelmingly positive,” Kim said. The chain is encouraging fans to use the hashtag #TacoBellDelivery to let them know where delivery should expand next. DoorDash — currently available in 16 major metropolitan areas including Brooklyn, N.Y., Boston, Chicago, Los Angeles, San Diego and Minneapolis, with plans to grow to 25 areas by the end of 2015 — uses a proprietary algorithm and technology that looks

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

And while food delivery seems to be the latest delivery trend, it’s only a matter of time before consumers are looking for the same delivery of everyday items — something Amazon is already preparing for with Prime Now. At DoorDash, they started with food because it is the most difficult thing to deliver in terms of timing and freshness. But the possibilities are endless. “We created our platform to be broadly structured and very agnostic so we can deliver tacos or toothbrushes,” said Shah. “We have focused on food the past two years, but long term we have a platform that can deliver anything on demand.”


The Cloud Transforms

Delivery is just one opportunity clouD solutions opens up for convenience stores

T

he convenience store supply chain is constantly teetering between delivering convenience and increasing profitability. In general, at c-store chains, there are between 300 and 500 SKUs per store. Most c-stores don’t have a backroom, and their replenishment cycles are more complex and faster to reduce outof-stocks. For c-stores, the elimination of slow-moving items is essential. The focus is on bestselling items that have higher margins, making the difference between a profitable and non-profitable c-store chain. There is very limited margin for error. Category management is essential. In addition, the success of By Diego Pantoja-Navajas, a c-store chain is largely LogFire based on balancing leader brands and owned-brands, but always with the focus of higher margins. Before the Internet, c-store owners were relegated to pen and paper to manage inventory, painstakingly documenting replenishment needs shelf by shelf. And there was no visibility over the entire network. Therefore, the strategy of replenishment was foundationally based on assumption, leading to an overflow of some products and an underflow of others, which ultimately led to a decrease in profit margins. ON-PREMISE SUPPLY CHAIN

Allowing c-stores to move from pen and paper, the introduction of on-premise solutions offered a more efficient

supply chain process. However, there were challenges. On-premise solutions require a greater upfront investment and regular maintenance for additional costs, making them cost prohibitive for some of the smaller convenience store brands. On-premise solutions take significant time to implement and maintain. Additionally, on-premise solutions can occupy major real estate, which is a huge issue for convenience stores that are working with smaller floor plans. THE CLOUD

The infiltration of true cloud solutions transformed the supply chain, and the c-store industry is no exception. With the introduction of the cloud, convenience stores are able to gain the advantage of larger brands. With no upfront costs, faster implementation times and the speed and ease of use of the Internet, cloud-based solutions change convenience store fulfillment in a big way: Visibility: Cloud solutions have greatly widened visibility over the c-store’s supply chain. Supply chain directors can now build an accurate warehouse replenishment strategy that is separate from a store replenishment plan, as well as a strategy that unifies the two. From warehouse to store, owners can see precise product levels. Furthermore, there is visibility from store to store, allowing for a more dynamic replenishment network. Replenishment based on actual consumption: Replenishing based on assumption is a losing game. Constant communication between warehouse and store is critical as store owners are better equipped to plan for the consumption habits of their neighborhood. Owners can now consistently send consumption signals to the warehouse, allowing the warehouse to prepare replenishment stock accordingly.

WWW.CSNEWS.COM | SEPTEMBER 2015 | Convenience Store News 35


Cover Story

Boundless business growth: With cloud solutions, c-stores are able to automate supply chain processes, opening up new avenues for cost cutting and increased revenue. Additionally, because true cloud solutions are rooted in the efficiency and speed of the Internet, adding new stores to the network is easier. LOOKING FORWARD

The introduction of the cloud to c-store supply chains provides a fertile foundation for c-stores to grow their footprint. To fully benefit from this cloud supply chain era, convenience stores need to consider making some strategic changes: Minimize one-off sales: These are short-lived product bursts that disrupt the flow of the convenience store supply chain. The return on investment of oneoff sales generally does not counterbalance the disruption enough to make them worth it. Utilize store brands strategically: Because c-stores have a difficult time competing on price due to larger wholesale costs, it will become increasingly imperative

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

to focus on moving their own brands as much as they move leader brands. Placing store products next to leader brands can help create awareness and demand for the store brand. Omni-channel supply chain: The smaller real estate of c-stores allows them to be nestled in the heart of neighborhoods. Because of this, convenience stores are in a prime position to offer delivery. Additionally, cloud supply chain solutions offer network visibility, making a customer delivery offering possible. With the ubiquity of same-day delivery and the entrance of grocery delivery services, it will be increasingly imperative for convenience stores to offer delivery services to compete. Cloud supply chain solutions have opened up a plethora of opportunities for convenience stores. If implemented strategically, the sky’s the limit (pun intended). CSN Diego Pantoja-Navajas is CEO of LogFire, a multi-tenant cloud-based supply chain solution and services provider for retailers, manufacturers and 3PLs worldwide. 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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TOP WHOLESALERS

Positioned for

Future Growth

Sales increases have slowed over this latest challenging year, but expanded fresh programs and improvements in technology bode well for the top wholesalers By Debra Chanil

Top Wholesalers Summary TOTAL SALES (Percent change vs. year ago) Top 30 wholesalers Top 10 wholesalers AVERAGE SALES PER Company Retail location served Warehouse Full-time employee

$66.9 billion (+1.7%) $58.3 billion (+1.9%)

$2.230 billion $361,190 $474 million $2.194 million

PERCENT OF SALES Chains Single stores

50% 50%

Source: Convenience Store News Market Research, 2015

Sales per Retail Location Served McLane Co. Inc. Liberty USA Team Sledd Imperial/Harrison Super Regional Charles C. Parks Co. Cooper-Booth Wholesale Co. Henry’s Foods Inc. Southco Distributing Co. S. Abraham & Sons Inc. Topicz

$687,097 $500,000 $482,727 $440,000 $406,250 $376,871 $372,000 $332,500 $322,703 $312,150

Source: Convenience Store News Market Research, 2015

W

hile sales for the Convenience Store News Top Wholesalers reached a new high of $66.9 billion, the past-year increase of only 1.7 percent reflects recent challenges faced by the industry. Compared to growth increases of 5.6 percent in 2014 and 6.7 percent in 2013, this relatively modest rise can be attributed to the continued decline of cigarettes — by far, the leading category among convenience wholesalers — as well as ramped-up retailer acquisition activity resulting in consolidation by retailers in the number of wholesalers used. The top 10 wholesalers posted $58.3 billion in sales, an increase of 1.9 percent. Companies in the top 10 remain the same as last year, though some rankings have changed. Despite a slight decline in sales, McLane Co. Inc. continues to sit atop the list, with total sales of $31.7 billion, down 0.6 percent from last year. Core-Mark Holding Co. Inc. remains in second place with sales of $10.3 billion, a 5.1-percent jump. Core-Mark also recorded the only major acquisition in the past year, as it completed a deal for Karry Brothers, a Canadian company, in May 2015. Eby-Brown Co. (with a solid 6-percent increase) and H.T. Hackney Co. (no change) maintained their third- and fourth-place rankings, respectively. With an 8.3-percent increase, Farner-Bocken Co. moved into fifth place on the list, with sales reaching $1.3 billion. This jump pushed Harold Levinson Associates Inc., AMCON Distributing Co. and S. Abraham & Sons Inc. down one place in ranking each. Imperial/Harrison Super Regional and Consumer (continued on p. 42)

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


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TOP WHOLESALERS

EstImAtEd sAlEs

RANKING

2015

Company/Headquarters

Chief Executive

REtAIl sERVICE

latest FY1 (millions)

Previous FY (millions)

% change

$31,669

$31,852

-0.6%

10,300 5,300

9,800 5,000

5.1 6.0

3

McLane Co. Inc., Temple, Texas 2 Core-Mark Holding Co. Inc., South San Francisco, Calif. Eby-Brown Co., Naperville, Ill.

Thomas B. Perkins Thomas & Richard Wake

4

H.T. Hackney Co., Knoxville, Tenn.

William Sansom

4,000

4,000

0.0

5

Farner-Bocken Co., Carroll, Iowa

Dean Onken

1,300

1,200

8.3

6

Harold Levinson Associates Inc., Farmingdale, N.Y. AMCON Distributing Co., Omaha, Neb.

Edward Berro

1,298

1,287

0.9

Christopher H. Atayan

1,237

1,200

3.1

S. Abraham & Sons Inc., Grand Rapids, Mich. 3 Imperial/Harrison Super Regional, Elmwood, La. 4 Consumer Product Dist. Inc., Chicopee, Mass. 5 GSC Enterprises Inc., Sulphur Springs, Texas 6 Garber Bros. Inc., Stoughton, Mass. Chambers & Owen Inc., Janesville, Wis. Liberty USA, West Mifflin, Pa. Cooper-Booth Wholesale Co., Mountville, Pa. Southco Distributing Co., Goldsboro, N.C. Team Sledd, Wheeling, W.V. Atlantic Dominion Distributors, Virginia Beach, Va. Tripifoods Inc., Buffalo, N.Y. Pine State Trading Co., Augusta, Maine Stephenson Wholesale Co. Inc., Durant, Okla. 7 Harbor Wholesale Foods, Lacey, Wash. Topicz, Cincinnati 8

Alan Abraham

1,103

1,108

John D. Georges

1,100

Jeffrey Polep

Resnick Distributors, New Brunswick, N.J. 9 Richmond-Master Distributors Inc., South Bend, Ind. Thomas & Howard Co. Inc., Columbia, S.C. Charles C. Parks Co., Gallatin, Tenn. Allen Brothers Wholesale Dist. Inc., Philadelphia Henry’s Foods Inc., Alexandria, Minn. Mountain Service Distributors, South Fallsburg, N.Y.

1 2

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Grady Rosier

trading Area

locations deliveries served per Week

50 states

46,091

64,348

50 states IL, IN, OH, MI, KY, TN, MO, IA, MN, SD, WV, PA, GA, AL, SD, NC, SC, MS AL, AR, FL, GA, MS, NC, SC, TN, LA, TX, KY, OH, PA, VA, WV, MD, IN, MO, IA MO, KS, IA, NE, OK, ND, SD, MN, WI, IL, WY, CO, MT 50 states

35,000 21,000

16,000 21,000

20,000

n/a

n/a

n/a

10,000

8,000

4,500

5,000

-0.5

AR, CO, GA, IA, ID, IL, IN, KS, KY, MN, MO, MT, NC, ND, NE, OK, SD, TN, UT, VA, WI, WV, WY MI, IN, WI, IL, IA, MO, KY, OH, WV, PA

3,418

3,195

1,035

6.3

LA, MS, AL, AR, TN, GA, TX, OK, KS, MO, FL, SC

2,500

2,700

1,026

959

7.0

MA, CT, RI, VT, NH, ME, NY, NJ, PA

3,760

4,460

Michael J. Bain

798

798

0.0

2,800

2,500

Harold Garber John K. Owen Gary F. McGuirk Sr. Barry Margolis Sherwin Herring Robert M. Sincavich Robin D. Ray

695 655 650 554 532 531 486

695 685 650 649 532 463 486

0.0 -4.4 0.0 -14.6 0.0 14.7 0.0

AL, AR, FL, GA, EL, KS, LA, MD, MS, MO, NM, NC, OK, NE, SC, TN, TX, VA, WV, DC ME, NH, VT, MA, RI, CT, NY, NJ, MD, PA WI, MI, MN, IA, IL PA, OH, WV, MD, NY, DE, VA PA, MD, DE, VA, WV, NJ, NY NC, SC, VA, TN, GA OH, PA, WV, VA, MD, KY VA, MD, DC, DE, NC

2,400 1,400 1,300 1,470 1,600 1,100 2,100

3,100 1,400 1,200 1,295 1,900 1,300 1,600

Gregory G. Tripi Charles F. Canning Jr. Tammy Cross

458 400 395

458 400 395

0.0 0.0 0.0

NY, PA, OH, IL, IN, WV ME, NH, VT, MA, NY, CT, RI OK, TX

2,750 5,000 1,634

2,970 n/a 2,165

Justin Erickson Marvin H. Schwartz

395 334

371 334

6.5 0.0

WA, OR, ID, CA, AK OH, KY, IN, IL, TN, WV

3,000 1,070

2,200 1,230

Steven Resnick Patrick A. Carrico

304 300

310 300

-1.9 0.0

NJ, PA, NY, CT, MD, DE, DC, VA, NC IL, IN, KY, MI, OH

1,600 1,400

1,100 810

Jeff S. Leischner Charles C. Parks III Jeff. B. Allen

250 247 245

250 255 242

0.0 -3.1 1.2

SC, NC, GA TN, KY, NC, VA, SC, GA, AL, MS, AR, MO, IN PA, DE, NJ, MD, NY, DC

1,500 608 1,610

2,300 700 935

Brian Eidsvoler Stephen Altman

186 148

186 148

0.0 0.0

NM, ND, SD, IA, WI NY, NJ, PA, CT

500 500

750 700

Footnotes: 1

FY = fiscal year

5

Consumer Product Dist. Inc. dba J. Polep Distribution Services

2

McLane Co. Inc. corporate parent is Berkshire Hathaway, Omaha, Neb.

6

C&S Wholesale Grocers announced plans to acquire GSC in November 2014.

3

S. Abraham & Sons Inc. corporate parent is GRAD, Grand Rapids, Mich.

7

Stephenson Wholesale Co. Inc. dba Indian Nation Wholesale

4

Imperial/Harrison Super Regional corporate parent is Georges Enterprises LLC, Elmwood, La.

8

Topicz corporate parent is Novelart Manufacturing Co., Cincinnati

9

Resnick Distributors corporate parent is Plainfield Tobacco and Candy Co.

Source: Convenience Store News Market Research, 2015

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


PERCENt OF sAlEs

WAREHOUsEs

Chain

Indep.

# of Warehouses

97%

3%

21

50 70

50 30

31 6

n/a

n/a

70

EmPlOYEEs

sq. Feet (thousands) 11,714

Full-time Part-time

PROdUCtIVItY RAtIOs: sAlEs PER sales

12,377

41

221

sq. Foot (thousands) $2,704

Employee (thousands) $2,559

location (thousands) $687

delivery (thousands) $495

4,000 2,300

5,933 2,200

0 0

1374 400

2,575 2,304

1,736 2,409

294 252

613 238

28

n/a

n/a

n/a

n/a

n/a

n/a

200

n/a

30

1

425

960

40

140

3,059

1,354

n/a

n/a

0

100

1

420

510

50

102

3,090

2,545

130

161

71

29

6

641

546

11

118

1,930

2,266

275

240

58

42

2

440

511

13

100

2,507

2,159

323

347

68

32

4

379

481

7

66

2,902

2,287

440

383

44

56

6

323

705

58

98

3,176

1,455

273

215

58

42

1

489

459

15

53

1,632

1,739

285

319

60 45 65 40 50 70 65

40 55 35 60 50 30 35

1 1 1 1 1 1 2

200 252 160 110 215 195 180

246 260 200 205 225 270 120

2 10 100 24 15 0 2

50 35 60 4 43 30 21

3,475 2,599 4,063 5,036 2,474 2,723 2,700

2,825 2,519 3.250 2,702 2,364 1,967 4,050

290 468 500 377 333 483 231

224 489 542 501 280 356 304

92 55 1

8 45 99

1 5 3

250 246 205

210 445 293

48 6 24

12 106 59

1,832 1,626 1,927

2,181 899 1,348

167 80 242

154 n/a 182

40 10

60 90

2 1

312 132

320 160

40 0

6 17

1,266 2,530

1,234 2,088

132 312

169 272

45 30

55 70

1 5

100 210

120 184

5 6

12 18

3,040 1,429

2,533 1,630

190 214

282 370

47 70 42

53 30 58

3 1 1

300 160 65

300 131 78

20 1 4

50 12 14

833 1,544 3,769

833 1,885 3,141

167 406 152

109 364 259

5 33

95 67

1 2

165 85

170 47

5 22

21 12

1,127 1,741

1,094 3,149

372 296

248 211

WWW.CSNEWS.COM | SEPTEMBER 2015 | Convenience Store News 41


TOP WHOLESALERS

Product Distributors Inc. maintained last year’s rankcategories over the past year, all mentioned fresh food ings to round out the top 10. programs. These include new commissary proThe cigarettes category continues to grams as well as bread, produce, dispensed Among bring in the majority of sales for these beverages and dairy. the 62 percent of top wholesalers, even as share for Advancements and investments in top wholesalers who the category continues to decline. technology have also led to operational reported expanding new improvements in the past year. Among Currently, cigarettes represents an product categories over the changes cited by top wholesalers average of 69 percent of sales (down from 74 percent last year), followed were adding online portals for ordering the past year, all by 8 percent from other tobacco prodand collecting business intelligence data; mentioned fresh ucts, 7 percent from candy and sweet new order entry and marketing apps for food programs. snacks, 5 percent from foodservice, 3 both field representatives and customers; percent from grocery, 2 percent each from improved shipping and loading software; and general merchandise, packaged beverages and salty improved scan-based delivery systems to improve accusnacks, and 1 percent each from gourmet and all racy and productivity. other categories. When asked to choose the single biggest trend Foodservice products and fresh foods, while still impacting their business today, a majority of top a relatively small portion of sales, are viewed as a wholesalers (37.5 percent) cited the short supply of key for future growth. Among the 62 percent of top qualified truck drivers. Pressure on tobacco margins wholesalers who reported expanding new product was cited by 25 percent of the top wholesalers, while last year’s top answer, increased government regulation, dropped to third at 18.8 percent.

Number of SKUs Carried

Methodology Core-Mark Holding Co. Inc. McLane Co. Inc. Harold Levinson Associates Inc. AMCON Distributing Co. Imperial/Harrison Super Regional Charles C. Parks Co. S. Abraham & Sons Inc. Team Sledd Cooper-Booth Wholesale Co. Atlantic Dominion Distributors

53,000 45,844 16,000 16,000 13,000 13,000 12,479 11,500 10,000 10,000

Source: Convenience Store News Market Research, 2015

Sales per Delivery per Week Core-Mark Holding Co. Inc. Liberty USA Cooper-Booth Wholesale Co. McLane Co. Inc. Chambers & Owen Inc. Imperial/Harrison Super Regional Richmond-Master Distributors Inc. Charles C. Parks Co. Team Sledd S. Abraham & Sons Inc.

Rankings for the Convenience Store News Top Wholesalers are based on sales from the last full fiscal year for each company. Data for this report was gathered via a survey conducted among the largest wholesalers primarily servicing c-stores that derive a majority of their annual sales from tobacco and candy products. Additional data was obtained through company reports and other public sources of financial data. In some cases, estimates have been made by Convenience Store News based on historical data and current industry trends. CSN

Single Biggest Trend Impacting Business Today $612,500 $541,667 $501,158 $494,996 $489,286 $383,333 $370,370 $364,286 $356,154 $346,792

Source: Convenience Store News Market Research, 2015

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

6.3% 12.5% 18.8% 25.0%

37.5%

Short supply of qualified truck drivers Pressure on tobacco margins Increased government regulation Increased retailer consolidation Competition from other full-line wholesalers

Source: Convenience Store News Market Research, 2015


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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

HOW TO

How to Navigate Foodservice Packaging Options By Bob Phillips

O

f all the components that make up the convenience store foodservice environment, perhaps the most overlooked and underappreciated of all is packaging. On the most rudimentary level, good packaging should protect the product from damage. But packaging also plays an important part in a product’s ultimate appearance — and in the foodservice sector, this includes prominently promoting the product’s freshness (or at least the perception thereof). The convenience channel continues to gain ground year after year by promoting products that project an image of freshness. Many c-store retailers say their goal is to grow their foodservice sales, and to do so with fresher products. This trend spills over to the dispensed beverages counter, including hot coffee, where formerly the emphasis had been on simply providing hot, ready-to-go, inexpensive products. Today, many c-stores have targeted the Starbucks consumer by offering a wide variety of upscale, fresh, good-tasting and reasonably priced hot beverages.

46 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM

Call tO aCtIOn: Foodservice 101

• Keep it simple. Try to use packaging that can be multipurpose. • Packaging is a critical element and showcases your product as it leaves the store. Invest the time and resources into selecting the right fit for the application. • Avoid going cheap and generic as this will result in ill-fitting packaging.


FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

thE Cult OF FREShnESS

Of course, just what “fresh” means is subject to interpretation. “It’s important to remember that fresh is a continuum and not a singularity,” explained Convenience Store News How To Crew member Mathew Mandeltort, currently with distributor Eby-Brown Co. and formerly with foodservice consultancy Technomic. “So it’s not as if every single item offered has to have the same freshness attributes for cues (e.g. MAP packaging vs. hand-wrapped).” There are several methods c-stores can employ to maximize consumers’ “fresh” perceptions of their foodservice operations. These include: • Maintaining clean, bright stores. • Merchandising techniques that optimally showcase the product. • Implementing processes and procedures that ensure “fresh” perceptions are consistently messaged and reinforced in-store (i.e. proper product rotation, executing quality-driven waste strategies and tactics, etc.). • Always keep in mind the importance of packaging to consistently enforce a strong “fresh” message. • Simple, effective, easy-to-understand graphics are vital in the messaging process. As important as providing fresh products and promoting an overall aura of freshness may be to the bottom line, many c-stores have a long way to go in implementing effective communication strategies regarding the quality of their foodservice operaFoodservice 201 tion to their customers. • Start branding supplies with your own “I think the conveimage and logos. nience store industry • Ask what types of packaging can be has, in general, a poor used that are proprietary branded and image in terms of freshdesigned to fit the product. You are ness and quality,” said probably at a stage where you can How To Crew member design and develop custom packaging. Ed Burcher, president of • Not putting your brand on the packBurcher Consulting, an age can be a big pitfall. Oakville, Ontario-based firm specializing in

Call tO aCtIOn:

48 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM

foodservice merchandising operations. “The research that I have seen and been a part of shows that we do not do a particularly good job conveying or executing on freshness, and it’s reinforced by our behaviors, product choices and merchandising.” “[Graphics] are the key driver to enforcing the freshness image to customers,” said another How To Crew expert. “The more customers see FRESH, the more they will believe it.” ShOw SOmE RESpECt

Protecting the product is the primary function of packaging, and there are several strategies retailers can employ to safeguard foodservice merchandise from damage. “Think Aretha Franklin: R-E-S-P-E-C-T,” said Mandeltort. As silly as this may sound, it’s critical that retailers have respect for the quality of their food and beverage offerings. “Sandwiches are not Timex watches,” he continued. “Though the latter may take a lickin’ and keep on tickin’, the former requires better care.” It’s also important that your suppliers partner with you and take the necessary steps to ensure that temperature-sensitive products are held, shipped and delivered under appropriately controlled temperature conditions all the way to your door. Some other procedures worth considering: • Check that food items are properly packed and have arrived unscathed. • Set quality standards for your food items and make sure suppliers understand and adhere to them.


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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

• Make sure your staff takes the necessary steps to monitor the condition of food items to ensure those quality standards are maintained. Generally speaking, spoilage is a much bigger issue than products damaged in shipping. “Spoilage is what we concentrate on,” said one How To Crew expert, adding that suppliers can play a key role in the process. “A big part of keeping that number under control is giving the stores data to know what is spoiling and tips on how to lower it, or raise it if they are losing sales because there is no spoilage.” COmmunICatE YOuR BRanD

Communication with your customers is a key element in driving sales at your foodservice operation. With this in mind, think of packaging as an extension of your printed menu, as well as a branding opportunity for your store. “People eat with their eyes,” explained one expert. “I ask clients to compare their communication executions with those of the national QSR [quick-service restaurant] chains. Look at how they use products, words, phrases and descriptions. In general, we have a long way to go to improve how we portray and communicate our products to our guests.” Indeed, packaging is a critical component of the overall shopping experience. The types of materials employed will depend on the application. Portable, car-friendly, and Foodservice 301 drip- and leak-proof all come into play. • Look for unique packaging that makes “It is best for you stand apart from others. retailers and product • Partnerships with innovative developers to think manufacturers can help you be first of how the guest will to market with new packaging. use the product and • Wraps and packages that can extend design from there,” freshness and quality while providing the expert continued. the coverage needed will help distin“There are many difguish your offer from your competition. ferent types of materials depending on whether the product is made-to-order or grab-and-go; hot vs. cold; and immediate consumption vs. food for later. Again, testing and understanding how the guest will use it is critical for designing the right packaging for the selected product.” While communicating image (e.g. fresh, nutritious, good for you) throughout the store is integral to driv-

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

“Sandwiches are not Timex watches. Though the latter may take a lickin’ and keep on tickin’, the former requires better care.” — Mathew Mandeltort, Eby-Brown Co.

“Packaging is a component of your environment. It is the first and last thing a guest usually touches and sees as they consume it. It is an extension of your brand.” — Ed Burcher, Burcher Consulting

“Our research indicates that consumers clearly want calorie and nutrition information, and want the brands and operators to be upfront and transparent, meaning don’t ‘hide’ high-calorie menu items.” — Tom Cook, King-Casey

ing sales, understand that if your offerings on the shelves, in cold cases and at the foodservice counter don’t reflect it, your customers will catch on quickly. “Understand that the market is constantly changing and that your packaging has to adapt to those changing influences, whether it’s driven by demands of a changing consumer or mandated by government legislation,” said Mandletort. “Understand, too, that packaging can be a critical part of your brand. It’s important to know who you are in terms of your foodservice. What is your positioning? Your packaging has to then be consistent with your positioning.” Retailers typically experience a sales lift of up to 30 percent when switching from first-generation plastic packaging to more contemporary packaging. “Packaging is a component of your environment,” added Burcher. “It is the first and last thing a guest usually touches and sees as they consume it. It is an extension of your brand.” thE COSt OF COmplIanCE

New Food and Drug Administration (FDA) regulation will require nutrition facts to be featured on packaging as well as on menu boards at chains with 20 or more stores, which begs the following questions:


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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

• How important is reliable calorie and nutrition information to the typical c-store foodservice consumer? • All in all, is it worth the time, effort and expense to provide said information? “Reliable calorie and nutrition information is as important to the typical c-store consumer as it is to consumers who frequent QSR, fast-casual and casualdining restaurants,” said How To Crew panelist Tom Cook, principal at design firm King-Casey. “Our research indicates that consumers clearly want calorie and nutrition information, and want the brands and operators to be upfront and transparent, meaning don’t ‘hide’ high-calorie menu items.” Consumers make their order decision based on what they want to eat and drink on a particular dining occasion. Calories and nutrition come into play based on whether the dining occasion will be a splurge or a health-conscious meal. According to How To Crew member David Bishop, managing partner of Barrington, Ill.-based Balvor LLC,

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

there are a range of costs associated with complying with the new regulations. Fixed costs, expenditures that a chain can allocate across its store base, include legal expenses as well as nutritional analysis of covered food and beverage items. These costs are driven in part by the breadth of the foodservice menu available across the chain, as well as existing processes or practices that an operator may have had in place before the regulations. “If you don’t have the nutritional component established already, this will trigger additional costs that could run between $280 and $1,030 per menu item, and it may not matter whether the item is sold in one store or the entire chain,” Bishop said. Why the broad range? Menu items vary in complexity, and the process that operators use could involve different resources such as nutritional databases and contracting with testing labs. “Operators really need to understand how this impacts the business,” noted Bishop. “I wouldn’t be surprised if some operators rationalize marginal menu items based on an


FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Our How To Crew expanded cost-benefit analysis.” In addition, there are variable costs, such as updating menu boards and training employees and managers. These outlays are driven by a variety of factors, including the number of stores operated, number of foodservice employees, and the operational model used. For instance, according to Bishop’s analysis of the FDA’s final impact analysis, the initial cost associated with bringing menu boards into compliance could run from $600 to $1,200 per board, and training store teams could easily cost $200 per store. “If an operator has a drive-thru window, the external menu boards also need to be compliant,” he added. There are also recurring expenses driven by new menu items or changes in store personnel. Bishop suggests operators leverage industry resources to help understand how to become compliant. Otherwise, non-compliance could subject the operator to civil and criminal penalties under current law. Ultimately, though, are the regulations beneficial to either the consumers or retailers? And, perhaps

David Bishop — Balvor LLC Ed Burcher — Burcher Consulting Joseph Chiovera — XS Foodservice & Marketing Tom Cook — King-Casey Jack W. Cushman — CST Brands Inc. 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 Group Paul Pierce — Pure Plates Tim Powell — Think Research & Consulting Chad Prast — Murphy USA Inc. Bonnie Riggs — The NPD Group Jennifer Vespole — QuickChek Corp. Ryan Krebs — Rutter’s Farm Stores

most importantly, given the costs involved, do consumers need or even want the nutritional information inherent in compliance? “I’m not aware of any research that analyzed

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Packaging’s Role in New Product Development s foodservice programs continue to position convenience stores in direct competition with traditional foodservice retailers, it is important for operators and suppliers alike to address consumer perceptions about the stereotypical c-store. Among the most important perceptions that need to be addressed and managed is food packaging quality. Technomic, a leading consulting firm in the convenience/foodservice sector, found that c-stores are more likely to view takeout/disposable packaging as a means of enhancing their foodservice programs — not at

A

all surprising considering that c-stores account for nearly $800 million of all disposable packaging shipments in the foodservice industry. According to Convenience Store News How To Crew member Tim Powell, founder of Chicago-based Think Research & Consulting and former director of convenience store programs at Technomic, many c-stores with successful foodservice programs today put nearly as much focus on packaging as the food itself when developing new products. Case in point: As part of a complete overhaul of its hot food program, a large and prominent c-store chain on the East Coast spent 30-40 percent of its product development time determining the type of packaging that functioned most efficiently in terms of product presentation. Convenience retailers do, indeed, see the importance of takeout packaging, according to a broad-based survey of c-store operators and consumers conducted by Technomic in 2009. (Even though the Technomic study was conducted in 2009, market dynamics have remained largely unchanged, according to Powell). Among other findings from that study: • Convenience stores are less likely than the overall industry to purchase packaging based on price alone. Product quality and availability through current distribution are more important factors. • Environmental friendliness in packaging is more important to c-stores than to the overall industry. Price, however, is the key sticking point for not using it as broadly. • Consumers tend to rate packaging at convenience stores “not as good” as quick-service restaurants. This is one of the primary reasons c-stores are making a concerted effort to upgrade. • Convenience store operators define quality packaging as packaging that merchandises the food (consumers buy with their eyes), meets food safety standards and is functional. Insights into the availability and feasibility of packaging should be considered in any discussion involving new product development. Suppliers have the advantage of knowing what packaging has performed best in other restaurant segments — such as packaging in fast-casual restaurants — and are in a good position to share these insights with their c-store clients.

56 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM

existing markets like this in some way,” said Bishop. “If it has been done already, it would be very helpful to understand the findings as it could affect policy decisions and how the regulations are implemented. We definitely need to better understand how these regulations improve health outcomes based on more rigorous research methods. While some research shows that consumers want this type of information, other research shows that providing it has limited if any effect on changing behaviors.” Even on the topic of behavior modification, there are varying views driven by different methodologies. Proponents highlight more qualitative research based on consumer surveys, while opponents show quantitative measures based on operator sales data. A key assumption driving the regulations is that consumers will make different choices if nutritional information is made available at these types of establishments. “If we are to assume that premise is valid, then a free-market view would suggest that operators who do not comply, even if they’re not required to by law, will be at a competitive disadvantage,” said Bishop. “To test this hypothesis, we could examine markets where menu-labeling laws are in place already to understand how companies with less than 20 locations are performing and what, if anything, they’ve implemented related to menu regulations. Then compare results from those markets against markets that do not currently have any similar regulations in place.” In the end, retailers need to look at the big picture. Indeed, compliance should be incorporated into the marketing and communication executions. “The costs of non-compliance are in losing guests to those retailers that do provide the desired information,” concluded Burcher. CSn


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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

40 Years in Foodservice Rutter’s Jerry Weiner retires, leaving a legacy of innovation By Don Longo

A

t the end of August, Jerry Weiner, foodservice director for York, Pa.-based Rutter’s Farm Stores, retired after more than 40 years in marketing and operations roles in the foodservice industry for both convenience stores and restaurants. During that time, he participated in the development of five different prototype store formats for four different companies, including the research and development of a different proprietary foodservice program for each store format. Weiner, 67, started his career in the c-store industry in 1972 when he entered 7-Eleven Inc.’s fast-track

management training program in Long Island, N.Y., and became a field representative. In 1976, he left 7-Eleven and with a partner, opened a deli in West Palm Beach, Fla. Over the next eight years, they opened a second deli, but in 1984 he and his partner parted ways and sold the two stores. He was in his early 30s, took a month off, sent out résumés and got a job with Stop N Go to improve the then-growing convenience store chain’s food program. Ever since, he’s watched the convenience industry’s romance with foodservice evolve. The first major advance was in coffee. C-stores used to sell little more than “brown water,” Weiner told Convenience Store News in an exclusive exit interview. “But the industry has really wrapped its fingers around coffee. From the presentation to the variety, and especially the quality, c-stores have come a long way with their coffee programs and the results show it.” It took the industry a little longer to get food right. Food requires a larger capital investment, as well as human investment in people and training, noted Weiner, who recalled the industry had another obstacle to overcome: the consumer perception that they couldn’t get quality food at a location that also sold gas. “For decades, c-stores were known for low-quality, inexpensive product. But I feel the industry is on the cusp of changing that perception, and a small part of me will miss the next five to six years as c-stores become proficient with foodservice. It’s been a helluva ride for foodservice at convenience stores.” THE RISKTAKER

Jerry Weiner (clockwise from top right) with celebrity chef Rick Bayless; participating in discussions at the annual CSNews Foodservice Summit; with Rutter’s CEO Scott Hartman; and receiving a CSNews Foodservice Innovators Award from Denny Woodard of Tyson Foods.

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

At Rutter’s, Weiner became well-known for trying almost any type of menu item and letting consumers decide what


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Meet Rutter’s New Foodservice Director Ryan Krebs, former restaurant manager at Rutter’s Middletown, Pa., store, is the new director of foodservice for the 60-store convenience store chain in central Pennsylvania. Krebs, a trained chef, has a culinary arts degree from Johnson & Wales University’s School of Hospitality in Providence, R.I., and is certified as a dietary manager from the University of North Dakota. In addition, he co-authored a book entitled “The LongTerm Care Improvement Guide,” which focuses on evolving and improving the culture and food offerings in nursing homes and rehabilitative care settings. Krebs has worked in foodservice for 27 years throughout the United States, including in hotels, country clubs, government buildings, local and chain restaurants, health care and private catering. The Middletown store where he was restaurant manager is one of Rutter’s newest and largest units. In his non-working life, Krebs enjoys anything baseball-related (especially if it includes the Boston Red Sox) and collecting sports memorabilia. He also likes drawing, herb and vegetable gardening, cooking (go figure), and spending time with his wife and two children.

they like. The retailer’s touchscreen ordering kiosks allow customers to literally mix and match any items on the menu to create their own customized meals. Among the scores of successful food items he’s championed during his career, Weiner was able to point to a couple that stand out. “At Stop N Go, they told me you could never sell a bagel and cream cheese in Texas,” he laughed. “I took that as a personal challenge and successfully launched a bagel and cream cheese product in their Texas stores.” Perhaps Weiner’s and the c-store industry’s greatest challenge is the dinner daypart. “I’ve always felt there was an awful lot of gross profit up for grabs to the retailer that figures out the dinner daypart. When consumers think about dinner, I want Rutter’s on their mind,” he said. Weiner feels his latest creation, called Basket Meals, finally gets c-stores successfully

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into the dinner game. Each Rutter’s Basket Meal includes one of five entrees: fried shrimp, chicken wings, beef short ribs, mahimahi bites or chicken strips. In

addition to the entrée, each basket comes with a large order of French fries, coleslaw, dinner roll and a dipping sauce. “I’ve never been afraid to try

anything that I felt had application to our customer demographic and that could work operationally,” Weiner explained. “The customer tells you it will work or it won’t. You can’t be afraid to try new things.” Weiner laughed again when asked to name some of his flops, like the chicken waffle. “When you are willing to try so many different things, not all of them are going to work,” he noted. “Turkey wings, for example. The manufacturer extracted one of the bones from the wing so they ate like a drumstick. It took off quickly, then sales trailed off almost as fast as they grew. Looking back now, I think they would have been a perfect LTO [limited-time offering].” FEELING SATISFIED

Looking back on his 40-plus years in the business, Weiner said, “I think I’m satisfied. A solution to the dinner daypart has been plaguing me and this latest venture [Basket Meals] seems to finally be making the impact I’ve wanted.” Weiner also said he wanted to prove a c-store can be considered more like a restaurant even though so many “experts” said you cannot sell food with gasoline. “I wanted to prove you could sell a high-quality food product in a c-store. And I wanted to show it’s about price and value, not just price.” He cites 2007 as the year Rutter’s embarked on its journey to excel at foodservice. “For a relatively small company, we were aggressively opening 10 stores in 14 months. At the same time that we were expanding our foodservice, we needed to hire and train people to handle the foodservice side,” he recalled. “We hired managers from the restaurant industry. I felt I could teach them

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


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Thanks to Weiner’s innovative spirit, Rutter’s has been honored multiple times in the CSNews Foodservice Innovators Awards program.

how to do food in a c-store easier than teaching a c-store manager how to do restaurant-quality food. We continue to hire people … from the foodservice industry.” In fact, Weiner’s successor Ryan Krebs is one such

hire. Krebs previously served as restaurant manager at Rutter’s Middletown, Pa., store, one of the 60-store chain’s newest and largest units. Krebs is a trained chef and graduate of Johnson & Wales University’s School of Hospitality. Weiner, whose official retirement date was Aug. 28, admits that retiring was a “really difficult decision. I still get an adrenaline rush, and I’ll miss a lot of the people both here at Rutter’s and in the industry. But I’m 67. It’s time to let the youths take over. I’ve always fantasized about what it would be like to wake up every morning and ask myself, ‘What do I want to do today?’ and not know the answer.” His gut feeling is to just “hang up my spikes. People tell me you can’t go from 100 miles per hour to zero overnight, but I’m going to give it a try.” It sounds like Weiner is more than pleased to “hop onto his stead and ride off into the sunset,” or in this case, retire to what had been his second home in Las Vegas. CSN

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At a Minimum This year, 12 states introduced bills to raise the legal age to buy tobacco By Melissa Kress

E

ach New Year’s Day, smokers across the country are used to digging a little deeper into their wallets as cigarette excise taxes typically go up as the ball goes down. Jan. 1, 2016, however, will see smokers and other tobacco users in Hawaii digging in their wallets for something else — their IDs. With a stroke of his pen on June 19 of this year, Hawaii Gov. David Ige set the last state in the union on a course to be the first state to increase the legal age to buy tobacco to 21. The legislation prohibits the sale, purchase, possesThe federal minimum legal buying age for tobacco products is currently 18. sion or consumption of cigarettes, other tobacco change is Aloha Petroleum Ltd., where training of sales products and electronic smoking devices to anyassociates and managers is a key focus, noted Gary one under 21. Altman, general manager of company-operated stores. “Raising the minimum age as part of our com“Beginning Jan. 1, 2016, customers under the age of prehensive tobacco control efforts will help reduce 21 who have been purchasing tobacco products from tobacco use among our youth and increase the likelius since they turned 18 will no longer be able to do so. hood that our [children] will grow up tobacco-free,” How this is communicated and handled by our sales Ige said at the time. associates is crucial, as we don’t want to lose those cusThe first offense will result in a $10 fine. Later viotomers’ business for non-tobacco items they purchase on lations would lead to a $50 fine or mandatory coma regular basis,” Altman said. “The key will be enforcmunity service. ing the new law while retaining the customers’ The law takes effect Jan. 1, giving retailers lloyalty.” in the Aloha State roughly six months to get Although the state has yet to provide their “tobacco house” in order, so to speak. any training materials or signage, Aloha One such retailer prepping for the Petroleum anticipates that it will provide signage as the law comes into effect, In 2016, Hawaii will become the firstt according to Altman. Signs will play an state to set the legal age to buy important role when it comes to informing tobacco consumers about the switch. He tobacco at 21. Other states where believes the six-month lead time has been “reasonbills have been introduced are California, able” from a retailer standpoint, but he is not sure the Massachusetts, New Jersey, New York, average consumer is aware of the change. While the tobacco category has been declining someOregon, Rhode Island, Utah, Vermont what over the last few years, it is still an important part and Washington. of Aloha Petroleum’s business and contributes more than 30 percent of in-store sales, Altman said, adding

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


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that many of the customers who purchase tobacco make other purchases in the store and visit its locations regularly. What effect, if any, the increase in the legal buying age has on those sales remains to be seen. “We expect to see some sales decline in the tobacco category when the new law takes effect. The unknown for us at this point is whether it will impact other categories within the store,” he explained. “Will that 18to 20-year-old consumer who currently makes legal tobacco purchases return to our store for the other instore purchases they are currently buying from us, or will this change their shopping habits?” A GROWING MOVEMENT

As it stands today, the federal minimum legal buying age for tobacco products is 18 years old — a standard followed by many state, county and local governments. Hawaii is the only state to hike the minimum age to 21, but it is by no means the only place requiring tobacco users to also be legal to drink alcohol. New York City emerged as the leader in this move-

Aloha Petroleum expects to see some sales decline when Hawaii’s new tobacco law takes effect.

ment when it increased its minimum age to 21 in 2013. Hawaii County in Hawaii followed suit, along with several municipalities across the country. And the movement seems to be regaining steam these days. Bills were introduced this year in 12 state legislatures to raise the minimum legal age to purchase and use tobacco products, according to Thomas Briant, executive director of the National Association of Tobacco Outlets. Oregon, Rhode Island, Utah, Vermont and Washington considered bills to raise the legal age to 21. These bills all died due to adjournment of the state legislative sessions. Measures to raise the legal age to

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

21 remain pending in California, Massachusetts, New Jersey and New York. Other states have set their sights on age 19. Iowa and Texas both had bills to increase the legal age to 19; neither passed. New Jersey has had age 19 on the books for several years. FEDERAL ACTION COMING?

State and local action, however, does not necessarily signal federal action. As Briant explained, the Food and Drug Administration (FDA) was required to submit to Congress a report regarding the public health impact of raising the legal age to purchase tobacco. The agency sponsored a study conducted by the Institute of Medicine (IOM) to determine the public health impact of raising the legal age to 21 and 25. In the report, a committee of experts reviewed existing literature on tobacco use initiation, developmental biology and psychology, and tobacco policy and predicted the likely public health outcomes of raising the age for tobacco products to 19, 21 and 25 years old. The report found that increasing the minimum age of legal access (MLA) for tobacco products would likely prevent or delay initiation of tobacco use by adolescents and young adults. The age group most impacted would be those aged 15 to 17. As a result of this review, the committee also concluded that the impact of raising the MLA to 21 would likely be substantially higher than raising it to 19. However, the added effect of raising the MLA from 21 to 25 would likely be considerably less. “While the IOM report is often referenced on this topic, it’s important to highlight two key points,” explained David Bishop, managing partner of sales and marketing firm Balvor LLC. “The analysis was designed to look at the issue from a federal level, and the findings are projected based on some very broad assumptions. In other words, it would be inappropriate for someone to argue that these findings are applicable at the state level.” COURT OF PUBLIC OPINION

The Centers for Disease Control and Prevention (CDC) followed with its own research, which found that three out of four adults — including seven in 10 cigarette smokers — favor boosting the legal purchasing age to 21. While an overwhelming majority of adults favor the policy, favorability is slightly higher among adults who never smoked and older adults.


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TOBACCO In contrast, 11 percent of adults strongly oppose making 21 the legal age of sale, while 14 percent somewhat oppose such measures. “The CDC’s research in this case is intended to reinforce that this is a politically popular and safe action to pursue,” Bishop said. The Campaign for Tobacco Free Kids (CFTFK) is also making a push to make it illegal to sell tobacco products to anyone under 21 years old. Part of the organization’s argument is the comparison to the minimum age to buy alcohol. By 1988, all 50 states had laws on the books putting the age at 21. “It’s important to understand the context of the IOM report as the perceived benefits will likely not occur anywhere to that magnitude if at all,” Bishop said. “Unfortunately, the CDC research and even some arguments being promoted by the CFTFK may influence legislative actions.”

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Regardless of the research and data cited, Congress is the only entity that can increase the legal buying age at the federal level. Until that happens, if at all, retailers need to be concerned about their tobacco sales bottom line as a result of state and/or municipal actions. Making it harder for adult consumers to legally purchase tobacco products on a state or municipal level could have the same effect as making it more expensive. Users won’t necessarily stop buying cigarettes or moist snuff, they will just buy them elsewhere. “This is critical for retailers to understand as increases to the minimum age in a state could impact consumer demand in ways similar to when there’s an increase in the state excise tax,” Bishop said. CSN


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

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By Don Longo, Melissa Kress & Angela Hanson

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et’s play a game. Sit outside any convenience store in Anytown, USA, for several minutes and take turns guessing what each customer walking inside is there to buy. If you guess something to drink, you’ll be a winner more times than not. That’s because nearly three-quarters of convenience store customers come through the door looking for something to drink, and this translates to almost 30 percent of inside sales. Still, the beverage categories — including packaged, alcoholic and dispensed beverages — are not immune to shifting consumer trends and preferences, as attendees of the 2015 Convenience Store News Beverage Retailing Summit learned at the June event held in St. Louis. Key beverage themes, according to Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, are the continued move toward better-foryou and healthier products; a broad shift away from carbonated soft drinks (CSDs), especially the downturn in diet; and the growth of bottled water and functional beverages. Notably, Herzog pointed out, bottled water has driven the majority of incremental growth in beverages, and energy drinks are the No. 2 non-CSD segment in retail sales. That aside, CSDs are still the largest beverage segment. As for diet CSDs, the downturn has stabilized a bit as manufacturers are getting better at pricing — which is almost a

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

page out of tobacco’s playbook, she noted. As Wells Fargo Securities’ early summer Beverage Buzz survey found, convenience store retailers have reason to be optimistic. According to the survey respondents, beverage sales were up about 5 percent during the Memorial Day holiday vs. last year’s holiday weekend. In addition, c-store beverage sales were trending up — approximately 6 percent — in the second quarter. And things may only get better. Retailers responding to the survey were predicting a 9percent increase in customer traffic this summer.


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Key beverage trends were discussed by Bonnie Herzog of Wells Fargo Securities (left) and Laura Lynn Freck of Red Bull North America.

Broadly, this should be a good thing for the beverage categories, Herzog explained. Overall, she said, beverage industry trends are getting better as c-store retailers experience tailwinds such as lower gas prices and higher disposable incomes.

This can be challenging. People have an average attention span of eight seconds, down from 12 seconds in 2000. A goldfish, by comparison, has an attention span of nine seconds. There are some key factors for retailers to keep in mind to win the customer. One important finding of Red Bull’s 2014 Global C-store Path Tracker research, ATTenTiOn C-sTOre shOppers which included on-site interviews with customers While the majority of convenience store customers are at ampm, Chevron and Circle K stores, was that shopcoming through the door looking for something to pers in c-stores are on “auto-pilot” more than any drink, retailers must still work to grab the consumer’s other retail format. attention in beverages and ancillary categories to “Shoppers are like robots in a c-store,” said Laura increase the overall basket. Lynn Freck, shopper insights manager for Red Bull North America, one of this year’s Beverage Retailing Summit speakers. “The majority choose the store on their path to or from someplace. Eighty percent SHOPPERS IN C-STORES ARE ON “ AUTO-PILOT” said they went to the store ‘out Fashion MORE THAN ANY OTHER of habit’ and the most frequent RETAIL FORMAT shoppers tended to be male Train stations and millennials.” Electronics Half of the shoppers said they went to the c-store on a weekly Grocery basis, and 70 percent of all shopBanks pers were on a beverage misC-stores sion, according to the Red Bull Increasing time research. Upon entering the store, 84 percent head straight for a SOURCE: 2014 Red Bull C-Store Path Tracker Research, Instinct Labs Increasing willingness to explore

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


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specific product and 56 percent head straight to the register to pay. “C-stores need to grab a shopper’s budget — the majority spend less than $5 — fast since most shop in under five minutes,” Freck said. Energy drink customers are even quicker customers: 48 percent shop in under four minutes, compared to 37 percent of non-energy drink customers who shop in the same time. What’s more, once inside the store, shoppers are bombarded with an average of 250 different messages on signs, counters, shelves and cooler doors. Despite all of this messaging, two-thirds of customers couldn’t recall any point-ofsale communication when queried about it after shopping. Repetition is key, Freck advised. Messaging needs to be clean, consistent and repeated along the path to purchase. She emphasized that beverages are as important as fuel to a c-store operator. In Red Bull’s research, customers were equally likely to

Daypart Believer The key to continued success in beverages will be capitalizing on dayparts, Dean Zurliene, senior director, category leadership at Anheuser-Busch Inc., told Beverage Retailing Summit attendees. As he explained, dayparting is not necessarily new. McDonald’s is moving toward all-day breakfast, and Dunkin’ Donuts and Starbucks are going after customers’ lunch money. More and more, channel blurring is apparent in the retail industry and in the convenience channel specifically. There are four major dayparts, which are like four different stores in four walls, according to Zurliene, with the c-store operating differently during each. As a share of daily revenue, breakfast accounts for 28.4 percent, lunch for 19.4 percent, rush hour for 39.1 percent and late night for 13.1 percent. However, share of profitability paints a different Dean Zurliene, Anheuser-Busch picture. The most profitable dayparts are lunch and rush hour, with late night and breakfast turning up at the other end of the spectrum, he explained. Capitalizing on the dayparts will require retailers to tap into the top segments in each daypart. For example, 28 percent of weekly c-store beer sales are rung up between 4 p.m. and 6 p.m. Targeting beer drinkers, though, should not only occur during that two-hour window. As Zurliene pointed out, 32 percent of shoppers who come in before 1 p.m. are beer buyers. “You can still target them with messaging and they will come back,” he said.

Beverages: As Important to C-stores as Fuel WHAT IS DRIVING THIS PARTICULAR MISSION TODAY? U.S. average

Energy drinkers

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Food

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

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on Dinner mond the Dia

No, he’s not singing the national anthem: CSNews’ Editorial Director Don Longo (top left) welcomed retailers and sponsors to the 2015 Beverage Retailing Summit, which included a backstage tour of Busch Stadium, visits from the Anheuser-Busch clydesdales, and Dinner on the Diamond.

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


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

Convenience Store News 2015 Beverage retailing summit Retailers, suppliers and industry experts took the field June 24-25 at Busch Stadium, home of Major League Baseball’s St. Louis Cardinals, as the Convenience Store News Beverage Retailing Summit provided a forum for the exchange of insights, innovative beverage concepts, fresh ideas, proven strategies, and best-in-class marketing and merchandising tactics. REtAILER AttENDEES

say beverages or fuel were the main reason for their visit to the c-store. Even among those who said fuel was their primary purpose, 53 percent of them said they also purchased a drink. Among all shoppers who make a second purchase, beverages and food are the most common grabs. “Drinks provide an easy opportunity to drive additional purchases,” Freck said. Csn

Demographic Derby Even if they fall into the same demographic bucket, all customers are not created equal. Terence Martin, director of sales, immediate consumption with Campbell Soup Co., cautioned retailers participating in the Beverage Retailing Summit to not have a single strategy for demographic groups such as millennials and Hispanics. “Demographics can be dangerous,” Martin said. “What you really need to understand is behavior.” Both millennials and Hispanics have varying habits and preferTerence Martin, Campbell Soup Co. ences within them. For example, Argentinian and Mexican consumers are both Hispanic, but have very different flavor profiles. Additionally, they are not mutually exclusive. C-stores can capture a greater share of the healthy beverage market from traditional grocery stores, Martin said, but focusing on demographics instead of behavior can prompt the wrong strategy. He also pointed out that the healthy beverages consumers want will change over time, citing that no beverage but bottled water has gone without some negative press about its level of healthiness.

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

Mike Adams, ampm Chris Borota, GPM Investments LLC tom Burkemper, 7-Eleven Inc. Madalena Morgan, Bobby and Steve’s Auto World Carolynn Hieb, SuperAmerica/Northern Tier Energy LP Joey Hobson, Maverik Inc. Rich Jacobs, RaceTrac Petroleum Inc. Steven Jones, Sunoco Mid-Atlantic Jonathan Ketchum, Alon Brands LLC Steve Lunderborg, Holiday Stationstores Mary Mamalakis, RaceTrac Petroleum Inc. terry Messmer, Tri Star Energy LLC Joe O’Connor, Holiday Stationstores Greer Palmer, Circle K Chad Prast, Murphy USA Inc. Jamie Pukylo, Country Fair Inc. Heidi Rembecki, NOCO Express Melinda Smith, Murphy USA Inc. Derric Watson, E-Z Mart Stores Inc. Damian Wyatt, MAPCO Express John Zikias, Holmes Oil

PRESENtERS Laura Lynn Freck, Red Bull North America Ira Gleser, Amplify Marketing Communications Bonnie Herzog, Wells Fargo Securities LLC Danelle Kosmal, Nielsen terence Martin, Campbell Soup Co. Larry Miller, Miller Management & Consulting Dean Zurliene, Anheuser-Busch

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An Exercise in Sports Drinks C-store retailers can be a good sport by following these top segment trends By Renée M. Covino

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ports drinks have turned the isotonic corner. Sure, the two segment leaders, PepsiCo Inc.’s Gatorade and The Coca-Cola Co.’s Powerade, still dominate convenience store sports drink sections with no signs of letting go. But consumer demographics, new usage and new product formulations are broadening this packaged beverages segment with implications for c-store best practices and forwardthinking retailers and suppliers. Here are the latest stats in the sports drink arena: Millennials have a significant influence on the growth of sports drinks. Young adults and the millennial generation are shaping a new breed of morning beverages, which includes sports drinks. The coffee market is even being threatened by the increasing share of sports drinks (and energy drinks) among young adults, according to a 2014 survey by the National Coffee Association. What’s more, the millennial generation’s affinity for convenience stores opens up opportunities in sports

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drinks if the channel is paying attention. “Convenience stores are a critical entry point for millennial shoppers, who are often the target of new beverage products,” Jessica Branson, a beverage expert and vice president/ general manager at marketing agency Epsilon, told Convenience Store News. “The convenience store provides a great environment to test new beverage products, particularly with the millennial generation as they tend to have larger basket sizes than the average convenience customer because they treat convenience stores as a fill-in trip rather than going to large-format mass or grocery stores.” She also cited 2014 NACS research that revealed when millennials use convenience stores as a fill-in trip, 60 percent of their purchases will include a beverage. Sports drink usage has a wider range of appeal. The broadening appeal of sports drinks lately — beyond athletes — has resulted in significant sales increases, according to 2015 Mintel research. “Some 34 percent of sports drink users drink them even when they are not working out — this rises to nearly half of respondents aged 18-24,” stated Beth Bloom, food and drink analyst for Mintel. “Such usage indicates the value of product positioning that moves beyond a sports focus and highlights attributes such as hydration and flavor.” Mintel also finds strong sports drink use for meal replacements and snacking. Mintel predicts that continued interest in health, convenience and functional products will benefit the segment in the near future. “Opportunity exists to grow sales in the category by increasing usage occasions and establishing relevance in the lives

2.


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

of consumers,” Bloom added. “Promoting products for their proven efficacy in meeting a range of specific consumer needs such as hydration, weight management, sustained energy, etc., will be one means of encouraging consumption. Expanded marketing and in-store positioning that highlights the wider use of products as convenient, nutritious and good-tasting is another.” Sports drink merchandising is taking better aim these days. Sports drink companies are helping convenience stores display their products in more innovative ways, according to Branson. “Because convenience store shoppers move through the store and make buying decisions quickly, secondary displays are key. Having second, third and fourth interruption points offer more opportunities to upsell,” she said. Major in-store hot spots include the cold vault, foodservice and deli counters, and near the register. “Many are experimenting with merchandising strategies aimed specifically at shoppers in the checkout line with at-register displays, added incentives and bundled programs with snack partners,” noted Branson. Sports drinks have gone healthier. “Sports drinks now are geared more broadly toward the nutritional needs of physically active consumers before, during and after demanding exercise, and they are formulated with ingredients that range far and wide beyond the salts and sugars found in the traditional versions of sports drinks,” said David Sprinkle, research director for Packaged Facts. One of the popular fortifying ingredients of late is whey protein, promoting muscle protein synthesis, according to industry research. Sports drinks are also taking on new compositions as they overlap other segments such as water and dairy. For instance, liquid water enhancers are now being positioned for sports, offering consumers an opportunity to add electrolytes. Agua Energy Water,

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founded by Carol Dollard, the former chief operating officer of Glacéau, boasts that it is the first of its kind to provide natural energy from the guarana berry. “This natural energy source offers drinkers of Agua Energy Water an added boost of caffeine, Other be which can help verage se gments and enh such as anced w enhance your milk ater are workou also goin t enthusi g after workout without asts. the dreaded crash that can come from drinking other energy-enhancing beverages,” Dollard said. “Simultaneously, the electrolytes within Agua Energy Water keeps consumers hydrated during their workout.” In the dairy realm, the Milk Processor Education Program (MilkPEP) is broadening its “Built With Chocolate Milk” campaign, which seeks to raise awareness and improve perceptions of chocolate milk as a post-workout recovery beverage among adult exercisers, according to Miranda Abney, marketing director of MilkPEP. The campaign is built around the sports, athletes and sporting occasions that are most relevant to the recovery target, and the newest star athlete of the program is Cleveland Cavaliers star Kevin Love. “The new national campaign is part of a long-term, multimillion-dollar, multi-channel strategy to inspire athletes to perform at their best and recover with lowfat chocolate milk,” Abney said. Gatorade and Powerade are price-conscious leaders. The sports drink icons Gatorade and Powerade have not just sat back amidst the evolution of the segment. “Gatorade went to a smaller bottle, moving from 32 ounces to 28 ounces in an effort to keep the cost low,” reported Cliff Simpler, operations manager at Minute Market, a chain of 13 c-stores based in Medford, Ore. “And consumers are good with it; we haven’t really had any bad feedback on it.” Convenience store chains also report that as sports drink flavors have expanded, two-fer pricing is increasingly popular to drive a higher ring among purchasers. CSN

5.


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

A Not-So-Sticky Situation Gum is staging a comeback thanks to the coordinated efforts of retailers and suppliers By Angela Hanson

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hewing gum is a standard part of any convenience store’s candy rack, but for retailers across the United States, the bubble burst several years ago. Gum sales have declined or been stagnant for some time, yet suppliers today aren’t gloomy about the product segment’s future. In fact, they are optimistic about what’s to come — and data shows they have reason to be. “I think the gum category is clearly in a state of growth,” said Kurt Laufer, vice president of U.S. Customer Development Strategy at Wm. Wrigley Jr. Co., maker of Orbit, Eclipse, Extra, 5, Juicy Fruit and Big Red gum, among others. He noted that week-to-week changes can be misleading without stepping back to view the bigger picture. “When I look at gum, [it is] flat on a 52-[week basis],

up in a 26-[week basis] and accelerating on a 12-week basis. The gum category is definitely back in growth.” Other gum manufacturers agree. The Hershey Co., maker of Ice Breakers and Bubble Yum, reported gum growth of 1.7 percent year to date ending June 13, driven by new products and the top 20 brands. Additionally, Mondelēz International Inc., maker of Stride and Trident, points to enhanced investment, pack type expansion, point-of-sale engagement and

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other growth drivers in a recovery that it says is fueled by base and incremental drivers. “Categories will ebb and flow,” Laufer added. “We’re looking at trends.” The ROAD TO ReCOVeRY

What kickstarted this positive trend? Instead of trying a radically different slate of products or means of promoting them, actively placing a strong focus on the core of the gum segment and launching targeted media campaigns for the products within it have had a noticeable effect. “It’s not just about throwing in flavor innovation and hoping that it works,” Laufer said. “The core has to be strong, and then you have to have news and innovation.” However, gum’s recovery is not uniform across the segment. While the top products that make up the largest portion of total gum sales are doing well, older, lowerranked products are declining and having a negative effect. To combat this, convenience store operators and their competitors have begun to weed out the weakest items for the segment’s overall benefit. “When looking at these numbers from a retailer’s perspective, we found that retailers that have reduced underperforming gum items and oftentimes replaced [them] with mints or candy are benefiting. In fact, it’s those retailers that have helped turn around the gum category,” said Hershey’s Joey Hendrix, senior manager of category insights Geo C Store, global knowledge and insights. “By taking out underperforming items and replacing them with mints or candy, the retailers saw their remaining gum items become more productive, which led to growth in the gum segment as we see now,” he continued.


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

Gum Category Is Staging a Recovery Total U.S. Gum Category Performance

DOLLARS

PACKAGES (Unit sales)

(Equivalent unit sales)

+1.8%

+0.1%

+7.8%

(Dollar sales)

vs. YAG

vs. YAG

PIECES

vs. YAG

SOURCE: AC Nielsen xAOC, Latest 13 Weeks Ending 3/14/15; Provided by Mondelez International Inc.

To maximize efficiency, Hendrix recommends that as gum typically generates 17 to 20 percent of candy, gum and mint sales, c-store operators currently allocating more than 20 percent of shelf space to gum should reduce that percentage with better-performing mint or candy items. WhAT CONSUMeRS WANT

Beyond rearranging their offerings, retailers should also stay aware of how suppliers are reaching out to consumers, and who those consumers are, in order to coordinate promotional efforts. Teenagers/young adult consumers now make up more than a quarter of total gum eatings in the United States. This figure is on the rise as gum brands promote themselves to this group through relevant channels such as social media and digital advertising. “What happened for years was all the manufacturers, including Wrigley, kind of stepped away from new or innovation in that fun segment,” Laufer said. “At the end of the day, sometimes we forget that the confectionery business is an awfully fun category that we all participate in, yet the consumer doesn’t always think about it that way. You have to bring them reasons to be involved in the category. And younger people, they love gum.”

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Successful “fun” gum products in recent years include Mondelez’s candy-flavored Stride gum, which has been co-branded with Swedish Fish and Sour Patch Kids. Still, mint remains the favorite flavor type, a fact that doesn’t always match up with what’s on the shelves. Mint also offers a functional benefit by appealing to the large number of consumers interested in oral care. “Another observation we’ve made is that mintflavored gums are under-spaced,” Hendrix said. “They typically generate 70 percent of sales, but only get 60 percent of the space. Retailers should start optimizing their gum space and begin to find items that fill the gum flavor-space-to-sales gap.” Ultimately, the future of gum is likely to be brighter if retailers develop a balanced offering of what consumers want in the segment. “What [retailers] have to do is make sure they have the core items represented and the core brands so that they can benefit from the advertising,” Laufer said. “At the same time, shoppers or consumers walking into a c-store are going to expect to see some of the innovation against those core brands. So, [retailers] have to have a balance of making sure they have the core right and having the innovation in place while all the media plans are working in the marketplace.” CSN


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

Not a Fleeting Opportunity Kwik Trip sees continued potential to expand its CNG offer By Brian Berk

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wik Trip Inc. is so pleased with sales at its compressed natural gas (CNG) fueling locations that it is considering nearly doubling its current location count in the near future. The La Crosse, Wis.-based convenience store chain opened 11 CNG sites in 2014, with three more set to open this year. Kwik Trip currently offers CNG at a total of 32 locations, but the operator of more than 450 c-stores believes that is just the tip of the iceberg. Kwik Trip is researching the viability of the alternative fuel at an additional 30-plus locations. All would be located within its upper Midwest operating region of Wisconsin, CNG boasts prices that are cheaper than traditional petroleum at the pump. Minnesota and Iowa, according to Joel Hirschboeck, its superintendent of commercial expertise so you become a strategic advisor to a lot of and alternative fuels. fleet customers.” “We’re actively expanding,” Hirschboeck Selling an alternative fuel produced in America and told Convenience Store News. “We built 45 c-stores purported to be more environmentally friendly and last year and 50 are on the books [to open] this year. cheaper than traditional gasoline has also piqued the Quite a few of them are interest of community groups, according to the Kwik truck accessible; those are Trip exec. “We’ve received a lot of interest from local good-opportunity stores for business councils regarding what alternative fuels bring compressed natural gas.” Fuel sales as a whole have to that specific market,” he said. “It makes them feel special because they have something to offer in their been on the rise since Kwik community that others don’t have.” Trip first opened natural gas To garner even more interest in CNG, Hirschboeck fueling stations. “We don’t has taken to the speaking engagement route, delivjust talk to a fleet about ering speeches at events sanctioned by NACS, the natural gas and ignore the fact they are using diesel and Association for Convenience & Fuel Retailing, gasoline today,” Hirschboeck SIGMA: America’s Leading Fuel Marketers and the NGV Infrastructure USA 2015 event, which took place said. “So, we’ve actually grown in sales of diesel quite in Atlanta in June. Kwik Trip’s alternative fuel efforts also have a bit due to conversations been recognized by the industry. The chain about natural gas. It’s an won Convenience Store News’ inaugural Fuels opportunity to really showInnovator of the Year award last year. case your knowledge in the With consumer options limited, fleets Consumer use of CNG vehicles is still quite limited, industry and leverage youpurchase 90 percent of Kwik Trip’s CNG.

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

Hirschboeck acknowledged, primarily because the fuel can only be used in the Honda Civic NG and a couple of pickup trucks. Nearly 90 percent of Kwik Trip’s sales of CNG are to commercial fleets. “There are not a lot of vehicle options for individuals to use,” he said. “Also, there is an upcharge to buy a CNG vehicle. If it costs $8,000 more to buy that vehicle, consumers weigh whether they will get that money back [by purchasing cheaper fuel at the pump] during the life of the vehicle, or if they instead should spend that money on leather seats and a premium sound system on a gasoline vehicle.” CSN Kwik Trip currently offers CNG at 32 locations and is considering selling it at 30 more sites.

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C-Store Ofce is the trusted back-ofce software l for d re t a virtual ce for recording, essing, tracking forecasting inventory and sales. It provides the nfrastructure, workfow and reporting needed to maximize margins and turns. This solution can save reconciliation and travel time while also decreasing the retailer’s IT costs. Stay connected to your business from any internetconnected device with C-Store Ofce. Fuel-Central is a cloud-based fuel distribution management software solution with customer account management, accounts receivables management, fuel inventory forecasting and management as well as fuel driver and feet scheduling management features. It is designed to enable fuel wholesalers, jobbers, or distributors to decrease timeconsuming manual processes, eliminate haul backs as well as optimize driver and feet scheduling for optimum productivity and returns. Petrosoft delivers cloud-based software, hardware, services and business solutions for the retail and petroleum industries. Petrosoft connects third-party data and applications along with its proprietary SmartPOS, Qwickserve, Direct Connect, C-Store Ofce and Fuel-Central solutions. Find out more at PetrosoftInc.com. ADVERTORIAL


MOTOR FUELS EXPERT’S VIEW

Gasoline + Diesel + Ethanol + LNG/CNG + Electric

Houston, We Have a Generation Gap The picture developing of millennials is worrisome

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nowing your customers’ needs and preferences and providing that service or product will increase your profitability. But for fuel resellers, understanding millennials — aged 15 to 32 and the largest generation in the United States — has proven a difficult task. When it comes to millennials, defined as the generation born between 1983 and 2000, the picture developing from growing data analysis is worrying for fuel marketers. Simply put by travel behavior analyst Nancy McGuckin, this generation that is projected to outnumber baby boomers by 22 million in 2030 is significantly less impassioned with the automobile than previous generations.

By Brian L. Milne, Schneider Electric

DECLINE IN VEHICLE MILES TRAVELED

Statistics show a 23-percent decline in annual vehicle miles traveled (VMT) by the 16- to 34-year-old group from 2001 to 2009, dropping from 10,300 miles to 7,900 miles each year per capita, according to the latest National Household Travel Survey. As Federal Highway Administration data shows, U.S. VMT hit a crescendo at more than three trillion in 2007, with percapita VMT reaching an all-time high in 2004. This would prove to be the end of America’s 60-year driving boom. The Great Recession from December 2007 to June 2009 was a clear factor in the sharp drop in U.S. VMT. A time when: • Unemployment surged; • Discretionary spending cratered; and • Consumer confidence reeled. As we look back at this period, millennials were affected more broadly than was widely understood at the time and in ways

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that now appear may be long-lived. This joined several trends pressuring driving demand already underway. THE WEALTH EFFECT

Growing household income was a principal feature in greater demand for driving and gasoline from the 1950s through the early 1990s, before the relationship began to diminish. As incomes increased, more individuals acquired vehicles and the number of multiple vehicle households grew dramatically. Families moved to the suburbs, increasing commuting distances, and the number of discretionary driving trips expanded. Called the “Wealth Effect,” the country reached a saturation point demonstrated when growing incomes failed to continue to generate rapidly higher VMT. During 1990-1997, real personal income growth averaged 3.2 percent annually and VMT 3 percent, which slipped to 2 percent year-over-year growth in VMT from 1997 to 2005 despite similar real personal income growth.


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

Gasoline demand was further pressured as vehicle fuel efficiency improved under Corporate Average Fuel Economy (CAFE) standards, while retail prices above $3 a gallon prompted conservation by many drivers, including purchasing a more mileage-efficient vehicle. Increased costs for vehicles, fuel, insurance and maintenance hit millennials harder than other generations. “Millennials reaching driving age today have no living memory of consistently cheap gasoline,” said the U.S. PIRG Education Fund, which conducted an analysis of the decline in driving in 2012 and updated the findings in late 2014. DECLINE IN LICENSED DRIVERS

Additionally, more vigorous and protracted testing for driver licenses delayed or shut out some young adults from achieving the legal status of automobile driver. So did policies at many colleges that discouraged students living on campus from driving.

between 1946 and 1964). The survey also found 20 percent of millennials use public transit at least once a week compared with 7 percent of generation Xers and 10 percent of baby boomers. The Great Recession and sluggish economic recovery since also had an outsized effect on job growth for millennials whether seeking to enter the workforce directly after high school or following graduation from college, with many finding fewer opportunities then previous generations. Many graduates also have struggled under college debt, with responses to these issues resulting in delays in marriage, procreation and buying a first home. PIRG said, “[Coming] of age in this time period could affect their long-term transportation and housing decisions.” CITY LIVING VS. RURAL LIVING

Eric Jaffee noted a widening shift in millennials living in cities as opposed to rural areas in his November 2014 article, “The 10 Biggest Factors Changing Millennial Driving Habits” from The Atlantic CITLAB, with 14 percent of millennials living in towns and rural areas compared to 26 percent for baby boomers. “Given how much more driving occurs in nonmetro areas, the shift into metros alone likely explains much of the overall decline,” wrote Jaffee. Other attributes that might have some effect on gasoline demand among millennials driving less is concern for the environment, or connecting with each other through social media. This socially concerned generation also has been early adopters of bike sharing and ride services like Uber and Lyft. WILL THIS CONTINUE AS MILLENNIALS AGE?

PIRG offered data on driver’s licenses held by high-school seniors, which dropped from 85 percent in 1996 to 73 percent in 2010. In 1983, 87 percent of 19-year-olds held a driver’s license compared to 70 percent in 2010, and 68 percent in 2012. From 2006 to 2013, those aged between 16 and 24 traveling to work by an automobile declined 1.5 percent, while commuting by public transportation, bike and foot increased. PIRG cited a 2013 survey from the Urban Land Institute that found 77 percent of millennials use a car to commute to work or school compared to 92 percent of generation Xers (born between the early 1960s and early 1980s) and 90 percent of baby boomers (born

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Peak driving occurs between the ages of 35 and 55. As millennials reach this period and start more families, will they buy houses in the suburbs like the recent generations before them? Will currently low gasoline prices and higher incomes change attitudes about driving and modify the current trend? These are questions data on housing and employment should help answer over the next few years. CSN Brian L. Milne is energy editor and product manager for Schneider Electric. He has been involved in energy for 19 years as a journalist, editor and analyst covering all types of U.S. energy markets. Milne manages the refined fuels editorial content, spot price discovery activity and cash market analysis for Schneider Electric’s energy segment. 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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TECHNOLOGY

TECHNOLOGY EXECUTIVE OF THE YEAR

Enterprise + POS + Digital + Payment Systems + Business Intelligence

Excellence in All He Does Phil Schwartz takes the road less traveled to become Technology Executive of the Year By Brian Berk

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ometimes, truth is stranger than fiction. Phil Schwartz, a decorated U.S. Air Force veteran, retired after 17 years in the service at the youthful age of 38. Considering this, it was certainly unexpected that he would become one of the convenience store industry’s foremost technology experts, let alone the winner of the 2015 Convenience Store News Technology Executive of the Year award. “The award is tremendously unexpected. I can’t believe it,” said Schwartz, manager of I/S credit card systems POS app support for Valero Payment Services Co. “I am truly humbled. I look at others who have been honored with this award and say ‘wow.’” Schwartz’s entry into the c-store industry was definitely for reasons unlike any other before or since. After retiring in 1995 at age 38, he spent about six months hanging out at his house, spending time with his children. One day, Schwartz’s wife (at the time, an activeduty member of the military) said, “You know Phil, I don’t mind supporting you. You’ve got your retirement [money], and although we are not bringing in the money we were, we have enough. But I’m not coming home to a dirty house one more day. So you have two choices: either you start cleaning this house, or you can get yourself a job and pay someone to clean this house.” Schwartz, who despises cleaning, opted for the latter option. “I actually started looking for a job so I could pay a housekeeper,” he joked. “After 20 years, I’m pretty sure I have enough money to pay a housekeeper for the rest of my life.” Finding a job wasn’t easy at first, though. When he left the military in 1995, he was a major, earning a solid salary. One of the places he applied to was National Convenience Stores, which operated the Stop N Go chain, as a store manager trainee. Schwartz felt he would be a good fit as a store manager because he had lots of management experience and was armed

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Phil Schwartz

with a master’s degree. “I figured maybe I could be pretty competitive in moving up through their operational chain,” he recalled. “I went in person to fill out the application, but it asked what my previous salary was. I filled in that information and never heard back from them.” Nonplussed, a month after receiving no response, he again saw a National Convenience Stores position posted and filled out an application online. “It didn’t require salary history,” he relayed. “I got a call in less than 24 hours, asking me if I could come in for an interview. That was right before Thanksgiving in 1995. Within a week, I was hired as a store manager trainee.” The week after Schwartz went to work for National Convenience Stores, the company was acquired by Diamond Shamrock, whose headquarters were in San Antonio, Schwartz’s current hometown. Diamond Shamrock merged with Valero later on.


Schwartz finished his training and became certified as a store manager, but fate led him in a different direction. “Diamond Shamrock decided they wanted to roll out a new, integrated computer point-ofsale system,” he said. “I was given the choice to be one of eight trainers for that, or be one of 260 store managers in the San Antonio area. I didn’t think it was a difficult choice. Within a week, I was the lead trainer for San Antonio. Within a year, I was on the corporate staff working on store automation.” That’s when technology officially became Schwartz’s vocation. CURRENT ROLE

Valero reorganized its retail division in 2007, but did not want to lose the knowledge Schwartz had.

In 2007, Valero decided to reorganize its retail division, but because the company valued Schwartz’s stellar work and didn’t want to lose the knowledge he had, it found another place for him, which was credit card processing. Schwartz has been in this role since. “I work with point-of-sale vendors. I work with communication providers we allow on our network, and I work with First Data, which is our acquirer on the front end of the credit process,” he said. “So I’m involved with EMV [Europay, MasterCard and Visa] and PCI [payment card industry] compliance.” After eight years in his current role, Schwartz is most fascinated by how much technology has advanced. “Today, your phone is your computer,” he stated. “I saw something recently that said your Apple iPhone 6 has more computing power than what we used to land on the moon in 1969. Even your car is ‘smart’ today

Schwartz is heavily involved in EMV, which often involves consumers receiving chip-and-PIN or chip-and-signature cards.

as it talks to your phone. Most of these advancements have taken place in the past eight years.” Mobile payment by providers such as Apple, Google and Merchant Customer Exchange has also advanced significantly in the past few years, Schwartz added. “There is a lot of stuff that has gone on and will continue to go on for the foreseeable future in terms of payment. It will not stay the same.” CONNECTING THROUGH CONEXXUS

In addition to his outstanding work at Valero, Schwartz is also being honored with the CSNews Technology Executive of the Year award for his contributions to Conexxus, formerly known as PCATS. This trade group addresses technology standards to improve business processes, reduce costs and increase productivity for the convenience and fuel retailing industry. “Our company is a member of Conexxus, so shortly after I moved to my current role in credit card processing, I would call in to committee meetings it had,” he said. “I happened to join three or four committees, but after sampling them, I gravitated toward data security. I would lurk on that committee meeting call and would sometimes voice my opinions.” Schwartz took it one step further by attending conferences, where he became more involved in the trade group. Shortly after, the late Ann Seki, former PCI program manager for Chevron Corp., asked Schwartz

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TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence

if he would assume the role of chairperson of the Data Security Committee when her term ended. Upon receiving corporate approval from Valero, Schwartz agreed. He considers Seki, who was posthumously inducted into the Conexxus Hall of Fame earlier this year, one of his greatest influences in the c-store industry. Becoming chairman of Conexxus’ Data Security Committee was an excellent decision, Schwartz said. “It gave me the opportunity to serve on the board of advisors for Conexxus and to get intimately involved on decision making in technology and standards in the industry, as well as put together some good educational programs.” Schwartz stressed that education is so vital in data security because although the biggest companies can have staff members whose job it is to focus on this technology aspect fulltime, smaller operators certainly cannot. “I wanted to make sure we took complicated topics like PCI and try to distill it down to what they needed to know,” he said. Schwartz later became a well-known name in the c-store technology industry by delivering speeches and moderating panels at several industry events. In fact, he will be presenting at the upcoming 2015 NACS Show in Las Vegas during an educational session on Oct. 11 entitled “Mitigating Card Systems Breaches.” “Kara Gunderson from CITGO and I are going to talk about things you can do to secure your systems,” he said. LIFE IN THE AIR FORCE

The Technology Executive of the Year award is not the first award Schwartz has received. He earned several while serving in the Air Force, where he also got his undergraduate degree in science in 1978. Upon graduation, Schwartz looked at what was most fun to him: security. So, he became a security police officer. “As soon as I started working, I had 80 people working under me in the nuclear missile field in Wyoming,” he recounted. “I did that for 17 years until

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I retired. It was very rewarding. “My last couple of assignments, I was a squadron commander,” he continued. “The last one was in Minot, N.D., where I commanded a unit of about 275 security specialists who were guarding nuclear assets around the state of North Dakota.” Schwartz, who grew up in Milwaukie, Ore., with two younger brothers separated by just two years and 11 months, wasn’t born with a love for technology. That came later in life because technology was in its infancy during his adolescent years. “I pre-date Bill Gates,” he said. “When I was a kid, my dad had to open the TV, pull the vacuum tube out, go to the hardware store and plug them into a tester device to see what was burned out.” Schwartz also recalls the early days of computers, when nobody could imagine the wonders data could provide for the c-store industry. “I played football on the computer,” he remembered. “But then, you had to input text. So you had a list of plays you could put in and based on algorithms, the computer would determine you gained five yards. It was that bad.” Schwartz now plans to retire for good in March. And yes, he still intends to keep his housekeeper. In addition to seeing his four children, Schwartz, who is about to celebrate his 23rd wedding anniversary, looks forward to spending more time with his 11 grandchildren, as well as having more time to watch his beloved San Antonio Spurs and Seattle Seahawks. Once he retires from Valero, Schwartz said he will miss the people at his company and in the industry the most. He specifically mentioned Marvin Burns, senior manager, I/S at Valero; Ed Collupy, executive consultant at W. Capra Consulting Group; Jenny Bullard, chief information officer for Flash Foods Inc.; Avsha Klachuk, director of marketing technology for Alon USA Energy Inc.; Patrick Lewis, co-founder and partner at Oasis Stop ‘N Go; and Conexxus Executive Director Gray Taylor as among the many in the industry he will truly miss. “I truly feel like I made a difference in the industry,” Schwartz concluded. Before retiring, he will receive his Technology Executive of the Year award at the CSNews Fuels & Tech Summit on Dec. 7 in Riviera Beach, Fla. CSN


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New & Improved

In its 42nd year, the NACS Show looks to reinvent itself By Danielle Romano

W

hen the 2015 NACS Show returns to the Las Vegas Convention Center Oct. 11-14, it will prove to be bigger and better than ever before. Now in its 42nd year, the show is getting ready to break records as it anticipates more than 23,000 attendees and 1,000-plus exhibitors, with expo space sizing up to 400,000 square feet. Each year, the NACS Show brings together convenience and fuel retailing industry professionals for four days of learning, buying and selling, and networking. At the expo, attendees are guaranteed to find the best and newest products and services, as well as new ideas through workshops and educational sessions, and a magnitude of networking opportunities. “The NACS Show allows retailers and suppliers to jumpstart their plans for the coming year,” said Jeff Lenard, vice president of industry advocacy for NACS, the Association for Convenience & Fuel Retailing. “The timing of the NACS Show in October is perfect. It allows retailers to incorporate new ideas, concepts, products and services they found at the NACS Show into their strategy retreats and planning for the new calendar year.” The NACS Show also gives suppliers access not only to the largest retail audience (convenience stores), but also direct access to buyers, Lenard added. “The NACS Show is one of the country’s premier buying shows, and consistently rates at or near the top in percentage of attendees with buying authority,” he said.

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REINVENTING THE WHEEL

Whether it is an operator’s first time at the event or their 10th, the NACS Show offers something for everyone. This year, it continues to reinvent itself with new offerings for attendees: New Exhibitor Area: To make it easier for retailers to discover new products and services, the designated New Exhibitor Area will feature only new-to-theNACS-Show exhibitors. There are more than 1,160 exhibitors expected at the 2015 NACS Show, of which 200 of them are first-timers, which is 65 more exhibitors than last year. The New Exhibitor Area will receive an extra hour of dedicated expo time each day. Four Days of General Sessions: NACS Show veterans are used to the traditional three days of general sessions and high-profile speakers, but this year the expo is breaking the mold by expanding with four full days of general sessions. Women’s Networking Forum: This debut session will provide attendees the opportunity to connect with other women in the convenience and fuel retailing channel. It is open to all female retailers seeking professional growth through networking and building relationships. Presenter Roberta Oster Sachs, leadership coach and Emmy award-winning journalist, will lead the forum. She’ll be joined by former NACS Chair Sonja Hubbard, CEO of E-Z Mart Stores and one of Convenience Store News’ 2014 Top Women in Convenience seniorlevel executive winners. Updated Technology Edge Event: Now in its second year, the Technology Edge program is partnering with


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Conexxus, the industry’s standards and technology organization, to bring more value, education and broader solutions to attendees. Over two and a half days, technology-professional attendees can benefit from specialized educational sessions, facilitated group discussions, networking opportunities and access to new tech products and solutions. MAXIMIZING YOUR EXPERIENCE

NACS Show attendees will be busy discovering new products, networking and learning best business practices. To help them maximize their experience even before they get to Las Vegas The MyShow Planner is designed to help attendees make the most and make the most of their time onsite, NACS is of their time onsite. introducing the MyShow Planner. With the MyShow Planner at their fingertips, Attendees can explore the 50-plus educational sessions showgoers can use their NACS login username and and schedule the specific ones they’d like to attend; password for access to a plethora of opportunities. browse exhibitor listings, new companies and save

Nothing General About These Sessions

Dynamic retailer and business/leadership speakers will take to the general-session stage Sunday, October 11 | 12:30 p.m. – 1:45 p.m. Chris McChesney is global practice leader of execution for Franklin Covey and the national bestselling author of “The 4 Disciplines of Execution.” For more than a decade, he’s led Franklin Covey’s design and development of these principles, as well as the consulting arm that has become the fastest-growing area of the company. Known for his high-energy and engaging message, McChesney has personally led many of the most noted implementations of the 4 Disciplines, including for the state of Georgia, Marriott International, Shaw Industries, Ritz Carlton, Kroger, Coca-Cola, Comcast, Frito-Lay, Lockheed Martin and Gaylord Entertainment.

Monday, October 12 | 10 a.m. – 11:15 a.m. Connie Podesta is an award-winning author, comedian and expert in the psychology of human relations, as well as sales and leadership. Not your typical motivational keynote speaker, Podesta motivates audiences differently by fueling them with exciting new ideas, mindsets, attitudes and solutions to empower them to tackle even the toughest challenges in today’s crazy, 24/7 world. She began performing comedy when she was 14 and never looked back; her humor allows her to tackle even the toughest issues organizations face with substance and style. She helps teams understand why it’s important to change behaviors, rethink attitudes, reassess old

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ideas and get on board to make things happen.

Tuesday, October 13 | 10 a.m. – 11:15 a.m. John Mackey, co-CEO and co-founder of Whole Foods Market, has led the natural and organic grocer to become a $14-billion Fortune 500 company with more than 400 stores and 87,000 team members in three countries. The company has been included on Fortune magazine’s “100 Best Companies to Work For” list for 18 consecutive years and ranked first in the food and drugstore industry as part of the magazine’s “Most Admired Companies” list. Mackey has also focused on building a more conscious way of doing business through the Whole Planet Foundation, Local Producer Loan Program, Global Animal Partnership and Health Starts Here initiative. He will discuss “conscious capitalism” and how a company’s higher purpose can effect stakeholder integration, leadership and culture.

Wednesday, October 14 | 8 a.m. – 9 a.m. “Ideas 2 Go,” since its inception in 1994, has featured hundreds of interviews with retailers from 38 states and five countries, showcasing the industry’s best practices. Each year, a new Ideas 2 Go program makes its debut at the NACS Show and attracts thousands of attendees looking for new ideas to implement in their stores.


time by adding them to the list of exhibitors they’d like to visit; and synch their MyShow Planner schedule with the NACS Show mobile app for nonstop access. Made available in August, the NACS Show mobile app navigates the shortest paths between attendees’ favorite exhibitors with the

interactive floor plan and enables them to view the complete schedule, review their personalized MyShow Planner agenda on the go, and stay in synch with the latest

show alerts and updates. The NACS Show mobile app is available for free download for iPhone, Android, iPod Touch, iPad and other web-enabled devices. CSN

By The NumBers 9,176 BUYERS attended the NACS Show in 2014 12.5 HOURS average time spent on NACS Show expo

1,167 exhibitors 199

frst-time exhibitors

85%

of retaile see new rs come to products

$19.7 MILLION the planned expenditure for a

retailer over the next year, based on what they saw at the NACS Show

400,000 net sq. f. of expo Source: NACS

WWW.CSNEWS.COM | SEPTEMBER 2015 | Convenience Store News 107


STORESPOTLIGHT Fresh & Easy

Wisening Up to Fresh Food’s Potential Fresh & Easy is reintroducing itself to customers as the “Smarter Market” By Renée M. Covino

T

here is fresh blood being pumped into Fresh & Easy. The newly christened “fresh food convenience store” — as Mike Evans, vice president of marketing, calls it — is being remodeled and reintroduced to customers as the

“Smarter Market.” After filing for bankruptcy in September 2013 and then transitioning to new ownership in November of the same year from London-based Tesco plc to Los Angeles-based The Yucaipa Cos.

Under new ownership, the Fresh & Easy chain has rationalized its store base and is redeploying assets to develop and grow into a “fresh food convenience store.”

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LLC, the Fresh & Easy chain, which operates in California, Arizona and Nevada, has spent much of its time and effort “transforming into a new business, focused on delivering a new vision of modern convenience,” Evans told Convenience Store News. In March, Fresh & Easy rationalized its store base and divested locations that did not meet the criteria of its new model of “modern convenience,” according to Evans, who said the move allows the company to redeploy capital into development and growth, including a 3,000- to 5,000-square-foot store model to provide a higher level of convenience and greater density. “The company has accomplished several major initiatives, including a massive renovation project and relaunch in Las Vegas with an all-new fresh food concept,” he relayed. This includes a new Fresh To Go hot food bar; a more open, modern feel and store layout; and a revamped product selection with lower fixtures and a more abundant selection of fresh food. The hot food bar is at the core of the in-store changes, featuring made-to-order food such as: • Sandwiches using upscale meats and cheeses prepared on La Brea Bakery artisan bread, and said to be ready in minutes;


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STORESPOTLIGHT Fresh & Easy

The former Tesco-owned small grocery chain now combines fresh produce with new features such as a coffee, espresso and tea bar.

• Fire Oven Pizzas that are hand-stretched and also ready in minutes; and • Hot soups made fresh in Fresh & Easy’s kitchen, served hot and ready to eat. Other in-store changes include: a coffee, espresso and tea bar; a smoothie machine; a self-serve beverage bar featuring draft soda, kombucha and freshly pressed

orange juice; a homeopathic and natural-remedies section with a health kiosk; and a natural baby section. Most recently, Fresh & Easy unveiled some of the first lines of USDA-certified organic muffins, mini muffins and cakes on the market, which join other Wild Oats-branded products sold exclusively at Fresh & Easy. Made locally in Southern California in small batches

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STORESPOTLIGHT Fresh & Easy

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The new Fresh & Easy is “a company built on fresh

ideas,” according to Evans. “Innovation is at the core of everything a Smarter Market does. From the hundreds of new, unique fresh products introduced this year, to eggs stamped with a laid-on date, to an in-store growler program and the first USDA-certified grab-and-go sandwiches and salads in America, Fresh & Easy is delivering its promise to be a destination for value and products that don’t exist anywhere else,” the VP of marketing stated. Regarding store design, Fresh & Easy is working with ADMI, the firm behind the design of the Apple Store, to design the Fresh & Easy store of the future. Using many of its Las Vegas stores as a test market to implement even more new ideas and concepts, “we are going to constantly fine-tune our ideas,” Evans maintained. One of the new ideas is its Click & Collect e-commerce service that allows Las Vegas shoppers to buy online and pick up the purchased items at the store. Like many of the concepts tested in Las Vegas, this is currently serving as a pilot for a potential chainwide rollout. CSN

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EXPERT’SVIEW

The Case for Making Women Happy everyone benefits from a female-friendly workplace

I

have a friend in the petroleum marketing industry with this mantra: “When momma’s happy, everybody’s happy.” Translation: When his spouse is happy, things get done. Life’s challenges are tackled with better results. Relationships grow stronger and everyone in the family has a By Joan Toth, safe and supportive place to grow, achieve Network of and be the best they can be. Executive Women It’s not a stretch to say, “When women are happy, everybody’s happy in your workplace, too.” Women and today’s millennials, in particular, want the same things at work. Both want to make a difference and feel valued. Both groups want greater work/ life balance. Both groups are more productive in an inclusive, collaborative workplace. Yes, women want equal pay for equal work. That’s a given. But attracting and keeping talented women and millennials takes more than money. A 2013 poll of 5,300 professional women conducted by LinkedIn found that women prioritize “flexible working arrangements” over “good remuneration/pay” as the most important factor when evaluating a job. They’re still concerned about the lack of investment in their personal development and lack of a clear career path, but they define “success” as achieving professional and personal balance. Research shows that millennials — male and female — have the same priorities and aspirations as working women. Today’s talent — tomorrow’s leadership — vote with their feet. When a company doesn’t match their values or accommodate their needs for flexibility and their desire for meaning, millennials will look for other options, like starting their own companies, according to a Bentley University study of 1,000 college-educated men and women born since 1980. A WorkplAce With No limits

Consider your company’s policies and workplace cul-

114 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM

ture. Are they family-friendly? Are they female-friendly? If your organization is undervaluing and underusing high-potential female employees, it’s driving away millennial talent. Because, as Bentley University found, millennials like women are family-oriented, want a life beyond work and seek a workplace where they can be authentic. The most successful convenience store operators are making progress in cultivating cultures that appeal to women and millennials — or to quote the Network of Executive Women (NEW) vision statement, “a workplace with no limits.” But there is much more work to be done. Like their older female peers, millennial women see themselves as having the experience, skills and desire to advance This is the third in a four-part series of exclusive educational columns by the Network of Executive Women (NEW), leading up to the 2015 Convenience Store News Top Women in Convenience awards in October. In addition to being a presentation sponsor for the Top Women in Convenience program, NEW and CSNews have partnered to develop this series of columns directed at helping corporate leaders drive more inclusive company cultures. More than 50 of the convenience store industry’s top female executives, managers and mentors will be honored at the secondannual Top Women in Convenience awards presentation, being held during the 2015 NACS Show in Las Vegas. SPONSORED BY:


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EXPERT’SVIEW to leadership positions. Six in 10 of those polled by Bentley University consider themselves “ambitious” (virtually the same share as men). But more male millennials than female millennials say their hard work is recognized by promotions, opportunities and compensation. And more women than men say their work is praised, but not rewarded. The study offers practical advice for creating a culture that attracts and retains millennials. These are the same changes NEW champions: • Let employees know their work matters. • Provide flexible work arrangements for men and women to spend more time with their families. • Offer parental leave to both parents in a positive and supportive manner. • Take an interest in the individual’s career aspirations by hiring, and supporting and sponsoring for career success. • Create a “work family” that engenders loyalty to the company. • Create multiple paths and flexible timeframes for

If your organization is undervaluing and underusing high-potential female employees, it’s driving away millennial talent. individuals to reach leadership positions. When the c-store industry creates a workplace culture that attracts and advances high-potential women, it creates a culture that attracts and keeps the best talent — of both genders, of all ages. When you solve for women, you solve for all. CSN Joan Toth is president and CEO of the Network of Executive Women, a learning and leadership community representing 9,500 members, 750 companies, 100 corporate partners and 20 regional groups in the United States and Canada. 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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EXPERT’SVIEW

Customer Mapping: A Road to Insights Prioritizing shoppers can turn information into something actionable

F

or convenience store operators, it is an ongoing challenge to determine the right mix of food and beverages to offer customers. The type of customers can vary widely by store, forcing retailers to constantly satisfy heavy users Low and not spend the A. Minimal Efort B. Keep Informed By Tim Powell, resources satisfying Think Research Ages 55-64 Millennial moms other shopper and/or & Consulting Less than high Professional females consumer segments. school education $150K+ Identifying the customer segments that frequent stores through Share of research and surveys is certainly C. Keep Satisfed D. Key Customers Visits a step in the right direction, but translating that information into SHIFT African Americans Female in general Males age 18-34 College graduates something actionable can be time Roller grill customers Pay-at-pump customers consuming, labor intensive and Hispanics Attended grad school potentially cost-prohibitive. One $25k-$49k $100k-$149k exercise that has proven successHigh ful is customer mapping. It serves as an output for quantitative data Low Level of interest High and also observable (or qualitative) insights. As the figure here shows, a variety of demographics is plotted on the quadrant based and/or product development. on their share of c-store visits (i.e., the last 30 days) Alternatively, consumers in box C are often the and level of interest (mostly observable, but with some most difficult to satisfy and manage. While this group, factual insights). This analysis is most useful when often female pay-at-the-pump customers and college related to an assessment of a specific development, graduates, may show only a passive interest in pursuch as expanding foodservice, as illustrated in the chasing foodservice, retailers can potentially reposiexample here of “Big A” convenience store. tion them into segment D by raising their interest. As plotted in the D box, “Key Customers” accept However, the caution for retailers is that those already current foodservice options by their high level of interoccupying segment D are not ignored or alienated to est and number of visits. Therefore, the group in this make way for the new users. segment should be a major consideration during the Similarly, the needs of customers/prospects in box formulation and evaluation of any new retailer strateB must be properly addressed — largely through gies, such as new menu options, daypart expansion information. Millennial moms, professional females

118 Convenience Store News | SEPTEMBER 2015 | WWW.CSNEWS.COM


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EXPERT’SVIEW and high-income consumers may not represent a large share of c-store visitors, yet they can be crucially important “allies” in influencing the attitudes of their peers. The caution here is that one bad experience can lead to a negative halo effect on the convenience store’s total retail experience. Finally, consumers who fall into box A show minimal interest in c-store foodservice purchasing and may only visit a c-store occasionally. While the resources for the remaining three quadrants should be proportional to their share of visits and purchases, consumers in segment A should not be overlooked. This group still has a voice, and thus lobbying power, over groups in the adjacent segments. Applying insights and analytics to make informed business decisions and deliver against critical business objectives can be resource and labor intensive. Using the mapping tool outlined here will help retailers better manage, analyze and synthesize the information that can lead to key decisions and ultimately action. This visual tool may also remove some of the guess-

Using the mapping tool will help retailers better manage, analyze and synthesize the information that can lead to key decisions and ultimately action. work out of the “science” of shopper behavior that can help influence store aesthetics, visual merchandising and store shop-ability, and increase traffic. CSN Tim Powell is founder and principal of Think Research & Consulting. Think is experienced in providing insights and actionable strategies to retailers looking to gain a competitive footing in an ever-changing industry. Contact Think at info@think-marketing.com. Powell has more than 20 years of consulting, research and sales experience across a variety of industries. Prior to Think, he worked for more than a decade with foodservice consulting firm Technomic. He can be reached at tpowell@think-marketing.com. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

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Spotlighting major industry events

Fun Vibe, Serious Purpose Second-annual Vapor Expo International takes on the burning issues around vapor A Convenience Store News Staff Report

J

une’s Vapor Expo International (VEI) event was evidence of the rapidly evolving world of vapor. Expanded with 20 percent more exhibitor space than in 2014, the second-annual show emitted a fun vapor vibe but with a somber purpose. “There’s a shift taking place; this is a serious business-to-business show that addresses the industry’s burning issues,” said Ed O’Connor, president and CEO of Tobacco Media Group International Inc., which produces the event. The two-day show kicked off with a legal/analyst double-header perspective, offering industry overviews from Bryan Haynes, a partner with Troutman Sanders law firm specializing in tobacco, and Bonnie Herzog, managing director of Wells Fargo Securities LLC. Haynes cut right to the chase with his take on what’s been weighing heavy on showgoers’ minds for over a year: the expectation for finalizing the Food and Drug Administration’s (FDA) deeming regulations proposed last April. “They said they’d hoped to Vapor Expo finalize them by June; my expectation is they will be finalized this International year, but then they still have to go June 17-18, 2015 through the White House Office Rosemont, Ill. of Management and Budget for review,” Haynes expressed. And he reminded the audience in tongue-in-cheek fashion, “there’s normal time, government time and FDA time.” Regarding Feb. 15, 2007, the so-called “grandfather date” of the pre-market tobacco application review process, Haynes believes there’s a “good chance” the FDA will change that for vapor products. “Every week, we hear about new products coming out, and innovation is the key to this industry,” Haynes stated, making the point that he believes the FDA understands that if they want to encourage “less risky” products, they also need to encourage more attractive and continually more advanced products. Haynes also said it’s important to note the deeming

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Vapor Expo International provided attendees with an opportunity to discuss serious business issues in a relaxed atmosphere.

regulations are only a “first step process, a foundational document” and that there will be more rules to come. He expects excise tax activity to start heating up soon as well. “There’s been proposals at the state level, but only two have passed,” he told the VEI audience. States are struggling over what is the fair and best way to maximize their revenue, weighing the various ways of taxing e-liquids, currently either as a percentage of the wholesale price or cost per milliliter. The industry will also continue to see proposals that limit youth access to vapor products, according to Haynes. “Contrary to popular belief, the status of the regulation in this industry is not the Wild, Wild West,” he cautioned. “A lot of regulation applies to you already, and you need to understand how [new regulation] will apply to you in the future.” Some of the ways Haynes advises the manufacturing community of the vapor industry to prepare and stay on top of regulation is to: • Compile ingredient lists; • Strengthen relationships with industry partners and suppliers; and • Continue to set and adhere to self-regulating standards.


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Companies also need to figure out who’s going to be responsible for compliance and “ideally, you will have that in a contract. Pointing fingers does not work,” he said. BEING PROACTIVE

Calling vapor a “very fast-moving category,” Herzog gave an update on the current marketplace. The global market for vapor products is expected to be $7.3 billion by the end of 2015, she said based on Wells Fargo’s independent vapor manufacturer survey. Other stats Herzog shared include: • There are more than 19,000 vape shops globally, of which more than half are in the United States. • 52 percent of convenience store retailers believe vape shops are negatively impacting their electronic cigarette sales. • Retailers believe greater regulation is needed for vape shops. • Vapor/e-cigarette category growth has moderated, growing 8 percent annually in the convenience channel. • Technology must improve for e-cigarette category growth to re-accelerate. VEI attendees were encouraged to be proactive in representing the industry to legislators and in adopting best practices in the manufacturing and retailing of vapor products. Retailers need to ensure they are buying from suppliers who are currently adhering to best practices, said Cynthia Cabrera, executive director of the SmokeFree Alternatives Trade Association. She took part in an industry association panel discussion alongside representatives from the Tobacco Vapor Electronic

Regulation Preparation Even though implementation of the final Food and Drug Administration (FDA) ruling on vapor products is expected to take years, experts speaking at the 2015 Vapor Expo International event advised the industry to stay on top of regulation preparation as much as possible by: • Compiling ingredient lists. • Strengthening relationships with industry partners/suppliers. • Figuring out who’s going to be responsible for compliance within the supply chain and nailing that down in a contract. • Continuing to set and adhere to standards. • Considering how the regulations will affect the business over the next one, three, five and 10 years, and strategizing accordingly. • Pushing away thoughts of “gloom and doom.” • Staying on top of cutting-edge industry technology and studies.

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Showgoers were urged to get involved in educating legislators to support efforts to conduct research on the health benefits of vaping and to adopt best-in-class business practices.

Cigarette Association, Tobacco Merchants Association, and the American E-Liquid Manufacturers Standards Association (AEMSA). If retailers are also manufacturing their own products, they need to find a good contract manufacturer or verse themselves in all the potential requirements that could come, Cabrera suggested. “Familiarize yourself with the different good manufacturing practices (GMPs) and with standards and procedures. If you are a retailer who is strictly selling, start vetting out your supply chain and make sure the people you are buying from will be here in the long term.” VEI attendees were urged, too, to get involved in educating legislators to support efforts to conduct research on the health benefits of vaping and ultimately adopt exemplary business practices. “Right now, there has been so much bad media out there that it’s scaring people away from these products and back to tobacco,” commented Lou Ritter, cofounder of AEMSA. “This industry can and needs to work together to fund research.” Anecdotal evidence will not fly on its own in this category, the panelists cautioned. “As a retailer, you can talk about your personal story and how you feel vaping benefited you personally, but be sure that you and anyone working at your store steers clear of offering medical advice,” Cabrera stressed to the VEI audience. Ultimately, the panelists agree the industry needs to get more involved to steer its own fate. What can be done? Join or initiate grassroots efforts to educate local and state legislators; support and tout research that will provide science-based data the FDA requires to understand vapor products; and hold your own company — and those who supply you — to the highest possible GMP standards in the absence of set standards that are, no doubt, coming. CSN


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ISSUE TWO, VOLUME FOUR

Like Father, Like Son Bill Lingle (right) and his son, Matt, partnered with Save-A-Lot to build their Pennsylvania grocery store lineup.

Advertorial


LIKE FATHER, LIKE SON

PHOTOS BY KAREN VIBERT-KENNEDY

A Pennsylvania duo partners with Save-A-Lot for ongoing growth.

Save-A-Lot Store Snapshot OPERATOR: The Lingle Corp. NUMBER OF STORES: 9 LOCATIONS: Pennsylvania FIRST STORE OPENING: 2011

Bill Lingle and his son, Matt, know a lot about supermarkets after decades of experience in the grocery business. Combining that industry knowledge with the benefits of Save-A-Lot's hard discount, carefully selected-assortment model, they say, has proved to be a winning formula. Peckville

South Williamsport Lock Haven Tyrone Johnstown

Altoona

WilkesBarre Hazleton

Somerset

Advertorial

ISSUE 2, VOL. 4

"Save-A-Lot allows us to compete with everyone on price and to offer the kind of value I believe everyone is looking for," says Bill Lingle, president of The Lingle Corp., their Pennsylvania-based company that operates nine Save-A-Lot locations throughout the state. > 2

WWW.SAVE-A-LOT.COM/OWN


And the endeavor has always been a true family affair, they add, emphasizing that their wives, Marie and Christine, have played key roles in the company’s success. “We would not be where we are without them,” says Bill Lingle.

The physical setup and the level of service Save-A-Lot provides are additional perks, they say. “Speaking as someone who comes from a conventional supermarket, I can tell you that Save-A-Lot stores are set up to be real plug-and-go concepts,” says Matt Lingle. “You can turn [a store] from an empty shell to a grand opening in 10 weeks!”

From baggers to business owners Bill Lingle made his initial foray into grocery retailing in 1972, when he began bagging groceries at Riverside, a local supermarket in State College, Pa. He has been in the business ever since.

Save-A-Lot also has a national advertising program in place, which owners can regionalize to suit their needs. “They offer great support in ways that let us market specifcally to our clientele,” says Matt Lingle. “We get direct results very quickly, and people are readily accessible and hands-on, even at the management level.”

“I was a stock clerk, cashier, night manager, manager and then district manager for the Penn Traffc Co.,” he says. Matt Lingle, now the company’s vice president, followed in his father’s footsteps. In 1993, he launched his career at a Penn Traffc Bi-Lo grocery store in DuBois, Pa., where he bagged groceries, stocked shelves, ran the cash registers and worked in produce. In 1995, he jumped at the chance to help his dad open Lingle’s Neighborhood Markets in Jersey Shore and Renovo, Pa.—conventional stores that carried the Penn Traffc banner. After the family debuted a third Lingle’s Neighborhood Market in 2003, this one in Watsontown, Pa., a change in wholesalers ultimately led them to Save-A-Lot. “When our contract with Penn Traffc expired, we took our three conventional supermarkets to SuperValu, the parent company of Save-A-Lot,” says Bill Lingle, noting that his family still operates those stores under the SuperValu banner today. On the move For 15 years, the three conventional SuperValu stores kept the Lingles busy. But they were always on the lookout for chances to grow.

Expansion possibilities

“SuperValu had talked to us about the opportunity to open a Save-A-Lot at some point in the future,” Matt Lingle recalls. “We fnally joined Save-A-Lot in 2010, and opened our frst location in 2011 in Lock Haven (Pa.).”

For now, the Lingles are satisfed with the nine Save-ALots they’ve opened since 2011, including stores in South Williamsport and Hazleton, Pa., that debuted in 2015. But that doesn’t mean they’ve stopped considering expansion.

Just what made the Lingles explore the Save-A-Lot format?

“We will continue to look at and strategize with Save-ALot—they have a terrifc real estate department and are always looking for places to grow,” says Bill Lingle, who notes that the size of a community isn’t a deciding factor for him. “If a site becomes available, Save-A-Lot does a nice job of doing studies and getting background about it.”

“After we got into Lock Haven, we were looking for a format to compete with the supercenters and the local [conventional] markets,” says Bill Lingle. “It is all right to be a low-cost operation, but Save-A-Lot creates value. We can give our customers a high-quality product for their food dollars—that’s what Save-A-Lot brings to the table.”

The economic conditions within a community, and whether the area can support a store with a hard discount format, are also important, says Matt Lingle.

“Save-A-Lot offers a low cost of goods, delivered to our store,” adds Matt Lingle. “Those things allow us to compete with national players like Walmart and regional players like Weis Markets. We can operate competitively because of the structure.” ISSUE 2, VOL. 4

“I work with Save-A-Lot on a weekly basis to discuss opportunities,” he adds. “We turn over a lot of stones and are always looking—if the opportunity is there, we will take advantage of the situation.” GE 3

WWW.SAVE-A-LOT.COM/OWN

Advertorial


With a proven hard discount, carefully selected-assortment business model, Save-A-Lot offers entrepreneurs the ability to compete effectively in today’s ever-changing grocery industry. And there’s never been a better time to be a Save-A-Lot licensee: Save-A-Lot is now offering a Licensed Store Incentive Program for all new and converted licensed stores. The amount of the incentive for each store will depend on the specific terms and financial considerations of each project, but will be a minimum of $200,000 per new store. If you have a proven track record of successful experience in grocery or other retail management, Save-A-Lot would like to talk to you about becoming a store owner. Here’s how you can take the next step toward a rewarding entrepreneurial opportunity as a Save-A-Lot licensee: ✱ Contact Eric Hunn, Save-A-Lot License Development, at eric.v.hunn@savealot.com or at (314) 592-9446. ✱ Visit the Save-A-Lot website at www.save-a-lot.com/own for more detailed information about becoming a Save-A-Lot owner.

The Save-A-Lot support advantage

Save-A-Lot by the numbers

✱ More than 1,300 stores nationwide ✱ 70% of locations owned and operated by independent licensed retailers ✱ Target neighborhoods with annual household income under $45,000 ✱ Average store size: 15,000 square feet ✱ Fewer than 2,500 SKUs per store ✱ 17 distribution centers across the country ✱ Prices up to 40% lower than conventional supermarkets

Advertorial

ISSUE 2, VOL. 4

✱ Market and consumer research ✱ Site selection and development assistance ✱ Owner, manager and associate training programs ✱ Advertising, public relations and information technology support programs ✱ Store opening assistance and ongoing operations support ✱ Integrated distribution center system

4

WWW.SAVE-A-LOT.COM/OWN

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CSN - Sept 2015  

CSN - Sept 2015