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VIEWPOINT By Don Longo, Editorial Director

Why I Love the Hall of Fame This year’s gala recognizes accomplishments of two longtime leaders and one bright newcomer

M

ajor League Baseball has the Baseball Hall of Fame. Auto racing has the NASCAR Hall of Fame Museum. And basketball has the Naismith Memorial Basketball Hall of Fame. In the convenience store industry, we have our own shrine to the leaders who have made lasting contributions toward building today’s $700-billion business segment. For the past 27 years, the Convenience Store News Hall of Fame has recognized c-store leaders from retailer and supplier companies of all sizes. The CSNews Hall of Fame is my favorite industry event of the year. From 1987 to 2004, we held our induction ceremony during a reception at the NACS Show. In 2005, we moved the locale to be in close proximity of the hometown of the retailer honoree so that he or she could more easily share the honor and recognition with other executives and managers of his or her company. Since then, we’ve been rotating our Hall of Fame ceremonies to different cities. Both retailer and supplier attendees appear to agree this traveling dinner format is preferable to the old cocktail reception at the NACS Show. “I really like this opportunity to commend those making a significant difference in the convenience industry,” said Bill Douglass, 2008 CSNews Hall of Fame inductee and CEO of Douglass Distributing Co., who added that the methodology of choosing inductees via a vote of retailer and supplier leaders adds credibility to the honor. 2010 Supplier Hall of Fame inductee Tom Joyce of The Hershey Co. added: “In today’s fast-paced world, we rarely take the time to recognize success. The

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 Profle, August 2012 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007

CSNews Hall of Fame ceremony is one of those times when the industry can come together to help honor a retailer and supplier for their efforts. Besides that, it is an opportunity to enjoy the people who we have worked with and help celebrate their hard work and success.” For comments, please contact Pat Cordle, the 2011 Don Longo, Editorial Director, supplier honoree from BIC at (201) 855-7606 or dlongo@stagnitomail.com. Corp., said the Hall of Fame is a “great event to recognize people in our industry that have made a career of contributions supporting their companies and the total industry.” This year, we’ll be honoring Scott Hartman, president and CEO of Rutter’s Holdings Inc., at our banquet to be held Nov. 5 in Hershey, Pa., not far from the retailer’s York, Pa., headquarters. From the supplier side, we will honor Stephen Brady, former vice president of business development at McLane Co. Inc. As in past years, we’ll also recognize our Grand Spirit Award for Community Outreach winner. And this year, we’ll present a newly-minted award, Retailer Executive of the Year, which will go to Kim Bowers, CEO of CST Brands Inc. She is being recognized for several notable achievements. With such a great lineup of leaders, pioneers and innovators, this year’s Hall of Fame promises to be the best yet. CSN

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 2007 Silver Ozzie Award, Folio: magazine Best Use of Typography, November 2006

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

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 3


CONTENTS OCTOBER 2014

VOLUME 50/NUMBER 10

40 | COVER STORY Continuous InnovationZ Sheetz drives customer satisfaction with a steady supply of new ideas and concepts.

INDUSTRY ROUNDUP 18 | Aloha Petroleum Explores Sale 22 | Walmart Rebranding Express Stores 24 | Community Service Spotlight 24 | Retailer Tidbits 26 | Eye on Growth 28 | Supplier Tidbits 30 | Marketing Moves 30 | In Memoriam

HOW TO DO WORLD-CLASS FOODSERVICE 62 | How to Source Your Foodservice Program 62 | Call to Action: Foodservice 101 64 | Call to Action: Foodservice 201 66 | Call to Action: Foodservice 301 72 | How to Do Chicken Right 72 | Call to Action: Foodservice 101 74 | Call to Action: Foodservice 201 | Call to Action: Foodservice 301

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by Stagnito Business Information, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright © 2014 by Stagnito Business Information. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

4 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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SINCE OUR RETURN: Category Leadership - A year after relaunch, Hostess® has sold $269 million in c-stores, while the remainder of the category has declined -$94 million.* Brand Leadership - Hostess continues to gain share, and is the #1 or #2 brand in over half of the U.S.** Top Sellers in Snacks - Hostess Chocolate Cupcakes and Twinkies® are the #1 and #2 selling snack cakes in the category.** Top Sellers in Breakfast - Hostess Donettes® are 3 of the top 4 selling mini-donuts in the category.** Quality Service - Flexible, Responsive, Best in Class supply chain partners. NACS - Come see us in the Acosta Booth (#1528) and get details on our new Hostess Partner Program and some exciting new products!


products. For answers to your category management needs, contact Customer Relations at Hostess Brands, LLC at 866-270-4314 or customer_relations@hostessbrandsllc.com. Or contact a convenience store distributor in your market. *Nielsen ScanTrack™, 52 weeks ending 8-09-14, Total US Convenience **Nielsen ScanTrack™, 12 weeks ending 8-09-14, Total US Convenience


CONTENTS

102 118 CATEGORY MANAGEMENT MOTOR FUELS

56 | The Rise of E15 More than 90 U.S. gas stations currently offer the fuel, with massive growth expected soon.

IN-STORE MERCHANDISING

112 | Taking the Seasons by Storm Seasonal items are the standout segment in the general merchandise category. SERVICES

FOODSERVICE

| C-stores Wake Up to Breakfast Competition Channel must improve consumersÕ perception of its breakfast programs. | Marketing Beverages Beyond Refills Dispensed beverage marketing programs can work harder to drive sales. TOBACCO

92 | No Smoking Jacket Required Capitalizing on an emerging trend, vape shops represent new competition. COLD VAULT

102 | Blurred Guidelines Alcoholic beverages represent promising sales opportunities, but state laws for convenience stores are not created equally. CANDY & SNACKS

106 | Nothing Standard About Snacking Consumers increasingly choose new options for between-meal munching.

8 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

| No More Soggy Sales Car wash activity is improving as operators think outside the traditional standards. 124 | Progress Along the Prepaid Path Prepaid products arenÕt getting the buzz of other c-store categories, but thereÕs plenty going on.

FEATURES TOP CHAIN PROFILE

36 | A Successful First Year Murphy USA is off to a strong start following its spinoff from Murphy Oil. MID-YEAR REPORT CARD

| So Far, So Good With the South leading the way, c-store sales this year are tracking slightly ahead of last yearÕs pace nationally. OPERATIONS

| Out of Sight, Not Out of Mind C-store operators balance environmentally friendly practices with the cost of investment.


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

BRAND MANAGEMENT

FEATURES TECHNOLOGY

134 | Under Attack What c-store retailers can do to try and prevent data breaches and cyberfraud. 142 | Who’s Most Effective on Social Media? Wawa, CaseyÕs and 7-Eleven lead c-store pack in building brand equity. 146 | Pumped-Up Foodservice Zarco USA uses at-pump technology to boost food and merchandise sales.

SATURATION STUDY

| Where Opportunity Knocks Economics, site availability and a host of other factors drive successful c-store development. 166 | Big Man on Campus C-store retailers see value in catering to the college crowd. 174 | 25 Years & Counting Bolla Oil celebrates milestone anniversary with a new franchise program and big growth plans.

DEPARTMENTS VIEWPOINT

3 | Why I Love the Hall of Fame This yearÕs gala recognizes accomplishments of two longtime leaders and one bright newcomer. 16 | Online TOC 32 | New Products

Group Brand Director (201) 855-7610

Michael Hatherill mhatherill@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 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 Renée M. Covino reneek@aol.com Tammy Mastroberte tmastroberte@gmail.com Michael Escobedo mescobedo@stagnitomail.com Debra Chanil dchanil@stagnitomail.com

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

President & CEO Harry Stagnito Chief Information Officer Kollin Stagnito Vice President & CFO Kyle Stagnito Senior Vice President, Partner Ned Bardic Chief Brand Officer Korry Stagnito Vice President/Custom Media Division Pierce Hollingsworth (224) 632-8229 phollingsworth@stagnitomail.com Production Manager Anngail Norris Human Resources Manager Sandy Berndt Strategic Marketing Director Bruce Hendrickson (224) 632-8214 bhendrickson@stagnitomail.com Vice President, Events John Failla (914) 574-5709 jfailla@stagnitomail.com Director, Conferences & eLearning Amy Walsh (781) 856-8381 awalsh@stagnitomail.com Director of Digital Media John Callanan (203) 295-7058 jcallanan@stagnitomail.com

CONVENIENCE STORE NEWS AFFILIATIONS Premier Trade Press Exhibitor

STORE SPOTLIGHT

| And the Survey Says… Shopper research leads Handy Mart to develop a new store prototype. EXPERT’S VIEW

| Is an Employee Ownership Plan Right for You? ESOPs can be much more than just Òfeel goodÓ plans for c-store chains.

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

Richard Mione GPM Southeast Rick Crawford Green Valley Grocery

Ian Johnstone Cenex Zip Trip

Matt Paduano Nice N Easy Grocery Shoppes

Jon Urbanik CST Brands Inc.

Jonathan Polonsky Plaid Pantries Inc.

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

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

14 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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CSNEWS.COM ONLINE EXCLUSIVE

TOP 5 Daily News Headlines The most viewed articles online.

In the Pits With Hunt Brothers Pizza Racing

LOGIC’s President The vapor products landscape may be shifting with the entry of Big Tobacco and the popularity of open-system vapor/tanks/mods, but LOGIC Technology Development LLC’s President Miguel Martin still sees huge potential in electronic cigarettes. “Any store that sells cigarettes responsibly to adult consumers can sell electronic cigarettes,” he said during a recent conference call.

Convenience Store News Editor-in-Chief Linda Lisanti got an immersive look at the world of NASCAR sponsorship courtesy of Hunt Brothers Pizza. For the 2014 racing season, the brand is the primary sponsor of driver Kevin Harvick for four Nationwide Series races and an associate sponsor of Harvick and the No. 4 team of Stewart-Hass Racing in the Sprint Cup Series. CSNews got a behind-the-scenes race day tour that included an all-access pass to the garage area; signing the start/finish line; checking out the fanfare in the “activation area” surrounding the track; and enjoying the race from the pit box, seated right behind Harvick’s crew chief. For more exclusive stories, visit the Special Features section of www.csnews.com.

Alimentation Couche-Tard Inc.’s completed acquisition of 13 convenience stores from Garvin Oil Co. and its pending purchase of 55 locations from Tri Star Marketing Inc. is just the beginning. The c-store operator has a strong balance sheet and is “actively looking for opportunities of various sizes,” said President and CEO Alain Bouchard.

PRODUCT HIGHLIGHT

The most viewed New Product online.

Convenience stores have been slow to embrace a key component of convenience in the world of quick-service restaurants: the drive-thru window. However, Sheetz Inc. has added the feature to 44 locations to date and is seeing the rewards.

The three new states Casey’s General Stores Inc. recently entered — Arkansas, Tennessee and Kentucky — are outperforming the rest of the retailer’s operating footprint in terms of both fuel sales and in-store merchandise sales, Bill Walljasper, the company’s chief financial officer, remarked during Casey’s 2015 fiscal first-quarter earnings call.

POLL

5 | Next Step for FDA’s Deeming Regulations With the closing of the public comment period, the Food and Drug Administration is moving on to the next phase of its bid to regulate additional tobacco products, including electronic cigarettes and cigars.

How will the merger of Reynolds American and Lorillard impact c-store operators?

It will have a negative impact

45%

It will have no impact It will have a positive impact

29% 16 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Snickers Xtreme Snickers Xtreme features a single layer of crunchy roasted peanuts and smooth caramel blended and enrobed in milk chocolate. For the first time, Snickers offered consumers the chance to select the name of a new product through a vote on the brand’s Facebook page, and Snickers Xtreme was the winner. The new candy bar will be available at retailers nationwide in 2015 in a 3.56ounce “2 to Go” format that’s ideal for sharing or saving some for later, according to the brand. Mars Chocolate North America Hackettstown, N.J. (908) 852-1000 www.mars.com

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INDUSTRYROUNDUP FAST FACT

Total convenience store industry sales were up about half a percent for the frst six months of this year vs. the frst six months of 2013. Source: Convenience Store News Mid-Year Report Card (page 48)

QUOTABLES

“We’re careful not to get complacent. We always have many products in the pipeline in an effort not to get stale.” — Joe Sheetz, Sheetz Inc. (page 40)

Aloha Petroleum Explores Sale Hawaii retailer taps Macquarie Capital to review strategic options

A

loha Petroleum Ltd. is shopping itself around. The Honolulu-based retailer tapped New York-based Macquarie Capital to help it review its strategic alternatives, which could include selling the company. Other strategic options may include strategic joint ventures or partnerships, the sale of a portion or all of the company’s stock, and continuing to operate the company in its current form. Sources put a possible price tag at $350 million. This figure is more than triple the $107 million Par Petroleum Corp. is paying to acquire Koko’oha Investments Inc., the parent company of Mid Pac Petroleum LLC. That acquisition was expected to close late in the third quarter. Mid Pac Petroleum is the exclusive licensee of the 76 brand in Hawaii, and operates or distributes through more than 80 retail sites and four terminals across the state. Par Petroleum is the parent company of Hawaii Independent Energy LLC. Aloha Petroleum is the largest independent gasoline marketer and one of the largest convenience store operators in Hawaii. However, according to news reports, the company is finding growth opportunities in its core business in the state to be limited. “Aloha Petroleum has a remarkable history of growth in the Hawaii market, which resulted from strategic decisions to build new stores and terminals, as well

18 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

as through acquisitions such as the Shell Hawaii operations in November 2010,” said Aloha Petroleum President and CEO Richard Parry. “Macquarie Capital’s global expertise will assist Aloha in determining our next strategic directions that will best position our company for the future. The review will continue for the near term.” In a 2010 deal, Aloha Petroleum acquired Equilon Enterprises LLC, doing business as Shell Oil Products US, petroleum assets in Hawaii. The sale included 32 retail sites, five fuel distribution terminals and associated assets on Oahu, Maui, the Big Island and Kauai. It also included the rights to supply another 11 Shell-branded independent retail sites. Aloha Petroleum continues to operate these retail locations under the Shell brand as part of a long-term agreement. Macquarie Capital’s parent company, Macquarie Group, owns Hawaii Gas, the state’s only franchised gas utility. Aloha Petroleum Ltd. markets through almost 100 Shell-, Aloha- and Mahalobranded fueling stations and 40 Aloha Island Mart convenience stores throughout the state.


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INDUSTRYROUNDUP

Walmart Rebranding Express Stores The 21 locations will now carry the Neighborhood Market banner

W

al-Mart Stores Inc. is discontinuing its Walmart Express banner. The Bentonville, Ark.-based company has decided to convert all of its Express stores to mini Neighborhood Market locations. As a result, the Express banner will be shelved, with all new small stores in the future branded Neighborhood Market. The 21 existing Express stores will be converted to the Neighborhood Market banner in coming months.

In an internal company memo distributed in early September, Judith McKenna, chief development officer for Walmart U.S., said: “Wal-Mart’s research into customers’ habits showed that its small Express stores were serving the same purpose as its larger Neighborhood Market stores. … While testing the Express format, the company learned that customers rely mostly on the stores for grocery fill-in trips, last-

22 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

minute dinners and prescription pickups. It’s the same with the Neighborhood Market.” Walmart debuted its Express format in mid-2011 with the first location opening in rural Gentry, Ark. This discontinuation comes seven months after the retailer announced it was expanding its Express units beyond the initial three-market pilot program. In February, the company expanded its original capital forecast, provided in October 2013, and said it expected to add approximately 270 to 300 small stores during this fiscal year, doubling its initial forecast of 120 to 150 stores. “Customers’ needs and expectations are changing. They want to shop when they want and how they want, and we are transforming our business to meet their expectations,” Bill Simon, president and CEO of Walmart U.S., said at the time. “Customers appreciate the broad assortment of our supercenters for their stock-up trips, as well as our small-store formats for fill-in trips. “By unlocking this growth opportunity and further combining our supercenters and small-store formats with an unlimited selection available through e-commerce, we provide our customers with anytime, anywhere access to our brand,” Simon continued. As a result of this more aggressive plan, Walmart U.S. projects to end fiscal year 2015 with net retail square footage growth of approximately 21 million to 23 million square feet across all formats vs. its original projection of approximately 19 million to 21 million square feet. The projected capital expenditures and square footage details exclude the impact of future acquisitions. In total, across its supercenter and small-store formats, Walmart U.S. plans to open 385 to 415 units in fiscal 2015, adding to the more than 4,000 stores it currently has open.


INDUSTRYROUNDUP

community service spotlight n C-store retailers joined the Ice Bucket Challenge to

raise awareness for amyotrophic lateral sclerosis (ALS) and raise money for the ALS Association. Participating in the fundraiser were Kum & Go CEO Kyle Krause, Casey’s General Stores CEO Bob Myers, Nice N Easy Grocery Shoppes President and CEO Fran Duskiewicz, Pilot Flying J CEO Jimmy Haslam, and Stewart’s Shops President Gary Dake. Cumberland Farms Inc. also donated 20 cents from every bag of ice purchased from Aug. 14 through Labor Day to the ALS Association. n CITGO Petroleum Corp. launched “CITGO Caring

for Our Coast,” a yearlong environmental conservation and restoration campaign in coastal regions. The

campaign kicked off Aug. 29 with a wetland restoration project at the Audubon Louisiana Nature Center. n BP served as a leading cor-

porate sponsor of the Valor Games Midwest, a regional competition that invites more than 200 wounded, ill or injured veterans and active-duty service members to challenge and support each other. The games took place Aug. 20-22. n Green Valley Grocery contributed to the Las Vegas

Global Economic Alliance’s “Engage Southern Nevada” investment campaign. The program launched in fall 2013 and is a three-year effort to raise $7.5 million for regional economic development.

retailer tidbits n Casey’s General Stores Inc. broke ground on its second

distribution center. The 250,000-square-foot site is being built in the Vigo County Industrial Park in Terre Haute, Ind., and will support the chain’s growth into Tennessee, Kentucky and further south. n VERC Enterprises offered CVS customers 50 cents off

a pack of cigarettes with their CVS ExtraCare loyalty card. The offer was good until Sept. 30. The discount came one week after CVS Health ended tobacco sales at all its stores on Sept. 3.

States and Canada by the end of the year. 7-Eleven first invested in Belly through its 7-Ventures program in 2013. n QuikTrip was named North

America’s favorite c-store chain in a Market Force Information study. Wawa, Sheetz, RaceTrac Petroleum and Speedway rounded out the top five brands, while national brands Chevron, BP and 7-Eleven ranked lower on the list.

n As a Hero Sponsor for this year’s

Medal of Honor Knoxville Convention, Pilot Flying J offered free coffee and commemorative travel mugs. The event took place Sept. 10-13.

n MAPCO Express Inc. teamed up with PayPal to

launch the MY MAPCO app so customers can make fuel purchases through their mobile devices. The MY MAPCO app gives customers 5 cents back on every fuel gallon filled using the app.

n 7-Eleven Inc. is expanding its partnership with

loyalty platform Belly to offer rewards to shoppers for repeat purchases. Belly is expected to be in place at more than a quarter of 7-Eleven stores in the United

24 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

n BP will introduce a new technology solution and an

associated offer for BP-branded retailers in early 2015, with deployment expected to begin in mid-2015. The solution will be deployed at the point-of-sale, inside PIN pads, electronic payment server, forecourt controller and network.


©2014 Altria Group Distribution Company. For Trade Purposes Only.


INDUSTRYROUNDUP

eye on growth n Susser Holdings Corp. officially

became a subsidiary of Energy Transfer Partners LP on Aug. 29, four months after the two companies announced a merger. Susser stockholders approved the deal with approximately 99 percent of the shares voted in favor of the merger. Susser ceased to be a publicly traded company and its common stock discontinued trading on the New York Stock Exchange. n Wawa Inc.

opened its 400th c-store offering fuel on Sept. 5 in Fredrick, Md. Two weeks later, the retailer celebrated its 50th location in Florida. Wawa plans to open another 50 stores in the Sunshine State during the next two years. n Marathon Petroleum Corp. entered

into a loan agreement with a syndicate of lenders that will provide it with $700 million to help pay for Speedway LLC’s $2.8-billion purchase of Hess Retail Holdings LLC. The loan will mature in five years following the funding date. n QuickChek Corp. will have a soft

opening of its first store on Long Island, N.Y., this month, with a grand opening planned for Oct. 27. The retailer has plans to build up its Long Island footprint to as many as 20 or 30 stores in the future. n 7-Eleven Inc. is looking for fran-

chisees for 85 percent of its convenience stores in the Baltimore and Washington, D.C., markets. There are about 30 stores available for franchise in the area.

ph: 800-776-8834 | fax: 920-432-1918 | www.cdlatm.com 26 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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INDUSTRYROUNDUP

supplier tidbits n The Veeder-Root Co. acquired

FuelQuest Inc., a Software as a Service (SaaS) provider for retail and commercial fueling logistics applications. Terms of the transaction were not disclosed. ®

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n Tyson Foods Inc. and The Hillshire

Brands Co. completed their $7.7-billion merger. The newly combined company has more than $40 billion in annual sales. n Reynolds American is rolling out

n The Federal Trade Commission

asked Reynolds American Inc. and Lorillard Inc. to submit more information on their pending merger. This second request comes as part of an antitrust review. n Anheuser-Busch is bringing

Zonnic, a nicotine replacement therapy gum, nationally. It will be available at major convenience/gas retailers as part of the first wave of expansion. Available in mint, fruit and cinnamon flavors, in two different nicotine strengths, Zonnic is being sold in packages of 10 pieces.

its first Mexican lager to the n Merchant Customer Exchange

unveiled its new mobile payment network, CurrentC. It has already launched in private pilot mode in select locations across the country. The private pilot will expand through 2014, with regional and national rollouts to follow in 2015.

wanted ar fingertips. Access training programs for MarkTen® e-vapor through APT, a new kind of training website fr to insightsc3m.com.

United States. The beer giant will sell Montejo lager in bars, restaurants and retail stores in California, Texas, Arizona and New Mexico. n Isis Wallet is rebranding to

Softcard. Small traces of the Isis name will be visible for a short time as the company launches the updated Softcard app.

n Coors Light launched its “Kick

Off Every Rivalry With A Cold One” football promotion. The brewer will host Coors Light Rivalry Tailgates at the Red River Showdown on Oct. 11 and the Iron Bowl on Nov. 29, and Coors Light-branded vehicles will also tour select markets. Retail accounts in key football towns will feature Coors Light Tweet Walls.

n The Hershey Co. refreshed its

corporate brand, including debuting a new logo. The new design

underscores its evolution from a predominately U.S. chocolate maker to a global confection and snack company. BM109 | ©2014 Nu Mark LLC. For T . MarkTen and related design marks are trademarks of Nu Mark LLC.

28 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

n Rich Products Corp. opened

a new multi-use Innovation Center and Atrium, following an $18.5-million renovation project at its Buffalo, N.Y., headquarters. Customers/operators can come for group product demonstrations or schedule one-on-one meetings where Rich’s team of culinarians can provide solutions for specific programs.


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Visit www.SplendaFoodService.com/mine or call 410.268.0030 ext. 259 to take advantage of your FREE 500ct. of SPLENDA® NO CALORIE SWEETENER packets. (While supplies last)

*NPD Group SPLENDA® Brand Study Revised, 2012

© McNeil Nutritionals, LLC 2014 | Fort Washington, PA, USA | All rights reserved.


INDUSTRYROUNDUP

marketing moves n Kum & Go

marked its 55th anniversary in September by offering a small coffee for 55 cents every Tuesday during the month. In addition, the retailer offered a different 55-cent coupon daily through its mobile app. n Pilot Flying J promoted its “Team

Pete” program at The Great

off an “Every 7th Cup Free” coffee rewards program through its 7-Eleven mobile app. n The Pantry

Inc.’s Kangaroo Express named Cheryl Anthony of Gainesville, Fla., the official winner of its “Double Salute” patriotic photo contest grand prize. The contest honored those that displayed their patriotic pride this summer. n CHS Inc., parent company of the

Cenex fuel brand, purchased the naming rights to the $63-million St. Paul Saints ballpark stadium.

American Trucking Show in August. The driver wellness movement, designed by drivers, encourages healthy living choices. n 7-Eleven offered a small cof-

fee for 50 cents at participating stores Sept. 3-14. It also kicked

Currently under construction, CHS Field will hold 7,000 seats and is scheduled to open in May 2015.

in memoriam Sam Thompson Jr., former NACS president (1973-74), died Aug. 12 at the age of 85, in Copley, Ohio. During his time as president of the NACS board of directors, he was instrumental in establishing the convenience store Educational Council. Additionally during his tenure, the association’s annual meeting offered an Equipment Exhibit — the first NACS expo. That year, under Thompson’s leadership, the board also approved a plan to keep one year’s worth of revenue in cash reserves. A graduate of Colgate University, Thompson served two years in the U.S. Air Force. After the military, he worked at supermarket chain Grand Union and earned a master’s degree in food distribution from Michigan State University. He subsequently joined Pik-Quik convenience stores. During his career, he also worked at The Kroger Co., Li’l General and served as president of Lawson Milk Co.

30 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


NEWPRODUCTS Blue Moon Cinnamon Horchata Ale

Totino’s Pizza Chips

Blue Moon Cinnamon Horchata Ale is inspired by the traditional and popular Latin American drink known as horchata. Crafted with cinnamon, Belgian dark candy sugar and longgrain rice, Cinnamon Horchata Ale delivers a subtle sweetness and smooth, creamy fnish. A limited supply of the brew is available in six-packs in select cities in Texas, California, New York and Colorado.

Totino’s Pizza Chips combine the favor of pizza with the crunch of a light and crispy chip. They are available in two popular pizza varieties: Pepperoni and Cheese. Totino’s Pizza Chips are exclusive to the convenience channel, according to maker General Mills. Each 1.25-ounce package has a suggested retail price of $1.49.

Blue Moon Brewing Co. Chicago (800) 253-6666 www.bluemoonbrewingcompany.com

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

Alpha G3 Brewer With FreshTrac

BBQ Pork Roller Rib

The Cur tis ALP3GT Brewing System with FreshTrac technology eliminates the need to manually oversee coffee freshness using hanging timer rings or marking devices. FreshTrac includes a fashing, visual indicator to monitor the freshness of coffee right from the point of brewing. Freshness settings, which can range from 10 to 120 minutes, are transmitted to the FreshTrac receiver that conveniently snaps on to any Cur tis decanter handle.

AdvancePierre Foods introduced the BBQ Pork Roller Rib, infused with a proprietary blend of sweet and tangy barbecue seasonings and juicy sauce. This new product, intended for the roller grill, has a 14-day refrigerated and 12-month frozen shelf life.

Wilbur-Curtis Co. Inc. Montebello, Calif. (800) 421-6150 www.wilburcurtis.com

AdvancePierre Foods Cincinnati (800) 969-2747 www.advancepierre.com

Voodoo E-Vapor Merchandisers Kretek International Inc. unveiled a new series of Voodoo acrylic displays and prepacked merchandisers. Choices range from a complete line of prepacked, six-count e-liquid and disposable e-vaporizer display cartons, to 74-count and 144-count permanent acrylic Voodoo merchandisers with up to 17 different SKUs of e-liquids, e-pens and accessories. Kretek International Inc. Moorpark, Calif. (800) 358-8100 www.kretek.com

32 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


Your cold vault is the #1 reason customers come into your store*. More choices and opportunities for profit, from the World’s #1 Beverage Company!**

®

Coca-Cola offers more top beverage brands, shopper insight and merchandising support to help drive more traffic and profit into your stores.

Go to CokeSolutions.com/c-store and discover new ways to get more sales from your cold vault. Visit us at the NACS Show, booth #3838

* NPD CSM, 2nd QTR 2012 ** 2013 Beverage Digest Fact Book

© 2014 The Coca-Cola Company, “Coca-Cola” and the Dynamic Ribbon Device are registered trademarks of The Coca-Cola Company.


NEWPRODUCTS King Edward VII Cigarillos

Narrow Footprint Reach-In Case

Swisher International introduced King Edward VII Cigarillos. Named for the ruler of early-1900s Great Britain, these cigarillos are hand-rolled in a natural Connecticut shade wrapper and have a rich, royal taste, according to the company. Available in two blends — vanilla and natural — the cigarillos are offered at an affordable buy two, get three price and are packed in resealable pouches for freshness.

Hussmann Corp. introduced the Freedom Line, a narrow footprint reach-in case designed for small-format stores. Available for both low- and medium-temperature applications, the new reach-in case fts easily through a standard 80-inch by 36-inch doorway for fast loading and installation. The reach-in also offers low energy costs, merchandising opportunities and the fexibility of topmounted or remote refrigeration, according to Hussmann.

Swisher International Jacksonville, Fla. (800) 874-9720 www.swisher.com

Hussmann Corp. Bridgeton, Mo. (314) 291-2000 www.hussmann.com

LET’S TALK SEASONS. 34 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


Nesquik Girl Scouts Cookie Beverages Nesquik Girl Scouts Thin Mints and Caramel Coconut beverages will hit shelves this fall for a limited time. The 14-ounce beverages combine low-fat chocolate milk with two of the most popular favors of Girl Scouts cookies, according to Nestlé USA. Nestlé USA Solon, Ohio (440) 349-5757 www.nestleusa.com

PriceStrat Version 5.4 KSS Retail, from dunnhumby, unveiled a major update to its PriceStrat price and promotion optimization solution for merchandising and category management teams.

With the new Automated Pricing module available in PriceStrat 5.4, merchants can seamlessly bring in updated costs or competitive data from third-party sources and then, according to predefned pricing policies, execute price changes, the company stated. KSS Retail Inc. Irvine, Calif. (866) 746-7180 www.kssretail.com

Cheez-It Grooves Cheez-It Grooves are thin, delicious crackers with grooves for a lighter, crispier eating experience, according to the Kellogg’s Convenience Team. Available in two tangy favors, Zesty Cheddar Ranch and Sharp White Cheddar, Cheez-It Grooves offer a unique texture and crunch that separate this snack from typical potato chips. Like all Cheez-It products, Grooves are made with 100-percent real cheese and quality ingredients, the company noted. Kellogg’s Convenience Team Elmhurst, Ill. (877) 511-5777 www.kelloggsconvenience.com

HERSHEY BRANDS DRIVE THE SEASONAL CELEBRATIONS. With the Hershey portfolio, you have even more reasons to celebrate during Valentine’s Day, Easter, Summer, Halloween and the Holidays. Our iconic brands play a critical role in helping consumers celebrate the traditional rituals they hold dear. So if you want to own seasonal sales, let’s talk!

Join us at the NACS Show, Booth 3826.

www.hersheysconvenience.com

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 35


TOPCHAINPROFILE Murphy USA Inc.

A Successful First Year Murphy USA is off to a strong start following its spinoff from Murphy Oil By Brian Berk

Large-format Murphy Express stores span 1,200 square feet or more.

36 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Photos by Mark Steele Photography

M

urphy USA Inc. has a business model that’s difficult to replicate since many of the El Dorado, Ark.-based company’s stores are strategically positioned in the parking lots of Walmart stores. This means the convenience store retailer has no lack of store traffic and can offer cross-marketing deals with the big-box retailer that few competitors can match. After being spun off from Murphy Oil Corp. on Sept. 1, 2013, Murphy USA President and CEO Andrew Clyde set forth a three-step plan for the new independent company: • Grow organically; • Diversify its merchandise mix despite operating some smaller legacy stores; and • Remain committed and engaged in the fuel category. “Let’s be clear,” Clyde said during Murphy USA’s Analyst Day in April. “Ninety-nine percent of our

Murphy USA’s goal is to create an enticing and memorable customer experience in its stores.

customers are Walmart’s customers. We are there to provide low-cost fuel and other items to those customers as part of the overall value proposition. So, in a competitive world where Murphy USA stores offer gasoline and have programs, we need to be consistent with all programs.” The operator of 1,035 Murphy USA sites and 193 Murphy Express stores is sticking to these three tenets as it begins year two as a public company. Regarding organic growth, the company opened nine new stores in its second quarter ended June 30, and another five as of early August. The convenience store retailer also broke ground on 18 new stores in August alone. “We’ve been pretty much opening one new store per week,” Clyde said. Whether it’s a new large-format Murphy Express location of 1,200-plus square feet or a legacy store redesign, the goal is to create an enticing and memorable customer experience. The retailer is partnering with Chute Gerdeman to perform many


©SFNTC 4 2014


TOPCHAINPROFILE Murphy USA Inc.

of these redesigns and new builds, aimed at providing customers a “fast, efficient and fresh” layout. As of press time, the Columbus, Ohio-based design firm had implemented this approach at 76 Murphy USA stores. “The new store design needed to convey speed and efficiency so that customers knew it would be a truly convenient option for them,” explained Adam Limbach, Chute Gerdeman’s vice president of brand communications, who heads up the Murphy USA design team. “As a result, basket size increased as well as more food and beverage purchases.” The rebuilding efforts are paying off. In-store merchandise sales have been gangbusters, led by robust results from Chute Gerdeman has built or redesigned 76 Murphy USA stores intended to provide a fast, dispensed beverages, salty snacks and effcient and fresh layout. alternative snacks. In its most recent quarterly results, Murphy USA saw a standalone public company. in-store merchandise sales increase by 6.3 percent year “We are proud of the strong foundation we built, as over year. well the value we are building for shareholders,” the As for the third tenet, regarding fuel, Murphy USA chief executive stated. initiated its Walmart 15-cent/10-cent fuel discount proThe retailer certainly has the numbers to back up gram on May 18 and concluded the program just after this claim, earning a net profit of $82.1 million for the Labor Day. The popular promotion positioned Murphy first six months of 2014. USA well in its fiscal third quarter, noted Clyde. Of course, the company cannot rest on its laurels. Plenty more work must be done to propel Murphy USA in the future, but the c-store retailer is surely off MOVING FORWARD to a strong start. CSN Murphy USA is definitely pleased with its first year as

Dispensed beverages, salty snacks and alternative snacks are leading the way in in-store merchandise sales growth.

38 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


COVER STORY

Continuous InnovationZ RetaileR innovatoR oF the YeaR

Sheetz drives customer satisfaction with a steady supply of new ideas and concepts By Don Longo

W

hat a year it’s been for Sheetz Inc. The Altoona, Pa.-based convenience store chain has continued to grow, both in stores and number of employees. Sheetz is on pace to open 28 new stores in its 2014 fiscal year and rebuild eight existing ones. The company’s vaunted Sheetz culture also shined as the retailer made Fortune magazine’s “100 Best Companies to Work For” list for the first time, coming in at No. 87. In addition, Sheetz began building its second Sheetz Distribution Center — including a Sheetz Bros. Kitchen commissary and bakery — which should start deliveries to stores in December. And, early next year, the retailer expects to open its first fuel-free Sheetz location on the campus of West Virginia University. From its humble beginnings as a dairy store in rural Pennsylvania, Sheetz’ history has been one of continuous retail innovations that have shaped the company into one of the largest and most-admired convenience store chains in the world. For its leadership in such critical areas as employee wellness, education and empowerment, giving back to the community, store growth and innovative retailing concepts, Convenience Store News ediSheetz maintains an iconic culture and was listed on Fortune magazine’s “100 Best tors selected Sheetz as its 2014 Retailer Companies to Work For” list for the frst time this year. Innovator of the Year. Previous winners of this award were Wawa Inc. in 2013 and RaceTrac Petroleum Inc. in 2012.

40 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


Convenience stores have been slow to embrace a key component of convenience in the world of quick-service restaurants: the drive-thru window. however, Sheetz has added the feature to 44 locations to date and is seeing the rewards: 10 percent of the company’s sales come through the drive-thru window.

“A big part of our success has been our ability to innovate within our industry, so we like to hire people who have a pioneering spirit,” CEO Joe Sheetz said in an exclusive interview with CSNews. “To succeed at Sheetz, you have to be a high-energy person. You have to be able to make real connections with our customers and your co-workers.” Another aspect of the company DNA is competitiveness. “Sheetz people are very competitive,” said Joe Sheetz. “We call it ‘driven to win.’ Dependability is important to us, as is respect for our customers, our business partners and each other.” The c-store retailer remains focused on the needs of its customers through a concept called Total Customer Focus. “The customer is at the center of everything we do here at Sheetz,” said the chief executive. “Total Customer Focus (TCF) has long been the mantra that all Sheetz employees use to guide their work, day in and day out. As food has become the center of our business, we’ve started focusing

more heavily on that restaurant-style hospitality in our training and employee development.” When it comes to business decisions, the voice of the customer is always a guiding force. Sheetz relies on its Customer Insightz Team and feedback from its store employees to take the pulse of customers’ needs from a store operations perspective. This focus on people and customers has had a direct positive impact on the retailer’s expansion efforts, particularly into its newest state, North Carolina. “Our success there [in North Carolina] has reinforced our belief that our people make us what we are,” said Joe Sheetz. “Thanks to some talented and hard-working Sheetz folks who agreed to relocate and successful recruiting efforts in the local areas, we were able to establish our brand and our culture fairly quickly in North Carolina. In branching out so far from our hometown, we learned just how strong our operations, people and culture are.” From a customer perspective, Sheetz learned that

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 41


COVER STORY

while there can be slight nuances in regional customer preference, some things are universal. Customers everywhere want fast and friendly service, as well as quality products in clean and convenient locations. It’s obvious that innovation is baked into the Sheetz culture. “Every day, we come to work with the vision of creating the Sheetz that will put the Sheetz as we know it today out of business,” said the executive, who assumed the CEO role last October. “We’ve hired people who are creative and passionate about food, who embrace our fast pace and the pioneering mentality we have at Sheetz.”

a second Sheetz Distribution Center — including a Sheetz Bros. Kitchen commissary and bakery — is expected to start deliveries to stores in December.

Reflections on innovation & Future Challenges Convenience Store News: Please define the role that “innovation” plays in Sheetz’ strategy. How does Sheetz stay ahead of changing consumer needs and trends? Joe Sheetz: Our vision is to create the Sheetz that will put Sheetz as we know it today out of business. That vision guides our decisions and helps align our employees to think big, new and different! We try to stay ahead of the curve by keeping tabs on trends and different industries, but most importantly by keeping in touch with our customer. CSNews: What do you believe are the three biggest challenges facing Sheetz and the convenience store industry in the years ahead? Sheetz: Government regulation on a national, state and local level; channel blurring as all retailers try to find ways to grow sales; and changing customer demographics and the resulting changes in customer needs and demands. CSNews: What technological advancements will have the biggest impact on Sheetz in the next few years (e.g. mobile payments, reward/loyalty programs, touchscreen ordering, etc.)? Sheetz: Technology, in general, is huge for us and will continue to be huge well into the distant future. A very general, common theme that we see is the potential for connection with your customers. We’ll be focused on ways for our brand to connect with our target customer in meaningful and exciting ways. CSNews: Any personal thoughts on the importance of innovation to a successful company? Sheetz: Retailers must be committed to innovation and change, and we are no different. If you don’t innovate, you quickly become irrelevant. If you become irrelevant, you die.

42 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


For Trade Purposes Only

WE GIVE YOU A THUMBS-UP!

Congratulations SHEETZ – 2014 Convenience Store Retailer Innovator of the Year. Tweet “Congrats @Sheetz on your #CSNInnovatorAward2014” by November 30, 2014, and we may choose your store for our Retail Ambassador Team Promotion.*

Follow Us @Tobaccovoice *USA Gold Glide Tec Pack Retail Ambassador Team Promotions are available only to retailers in the following states: KY, NY, NC, AL, WV, OH, TN, PA, ND, SD, NE, CT, VT. Retailer must stock USA Gold Glide Tec Pack and must have a minimum industry carton volume of 50 cartons per week to qualify. KIOSK stores do not qualify. Stores selected for inclusion in the Retail Ambassador Team Program are at the sole discretion of the Sponsor, Commonwealth – Altadis, Inc., and will be based on a number of factors, including demand, location, and the total resources available for the Program. While the Sponsor hopes to be inclusive, there is no representation that all retailers who tweet will be selected to participate.

www.joinusagold.com

©2014 COMMONWEALTH BRANDS, INC.


COVER STORY

above, an artist’s rendering of the frst fuel-free Sheetz store on the ground foor of a multi-room building at West virginia University. at right, the real site currently under construction.

Although Sheetz has been one of the convenience store industry’s most successful foodservice retailers, there’s little chance that it will rest on its laurels. The celebration of wins is short-lived at the company. “We’re careful not to get complacent,” the chain’s leader stressed. “We always have many products in the pipeline in an effort not to get stale.”

THE PERFECT SNACK

PACKED WITH WHOLE FOODS!

The GrowTh Goes on

In the company’s 2014 fiscal year, it will have opened 28 new stores and completed eight rebuilds, in addition to a heavy remodel initiative that’s been ongoing for the past few years.

• CERTIFIED USDA ORGANIC, GLUTEN-FREE, ALLERGEN-FREE, VEGAN & KOSHER • SUITABLE FOR DIABETICS • PROVIDES SUSTAINED ENERGY TO MANAGE HUNGER FOR HOURS • NO ARTIFICIAL SWEETENERS, FLAVORS OR DYES

TA Y NEVER STED SO GO H T L OD H EA ! Available from these fne distributors: INBalanceHealthCorp.com

44 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


COVER STORY

In fiscal 2015, Sheetz plans to keep the pedal to the metal with growth in its current operating areas. There are currently no major plans to jump into a new market just yet. In terms of store design, Sheetz is always evaluating and testing new ideas. “Drive-thrus, inside seating, car washes and new consumer convenience features are always on the table for consideration,” said Joe Sheetz. By the end of its 2014 fiscal year, the retailer will have 45 drive-thrus in operation. “But the bigger point is that we are committed to innovation, so you can always count on us to be testing something new.” One of these new tests is the company’s idea to open a 15,000-square-foot convenience/grocery store in West Virginia. Why would Sheetz stray from its proven format to open a unit on the campus of West Virginia University? “Well, first of all, West Virginia is a great market for us,” Joe Sheetz responded. “We have terrific people there working hard to deliver our mission and connect with the great communities we serve. As for the new format, it was attractive from both an innovation and foodservice point-of-view. Opening a site that showcases the food side of our business in a prominent way makes a lot of sense for us.” The executive expects the store to sell a lot of food and beverages, and he’s equally excited about the new things the retailer will learn about foodservice operations. “It’s safe to say that if this format pans out like we think it will, we would certainly consider opening more.” Besides format innovation, Sheetz is one of the most prominent industry retailers in promoting its brand, products and services via social media and mobile apps. Social media, in particular, has turned into a tremendous tool for the retailer. “We love being able to connect with all our ‘Sheetz Freakz’ in a meaningful and direct way,” said the company’s leader. “The main goal of social media is engagement. With 1.2 million Facebook likes and a budding Twitter and Instagram following, there’s a lot of great two-way interaction.” As for the future, it’s always difficult to look into the crystal ball and predict anything with certainty, but Joe Sheetz is not afraid of more change. “It will be fun to watch the Sheetz store of the future come alive,” he said. “While there will be a lot of innovation and tests that happen before we get there, I can guarantee one thing … if we build it, it will be awesome.” Csn


for being selected the Convenience Store News 2014 Retailer Innovator of the Year.

Your Source for Tobacco Category Solutions


Mid-Year reporT Card

So Far, So Good

With the South leading the way, c-store sales this year are tracking slightly ahead of last year’s pace nationally By Don Longo

T

he convenience store industry appears to be on track for a slightly improved performance over last year in both total sales and in-store sales, based on Convenience Store News’ inaugural Mid-Year Report Card. Based on mid-year numbers from Nielsen, government data and CSNews’ own research analysis, total c-store sales were up 0.6 percent for the first six months of this year vs. the first six months of 2013. That small increase comes on the heels of flat total industry sales in full-year 2013, as previously reported in the CSNews 2014 Industry Report published in June. In-store sales (including merchandise and foodservice) were up 2.3 percent for the first six months of this year. In-store sales grew by 2.1 percent in full-year 2013, trailing the more robust increase of 4.7 percent seen in 2012. Like last year, motor fuel volume was up slightly (1.3 percent) as of the first half of this year, but dollar sales of fuel were essentially flat (down 0.2 percent) as the average sales price per gallon of $3.54 was slightly lower than the $3.59 per gallon reported for the first half of 2013. CSNews was able to break down convenience industry sales on a regional basis. The South generated the largest increase in total sales for the first six months of this year (up 1.5 percent). It’s also the only region to show an increase in dollar sales of motor fuels.

The West, however, generated the strongest gain for in-store sales (up 3.7 percent for the first six months), followed by the South (2.8 percent) and the Midwest (2.3 percent). Nationally, foodservice sales (including prepared food and hot, cold and frozen dispensed beverages) were up an estimated 6.2 percent during the first half of this year, nearly on pace with last year’s 6.5-percent full year sales gain. On a regional basis, the West (up 7.3 percent) and the South (up 7.2 percent) are ringing up the strongest foodservice increases this year, while the Northeast is lagging (up only 3.4 percent through the first half of the year). On a sales-per-store basis, which eliminates the differences in store count by region that are reflected in the regional numbers, the West grew in-store sales the most (up 2.4 percent) in the first half of this year. Average sales per store in the South were up 2 percent. For per-store foodservice sales, the South is leading the way, up 6.4 percent through the first six months, followed by the West (5.9 percent) and Midwest (5.5 percent).

Total Convenience Store Sales

Total U.S. Northeast Midwest South West

Total

$ billions

% change vs. frst half 2013

$357.424 64.715 88.491 121.383 82.835

0.6% -0.4 0.1 1.5 0.5

Source: Convenience Store News Market Research, 2014

48 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Motor Fuels $ billions

$251.2 46.2 63.8 75.1 66.1

In-Store

% change vs. frst half 2013

$ billions

% change vs. frst half 2013

-0.2% -0.4 -0.8 0.7 -0.3

$106.224 18.515 24.691 46.283 16.735

2.3% -0.3 2.3 2.8 3.7


Mid-Year reporT Card Also on a sales-per-store basis, the best-performing categories inside the store as of the first six months of 2014 were: wine and liquor (up 9.1 percent), alternative snacks (7.7 percent), prepared food (6.9 percent) and salty snacks (4.9 percent). The biggest percentage gain was registered by packaged sweet snacks — the category was up 12 percent in per-store sales in the first half of 2014. Below are national and regional first-half category breakouts on a per-store basis.

Regionally, on a sales-per-store basis, cigarettes are struggling the most in the Northeast (down 4 percent from last year’s comparable period). Declines in cigarette sales in the other three regions ranged from 1.2 percent to 1.6 percent. Packaged BeverageS

Packaged beverages were up 3.8 percent per store through the first half of 2014. Carbonated soft drinks were flat, alternative beverages (including energy drinks) up 6.1 percent, juice/juice drinks up 0.2 percent, sports drinks up 8.3 percent, bottled water up 4.9 percent, iced tea (ready-to-drink) up 6 percent, and enhanced water up 4.2 percent. Regionally, packaged beverage sales are strongest in the West (up 5.5 percent per store), followed by the South (4.5 percent) and Midwest (3.6 percent). Packaged beverage sales are soft in the Northeast (down 0.2 percent).

cigaretteS

Through the first six months of 2014, cigarette sales were down 1.9 percent per store. Premium brands were down 1.7 percent, subgeneric/private label down 4.3 percent, branded discount down 1.6 percent and fourth-tier down 11.7 percent.

Motor Fuel Volume

Total U.S. Northeast Midwest South West

Gallons (billions)

70.9 13.1 18.2 22.2 17.4

% change vs. frst half 2013

1.3% 0.8 1.7 1.8 0.6

Sales volume

% change vs. frst half 2013

$251.2 46.2 63.8 75.1 66.1

-0.2% -0.4 -0.8 0.7 -0.3

Beer/Malt BeverageS

Price per gallon

Beer/malt beverages were up 1.5 percent per store in dollar sales after the first six months of this year. Premium brands were down 1.9 percent, budget brands down 7.7 percent, and popular brands down 4.2 percent. However, imports were up

$3.54 3.53 3.51 3.38 3.80

Source: Convenience Store News Market Research, 2014

Total Merchandise & Foodservice Sales

Total U.S. Northeast Midwest South West

Total $ billions

Merchandise

% change vs. frst half 2013

$ billions

% change vs frst half 2013

2.3% -0.3 2.3 2.8 3.7

$89.799 15.524 20.747 39.507 14.021

1.6% -1.0 1.7 2.1 3.0

$106.224 18.515 24.691 46.283 16.735

Foodservice $ billions

$16.425 2.991 3.944 6.776 2.714

% change vs frst half 2013

6.2% 3.4 6.1 7.2 7.3

Source: Convenience Store News Market Research, 2014

In-Store Sales per Store

Total U.S. Northeast Midwest South West

Total

Merchandise

Foodservice

Avg. sales $ per store

% change vs. frst half 2013

Avg. sales $ per store

% change vs. frst half 2013

Avg. sales $ per store

$717,318 802,036 814,858 664,976 666,786

0.6% -1.7 1.8 2.0 2.4

$606,402 672,471 684,697 567,621 558,650

0.0% -2.4 1.1 1.3 1.7

$110,916 129,565 130,161 97,355 108,136

Source: Convenience Store News Market Research, 2014

50 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

% change vs. frst half 2013

4.5% 2.0 5.5 6.4 5.9


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Mid-Year reporT Card 11.4 percent, flavored malt beverages up 18.7 percent, super premium up 17 percent, malt liquor up 4.8 percent, and microbrews and craft beers — the darling of the category — were up a whopping 23.3 percent. Regionally, the West leads the growth in beer/malt beverage sales with a 4.3-percent increase for 2014’s first half. Beer sales were up 1.9 percent and 1.2 percent in the Midwest and South, respectively. Northeast beer sales were down 1.9 percent through the first half of 2014. other toBacco ProductS

Over the first six months of 2014, other tobacco products (OTP) were up 2.9 percent per store. Smokeless products were up 4.5 percent, cigars up 0.5 percent,

In-Store Sales by Category

Total sales ($ millions)

% change vs. frst half 2013

Avg. sales per store

MERCHANDISE Cigarettes

$33,128

-1.0%

$223,709

and electronic cigarettes up 8.4 percent. Vapor products are not included in these totals. Regionally, the Northeast is the place for OTP sales growth so far this year. OTP sales per store in this region were up 5.8 percent for the first six months. The Midwest clocked in at a 4.1-percent sales gain, with the West up 3.8 percent. The South trailed with a 1.3-percent gain. candy

Candy sales were up 1.5 percent for the first half of the year. Most of the major candy subcategories were down: chocolate down 3.9 percent, non-chocolate down 6.8 percent, gum down 4.6 percent, and candy rolls/ mints/drops down 3.3 percent. The bright spots were pegged/repackaged candy up 15.6 percent and novelties/seasonal up 7.6 percent. Regionally, per-store candy sales % change vs. for the first six months of 2014 frst half 2013 across the country ranged from a 0.8-percent decline in the Northeast -1.9% to a 2-percent gain in the South. 3.8

Packaged beverages

13,104

4.8

88,490

Beer/malt beverages

10,278

2.4

69,406

1.5

Edible grocery

5,229

-1.1

35,311

-2.0

Other tobacco products

5,206

3.9

35,155

2.9

General merchandise

3,371

4.9

22,764

3.9

Candy

3,538

2.4

23,892

1.5

Salty snacks

2,884

5.9

19,475

4.9

Fluid milk products

2,054

-2.8

13,870

-3.7

Non-edible grocery

2,053

-0.6

13,864

-1.5

Wine & liquor

1,286

10.1

8,684

9.1

Alternative snacks

1,104

8.7

7,455

7.7

Ice cream & frozen novelties

997

-0.1

6,733

-1.0

Health & beauty care

792

-0.5

5,348

-1.4

Publications

573

-0.7

3,869

-1.6

Ice

424

6.8

2,863

5.8

312

13.0

2,107

12.0

3,466

5.0

Packaged sweet snacks All other merchandise Merchandise subtotal

$89,799

1.6%

23,405 $606,402

4.0 0.7%

Prepared food (prepared on- or off-site)

$10,975

7.9%

$74,113

6.9% 2.4

Hot dispensed beverages

3,596

3.4

24,283

Cold dispensed beverages

1,261

2.9

8,515

1.9

Frozen dispensed beverages

593

1.9

4,004

0.9

TOTAL IN-STORE

As of mid-year, salty snacks were up 4.9 percent. Potato chips were up 5.4 percent, tortilla/corn chips up 7.1 percent, nuts/seeds up 4.6 percent, and puffed cheese snacks up 5 percent. Regionally, salty snack sales are popping in the West so far this year, with a 6.1-percent increase per store for the first six months. The South and Midwest also saw strong sales gains of 5.3 percent and 5.1 percent, respectively. Salty snack sales were a bit soggier in the Northeast, which only registered a 1.6-percent sales gain. FoodService

FOODSERVICE

Foodservice subtotal

Salty SnackS

$16,425 $106,224

6.2%

$110,916

5.3%

2.3%

$717,318

1.3%

Source: Convenience Store News Market Research, 2014

52 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

The first six months of the year saw sales of prepared food (prepared on- or off-site) increase by 6.9 percent per store. The South again led the way with an 8.2-percent increase per store for the first half, followed by the West (7.4 percent) and Midwest (7.1 percent). The Northeast trailed in prepared


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Mid-Year reporT Card food sales growth at a 3.4-percent gain. Hot dispensed beverages, which includes coffee, hot tea, cappuccino and espresso, were up 2.4 percent for first-half 2014, a nice turnaround from the 2.3-percent decline this category experienced in full-year 2013. Hot beverages were up 3.4 percent per store in the South and 3.1 percent in the West. In the Midwest, hot drinks were up 2.8 percent for the first half, but in the Northeast they were down 0.7 percent. Cold dispensed beverages were up 1.9 percent per store, an improvement from the meager 0.5-percent increase of full-year 2013. Frozen dispensed beverages, however, were up only 0.9 percent, compared to flat sales for the full last year.

Per-store sales of cold dispensed beverages ranged from a 0.9-percent decline in the Northeast to a 2.9-percent gain in the West, while frozen beverages were up the most in the West (up 2 percent).

Methodology The inaugural Convenience Store News Mid-Year Report Card continues on the foundation built for the 38th annual Convenience Store News Industry Report, published in June. Store census data was provided by Nielsen TDLinx, while dollar sales and unit volume data were provided by Nielsen Co. from its Convenience Track retail measurement service. Motor fuel data was provided by the U.S. Department of Energy. Preston/Rogers Associates Inc. coordinated the various data used in this report.

Regional In-Store Sales by Category

Northeast

MERCHANDISE Cigarettes $272,038 Packaged beverages 80,528 Beer/malt beverages 42,625 Edible grocery 58,480 Other tobacco products 33,138 General merchandise 19,580 Candy 21,616 Salty snacks 17,717 Fluid milk products 25,125 Non-edible grocery 23,998 Wine & liquor 6,931 Ice cream & frozen novelties 11,696 Health & beauty care 4,678 Alternative snacks 7,537 Publications 5,891 Ice 2,816 Packaged sweet snacks 2,469 All other merchandise 35,608 Merchandise subtotal $672,471 FOODSERVICE Prepared food (prepared on- or off-site) $86,550 Hot dispensed beverages 29,110 Cold dispensed beverages 9,443 Frozen dispensed beverages 4,462 Foodservice subtotal $129,565 TOTAL IN-STORE

Midwest

South

Avg. sales % change vs. Avg. sales % change vs. per store frst half 2013 per store frst half 2013

$802,036

West

Avg. sales % change vs. Avg. sales per store frst half 2013 per store

% change vs. frst half 2013

-4.0% -0.2 -1.9 -8.0 5.8 3.2 -0.8 1.6 -3.6 -2.8 29.3

$287,251 90,591 59,734 35,642 39,438 27,128 26,534 19,207 15,676 15,016 13,399

-1.5% 3.6 1.9 -0.2 4.1 4.1 1.9 5.1 -7.1 2.0 7.7

$200,960 85,703 82,384 27,787 35,790 22,140 22,356 18,577 10,316 10,373 6,810

-1.2% 4.5 1.2 0.7 1.3 5.7 2.0 5.3 -2.3 -2.0 6.1

$165,631 101,004 69,727 34,465 30,082 22,153 27,054 23,906 11,196 12,830 9,802

-1.6% 5.5 4.3 -0.5 3.8 -0.4 1.7 6.1 -2.0 -3.4 6.5

-5.9 -4.9 3.3 -6.9 -7.1 8.1 -1.4 -2.4%

5,148 5,379 8,548 4,389 3,135 2,013 26,468 $684,696

4.2 -1.1 7.8 4.2 5.0 16.7 10.2 1.1%

5,244 5,517 6,623 3,118 3,032 1,954 18,937 $567,621

-0.8 -0.5 8.9 -0.8 13.2 8.8 4.9 1.3%

8,208 5,459 8,367 3,466 2,112 2,311 20,878 $558,651

1.2 -1.3 8.5 -3.5 -1.3 19.2 1.6 1.7%

3.4% -0.7 -0.9

$86,961 29,075 9,604

7.1% 2.8 2.3

$65,071 20,574 7,974

8.2% 3.4 2.5

$72,237 24,345 7,849

7.4% 3.1 2.9

3,736 $97,355

1.2 6.4%

3,705 $108,136

2.0 5.9%

2.0%

$666,787

2.4%

-1.4 2.0%

4,521 $130,161

1.7 5.5%

-1.7%

$814,857

1.8%

Source: Convenience Store News Market Research, 2014

54 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

$664,976


MOTOR FUELS

Gasoline + Diesel + Ethanol + LNG/CNG + Electric

The Rise of E15

More than 90 U.S. gas stations currently offer the fuel, with massive growth expected soon By Brian Berk

I

t took some time for E15 to make its presence felt following the U.S. Environmental Protection Agency’s (EPA) June 2012 approval of the fuel blend for 2001 and newer cars. But the alternative fuel is now sold in 91 gas stations (as of Sept. 1), with this number expected to rise exponentially in the near future. Scott Zaremba, president of Zarco USA, jumped on board right away, becoming the first U.S. retailer to sell E15 at his Lawrence, Kan., location in July 2012, just one month after the EPA’s approval. He currently sells E15 at two Zarco USA stores. “I fundamentally think we have to make changes [as convenience store retailers],” Zaremba told Convenience Store News regarding why he offered E15 so quickly. “If you stay the same, you will go on the same path and something catastrophic will happen. I’m in a competitive marketplace and have to be different.” Few retailers followed Zaremba’s lead immediately, primarily due to controversy surrounding the 15-percent ethanol, 85-percent gasoline blend. Both the American Petroleum Institute (API) and AAA claimed the use of E15, which carries an 88 octane, could potentially cause engine damage, something auto manufacturers allegedly would not cover under warranties. Following EPA approval, some convenience store

E15 is now being sold at Murphy USA locations in Arkansas and Iowa.

56 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

retailers were also hesitant to offer E15 at the pump due to their worry about litigation risks if consumers misfueled their older vehicles with the new alternative fuel blend. “EPA approved E15 before vehicle testing was complete, and we now know the fuel may cause significant mechanical problems in millions of cars on the road today,” stated Harry Ng, vice president and general counsel for API. Despite this testimony, though, the U.S. Supreme Court on June 23, 2013 rejected the API’s challenge to block the sale of E15, essentially ending all attempts to block the ethanol blend from entering the U.S. motor fuel marketplace. Since the highest court in the land blocked the API challenge, retailer concerns have subsided. E15 is now sold in 14 states, and the alternative fuel is eligible to be sold in 44 states, with the exceptions being Arizona, California, Delaware, Hawaii, Nevada and New York, according to ethanol advocacy group Growth Energy. Among the states that do allow E15, some require special labeling at the pump that, in part, addresses which vehicles can fuel up with E15. Ethanol groups such as Growth Energy work with c-store retailers to obtain proper labeling and meet all state requirements. As for stations that already offer E15, feedback has been overwhelmingly positive thus far, noted Mike O’Brien, Growth Energy’s vice president of market development. “We surveyed 40 locations in November 2013 that had at least six months of experience offering E15,” he told CSNews. “There were zero complaints with


E15 and that still [is true]. In fact, consumer reaction to E15 has been extremely positive. Consumers love saving money with E15 and have reported their cars perform the same, if not a little better. One retailer even told us he had a consumer walk in the store and announce, ‘I saved so much with E15, I’m going to buy a six-pack with my extra money.’” The growth of E15 is crucial for the future of fuel sales, according to O’Brien. E10, the current standard fuel offered at most pumps, carries low margins for the retailer. On the consumer side, the price of gasoline has been high in recent months, causing fewer trips to c-stores. In fact, this summer was worse than others as nationwide gas prices averaged $3.68 per regular gallon during the July Fourth holiday weekend, 20 cents more than in 2013, and the highest price seen for this time period since 2008, AAA reported. Political unrest in Iraq was the main culprit behind the inflated prices. E15 can provide some relief, noted O’Brien. “E15/88 octane provides retailers with a 5- to 10-cent price advantage vs. 87 regular,” he said. “So consumers save money, get more octane and the retailer benefits because they typically get a little better margin, plus additional traffic to their stores.” WHAT’S AHEAD

From a biological standpoint, E15 is not tremendously different from the E10 blend, O’Brien explained. So, why all of the controversy around E15? “All of the fights against E15 are really about [Big Oil] fighting to keep their market share,” he said. Looking ahead, with many of the legal battles regarding E15 in the rear-view mirror, more c-store retailers plan to offer the alternative fuel. For example, Murphy USA Inc. recently added E15 at the pump in both Arkansas and Iowa. According to Growth Energy, approximately 75 sta-

CHS introduced the Cenex Tank Program, designed to pay for a signifcant portion of the cost to install E15 pumps.

Minnoco dealers (left to right) Richard Bohnen, Joel Hennen and Jerry Charmoli all report E15 is selling well at their locations.

tions are expected to add E15 in the next six to eight months. All told, nearly 200 gas stations could offer E15 by next summer. This charge is expected to be led in part by MAPCO Express Inc. “We have an expectation of [offering E15 at] 11 sites by the end of this year, with a total of 16 by [early] 2015,” Law Johnson, MAPCO’s senior director of retail fuel, told CSNews. “Our goal is to be able to build stores with the ability to offer the ‘fuel of the future.’ By adding the additional tanks and flexible piping and dispensers at our store locations, we will position ourselves to be able to offer E15 and potentially other blended fuels in the future. We will be able to determine what the market demands and also be able to have a flexible product offering that can ebb and flow as we see commodity markets rise and fall.” The ante could be raised even higher now that CHS Inc. has also entered the E15 game. In late August, the energy, grains and food company, which is also a top farmer-owned cooperative, introduced its Cenex Tank Program, an effort to meet consumer demand for E15. The program will pay for a significant portion of the cost to install an additional storage tank for the purpose of selling E15 at any of the 1,400 Cenex-branded convenience stores that desire to do so. “We value our partnership with Cenex retailers and will continue to assist them in their efforts to meet consumer demand for ethanol blends,” said Doug Dorfman, vice president of refined fuels for St. Paul, Minn.-based CHS, the parent company of Cenex. “Supporting ethanol demand also adds value to CHS member owners and farmers.” LAND OF 1,000 E15 STATIONS?

CHS is not the only retailer in Minnesota to support

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 57


MOTOR FUELS

Gasoline + Diesel + Ethanol + LNG/CNG + Electric

E15, on average, sells for 10 cents less per gallon than traditional petroleum, according to ethanol advocacy group Growth Energy.

E15. The state is enjoying excellent growth in terms of E15 stations, led in large part by the Minnesota Service Station & Convenience Store Association (MSSA) and its executive director Lance Klatt. Currently, nine gas stations offer E15 in the Land of 1,000 Lakes, with many more expected in the coming months. MSSA created its own fuel brand called Minnoco (Minnesota Independent Oil Co.) three years ago. Klatt stressed that his organization has no intention of “picking on” major oil companies, but MSSA supports the opportunity for retailers to sell whatever fuel they wish. “We’re hoping within the next five years to have 100 Minnoco locations,” he said. “And we are not afraid to venture outside the state of Minnesota. We’ve had inquiries from retailers in Wisconsin already.” Six Minnesota gas stations carry Minnoco as their fuel brand, with four selling E15 at the pump. According to Klatt, 19 more stations will soon offer E15 in the Minneapolis-St. Paul area, bringing the total to 23 retailers offering E15 in the Twin Cities. Three of the four Minnoco c-store and gas station operators currently selling E15 joined CSNews for an in-person interview. All three retailers — mechanics by trade — stressed that E15 does not cause any engine issues and said the alternative fuel is selling well. Richard Bohnen became the first Minnoco dealer to offer both E15 and E30 at the pump when he added it to his south Minneapolis store in October 2013. The former Mobil operator said customer response to alternative fuels has been “very positive” thus far. He

58 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

sells E15 for 15 cents cheaper than E10, which is considered traditional petroleum under the blend wall. “The perfection of fuel injection makes E15 and higher [ethanol] blends that much easier to utilize,” Bohnen said. “We have yet to receive any consumer complaints about our alternative fuels.” Bohnen believes he has an advantage because he sells E15. “A lot of my customers are excited about the fact they can buy a cleaner, cheaper and renewable fuel,” he said. “That gives me a leg up. I offer a product that nobody else does.” Joel Hennen, third-generation operator of Hennen’s Auto Service in Shakopee, Minn., is a former Shellbranded operator who currently sells eight different fuels, including E15 and E30, making the possibility of misfueling much higher. “Anyone wanting a misfueling nightmare should come to my [location],” he joked. “[But seriously], in the past nine months, we’ve had zero misfueling issues.” Jerry Charmoli, also a former Mobil-branded operator and a 45-year veteran of the retail business, took Bohnen’s comments a step further by stating that E15 is a great thing for the local community because of the choices it provides consumers, as well as the environmental benefits ethanol provides. He acknowledged that many consumers who visit his Coon Rapids, Minn., Minnoco location are unaware that traditional petroleum already contains 10-percent ethanol, but education can go a long way to solving that problem. “E15 has been selling very well at my store,” Charmoli said. “It’s really fun working with customers to let them know the fuel choices they now have.” Bohnen also sees education as the biggest roadblock standing in the way of E15’s success. “The most common question we get about E15 is: ‘Will it work in my car?’” he said. “It would be nice if customers knew that. Education will be the biggest hurdle we have to overcome.” FUTURE GROWTH

Considering E15 is only available in about one-fourth of the states and the alternative fuel is sold at just 91 of the total 126,658 convenience stores selling fuel nationwide, it’s fair to say E15 has plenty of room for growth. Although a majority of E15 stations are currently in the Midwest, this fact is about to quickly change, relayed O’Brien of Growth Energy. “Most of our conversations and interest is coming from outside the Midwest,” he revealed. “You will see E15 sold in a wide geography of the country


MOTOR FUELS

Gasoline + Diesel + Ethanol + LNG/CNG + Electric

conservatively in the next year.” In fact, Protec Fuel on Sept. 2 announced it will team with fuel retailers to offer E15 in a multi-phase rollout at 28 locations in Atlanta, Houston, San Antonio, Florida and Virginia. Some retailers in these locales will sell E15 as early as this month, with the rest coming online during the remainder of the fourth quarter and first quarter of 2015. “Because of the success of our retailers who have offered E85 in the past, our retail customers are asking us for E15,” said Todd Garner, CEO of Protec Fuel, an ethanol blends provider and ethanol blends station installer. Zarco USA’s Zaremba certainly believes E15 is ready to take off, and he is quite pleased many other c-store retailers have followed his lead. “It’s always great to do what you believe is the right thing to do and have others come on board,” he said. “But it’s always hard work making progress when you are going up against an established [petroleum] industry that has been around 100 years.” Although the growth opportunities for E15 are

60 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

tremendous, challenges do lie ahead. None of the six states that currently disallow E15 have specifically announced they are opposed to the fuel, but laws would need to be changed in most circumstances. Altering any law is a lengthy process and could face opposition from groups such as API and AAA. Hence, E15 still faces challenges in Arizona, California, Delaware, Hawaii, Nevada and New York moving forward. But considering it’s only been two years since the EPA approved E15, progress is solid in terms of both the number of stations offering the fuel and the number of states allowing its sale, with the potential for a much stronger future. O’Brien can see a day when E15 is considered the standard mid-grade fuel offered at the pump, as opposed to being characterized as an alternative fuel. “There are two types of retailers: those who currently sell E15 and those who will be selling E15,” he concluded. “The economics prove it. Consumers want cheap gasoline and E15 sells, on average, for 10 cents less than traditional petroleum.” CSN


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HOW TO

How to Source Your Foodservice Program By Maureen Azzato

I

t’s never too early to contemplate how to source your foodservice program. In fact, it’s an activity that should take place simultaneously with menu development, equipment purchasing and in-store process mapping. Menu development and supply sourcing should be done hand in hand, according to Convenience Store News’ How To Crew experts, to ensure the ingredients and products needed to make menu items are available and the prices are amenable. “Because price points are so critical in this segment, you can’t really afford to design a recipe with ingredients that are costly to source,” said Mathew Mandeltort, corporate foodservice manager for distributor EbyBrown Co. and a member of the CSNews How To Crew. “Additionally, product availability is a big issue. Out-of-stocks can be a pain.” As part of the in-store process mapping, individual recipes of each menu item should be documented, as well as all the preparation processes. Then, detailed specifications for each product/ingredient for every menu item should be drafted so they can be shared with distributors. This way, retailers can confirm that “the current supply chain partner either has the specified products within their current supply chain; has [products] that are comparable to the operator’s specification; or the distributor can source and add the new products to their portfolio,” said Maurice Minno, principal of foodservice consultancy MPM Group and a fellow CSNews How To Crew member. If some of the products the distributor carries are not exact matches to the retailer’s specifications but are close, retailers should request samples and conduct detailed product specification and cost

62 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Call tO aCtIOn: Foodservice 101

• At this level, it is fine to use a c-store distributor as the foodservice business is first developed and launched, and during the initial stages of growth. • Connect with a UNIPRO representative, who can help operators at all levels but will be especially useful to independents and small foodservice operations. • Do your research and vet numerous c-store and foodservice distributors before making a decision. • Try to tag along with bigger retailers on product/menu assortment. It may help you get a lower cost vs. bringing in all proprietary items.


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comparison analyses to determine if the substitution is acceptable, Minno added. “If the products that are available through the current distributor’s supply chain are not acceptable, the retailer should ask if the new products can be sourced/added to the distributor’s supply chain.” One of the biggest questions that vex retailers about foodservice sourcing is the best type of suppliers and distributors to partner with — convenience store distributors, foodservice distributors, specialty suppliers or broadline distributors. The ideal number of distributors and suppliers, as well as how to negotiate the best contract terms are a few other questions that are top of mind for retailers. FOODSERVICE VS. C-StORE DIStRIbutORS

Most of the CSNews How To Crew experts agree that foodservice distributors bring expertise to the category that convenience store distributors lack. “Convenience store distributors don’t have the expertise to be food distributors any more than a food distributor has the expertise to be a c-store distributor,” one How To Crew retailer said. Another How To Crew retailer noted that product variety is another big reason to select a foodservice distributor. “Convenience store distributors are starting to do a much better job, but they are still limited by the number of c-stores that sell food. Since only a few have extensive foodservice programs, it is hard to get everything you need easily,” this retailer said. “Even the major convenience store distributors struggle when it comes to foodservice from distribution center (DC) to distribution center. Some DCs that have a high concentration of conveFoodservice 201 nience stores with • Compare markups between distribufood do well, but tors. This can increase margins or trying to carry that allow you to lower retails with the to the next DC can same margin by as much as 10 perbe tough.” cent to 15 percent. A third How To • At this level and above, you should Crew retailer agreed, strongly consider moving to a adding that foodserfoodservice distributor to maximize vice distributors also program growth and selection of carry restaurantquality items. quality products. “[Convenience store

Call tO aCtIOn:

64 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

distributors] might have one or two burgers to choose from, while Sysco or US Foods might have 10 to 20,” this retailer explained. Most experts, however, concede that c-store operators just beginning in foodservice can be adequately serviced by c-store distributors. But as the foodservice program expands and volume grows, a more specialized foodservice supply chain will be required. The majority of experts also agree that it is ideal to have one foodservice distributor so that a true partnership is created and both parties are working to grow the business. One retailer put it like this: “You are looking for a marriage, not dating many distributors.” While multiple vendors allow c-stores to use several specialists, such as distributors for produce, meat or fish, etc., managing multiple vendors is painstaking. “Having a single source will streamline the supply chain and administrative process, saving time and money,” said Mandeltort. “Having a single source can often get you better pricing by including a broad range of products as opposed to a series of small orders with multiple vendors.” The other side of the same coin is that a single source can leave your entire program “at the mercy of a single delivery,” he acknowledged. “If they don’t show up, you’ve got nothing. Regardless of which direction retailers go, they should always have a secondary vendor just in case something goes wrong.” The fewer the number of suppliers, the more efficient for the retailer, Minno concurred. “In a perfect world, this would be one supplier with consolidated cross-temperature distribution capability,” he said. “This supply chain would then equate to a very efficient, optimized, end-to-end distribution chain that is efficiently managed with consolidated deliveries.”


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• Don’t just “buy,” but manage your supply chain. If you are large enough, you can even possibly get manufacturers involved to help achieve better pricing. • Work with your distributors to get the lowest minimums allowed, so when you have signature items that may have slower movement, you don’t have to worry as much about turns.

This supply chain would also be cost competitive, capable of meeting the retailer’s service and menu needs, and be in compliance with all food safety and employment standards such as the U.S. Department of Agriculture; Health, Safety, Security and Environment; and the Occupational Safety & Health Administration, to name a few, said Minno. The biggest reason to go with one distributor, however, is to build a partnership, another How To Crew expert stressed. “Two dis-

tributors are too many unless you are looking at a dairy distributor or a produce vendor, but even that’s not necessary in my opinion,” he said. “One distributor is always best because you are trying to build a relationship and help each other. It’s about building trust and a partnership where you can grow together.” COntRaCt nEgOtIatIOnS

Once you have narrowed the field of distributors you are interested in partnering with, what are the most important terms to negotiate and

The Pros & Cons of Sourcing From a Foodservice Distributor While there are many reasons convenience stores should consider partnering with foodservice distributors, there are some downsides to weigh before making a final decision. Below is a list of the pros and cons of sourcing from a foodservice distributor, according to Maurice Minno, principal of foodservice consultancy MPM Group and member of the Convenience Store News How To Crew.

• Already carry within their supply chain a line of quality foodservice ingredients and products. • Given their high distribution volume, they have an established reputation, management processes and proven capability for managing an efficient, optimized supply chain, distributing fresh, frozen and ambient foodservice ingredients and products. • Have a broad and deep portfolio of foodservice chains as

• May require minimum warehouse stocking requirements for each product, which the retailer may not be able to meet due to sales volume. • May not be willing to authorize a new product/ingredient if they already have what they consider to be a comparable product. • Minimum drop amounts to each store may not fit with the retailer’s business (i.e., minimum number of cases per

clients, many of which overlap in many medium to large c-store chain operating areas. • Additional resources available to commit to a retailer’s new menu program include marketing funds, chef/test kitchen support for new product development, and product/category/consumer insights and trend reports.

drop may exceed store storage space). Also, the shelf life of certain products may be too short — considering the retailer’s sales throughput — prior to shelf-life expiration. • May not be willing/able to split cases to meet the retailer’s potential low volume requirements for some SKUs.

66 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

include in the contract? Of course, the obvious one is cost of product — and cost increases and decreases related to volume. Other important terms to consider include payment terms, delivery standards and schedule, performance rebates, electronic data reporting and interface, compliance standards at all facilities, new product additions and launch terms, promotional investment funds and other retailer support, according to Minno. “Always have clear performance standards so you can easily correct issues,” one retailer recommended. “I also look for distribution costs to be very clear and have escalators so if your volume surpasses what was negotiated, you can reap a financial benefit retroactively.” Another How To Crew member said the most important things to negotiate are markups and minimums. “Food usually has a very high markup compared to other items due to refrigeration and shorter shelf life,” he said. “The markup can vary as much as 20 percent, which can kill margins. Buy an item from a controlled distributor with a set agreement and your

68 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

markup can be as low as 8 percent. Buy from a foodservice distributor with no agreement and it can be as high as 25 percent.” High minimum orders from foodservice distributors can be very difficult for convenience store operators — especially small chains and independents — to meet, particularly on items that do not turn quickly and are difficult to get anywhere else. As a result, both independent c-stores and restaurants have little leverage with foodservice distributors due to their lower sales volume, Mandeltort noted. He offered this illustrative example: “Average monthly c-store sales of prepared foods are around $19,000. If your food costs are 33 percent, we’re talking about purchasing $6,300 of food per month or $1,575 a week [from the foodservice distributor]. To put things into context, the average McDonald’s probably purchases between $12,000 and $15,000 a week.” It will be hard to excite foodservice distributors with $1,500 in volume per week, Mandeltort said, adding that this is one reason c-store distributors can


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FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

be a better option for c-store operators with smaller foodservice volume. This way, they “stand a better chance of leveraging purchases in other categories to get the best pricing and other terms,” he said. The bottom line with any distributor that c-stores partner with is that price can’t be the only consideration. “The question really should be –– besides delivering what I want, when I want it and how I want it –– is how can you help me grow my business? To do so, a distributor has to have a strong understanding of both the c-store industry and the foodservice industry. There are not many distributors that can make that claim,” stated one How To Crew expert. Finally, how often should retailers put their foodservice distributor/vendor contracts out to bid? Most How To Crew members recommend every three to five years. Yet, as one retailer put it: “If you really have trust and transparency, it’s not necessary” to put contracts out to bid at all. “Certainly you have to have an open invoice audit agreement, but it still goes back to relationships and trust.” CSn

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

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FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

HOW TO

How to Do Chicken Right By Maureen Azzato

T

he beauty of chicken is it has near-universal appeal and you can do so much with it. This simple protein can be transformed into a wide variety of menu items ranging from ethnic favorites such as Italian, Mexican, Asian and Greek offerings to American favorites such as chicken fngers and strips, nuggets, wings, bone-in fried chicken and boneless fried chicken breasts for sandwiches, sliders and salads. Chicken’s naturally mild flavor and soft texture allow it to easily absorb marinated flavors, sauces and spices, making it an all-purpose versatile protein that can cross all meal and snacking dayparts. Beginning with breakfast, there’s fried chicken breast on a biscuit, English muffin or roll with or without an egg. For hot lunches and snacks, convenience store operators can offer chicken quesadillas, chicken parmesan plates or subs, and grilled chicken sandwiches and sliders with a large variety of sauces, cheeses, toppings and bread styles that can create endless menu offerings. And, of course, there are the ubiquitous fried or speed-oven-cooked chicken wings and fingers with a variety of sauces that can create so many options for customers, from the hot and spicy to the sweet and savory. These hot grab-and-go items do well in c-stores because once cooked, they can be held several hours in good temperature-controlled merchandisers, according to the experts. Chicken also can be incorporated into other menu items such as pizzas, veggie and rice bowls, wraps and salads. Despite consumers’ aspirations for healthier fare, breaded and fried chicken continue to be the most popular menu items by far.

72 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Call tO aCtIOn: Foodservice 101

• Partner with a knowledgeable manufacturer that will help you develop and grow your chicken business. • Offer regional favorites that suit the demographics and local tastes of your market. • Avoid handling raw chicken due to food safety and sanitation concerns. • Have very clear recipes with easy-tofollow directions. • Make a strong commitment to the programs from the start and accept that there will be food waste and investment required.


FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

One need only look at the success of fried chicken items at national quick-service restaurants (QSRs), such as Chick fil A, KFC and McDonald’s. Regional players are also winning with fried chicken, including Raising Canes, whose success hinges on a wide variety of “fresh, never frozen” chicken finger meals; or Zaxby’s, which offers chicken all ways including Chicken Fingerz, Traditional or Boneless Wings, sandwiches, Zalads and Zappetizers, along with nine sauces ranging from Wimpy and Tongue Torch to Nuclear and Insane. Then, there are Bojangles’ and Popeyes, two regional QSRs that specialize in southern fried chicken, biscuits and all the fixings. The recent return of Burger King’s Chicken Fries — as a result of an onslaught of social media pressure after the fast feeder nixed the item from its menu two years ago — is another example of America’s love affair with fried chicken. “Demand for this product is so fanatical that we asked ourselves, ‘Who are Foodservice 201 we to get in the way of our guests having • Develop limited-time offers that you Chicken Fries?’” Eric can easily execute with different Hirschhorn, Burger seasonings and sauces, cheeses and King’s chief marketbreads to add variety and excitement. ing officer for North • Be sure to offer snack items and America told USA handheld products that are easy to Today. At its peak, eat on the go. Burger King was see• Don’t sacrifice quality for value. Good ing one tweet every food is easier to find today, which 40 seconds about means customers won’t return unless Chicken Fries, as the quality is high. well as some dedicated Facebook pages and Twitter accounts lamenting the loss of the beloved menu item and hoping for its return. Alas, customers got their way. With so many QSRs and limited-service restaurants (LSRs) executing high-quality chicken programs that have fanatical fans, where does this leave

Call tO aCtIOn:

74 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

convenience stores? There are myriad opportunities, according to Convenience Store News’ How To Crew panel, for operators that make a strong commitment to their programs, and focus on quality and portable items ideal for c-store customers on the go. “Doing chicken right takes commitment to equipment, labor, ingredients and merchandising,” said Ed Burcher of Burcher Consulting, a member of the CSNews How To Crew. “At the end of the day, portable, handheld menu items will win for most convenience store guests, and from what I have seen, while people talk grilled and rotisserie, they buy crispy!” Because a preponderance of c-store foodservice items are consumed immediately, it’s important that the chicken not be too messy or difficult to eat and that the packaging is well thought-out, making it easy for customers to eat on the go, according to fellow How To Crew member Mathew Mandeltort, corporate foodservice manager for distributor Eby-Brown Co. LLC. Some new menu items to consider include chicken and waffle sandwiches, chicken nugget skewers, and popcorn chicken or chicken strips served in paper cups or cones, he said, noting that more adventurous fare could include Korean fried chicken or chicken coated with different crusts and batters such as Panko, potato chips, ramen, coconut, parmesan cheese or beer batter, depending on the region of the country and local demographic preferences. FRESh OR FROzEn?

Because freezer-to-fryer or freezer-to-oven chicken products — as well as the equipment used to prepare them — have improved so much in recent years, there are many more easy-to-prepare chicken menu options available to convenience store operators today. Par-cooked, sometimes called pre-cooked, individually quick-frozen (IQF) chicken is available either breaded or unbreaded, giving operators many options to choose from, noted Larry Miller, principal of foodservice consultancy Miller Management & Consulting Services and a How To Crew member. The beauty of cooked IQF chicken is it allows operators to pull out one, five or 10 pieces of chicken without any of them being stuck together, according to one retailer member of the CSNews How To Crew.


FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

“You can use fryers, high-speed convection ovens or impinger ovens to heat them.” While admittedly the experts agree there is a discernible taste and texture difference between fresh breaded and prepared chicken compared to frozen precooked options, most do not recommend convenience stores handle raw chicken in the stores due to food safety and sanitation concerns. For those who insist on executing fried chicken programs from scratch, the experts stress that program training and execution must be flawless, and management must be laserfocused on the program at all times. “Doing any bone-in chicken is difficult with the only exception being wings. If you want to have quality, it needs to be at the very least raw individually portioned pre-marinated chicken,” the retailer said, noting that operators can certainly bring in raw chicken and marinate it themselves in-store “but it’s a very difficult program to do and to do consistently in all locations.” With all the high-quality frozen chicken styles and options available to c-stores today that can make them

76 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

competitive in the category, “it seems an unnecessary food safety risk to handle the raw protein,” the retailer added. The other advantage of all the frozen, cooked boneless items available, such as fingers, strips, wings and nuggets, “is they can be used in so many other menu items, expanding your offering without adding SKUs, which is a big plus,” he said. The other challenge of from-scratch chicken programs is operators need ample production space in the store, skilled and well-trained labor and high customer traffic,


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as well as compelling sides such as macaroni and cheese, potato sides, corn or other veggies, biscuits and gravy, cole slaw and/or other cold salad accompaniments. From-scratch chicken programs can yield high results for operators of high-volume stores with heavy evening traffic, but “to maximize store real estate, there should be seating and a drive-thru to grow volume to its highest level,” Miller said. “A store designed for chicken sales can offer fried, grilled, Foodservice 301 rotisserie and every • Continue with limited-time offers and imaginable chicken look to premium cuts and varieties part or portion that in the chicken tender and boneless would be in demand, product categories. depending on the • Meal deals are the key to dinner. demographics.” Offer two-person, four-person and Programs such as six-person meals with sides, bread this typically require and beverages. high-volume fryers • Consider wing bars or adding overunder a fire suppressized legs and wings to the menu, sion high-air-volume including turkey wings and legs if vent hood, according local tastes and demographics to Miller. Operators support it. with less anticipated • Offer inspired and trending sauces volume can use ventand flavors such as Jalapeño, Smokey less fryers. Chipotle, Thai Chili, Caribbean Jerk Manufacturer and aioli sauces. licensed brands such as Chester’s, Krispy Krunchy or Broaster are other programs for smaller or less experienced foodservice operators to consider. “These companies can add a lot of value with training, local advertising, bulk savings, packaging savings and promotional offers for operators that are not large enough to develop their own brand,” Miller explained. “With low volume, the cost of packaging alone can put retailers at a severe cost disadvantage.” The reason QSRs and LSRs “rule the roost when it comes to chicken away from home is they are perceived by consumers as chicken experts or specialists, which provides them with an aura of authenticity and quality,” said Mandeltort. For c-stores to succeed with chicken, “it’s all about the bird” and he noted that operators “need to deliver a great-tasting, flavorful chicken that’s moist and tender.”

Call tO aCtIOn:

MaRkEtIng & MERChanDISIng

Because chicken is a low-fat protein, it has a tendency to dry out fast if overcooked or if it sits in a merchandising

78 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

case too long, which makes it very important to cook and display freezer-to-fryer or freezer-to-oven chicken products according to manufacturer specifications. Partnering with the right manufacturer — Tyson, Pilgrim’s Pride, Brakebush or Cargill, to name a few — is one of the most important components of executing a strong chicken program because they can offer support and knowledge to ensure success, according to our How To Crew panel. When it comes to in-store signage and menu board design, remember that “pictures and merchandising are worth a thousand words,” advised Burcher. “People buy with their eyes. A full display case with freshly prepared product says you are in the chicken business.” While most experts agree marketing chicken programs is no different than marketing other foodservice programs, one retailer said sampling, especially of new menu items, is a way to create buzz and trial. Bundled meal offers and two-for promotions are also very effective for new hot food programs. Serving a quality product that tastes great, however, is the best way to get repeat business. And don’t be afraid to offer something unique. “Do something different — KFC already sells KFC-style chicken,” said Mandeltort. For instance, he suggests operators also provide customers the opportunity to customize their chicken menu items with seasonings and sauces. “Chicken bar anyone?” CSn

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


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FOODSERVICE

Category Trends + Insights from

TRENDSIGHTS

C-stores Wake Up to Breakfast Competition Channel must improve consumers’ perception of its breakfast programs

W

ith more quick-service restaurants adding breakfast or ramping up their existing morning menus, convenience stores must strengthen their breakfast programs to attract morning diners. According to Technomic’s Breakfast Consumer Trend Report, c-stores are the top breakfast destination during the week for only 5 percent of consumers, compared to 56 percent who said fastfood burger and sandwich restaurants are their primary breakfast destinations. By Donna Hood Crecca Additionally, 31 percent of patrons said Senior Director, Technomic Inc. they plan to purchase breakfast from dcrecca@technomic.com c-stores less often this year, with many citing low-quality options and a desire to eat healthier as their reasoning for the decrease in visits.

The perception of c-store breakfast fare as being low quality and unhealthy indicates an opportunity for the channel’s operators to highlight more premium, better-for-you breakfast options. One c-store chain rising to the challenge is Wawa Inc., which earlier this summer added an Egg White Omelet Sandwich featuring spinach and tomato and containing fewer than 500 calories. Wawa also gave patrons the option of ordering egg whites in a bowl, hoagie or breakfast burrito. Kwik Trip Inc. is another chain that debuted an egg-white sandwich recently, launching an Egg White, Ham & Cheese English Muffin. C-stores are also promoting high-quality coffee options by emphasizing where the beans are sourced. Turkey Hill Minit Markets debuted Kona Classic coffee featuring a blend of Hawaiian and Central American beans, while SuperAmerica LLC added In the coming year, do you think you will be purchasing breakfast Brazilian Amazon coffee made with from the following location more often, the same amount or less Brazilian beans. often than you are now? In addition to upscale fare, diners seek portable breakfast options and a diverse C-store prepared food areas 6% 63% 31% breakfast menu. More than 60 percent of More often Same amount Less often patrons cited portability and variety as important factors when visiting a c-store Base: 1,500 consumers aged 18-plus; may not total 100 percent due to rounding Source: The Breakfast Consumer Trend Report, Technomic, 2013 for breakfast. Retailers can offer both variety and portability by adding breakWhy do you think you will purchase breakfast less often fast handhelds with new meats, cheeses at c-stores? Select all that apply. and/or breads. Have less to spend on eating out 36% In July, Cumberland Farms Inc. intro31% Low-quality breakfast option duced an Asiago Bagel Sandwich featuring 27% Trying to eat healthier egg, steak and Muenster cheese on an Asiago bagel. Also in July, Nice N Easy Grocery Base: Varies based on percentage who plan to purchase breakfast from these concepts less often as noted in the table Source: The Breakfast Consumer Trend Report, Technomic, 2013 Shoppes expanded its breakfast offering by

Breakfast Purchases at Convenience Stores

80 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


FOODSERVICE Category Trends + Insights from

Attributes of Importance Percentage of patrons who said it’s extremely important or important that limited-service/prepared food outlets offer the following: 55% 57% 54% 62% 50% 55% 46% 45% 46% 55% 45% 61% 43% 50%

Breakfast items on a value/dollar menu Wide variety of breakfast items Breakfast sandwiches, wraps or burritos Breakfast coupons or specials Combo meals Portable breakfast items Healthy breakfast choices Signature breakfast items

32%

Breakfast all day

31% 33%

Limited-service restaurants

43%

Retailer prepared food areas

Base: 390 (limited service) and 348 (prepared food) consumers aged 18-plus who purchase breakfast from these locations Consumers indicated their opinion on a scale of 1 to 6 where 6 = extremely important and 1 = not important at all Source: The Breakfast Consumer Trend Report, Technomic, 2013

introducing its first wrap: an Italian Sausage Breakfast Wrap made with Italian sausage, egg, cheese, green peppers and onions. C-stores can increase variety by expanding their morning beverage programs, too. For instance, in June, QuikTrip Corp. began offering frappés at its Tucson, Ariz.area locations. The convenience channel should continue developing creative, premium handhelds and coffees to attract consumers seeking quality, convenient options at breakfast. By offering a variety of both healthy and upscale morning dishes, c-stores can improve consumers’ perception of their breakfast programs and will be better able to compete in the breakfast sector. CSN

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FOODSERVICE

EXPERT’S VIEW

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Marketing Beverages Beyond Refills Dispensed beverage marketing programs can work harder to drive sales

W

hen it comes to beverages, convenience store retailers really do have an edge on the competition and a real value proposition for consumers. By offering a broad array of popular brands, in a variety of favors and package forms, at compelling price points, convenience stores truly have a beverage offering to satisfy any thirst for consumers on the go. On the surface, beverages are a business driver for convenience retailers, representing the second highest-selling category (foodservice, which includes dispensed beverages) and the third highest (packaged beverages) behind tobacco. According to Convenience Store News Industry Report By Jacqui Cintron, Whirley-Drinkworks! data, dispensed beverages contribute more than 30 percent of foodservice sales and an average of 57 percent gross margin. When you drill down a bit further, however, the fact is your dispensed beverage marketing programs for coffee and fountain soft drinks could be working harder for you — driving incremental sales, profits, visits and customer loyalty. Based on data from our top 25 convenience store chain customers (approximately 20,000 stores), the upside potential is enormous. If these chains sold one mug per store per day, and customers purchased refills once a week, the total potential sales would be upwards of $745 million, equating to more than $25,000 in annual store sales and in excess of $14,000 in gross profit margin. This is not a far-fetched proposition when you consider the current average mugs sold per store per day is 0.3 to 0.5, and average refills are three per month. BEVERAGE MARKETING BEST PRACTICES

The business opportunity in the dispensed beverage category does not begin and end with the decision to

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feature a refill product or discount offer. A well-designed and executed beverage refill program can drive increased store sales in excess of 25 percent. These promotions are normally anchored by a reusable vessel or custom product with a compelling retail price point and refill offer. There are three key components that define best practices in the marketplace: • Program development; • Product selection; and • Program execution. PROGRAM DEVELOPMENT

Most quick-service restaurants (QSRs) do not promote a refill program, so this is a point of differentiation for you. While most convenience stores do offer a refill program for coffee or fountain beverages, most do not leverage the mug or product as a promotional vehicle that can keep their brand top of mind with customers. The most successful refill promotions in this channel work best because they have resources dedicated by the category, merchandising and operations teams; in other words, a totally consumer-focused program. For example, the successful ROO Cup program at Kangaroo Express (now in its fourth year) and the 7-Eleven Mustache Straw (which drove consumer awareness and interest through well-executed in-store merchandising) integrate marketing using social media


FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

and mobile marketing to engage customers and industry media communication. Understanding your business objective is the key to success. Do you want to drive visit frequency or traffic against a specific daypart? Introduce a new product? Attract more visits by women and kids? Once you are clear about your objective, the next step is to develop the right core offer, including margin for your company and a compelling offer for your customers (e.g. a $5.99 mug retail with 50-cent refills for the 100 days of summer; a Happy Hour discount from 2-6 p.m.; or a custom straw for frozen carbonated beverages to drive purchases among kids). When considering your objective, it is also recommended that you don’t “hot price” your disposable cups during the promotional period. Why sacrifice margin on disposables when you can drive traffic to your beverage refill program? In addition to promoting your core offer, consider inserting discount coupons into the mug to drive breakfast traffic or trial of a new snack offer. This provides your customers with immediate gratification and lets you partner with food vendors to co-promote new products. PRODUCT SELECTION

Refill programs are also a very effective way to promote your brand outside the store and build consumer loyalty. Consumers understand that convenience retailers need to feature their brand on the refill mug, but this mug is also a reflection of their taste and personality. Size, style, colors and graphics are key drivers of the purchase decision, so the design

88 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

of your mug deserves strategic thought and consideration. Paying attention to current trends in colors and graphics, and creating an attentiongrabbing design that your customers would proudly carry with them are table stakes to making your dispensed beverage marketing programs work harder for you. Consider a unique custom product design as a great way to bring your brand to life and differentiate your beverage program. COMMUNICATION & EXECUTION

Once your objective has been defined and you have selected the right promotional product, it’s time to plan for best execution. One of the most important and yet most commonly overlooked best practices is in-store execution. Commit to merchandise and promote the program in your stores. Your refillable mugs should be in a display positioned properly and neatly in a highly visible part of your store near the beverage center, with clear signage at eye level to have the greatest impact. At your point-of-sale (POS), the refill discount is what drives value to your consumer and should be front and center. Keep other information simple, concise and readable. A best practice in the area of execution is to have marketing communications involved and be sure to integrate social media into your program. Are you leveraging your website, Facebook page, Twitter or foursquare accounts to stay connected with your customers? Your refill mug program can be used as a fan-building promotional item. Consider including your Facebook address or Twitter handle/hashtag on the mug artwork as a way to gain new followers. Create contests and special offers around your refill mugs to engage your current followers, and support your social media campaign with in-store POS as an additional awareness-building component. Why not use your refill program to build traffic and sales across dayparts? Capitalize on


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FOODSERVICE

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

the opportunity around afternoon snacks by featuring a beverage category such as iced coffee or frozen beverages to encourage trial, or

offer a bounce-back coupon good for a snack item and/or a beverage when customers purchase a breakfast or lunch deal.

Happy hour is a concept that Sonic and Taco Bell are promoting extensively in the QSR category, and convenience stores can use this idea as well. Millennials are the biggest opportunity for future growth. Besides looking for deals, this generation is “socially conscious,” so promotions that support charities or the environment will resonate with them. You can create promotions that contribute to a nonprofit cause or promote “choose to reuse” refill programs that are a great way to minimize use of disposable cups, and an easy way for your customers to feel like they are doing their part to be more environmentally focused. At the end of the day, the very nature of refill promotions is consistent with the essence of convenience — good value, quick in and out, and satisfying a consumer need. To be successful, all it takes is establishing a clear objective for the program, designing a refillable mug that your customers will be happy to carry with them, and committing to promoting and executing the program with distinction. You may find the results to be very refreshing! CSN Jacqui Cintron is vice president of marketing at Whirley-Drinkworks!, which has been designing and manufacturing custom drinkware products and developing marketing programs to drive dispensed beverage sales for more than 50 years. Prior to joining the company, Cintron developed her marketing expertise working for The Walt Disney Co. in brand management and The Coca-Cola Co. in national sales. She can be reached at (949) 492-4231 or jcintron@ whirleydrinkworks.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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Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP

No Smoking Jacket Required Capitalizing on an emerging trend, vape shops represent new competition By Melissa Kress

T

here is a new kid on the tobacco retailing block, and if recent trends continue upward as some predict, vape shops are here to stay. Need proof? As of May 9, vapor shops became their own category on social media site Yelp. “Now, vape shops everywhere will have the option to use this as a marketing tool for building and properly promoting their business,” Jim Root with the California Vapor Association wrote in a blog. “This is just a first step toward legitimizing the industry and creating the separation that vape shops need to become successful.” According to his blog post on the Smoke Free Alternatives Trade Association (SFATA) website, the push to separate vape shops from tobacco shops on Yelp began in March. The campaign of emails and phone calls intended to educate Yelp included studies showing the difference between vapor and smoke; studies about the lack of any secondhand effects of vapor; data on the dramatic rise of retail shops during the last three years; public opinion polls showing

Lounge areas can be found in many vapor shops.

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Vape Shop in Las Vegas has a tasting station where customers can mix and match favors.

confusion between vape shops and smoke shops; and testimonials from ex-smokers. In a world where more people are turning to social media before making any decision — whether it’s what to buy and where, or what hotel to stay at when traveling — this accomplishment can seemingly go a long way with the vaping community. According to SFATA, there are as many as 15,000 vape stores currently operating in the United States and that number may just be the tip of the iceberg. Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, has been vocal with her opinion that vape shops are a growing trend to watch. She remains bullish that vapor consumption (electronic cigarettes and vapor/tanks/mods) could surpass consumption of combustible cigarettes in 10 years. Adding vape shops and online sales to Nielsentracked channel data, Herzog puts vapor category sales at about $2.5 billion. After visiting the Henley Vaporium in New York earlier this year, Herzog called vape shops the “Starbucks of e-vapor,” a “third place” experience where vapers can hang out, work, socialize and vape. The retail component is also an important factor: vapers can not only


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buy hardware and accessories, but also sample different e-liquids and test the equipment. VApe nY

Someone who has seen the evolution of the vapor category and its products is Spike Babaian, co-owner of Vape NY, a chain of vape shops. “I have been doing this for six years. It’s funny; it’s almost like we went forward, then backward, then forward, then backward again,” she said. “The product evolved and then people who hadn’t heard of them stepped backward to products we were already passed. So, the new people are always stepping backward to the older products.” The best way to explain it, Babaian said, is that vapor products sold in convenience stores are “last generation.” New people turn to older generations because the newest products tend to be more complicated, she explained. However, newer models are more functional. Educating users on vapor products is where vape shops have the edge over convenience stores, or any other retail channel that enters the category. “Being able to try different flavors and different tank systems is what gives vape shops an advantage over convenience stores. Mixing and matching is what fine-tunes the product to work for a certain person,” she said. “In a convenience store, you are buying a kit so you are stuck with that tank and that battery. You can change the flavor, buy a different liquid to put into the open tank, but you really can’t change much else.” Vape NY has three locations in New York City — Queens, Manhattan and Brooklyn — and Babaian and co-owner Phil Roseman are hoping to open No. 4 by the end of the year. When they first began vaping in 2008, Babaian and Roseman started a club where other vapers could come together and try different flavors, tops and batteries. The Long Island Vapers Club eventually grew to become the National Vapers Club. “It grew pretty fast and we realized it was lacking shops where you could try the different stuff,”

Vapor Group Inc. started opening brick-and-mortar stores to sell its products.

94 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Black leather accents create ambiance at Lucky Deuces in Redondo Beach, Calif.

she recalled. Through fundraisers, the National Vapers Club raised money to do research on e-cigarettes. Clarkson University in Potsdam, N.Y., conducted a study on whether e-cigarettes were toxic and the results found the vapor was non-toxic, according to Babaian. Once the results were in, she and Roseman decided to open their first vape shop. STep InSIde

There are different approaches to vape shops. Some reflect that Starbucks feel Herzog observed in her visit to Henley Vaporium. Vape NY takes a more no-nonsense approach to retailing vapor products and catering to vaping consumers. “There is a social aspect to it. People come in and talk with us because you don’t walk down the street and see 100 other vapers in New York like you do in California,” Babaian said. “We have some chairs and tables and little lounge areas in our stores, but other vape shops are different than ours.” Some other shops focus on the hobbyist aspect, the rebuilding of atomizers and how to make e-cigarette coils. “They have a different type of people that go there. We cater mostly to heavy smokers. A lot of them are hobbyists, but most of them are not into building their own e-cigarettes or blowing giant clouds. They are really more into just not smoking. Their purpose is to not smoke. We have a different focus than other vape shops,” she added. As for product lineup, Vape NY offers approximately 30 different flavors, five different nicotine strengths and more than 200 different combinations of tops and bottoms — 75 to 100 different types of tanks (tops) and about 80 to 100 different types of batteries or devices (bottoms).


TOBACCO

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A Firsthand Look

The frst Total Vapor stores opened in Florida this summer.

“Customizing which top and which bottom is one of the most important things for people,” Babaian said. “We do have a basic kit in the store for people who just want a simple kit. But fine-tuning for exactly what will work for that person is more of what we do.” It’s important to note, she said, that although there are different styles of vape shops, most of the shops are owned by people who personally use the products. “They understand what the customer wants. The people in the convenience store just hand the customer a product and get the money. They don’t have the ability to explain what’s wrong with it, how to fix it,” Babaian said. In fact, up to this point, Vape NY has not hired anyone who does not vape. “If you don’t use the product, you cannot teach someone else how to use the product. And if you don’t know how to use the product, you cannot fix the product,” she noted. “A very big part of employment at a vape shop is not just understanding how the product works and being able to explain it, but also being able to figure out what may be wrong with it.” TOTAl VApOr

Further south along the East Coast, Davie, Fla.-based Vapor Group Inc. started out as a developer and manufacturer of vaporizers and e-cigarette brands in 2012. The company entered the scene through online sales. Then, recognizing the importance of an outlet dedicated to vapor products and their users, the company branched out to retail stores. “We started with online sales, but have moved to brick-and-mortar sales in order to interface directly with consumers. We learned that the interaction in brick-and-mortar helps sustain the legitimate brand.

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During a recent Convenience Store News webcast, attendees were asked if they had visited a vape shop in the past 30 days. Thirty-one percent responded yes. Count me as one, even though my visits to several vape shops on the West Coast were 90 days ago. Newspapers across the country carry stories every day about new vape shops opening, so during a trip to Los Angeles and Las Vegas in early July, I stopped by three to get a first-hand look. And what I found was vape shops are certainly not your grandfather’s cigar lounges. Lucky Deuces in Redondo Beach, Calif., and Las Vegas’ Pink Spot Vapors and Vape Shop have several things in common. They all showcase the products in clean, beautifully laid-out display cases (think high-end jewelr y store); they all have tasting stations where customers can mix and match flavors (Lucky Deuces features a six-page menu book); and they all have lounge areas (black and leather). Most notably for vapers — novice and veteran alike — each store had employees who were knowledgeable and more than willing to share that Lucky Deuces uses eye-catching knowledge with a nosy displays to showcase products. editor like me. And it wasn’t just the employees. At Lucky Deuces, a customer sat with me on the sectional couch and talked to me about the category, the different products and his personal vaping experience all while keeping one eye on the World Cup match between Germany and Brazil. David Bishop, managing partner at sales and marketing firm Balvor LLC, had similar experiences during his visits to vape shops. He spoke about his experiences during the CSNews webcast I mentioned earlier. “These retailers will engage you in extensive conversation and educate you on the products,” he shared. “They excel at high customer service.” Most vape shops, according to Bishop, are owned by former tobacco users. “They don’t see themselves as tobacco retailers; they see themselves as something else,” he said. — Melissa Kress


TOBACCO

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It is better to be face-to-face with the customers. They believe in your product more,” explained Michelle LaBarbera, director of marketing for Vapor Group. While continuing to work with wholesalers and distributors to get its products into c-stores like 7-Eleven, Vapor Group opened its first Total Vapor stores in Florida this summer. Its latest location in North Miami Beach held its grand opening Aug. 13. Vapor Group plans to have five to seven locations up and running in Florida by the end of this year — some company owned and perhaps some franchised. The concept will move beyond the Sunshine State’s borders in 2015, LaBarbera said, adding that the company will probably move more toward franchising the Total Vapor brand next year. To that end, Vapor Group engaged Harold L. Kestenbaum of East Meadow, N.Y., as its franchise attorney to represent the company in the franchising of its brands. “As I have said previously, we are about to begin the franchising of our Total Vapor store concept in the Northeast corridor, North Carolina, Washington D.C., Texas and other places over time. Each of these geographical markets represents tremendous sales potential and we are excited by what franchising can mean to us long term,” CEO Dror Svorai said. FACe-TO-FACe

While Vapor Group does sell its products online and in some other retail stores, its Total Vapor locations sell different products such as bigger mods and more stateof-the-art products. “We can’t sell everything online because it’s better to test the products and have them in your hand. It’s hard to tell, sometimes, online. Our online sales are for people who really do know the products. The stores help consumers learn the new technology that is out there in the industry,” LaBarbera said. Total Vapor employees go through extensive training and have the chance to test products. “At the store level, they are able to use and test any product so they can sell them, especially our liquids and how to mix the liquids,” she explained, noting that the stores offer 19 flavors that can be mixed and matched to create new ones. The stores also have free taste testing and samples so customers can determine what flavors they like and what vaporizers they want. Unlike Vape NY, Total Vapor stores are similar to those vape shops that have more of the lounge-type Starbucks setting. “The stores have couches for custom-

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Pink Spot Vapors in Las Vegas even offers apparel for vapers.

ers to hang out. They have free Wi-Fi. It is kind of like Starbucks; you can hang out there all day. You can listen to the music or watch sports on TV,” she noted. With more vape shops popping up around the country, LaBarbera believes convenience stores will be able to compete in this emerging category to some degree. “Convenience stores will compete to some extent, but the products will be basic. They will have the kits that have a USB charger, a typical battery and an atomizer that a consumer can pick up quickly. Convenience stores will carry some liquids, but you are not going to have the variety like you do in a brick-and-mortar vape store,” according to LaBarbera. Vape stores will also offer more high-end products than c-stores and a different type of customer service, she added. “We offer expert assistance in product selection as opposed to a c-store where employees don’t really know anything about the products unless they are a vaper,” she said. CSn


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COLD VAULT

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Blurred Guidelines Alcoholic beverages represent promising sales opportunities, but state laws for convenience stores are not created equally By Angela Hanson

O

n a typical Friday night in the United States, many consumers are ready to kick off the weekend by picking up a six-pack of beer or other alcoholic beverages to share with friends. Stopping by a convenience store to make a quick purchase should be easy, but the reality is that this depends entirely on which state and region the consumer is in. For instance, buying and selling alcohol in Tennessee can be a tricky business. Until recently, the division was clear: wine and distilled spirits could only be sold at licensed liquor stores, while convenience stores and supermarkets were the only retailers that could offer beer — to a point. Only beer with an alcohol content of 5 percent or less by weight or 6.25 percent by volume could be sold at c-stores. Anything else qualified as “high-gravity” beer that had to be sold in a liquor store. That cap on alcohol content — the lowest in the region — was at odds with neighboring states such as Alabama, where the cap is set at 8 percent by weight. This was a problem for Tennessee retailers that wanted to Tennessee Gov. Bill Haslam recently signed a capitalize on the popularbill that raises the state’s standard beer cap. ity of craft brews, which often have a considerably higher alcohol content. It was also a problem for the brewers themselves, who couldn’t create or sell highgravity beer in the state without a specialty license. Because of this, the brewers and retailers united in support of the “Fix the Beer Cap” campaign, and they

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succeeded in forcing a change. On May 1, Tennessee Gov. Bill Haslam signed a bill that raised the standard beer cap to 8 percent by weight or 10 percent by volume. “It’s going to allow brewers to sell the beer at their brewery taprooms and for off-premise consumption,” said State Rep. Ryan Haynes (R-Knoxville), sponsor of HB0047/SB0289, the bill that raised the cap. “It will clarify the law that allows liquor retailers to sell highgravity beer growlers. And this will also allow highgravity beer to be sold in grocery stores.” Breweries can take advantage of the new definition immediately, while convenience stores and supermarkets must wait until Jan. 1, 2017, to sell beer with the higher alcohol cap. Still, c-stores in other states are wrangling with equally or even more restrictive laws, and the likelihood of them effecting change is much more in doubt. The BATTLe OVer Beer TemperATUre

In Indiana, the controversy over beer sales in convenience stores isn’t an issue of alcohol content; it’s an issue of temperature. Liquor stores, grocery stores and c-stores can all sell beer, but only liquor stores can sell chilled beer. All other retailers must sell beer at room temperature.


“It’s really not based on any sort of rational public policy,” said Scott Imus, executive director of the Indiana Petroleum Marketers and Convenience Store Association (IPCA). The organization contends that the regulation is “archaic” and illegal under both the Indiana Constitution and the U.S. Constitution, but it has had a difficult time proving that to the courts. In May 2013, the IPCA filed a lawsuit in federal court arguing that the cold beer law violates the equal protection clause of the U.S. Constitution by favoring one class of retailers over another. However, District Court Judge Richard Young upheld the status quo this June, when he ruled that since the Indiana state legislature drew a line on what it would allow and made a case for it, it was not his place to act as a super-legislature and overturn it. The IPCA has since filed a federal appeal to Judge Young’s decision. Additionally, the association filed a lawsuit in Marion County Superior Court arguing that the law violates the Indiana Constitution. Both lawsuits were awaiting their next court dates as of press time. Indiana consumers are solidly on the IPCA’s side, according to Imus. “There’s certainly support,” he said. “Unfortunately, the liquor store industry in Indiana is very powerful. And right now, they have a monopoly on cold beer sales.” If the law were to change, Imus said, it would present a new opportunity for c-store operators, as well as the need for shelving changes. “There would be a lot of growth in that category for convenience stores,” he

Liquor stores in Indiana, like the ones pictured on this page, can sell cold beer, but the state’s c-stores cannot.

said, noting that stores would need to add more cooler space or swap out existing beverages in the cold vault. “At the end of the day, you would see a lot of redesign of c-stores.” In addition to arguing against the constitutionality of the law, Imus dismisses the notion that allowing c-stores to sell cold beer would make it difficult for the Indiana State Excise Police to keep up with the increased sales and enforce the state’s liquor laws. Figures provided by the Indiana Alcohol and Tobacco Commission show that since 2005, liquor stores received 1.73 violations per permit holder, compared to just .321 violations per permit holder among convenience, grocery and pharmacy stores. Additionally, the Excise Police’s own Survey of Alcohol Compliance found that since 2010, stores with liquor permits averaged an 18.9-percent failure rate in preventing the sale of alcohol to minors, while stores with grocery permits — which convenience stores are usually issued — saw an average 7.7-percent failure rate. Liquor stores are unlikely to suffer much if c-stores do get the chance to offer cold beer, Imus also pointed out. Along with the other kinds of alcohol they can sell, liquor stores have the capacity to offer greater variety. “In Indiana, there’s a massive variety of beers. It’s more than just your major manufacturers,” he said. “There [are] craft beers from all over. There’s no way a c-store is going to be able to stock that many.” While the IPCA continues to fight for cold beer,

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COLD VAULT

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

Imus believes Indiana officials may warm up more quickly to the concurrent push around expanding alcohol sales to seven days a week. “I think Sunday sales have more of an opportunity,” he said. pUShBACk iN peNNSyLVANiA

C-store retailers in Pennsylvania, meanwhile, face a different dilemma. In the Keystone State, it is specifically forbidden for beer to be sold at the same location where gasoline is sold. Wine and spirits are only sold at state-owned stores and to buy beer, consumers must visit a restaurant, bar, licensed beer store or beer distributor, which primarily offer cases and kegs and do not sell beer by the bottle or six-pack. Even at locations where six- and 12-packs are available, there are restrictions. “One of the weirdest parts is you can’t actually buy three six-packs in the state of Pennsylvania,” said Scott Hartman, CEO of York, Pa.-based Rutter’s Farm Stores. Customers who want more than two six-packs

Sheetz is an active participant in the “Free My Beer” campaign that’s ongoing in Pennsylvania, where beer cannot be sold at the same location as gasoline.

but less than a case of a single brand must make multiple, separate purchases. And if a customer wants to buy food plus beer, wine or liquor, they could potentially have to make three separate stops in the course of a single shopping trip. To adapt to the state’s restrictions, convenience store chain Sheetz Inc. went so far as to transform its business model by becoming more than a convenience store. Sheetz converted its flagship site in Altoona, Pa., into a two-part location. The c-store business is physically and legally separate from an on-site restaurant

104 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

that offers beer. Even once a liquor license is issued, though, that doesn’t mean the battle is over. Only weeks after Sheetz began selling beer at a second c-store/restaurant site in Shippensburg, Pa., it had to lock up the coolers pending resolution of a new legal challenge from the local Civic Club. The primary opponent to c-store beer sales in the Keystone State is the Malt Beverage Distributors Association of Pennsylvania, which works to block change through its own efforts and by working with other organizations, according to Gary Zimmerman, assistant vice president and legal counsel for Sheetz. Zimmerman dismisses the argument that allowing c-stores to sell beer would harm local mom-and-pop beer distributors. “Since we’ve been selling beer in Altoona, I don’t know of one distributor in Altoona that has closed,” he said. Some distributors have also claimed that c-stores would have an unfair advantage in attracting customers if they were allowed to sell beer alongside their other products like snacks. But beer distributors are legally allowed to sell certain other products, too, and choose not to, Zimmerman pointed out. “I understand that business decision, but if they don’t want to sell certain snacks and other items that they’re allowed to sell because they choose not to, that’s their business.” Retailers and trade organizations including the Pennsylvania Food Merchants Association continue to work for change via the “Free My Beer” campaign and by meeting with lawmakers. Several c-store operators express optimism that change is on the way — either through legislation or the courts — but only time will tell whether such confidence is warranted. Whatever changes might occur, though, Hartman made his position on Pennsylvania’s alcohol sales laws clear. “They need to get rid of the prohibition-type rules,” he said. CSN


CANDY & SNACKS

Chocolate + Non-Chocolate + Gum + Salty Snacks

Nothing Standard About Snacking Consumers increasingly choose new options for between-meal munching By Angela Hanson

A

ny convenience store customer looking for a quick snack can choose from among the wide variety of candy bars, potato chips and other traditional sweet and salty snacks, but these snacking mainstays are no longer the obvious choices for many consumers. Snack options are growing, and how and when people eat them are changing. ÒIn the consumerÕs mind, there is a little bit of blurring between what traditionally was reserved for snack time and whatÕs reserved for main mealtime,Ó Darren Seifer, food and beverage industry analyst for The NPD Group, told Convenience Store News. Items such as potato chips are more often consumed alongside main meals, especially lunch, but better-for-you snacks like refrigerated fruit, fresh yogurt and cereal bars are increasingly being eaten both at meals and between meals. As a result, forecast data shows sales of such snack types are expected to keep pace with population growth over the next five years,

Snack bars are increasingly being eaten both at meals and between meals.

106 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

while savory snacks are projected to fall slightly behind that rate and sweet snack growth will likely be flat. ÒSnack foods are not just for snacks anymore. Consumers are eating snack foods as part of meals, and eating meal foods as snacks,Ó said Chris Quam, global consumer insights manager with General Mills Convenience & Foodservice. ÒIt really depends on when, where and how much the consumer eats at that moment. These days, anything can be a snack.Ó SNACKiNg oN the RuN

For many people, the shift in snack choices is being prompted less by evolution of their personal tastes and more by the need to accommodate their schedule. Between work, family obligations and countless other occasions, consumers snack to sustain themselves during a busy day or they choose to eat portable, graband-go items that can be consumed anywhere in order to multitask. A 2013 General Mills survey of 1,500 snack bar consumers highlighted the hectic nature of AmericansÕ lives. Among the findings: • 44 percent agreed they are Òalways doing things while eating snacks.Ó • 29 percent agreed they are Òalways eating on the go.Ó • 28 percent agreed they Òsnack a lot throughout the day.Ó • 24 percent agreed they Òoften skip/forget to eat meals.Ó ÒItÕs clear that consumers arenÕt slowing down. Therefore, competition between QSRs [quick-service restaurants] and convenience stores will continue to intensify,Ó said John Oros, senior manager of business development for Hillshire Brands. ÒOn-the-go consumers have many grab-and-go options; however, only convenience stores can provide customers with a onestop-shop experience.Ó


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While many snacks deemed fresh and healthy are growing in popularity, some particularly stand out. Yogurt, long seen as a healthy snack, has shot up in popularity in recent times. Suppliers are pushing its health benefits, such as the high level of protein found in Greek yogurt, and consumers are taking notice. “It sits at the intersection of a meal and snack. It works for both occasions,” Quam said. “It’s portable, tastes good and consumers can feel good about it. It fits the way we eat today.” The versatility yogurt offers can be a key benefit to c-store retailers that want to maximize their appeal to customers by serving as a reliable destination for both snacks and meals. “Refrigerated yogurt is consumed about 44 percent of the time with a main meal and another 40 percent of the time between the main meals,” NPD’s Seifer said. A retailer that offers a good selection of yogurt will effec-

108 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

tively offer it at both eating occasions while taking up the same amount of space in the cooler. Snack bars are another boundary-crossing item that offers convenience as well as various benefits. Protein bars tend to appeal to athletes, while cereal and nutbased bars can serve as a treat — one that doesn’t consist solely of “empty” calories. The growth in this segment has prompted considerable manufacturer development to meet the needs of consumers seeking organic/natural products, meal replacements, weight management and more. the Next Step

It’s unlikely the snack categories will reverse course on these changes anytime soon, so smart suppliers and retailers alike are adjusting their tactics in response. A good first step is simply to spotlight the benefits of items already being stocked in c-stores. “Given the blurred lines we’re seeing, it would be wise for any marketer who has an existing item that is convenient and can go between the main meal


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The bakery case is an often underutilized space in c-stores.

occasion and snack meal occasion to promote it as such,” said Seifer, noting the past two years have seen an increase in this practice. Choosing the right snack products to offer from an increasingly crowded marketplace is more difficult for c-stores, especially those that operate smaller locations where every new product added must displace one already on the shelf.

For the best results, retailers should step back and examine which physical areas of the store can be used more effectively, especially at different times of day. “The bakery case is an underutilized space that can continue to drive sales in the afternoon and evening,” Oros said. “Operators have the opportunity to fill the case with new, unexpected bakery items, beyond doughnuts and basic packaged goods, to drive crosscategory and impulse purchases.” At the same time, he acknowledged, operational efficiencies inside the store can’t be sacrificed just to increase diversity of offerings. Offering an extra new flavor or two, especially seasonal or regional flavors, can help satisfy the desire for variety without going overboard. As snacking continues to evolve, optimizing a store’s offerings requires keeping track of rising trends, in addition to knowing what’s currently popular. For instance, NPD research shows that demand for protein is getting stronger. “More consumers are looking for that on the nutrition label,” Seifer said. CSN

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110 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


IN-STORE MERCHANDISING Grocery + General Merchandise + HBC + Periodicals

Taking the Seasons by Storm Seasonal items are the standout segment in the general merchandise category By Renée M. Covino

I

t’s hurricane season. Do you know where your fashlights, duct tape and batteries are? More importantly, do your customers know? In areas of the United States located in hurricane zones, such as the Gulf Coast or Eastern Seaboard, convenience stores have an enormous opportunity to sell weather-related general merchandise when hurricane season hits. Keeping up with the current weather status and having backstock or secondary displays ready to go on items such as flashlights, batteries and even candles will result in greater incremental sales, according to Kirk Bailey, merchandising manager at wholesaler McLane Co. Inc. “With the continued blurring of the channels, c-stores must include a plethora of seasonal items to

112 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

compete,” Bailey said, citing sun care and insect repellants during the spring and summer, and hunting accessories during the fall. “More c-stores are looking for in/out seasonal item opportunities to drive sales.” Items that are attached to new movie releases, such as cups, mugs, caps/hats, flatware or plush toys, are also worthwhile seasonal options to drive sales and create excitement in-store, according to McLane’s merchandising manager. The same holds true for items with local collegiate logos, including caps, visors, keychains, etc., particularly in the fall during back-to-school time and in the winter during the holiday season. From the retailer perspective, Phyllis Simpler, operations manager at the 13-store Minute Market chain in Medford, Ore., confirms that she has been staying on top of seasonal merchandise “add-ons” thanks to fierce and growing competition from all angles — Walmart’s downsized stores to dollar stores to drugstores and even the liquor store down the street. “We know our customers have choices and we know the No. 1 reason they come to us is based on our customer service, but we also know they don’t want to see the same things every day, and seasonal general merchandise is our ticket to variety and excitement,” Simpler said. Indeed, when it comes to general merchandise, seasonal is where it’s at for c-stores right now. While the overall category eked out a 0.6-percent increase in per-store sales last year, seasonal items posted a stellar 17.6-percent sales increase, according to the Convenience Store News 2014 Industry Report, released in June. As a result, distributors and retailers in the convenience channel are gearing up for more strategic seasonal sales. “There are opportunities to increase general merchandise sales by developing a merchandising calendar for seasonal items — for example, licensed NFL products in the fall and cold-weather


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IN-STORE MERCHANDISING Grocery + General Merchandise + HBC + Periodicals

gloves in the winter,” advised John Roach, vice president of merchandising for distributor EbyBrown Co. LLC “Since many of these ‘in-and-out’ items are ordered well in advance, it is important to plan ahead.” It is critical that the product is in the store at the very beginning of the season, Roach stated. However, it is also important for retailers to start getting out of that product before the season is over so that a proper sell-through can be achieved.

Pine State Trading Co., another convenience wholesaler, likewise stresses the importance of “pre-planning” and says it is the key to seasonal general merchandise success. “We present c-stores with seasonal offerings to pre-order months in advance — from BIC limited-edition trays, to Novelty Inc. floor displays, to fishing and hunting merchandise,” explained Dan Goulette, category analyst for the distributor. Recent seasonal items that have sold well in Minute Market locations include warm-weather apparel such as “popcorn” tops that stretch to fit many sizes; greeting cards and gift wrap at key holiday times such as Christmas

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and Valentine’s Day; little toys for children and dogs at Christmas time; and Halloween earrings and novelty jewelry that Simpler sells from a little round basket at each store’s checkout area. As for the proper merchandising of these and other seasonal items, Eby-Brown’s Roach advises c-store retailers to maximize awareness and increase impulse opportunities through a variety of vehicles, such as counter displays, endcaps, inline presentations and freestanding displays. “Keep in mind that the front door and the cash wrap area are not the only areas to catch the attention of the customer. There are many high-traffic areas that can be considered,” he added. When c-stores keep core


IN-STORE MERCHANDISING Grocery + General Merchandise + HBC + Periodicals

seasonal display locations maintained, customers become accustomed to seeing the items in the same locations. Then, seasonal needs and seasonal planning can be strategized accordingly, ideally utilizing a single source, Roach explained. “By working with Eby-Brown on the core general

merchandise items, which we deliver weekly along with all the other categories, our retailers are able to improve operational efficiencies and maintain proper inventory positions, which they are typically unable to achieve using a group of DSD [direct-store delivery] suppliers,” he said. CSN

Mainstay Merchandise A convenience store that wants to compete in the high-growth seasonal arena needs to keep a core general merchandise set

be added without bulk. Pine State Trading Co. recommends that batteries be mer-

— in a small dedicated section and sprinkled throughout the store — for legitimacy and add-on sales on a regular basis. “The core general merchandise programs should be maintained year-round and should always be in stock,” said John Roach, vice president of merchandising for Eby-Brown Co. LLC. “The core assortment should be made up of items that sell and can be easily replenished. Too many programs are set with items that do not turn. Bigger/more is not necessarily better.” However, Roach does believe “there are many good opportunities to augment the core assortment by frequently rotating in non-core items to keep things fresh for the customers.” He is not referring to seasonal items here, but rather limited-edition or trendy items currently offered in the category, such as “Duck Dynasty” lighters from BIC. Here are the top basic items in a core general merchandise set: Lighters — With BIC as the primary player in the convenience channel, lighters are the darling of the everyday general merchandise set. They are most often merchandised at the front counter by the registers. “Stores need to keep the main, everyday lighters in stock

chandised on a set display, as well as on cross-merchandise power wings. Sunglasses — Contrary to the way some c-stores have merchandised them in the past, sunglasses are not just a summer seasonal item, but rather an everyday staple. Pine State recommends merchandising them on a combined floor merchandiser with cellular phone accessories. “Pumptoppers are great at leading customers inside for a planned purchase of a pair of sunglasses or a cell phone charger at an affordable price,” said Dan Goulette, category analyst for Pine State. “A retailer will generally make about 35-percent to 45-percent profit in general merchandise, but in our sunglasses program, retailers make about 50 percent.” Roach of Eby-Brown maintains that “freestanding displays of sunglasses generate the greatest awareness and sales, and should be merchandised year-round in a very conspicuous area.” Cellular phone and telecommunication accessories — Cell phone accessory sales are on the rise, while telecommunica-

and also have in/out promotional items on the lighter displays,” said Kirk Bailey, merchandising manager for McLane Co. Inc. “NFL, MLB, NBA, camouflage, hunting and fishing are a few of the in/out varieties of lighters that can increase activity and sales. This will keep the section fresh and appealing to customers.” Batteries — AA and AAA are still the top-selling battery sizes, with 9-Volt being a good third choice. However, “with the continued new and updated electronics, coin batteries are emerging” as a logical mainstay choice for c-stores, too, Bailey said. Their small size and light weight means they can

tion accessories “have exploded,” according to industry insiders. This segment can be a good general merchandise mainstay for c-stores, but only if the items are super current and constantly kept up-to-date. “One area that continues to provide increased sales for c-stores is electronic accessories. This will continue to grow,” said Bailey of McLane. “Each time an electronic item is introduced, updated or improved, the accessories must also change to fit those items. Having a good variety of ear buds, chargers and phone covers will drive consumers to the category and, in turn, drive sales.”

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SERVICES

Car Wash + Lottery + ATM + Prepaid + Financial

No More Soggy Sales Car wash activity is improving as operators think outside the traditional standards By Renée M. Covino

H

ow many drivers are purchasing a side of car wash with their tank of gas? Would you like to lather your business up? If the answer is yes, then you’ll be pleased to know that industry experts say the time is ripe again to clean up with more car wash proft. “Car wash activity has much improved in the last 18 months. The improved economy, PCI [payment card industry] compliance, the overall convenience store environment and more are contributing to a very healthy time for c-store car washes,” said Eric Wulf, CEO of the International Carwash Association. What is especially notable, he added, is “operators are thinking outside of the traditional c-store car wash paradigms.” Observing this first from a macro perspective, the overall U.S. car wash industry is benefiting from recent improvement in consumers’ disposable income and will continue to rebound in the coming years. Revenue growth of 3.3 percent annually is anticipated through 2018, according to research released by IBISWorld and reported by the Small Business Development Center Network. The car wash industry is said to rely heavily on discretionary spending and the driving habits of consumers, meaning it is vulnerable to slower economic conditions. Demand is driven by new car sales and growth in consumer spending, both of which have improved as of late. Reacting to this positive news, traditional car wash establishments are gaining an edge thanks to good advertising and savvy customer loyalty programs. Other key points from the overall car wash industry report include: • The total number of car wash businesses has declined in recent years, encouraging existing estab-

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lishments to expand or diversify their services. • With continued economic growth, car sales are expected to be on the rise, along with the number of motor vehicle registrations, which are predicted to increase 1.3 percent annually through 2018. This will result in increased consumer demand for aftermarket services such as car washes. • Rising utility costs, combined with increased competition, has pinched profitability. To offset these factors, more efforts are being made to refresh and expand product and service lines. The development of customer loyalty programs is on the rise, for instance. Taking this macro picture into account can be helpful for convenience store car wash operators when strategizing their channel-specific micro perspective. It’s also beneficial to consider some of the latest activity and best practices within the channel. ToTal MaRkETIng InTEgRaTIon

A car wash is a common sight alongside a c-store. It is certainly not a new idea, but what is refreshing is “integrating the car wash into a site’s total marketing


SERVICES

Car Wash + Lottery + ATM + Prepaid + Financial

program,” according to Wulf. This is particularly applicable to multi-site operators with a regional strategy. “Integrated, as opposed to treated like a stepchild on the side,” is where it’s at, he said. Ideally, digital, social, print and in-store promotions are all utilized as promotional tools to align the car wash with the overall store brand. “Everyone knows a c-store sells gas and quick-serve food, but not necessarily [that it has] a car wash. So, if you have one, you want to make sure it’s not just a thing on the side,” Wulf advised. Providing multiple places to pay — at the pump, through an auto-cashier at the car wash and inside the store — is another way c-store chains like The Pantry Inc.’s Kangaroo Express are integrating the service into the total store strategy. Since last year, the chain based in Cary, N.C., with more than 1,500 stores and close to 250 car washes, has reportedly updated at least 50 of its car washes and married car wash sales with in-store sales. MoRE EquIpMEnT ChoICE

There was a time when operating a c-store car wash meant that you operated what the industry refers to as a “rollover” or in-bay automatic, whereby the car being washed is stationery and the machine moves around it. That is not necessarily the case anymore — and in fact, growth in the segment has moved well beyond that. “It’s a much more complex choice now, and there is more opportunity for convenience retailers to decide how they want to execute on this concept,” Wulf explained. The channel is now growing its car wash business with multiple bays, hybrid bays (whereby the wash unit is separate from the dry unit, allowing

Brushing Up on the Dos and Don’ts • Don’t treat the car wash like a stepchild on the side. • Do integrate the car wash into a total marketing program. • Don’t think a c-store car wash is limited to a single rollover or automatic bay. • Do consider multiple bays, hybrid bays and shorter tunnel conveyor operations. • Don’t send the car wash the way of the free air pump. • Do devote daily maintenance and frequent capital attention to the business. • Don’t assume less car wash traffic means lower sales. • Do count revenue per location and average purchase increases.

increased throughput), and best of all, shorter conveyor or express tunnel operations. “Conveyorized car washing has come to the c-store and petroleum segment now that the footprint has shortened,” Wulf relayed. “Conveyors were thought to have a huge footprint of 100-feet-plus, but we are now seeing from car wash equipment manufacturers, shorter tunnels of 30 feet to 50 feet, which opens them up to c-store sites.” One of these manufacturers is Ryko Solutions Inc., headquartered in Grimes, Iowa. Ryko recently acquired National Carwash Solutions (NCS), which Ryko Vice Chairman Steven L’Heureux said is “an ideal strategic fit” partly because of its in-depth expertise in the tunnel space. Wulf likened improvements to the conveyor systems to improvements in the cell phone industry. “It’s a much more viable, compact and tight package,” he stated. Based on his observations, Wulf also pointed out there seems to be more c-store car wash activity lately in “reload and change,” meaning upgrading and refreshing existing car wash sites rather than investing in new car wash construction. IMpRoVEd MaInTEnanCE

Car wash maintenance on the part of convenience stores has traditionally been slim to non-existent, especially without the integration of the business into the store. Store managers typically couldn’t find the time to do the work needed, and so it was

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often “let go.” If the car wash broke down, it was left that way for a while. The service was viewed as an “extra” and not an integral part — certainly not a destination part — of the business. But that is changing now, too. “As a bad example, we’ve all seen gas stations with the free air on the side. Most operators aren’t aware of it; the hose is hanging in the street and it hasn’t been used,” Wulf said. “This is what not to do with the car wash.” These days, more c-store operators are starting to wake up to the car wash reality of recent times. “If you have a car wash, it requires regular maintenance and capital attention. You can’t simply treat it like the air pump,” he remarked. While c-stores don’t often discuss car wash profit, industry reports reveal that car wash operations at a c-store can generate between 50-percent and 65-percent gross profit. While maintenance costs can reduce that, regular maintenance and investment can also increase the traffic and, most importantly, lead to

repeat business. Ryko Solutions is one supplier that’s partnering with c-store retailers to help them focus on maximizing profit in the business. The aforementioned NCS acquisition expanded the company’s service support reach to now be a combined network

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 121


SERVICES

Car Wash + Lottery + ATM + Prepaid + Financial

of 250-plus technicians across the United States, according to L’Heureux. The company also created the new position of senior director of professional services to not only manage this technician force, but also develop and execute on maintenance and customer (retailer) connectivity programs and continue to build on the customer service experience. Sam Toubia was appointed to the new role this summer. BETTER ValuE, hIghER TICkET

Just released from the International Carwash Association were second-quarter 2014 c-store car wash figures comparing same-store figures from second-quarter 2013. Revenue is up 9.3 percent and the average ticket spent per wash is up 12.4 percent. Interestingly, total washes are down slightly, by 2 percent. “So, the bottom line is that even with slightly less traffic, significantly more is being spent per visit,” explained Wulf. The association is “just beginning to digest this research,” but he hypothesizes that the channel is “incre-

mentally, over time, taking the advantage they have in convenient car washes and turning it into a product with a much better value.” For example, Kangaroo Express is offering “car detailing” services at some of its North Carolina locations, and Kwik Trip Inc. is featuring a plethora of car wash gift card values on its website — from a single wash card to five, 10, 15, 20, 25, 50, 100 and 200 count cards. The more washes purchased, the more consumer savings. Kwik Trip’s four available washes — standard, deluxe, ultimate and elite — are described in detail on its website, encouraging customers to trade up in quality and value. Car wash-specific customer loyalty programs are also turning out to be great marketing tools for the channel. Offering incentives and coupons are a customer perk, but the real value to retailers lies in collecting the car wash customer data and utilizing it to improve programs and services and ultimately, bring customers back more frequently. CSn

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SERVICES

Car Wash + Lottery + ATM + Prepaid + Financial

Progress Along the Prepaid Path Prepaid products aren’t getting the buzz of other c-store categories, but there’s plenty going on By Renée M. Covino

T

he prepaid card segment may not be a glamourous one for convenience stores, but it is an expanding one. The category is also a quick and easy way to bring in some new customers and turn a proft. Accordingly, here are some quick and easy tips and tidbits for retailers that want to progress further on the prepaid path. Prepaid cards have entered the mainstream. In 2014, retail purchases made with prepaid cards, which include debit, payroll cards, open gift cards (from a major card company, which can be used anywhere), closedloop gift cards (like Starbucks), and open and closed-loop consumer incentive cards, will top $200 billion. This will equal 5 percent of all retail spending in the United States, according to Madeline Aufseeser, a senior analyst at Aite Group, a financial technology consultancy. The Aite Group recently interviewed 35 industry executives from “large, well-known national brands” and “recognizable regional retailers” and concluded that merchants are pushing prepaid card sales to generate revenue. When asked what types of prepaid cards their companies sell now or plan to sell, the results were: third-party closed-loop gift cards (89 percent), prepaid debit cards (85 percent), own

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company’s branded closed-loop gift cards (77 percent), and third-party open-loop gift cards (80 percent). There is a growing crowd of “unbanked” customers. About 40 percent of adults aged 18 and older are unbanked, according to research from Packaged Facts. The firm’s Unbanked and Underbanked Consumers in the U.S. 2014 report noted that this represents an overall 13.2-percent increase from 2005. Digging deeper, young Millennials, aged 18-24, are now among the most likely to seek alternatives to traditional banking. Young Millennials identifying themselves as “unbanked” grew almost 25 percent between 2005 and 2014 to reach 67 percent. Packaged Facts attributes this increase to “recession-driven unemployment and wage trends that have disproportionately affected younger entrants to the job market, with diminished job prospects and wage issues dampening the need for bank accounts.” However, the researcher also suggests that a larger generational shift away from traditional banking relationships among Millennials may be underway, as these young consumers adapt to newer forms of alternative banking, led by non-bank funding accounts such as reloadable prepaid cards. Visa dominates the top c-store distributor’s top prepaid SKUs. The top-shipped prepaid SKU from convenience store distribution giant McLane Co. Inc. last


SERVICES

Car Wash + Lottery + ATM + Prepaid + Financial

year had a substantial value — the $100 Visa gift card. Visa also was a popular spot holder in the wholesaler’s top 10 prepaid lineup. The No. 2 prepaid McLane SKU was the PayPower Prepaid Visa brochure, followed by the American Express $100 gift card, the Visa $50 gift card and the Boost $50 phone card. The next five most-shipped SKUs were the Visa $25 gift card, the Visa $100 GPR card (plus $3.95 purchase fee), the Verizon $15 phone card, the American Express $50 gift card and the Amazon $25 gift card. In the retail merchant gift card arena, gas station cards are up. Last year’s holiday season found 12 percent of those shoppers purchasing gift cards to be purchasing them from gas stations, up from 11 percent the year prior. This was the highest amount seen in five years for the channel, according to the National Retail Federation. According to its most recent gift card spending survey, top choices for those giving gift cards were department stores (around 40 percent) and restaurants (around 34 percent). Total spending on the gift card segment was tallied at $29.8 billion. C-stores are making merry with international phone cards at holiday time. Stores with high percentages of migrant workers or first-generation foreigners do well with international long-distance prepaid cards in their regular set. But other c-stores are wising up that this might be a super seasonal business, highlighted as a gift item. “We find we sell a lot of international phone cards during the holidays,” relayed Phyllis Simpler, operations manager at the 13-store Minute Market chain based in Medford, Ore. “Our Hispanic customers know which cards they want — the ones with the least amount of hook-up fees — and they tell us.” The word on the street is profit margins on international long-distance cards run from 15 percent up to 30 percent. In-house prepaid cards are a no-brainer. More retailers, including c-store operators, are learning to sell their own branded prepaid cards because they can learn about customer preferences and drive more sales this way. Sixty percent of the merchants surveyed by the Aite Group said that increasing customer loyalty through prepaid cards was a priority over the next 24 months.

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7-Eleven highlights its prepaid products on its website.

Minute Market’s Simpler also told Convenience Store News that “our own in-house gift cards are turning into a very good idea. We have one customer that buys them for his disabled brother. We are really getting to know our customers through these cards.” Prepaid centers are popping up on convenience store websites. Prepaid products are not only gaining more prominence in-store, they’re also gaining digital attention. Convenience channel giant 7-Eleven Inc. is case in point. Under the “Financial” tab on the brand’s website — in addition to payment services and cash services — it now has a prepaid center link that explains to customers: “With a reloadable prepaid card in your pocket, you can shop online, pay bills and more. And adding money to your card is easy with Green Dot MoneyPak, NetSpend Reload or Vanilla Prepaid Reload. Let’s do a cheer about it. No credit check! YAY!” Clearly, the language and enticement is targeted primarily at young adults. In addition to the cards mentioned, other prepaid options available at 7-Eleven stores are: Green Dot Visa, OneVanilla Visa Prepaid Card, PayPal Prepaid MasterCard, RushCard Live Reloadable Prepaid Visa Card and Western Union MasterCard. The 7-Eleven website also has a “Cards” tab, which highlights apps and digital, gaming, no contract wireless and gift cards. The website tabs are for information purposes only. Customers can browse and learn about the chain’s prepaid options before they head to the stores, but there is no online purchasing of products — at least not yet. CSN


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Out of Sight, Not Out of Mind C-store operators balance environmentally friendly practices with the cost of investment By Angela Hanson

L

ooking back at the convenience store industry several years ago, “green” was the buzzword. The belief was that operating practices based on green and sustainable principles would not only be good for the world we live in, but they’d be good for business, too, marking a perfect match between good intentions and practicality. Today, green makes the headlines less frequently, but that doesn’t mean it has gone out of sight, out of

mind. C-store operators are still putting environmentally friendly practices in place, but they are balancing these initiatives with the cost of investment. “The almighty dollar is always the first thing,” said Mike Lawshe, president and CEO of Paragon Solutions Inc., a Fort Worth, Texas-based retail design firm. Paragon Solutions works on roughly 250 projects each year and factors in green options as a standard part of the process. Rather than fading away like a no-longer-fashionable trend, Lawshe said sustainability has become standard in the industry. “It’s expected that we incorporate as much [sustainability] into the design as we can,” he said, noting this can include anything from LED lighting to energy management systems and beyond. “It’s a conscious discussion on an ongoing basis.” Ten years ago, this discussion was less of an analysis on which features made the most sense for a c-store and more like addressing a classroom. “We had to educate them,” he said. “It’s not that way anymore.” This is partially due to changes in technology. Green features that were once expensive to implement, with a five- to seven-year wait before they paid for themselves in cost-saving measures, are now much cheaper to implement. Some allow retailers to cut back on energy costs so quickly that their price tag is nearly equivalent to the savings. Time is another factor. As c-store veterans grow more knowledgeable about and comfortable with sustainable technology, younger people who grew up understanding it are joining the industry — and becoming customers, too. TAkINg ThE LEED

Recycling bins are an easy way c-store retailers can score green points.

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“[Green is] not going away because it’s not a fad, it’s a value,” said Sara Kurovski, manager of sustainability for Kum & Go LC. The West Des Moines, Iowa-based


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Store Ops + Labor + HR + Real Estate + Financial + Field Ops

convenience store chain makes a point of going green on multiple levels, from the use of water-saving fixtures, to building stores with reflective concrete and sustainable materials, to offering renewable fuels. At Kum & Go, much of the support for sustainability comes from CEO Kyle Krause, who “believes in it wholeheartedly,” Kurovski said. “It’s just part of who he is.” Before Krause created a dedicated role to oversee the company’s sustainability efforts, a “green task force” of sorts existed to work on lower-level efforts such as double-sided printing. Today, Kum & Go is the only c-store chain to participate in the U.S. Green Building Council’s Leadership in Energy & Environmental Design (LEED) Volume Program, and it is on track to open its 100th LEED-certified store in January. LEED guidelines definitely help c-stores get greener, but the rigorous program isn’t for everyone. Certain requirements may be financially out of reach, while others may earn a store points but serve no functional purpose, such as installing a bike rack at a store located off an interstate. Lawshe advises retailers to set their sustainability goals independently and then either work toward LEED certification if it matches these goals or just use it as a guideline without formalizing anything. “You can use that as benchmarks to guide you in the process of ... being more green,” he said. Although LEED may be the gold standard in terms of c-store sustainability, small-chain and single-store retailers shouldn’t be intimidated from approaching sustainability in smaller ways. “The most common on the energy-saving side are LED technologies and energy management systems. To me, those two are automatic,” Lawshe said. “It could be as simple as doing analysis on your store and

Sustainability is a core value for Kum & Go.

130 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Using recycled materials is becoming a standard industry practice.

saying, ‘OK, the ice maker doesn’t need to be running 24/7; energy is cheaper after 7 [p.m.]’” FIRST STEPS

A typical starting point is to focus on managing what is already inside a c-store rather than going out and buying new equipment — even if it is more efficient. Lawshe estimates it is possible to reduce energy costs by 20 percent at a single store. One method is to look at existing equipment and habits from a different perspective. For example, store operators should avoid turning on multiple lights or pieces of equipment at once, which can cause energy surges. Low-tech automatic timers and sensors serve as a relatively simple investment for retailers that want to keep a store’s energy usage even without doing everything manually. Larger chains and those that are ready to make a bigger investment can investigate the more robust energy management systems, which allow one person to remotely control processes at multiple stores from a single site. This option will likely grow more appealing as the c-store market continues on its current path of development. “Some of our [industry’s] stores are getting much bigger,” Lawshe said. “Bigger stores come with bigger energy costs.” At the same time, the human element can make nearly as much of a difference as new technology. “The most important thing to consider is who is running and operating your store,” said Kurovski. “You can build an environmentally friendly building, but if you don’t have the right people responding to it and working within it, you’re not going to be as effective


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OPERATIONS

Store Ops + Labor + HR + Real Estate + Financial + Field Ops

as you can be.” This is relevant at all levels: Everyone from management to entry-level associates need to be aware of green practices and do their part to support them, she explained. This encompasses everything from separating recyclable products from the garbage to fixing a

Green Newsmakers Convenience store chains across the United States are implementing sustainability in their own ways. Some are just starting to add green features, while others have been at it for quite a while. These companies have made headlines recently for their approach to sustainability: On Earth Day this spring, Sheetz Inc. accepted gold certification from the Global LEED Program for the environmentally responsible design of its Sheetz Center for Shwellness in Claysburg, Pa. The 11,000-square-foot center is Blair County’s first LEED-certified building, meeting strict environmentally friendly criteria in its design, construction and operation. Stripes Convenience Stores installed its first environmentally safe truck parking area in Refugio, Texas. The chain replaced its previous over-the-road parking lot with new TRUEGRID technology. TRUEGRID is made from 100-percent recycled plastic and can be recycled itself. The new parking lot serves as a frontline solution to erosion control and storm water management. Sugarland Petroleum contracted with Energy Efficiency & Sustainability Consulting to implement LED lighting and energy-efficient beverage cooler motors, controls, reflective roof coatings, variable speed cooler door heaters, and more at two of its Houston convenience stores. The retailer expects to save more than $15,000 per year in energy costs, and has already seen an approximate 32-percent reduction in its utility bills. Hess Corp. was named the No. 1 greenest U.S. company in the energy sector on Newsweek’s Green Rankings 2014 list for the fourth consecutive year. The annual rankings are based on performance indicators such as combined energy productivity, audited environmental metrics, and sustainability pay link (relationship between the pay of the senior executive team and the company’s achievement of environmental performance targets). C-store suppliers are also going green. Earlier this year, Mars Chocolate North America announced an agreement to open a wind farm near Lamesa, Texas, which will provide electricity for 100 percent of Mars’ U.S. operations.

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The Sheetz Center for Shwellness is LEED-certifed.

toilet that is running too long and wasting water. “It’s all about living and working within a green building — you don’t just get to build it and let it sit there,” said Kurovski. In addition, she noted that it is easy for organizations to get overwhelmed by tackling too much at once, but progress can be made by focusing on just one thing and moving forward from there. Take recycling cardboard, for example. “That’s easy to do,” she said. “When you multiply [a sustainable habit] by hundreds and hundreds of people, that’s a huge impact.” Not only does it make a difference, but it also gets noticed by customers. Many consumers include sustainable practices in their own values and are likely to appreciate such efforts. Kum & Go has received positive feedback for its adoption of recycling bins at its fuel pumps. For retailers that are truly committed to sustainable features, they should go out of their way to keep up with the latest options available, which change all the time. “A good goal for us is to become energy-neutral where we are off the grid, where we produce as much energy as we consume,” Lawshe said. “That’s very aggressive, but I think it’s doable.” Truck stops and other large areas have the best prospects for making use of solar and wind power. While the prospect of being energy producers and not just energy consumers is a long-term goal, Lawshe doesn’t see it as beyond the convenience store industry. “Wouldn’t that make the world a wonderful place? I think so,” he said. CSN


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Under Attack What c-store retailers can do to try and prevent data breaches and cyberfraud By Brian Berk

T

arget Corp., Home Depot Inc., P.F. Chang’s China Bistro Inc., eBay Inc., Michaels Stores, SUPERVALU Inc., JPMorgan Chase and Co., and in the convenience channel, MAPCO Express Inc. All these companies have something in common — and it’s not a good thing. Each one has suffered from a cyberattack in some form in the past two years. There were 395 reported breaches in the United States in 2014 as of July 8, a 21-percent increase compared to the same period in 2013, according to the Indentify Theft Resource Center. Clearly, data breaches are on the rise, culminating in August when a Russian group hacked 1.2 billion usernames and passwords belonging to more than 500 million email addresses. According to Hold Security, a company that specializes in data breaches, this hack attack represents the “largest breach known to date.” Breaches are on the rise because in the past, hackers needed to be quite sophisticated to successfully steal data. Today, the barriers to entry are much lower than ever before. “Not only are there automated hacking tools,” said Dwayne Melancon, chief technology officer at Portland, Ore.-based Tripwire Inc., provider of products intended to prevent cyberthreats. “But also it’s because retailers have tight budgets and a false sense of security due to PCI (payment card industry) standards. But PCI requires continued vigilance and I’m not sure all retailers continuously monitor their environments for attacks.” Financial gain and the theft of intellectual property are why 85 percent of cyberattacks take place, Verizon’s 2014 Data Breach Investigations Report showed. Conversely, hacking incidents done for fun or based on

134 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

an ideology are near zero, the report concluded. Retailers concerned about cyberattacks coming from internal employees can take solace in the fact that only 10 percent of attacks stem from this source, although this figure did rise slightly in 2013 compared to the prior year, Verizon reported. Cashiers and end-users account for a majority of the internal attacks. Breaches are the act of stealing data. Once this stolen data is used for gain of some form, it constitutes fraud. Once either or both take place, retailers can have a massive mess to clean up, including negative public perception and consumer lawsuits. The financial bill is large, too, with Target acknowledging it spent $148 million in its fiscal second quarter alone trying to get back on track following its cybersecurity incident. Adding to the pain beyond the financial frustration is the mental frustration. Following a breach, holding the offending party/parties responsible for the attack is a nearly impossible process in many cases. Even if


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the offending party can be identified, they likely live in a country with no extradition agreement with the United States. “The likelihood we can get local law enforcement to make an arrest is unlikely,” acknowledged Seth Ruden, senior fraud consultant at ACI Worldwide Inc. PREVENTING A BREACH

If a retailer such as Target, one of the largest retailers in the world, could not prevent a data breach, how can smaller convenience store chains do so? While there is no definitive way to prevent a data breach, experts say there are several ways to ward off cybercriminals, even for c-store retailers that have limited budgets. At the point-of-sale (POS), hackers often already know of an explicit vulnerability a retailer has and they continue to attack it repeatedly. Retailers that do not have large technology budgets and have yet to implement EMV (Europay, MasterCard and Visa) guidelines still do have hope of thwarting an attack however, stated Ruden. “It’s important to default passwords, especially for remote access,” he said. “If a retailer uses an applica-

“You need to identify your sensitive data. We put a lot of focus on credit data, but you may have loyalty data and employee data that you have gathered. Anything you don’t want someone in eastern Europe to look at, you need to identify.” — Phil Schwartz, Valero Energy Corp.

tion that allows them to check POS records from home or allows them to access their computer network from a remote location, it can lead to potential problems.” And not only the POS can be attacked. Retailers must recognize that any network associated with the POS computer can be at risk. “So whenever possible, it’s very important to separate the POS network from any other network [retailers] use that is connected to the Internet,” he said. “If it’s possible to remove the POS computer from the external Internet, that would be very helpful.”

136 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Tripwire’s Melancon believes the first thing retailers should do is be suspicious and start thinking like the cybercriminal would. He recommends taking a picture of both the pump and the POS and periodically comparing the reality to the photos. “That forms a baseline,” he said. “Has anything changed since? Does anything look like it was tampered with? That’s a good place to start, and it isn’t very expensive [to do].” Poor access controls is another major problem, added Melancon. “Pay attention to who you allow to access your system and what privileges they have,” he said. “Make sure anyone who has the ability to make changes to the POS or card environment is noticed any time they make a change. That means you need to basically fingerprint your system to know how it changes over time and then be able to investigate to determine if you trust that change or not.” If all else fails, an inexpensive way to reduce fraud is to reduce your points of entry, said Tim Erlin, director of security and IT risk strategist for Tripwire. Simply stated, this means reducing the number of POS terminals in-store or the number of pumps, but he acknowledged this may hurt profits, so retailers must carefully weigh this decision. A RETAILER’S APPROACH

Looking at the problem from a retailer’s view, Phil Schwartz, manager of I/S, credit cards systems and POS applications support at Valero Energy Corp., has been behind many efforts to thwart data breaches and subsequent fraud during his 19 years at the San Antonio-based company. Retailers attempting to prevent breaches need to make sure they have security practices in place


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— based upon PCI framework — that will secure data every day. C-store operators should go through some basic steps, Schwartz advised. “First, you need to identify your sensitive data,” he said. “We put a lot of focus on credit data, but you may have loyalty data and employee data you have gathered. Anything you don’t want someone in eastern Europe to look at, you need to identify.” The second step is to figure out where data sits and how it travels from one place to another, giving a c-store retailer a good idea of where they are vulnerable. To obtain help ascertaining this information, c-store operators can go to Conexxus.org, which is developing a Security Instant Reporting database. Conexxus, formerly known as the Petroleum Convenience Alliance for Technology Standards (PCATS), lists convenience and petroleum websites that have been threatened in the industry. Lastly, retailers need to implement countermeasures that prevent a threat from becoming a breach. Schwartz admits this is not an easy task. Once a retailer has implemented countermeasures, they need to do it again and again, he explained. “One simple thing you can do is, if you don’t need a particular [piece of data], get rid of it,” he said. “For the most part, a lot of data just isn’t needed. Under PCI standards, it says to get rid of particular pieces of cardholder data as soon as it’s no longer serving a purpose. That’s a really good idea.” EMV TO THE RESCUE?

One solution to fraud is EMV implementation. The EMV liability shift will begin one year from now. On Oct. 1, 2015, credit card manufacturers will start shifting responsibility from themselves to the retailers regarding fraud occurring at non-EMV-ready POS terminals. Fuel pump liability shifts will happen exactly two years later. Experts agree that EMV — also referred to as chipand-PIN or chip-and-signature — is not an end-all solution to cyberfraud, nor is it intended to be. After all, most developed countries other than the U.S. already have EMV guidelines in place, and breaches and fraud still take place. According to Tripwire’s Erlin, once current mag-

138 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

netic stripe cards begin to wane in the U.S., attackers will shift their focus in a “perpetual arms race to stay ahead of the other party.” But experts do agree that EMV implementation is definitely a step in the right direction in an effort to combat hack attacks, as EMV cards provide much more fraud protection vs. omnipresent magnetic stripe cards. As Valero’s Schwartz pointed out, it is nearly impossible to counterfeit an EMV-enabled card based upon the chip these cards feature. Worries about lost and stolen cards can be counteracted by the PIN numbers that EMV cards also feature. “So if you have chip-and-PIN, you are protected from both counterfeit and lost and stolen card fraud,” said Schwartz. “But it’s not designed to protect the data. It wouldn’t have done anything for Target to prevent the breach. But it would have made it more difficult to monetize once [hackers] had [the data]. If you can’t make money off the data, why bother stealing it?” EMV will have the largest impact at the time of purchase, according to one Midwest convenience store retailer. “It does not help with data in flight from the stores to the banks, nor at rest,” he said. “The chip stays in communication with the processing solution so the chip can be verified and changed if needed. The design and functionality of the chip is significantly more secure than the traditional magnetic stripe we use today.” Before c-store retailers switch to EMVcapable devices, they need to accept that it comes with one drawback: a high cost. According to some experts, implementation may carry a five-figure price tag — depending on the size of the retailer — a cost that is perhaps too hard to swallow for smaller c-store operators. Paul McMeekin, manager of business intelligence and market research at ACI Worldwide, agrees the cost is high to upgrade the POS, so c-store retailers must weigh the pros and cons. “If you own 10 or 15 stores, it’s a tough decision to make financially, especially if you just upgraded your POS a couple of years ago,” McMeekin said. “But you don’t want to be left behind as the guy who is ‘holding’ the fraud. In the mind of the cybercriminal, retailers that don’t upgrade to EMV-ready


TECHNOLOGY

Enterprise + POS + Digital + Payment Systems + Business Intelligence

devices [on or near Oct. 1, 2015] will be seen as the weak link in the chain.” The majority of the cost is associated with the purchase and installation of the compliant devices such as PIN pads and fuel dispensers. “This cost has to be compared to the cost associated with the liability shift,” noted the Midwest c-store retailer. “Any additional cost could be associated to hiring consulting firms to assist with education and the EMV certification process. Many experts are stating the certification process is going to be very detailed and time consuming.” However, Rob Nathan, chief technology officer at payments technology provider CardConnect, said the cost to upgrade to EMV isn’t as “devastatingly expensive” as some believe. The best approach is to purchase hardware that is EMV-ready and provides point-to-point encryption (P2PE), along with software that handles tokenization for any storage of card data, he relayed. “An ultra-secure P2PE and EMV reader costs $300 to $400,” said Nathan. “Obviously, that adds up for a multi-location retailer with multiple checkouts in each store. But the retailer has to know it has flexibility. One simple option to mitigate the upfront cost is to rent the hardware.” Whether retailers actually go ahead and switch to EMV-ready devices in mass during the next 12 months when the liability shift takes place is still in question. “The banks have started moving along and have issued EMV credit and debit cards this year,” said McMeekin. “That suggests retailers may begin to move along that haven’t already done so.” The Payments Security Task Force revealed in August that a group of nine major banks it surveyed expect to issue more than 575 million EMV cards combined to customers in 2015. IF YOU GET HACKED

No matter what efforts a retailer takes to prevent cyberfraud, breaches will still occur. If one takes place, from a public relations standpoint, retailers must make sure the message gets out quickly and reaches the masses, advised McMeekin.

140 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

“As a consumer, we live in a world where this type of thing is going to happen and you want to be informed and have the information as quickly as possible,” he said. “It’s easiest to get the pain out of the way quickly and start to make corrective actions.” If possible, retailers should be the first to break the news about the breach, communicate their plan for immediate action and let the public know they are not sitting idle, added Mike Starosciak, CardConnect’s head of marketing. “Be prepared to respond to the flood of questions you will soon get from customers,” Starosciak said. “Set up a page on your website dedicated to breach updates, and ensure your customer service team is prepared to deal with the influx of requests. And don’t forget about social media; respond to users quickly, directing them to your website or customer service line.” From a technological standpoint, Ruden said if a breach occurs, retailers should immediately alert their POS acquiring software processor and their POS vendor. “It’s very important to have a detailed forensic analysis. Plenty of organizations specialize in this,” he concluded. “They are the ones that make sure you don’t have a repeat occurrence, which is absolutely critical. Frequently, I’ve seen merchants get breached and then six weeks later, it happens again because the POS wasn’t thoroughly and correctly investigated.” CSN


TECHNOLOGY

Enterprise + POS + Digital + Payment Systems + Business Intelligence

Who’s Most Effective on Social Media? Wawa, Casey’s and 7-Eleven lead c-store pack in building brand equity

W

hich retailers use social media most effectively in the convenience store industry? To answer that question, Convenience Store News asked Brand Chorus, a leading brand and social intelligence frm, to look at 30 days of social media posts from 10 leading convenience store brands using its proprietary StoryScore methodology. StoryScore looks at how well a retailer’s social media posts align with broader brand values and themes. Convenience stores with a high StoryScore are using social media effectively to reinforce their brand narrative, while those with lower StoryScores tend to be more opportunistic with their posts. WHaT Is sTOrYsCOrE?

When it comes to social media, most convenience stores look to likes, shares and comments as the key measures of effectiveness. But according to the social media experts at Brand Chorus, popularity should not be the sole objective of a company’s social media efforts. “Instead of focusing only on popularity, retailers

Giving back is a key theme in Casey’s social media posts.

should also be using social media to strengthen their brand equity,” said Martyn Tipping, CEO of Brand Chorus. “Very few convenience stores are using social media as an effective tool for telling their brand story.” The StoryScore is a number between one and 100 that represents the strength of a brand’s narrative — in other words, how well its social media content is aligned with the brand. Brand Chorus uses a state-of-the-art social monitoring platform, combined with a proprietary algorithm and human intelligence, to calculate a brand’s StoryScore. StoryScore reports quantitatively what’s working and what’s not, and points out opportunities to improve social media content and align strategies to drive a higher StoryScore. KEY CONvENIENCE sTOrE INsIGHTs

The findings are both insightful and informative. For Wawa invests in cool videos and graphics that build its brand.

142 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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instance, promoting private label is a big focus for convenience stores: 32 percent of all posts promoted private label, and 85 percent of 7-Eleven Inc. posts pertained to private label such as Slurpee or Big Gulp. Admirably, many brands post about giving back and community outreach. Recognition in this area

goes to Casey’s General Stores Inc. and Kum & Go LC for a comparatively larger percentage of these posts than others. Use of imagery across the brands varies widely from poor to excellent. Having interesting images and videos strengthens the StoryScore, provided those images are relevant and contribute to an overall brand narrative. For example, Wawa Inc. invests in cool videos and graphics that build its brand far more than others. While having fun and interesting images/gifs/videos helps, having trivial and unrelated images hurts the score. For example, posting a cute kitty might be nice, but it does not build brand value. The quality of posts is more important than the quantity of posts. Casey’s performed better than 7-Eleven despite having significantly less posts — Casey’s 50 posts vs. 7-Eleven’s 85 posts during the 30-day monitoring period. Personality and style matter, too. Brands that have a consistent tone of voice score better. Wawa and 7-Eleven are notable examples. Some other highlights of this exclusive report for CSNews are: • BP’s ampm capitalized on the World Cup soccer tournament to engage its heavily Millennial and multicultural customer base. • Maverik Inc. uses its social media to promote itself as more than a convenience store — it’s a lifestyle brand. • Cumberland Farms Inc. highlights its innovative mobile payment app and its considerable community service activities. • Sodapalooza was the big promotion heralded on RaceTrac Petroleum Inc.’s Facebook pages during the 30-day period. CsN For more information about StoryScore, or to learn how to add your brand to the index, go to www.storyscore.com or contact Martyn Tipping at martyn. tipping@brandchorus.com.

144 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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TECHNOLOGY

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TECH WATCH

Pumped-Up Foodservice Zarco USA uses at-pump technology to boost food and merchandise sales By Brian Berk

Z

arco USA President Scott Zaremba believes he truly has a “game changer.” A few months ago, at one of his Lawrence, Kan., convenience stores, Zaremba installed what he calls “version 2.0” of his Siris tablet, which allows consumers to order the retailer’s proprietary Sandbar Subs foodservice items at the fuel pump. Soon after, Zaremba added the 10.4-inch kiosk ordering tablets to a second store in Lawrence. The entrepreneur then took his idea one step further at the end of July. Based on customer feedback, consumers at one Zarco USA Lawrence location can now pick up their foodservice items at a drive-thru window. “There is nothing else like it in our marketplace,” Zaremba told Convenience Store News. “Of course, QSRs [quick-service restaurants] in the area offer drive-thru options, but you can’t fill up your tank there. We are the only one that offers both.” Zarco USA’s presiZarco USA’s Siris tablet dent added allows customers to purchase that customer foodservice items at the pump for in-store or response drive-thru pickup. has been so positive that he will look to add additional items to what consumers can pick up at the drive-thru. Offering bundles of two or more items is one thing he is considering. “People have limited time today,” he said. “Parents of young children and the elderly don’t want to get out of their cars. They want to fuel up, pick up something

146 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

to eat and go.” When customers arrive at one of the two Zarco USA stores that currently offer at-the-pump ordering, they see the Siris tablet, which has been retrofitted onto the pump dispenser. As of press time, a total of eight such tablets were in place at the two stores. Using the tablets, consumers can purchase any Sandbar Subs item on the menu. This includes 15 subs and wraps, 12 breakfast items, as well as coffee. If no item on the menu appeals to them, made-to-order items also can be requested. “We have a billion different food combinations,” said Zaremba, who founded Sandbar Subs in 2010. Biscuits and gravy is the best-selling menu item, he noted. Once an order is placed at the Siris tablet, it is ready in approximately five minutes, or about the time it takes to fill a gas tank. Customers can either pay for their items at the pump using a card swipe acceptor housed within the tablet, or go inside the store to pay. There is one potential downside to having a drivethru. Customers using the drive-thru have few reasons to walk inside the physical store. But Zaremba explained that these same customers now using the drive-thru used to only fill up their gas tanks and then drive away. Hence, Zarco USA is drumming up plenty of new revenue that is boosting its bottom line. “We also still have plenty of customers who order at the kiosk and pick [their items] up inside the store,” Zaremba stated. “When they leave their cars to pick up their meal, they are buying other items in the store as well. Sales at Sandbar Subs are up, and in-store merchandise sales are up.” Zaremba, who created the Siris tablet with the help of technology whiz Peter Tawil, hopes to spread the wealth. Costa Mesa, Calif.-based Signal Peak Designs is selling his tablet in 8-inch and 10.4-inch sizes to other retailers on a 36-month lease basis. At the pump, Siris can be retrofitted onto Gilbarco Encore or Wayne Ovation dispensers. CSN


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Where

Opportunity

Knocks

Economics, site availability and a host of other factors drive successful c-store development By Debby Garbato

D

etermining where to open — or sometimes close — a convenience store can be as difficult as trying to judge a candy bar by its wrapper. What may look good on the shelf may or may not live up to customer expectations. Hence, an undersaturated market may or may not be the best place to open new stores; the same holds true if a market is oversaturated. Predicting what works where can be challenging. Oversaturation can be driven by proximity to an interstate, university or military base. Or, a market can be a destination for tourists, employment or medical services. Factors causing undersaturation, in contrast, can include low income, high property costs, loss of a major employer or competition from another retail channel. There is no clear-cut answer. Using a combination of data and analysis, the Convenience Store News 2014 Saturation Study seeks to help retailers identify which

148 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


areas of the United States are ripe for growth and which areas already have their fill of c-stores. This year’s study, which picks up where the 2008 and 2004 installments left off, is based on 381 markets, including metropolitan statistical areas (MSAs) that have an urban core population of at least 50,000. Saturation is defined as population divided by c-store count. The saturation for each state and market area is calculated and the results are then indexed against the national average. An index of 100 is average. Any index above 100 indicates an area with fewer people per c-store than the national average, or high saturation (generally not an opportunity for growth). An index below 100 indicates an area with more people per

Top Undersaturated Markets in U.S. 2014 Market Area 1 San Jose-SunnyvaleSanta Clara, Calif. 2 Los Angeles-Long Beach-Anaheim, Calif.* 3 Boulder, Colo. 4 Anchorage, Alaska 5 Provo-Orem, Utah 6 San Francisco-OaklandHayward, Calif.* 7 Oxnard-Thousand Oaks-Ventura, Calif. 7 Phoenix-MesaScottsdale, Ariz. 7 Santa Fe, N.M. 10 Trenton, N.J.* 2004 1 Los Angeles-Long Beach, Calif. 2 Oxnard-Thousand Oaks-Ventura, Calif. 2 San Jose-SunnyvaleSanta Clara, Calif. 4 San Francisco-OaklandFremont, Calif. 4 Trenton-Ewing, N.J. 4 Santa Barbara-Santa Maria, Calif. 7 San Diego-CarlsbadSan Marcos, Calif. 8 Honolulu, Hawaii 9 Boulder, Colo. 10 Philadelphia-CamdenWilmington, Pa.-N.J.-Del.-Md.

Population

Number of C-stores

1,919,641

421

13,131,431 310,048 396,142 562,239

2,982 72 93 139

4,516,276

1,137

839,620

224

4,398,762 147,423

1,188 40

370,414

104

12,896,262

2,351

792,260

159

1,799,457

364

4,275,793 361,578

962 84

412,081

96

2,960,132 899,864 306,514

709 222 77

5,756,898

1,466

*Market area definition revised since 2004 Source: Convenience Store News Market Research, 2014

150 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

store than average, or low saturation (generally an opportunity for growth). Just looking at the indexes alone, though, doesn’t tell the whole story of a market. “If you read the study and say you should build more stores in low saturation markets and you Population Saturation shouldn’t do so in high indexper Store Index ing markets, it’s not that simple,” 4,560 46 cautioned Neil Stern, partner at retail consulting firm McMillian/ 4,404 47 Doolittle in Chicago. 4,306 48 Take the case of Trenton, N.J., 4,260 49 4,045 51 and Grand Island, Neb. These areas are polar opposites: Trenton 3,972 52 is the most undersaturated market in the densely populated Northeast, 3,748 56 while Grand Island is the most 3,703 56 oversaturated city in the more 3,686 56 thinly populated Midwest. 3,562 58 CSNews chose to take a close look at these communities because the conditions they face are shared 5,485 41 by a number of other markets in 4,983 45 the study. Trenton is home to 370,414 4,944 45 people, which translates to a whopping 11,033 people per square mile, 4,445 50 4,305 52 according to CSNews and city-data. com figures, respectively. With a 4,293 52 population of 3,562 humans per store and a low index of 58, Trenton 4,175 53 4,053 55 would seem ripe for development. 3,981 56 It is not. Median income is $31,311 (compared to a state aver3,927 57 age of $69,667), median home value is $111,400 (state average is


$311,500), unemployment is 23.6 U.S. Overview by Region percent and 26 percent of people did not finish high school. In addi2014 Number of Population Saturation tion, several thousand of the city’s Region Population C-stores per Store Index residents live in the state maxiNortheast 55,943,073 23,605 2,370 88 mum security prison, making them South 118,383,453 71,352 1,659 125 Midwest 67,547,890 31,154 2,168 96 unlikely convenience store shopWest 74,254,423 25,751 2,884 72 pers, according to city-data.com. TOTAL 316,128,839 151,862 2,082 100 The crime rate is also high. “Many inner cities are not 2004 Northeast 54,429,698 19,108 2,849 78 destinations since nobody works South 104,373,888 62,435 1,672 133 there,” said Aaron Jackson, direcMidwest 65,379,873 27,972 2,337 95 tor at Dechert Hampe & Co., West 66,463,704 21,144 3,143 71 a sales and marketing manageTOTAL 290,647,163 130,659 2,224 100 ment consulting firm. “And when Source: Convenience Store News Market Research, 2014 it comes to inner cities and big chains, saturation is purely related to the business model of how much discretionary heart of a highly agricultural state and has just 2,329 income people have.” people per square mile. With 56 convenience stores, Other markets that face challenges similar population per store is 1,500. But unlike Trenton, to those in Trenton include: Washington, D.C./ many Grand Island residents are likely c-store shopArlington, Va.; Chicago; Newark, Jersey City and pers. And there is little crime. Camden, N.J.; Philadelphia; Baltimore; El Paso, According to city-data.com, median income is Texas; and Los Angeles. $44,217 (state average is $50,723), average home Then, there is Grand Island, Neb. With about price is $110,579 (state average is $128,200) and a a fourth of the population of Trenton, it is in the large manufacturing industry supports a steady stream

CAN CHAINS FLOOD FOOD DESERTS? Some major retailers have tried to reverse undersaturation in inner-city markets, particularly in “food deserts” that lack fresh food. But they are challenged by a customer base that often relies on monthly public assistance and food stamps and whose resources are depleted

functions as convenience stores or small grocery stores. The retailer said it would open 1,000 “food oasis” stores by the end of 2016, but to date, it still needs to build or conver t 900 locations, Crain’s repor ted. In Chicago, where the company has a major

before the month is out. This leaves retailers with many challenges, including inconsistent traffic and sales, and makes selling perishable products particularly difficult. “Food deserts exist because people don’t have enough money to buy consistently,” Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California at Santa Barbara, recently told Crain’s Chicago Business. These are the dilemmas that may be facing drugstore chain Walgreen Co., which announced it was adding produce to many inner-city stores. Walgreens locations perform some of the same

focus, Walgreens’ food oasis store count is just 26; it was supposed to hit 50 last year. While it is unclear whether or not these stores are profitable, Walgreens said it plans to continue pursuing its goal. Will convenience stores follow? If they do, they may face more challenges than Walgreens. In addition to store traffic and produce issues, the foodservice offer at c-stores probably cannot compete with the low prices of McDonald’s, a popular destination for cash-strapped, food-desert customers. And since many residents do not own cars, a retailer’s fuel business would be limited.

152 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


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WHAT DO THOSE NUMBERS MEAN? An index of 100 is average. Any index above 100 indicates an area with fewer people per c-store than the national average, or high saturation. An index below 100 indicates an area with more people per store than average, or low saturation.

of “Bubbas” seeking smokes and Cokes. Unemployment is just 4.7 percent. And there is no state prison. Grand Island indexes high at 139. Cities like Grand Island also tend to attract people who work in the area but live elsewhere. This means the daytime population — a.k.a. the convenience store customer base — is higher than reported. This is not generally the case in inner cities. “The population may increase 30 percent or 40 percent during

the day,” said Jackson. “Knowing the type and flow of people, along with income per capita, are two factors that dictate the types of businesses there.” RETAIL DIVERSITY

In some undersaturated markets, other retail channels fulfill many of the roles that convenience stores could otherwise play. Delis are a big factor in the Northeast. Also in the Northeast and elsewhere, there are many small grocery stores and bodegas. The latter may cater to a specific ethnicity. These small stores can even exist in upscale areas since the cost of operation for a single store is much less than for a chain operator, said Jackson. New York City and both Jersey City and Newark, N.J., are among the Northeast markets where grocers and bodegas dominate.

Top Oversaturated Markets in U.S. 2014 Market Area 1 Florence, S.C. 2 Macon, Ga. 3 Valdosta, Ga. 4 Brunswick, Ga. 4 Rocky Mount, N.C. 6 Rome, Ga. 7 Decatur, Ala. 8 Hattiesburg, Miss. 9 Albany, Ga. 10 Lake Charles, La. 2004 1 Bristol, Va. 2 Decatur, Ala. 3 Brunswick, Ga. 4 Florence, S.C. 5 Anniston-Oxford, Ala. 6 Gadsden, Ala. 7 Myrtle Beach-Conway, S.C. 8 Hattiesburg, Miss. 9 Danville, Va. 10 Alexandria, La.

Population 206,261 231,259 142,897 113,807 150,667 95,821 153,374 147,991 155,694

Number of C-stores 213 233 141 112 148 92 146 139 145

Population per Store 968 993 1,013 1,016 1,018 1,042 1,051 1,065 1,074

Saturation Index 215 210 206 205 205 200 198 195 194

202,040

182

1,110

188

69,494 147,751 96,385 195,176 106,215 102,316 211,091 126,310 112,249 144,999

78 154 98 190 102 98 199 117 99 126

891 959 984 1,027 1,041 1,044 1,061 1,080 1,134 1,151

250 232 226 217 214 213 210 206 196 193

Source: Convenience Store News Market Research, 2014

154 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

They are in both upscale and lowincome areas. Sans fuel, their business models often revolve around strong foodservice components. This is partly because space is

CHRONIC CONDITIONS Almost any long-term situation or condition can affect the success or failure of a convenience store. A hurricane destroys the town. A highway is rerouted. The creation of a federal prison creates thousands of jobs in an economically blighted community. The reasons are almost endless. Below is a list of just some of the factors to consider: • Age of residents • Ethnic makeup/changes • Competition (convenience stores and other channels) • Types of employers/industries in the area • Income levels • Gentrification/revitalization • New housing construction • Near public transportation • Near major interstate • Local infrastructure improvements (e.g. new bridge, better highways, road rerouting) • Tourist destination • College town • Presence of crime, drugs, indigents, etc. • Close to a federal prison • Near a church/school • Huge tax structure changes • High tobacco tax • Stringent gas/alcohol laws • Serious population growth or decline • Site of major natural disaster or devastating scenario • Destination for medical care or other services • Little available land • Market is too high priced to make a profit


often too valuable for fuel. “The minute you sell fuel, you need a larger site,” said David Bishop, managing partner at Balvor LLC, a sales and marketing firm based in Barrington, Ill. “If you don’t have fuel, you can support the business with lower square footage. If you don’t have gas, and foodservice is strong, it drives higher margins and lets the retailer make a strong return on dollars.” What QuickChek Corp. looks for in a site, for example, and what RaceTrac Petroleum Inc. wants are very different. Two-thirds of QuickChek’s New

“If you read the study and say you should build more stores in low saturation markets and you shouldn’t do so in high indexing markets, it’s not that simple.” — Neil Stern, McMillian/Doolittle

Largest U.S. Markets by Population 2014 Market Area 1 New York-NewarkJersey City, N.Y.-N.J.-Pa.* 2 Los Angeles-Long BeachAnaheim, Calif.* 3 Chicago-NapervilleElgin, Ill.-Ind.-Wis.* 4 Dallas-Fort WorthArlington, Texas 5 Houston-The WoodlandsSugar Land, Texas* 6 Philadelphia-CamdenWilmington, Pa.-N.J.-Del.-Md. 7 Washington-ArlingtonAlexandria, D.C.-Va.-Md.-W.Va.* 8 Miami-Fort LauderdaleWest Palm Beach, Fla.* 9 Atlanta-Sandy SpringsRoswell, Ga.* 10 Boston-CambridgeNewton, Mass.-N.H. 2004 1 New York-NewarkEdison, N.Y.-N.J.-Pa. 2 Los AngelesLong Beach, Calif. 3 Chicago-NapervilleJoliet, Ill.-Ind.-Wis. 4 Philadelphia-CamdenWilmington, Pa.-N.J.-Del.-Md. 5 Dallas-Fort WorthArlington, Texas 6 Miami-Fort Lauderdale, Fla. 7 Washington-Arlington, D.C.-Va.-Md.-W.Va. 8 Houston-BaytownSugar Land, Texas 9 Atlanta-Sandy SpringsMarietta, Ga. 10 Detroit-WarrenLivonia, Mich.

Population

Number of C-stores

Population per Store

Saturation Index

19,949,502

6,864

2,906

72

13,131,431

2,982

4,404

47

9,537,289

2,901

3,288

63

6,810,913

3,280

2,076

100

6,313,158

3,533

1,787

117

6,034,678

1,828

3,301

63

5,949,859

1,686

3,529

59

5,828,191

2,458

2,371

88

5,522,942

2,735

2,019

103

4,684,299

2,131

2,198

95

18,709,760

4,790

3,906

57

12,896,262

2,351

5,485

41

9,323,724

2,414

3,862

58

5,756,898

1,466

3,927

57

5,558,561 5,265,793

2,725 2,048

2,040 2,571

109 86

5,052,853

1,402

3,604

62

5,007,662

2,944

1,701

131

4,602,654

2,289

2,011

111

4,485,848

1,532

2,928

76

*Market area definition revised since 2004 Source: Convenience Store News Market Research, 2014

156 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Jersey stores do not sell fuel; some are in urban or downtown areas. RaceTrac is suburban and has a huge fuel operation. Urban or otherwise, there are a few markets where it may be too expensive for a convenience store to operate. According to Forbes, California has the highest number of “overpriced” cities, with San Jose, Sunnyvale and Santa Clara topping the list. The state’s median home price is $625,000. While the total population is almost 2 million, there are just 421 convenience stores (4,560 people per store) so the area indexes low at 46. High-income cities can often support multiple retail food formats, which can also bring down the convenience store count. This is because convenience stores can exist at one end of the spectrum and supercenters at the other. In between, there are many formats and price points, including traditional supermarkets, upscale gourmet shops and specialty markets. “When I look at the CSNews study, the big influence isn’t c-stores, but how they exist with other channels and whether other channels can fulfill multiple purposes,” said Jackson. In some instances, undersaturated markets present opportunities. McMillian/Doolittle’s Stern pointed to Ann Arbor, Mich.,


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TH E NOR REG

Top 10 Undersaturated Markets 2014 Market Area 1 Trenton, N.J. 2 Gettysburg, Pa. 3 Philadelphia-CamdenWilmington, Pa.-N.J.-Del.-Md. 4 York-Hanover, Pa. 4 Lancaster, Pa. 6 Vineland-Bridgeton, N.J. 7 Ocean City, N.J. 7 Reading, Pa. 9 State College, Pa. 9 ChambersburgWaynesboro, Pa.

Population 370,414 101,546

Number of C-stores 104 30

Population per Store 3,562 3,385

A ST

ION

Saturation Index 58 62

6,034,678 438,965 529,600 157,332 95,897 413,521 155,403

1,828 139 168 51 32 138 52

3,301 3,158 3,152 3,085 2,997 2,997 2,989

63 66 66 67 69 69 70

152,085

51

2,982

70

Number of C-stores 135 85

Population per Store 1,136 1,266

Saturation Index 183 164

1,302 1,433 1,566 1,575 1,602 1,713 1,724 1,756

160 145 133 132 130 122 121 119

Population per Store 2,175 1,234 2,064 1,487 3,022 2,412 2,812 2,103 1,031 2,370

Saturation Index 96 169 101 140 69 86 74 99 202 88

Source: Convenience Store News Market Research, 2014

Top 10 Oversaturated Markets 2014 Market Area 1 Bangor, Maine 2 Lewiston-Auburn, Maine 3 Burlington-South Burlington, Vt. 3 Barnstable Town, Mass. 4 Glens Falls, N.Y. 5 Portland-South Portland, Maine 6 Kingston, N.Y. 7 Springfeld, Mass. 8 Norwich-New London, Conn. 9 Albany-Schenectady-Troy, N.Y.

Population 153,364 107,604 214,796 214,990 128,430 519,900 180,998 626,915 274,150 877,905

165 150 82 330 113 366 159 500

Source: Convenience Store News Market Research, 2014

Region Overview by State 2014 State Connecticut Maine Massachusetts New Hampshire New Jersey New York Pennsylvania Rhode Island Vermont TOTAL

Population 3,596,080 1,328,302 6,692,824 1,323,459 8,899,339 19,651,127 12,773,801 1,051,511 626,630 55,943,073

Number of C-stores 1,653 1,076 3,243 890 2,945 8,148 4,542 500 608 23,605

Source: Convenience Store News Market Research, 2014

158 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

which indexes at 68. Since it is a college town, he believes it can support more convenience stores. “It’s not just the campus. It’s the whole town, since colleges support service industries,” he noted. Opportunities also may exist in the Dakotas, which have the lowest populations of any Midwest states. At an index of 126 (North Dakota) and 125 (South Dakota), they also have the highest indexes in the region. Gross domestic product (GDP) is robust, unemployment is low and wage growth is strong, said Bishop. The populations are growing. Casey’s General Stores Inc. and Kum & Go LC may be considering growth in these markets, he added. OVERSATURATION

In places where income is not high, Walmart is very strong, while other types of retailers (except convenience stores) are weak. “Grocery stores and others in the ‘middle’ are killed off,” Jackson said. “That leaves you with just c-stores for when people don’t want to go to Walmart.” This phenomenon appears to be most prevalent in the South. With a population of nearly 120 million (the count grew by almost 10 million since 2008), the South is home to 71,352 convenience stores — more than twice that of any other market. Population per store is 1,659. The region indexes at 125. According to Wal-Mart Stores Inc.’s 2014 annual report, the retailer’s highest concentration of stores (100-plus per state) is in eight southern states, with Texas (345 stores) and Florida (207 locations) having the highest counts for the whole company.


SOU REG

Top 10 Undersaturated Markets 2014 Market Area Population 1 Washington-ArlingtonAlexandria, D.C.-Va.-Md.-W.Va. 5,949,859 2 California-Lexington Park, Md. 109,633 3 Baltimore-ColumbiaTowson, Md. 2,770,738 4 Naples-ImmokaleeMarco Island, Fla. 339,642 4 Fayetteville-SpringdaleRogers, Ark.-Mo. 491,966 6 El Paso, Texas 831,036 6 Louisville/Jefferson County, Ky. 1,262,261 8 North Port-SarasotaBradenton, Fla. 732,535 9 Cape Coral-Fort Myers, Fla. 661,115 10 Punta Gorda, Fla. 164,736

Number of C-stores

Population per Store

TH

ION

Saturation Index

1,686 36

3,529 3,045

59 68

949

2,920

71

130

2,613

80

189 330 503

2,603 2,518 2,509

80 83 83

295 270 68

2,483 2,449 2,423

84 85 86

Source: Convenience Store News Market Research, 2014

Top 10 Oversaturated Markets 2014 Market Area 1 Florence, S.C. 2 Macon, Ga. 3 Valdosta, Ga. 4 Brunswick, Ga. 4 Rocky Mount, N.C. 6 Rome, Ga. 7 Decatur, Ala. 8 Hattiesburg, Miss. 9 Albany, Ga. 10 Beaumont-Port Arthur, Texas 10 Lake Charles, La.

Population 206,261 231,259 142,897 113,807 150,667 95,821 153,374 147,991 155,694 404,872 202,040

Number of C-stores 213 233 141 112 148 92 146 139 145 366 182

Population per Store 968 993 1,013 1,016 1,018 1,042 1,051 1,065 1,074 1,106 1,110

Saturation Index 215 210 206 205 205 200 198 195 194 188 188

Number of C-stores 3,936 1,865 350 198 9,771 6,747 2,622 3,316 1,942 2,722 6,259 2,736 3,493 4,316 15,328 4,486 1,265 71,352

Population per Store 1,228 1,587 2,645 3,265 2,001 1,481 1,676 1,395 3,053 1,099 1,573 1,407 1,367 1,505 1,725 1,841 1,466 1,659

Saturation Index 170 131 79 64 104 141 124 149 68 189 132 148 152 138 121 113 142 125

Source: Convenience Store News Market Research, 2014

Region Overview by State 2014 State Alabama Arkansas Delaware District of Columbia Florida Georgia Kentucky Louisiana Maryland Mississippi North Carolina Oklahoma South Carolina Tennessee Texas Virginia West Virginia TOTAL

Population 4,833,722 2,959,373 925,749 646,449 19,552,860 9,992,167 4,395,295 4,625,470 5,928,814 2,991,207 9,848,060 3,850,568 4,774,839 6,495,978 26,448,193 8,260,405 1,854,304 118,383,453

Source: Convenience Store News Market Research, 2014

160 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

The other six states are Arkansas, Georgia, Missouri, North Carolina, Tennessee and Virginia. Four other states have 100-plus stores but are more scattered — Pennsylvania, Ohio, Illinois and California. Walmart’s presence continues to grow and not just through supercenters, where it is nearing saturation. In Atlanta, Walmart — as well as The Kroger Co. — is investing heavily in fuel stations. This is destroying some c-store competition. “In Atlanta, once you take QuikTrip and RaceTrac out, the rest are independents,” said Jim Tudor, president of the Georgia Association of Convenience Stores. 191 DENTURE PROVIDERS

Throughout the South, the most oversaturated city is Florence, S.C., which indexes at 215. There are 213 convenience stores and the population exceeds 200,000. Population per store is 968. Many businesses are based in Florence, but the big draw is its 191 denture providers, according to Tudor. Since the 1930s, dentists in this area have been providing affordable dentures in one day. “It’s where everybody goes to get their false teeth,” he explained. Visitors, who often come by car, stay overnight and are frequently accompanied by other people. Weather drives southern convenience store activity, too. Balmy climates mean people are out and about more. There is also the infrastructure to consider. Since many southern areas, particularly Florida, did not experience huge population growth until at least the 1970s, cities were built around cars and highways, facilitating convenience store access and development. This is not the case in many parts of the Northeast.


E ST M I DW REG

Top 10 Undersaturated Markets 2014 Market Area 1 Chicago-NapervilleElgin, Ill.-Ind.-Wis. 2 Wichita, Kan. 3 La Crosse-Onalaska, Wis.-Minn. 3 Bloomington, Ind. 3 Ann Arbor, Mich. 3 Minneapolis-St. PaulBloomington, Minn.-Wis. 7 Lafayette-West Lafayette, Ind. 8 Indianapolis-CarmelAnderson, Ind. 9 Lawrence, Kan. 10 Grand Rapids-Wyoming, Mich.

Population

Number of C-stores

Population per Store

ION

Saturation Index

9,537,289 637,394 135,512 163,089 354,240

2,901 202 44 53 116

3,288 3,155 3,080 3,077 3,054

63 66 68 68 68

3,459,146 209,027

1,124 69

3,078 3,029

68 69

1,953,961 114,322 1,016,603

657 40 370

2,974 2,858 2,748

70 73 76

Source: Convenience Store News Market Research, 2014

Top 10 Oversaturated Markets 2014 Market Area 1 Grand Island, Neb. 2 Battle Creek, Miss. 3 Bay City, Miss. 4 Jefferson City, Mo. 4 St. Joseph, Mo.-Kan. 6 Rapid City, S.D. 7 Kokomo, Ind. 8 Toledo, Ohio 9 Niles-Benton Harbor, Mich. 9 Duluth, Minn.-Wis.

Population 83,989 135,012 106,832 150,494 127,767 141,431 82,760 608,145 155,252 279,887

Number of C-stores 56 89 70 96 81 89 51 372 94 169

Population per Store 1,500 1,517 1,526 1,568 1,577 1,589 1,623 1,635 1,652 1,656

Saturation Index 139 137 136 133 132 131 128 127 126 126

“The South has less public transportation and is vehicle driven,” said Tudor. “Eighty percent of fuel is sold in convenience stores. You don’t build a convenience store here without fuel.” Some southern cities serve transient populations, including Macon, Brunswick and Valdosta, Ga. They are among the top five southern markets, with each indexing at 200-plus. All three are on

“When I look at the CSNews study, the big infuence isn’t c-stores, but how they exist with other channels and whether other channels can fulfll multiple purposes.” — Aaron Jackson, Dechert Hampe & Co.

Source: Convenience Store News Market Research, 2014

Region Overview by State 2014 State Illinois Indiana Iowa Kansas Michigan Minnesota Missouri Nebraska North Dakota Ohio South Dakota Wisconsin TOTAL

Population 12,882,135 6,570,902 3,090,416 2,893,957 9,895,622 5,420,380 6,044,171 1,868,516 723,393 11,570,808 844,877 5,742,713 67,547,890

Number of C-stores 4,642 2,848 1,809 1,254 4,898 2,331 3,089 969 439 5,516 630 2,729 31,154

Source: Convenience Store News Market Research, 2014

162 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

Population per Store 2,775 2,307 1,708 2,308 2,020 2,325 1,957 1,928 1,648 2,098 1,341 2,104 2,168

Saturation Index 75 90 122 90 103 90 106 108 126 99 155 99 96

major interstates — I-75, I-95 and I-475. Valdosta is also 995 miles from New York and 435 miles from Miami, making it a popular overnight destination for travelers headed south during cold months. Another city, Brunswick, Ga., indexes at 205 and is on the coast, also drawing tourists. “They’re serving customers who don’t live there and don’t show up in store-per-capita data,” Tudor noted. He added that many Florida travelers stop for tobacco in Georgia, where cigarette prices are much lower than in Florida. The same goes for gas, which is 10 cents cheaper

R


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T

WE S REG

Top 10 Undersaturated Markets 2014 Market Area 1 San Jose-Sunnyvale-Santa Clara, Calif. 2 Los Angeles-Long BeachAnaheim, Calif. 3 Boulder, Colo. 4 Anchorage, Alaska 5 Provo-Orem, Utah 6 San Francisco-OaklandHayward, Calif. 7 Oxnard-Thousand OaksVentura, Calif. 7 Phoenix-Mesa-Scottsdale, Ariz. 7 Santa Fe, N.M. 10 Logan, Utah-Idaho

Population per Store

ION

Population

Number of C-stores

Saturation Index

1,919,641

421

4,560

46

13,131,431 310,048 396,142 562,239

2,982 72 93 139

4,404 4,306 4,260 4,045

47 48 49 51

4,516,276

1,137

3,972

52

839,620 4,398,762 147,423 129,763

224 1,188 40 36

3,748 3,703 3,686 3,605

56 56 56 58

Source: Convenience Store News Market Research, 2014

Top 10 Oversaturated Markets 2014 Market Area 1 Flagstaff, Ariz. 2 Grants Pass, Ore. 3 Longview, Wash. 4 Mount Vernon-Anacortes, Wash. 4 Redding, Calif. 6 Bellingham, Wash. 6 Farmington, N.M. 6 Yuba City, Calif. 9 Yakima, Wash. 10 Albany, Ore.

Population 136,539 83,306 101,860 118,837 178,980 206,353 126,503 168,690 247,044 118,765

Number of C-stores 115 55 64 71 107 119 73 97 140 67

Population per Store 1,187 1,515 1,592 1,674 1,673 1,734 1,733 1,739 1,765 1,773

Saturation Index 175 137 131 124 124 120 120 120 118 117

Number of C-stores 198 2,204 11,336 1,827 521 807 558 1,152 940 1,846 1,038 2,979 345 25,751

Population per Store 3,713 3,007 3,381 2,884 2,695 1,998 1,819 2,422 2,218 2,129 2,795 2,340 1,689 2,884

Saturation Index 56 69 62 72 77 104 114 86 94 98 74 89 123 72

Source: Convenience Store News Market Research, 2014

Region Overview by State 2014 State Alaska Arizona California Colorado Hawaii Idaho Montana Nevada New Mexico Oregon Utah Washington Wyoming TOTAL

Population 735,132 6,626,624 38,332,521 5,268,367 1,404,054 1,612,136 1,015,165 2,790,136 2,085,287 3,930,065 2,900,872 6,971,406 582,658 74,254,423

Source: Convenience Store News Market Research, 2014

164 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

per gallon in Georgia, said Tudor. Whether it is Florida or somewhere else, and whatever the situation may be there, the bottom line is convenience stores’ needs can be very different. When coupled with demographic and market conditions, this makes the growth jigsaw puzzle very complex. “It ultimately comes down to feasibility,” said Balvor’s Bishop. “This is different for every retailer since each has a different go-tomarket strategy. How do I know there are opportunities? This is where the retailer’s resourcefulness pays off in spades.” CSN

METHODOLOGY

The Convenience Store News 2014 Saturation Study is based on 381 markets, including metropolitan statistical areas (MSAs) that have an urban core population of at least 50,000. Saturation is defined as population divided by convenience store count. For the purposes of this repor t, the national average saturation is 2,082 people per store, based on a total U.S. population of 316,128,839 divided by 151,862 c-stores. Historical data is sourced from the CSNews 2004 Saturation Study, which was based on a total population of 301,045,294 and 146,294 c-stores. Population figures are from the U.S. Census Bureau, Population Division. Store counts are provided by Nielsen TDLinx. The saturation for each state and market area is calculated and the results are then indexed against the national average. An index of 100 is average. Any index above 100 indicates an area with fewer people per c-store than the national average, or high saturation. An index below 100 indicates an area with more people per store than average, or low saturation.


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Advertising Fee (per unit): 0%

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Each licensee is responsible for leasing or acquiring real estate as well as contracting the construction of their store. However, Save‑A‑Lot will provide assistance for site selection, market analysis, store layout, project management and décor/ equipment recommendations.

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ADVERTORIAL


Big Man on Campus C-store retailers see value in catering to the college crowd By Melissa Kress

S

tudents were not the only ones who headed back to college this fall. While they may not be sporting oversized sweatshirts with school logos or backpacks, convenience store retailers are certainly looking to make the Dean’s List. Among the incoming freshman class are Altoona, Pa.-based Sheetz Inc. and La Crosse, Wis.-based Kwik Trip Inc. In early March, Sheetz revealed plans to open a 15,000-square-foot restaurant and grocery store on the ground floor of University Place, a new student apartment and retail complex at West Virginia University in Morgantown, W.Va. The housing community welcomed students in August and Sheetz is on pace for an early 2015 opening. The store will be the first of its kind for the Sheetz brand — triple the size of a typical Sheetz store, with indoor and outdoor seating for more than 100 people. It will feature fresh food options, including the chain’s signature MTO subs and sandwiches, M-T-Go! prepared foods, Shweetz Bakery and Sheetz Bros. Coffeez, a full-service espresso and smoothie bar. In addition, the market will offer a wide variety of tra-

Starbucks mobile trucks are making the rounds on several campuses this school year.

166 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

In March, Louie Sheetz announced plans to open a 15,000-square-foot Sheetz store at West Virginia University.

ditional grocery items so students and neighborhood residents no longer have to leave the downtown area to purchase groceries. Kwik Trip, meanwhile, is staying close to its Midwest roots with plans to open a 6,500-squarefoot convenience store without a gas station on the first floor of the Varsity Quarters apartment building at the University of Wisconsin — Madison. Construction on the project, which was announced in May, is still underway. And c-store retailers aren’t the only ones trying to stake a claim with the college crowd. This fall, the Starbucks mobile truck joined the population of several campuses. The Seattle-based coffee giant has been a familiar face to campus denizens for a while now, but its mobile endeavor hit the streets at Arizona State University in Phoenix, James Madison University in Harrisonburg, Va., and Coastal Carolina University in Conway, S.C., this school year. According to Starbucks, its mobile trucks can move to various locations on campus throughout the day, making it convenient for students and faculty to grab a snack or beverage. While hours will vary on each campus, the trucks are able to adjust business hours to suit the needs of their customers, in some cases staying open later than a dining hall.


A Lesson in the Munchies To some extent, success in retail relies on grabbing the next “It” customer. Over the past few years, Millennials have found themselves on retailers’ radars. And more specifically, many convenience store operators are sharpening their focus on college students, aged 18 to 25. Citing information from StateUniversity.com’s A Look at the Spending Habits of College Students, Matt McGovern, CEO of Shop24 Global LLC, pointed out the typical college student receives an average of $757 a month from jobs, parents and other sources. Of that discretionary income, coeds spend the most on food. In fact, the report noted that students spend more than $11 billion a year on snacks and beverages alone. That’s good news for foodservice retailers. According to Technomic Inc.’s College & University Trend Report, the research firm found that 54 percent of college students use on-campus foodservice at least twice a week, and 22 percent visit these establishments twice daily. Meanwhile, 35 percent of students make at least two off-campus visits per week. These figures are in spite of the fact that only 35 percent of students are highly satisfied with their school’s on-campus dining program, Technomic reported. This signals an opportunity for convenience store retailers to better meet their needs. C-store retailers should let students customize their foodservice offerings. Fifty-three percent of students said it is highly important to be able to omit or substitute ingredients, and 50 percent strongly prefer to add sauces, seasonings and flavorings to their meals themselves. In addition, Boston marketing agency Fluent conducted a survey and found that 75 percent of college students use snack foods to replace meals at least once per week. Afternoon snacking trumps late-night and evening snacking by a ratio of three to one. The Fluent survey also revealed that winter is prime munching season. One-third of the respondents aged 18 to 25 cited the coldest season of the year as their most likely snacking time. As for why, the study theorized that more intense academics and an ability to hide weight gain under heavier clothing could be why students snack most during the winter. Still, “healthy options” was the first choice among the snacking items selected by respondents.

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The mobile truck is a licensed store operated through Aramark and is a natural extension of the long-standing partnership between the two companies. OLd PrO

While Sheetz, Kwik Trip and the Starbucks mobile truck are new to the university scene, Shop24 Global LLC has made going back to college a priority for two years now. Prior to that, the Westerville, Ohio-based company sold a few Shop24 stores to individuals that are not on college campuses. For example, there’s one in North Dakota in the employee camps near where they are drilling for oil. Shop24 is also trialing a couple of stores at transportation hubs. But its real focus is partnering with colleges and universities, said CEO Matthew McGovern. Why? The answer, according to McGovern, depends largely on student needs and whether the school is providing amenities and food items where and when the students want them. “That is absolutely key to the conversation,” he said. Some colleges and universities have stores on campus, but the convenience factor may not always be there in location or hours. On the other hand, Shop24 is a self-contained, totally automated and refrigerated convenience store designed to enable 24/7 accessible consumer purchasing. With rising labor rates and talks of raising the minimum wage, profitability is also becoming an issue for schools, which typically fill their inventory of on-campus foodservice providers as part of a much larger relationship with the likes of Aramark, Compass Group and Sodexo. Expansion also poses a challenge. As institutions open new schools and buildings, additional student housing begins to move to the outer rim of campus, if not off campus. “We saw an opportunity, because of that sprawl, to move a smaller store that is open 24/7 and automated into those areas,” McGovern explained. “[A college] can now look and say, ‘Well, we only have XX number of hours at our convenience store today and a sort of hub-and-spoke-type concept. But now, we can put a Shop24 closer to the private student housing that was developed but pushed out to the edge of campus, and not near the centers or other places where the convenience store was initially located.’” Having a convenience store located in or near student housing answers the safety worries of many


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students, their parents and college officials. Without a convenient location to grab something, students have no choice but to go off campus. “There is a push on campuses to keep students on campus. [Many times], it is 11 p.m. and you are not ordering a pizza or other things; you want to grab something to eat but nothing is open. Now, you are getting in the car and going off campus,” McGovern pointed out. Solving safety concerns frequently comes up in the accolades Shop24 receives. “We hear from a lot of parents — which is nice to hear that feedback — who have a son or daughter on one campus where there is a Shop24 and their other son or daughter is at another school that does not have a Shop24,” McGovern said. “We get a lot of emails asking if we are planning to put one at other campuses. They really like the convenience of the amenity.” A Shop24 also works just as well at commutergeared schools, the chief executive noted, where the standalone stores can be installed near parking lots and class buildings. A typical Shop24 unit offers about 200 SKUs, or front-facing items, and holds about 4,000 total items depending on the size of the products. In addition to accepting debit and credit cards, the typical unit is fully integrated with the school’s meal plan and accepts flex dollars — a form of payment used at large institutions, especially universities. “To us, it is more in line with convenience stores because of what goes in it. We can have fresh-made sandwiches and sushi, and then there is also shampoo and aspirin,” McGovern explained. “We do look to see what is already on campus in terms of vending, and what is around us. If there are multiple options to

get Coke and Pepsi, we will try to work with them to get their items in our stores. But we will also try to get creative and outside the norm and add certain juices, as well as things like flip-top yogurts — a lot of graband-go items.” To meet student needs, Shop24 works with Advantage Sales & Marketing, a major player in planogramming and SKU optimization. “We really look hard at that. We really want to make sure every single space in a Shop24 is something that a student wants,” he said. As for how the products actually get into the automated stores, Aramark, Sodexo, Compass, some vending companies and those schools that self-operate are the ones physically doing the stocking. High-performing Shop24 stores are restocked daily, seven days a week, which takes about an hour a day to complete. If a store is not performing to the company’s expectation level, it may be restocked three days a week. “If it’s two days a week, we have a different problem — maybe the assortment is wrong or we are not in the right location,” McGovern acknowledged. Aside from having convenient grab-and-go items, Shop24 locations feature outlets and USB power connectors on the outside so students can come by and plug in, making them a destination point. Some schools will add to the atmosphere by installing benches around the units. Students can go there on a nice day and meet up with other students to study or just chat. “It has become more of a destination and we foster that concept,” McGovern said. “As with most convenience stores, the [Shop24] store is not only an impulse buy, it is also a destination buy.” GrOWInG FOOtPrInt

Shop24 stores (shown here and above) are self-contained, totally automated convenience stores designed to offer 24/7 product access.

170 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

As of this summer, there were a total of 26 Shop24 stores in the United States. An additional 13 stores are


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slated to be installed by the end of the year. “We are still hoping the schools that make the most sense will come around to the concept and say, ‘Let’s put three of these on the campus,’” McGovern said. “We do know multiple locations do better than single locations. Students see them here and over there, and know what it is.” Part of Shop24’s strategy is to focus on smaller schools with approximately 3,000 to 4,000 students. However, the company is expanding its reach through a newly formed partnership. In February, Shop24 entered into a non-exclusive agreement with Memphis, Tenn.-based EdR, a real estate investment trust specializing in student housing. EdR has approximately 70 properties in its portfolio of owned and managed sites. Its sites are typically at Tier 1 schools and either on campus or within less

“If you know anything about 18- to 22-year-olds, they do their best work at 2 a.m. They’re hungry, they’re thirsty, they need something. Now, they can just walk out their door –- in their pajamas –- and go to the Shop24 store located on our property that has 200 items to choose from.” — Scott Casey, EdR

than a half-mile of campus. So far, the two have teamed up on several Shop24 locations. The first two stores opened at EdR’s East Edge at the University of Alabama in Tuscaloosa and the Commons on Kinnear at The Ohio State University. Stores at Purdue University in Lafayette, Ind., and at University Towers at North Carolina State in Raleigh, N.C., were slated to open in mid-September. EdR is hoping to have a Shop24 at its University of Texas at Austin location by the end of the year, too. In all, the developer and manager of student housing hopes to have “somewhere between six and eight stores up and running” by the end of 2014, according to Scott Casey, EdR’s chief technology officer and senior vice president of strategic business development. EdR apartments come fully furnished and the communities’ common areas feature amenities such as pools, theaters, tanning beds, golf simulators and study rooms. The only thing missing seemed to be a store. The developer had talked about adding little stores with a few items on the shelves, drinks in the

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cooler and some toiletries to its properties — similar to what is found in some hotels. Yet, it couldn’t figure out how to make the concept work — until now. “It’s great. We’ve wanted to apply this to our properties, but we would have had to man it 24/7 and locate it inside, [which means] your clubhouse or common area would also have to be open 24/7,” Casey explained. “We just could never make sense of it. [Shop24] stores came to our attention and we realized this is it; this is what we’ve been trying to do for a few years. It’s perfect. We supply the land, we supply the electricity and then, we don’t have to do anything.” Opening a convenience store on-site was a welcome idea to the students as well. “We talk to our residents as much as possible, soliciting their feedback. We’ve been very insistent about talking with our residents to find out what they think and what they want. When we presented this idea to them, they thought it was an awesome concept,” he said. Having a c-store on-site is also a great tool to bring in potential residents. “For us, real estate is all about location. We can overcome that by being adjacent to campus. The next piece is we are competing with a lot of different owners and the university for putting heads in beds. It’s all about the amenities and the marketing,” Casey said. “If you know anything about 18- to 22-year-olds, they do their best work at 2 a.m. They’re hungry, they’re thirsty, they need something. Now, they can just walk out their door — in their pajamas — and go to the Shop24 store located on our property that has 200 items to choose from.” EdR’s Shop24 stores are stocked with everything from frozen food to paper products to laundry detergent. Surprisingly, its biggest seller are rolls of cookie dough. “The students buy it and eat it raw. It sells like crazy,” he noted. It’s been seven months since the companies joined forces and Casey already gives high marks to the partnership with Shop24. “It’s been a great experience so far. They have an aggressive growth model, but they are also very conservative. They want to make sure they are doing the right thing,” he said. “They do a lot of research to decide what to put in a store and where to locate it. They adjust based on what sells and what doesn’t sell in other locations. They try to accommodate the region and the market they are in, and the university. Shop24 has a lot of data and a lot of history to determine what makes sense to populate a store.” CSN


Harry Singh founded Bolla Oil Corp. in 1989.

25 Years W & Counting Bolla Oil celebrates milestone anniversary with a new franchise program and big growth plans By Angela Hanson

There are 28 stores currently operating under the Bolla Market banner.

174 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

hen a customer walks into a Bolla Market store, they may not realize that behind the usual offerings of coffee, snacks and newspapers is an entirely homegrown operation — not only is the majority of its foodservice offerings prepared on-site, but even the aisle endcaps and store signage are built inside a warehouse at the company’s headquarters in Garden City, N.Y. To anyone familiar with Bolla Oil Corp. President and CEO Harry Singh, though, it comes as no surprise. He launched the company in 1989 as an automotive repair technician with a single Mobil location in New York City. Since then, he’s expanded Bolla into a powerhouse operation that includes more than 90 retail sites — 28 of which operate under the Bolla Market banner — and operates multiple divisions covering nearly every aspect of the industry, including real estate, fuel supply, construction, car washes and more. Its most recent expansion is fuel trucking fleet Bolla Transport, which launched in the summer of 2013. But to celebrate its silver anniversary, Bolla is on the verge of a brand-new project: its first franchise Bolla Market store, tentatively scheduled to open during the first half of 2015. This continuous increase in scope took hard work, determination and a refusal to play it safe. “I’m a risk taker,” Singh told Convenience Store News. That doesn’t mean he visualized from the start what he would make of his company. In the early years,


convenience stores weren’t the main focus. “The way you started a gas station is that you were doing automotive service or you were selling gas only,” he recalled. The company did very well for around 10 years, but then the auto repair side of things began to slow. “When the business started declining, we realized we had to do something to move into the future and keep gasoline as a main business for us,” Singh said. He found opportunity in convenience stores, and from then on, “anything we bought, built, either of our own properties or other properties that we leased, we focused strictly on convenience store growth.” Now, the next step in Bolla’s growth is franchising. The company is in the final stages of filing its franchise disclosure to get approval from the Federal Trade Commission. As a franchisor, Bolla can offer the support and consistency of an established name and branded fuel solution, and the breadth of its divisions will allow the company to put its expertise to use. “To a point, we can almost hold their hands from building to running the sites and making money at the end,” Singh explained. Plans are already in place for when Bolla gets the green light, but the company doesn’t intend to sell franchises to just anyone. “We have two committed Bolla Market franchisees on hand,” the CEO said. “Once we’re official, we’ll hold meetings with our existing franchisee-and-supply locations and give them the pros and cons of Bolla Market. Since we own the property, we’ll be investing millions of dollars building [stores]. We want to make sure they buy into it so we’re not forcing anybody to do something.”

on reheating frozen items such as hamburger patties. The chain continues this practice today, shopping at butchers every other day and sourcing new product two to three times a week. “The message for us is fresh,” Singh said. Communicating the fresh message to consumers is one of the company’s biggest challenges. One way Bolla gets the message out is by offering food and coffee samples. Once customers have experienced the quality of its offerings, they’ll automatically think of Bolla Market when they’re on the road, Singh believes. And to keep them coming back, the retailer offers variety in its standard menu and between stores. “You can’t eat the same thing every day,” he said. While most of the hot food Bolla Market offers is the same from store to store, the company allows individual stores the flexibility to tailor 30 percent to 40 percent of its foodservice offering to the taste of the

FreSH & FlexiBle

A key part of what makes Bolla Market unique and has helped it to succeed is its foodservice program, which includes a fresh, prepared-to-order gourmet deli, 100-percent organic coffee and a cold open-air case containing sandwiches, wraps and other graband-go items. While the program has grown over the years, it’s stayed true to Singh’s vision from the early days. “What … makes the customer think, ‘Wow’? You wouldn’t think of buying a gourmet meal at a gas station,” he said. In 2007, the company opened a 2,100-square-foot store designed to make customers think of doing just that. Two Italian chefs staffed a complete on-site kitchen that offered restaurant-quality food in a to-go format. Food was prepared fresh daily instead of relying

Bolla Market’s goal is to prove to consumers they can get gourmet meals prepared fresh at a gas station.

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local market — a practice that’s especially critical in the diverse, densely populated New York City region. The company is also willing to take menu requests, if they are feasible. “We are very customer-focused. We listen to customers, see what they want. … If we don’t offer it, if we have enough demand for it, we will make that item available,” Singh said. The effort Bolla puts into the foodservice program can make it difficult to sustain since finding qualified chefs with the right skills is more difficult than training an entry-level employee to work a cash register, he acknowledged. Additionally, varying municipal building codes mean a store can’t always include an on-site kitchen, or one big enough to suit its preferences, making consistency a particular challenge for this relatively small company for which consistency is key. Ultimately, though, Singh and other company officials consider the extra effort worth it. Also worth it for Bolla is the balancing act of offering high-quality products at low prices. The retailer’s coffee line is completely organic, which means a higher cost for the company, yet Bolla prices competitively for the marketplace. “We absorb some of the cost,” Singh said, noting that higher prices have the potential to deter customers despite offering a superior product. On the plus side, the thinner profit margin lets Bolla distinguish itself in another way. “That’s a niche that we’re looking for. We’re looking to give customers something that other competitors don’t offer.” THe NexT 25 YearS

Although Bolla reached a major milestone in 2014, Singh is already looking ahead to the company’s golden anniversary — and beyond. “We don’t have a short-term plan,” he said. “I’d

Bolla Transport, a fuel trucking feet, launched in 2013.

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Offering high-quality products at low prices is part of Bolla’s strategy.

like to see Bolla survive the next two to three generations. For me, it’s a legacy.” That legacy includes a willingness to make mistakes. Years ago, the company tested a two-store coffee venture called King’s Café that featured high-end pastry on display, restaurant-style cappuccino and even exStarbucks baristas behind the counter. Sales weren’t great, and after the program failed to take off, Singh ended the experiment. But rather than look at it as a failure, he sees King’s Café as a lesson in what his hurried, on-the-go consumers wanted in a convenience coffee program. The lesson set him on the path toward the successful coffee program Bolla Market offers today. Looking ahead, Singh plans to put his hard-earned knowledge to use at the 10 to 15 new stores Bolla intends to open annually. As a strong believer in relying on the experience gained by being a hands-on operator instead of turning to outside consultants, he prefers to add a smaller number of high-quality stores that will go the distance. “We believe in organic growth, not hyper growth,” he said. “My growth goals are not necessarily counted by the number of stations, [but] by the quality of the sites that we own, the sites that could last for many, many years to come.” While its potential numbers are conservative, Singh’s vision of what Bolla can become isn’t. “We don’t even want to call ourselves a convenience store because we’re more than a convenience store,” he said. “We don’t want to talk about just being convenience.” This December, Bolla’s executive team, store employees, business partners, customers and friends will mark its 25th anniversary with a large celebration in honor of what’s been achieved so far. However, if Singh has his way, the first 25 years are only the beginning. “When people ask me what [my] goals are, I say anything possible that I can do is my goal,” he said. CSN


STORESPOTLIGHT Handy Mart

And the Survey Says… Shopper research leads Handy Mart to develop a new store prototype By Renée M. Covino

W

ith today’s consumers having more shopping choices than ever and retailers of all kinds trying to capture the convenience market, fulfilling customer needs is paramount. The question is: Do you know what your customers need and want? Handy Mart, the 41-unit convenience store chain, based in Mount Olive, N.C., recently found itself asking this question and turned to shopper surveys to get the answers. The retailer employed an in-store customer survey and discovered that although it received strong customer satisfaction scores, the business would benefit from working on the basics, specifically operational and merchandising basics. For the past year, Handy Mart has been honing those basics and the retailer initiated a new store prototype, too. All of this came about after the NACS/Coca-Cola Retailing Research Council (NACS/CCRRC) published its Playbook for Success report last year. That report caught Handy Mart’s attention. “We had been wanting to do another customer survey for a couple of years. We had previously done one with a professional outside firm, but it was cost-

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ly,” explained Tony Noonan, vice president of retail for Handy Mart, a division of E.J. Pope & Son Inc. “With technology, we knew there was a better way; the issues had always been setting up the structure, asking the right questions and having something to compare the results to.” When a survey process and 10-point scale was revealed in the Playbook for Success report, Handy Mart knew it had found its game plan. “A precedence was set that was easy to duplicate and execute,” Noonan said. THe $2 Allure

In August 2013, Handy Mart queried customers in 36 locations for five weekdays during two different dayparts. The company hired college students, equipped them with iPads (already owned by Handy Mart) and utilized a survey created on SurveyMonkey. On the advice of the NACS/CCRRC report, Handy Mart offered customers a $2 bill for 10 minutes of their time. “We agreed the $2 bill would pique customers’ interest,” Noonan said. It did and after all was said and done, Handy Mart had 440 completed shopper questionnaires for


evaluation — and that, of course, was the most crucial part. “We had the results pretty immediately. I was back here monitoring them. Once a survey was finished and closed, it was posted online and I could pull up a query in SurveyMonkey and see what was going on with the raw results,” Noonan recalled. “But there’s raw results and interpretive results, so we worked with [NACS/CCRRC study leader] Bill Bishop [of Willard Bishop Consulting] and NACS to come up with a net promoter score Messaging a good value is a greater priority for Handy Mart now. to get interpretive results and then compare that to some of the NACS data.” areas where Handy Mart expected to do well in, but Right off the bat, Handy Mart learned of some key receiving confirmation was valuable input. demographic data needing no interpretation. “We’ve done mystery shops for 10 years in our “It surprised us to learn how young our customer stores with a private outside firm that verified our steps base was. It really skewed to the younger side,” of service and cleanliness,” Noonan noted. “We’ve seen Noonan said. What did not surprise him was how male- consistent improvement in those areas through the mysdominant Handy Mart’s consumer base is, “especially tery shoppers, but that doesn’t always [translate] to the since we surveyed inside the store only; we did not sursatisfaction of our customers, so it was really good to vey the pump operations to keep the costs down.” see where they rated us in satisfaction.” Moving into more interpretive data, Handy Mart While the “safe” factor was a high score, the “cleanscored strongly in customer satisfaction, meaning liness” factor emerged as an area of opportunity. “It customers believe it offers a safe environment. It also wasn’t terrible, but it wasn’t ranking among the best scored high in staff friendliness and hospitality — and that’s an area we want to be best at,” he stated. Another area needing improvement for Handy Mart, the survey revealed, was its in-stock position. “Again, it wasn’t the worst, but it wasn’t the best. And we want our customers to get in and out quickly with a frustration-free experience,” according to Noonan. A BASicS OppOrTuniTy

Beverages to go are a big focus in the retailer’s new prototype stores.

Beyond cleanliness and in-stock position, though, the top opportunity for improvement at Handy Mart was messaging a good value, the survey data revealed. “I think we have a very good value, but the message is not getting out there through promotions, pricing and deals,” he said. And so, the chain has “fallen back to address some of the basics,” including daily shift basics, merchandising profile basics, operational basics and store system basics. While Handy Mart is still in the execution stage, it’s already made improvements in cleanliness, in-stock position and an overall refinement of its store operating procedures. In fact, two stores were opened after the survey data was interpreted and they have now become examples of a new store prototype put into play for the

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Legal Notce

If you purchased Shell Eggs or Egg Products produced in the United States directly from any producer from January 1, 2000 through July 30, 2014, you could be a Class Member in a proposed class acton setlement.

STORESPOTLIGHT Handy Mart

This legal notice is to inform you of proposed Settlements between Plaintiffs and Defendants Midwest Poultry Services, LP (“Midwest”), National Food Corporation (“NFC”), and United Egg Producers/United States Egg Marketers (“UEP/USEM”), reached in the class action lawsuit, In re Processed Egg Products Antitrust Litigation, Case No. 08-md-02002, pending in the United States District Court for the Eastern District of Pennsylvania, and also to inform you of a second amendment to the Sparboe Settlement. Who is included in the Setlements & Second Sparboe Amendment? The Settlement “Classes” include all persons and entities in the United States that purchased Shell Eggs and Egg Products, in the United States directly from any producer from January 1, 2000 through July 30, 2014. Due to the recent Settlements, the prior Sparboe Settlement is amended to add to the Sparboe Settlement Class direct purchases of Shell Eggs and Egg Products from March 1, 2014 through July 30, 2014, expanding the Class Period to make it comparable to the more recent Settlement Classes. What is this case about? Plaintiffs claim that Defendants conspired to limit the supply of Shell Eggs and Egg Products, which raised the price of Shell Eggs and Egg Products and, therefore, violated the Sherman Antitrust Act, a federal statute that prohibits agreements that unreasonably restrain competition. The settling Defendants deny all of Plaintiffs’ allegations. What do the Setlements provide? Under the settlements, Plaintiffs will release all claims against Midwest, NFC and UEP/USEM. In exchange, Midwest will pay $2.5 million; NFC will pay $1 million; and UEP/USEM will pay $500,000, into a settlement fund for the benefit of the Classes. Plaintiffs also will receive documents and information that Plaintiffs’ attorneys believe will aid in their analysis and prosecution of this Action. What does the Sparboe Setlement provide? There is no monetary relief under the Sparboe Settlement. Sparboe agreed to provide substantial and immediate cooperation to Plaintiffs, which the Court already found conferred substantial benefits upon the Class. The second amendment merely conforms the Sparboe Class to the recent Settlement Classes. What do I do now? If you are a Class Member your legal rights are affected, and you now have a choice to make. Participate in the Settlements: No action is required to remain part of the recent Settlements or the amended Sparboe Settlement. If the Court grants final approval to the Settlements and the Second Sparboe Amendment, they will be binding upon you and all other Class Members. By remaining part of the Settlements, you will give up any potential claims that you may have against Midwest, NFC, UEP/USEM and Sparboe relating to the claims alleged in this lawsuit. You may be eligible to receive a settlement payment at a future date. Ask to be excluded: If you wish to exclude yourself from the Sparboe Settlement as amended (if you had no purchases before March 1, 2014) and/or the recent Settlements and wish to retain your rights to pursue your own lawsuit relating to the claims alleged in this lawsuit, you must formally exclude yourself from the Classes by sending a signed letter to the Claims Administrator postmarked on or before March 6, 2015. Object: You may notify the Court that you object to the recent Settlements and/or Second Sparboe Amendment by mailing a statement of your objection(s) to the Court, Plaintiffs’ Counsel, and Defense Counsel postmarked by March 6, 2015. Detailed instructions on how to participate, opt out or object are on the settlement website. Who represents you? The Court appointed Steven A. Asher of Weinstein Kitchenoff & Asher LLC; Michael D. Hausfeld of Hausfeld LLP; Stanley D. Bernstein of Bernstein Liebhard LLP; and Stephen D. Susman of Susman Godfrey LLP as Interim Co- Lead Class Counsel. You do not have to pay them or anyone else to participate. You may hire your own lawyer at your own expense. When will the Court decide whether to approve the Setlements and/or the Second Sparboe Amendment? At 9:30 a.m. on May 6, 2015, at the United States District Court, James A. Byrne Federal Courthouse, 601 Market Street, Philadelphia, PA 19106, the Court will hold a hearing to determine the fairness and adequacy of the recent Settlements and the Second Sparboe Amendment, and consider any motion for an award of attorneys’ fees and incentive awards and reimbursement of litigation costs. You may appear at the hearing, but are not required to do so. Please note that the Court may change the date and/or time of the Fairness Hearing. Settlement Class members are advised to check www.eggproductssettlement.com for any updates. How can I learn more? This notice is only a summary. www.eggproductssettlement.com.

For

more

information,

www.eggproductssetlement.com 180 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

visit

The two prototype stores that have opened to date emphasize fresh food and have a lower merchandising profle.

chain — one with a more open feel, lower merchandising profile, larger emphasis on fresh food to go and a bigger focus on beverages to go. “Opening these stores was a big deal for us. We don’t do that a lot,” Noonan told Convenience Store News. A third prototype store will open next year, and Handy Mart also has its first retrofit design in progress. As of early September, the retrofit was expected to be completed in 45 days. Handy Mart is anxious to conduct more surveys to glean valuable shopper insights and continually improve its business. Noonan was originally thinking of doing another one this August, one year since the original survey, but decided against it since not all of the new store operating procedures have been implemented yet. The retailer is now looking at spring or summer 2015 to conduct a follow-up shopper survey. “We haven’t finished all of the action items from the results of the first survey,” he said. “However, we know we want to keep doing [shopper surveys].” CSN


EXPERT’SVIEW

Is an Employee Ownership Plan Right for You? ESoPs can be much more than just “feel good” plans for c-store chains

A

s Baby Boomer business owners are now reaching an age where they need to plan for business transition, one option they should be considering is an employee stock ownership plan (ESOP). There are several convenience store chains with By Corey Rosen, these plans, including Sheetz Inc., National Center for Employee Ownership Stewart’s Shops, PDQ Food Stores Inc., Rocky Top Markets, Pester Marketing Co. and others. The plans range anywhere from 11-percent ownership at Pester to 100 percent at PDQ. But perhaps the company that has shown the most commitment to the idea is Wawa Inc., the innovative chain with an often fiercely loyal customer base. Howard Stoeckel, Wawa’s vice chairman of the board and author of “The Wawa Way,” set up an ESOP in 1992 (before that, the company stock had been in a profit sharing plan set up in 1977), which as far as we know was the first ESOP in the industry. The plan covers more than 10,000 employees and owns about 48 percent of the company’s shares. Stoeckel could have sold the company to another buyer, but speaking at a commencement ceremony at Rider University, he said what has most gratified him at Wawa is “seeing people grow and achieve their dreams — people that came to us with a high school degree who have worked their way through the organization. People are judged

182 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

by the people they leave behind, and I’m proud of the people I left behind.” An ESOP has allowed that vision to continue. Today, Cathy Pulos, senior vice president, chief people officer and chief financial officer, says that “Wawa’s culture is based on private ownership, shared ownership and a commitment to living our core values.” She notes that “associate ownership [employees are called and treated as associates] has a unique place in Wawa’s history, future and culture.” How ESoPS work

Many business owners want to leave a legacy they can be proud of. Many also want to continue to play some role in the company, whether in ongoing management, serving on the board or acting as an advisor. ESOPs also have significant tax benefits as a tool for business transition. ESOPs are flexible and make all of this possible. ESOPs can be set up to own any percentage of the company and can buy shares all at once or in stages. Finally, if companies do what Wawa has done so well — going beyond simply sharing ownership to also sharing information about company performance and involving employees in day-to-day decisions about how their job is done — research definitively shows they will typically easily outperform competitors. But ESOPs are not just “feel good” plans. Congress intentionally set up ESOPs to be the most taxfavored way to do a business transition. For instance: • For the owner of a C corporation, proceeds on the gain from the sale to the ESOP can be tax-deferred by reinvesting in the securities of other domestic companies. If these securities are not sold prior to


the owner’s death, no capital gains tax is ever due. If the company is a S corporation, LLC or partnership, it can convert to a C corporation before the sale to take advantage of this tax deferral. • ESOPs are funded not by employees, but by taxdeductible contributions from the company to the plan to buy shares. This kind of corporate stock redemption is not normally deductible. So, if an owner sells $5 million in shares through a corporate redemption, the company normally must make about $8 million in pretax money to leave $5 million for the purchase. An ESOP sale only requires $5 million.

• Employees are not taxed on the contributions until they take a distribution after they leave the company, and then are taxed as in any other retirement plan. • In S corporations, the percentage of profits attributable to the ESOP’s ownership is not taxable. A 30-percent ESOP pays no tax on 30 percent of the profits; a 100-percent ESOP pays no tax. wHat iS an ESoP?

To get these benefits, however, companies must comply with a variety of rules. An ESOP is a kind of employee benefit plan, similar in many ways to qualified retirement plans and governed by the same law (the Employee Retirement Income Security Act). ESOPs are funded by the employer, not the employees. Stock is held in a trust, at least for all employees working 1,000 hours in a year, and is allocated to employees based on relative pay or a more level formula. The stock is then distributed after the employee

terminates, with some flexibility in paying out over time. Employees must vest over not more than six years. ESOPs cannot be used to share ownership just with select employees, nor can allocations be made on a discretionary basis. The plan is governed by a trustee who votes the shares, but the board appoints the trustee, so changes in corporate control are usually nominal unless the plan is set up by the company to give employees more input at this level. Companies can pass through full voting rights if they want, however. Financing & Valuation

The simplest way to use an ESOP to transfer ownership is to have the company make tax-deductible cash contributions to the ESOP trust, which the trust then uses to gradually purchase the owner’s shares. Alternatively, the owner can have the ESOP borrow the funds needed to buy the shares. In this way, larger amounts of stock can be purchased all at once, up to 100 percent of the equity. Loans can come from banks or, as is increasingly the case, from sellers taking back a note at a reasonable rate of interest (currently about 5 percent to 9 percent). The price the ESOP will pay for the shares must be determined at least annually by an outside, independent appraiser. Generally, all full-time employees who have worked for a year or more must be eligible to be in the plan. Allocations in the plan are based on relative pay or a more equal formula. Distributions are made after termination on a flexible basis, with the employees putting the shares back to the company or being bought out before they leave. ESOPs are not for everyone, however. Companies generally need to have at least 15 to 20 employees to justify the costs of setting up and maintaining the plan. Typically, the costs range from $60,000 to $120,000 — a lot, but less than what it costs to sell to a third party. Companies also must have qualified successor management. An ESOP can pay what a financial buyer would pay, but not what a synergistic buyer, such as a competitor, might offer. Companies need to be profitable enough to buy the shares, as well. For companies that do meet the basic criteria, however, an ESOP is well worth considering. CSN Corey Rosen is founder of the National Center for Employee Ownership, a nonprofit information and membership organization. More information can be found at www.nceo.org. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 183


HOTPRODUCTS Special Advertising Section

BEVERAGES

184 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


HOTPRODUCTS Special Advertising Section

HYDRATION PRODUCTS

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 185


HOTPRODUCTS Special Advertising Section

E-PRODUCTS

186 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM


HOTPRODUCTS Special Advertising Section

E-PRODUCTS

GENERAL MERCHANDISE

WWW.CSNEWS.COM | OCTOBER 2014 | Convenience Store News 187


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FOODSERVICE EQUIPMENT

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Cellular Products


ATM’s

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Services

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ADINDEX Add Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.addsys.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 AFG Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.bucknakedecigs.com. . . . . . . . . . . . . . . . . . . . . . 60 Alon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.alonbrands.com. . . . . . . . . . . . . . . . . . . . . . . . . 125 Altria Group Distribution Co/Numark . . . . . . . . . . . . www.insightsc3m.com. . . . . . . . . . . . . . . . 2,25,28,30,47 American Licorice Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Anheuser- Busch. . . . . . . . . . . . . . . . . . . . . . . . . . . . www.anheuser-busch.com. . . . . . . . . . . . . . . . . . . . . 204 BIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.biclighter.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Blac Label. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.govapex.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Blu Cigs/LOEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.blucigs.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 The Broaster Company. . . . . . . . . . . . . . . . . . . . . . . www.broaster.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Bunn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.bunn.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Calbee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.harvestsnaps.com. . . . . . . . . . . . . . . . . . . . . . . 169. Cash Depot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.cashdepotplus.com. . . . . . . . . . . . . . . . . . . . . . . 26 CB Distributors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.21stCenturySmoke.com. . . . . . . Cover Tip Regional Chef Robert Irvine. . . . . . . . . . . . . . . . . . . . . . . . . . . sales@fitcrunchbars.com . . . . . . . . . . . . . . . . . . . . . . . 68 Chester’s International LLC. . . . . . . . . . . . . . . . . . . . www.chestersinternational . . . . . . . . . . . . . . . . . . 10-11. Cheyenne International . . . . . . . . . . . . . . . . . . . . . . www.cheyenneintl.com. . . . . . . . . . . . . . . . . . . . . . . 149 Chiquita Brands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.chiquitaToGo.com. . . . . . . . . . . . . . . . . . . . . . . . 69 Coca Cola. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Commonwealth- Altadis Inc.. . . . . . . . . . . . . . . . . . 1.800.440.5797. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ConAgra Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.conagrafoods.com. . . . . . . . . . . . . . . . . . . . . . . 111 Convenience Valet . . . . . . . . . . . . . . . . . . . . . . . . . . www.cvalet.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Cornelius. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 DelMonte Fresh Produce Inc. . . . . . . . . . . . . . . . . . . www.freshdelmonte.com. . . . . . . . . . . . . . . . . . . . . . . 71 Emerson Climate Technologies. . . . . . . . . . . . . . . . . www.emersonclimate.com. . . . . . . . . . . . . . . . . . . . . 163 Ferrero. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.ferrerousa.com . . . . . . . . . . . . . . . . . . . . . . . 51,167 FIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.fisglobal.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Forte Product Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Foster Foods/Corn Dogs. . . . . . . . . . . . . . . . . . . . . . . www.fosterfarmsfoodservice.com . . . . . . . . . . . . . . . . 91 Foster Foods/Fernandos . . . . . . . . . . . . . . . . . . . . . . www.fernandosfoodservice.com . . . . . . . . . . . . . . . . 155 The Garden City Group. . . . . . . . . . . . . . . . . . . . . . . www.eggproductssettlement.com . . . . . . . . . . . . . . . 180 G E Wayne. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Genesis Car Wash. . . . . . . . . . . . . . . . . . . . . . . . . . . www.genwash.com . . . . . . . . . . . . . . . . . . . . . . . . . . 121. Growth Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.ethanolretailer.com. . . . . . . . . . . . . . . . . . . . . . 181 Hatco Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.hatcocorp.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 83 The Hershey Company. . . . . . . . . . . . . . . . . . . . . . . www.hersheys.com . . . . . . . . . . . . . . . . . . . . . . . . 34-35. Home Market Foods. . . . . . . . . . . . . . . . . . . . . . . . . . www.rollerbites.com. . . . . . . . . . . . . . . . . . . . . . . . . . .81 Hostess Brands LLC. . . . . . . . . . . . . . . . . . . . . . . . . . customer_relations@hostessbrandsllc.com . . . . . . . . 6-7. Hunt Brothers Pizza. . . . . . . . . . . . . . . . . . . . . . . . . . www.huntbrotherspizza.com. . . . . . . . . . . . . . . . . . . . . 5 Hussmann. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.hussmann.com . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Imageworks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.imageworksdisplay.com. . . . . . . . . . . . . . . . . . 161. InBalance Health Corp.. . . . . . . . . . . . . . . . . . . . . . . www.inbalancehealthcorp.com. . . . . . . . . . . . . . . . . . 44 Innovative Control Systems. . . . . . . . . . . . . . . . . . . . icscarwashsystems.com. . . . . . . . . . . . . . . . . . . . . . . 119. Inline Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.inlineplastics.com. . . . . . . . . . . . . . . . . . . . . . . . 90 J&J Snack Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . www.jjsnackfoodservice.com. . . . . . . . . . . . . . . . . . . 147. Jane’s Dough. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.JanesDoughFoods.com . . . . . . . . . . . . . . . . . . . . 70 JTM Foods, LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.jjsbakery.net . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Kretek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . salesinfo@kretek.com. . . . . . . . . . . . . . . . . . . . . . . . . 135 Krispy Krunchy Chicken. . . . . . . . . . . . . . . . . . . . . . www.krispykrunchy.com . . . . . . . . . . . . . . . . . . . . . . . 73 Kunzler and Company. . . . . . . . . . . . . . . . . . . . . . . . www.kunzler.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Liggett Vector Brands. . . . . . . . . . . . . . . . . . . . . . . . www.zoomecigs.com . . . . . . . . . . . . . . . . . . . . . . . 93,99. Lindt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.lindt.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 . Living Essentials. . . . . . . . . . . . . . . . . . . . . . . . . . . . www.5hourenergy.com . . . . . . . . . . . . . . . . . . . . . . . . 27 Logic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.logicecig.com. . . . . . . . . . . . . . . . . . . . . . . . 12-13 Manitowoc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.mtwfsusa.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 67 MarsUSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.mars24seven.com. . . . . . . . . . . . . . . . . . . . . 65,87 McKee Foods/Little Debbie. . . . . . . . . . . . . . . . . . . . www.littledebbiecstore.com. . . . . . . . . . . . . . . . . . 84-85. McLane Co. Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.mclaneco.com. . . . . . . . . . . . . . . . . . . . . . . . 20-21 Mondelez. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Nat Sherman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.natsherman.com. . . . . . . . . . . . . . . . . . . . . . . . . 95 Newborn Enterprises. . . . . . . . . . . . . . . . . . . . . . . . 800.227.0285. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Norseland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.norseland.com. . . . . . . . . . . . . . . . . . . . . . . . . . 133 Ovention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.oventionovens.com. . . . . . . . . . . . . . . . . . . . . . . 77 Paragon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.paragon4design.com . . . . . . . . . . . . . . . . . . . . 115 Perfetti van Melle . . . . . . . . . . . . . . . . . . . . . . . . . . . www.airheads.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 109. Ploom Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.ploom.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Premier Nutrition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 The Proctor & Gamble Co.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 ProFood/Champs Chicken. . . . . . . . . . . . . . . . . . . . . www.champschicken.com. . . . . . . . . . . . . . . . . . . . . . 76 R.J Reynolds Tobacco Company. . . . . . . . . . . . . . . . www.engagetradepartners.com. . . . . . . . . . . 9, 100-101 Republic Tobacco . . . . . . . . . . . . . . . . . . . . . . . . . . . 800.288.8888. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159. Rich Products Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . www.mytoporders.com. . . . . . . . . . . . . . . . . . . . . . 63,89. Ryko. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.ryko.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 S&M Brands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.smbrands.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Santa Fe Tobacco. . . . . . . . . . . . . . . . . . . . . . . . . . . . www.engagetradepartners.com. . . . . . . . . . . . . . . . . . 37 Sara Lee/Hillshire Farms. . . . . . . . . . . . . . . . . . . . . . saraleefoodservice.com. . . . . . . . . . . . . . . . . . . . . . . . . 49 Save-a-Lot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.save-a-lot.com . . . . . . . . . . . . . . . . . . . . . . . . . 165. SCA Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.talktork.com . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Scotsman Ice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Shelia G’s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Spark Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800.280.8980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173. Splenda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Subway. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.subway.com . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 . Swedish Match NS, Inc. . . . . . . . . . . . . . . . . . . . . . . customerservice@smna.com. . . . . . . . . . . . . . . . . 53,153 Swisher International. . . . . . . . . . . . . . . . . . . . . . . . www.swisher.com . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Tabletops Unlimited . . . . . . . . . . . . . . . . . . . . . . . . . www.roveliving.com. . . . . . . . . . . . . . . . . . . . . . . . . . 117 Tantus Tobacco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.redbuck.com. . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Tillamook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.tcsjerky.com. . . . . . . . . . . . . . . . . . . . . . . . . . . .137 Trendsettah. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . orders@trendsettah.com. . . . . . . . . . . . . . . . . . . . . . . . 39 Tribe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . customer.service@tribehummus.com. . . . . . . . . . . . . . 55 Tyson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Vapor4Life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.wowvapor.com . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Visual Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . www.vmichicago.com/AIM. . . . . . . . . . . . . . . . . . . . . 113 White Castle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ordings@whitecastle.com. . . . . . . . . . . . . . . . . . . . . . 143. Xyience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . www.xyience.com . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

202 Convenience Store News | OCTOBER 2014 | WWW.CSNEWS.COM

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