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VIEWPOINT By Don Longo, Editorial Director
So Far, a Very Good Year for C-store Retailers But do solid first-half results bode well for the rest of 2015?
he convenience store industry is poised for a strong financial performance in 2015 with improved in-store sales, based on Convenience Store News’ second-annual Mid-Year Report Card. Based on mid-year data from Nielsen, government sources and CSNews’ own research analysis, total merchandise and foodservice sales were up 3.5 percent for the first six months of this year vs. the first six months of 2014. Some other key stats from this soon-to-be released report, exclusively from CSNews, are: • Motor fuel volume in gallons was up 2.8 percent (although dollar sales were down 28 percent due to lower fuel prices); • Foodservice sales were up 5.2 percent; • Cigarettes sales were up 2.3 percent, and more importantly, pack volume is stronger than in past years; • Packaged beverages were up a strong 5.4 percent; • Edible grocery was up 7.8 percent; • Other tobacco products (including electronic cigarettes) were up 4.9 percent; • Candy sales were up 3.1 percent; and • Salty snacks were running 4.4 percent ahead of last year. Our Mid-Year Report Card also looks at regional sales. The South and West regions of the United States turned in the best first-half performances, with both regions up 3.6 percent in in-store sales. In motor fuel volume, the South was up 3.2 percent in gallons, followed
by a 2.9-percent hike in the West. It appears lower fuel prices continue to drive more foot traffic and larger basket sizes at c-stores. But the big question is: Will this strong performance hold up in the second half of 2015? Two potential headwinds might dampen second-half For comments, please contact performance. First is fuel Don Longo, Editorial Director, margins. While gasoline prices at (201) 855-7606 or continue to hover at their low- email@example.com. est levels in years, retailers will be hard-pressed to match the dramatic margin increases they experienced in the fourth quarter of 2014. So, while margins should still be solid, they aren’t going to look as good when examining comparable periods. Second is the Fed. If the Federal Reserve starts hiking interest rates, the The full 2015 Convenience economy would slow down, Store News Mid-Year Report which could mean slower inCard will be available online store sales growth for c-stores only at www.csnews.com despite low gas prices. So far, this month. the Fed seems to be cautious about raising rates amid low inflation and unstable global economic markets. Overall, c-store retailers have good reason to be cautiously optimistic that 2015 will be another very good year.
CSNews has been recognized with more editorial awards, including the prestigious Jesse H. Neal Award for business journalism, in the past six years than any other industry publication. 2013 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2012 2013 Jesse H. Neal National Business Journalism Award Finalist, Best Profile, August 2012 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007 2010 Trade Association Business Publications Intl. Tabbie Awards Honorable Mention, Front Cover Illustration, October 2009 2009 Trade Association Business Publications Intl. Tabbie Awards Gold, Front Cover Illustration, February 2008 Honorable Mention, Best Single Issue, October 2008
2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2013 2013 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2012 2011 Silver Eddie Award, Folio: magazine Business to Business, Retail, Full Issue, October 2010 2011 Silver Eddie Award, Folio: magazine Business to Business, Retail, Best Single Article, October 2010 2009 Gold Ozzie Award, Folio: magazine Best Use of Illustration, October 2008 2009 Silver Eddie Award, Folio: magazine Business to Business, Retail, Full Issue, October 2008 2009 Bronze Eddie Award, Folio: magazine Business to Business, Retail, Website
2015 American Society of Business Publication Editors, National Silver Azbee Award Best Profile (long form), February 2014 2015 American Society of Business Publication Editors, Midwest Regional Gold Azbee Award Best Special Supplement, November 2014 2015 American Society of Business Publication Editors, Midwest Regional Silver Azbee Award Best Profile (long form), February 2014 2013 American Society of Business Publication Editors, Midwest Regional Bronze Azbee Award Best Editorial/Commentary, July 2012 2010 American Society of Business Publication Editors, Northeast Regional Silver Azbee Award Feature Article Design, November 2010
WWW.CSNEWS.COM | OCTOBER 2015 | Convenience Store News 3
CONTENTS October 2015
VOLUME 51/NUMBER 10
26 | COVER STORY QT Cuts to the Chase QuikTrip has been quick to set an example for how a c-store company should strive for constant improvement.
INDUSTRY ROUNDUP 12 | Kangaroo Express Stores Will Hop to Circle K Banner 16 | New Labor Standards May Threaten Franchise Model 18 | Retailer Tidbits 18 | Competitive Watch 19 | Eye on Growth 19 | Supplier Tidbits
20 | People on the Move
3 | So Far, a Very Good Year for C-store Retailers But do solid first-half results bode well for the rest of 2015?
156 | Finding Your Perfect Lender The best partner mirrors the size of your business and your aspirations for growth.
8 | CSNews Online OUT & ABOUT
22 | New Products STORE SPOTLIGHT
146 | New Name, New Look Enmark rebrands to “enmarket” in its commitment to fresh food and health. EXPERT’S VIEW
152 | Three Truths That Will Change Your Career Debra Sandler’s first rule for women: “Stop behaving as expected.”
162 | Blazing a Trail The McLane National Trade Show showed the way in the Mile High City.
20 | Convenience Distribution Leaders Honored
FEATURES 46 | Rewriting the Rules 7-Eleven is taking its private brand program into directions typically not associated with the c-store channel. OPERATIONS
OUT & ABOUT
167 | Tapping Into Your Hunter Instincts Convenience Distribution Business Exchange spurs attendees to think differently.
120 | Minimum Wage, Maximum Concerns As workers and politicians push for pay hikes, c-stores worry about the bottom line. TECHNOLOGY
126 | EMV: What Now? With the Oct. 1 POS liability shift deadline passed, what can c-stores expect?
Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by Stagnito Business Information, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright © 2015 by Stagnito Business Information. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.
4 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
Fuel for your C-Store Enterprise Successfully installed on thousands of terminals, our complete, modern Java™-based enterprise software centralizes multi-store operations, provides point of sale with integrated fuel pump management, and generates dashboard analytics to effectively manage daily operations.
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• POS • Mobile POS • Kiosk • Integrated Fuel Pump Management • Customer Loyalty • • eRewards • Reporting & Analytics • EDI-Supplier Integration • Inventory Management •
CONTENTS FEATURES 136 | Time to Rethink the Boomers? Buying power of the 50-plus crowd still packs a punch. 140 | Continuing the Tradition Inaugural Multicultural Retail 360 Summit provided insights for marketing not only to Hispanics, but all key demographic and cultural segments of the U.S. population.
CATEGORY MANAGEMENT MOTOR FUELS
54 | The Good Times Keep Coming After a wildly profitable 2014, fuel margins expand again this year. 62 | Champion of Choice Sunoco expands fuel offerings in Pittsburgh and beyond. 66 | Taking Alternative Fuels by Storm Michael Lorenz is the driving force behind Sheetz’s foray into E15.
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EDITORIAL Editorial Director (201) 855-7606 Editor-in-Chief (201) 855-7608 Managing Editor (201) 855-7614 Senior Editor (201) 855-7618 Field Editor (201) 855-7619 Assistant Editor (201) 855-7604 Contributing Editor (303) 741-3377 Contributing Editor (201) 280-2614 Art Director (224) 632-8245 Director of Market Research (201) 855-7605
Don Longo email@example.com Linda Lisanti firstname.lastname@example.org Brian Berk email@example.com Melissa Kress firstname.lastname@example.org Angela Hanson email@example.com Danielle Romano firstname.lastname@example.org Renée M. Covino email@example.com Tammy Mastroberte firstname.lastname@example.org Michael Escobedo email@example.com Debra Chanil firstname.lastname@example.org
MARKETING & PROMOTION
70 | These Chains Have It Made More c-store operators are making their mark by developing made-to-order programs.
Audience Development Manager Shelly Patton (646) 217-1045 email@example.com List Rental The Information Refinery (800) 529-9020 Brian Clotworthy Reprints and Licensing Wright’s Media (877) 652-5295 firstname.lastname@example.org Subscriber Services/Single-Copy Purchases (978) 671-0449 Stagnito@e-circ.net
76 | How to Turn Women & Millennials Into Foodservice Customers Both are underserved by today’s convenience stores. IN-STORE MERCHANDISING
90 | Healthy Foods, Healthy Profits Convenience stores can benefit by investing in better-for-you products. COLD VAULT
94 | Beverage Bonanza There’s a wealth of ways to optimize packaged, alcoholic and dispensed drinks. TOBACCO
102 | Vape Crusades As quickly as vapor is evolving, it’s not fast enough for still-unsatisfied smokers. CANDY & SNACKS
108 | Passing the Bar Today’s consumers are increasingly choosing bars for a variety of purposes.
EVENTS • MEDIA • RESEARCH • INFORMATION UNITED STATES MARKETS Convenience • Grocery/Drug/Mass Store Brands • Specialty Gourmet Multicultural • Green
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 email@example.com Production Manager Anngail Norris Human Resources Manager Sandy Berndt Strategic Marketing Director Bruce Hendrickson (224) 632-8214 firstname.lastname@example.org Director of Events Ken Romeo (203) 295-7058 email@example.com Director of Digital Strategy Matt McGuire (224) 632-8180 firstname.lastname@example.org
CONVENIENCE STORE NEWS AFFILIATIONS Premier Trade Press Exhibitor
EDITORIAL ADVISORY BOARD
112 | Scratch-Off Fever 7-Eleven, Virginia Lottery team up to drive traffic.
Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Rick Crawford Green Valley Grocery
116 | Recalculating: This Way to a Better Car Wash C-store operators must remember successful car wash programs don’t run on automatic.
6 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
CANADIAN MARKETS Convenience Pharmacy Foodservice
Kyle McKeen Alon Brands Inc. Richard Mione GPM Southeast
Joe Hamza Tedeschi Food Shops
Matt Paduano Nice N Easy Grocery Shoppes
Jack Lewis Village Pantry LLC
Jonathan Polonsky Plaid Pantries Inc.
Roy Strasburger Convenience Management Services Inc. Jon Urbanik CST Brands Inc.
The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations.
CSNEWS.COM ONLINE EXCLUSIVE
TOP 5 Daily News Headlines The most viewed articles online. 1 | Judge OKs Circle K Overtime Suit as National Class-Action U.S. District Judge Richard Boulware II ruled that a lawsuit alleging Circle K Stores failed to pay overtime wages to store managers can move forward as a national class-action suit. According to the 2014 lawsuit, Circle K misclassified employees to avoid paying overtime wages. The plaintiffs — who worked in Arizona and Nevada Circle K convenience stores — allege they held store manager titles, but had no authority to make decisions regarding the personnel or operations of their stores.
Circle K & The Great American Milk Drive
The Great American Milk Drive kicked off Sept. 1 with Circle K Stores Inc. as the first-ever major convenience store retailer to participate in the Milk Processor Education Program’s national campaign. The goal of the annual drive is to secure highly desired gallons of nutrient-rich milk for millions of hungry families in partnership with Feeding America. “At Circle K, we strive to be good corporate citizens by improving the quality of life in the communities we serve through a host of local charities and organizations,” said Misti Mason, category manager for Circle K Stores. “Because all donations to The Great American Milk Drive stay in the community in which they were donated, we’re able to directly help our neighbors in the communities we serve.”
2 | Target Stores to Test Fast Casual-Style Café Concept Target Corp. will test a new fast-casual café concept at 14 stores starting in October. The test will place fast-casual chain Freshii at nine stores; Pizza Hut’s limited menu of “artisan” pies, including margherita and barbecue chicken, at three stores; and Italian chain D’Amico & Sons in two Minneapolis stores.
For more exclusive stories, visit the Special Features section of www.csnews.com.
3 | 7-Eleven Adds Zipcar to Growing List of Services 7-Eleven Inc. reached an agreement with Zipcar to bring the car sharing network to convenience stores in the Washington, D.C. metropolitan area. The pact calls for Boston-based Zipcar to place a total of 18 cars at 7-Eleven locations. The vehicles are available for reservation by the hour or the day at affordable rates that include gas, insurance and 180 miles of driving per day.
PRODUCT HIGHLIGHT The most viewed New Product online.
New Oregon Chai Tea Latte Flavors
Oregon Chai is releasing two new flavors of its shelf-stable liquid chai concentrate just in time for fall: Spiced and Salted Caramel. Built on Oregon Chai’s versatile black tea blend, the Spiced concentrate has a stronger chai flavor with an extra kick of cinnamon, while the Salted Caramel concentrate features rich caramel with a hint of sea salt. Both new varieties are made with natural ingredients and are GMO-free. Operators can craft bold, on-trend hot or iced signature beverages for fall quickly with stress-free measuring — one part concentrate to one part liquid. Oregon Chai Inc. San Francisco (888) 874-2424 www.oregonchai.com
4 | MKM Oil Exits C-store Business With Portfolio Sale MKM Oil Co. closed on its sale of 35 Fresh & Fast convenience stores in Central Illinois to TravelCenters of America LLC. Gardner-based MKM Oil began with one convenience store in 1989 and grew to 35 stores in the 26 years since.
5 | Parker’s Ranked Among FastestGrowing Companies For the fourth year in a row, convenience store chain Parker’s was named to the Inc. 500|5000 list of the fastest-growing private companies in America. To make the list, companies must have achieved significant sales growth between 2011 and 2014.
What do you believe the new minimum wage should be?
At least $8 an hour
Around $9 per hour
Above $10 per hour $15 per hour
It doesn’t need to be increased 8 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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INDUSTRYROUNDUP FAST FACT
Gas prices at convenience store chains averaged $2.46 per gallon in the first half of 2015, a whopping $1.06-per-gallon decrease compared to the same period last year. The average price only dipped by 5 cents per gallon when comparing the first half of 2014 to the same period in 2013. — Source: Convenience Store News 2015 Motor Fuels Study (page 54)
“The minimum wage is part of a bigger trend. This, what I would call an increasingly popular trend to get whatever your agenda issue is enacted at the local level, is very difficult, frustrating and annoying for businesses to comply with.” — Tom Robinson, Rotten Robbie (page 120)
Kangaroo Express Stores Will Hop to Circle K Banner Couche-Tard slates chainwide rebranding to begin in January By Brian Berk
limentation Couche-Tard Inc. will convert the approximately 1,500 Kangaroo Express convenience stores it acquired from The Pantry Inc. to its Circle K brand. “We have decided to go with the Circle K brand,” President and CEO Brian Hannasch revealed during the Laval, Quebec-based company’s 2016 fiscal first-quarter earnings call Sept. 1. The rebranding from Kangaroo Express to Circle K should begin in January; however, Kangaroo Express customers will begin seeing Circle K features even before the official transitioning. Notably, Circle K’s Polar Pop fountain beverage program has been a major new component in these stores. CoucheTard will add the offer to 900 sites this year. The rebranding has nothing to do with any weakness at The Pantry division. In fact, Hannasch said he “is very pleased” with the convenience stores it acquired in the Southeast and reported that this divi-
12 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
sion was “accretive to the overall network” for the company’s 2016 first quarter, which ended July 19. “The integration of The Pantry stores is well underway with a lot of activity on all fronts,” he said. “We are already seeing solid results, and I am excited to see how this network will perform with the implementation of key programs and harmonization of the brands.” Despite the ongoing process of integrating the Kangaroo Express locations, Hannasch and Couche-Tard Chief Financial Officer Raymond Paré stressed that CoucheTard has the financial wherewithal to make additional acquisitions. “We can take advantage of any attractive opportunities,” Paré said. “The pipeline is interesting.” “We are working on several promising projects,” Hannasch added. No specifics were provided regarding potential acquisition targets.
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New Labor Standards May Threaten Franchise Model National Labor Board adopts a more expansive definition of “joint employer”
decision by the National Labor Relations Board (NLRB) paves the way for employees at franchise businesses to unionize. However, the move could negatively affect the franchise business model, according to NACS, the Association for Convenience & Fuel Retailing. “The National Labor Relations Board adopted a more expansive definition of ‘joint employer’ under the National Labor Relations Act. The new standard is expected to have significant impacts on the franchisorfranchisee relationship, potentially resulting in franchisors being held liable for the labor practices at its franchise locations,” NACS reported. The ruling, which stemmed from a case involving a waste management company and its staffing company, refines the board’s standard for determining when parties can be identified as joint employers. The decision could have broader implications for unions that have struggled to organize workers at fastfood restaurants, which are often run by franchisees who consider themselves small-business owners, but pay fees and adhere to standards set by the companies, according to The Associated Press. In articulating its new “joint employer” standard, the NLRB states it “may find that two or more statutory employers are joint employers of the same statutory employees if they ‘share or codetermine those
16 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
matters governing the essential terms and conditions of employment,’” NACS explained. In addition, the NLRB will no longer require that a joint employer possess and exercise the authority to control employees’ terms and conditions of employment. Under the new standard, simply possessing the authority to control terms and conditions of employment is sufficient to be held as a joint employer. “The NLRB may attempt to apply the expanded standard to the branded marketer model that is used by many in the retail motor fuel industry,” NACS noted. Further, the franchisor-franchisee model may be particularly affected. In a separate case brought against McDonald’s Corp., the NLRB has charged that McDonald’s should be held as a joint employer with many of its franchise locations. Under its case against McDonald’s, the NLRB seeks to hold the parent corporation jointly responsible for labor violations at numerous franchise locations nationwide, the association added. “If franchisors are held responsible for actions at its franchise locations, or if they are responsible for bargaining with franchise employees, they may not see the benefit in continuing the franchisor-franchisee business model. Rather than franchising store locations, they may choose to own and operate the location itself. Such a move could jeopardize the business model used by many in the retail motor fuel industry,” NACS stated.
retailer tidbits n 7-Eleven Inc. launched a partner-
ship with DoorDash to provide on-demand delivery service from 7-Eleven stores in New York, Los Angeles and Chicago. The partnership will expand to Washington, D.C. and Boston in the coming months. n RaceTrac Petroleum Inc. extended the bid deadline on
the sale of 29 of its RaceWay convenience stores to Sept. 29. The sites are located in eight states: Alabama, Arkansas, Florida, Georgia, Mississippi, South Carolina, Tennessee and Texas. n Wawa Inc.’s new flagship store
in Philadelphia opened on Sept. 18, just days before Pope Francis visited the city. It is the first Wawa store to feature indoor seating. n Kum & Go LC will receive $18.59 million in
economic incentives from the Iowa Economic Development Authority Board for its new corporate headquarters. The cost for the project is now expected to reach $151 million.
n The Spinx Co. introduced a Business Management
Program, available to students working toward a degree in business. The program is designed to provide students with invaluable experience and a clear career path opportunity, as well as comprehensive tuition reimbursement and weekly paychecks. Students can be employed full- or part-time at Spinx while completing their coursework. n Westex Capital Ltd. and Bohica Investment Ltd. have
exited the retail and fuel/propane distribution business. The companies’ assets were sold in a multi-tiered sale and included 26 convenience stores under the Pico Petroleum banner. n Sheetz Inc. is partnering with
First Bankcard to offer the Sheetz Personal Credit Card, the chain’s first private-label credit card. It offers automatic savings at Sheetz fuel pumps. n Kwik Trip Inc. was among the recipients of the 2015
Community and Economic Development Awards, presented by the Wisconsin Economic Development Association. The program recognizes groups whose best practices make the community or region it serves a better place.
n Pilot Flying J will roll out its Driver Service Champion
initiative to an additional 26 stores. The travel center operator now offers this specially focused position at 129 travel centers and travel plazas across North America.
n Perfect Petroleum is the latest distributor to sign on with
VP Racing Fuels Inc.’s retail branding program. Perfect Petroleum services more than 250 retail locations.
competitive watch n A CVS Health Research Institute study found cigarette
pack purchases at convenience stores, gas stations, drugstores, grocery stores, big-box stores and dollar stores declined by 1 percent in the eight months after CVS removed tobacco sales in those states where CVS/ pharmacy had a 15-percent or greater share of the retail pharmacy market.
n Dollar General will roll out a new
prototype for all its stores in 2016. The new store model will offer speedier checkout, a greater focus on perishables and health and beauty, and a more customer-friendly shopping experience. n Burgers have helped casual-dining res-
n McDonald’s Corp. began offering breakfast items
all day at more than 14,300 U.S. restaurants on Oct. 6. Traditionally, the chain has ended breakfast service at 10:30 a.m. Testing of all-day breakfast began last spring.
18 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
taurants increase their lunch visits by closing the price gap with quick-service restaurants, according to The NPD Group. Nearly 9 billion servings of burgers were ordered at restaurants and foodservice outlets for the year ending June 2015.
eye on growth n Eskimo Hut, which specializes in fro-
zen daiquiris, is doubling the size of its drive-thru convenience store chain. Franchise deals call for 27 new outlets, all in Texas. The first new location was slated to open in Lubbock by October. n Turkey Hill Minit Markets acquired two Giant to Go
convenience stores from GIANT Food Stores LLC. The Pennsylvania stores measure nearly 4,100 square feet and will be rebranded to the Turkey Hill banner. n The United Family will break ground on its
“next generation” United store this fall. The 56,000-square-foot United store will feature an adjacent 2,500-square-foot United Express convenience store with drive-thru. n U.S. Oil acquired a refined products terminal
in Indianapolis. The terminal adds 410,000 barrels of capacity and expands U.S. Oil’s existing distribution network to 21 terminals in North America. n Green Zebra Grocery will
expand its healthy convenience concept with the opening of a second store in the Lloyd District of Portland, Ore. The company has raised $2.5 million in capital to further its growth. n TravelCenters of America LLC
closed on the acquisition of 21 stores in Kentucky from seller Thoroughbred Energy LLC. The acquisition of an additional 13 stores, principally leased, was pending as of press time.
supplier tidbits n Talking Rain is partnering with its
hometown NFL team, the Seattle Seahawks. The multi-year partnership will feature co-branded Seahawks Talking Rain and Sparkling Ice products, on- and off-premise advertising, and retail availability and distribution. n 22nd Century Group Inc. hired Gregg M. Gellman
as director of business development and regulatory affairs. He will help the company navigate through the Food and Drug Administration modified-risk process for two new tobacco products. n The Convenience Distribution Association (formerly
AWMA) unveiled a host of digital tools. The new features include a series of online communities, dubbed IdeaXchange, as well as a redesigned website with more content.
High School Scholars. n Dos Equis launched its annual
Masquerade promotion for the fifth consecutive Halloween. Point-of-sale materials include case stackers, standees, pole toppers and interactive decals, as well as door handles and fridge headers that aim to encourage cross-category purchases of Jim Beam products. n Mello Yello soda labels sport a new sig-
nature camouflage pattern designed by Realtree Outdoors as part of the “This is MY World” campaign. The promotion is being supported with out-ofhome, radio and in-store point-of-sale in select markets between Aug. 3 and Dec. 31. n Subway named Manitowoc Foodservice as Vendor
n The Hershey Co. was recognized as a top company
and workplace for millennials in two recent studies: the Youth 100 VoxBurner Report and the 2015 Millennial Career Survey by the National Society of
of the Year during its recent 50th Anniversary Convention in Las Vegas. The award was given in recognition for the hard work of the Manitowoc Foodservice brands, Manitowoc Ice and Merrychef.
WWW.CSNEWS.COM | OCTOBER 2015 | Convenience Store News 19
people on the move n Kim Lubel, chairman, CEO and president of CST
Brands Inc., was named one of Fortune’s 50 Most Powerful Women in Business. She also received this honor in 2013. n 7-Eleven Inc. promoted Dennis Phelps to vice presi-
dent, merchandising, fresh food. In his new position, Phelps leads the retailer’s strategic foodservice categories at the headquarters and field level. n Kum & Go appointed Krischelle Tennessen as senior
vice president of human resources. The senior leadership team member reports to CEO Kyle J. Krause.
n Roger Ahuja has taken on the role of vice president
of operations at Love’s Travel Stops & Country Stores. He now oversees a large portion of Love›s retail operations at the store level, and manages the operations for two new company ventures: Love’s Hospitality and Love’s Storage Solutions. n Parker’s Convenience Stores hired Adrian Gibson
as talent acquisition specialist. He is responsible for recruiting, onboarding and retaining qualified job candidates at Parker’s. The retailer also promoted Sarah Bragg to development supervisor.
Convenience Distribution Leaders Honored Pat Carrico and Bob Sears recognized during Business Exchange event
he Hall of Fame and Dean of the Industry awards are both coveted honors for members of the Convenience Distribution Association (CDA). The 2015 awards were presented Sept. 9 during the opening general session of the Convenience Distribution Business Exchange in Chicago. Hall of Fame inductee Pat Carrico, president and CEO of Richmond-Master Distributors in South Bend, Ind., was recognized for 50 years of service, including a term as CDA chairman in 2004. “Pat is one of the best listeners I’ve ever met,” Steve Shing, retired from G.S.C. Enterprises and the current vice president of member engagement at CDA, said in presenting the award. He noted the qualities that have made Carrico successful in business “are rooted in deeply held values that guide his life: honesty, kindness, generosity, patience, loyalty and a strong work ethic.” Upon accepting the award, Carrico said: “I believe that involvement in CDA has been vital to our company. Without CDA, our company wouldn’t be anywhere close to where it is today.” This year’s recipient of the Dean of the Industry Award was Bob Sears, Northeast section sales direc-
20 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
tor for Altria Group Distribution Co. Sears is also a member of the supplier wing of the Convenience Store News Hall of Fame. “He is a consummate professional and an incredible statesman representing the industry,” Keith Canning, Carrico (top left) and Sears (bottom). managing partner of Pine State Trading Co. in Gardiner, Maine, said upon presenting the award to Sears. “He genuinely cares about others and always looks out for all the constituents in the supply chain. … You’d want him in your foxhole. You can trust he’s got your back.” Sears spoke of the importance of listening during his acceptance speech. “We try hard to listen. I hope that I’ve advanced that. It’s important that we do so,” he said, adding that the “cherished relationships” he’s built have “helped to move the industry and our collective interests forward.”
NEWPRODUCTS Cherry Cola Ring Pop
Aqua Straw Natural Spring Water
Bazooka Candy Brands, a division of The Topps Co. Inc., introduces Cherry Cola as a new limited-edition flavor to its Ring Pop line. The soda-inspired flavor was selected by fans through a crowdsource program on the Ring Pop Facebook page, where fans were presented with the choices of Cherry Cola, Fruit Punch and Lemon Lime. Now in its fourth year, the crowdsource program is one of the biggest annual fan events for Bazooka Candy Brands and provides fans the opportunity to weigh in on the iconic candy, according to the company. Previous winning flavors have included Cherry Limeade, Strawberry Lemonade and Raspberry Lemonade.
Aqua Straw provides natural spring water with a telescopic straw built into the bottle. The patented closure prevents spills, and there’s no need to tilt the bottle when you take a sip, stated the maker. Each bottle comes with a sterilized straw. To use, gently remove the cap, lift the straw approximately 1 inch and bend it to the desired angle. The 20-ounce bottle is available in packaging of 12 or 24 bottles.
Topps Co. Inc. New York (800) 489-9149 email@example.com www.topps.com
King Edward VII Chocolate Cigarillos Swisher International introduces a chocolate flavor profile to its line of King Edward VII Cigarillos. Chocolate joins its other premium tobacco tastes including vanilla and natural. The cigarillos are hand-rolled in the Dominican Republic in a natural Connecticut shade wrapper and packed in resealable foil pouches to ensure freshness, the company noted. They are offered in a “Buy 2, Get 3” price point. Swisher International Jacksonville, Fla. (800) 874-9720 www.swisher.com
AquaStraw Inc. San Rafael, Calif. (415) 244-0557 firstname.lastname@example.org
5-hour Energy Extra Strength Peach Mango Living Essentials LLC is adding a new peach mango flavor to its line of Extra Strength 5-hour Energy shots. The ship date is Nov. 2. Peach mango is the fifth Extra Strength variety, joining strawberry watermelon, sour apple, grape and berry. 5-hour Energy shots also come in six regular strength flavors, as well as decaf. Extra Strength 5-hour Energy shots contain caffeine comparable to 12 ounces of the leading premium coffee. Living Essentials Farmington Hills, Mich. (248) 960-1700 email@example.com www.5HourEnergy.com
Korean BBQ Flame-Grilled Pork Jerky New from Jack Link’s, Korean BBQ Flame-Grilled Pork Jerky provides a sweet and spicy way to enjoy this popular Eastern Asian-style of cooking. Jack Link’s has added a “kiss of fire” to its Korean BBQ Pork Jerky by finishing the product over an open flame — a cooking technique new to the jerky category, according to the company. Consumers can see the authentic flame edge on each piece of jerky and smell the authentic aroma. The sweet pork flavor is contrasted with double-toasted sesame seeds and caramelized brown sugar notes, followed by hints of white onion and garlic. The product will be sold nationwide in 2.85-ounce packages for a suggested retail price of $6.99. Jack Link’s Beef Jerky Minong, Wis. (715) 466-2234 www.jacklinks.com
22 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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Created specifically for the convenience store market with a focus on value-added coffee and fountain vessels, ThermoServ’s newly updated insulated drinkware can be customized to integrate with a retailer’s existing marketing messages. The commercial drinkware features a proprietary polyurethane insulation that keeps hot drinks hot for up to four hours, and cold drinks ice-cold for up to eight hours. In addition, ThermoServ’s custom capabilities and strategic marketing expertise allow the company to custom-mold and print products to the customer’s brand colors, and work with them to build programs based around stores’ existing marketing campaign themes or in-store messaging.
Angry Orchard Stone Dry is the newest hard cider and driest style in the brand’s core collection. It is an interpretation of the traditional English dry cider style. Gluten free, Stone Dry has a bright apple aroma, juicy flavor and a clean, puckering, dry finish, showcasing a balance of sweetness and acidity of culinary apples and the taste of traditional cider. It’s available nationwide in six-packs for a suggested retail price of $8.99 to $10.99, varying by market.
ThermoServ Dallas (800) 635-5559 www.thermoserv.com
ChexXtreme Exclusive to convenience stores, ChexXtreme comes in 1-ounce, single-serve “slampack” packages, available in Spicy Sriracha and Hot Chile & Lime varieties. Easy for eating on-the-go, ChexXtreme features bold, spicy flavors. The suggested retail price per bag is 99 cents. General Mills Convenience Minneapolis (800) 767-5404 www.generalmillscf.com
Angry Orchard Cider Co. Cincinnati (800) 362-7110 www.angryorchard.com
Rice Krispies Treats Blasted With M&M’S Minis Rice Krispies Treats Blasted with M&M’S Minis is the newest snack creation from Kellogg’s. The product delivers the traditional crispy marshmallow taste of Rice Krispies Treats, with real milk chocolate candies from M&M’S Minis. Rice Krispies Treats Blasted with M&M’S Minis joins the Big Bar line, which includes existing flavors: Original, Double Chocolatey Chunk, Buttery Toffee, and Chocolatey Chip. Kellogg Co. Battle Creek, Mich. (800) 962-1413 www.kelloggs.com
Ball Park Flame-Grilled Jerky Ball Park, maker of “America’s Favorite Beef Hot Dog,” is reinventing jerky with Ball Park Flame-Grilled Jerky because meat from the grill just tastes better, according to the brand. The jerky is dried for toughness and then flame-grilled for a tender texture and chargrilled flavor. Flavor profiles include Original, Teriyaki, Barbecue, Bourbon BBQ and Peppered Jerky. Tyson Convenience Springdale, Ark. (844) 356-4753 www.ballparkbrand.com
24 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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RetaileR innovatoR of the YeaR
to the Chase QuikTrip has been quick to set an example for how a c-store company should strive for constant improvement
By Don Longo
hen Burt Holmes and Chester Cadieux opened the first QuikTrip store on Sept. 25, 1958 in Tulsa, Okla., they launched the beginning of one of the most astounding success stories not just in convenience retailing,
but in business. Today, QT, as itâ&#x20AC;&#x2122;s known to many of its customers, is the nationâ&#x20AC;&#x2122;s eighth largest convenience store chain in company-operated units, with more than 700 stores generating more than $11 billion in revenue across 11 states. Over its 57-year history, QT was one of the first to operate all its stores 24 hours a day, became a leading seller of motor fuels in all the markets in which it operates, and is now becoming a major factor in improving the perception of fresh foodservice in the c-store industry. QT has always been one of the leading innovators in the c-store industry, whether it was leading the industry in growing the fuel business, setting an example for how a progressive company should empower its associates, pioneering the next generation of convenience store design, or its latest efforts to help improve the perception of foodservice quality in the c-store industry.
26 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
WWW.CSNEWS.COM | OCTOBER 2015 | Convenience Store News 27
coveR stoRY This year, QT earned a spot on Convenience Store News’ Top 20 Growth Chains list for the fourth year in a row; was named to Fortune magazine’s list of the 100 Best Companies To Work For, for the 12th straight year; achieved a nod on Fortune magazine’s inaugural list of the 100 Best Workplaces for Millennials; and rolled out its highly-praised, fresh, made-to-order food and beverage concept — QT Kitchens — to more than 90 percent of its stores nationwide. Also this year, CSNews’ editors have innovation may be in selected QuikTrip Corp. the eye of the beholder, as the 2015 Retailer Innovator of the Year. but if the measure of a Previous winners of this successful company is award were Sheetz Inc. in 2014, Wawa Inc. in 2013 its ability to adapt to a and RaceTrac Petroleum Inc. in 2012. changing marketplace “I personally think and to foster a culture that it [innovation] is an overused term,” said Chet of constant improveCadieux, son of company ment, Qt fits the bill. founder Chester, who became president of the company in 2002. “Most changes that I see, including at QT, are evolutionary more than they are innovative. By that I mean, getting better every day or constant improvement. Whatever you want to call that constant improvement process, I think it is critical to a company’s survival.” In an exclusive interview with CSNews, Cadieux said he feels true innovation, as in actually inventing
28 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
President Chet Cadieux addressed employees from QT’s Tulsa division last month. The company has more than 18,600 employees total.
something new, is rare and not essential to a company’s survival. “I don’t necessarily think QT is good at literally inventing things. There are certainly companies that are a lot better at it than us. However, we are, I think, really good at working toward perfecting things that already exist.” Innovation may be in the eye of the beholder, but if the measure of a successful company is its ability to adapt to a changing marketplace and to foster a culture of constant improvement, QT fits the bill. Of all the company’s accomplishments this year, Cadieux said he is most proud of having installed the QT Kitchens concept in almost every store. “Of course, that necessitated us hiring a lot of people to run those kitchens, which created a 30-percent increase in employee count companywide,” he said. QT has more than 18,600 employees. “And, of course, we had to train all those newbies as well as our existing employees on how to run those kitchens. To get all
coveR stoRY of that done in just one year was a real biggie for us.” You’d think such growth and training needs would put stress on the company’s resources, but QT continues to rank at the top of “Best Places to Work” lists, even nabbing a spot on Fortune magazine’s first Best Millennial Workplaces list. “Everything we do is based upon helping our employees grow and succeed with the company,” said Cadieux. “We’re very proud that year in and year out, our employees place QuikTrip as one
A visit to Dallas where he saw thriving 7-Eleven stores inspires Burt Holmes with the idea to open a small grocery store — then called bantam stores or drive-in groceries — in his hometown of Tulsa, Okla.
What’s in the Kitchen?
More than 90 percent of QuikTrip stores now feature the QT Kitchens offering consisting of made-to-order fresh food, premium specialty drinks and tasty frozen treat selections available at fullservice counters open daily from 6 a.m. to 10 p.m. at most locations. Specialty drinks include premium hot chocolate, frozen frappes, real fruit smoothies and frozen lemonade. Frozen treats include the QT Twister, soft-serve cones and QuikShakes. The made-to-order fresh food menu includes toasted sandwiches, personal pizzas, soft pretzels, flatbreads and kolaches (a type of filled pastry). The QT Grab & Go menu includes freshly crafted sandwiches, salads, wraps, doughnuts and pastries. Hot to-go meals include the chain’s signature Hotzi breakfast sandwiches, as well as many varieties of roller grill items. The Top Your Dog toppings bar enables customers to create their own masterpiece with fresh toppings of diced onions, pico de gallo, pickle slices, diced tomatoes, sliced jalapeños and more. Breakfast has been given an injection of excitement with the retailer’s new breakfast pizza — a freshly cooked pizza topped with eggs, sausage, bacon and cheese.
Burt convinces a former junior high school classmate, Chester Cadieux, to invest in and operate the store they decide to call QuikTrip. Burt and Chester open the first QuikTrip on Sept. 25 in Tulsa.
After nearly four years of struggle, QuikTrip finally achieves a positive net worth. The company ends the 1961-62 fiscal year with eight stores and total sales of $1,090,008.
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30 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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coveR stoRY of the best places to work. It’s not just a corporate culture to us — it is QuikTrip. We hire people that we believe will fit our culture and belief. They are overachievers, highly competitive, and are in perpetual motion performing multiple tasks consistently day in and day out, all while wearing a smile. I think they are amazing.” HaPPy EmPloyEEs, HaPPy CusTomErs
By taking care of its employees, those employees help the retailer focus better on the needs of its customers. “Our employees are really great listeners,” said Cadieux. “The customer will tell you which products they would like to see and what their expectations are.” According to CSNews’ 2015 Top 20 Growth Chains report (published in the March issue), QT
QuikTrip opens its first store outside of Tulsa, No. 30 in Miami, Okla., on May 15.
The company operates 43 stores, with annual sales of $5.5 million and 167 employees.
Kolaches are a signature QT Kitchens item.
grew its store count from 678 stores in 2013 to 711 in 2014, an increase of 33 net new units. Growth has been organic and across all of its existing markets, with the newest states, North and South Carolina,
Expansion outside of Oklahoma begins with the Oct. 1 opening of Store No. 150 in Grandview, Mo.
32 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
QuikTrip merges with Shopeze, a Wichita-based
continued on page 36
convenience store chain. The merger increased its store count from 69 to 97 locations. Stores under construction bring that number to 120 by the end of the year. The chain also offers gasoline for the first time.
The Coca-Cola Company congratulates QuikTrip on being named the Convenience Store News Innovator of the Year!
ÂŠ 2015 The Coca-Cola Company
QuikTrip Corp. consistently ranks among the best places to work for employees of all ages. But recently, the Tulsa, Okla.-based c-store retailer got a big thumbs-up from the younger generation. In June, Fortune magazine and the Great Place to Work Institute published their first-ever ranking of the best workplaces for millennial workers, which lists the top 100 employers that scored the highest among workers under the age of 35. QuikTrip landed at No. 69 on the inaugural list. Fortune noted: “Unlike other gas station and convenience store chains, QuikTrip has extremely low employee turnover. Only 13 percent of workers leave compared to an industry average of 59 percent. That’s a credit to the company’s above-industry average pay and what employees say is an overall friendly and supportive atmosphere.”
receive a perfect score on a mystery shopper review, too. One QT employee told Fortune: “We are truly treated as individuals and the company takes a personal interest in each of us. I believe this is unheard of when a company grows to the size we are. We actually have to open new markets to create movement to give our employees an opportunity to advance because no one leaves.” Millennial respondents to the Fortune survey said they desire open communication, risk-taking, collaboration, support among employees, and fewer internal politics. More than 90,000 employees were asked to evaluate and rate the practices of their employers. For each of the 465 companies that participated, at least 50 employees from every company were surveyed. There was no limit to the size
QuikTrip also rewards loyalty, providing awards to employees for one, five, 10, 15, 20 and more years of service with the company. Store employees can get $50 bonuses if they
or type of organization. Perks and benefits programs were not included as part of the ranking methodology and scoring was based entirely on employee feedback.
QuikTrip enters Iowa with the Sept. 22 opening of Store No. 503 in Iowa City. This store will be the first of many openings in cities all across central Iowa.
QuikTrip stores are open 24 hours companywide. This is a significant advantage vs. the competition as other chains are open on a scattered basis.
34 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
QuikTrip hires Wyatt Phillips, an Atlanta marketing consultant, who creates the company’s QT logo. Signs featuring the new logo begin appearing in front of QuikTrip stores. To many customers, QuikTrip becomes QT.
Congratulations QuikTrip ®
CSN Retailer Innovator of the Year
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coveR stoRY seeing the most new store activity. The retailer expected this year’s growth pace to be about the same as last year’s. “We have experienced tremendous new store count the last couple of years, which has been great,” noted Cadieux, adding the retailer doesn’t comment on future expansion plans. He did, however, acknowledge that “the Carolinas have been absolutely fantastic. We have been really well received by the customers.” Importantly, Cadieux believes QT has “learned a lot [from its Carolinas expansion], which is critical because learning is how you get better. Further, we reaffirmed just how hard our people work and how dedicated they are continued on page 40
The chain introduces its first fastfood module with the then-revolutionary idea of customers serving themselves.
The 200th store opens Aug. 13 in Raytown, Mo.
QT introduces Lamar and The Cowboy in the first of a series of memorable television commercials that would eventually run nine years.
The company hires Lloyd Poston, who brought years of knowledge of all facets of the gasoline business. He instructs QuikTrip that it’s time to stop playing at selling gasoline and become a serious gasoline marketer. Gasoline sales double over the next three years.
36 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
Customers can build their own Quikshake.
QT adds the RE-100 computer that links each store with the company’s mainframe IBM 4341 computer. Stores use the RE-100 to order merchandise from the distribution warehouse and later to enter time sheets and other report information.
Expanding for the first time in 12 years, stores open in the St. Louis and Atlanta markets on consecutive days in November.
What Makes QT Special?
Market Force is a leading global customer intelligence solutions company for multi-location businesses, including major retailers, restaurants, and grocery and convenience stores. Each year, it conducts a research study of consumers’ satisfaction with their most recent gas station or convenience store experience and their likelihood to refer that store brand to others. The results are averaged to attain a Composite Loyalty Score. QuikTrip took the top spot in the 2014 study and came in second to Wawa in the 2015 rankings. Its Composite Loyalty Score of 62 percent was six points below Wawa, but ahead of Sheetz, which was third with 59 percent, and Speedway and Phillips 66, which tied at 54 percent. QT topped the rankings in appearance/maintenance and customer service; was second in easy entry/exit and brand reputation; and came in third in fuel quality, fresh food, good coffee and fuel price.
Convenience Store News selects Chester Cadieux as the first inductee into its Hall of Fame.
The Quik’n Tasty distribution warehouse opens in Belton, Mo.
AppeArAnce/mAintenAnce Quiktrip 61% Wawa 60% Sheetz 54% exxonmobil 38% chevron 37% Service Quiktrip Wawa Sheetz 76 circle K
42% 40% 37% 31% 30%
entry/exit Wawa Quiktrip
The chain introduces a sports bottle called the Squart and watches as Squartmania becomes the summer craze. Sales top one million by year’s end.
circle K Sheetz phillips 66
51% 51% 50%
BrAnd reputAtion Wawa Quiktrip chevron Shell exxonmobil
57% 55% 51% 45% 45%
FreSh Food Wawa Sheetz Quiktrip 7-eleven Speedway
50% 48% 35% 19% 16%
QT announces in July that it will unconditionally guarantee its gasoline. The Guaranteed Gasoline drastically changes customer perception of the quality of QuikTrip gasoline.
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38 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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coveR stoRY to being the best.” In addition to the new store growth, QT has been busy refurbishing and retrofitting its existing stores to accommodate the full-service QT Kitchens concept. “We have been fortunate in that we have retrofitted about 93 percent of our existing stores with our full service QT Kitchens and we were able to do it without really affecting our customer flow. “It’s no secret, we are in the process of doing a lot of relocations and scrapes/rebuilds, making way for our new Gen 3 model,” Cadieux added. The creation of QT Kitchens in 2006 is an example of how good QT is at taking an idea and perfecting it. The concept originated because two of the industry’s
The 300th store opens in Sand Springs, Okla. Stores open in Omaha, Neb.
Flatbreads combine meat, melted cheese and delicious sauce.
biggest categories — gasoline and cigarettes — are no longer growth categories, and instead are declining. “As such, we needed to find something to replace
The first store opens in the new Dallas/Fort Worth Division in Arlington, Texas.
Chet Cadieux, son of company founder Chester Cadieux, becomes president.
QuikTrip arrives in Arizona with the opening of Store No. 461 in Phoenix on April 20.
40 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
The 400th store opens in Tempe, Ariz.
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coveR stoRY them. We always thought we were pretty good at selling gasoline and convenience store items. Over time, our goal is to be as good at selling fresh food as we are at other items,” Cadieux noted. According to one foodservice expert, QT innovated its operational systems so that it could use made-to-order customer service as the basis for its new food and drink products. This new offer includes made-to-order breakfast pizza, pizza for lunch and dinner, toasted sandwiches, flatbread sandwiches,
The company opens the QT Commissary and Bakery in Tulsa. The 500th store opens in Broken Arrow, Okla.
“social media and digital marketing are critical components of our overall toolset for communicating with our customers, our non-customers, our employees and our shareholders. in some instances, digital is the best tool to use for that communication. sometimes it isn’t. the key is knowing how and when to use it vs. another medium. i think we’re getting better at it, but still have a lot to learn.” — QuikTrip President Chet Cadieux on social media
QT celebrates its 50th year in September by hosting a daylong festival for employees and customers in Tulsa that featured the hometown musical acts Hanson and Leon Russell.
The first store opens in Tucson, Ariz.
The first “Gen 3” QuikTrip store opens in Tulsa.
The chain expands to the Carolinas in October with the first store in Boiling Springs, S.C.
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Poppies International, Inc. / Phone: 252-442-4016 / Fax: 252-442-3191 / Email: firstname.lastname@example.org / www.poppies.com 42 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
coveR stoRY kolaches and fresh baked pretzels, among other items. Coinciding with the chainwide rollout, QT has clearly taken its fresh food business to a new and higher level. Cadieux, whose father Chester was the first inductee into the CSNews Hall of Fame in 1987, laughs when questioned about the industry’s three biggest challenges in the years ahead. “Boy, only three biggest challenges? Channel blurring, declines in demand for motor fuels, and declines in cigarette consumption. Any of those three should be enough to keep everyone in our industry awake at night. All three combined is just scary.” For the future, Cadieux admits he “has no idea” what c-stores will look like in 2030 or 2040, but he promises QT will “be working really hard every day during the interim years to figure it out.” The retailer is never satisfied with the status quo.
The 600th store opens in Claremore, Okla.
A third version of Store No. 1 opens in October on the former site of the Camelot Hotel, a legendary Tulsa hotel.
“We believe there is always a better way to do things and we believe to remain successful that we simply have to get better every day. Sometimes we stay ahead and sometimes we fall behind … but we’re always working at it,” he said. And this year, QT’s pursuit of constant improvement is as good a definition of innovation as any other. CSN
QT introduces a fresh, made-toorder menu with the addition of QT Kitchens full-service counters.
QuikTrip is named for the 12th straight year to Fortune magazine’s list of the 100 Best Companies To Work For.
44 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
The 700th store opens in Overland, Mo. Source: Quiktrip.com
Pefeti Van Melle cogatulates QuikTrip o being named Covenience Stoe News Innoato of the Yea! We value yor patneship and wish yo all the best!
Sean Thompson, Joseph Peng and Denise Jenkins (from L to R) show off some of 7-Eleven’s store brands.
Rewriting the Rules From premium confectionery to better-for-you snacks and OTC medications, 7-Eleven is taking its private brand program into directions typically not associated with the c-store channel By Kathie Canning
46 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
n an environment in which convenience store chains tend to lag far behind supermarket, drugstore and other chains when it comes to private label product and program development, 7-Eleven Inc. stands out as a noteworthy exception. The Dallas-based company has long been associated with such iconic brands as Slurpee, Big Gulp and Big Bite. But a spate of activity on the product development side in recent years has taken 7-Eleven’s store brand program to new heights. Within just the past year or so, for example, the retailer added such items as 7-Select Go! Smart fruit and nut bars, 7-Select Go! Yum sweet treats, and even a line of 7-Select over-the-counter (OTC) medications. 7-Eleven, part of Tokyo-headquartered SevenEleven Japan Co., operates, franchises and licenses almost 8,700 stores in the United States and Canada. The sheer size of its operations allows 7-Eleven to “go a little farther and deeper” within the private brand arena, said Jim Wisner, president and founder of
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Wisner Marketing Group in Libertyville, Ill. Carol Spieckerman, president of the newmarketbuilders retail consultancy, agrees. “The depth and breadth of category offerings go far beyond traditional c-store fare,” she said. “7-Eleven has also taken a thoughtful approach to packaging and pricing. Its private brand products present a compelling value proposition, which runs counter to the price-gouging standard that c-stores have set in the past.” The retailer’s recent entry into healthful private brand items also is a plus, contends Kai Clarke, CEO of the global American Retail Consultants. “I like the perspective that 7-Eleven is giving to their healthy snacks,” he said, “since this plays away from the traditional perspective of a convenience store.” Spieckerman likes that direction, too, suggesting it could help attract more women to 7-Eleven stores. Another positive that bodes well for 7-Eleven’s store brand program is the retailer’s commitment to making store brands a significant part of its business, Wisner added. He points out, for example, that the c-store operator was “first to the table” with store brand wine and beer — commonly purchased c-store items. “Private brands are a major part of 7-Eleven’s strategy,” explained Sean Thompson, the retailer’s senior director of merchandising and a key member of its private brands team. “Our organization is fully aligned that expanding our private brand offering is a key component of our future growth.” Speaking of expansion, 7-Eleven has a goal to increase its private brand SKU count by 60 percent in 2015, he noted. FOCuS On innOvaTiOn, DiFFEREnTiaTiOn
Innovation and differentiation have been key buzzwords in the private brand arena for a few years now. But for 7-Eleven, they are much more than just buzzwords — they are among the guiding principles for product development. “To drive total-category performance, private brand items need to offer customers something they aren’t currently getting,” Thompson explained. “We listen to our internal team, conduct research with our consum-
48 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
ers and validate the opportunity with our franchisees. We [had] several groundbreaking platforms launching this summer, and they all started by listening to the needs of the business.” Quality is a key differentiator for the retailer. Products offered under 7-Eleven’s own brands give shoppers items that are of “exceptional quality,” he said, driving profits for the retailer’s all-important franchisees. (More than 6,400 of its U.S. and Canadian stores are franchised.) On the quality front, 7-Eleven begins with a specific benchmark for a product, and works to create a store brand item that is “noticeably higher” in quality than that benchmark, Thompson said. Although this approach makes it much more difficult to bring products to market, the retailer will not compromise here. 7-Eleven’s category managers also play a critical role in store brand innovation and differentiation via a strong category strategy that allows them to identify gaps in the assortment. “They know the needs of their customers and work with our team to deliver on opportunities that add incremental sales to their assortments,” Thompson said. One recent success story came out of a collaborative effort between a 7-Eleven category manager and a product development manager. The goal was to offer customers a line of sweet treats they might expect to see at a local confectionery outlet, but at a compelling price, he noted. The first products introduced under the resulting product line — 7-Select Go! Yum — also were created based on 7-Eleven’s consumer insight research that showed consumers want to reward themselves with premium, high-quality treats. “Each product is made with premium ingredients curated to provide high-quality products with on-trend flavors that have features designed specifically for the 7-Eleven customer,” Thompson said. “They did a great job, and this platform is helping to drive incremental sales for the entire category.” EnhanCing ThE PaCkaging ExPERiEnCE
7-Eleven also understands that packaging plays a significant role in own-brand innovation, differentiation and, ultimately, product success.
Taste Success Store brands and convenience stores are a marriage made in heaven. Customers rely on their convenience shops for solutions to quick meal needs and everyday products. But how can c-stores differentiate themselves from their competitors. Friendly service and their own store brands. Are you building a store brands program worthy of your company’s name. PLMA’s 2015 Private Label Trade Show can help. All your competitors will be there. Register today for see what store brands can mean to you and your company.
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“We believe packaging is a significant part of the customer experience,” said Denise Jenkins, director of marketing for 7-Eleven private brands. “Great packaging can take an otherwise strong product and enhance the customer experience.” Consumers also have a number of frustrations regarding existing packaging in general, so 7-Eleven understands that it needs to discuss those frustrations and how they might be overcome early in the product development process, she said. In addition, the final packaging must be able to “accurately showcase” the product’s quality. “Our packaging works hard to demonstrate the quality of the product inside,” she said. “We are using shopper data, customer feedback and a well-honed brand position to better understand what attributes we should communicate, and then we use imagery and storytelling to tie it all together.” COmmiTTED TO FRanChiSEES
Most U.S. 7-Eleven stores are franchisee-run, so 7-Eleven does everything it can to help its franchisees succeed. And own-brand products are critical in the franchisee-support process. “With unique and different items, we can give customers products they can only get at our store,” said Joseph Peng, a 7-Eleven franchisee who operates a store in Lincoln Park, Texas. “This helps us build our brand, and nobody else can offer these products in our area.” The retailer’s private brands team spends a lot of time traveling to talk with its franchisees throughout the year, Thompson noted, to find out what’s working and what’s not, as well as to help identify gaps that private brand products could fill to better serve the needs of shoppers. “This feedback is incorporated into our plans either for new items or continuous improvement opportunities,” he said. “What we want them to know is they have a private brands team that is passionate about developing products that will differentiate them from their competitors, create loyalty with their customers and drive sales
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and profit for their business.” Franchisees also learn of news related to 7-Eleven’s strategy, business results and planned new product launches during face-to-face meetings. In addition, they get to try new own-brand products so they are confident in offering them to their customers. “I am really impressed with the quality of our 7-Select products,” Peng said. “My associates talk with our customers about these products because we know they will love them and come back to our store for more. They also generate great gross profit for my store, and that is great for my business.” 7-Eleven’s annual meeting — the 7-Eleven Experience — also has a significant focus on private brands and gives 7-Eleven a prime opportunity to interact with franchisees. “Each franchisee is invited to interact with senior leadership, talk about business performance, provide feedback and see what is new from merchandising,” Thompson said. “We want our franchisees to get excited about what is coming, and we work hard to sample products, demonstrate merchandising best practices and gather recommendations from them regarding what we can do better to serve.” Franchisees ultimately make the decision as to how many private brand SKUs they will carry in their stores. For his part, Peng opts to merchandise more than 95 percent of the products — his customers love the products and come back to his store to make repeat purchases. “This is really good for my business,” he stressed. “The gross profit is much higher than national brands, and this helps me run a profitable store.” Of course, part of the commitment to franchisees is a commitment to the franchisees’ customers. “I want our customers to know we have countless options for them to enjoy in our stores,” Thompson said. “7-Eleven offers an awesome fresh food program, exclusive items co-developed with branded manufacturers and a great private brand program. We try to create an experience where our customers can always find something new and exciting, while being able to get in and out quickly.”
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Because 7-Eleven has a mission to bring high-quality, differentiated private brand products to market, its supplier partners must be up to that task. “We have heard from several suppliers that we ask more questions regarding product details and specifications than any other retailer,” Thompson noted, “and this makes me happy to hear.” When the private brands team is working on a major platform, it needs to get the full commitment of the manufacturer’s executive team and meet with that team to discuss the project’s goals, needs and criteria for success, he said. The team also explains 7-Eleven’s product development process to prospective suppliers. That process starts with a demonstrated clear consumer need and ends with a product that significantly outperforms the benchmark set for quality in the quest to improve franchisees’ business. “We get into a high degree of depth during these meetings, and my team typically walks a manufacturer through a past presentation so we can calibrate on the level of detail, energy and resources needed to develop products for 7-Eleven,” he stated. 7-Eleven is particularly drawn to manufacturers that possess an in-depth knowledge of the consumer and are able, therefore, to talk about consumers’ needs and unmet needs, Thompson said, as well as how they are innovating to meet those needs. “These manufacturers have specific quality-related reasons for procuring their raw ingredients, seek out innovative suppliers [and] have distinct differences in the process they use that differentiates them from their peer group,” Thompson maintained. “Additionally, they are able to help us think through how to leverage packaging
and supply chain to ensure the quality of the product is the same at the store as it is coming off the line.” The high expectations mesh with the new investments 7-Eleven has made to its private brands team. The company “dramatically increased” the size of the product development team, he said, and added dedicated marketing resources and a strategy and analytics function. “This investment has allowed us to really develop and market products differently and engage with our operations team and franchisees to drive the business,” Thompson explained. FORwaRD-Thinking
7-Eleven has done much to “rewrite the rules” when it comes to store brand product development for a c-store setting. But Thompson admits that the retailer is not without its challenges here. “When you have as much happening as we do, customer trial becomes critical,” he said. “We spend a lot of time thinking about how to engage with our customers, show them what is new and give them an opportunity to try our products.” In addition, many of 7-Eleven’s customers are “routine-based” — stopping in for coffee and a doughnut each weekday, for example. “Our customer research tells us that we need to work harder at breaking through and making our products more visible,” Thompson said, “and we applied these insights when designing our packaging and in-store merchandising.” When it comes down to it, 7-Eleven is “doing so many things right,” Spieckerman stressed. But the competition is heating up in the form of small-format stores from players such as ALDI, Walmart, Target and even Lidl. “All of these competitors are focusing on fresh and healthy selections, and Walmart and Target are working hard at integrating their e-commerce businesses with their physical locations,” she said. “7-Eleven has found itself operating in a once-sleepy retail tier that has suddenly become a hot spot.” Still, 7-Eleven has demonstrated a fairly sophisticated approach to obtaining and leveraging consumer insights to create unique products that resonate with its customers, Wisner said, which bodes well for the future. “7-Eleven hasn’t fully developed all of [its] opportunities yet, but it is going after them aggressively,” he concluded. CSN Kathie Canning is editorial director of Store Brands, a sister publication of Convenience Store News.
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2015 Motor fuels study
Gasoline + diesel + ethanol + lNG/CNG + electric
the Good times Keep Coming After a wildly profitable 2014, fuel margins expand again this year By Brian Berk
First-Half Motor Fuel Results
Convenience store chains sold $89.8 billion worth of fuel in the first half of 2015 vs. $124.6 billion in the same period in 2014. This 28-percent decline year over year is primarily due to the average price per gallon of fuel, which came in at $2.46 in the first half of 2015, $1.06 cheaper than 2014’s first half. Gallon volume is a beneficiary of lower gas prices, however, increasing 3.1 percent year over year to 36.5 billion gallons during the first half of this year. DOllAR SAlES (IN BIllIONS)
First half 2015 First half 2014 First half 2013
$89.8 $124.6 $124.5
GAllON VOlUME (IN BIllIONS)
PRICE PER GAllON
-27.9% 0.0% n/a
36.5 35.4 34.9
3.1% 1.4% n/a
$2.46 $3.52 $3.57
-30.1% -1.4% n/a
Source: Convenience Store News Market Research, 2015
Motor Fuel Margins
C-store chains enjoyed a banner first half of 2014 in terms of motor fuel margin dollars and profit cents per gallon. This year, c-store chains are having another great year in these metrics. Motor fuel margins increased 10.2 percent year over year to $7.3 billion, while motor fuel profit cents per gallon improved by a penny to 20 cents per gallon. MOTOR FUEl MARGIN (IN BIllIONS)
PROFIT CENTS PER GAllON
$7.3 $6.6 $6.5
10.2% 2.2% n/a
$0.20 $0.19 $0.18
6.9% 0.8% n/a
First half 2015 First half 2014 First half 2013
Source: Convenience Store News Market Research, 2015
Types of Motor Fuels Offered
Traditional gasoline continues to dominate the fuel offering landscape, with all c-store chain respondents stating they currently offer this fuel. However, only 88 percent of chains expect to offer petroleum at the pump in the next five years. One of the main beneficiaries could be E15. Seventeen percent of chains report offering the ethanol/gasoline blend now, and 24 percent plan to sell the alternative fuel within five years. NOW
Gasoline (10% or less ethanol) Diesel Any alternative fuels (net) Propane Mid-level ethanol blend (E15) Flex fuels (E20, E30, E85, etc.) Natural gas (CNG, LNG) Electric charging Other alternative fuels
100.0% 87.8% 61.0% 34.1% 17.1% 12.2% 4.9% 2.4% 9.8%
Source: Convenience Store News Market Research, 2015
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IN FIVE YEARS
87.9% 72.7% 60.6% 24.2% 24.2% 15.2% 9.1% 12.1% 3.0%
ollowing a 2014 that was one of the best in recent years in terms of fuel margins, most metrics were up again in the first half of this year, according to the exclusive 2015 Convenience Store News Motor Fuels Study, which covers convenience store chains. The greatest gain can be found this year in fuel margins, which increased a stellar 10.2 percent year over year to $7.3 billion. Motor fuel profit in cents per gallon for the first half of this year was also strong, ticking up by a penny per gallon — a rise of 7 percent — to 20 cents per gallon. When comparing the first half of 2015 to the first half of 2014, a major difference in the fuel environment is price. Prices at the pump at convenience store chains averaged $2.46 per gallon in the first half of 2015, a whopping $1.06-per-gallon
MOTOR FUELS Gasoline + diesel + ethanol + lNG/CNG + electric
decrease compared to the same period last year. By comparison, the average price only dipped by 5 cents per gallon when comparing the first half of 2014 to the same time period in 2013. These lower pump prices helped gallon volume at c-store chains increase by 3.1 percent in the first half of the year. In addition, 77.5 percent of c-store chain retailers said gallons sold per transaction either increased or stayed the same in 2015’s first half. Lower gas prices did cause one negative effect, however. Overall, c-store chains sold $89.8 billion worth of fuel in 2015’s first half, a
28-percent decrease compared to the $124.6 billion sold in the first half of 2014.
E15, an alternative fuel blend containing 15-percent ethanol and 85-percent gasoline, could be the biggest beneficiary. Among all
ALTERNATIVE FUELS GAINING GROUND
Perhaps the most fascinating findings from this year’s study involve the types of motor fuels that c-store chains offer and what they plan to offer in five years’ time. As expected, all c-store chains currently offer traditional petroleum (defined as fuel containing 10 percent or less ethanol). Surprisingly, however, only 88 percent of c-store chains expect to offer this fuel in five years.
Motor Fuel Programs, Branded vs. Unbranded
Nearly three in every four c-store chain retailers currently carries branded motor fuels. Those with branded fuels have sold that fuel for an average of 17.3 years. C-store chains overall appear to be quite pleased with the brand(s) they carry. Nine of every 10 retailers say they plan to continue offering branded fuels when their existing contract runs out. Carry branded motor fuel Years in place Number of brands carried Switched brands in past two years Switching increased volume Carry unbranded motor fuel Years in place Carry both branded and unbranded motor fuel
73.8% 17.3 1.7 3.6% 100.0% 40.5% 14.3 4.80%
Change in Gallons Sold per Transaction vs. Year Ago
Source: Convenience Store News Market Research, 2015
Plan to drop branded fuels when contract runs out:
Sales Technology & Promotions at the Pump
C-store chains love pumptoppers, with all chains reporting they use this marketing tool. More than 90 percent of chains also use pay-at-the-pump technology. Video monitors, audio monitors and merchandise/foodservice ordering at the pump are lesser-utilized options. Pumptoppers
Pay-at-pump technology Video monitors at pump
Lower fuel prices mean consumers are driving more, leading to a rise in gallons sold per transaction. More than 52 percent of c-store chains said gallons sold per transaction rose in the first half of this year, with another 25 percent saying volume stayed the same. Just 22.5 percent of retailers reported gallon volume declined in the first half of 2015. Increased
Audio promotions at pump
Merchandise/foodservice ordering at pump
Stayed the same
Source: Convenience Store News Market Research, 2015 Source: Convenience Store News Market Research, 2015
56 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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MOTOR FUELS Gasoline + diesel + ethanol + lNG/CNG + electric
Percent of Fuel Transactions by Payment Type Talk of cash’s demise as a payment method at the pump have clearly been overstated. Although cash transactions at chain stores’ pumps declined 1 percentage point year over year to 35.1 percent of all transactions, the decline has been gradual. Credit cards picked up the difference, with all other forms of payment virtually staying the same.
c-store retailers (both chains and single-store owners), 6.7 percent offered E15 in 2014. This figure rose by 10.2 percentage points in this year’s study to 16.9 percent. Among just c-store chains, 17.1 percent currently offer E15, with
24.2 percent saying they plan to offer it within five years. The alternative fuel was approved in 2011 by the Environmental Protection Agency for cars manufactured in the model year 2001 and newer. Also noteworthy is that despite
Cash Credit Debit ACH Other
35.1% 42.2% 21.9% 0.4% 0.3%
36.1% 41.3% 21.9% 0.5% 0.2%
Source: Convenience Store News Market Research, 2015
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2015 Alternative Fuels Leader of the Year
58 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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MOTOR FUELS Gasoline + diesel + ethanol + lNG/CNG + electric
the plethora of new payment methods entering the marketplace, nearly all fuel transactions at c-store chains are paid for via cash, credit cards and debit cards. The use of
cash as a payment method did drop by 1 percentage point year over year to 35.1 percent of all transactions. Credit cards picked up the majority of these transactions
Age & Cost of Current Motor Fuel Equipment C-store chains spend an average of $912,667 per store on motor fuel equipment, and replace these dispensers an average of once every 15 years. These figures are likely to change in the near future, though, as the liability shift deadline for upgrading forecourt devices with EMV (Europay, MasterCard and Visa) is set at Oct. 1, 2017. Average investment per store Average age of equipment How often equipment is replaced
$912,667 9.5 years 15.0 years
Source: Convenience Store News Market Research, 2015
â&#x20AC;&#x201D; not mobile payments or other fledgling forms of payment. A final takeaway from the study is the loyalty c-store chains show for the branded fuels they offer. Nearly three-quarters of chains currently carry branded fuels on the forecourt and just one in 10 said they plan to drop branded fuels when their current contract runs out. CSN
Convenience Store News fielded this study to convenience store retailers in August. A total of 101 responses were received; only retailers who currently have motor fuel programs at their stores were included. Additional sales and volume information was obtained from the U.S. Department of Energy. This report only includes the results for c-store chain operators (those with two or more stores). For a report of the results among singlestore owners, see the October issue of Convenience Store News for the Single Store Owner.
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FUELS INNOVATOR OF THE YEAR
Gasoline + Diesel + Ethanol + LNG/CNG + Electric
Champion of Choice Sunoco expands fuel offerings in Pittsburgh and beyond By Brian Berk
unoco Inc. has long been a champion of alternative fuels, evidenced by the ownership of its ethanol plant in New York State, relationship with NASCAR and INDYCAR, and its E85 offering at the pump. But the company truly stepped it up a notch this year when it reopened an APlus convenience store near Pittsburgh International Airport that features three compressed natural gas (CNG) pumps, one singlesided liquid propane pump and three electric charging stations — the first Sunoco location to offer three alternative fuels. Diesel and traditional E10 gasoline are also available at the location.
Sunoco’s APlus location near Pittsburgh International Airport is its first to offer three alternative fuels.
This innovative site, as well as Sunoco’s plans to offer CNG at more Pennsylvania locations, earned the retailer the Convenience Store News 2015 Fuels Innovator of the Year award. “It’s an honor to be chosen Fuels Innovator of the Year. It’s something Sunoco is really proud of,” said Drew Kabakoff, Sunoco’s director of brand marketing. “Every day, Sunoco employees work very hard to bring high-quality and high-performance fuels to
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market. And, when we have the opportunity to provide more choices to customers for their vehicles, we take that challenge very seriously.” Ensuring Sunoco standards was critical in developing the alternative fuel program, explained Mark Borosky, Sunoco’s manager of retail engineering. “That means providing customers with a fast, full-fill of CNG, while focusing on the fuel quality with drying and filtration. All sites are also designed to accept fleet cards and capable of expanding as the market demands.” Sunoco spokesperson Jeff Shields added Sunoco always strives to meet the needs of its customers. “Whatever fuel they need, we have tried to provide that for them,” he said. The Pittsburgh site, which opened May 20, has been a success thus far, according to both Kabakoff and Borosky. As for why Sunoco ratcheted up its efforts to offer alternative fuels, Borosky said it is important for forward-looking companies like Sunoco to put this type of program in place and see what the results will be. “It is difficult to predict the market when you’re entering new territory,” added Kabakoff. “Our goal was to establish a great, dynamic program at one of our signature locations. We will see how the market develops, but we have been pleased with the volume so far. “The location looks great and is built to exceptionally high retail standards. There is a real focus toward delivering great products quickly and efficiently to our customers,” Kabakoff continued. “We are optimistic about the future [of this location] and certainly glad we did it.” On the retail end, the location near Pittsburgh International Airport works because of the number of limousines, taxis and shuttle fleets that constantly escort airline passengers to and from the airport. Many of these fleets can consider switching to alternative-fuel vehicles — if they have not done so already — and take advantage of prices that are oftentimes less expensive than traditional petroleum fuels, noted Borosky. One fleet to take advantage of Sunoco’s CNG offering is Veterans’ Taxi. The Pittsburgh startup company’s
*based on STW compounded annual growth rate for all NAS cigarette styles from 1999-2014
CIGARETTES Â©2015 SFNTC (4)
MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric
slogan is “Proud to serve you … again,” and its drivers are all military veterans. “As we started offering CNG pumps, the owners of the organization have been very supportive because they say it creates business opportunities for veterans; independent entrepreneurs who can start a taxi business at a very low cost of entry,” said Shields. “We were really gratified when we heard that.” STEEL CITY & BEYOND
Pittsburgh isn’t Sunoco’s first foray into alternative fuels. It first opened a CNG location in November 2014 on the Pennsylvania Turnpike, east of Pittsburgh in New Stanton, Pa., offering CNG to customers both on and off the Turnpike. Despite a high cost of entry, Sunoco will also open additional alternative fuel sites. In fact, Kabakoff revealed to CSNews that two sites have been recently approved to offer CNG by late 2015 or early 2016 in Central and Western Pennsylvania. When deciding if and where to open future alternative fuel sites, Kabakoff said locations with existing fleets and high-traffic locations are the two main criteria. “There are many fleets in this area and we are giving them a place where they know they can refuel,” he said. “It’s a win-win for both companies,” added Borosky. “Fleets in these areas no longer need to go 20 minutes out of their way to refuel.” Among alternative fuels, Kabakoff believes CNG has the potential for long-term success due to its cost structure and availability of supBob DeLucia, owner of Veterans’ Taxi, fuels up ply in the Northeast. his personal electric vehicle at the Pittsburgh “Ultimately, the customer Sunoco location. has to demand CNG for their vehicles,” he stressed however. Price differential at the pump will be the main factor determining how viable CNG is for the future, acknowledged Shields. “Someone will not invest a ton of money buying or converting vehicles to CNG unless they believe there will be a cost benefit in the long term.”
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Sunoco has three electric charging stations at its Pittsburgh location and provides dedicated parking for the service.
Although CNG tends to get the most press in the alternative fuel space due to its local abundance and it being touted as cleaner burning and cheaper at the pump compared to traditional petroleum, electric charging is garnering its fair share of headlines, mostly due to the popularity of Tesla vehicles. In fact, the new $130,000 Tesla Model S P85D earned the first perfect 100 grade ever handed out by Consumer Reports in August. Sunoco’s Pittsburgh location offers three electric chargers, two of which are Level 2 chargers that require multiple hours of charging time, and one Level 3 charger that can fully charge a vehicle in a rapid 20-minute timeframe. The Sunoco location transitioned to an app-based payment system for electric charging in September, enabling users to purchase charging time online. Sunoco receives remittance from a third-party company when customers purchase time and use the electric chargers. The Pittsburgh location also enjoys an added benefit: Customers utilizing electric chargers tend to spend time on-site and purchase in-store items at the APlus c-store, reported Borosky. “The convenience store that’s there offers prepared food, restaurant seating and additional restrooms,” he said. “We are encouraging people who can wait to recharge their vehicle to eat and then go back on their merry way.” The Pittsburgh location has dedicated parking for electric charging customers so that the service does not affect its other c-store or gasoline customers. Sunoco executives will be on hand to accept the Fuels Innovator of the Year award on Dec. 7 at the Convenience Store News Fuels & Tech Summit in Riviera Beach, Fla. CSN
ALTERNATIVE FUELS LEADER OF THE YEAR
Gasoline + Diesel + Ethanol + LNG/CNG + Electric
Taking Alternative Fuels by Storm Michael Lorenz is the driving force behind Sheetz’s foray into E15 By Brian Berk
onsidering the level of success it has achieved, such as being named Brand of the Year in the 2015 Harris Poll EquiTrend study and one of STORES Magazine’s 2015 Hot 100 Retailers, it would be easy for Sheetz Inc. to maintain the status quo. But the fast-growing convenience store chain, which celebrated the opening of its 500th location earlier this year, is a true innovator that always enhances the options it offers customers. These efforts are especially evident at the forecourt, a robust effort led by Michael
Sheetz currently offers five grades of gasoline at three North Carolina locations, including E15 and E85.
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Lorenz, executive vice president of petroleum supply for Sheetz. Lorenz’s decision to offer E15, a blend of 15 percent ethanol and 85 percent gasoline, at 60 North Carolina Sheetz stores by spring 2016, is an impressive undertaking that’s earned him the 2015 Convenience Store News Alternative Fuels Leader of the Year award. Lorenz is the second c-store executive to win this award, following Zarco USA President Scott Zaremba, who took home the trophy in 2014. Coincidentally, Lawrence, Kan.-based Zarco USA was the first U.S. retailer to sell E15 at the pump after the alternative fuel received Environmental Protection Agency approval in 2011 for use in 2001 and newer vehicles. Considering gas prices have been quite low this year compared to prior years — with the exception of the Midwest due to the Whiting, Ind., refinery disruption — Lorenz’s continued dedication to E15 is notable, as public outcries for alternative fuels are often much more pronounced when prices at the pump are high vs. today’s environment. Sheetz began selling E15 in early August. It is currently sold at three North Carolina locations. “We wanted to give the consumer as many choices as possible,” Lorenz said. “If you look at our in-store product selection and mix, we have more than 400 beverages in the cooler and a wide variety of food choices from ready-to-eat to having it made-to-order. We wanted to make sure we offer choices at the pump as well. There will be five grades of gasoline to choose from: the three typical grades of E10 (87, 89 and 93) plus E15 and E85.” Lorenz noted that the decision to offer E15 was made even easier thanks to financial funding Sheetz received from Prime the Pump to aid with its store conversions. “That was an impetus to get us to move forward with E15 at the pump,” he said. “Receiving those third-party funds really got the ball rolling.”
Considering Sheetz is only selling E15 at three locations thus far, the company has not initiated any marketing blitz to promote the alternative fuel. But once E15 is sold at enough sites, the c-store chain will commence a large marketing campaign, confirmed Lorenz. Even without strong promotional efforts, though, E15 is being noticed by Sheetz customers. The alternative fuel, which Altoona, Pa.-based Sheetz has always been known as an innovator at its 500-plus c-stores. carries an 88 octane, is being sold for 10 cents per gallon cheaper than 87-octane E10 at the pump at the three North Pennsylvania, and one each in Virginia and North Carolina stores. Carolina. At the 60 aforementioned sites in North “Consumers definitely notice the price difference,” Carolina, Sheetz will sell E85 at all of them in addirelayed Lorenz. “We also have brochures that explain tion to E15. what E15 is and even what E10 is. Even though According to Lorenz, the Altoona, pumps often say that gasoline can contain up to 10 Pa.-based operator of 500-plus stores percent ethanol, [consumers] never use the E10 verdecided to offer E15 and E85 specifinacular. We begin the brochure by talking about E10 cally in North Carolina because the because once a consumer understands that, they tend retailer’s marketing effort is simpler to understand E15 and E85.” in a more concentrated area. With Sheetz now on board, 134 U.S. convenience “It’s much easier to get the mesMichael Lorenz stores were offering E15 at the pump in 19 states as sage out,” he said. “If we took the of late August, ranging from Nebraska to Florida, other extreme and scattered [alternaaccording to Growth Energy, which represents the tive fuel offerings] throughout our six-state geographic producers and supporters of ethanol. Approximately footprint, it would be difficult to market it to consum200 more convenience stores will soon sell E15 at the ers. This way, we will have critical mass. Consumers pump, the trade group reported. can then expect to find E15 at our North Carolina stores instead of having it as a hit-or-miss proposition.” Even back in 2006, Sheetz knew E85 may not be OTHER ALTERNATIVES the only alternative fuel it would offer in the future, While it is new to E15, Sheetz is no stranger to and so the company prepared its underground infraalternative fuels. The chain has offered E85 at structure, Lorenz explained. “We could see on the the pump since 2006 and now has nine locations horizon that offering higher blends of ethanol were a selling the alternative fuel, seven of which are in strong possibility in the future.” In addition to ethanol, Sheetz also has electric charging stations at five locations. In the future, Lorenz said Sheetz will consider offering compressed natural gas (CNG) at the pump, although nothing is imminent. Lorenz will accept the Alternative Fuels Leader of the Year award on Dec. 7 during the Convenience Store News Fuels & Tech Summit in Sixty North Carolina Sheetz locations are expected to sell E15 fuel by spring 2016. Riviera Beach, Fla. CSN
WWW.CSNEWS.COM | OCTOBER 2015 | Convenience Store News 67
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
These Chains Have It Made More c-store operators are making their mark by developing made-to-order programs By Angela Hanson
hat foodservice is now one of the most important categories for convenience stores wanting to become a destination consumers consciously seek out isn’t big news. Across the United States, big chains, small chains and single stores are all exploring the best way to develop their programs, and more are finding success by offering made-to-order items. A lineup of customizable products isn’t for every c-store, as a made-to-order program requires considerable investment in recipe development, inventory and training. But as made-to-order becomes more popular with c-store customers, chains with established foodservice programs are discovering just how valuable it can be. Here, we take a look at some of the chains learning from experience and putting their own unique made-to-order mark on the industry.
QuikTrip rolled out its QT Kitchens made-to-order menu chainwide this year.
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Earlier this year, Tulsa, Okla.-based QuikTrip Corp. completed a chainwide rollout of its QT Kitchens program. Nearly all existing stores were retrofitted to include the concept’s made-to-order counters, which offer QT Kitchens is in place at all pizza, breakfast sandQuikTrip Gen 3 stores and will be wiches, specialty beverincluded in all new builds. ages and more. “I’ve really got to give props to our store development team,” company spokesman Mike Thornbrugh told Convenience Store News. “To get all that work done in about a year’s period of time and without interrupting customer flow is phenomenal.” QT Kitchens is in place at all QuikTrip Gen 3 stores and will be included in all new builds. Nearly all of its older format stores have been retrofitted to include the counters as well, giving the chain true foodservice consistency across its footprint for the first time. The program also presents a prime opportunity to expand the made-to-order menu and offer a larger number of product varieties, although Thornbrugh noted that QuikTrip is moving cautiously as it seeks to master one element at a time. “If [a new product] looks like it has a chance to be successful, we test it in stores and spread it around
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
curiosity factor and this gives us the advantage.” CORnER STORE
Since acquiring Canastota, N.Y.based Nice N Easy Grocery Shoppes in 2014, San Antoniobased CST Brands Inc. has begun “cross-pollinating” products between its two U.S. c-store chains. These efforts have gone well enough that the company is now working to open five new-toindustry prototype stores in Texas before the end of the year in order to bring the best parts of Nice N Easy’s Easy Street Eatery foodserThe best parts of Nice N Easy’s Easy Street Eatery program will be adopted by Corner Store. vice concept to Corner Store. These new prototype Corner a little because we have to learn how to do it the right Stores will not exactly replicate the well-established way,” he said, explaining that store associates must be Easy Street Eatery made-to-order program, but it is able to produce menu additions in a timely manner so likely menu items will be the same, combining CST’s they taste good and are consistent. “We try to get that breakfast daypart success with the lunch and dinner down before we roll it out everywhere.” achievements of Nice N Easy. The chain’s latest success is its breakfast pizza, Made-to-order food is most likely to do well moving launched in April to take advantage of both the popuinto the lunch hour, when customers expect personal larity of pizza and the heavy traffic of the breakfast service and the ability to customize, according to CST. daypart into lunch. “I always knew this business model would take “We recognize the morning crowd is huge, and we off coast to coast,” Director of Foodservice Jack recognize in today’s world when the competition lines are so blurred, you have to keep adding things or people will lose interest in it,” Thornbrugh said. Rolling out QT Kitchens hasn’t been without its challenges. For a company that’s typically offered self-service food in the past, adding made-to-order is a major business change. Properly training employees, whether they’re brand-new or existing workers accustomed to the old way of doing things, has been the greatest challenge, Thornbrugh said. QuikTrip has developed and refined its training methods over time. “We’ve spent a lot of time and effort training our people on how to do it right over and over and over again.” So far, QuikTrip’s investment in made-to-order is paying off in customer interest. “We were fortunate that we’ve been operating a long time. We’ve got a loyal fan base and they give us the benefit of the doubt because they trust us,” Thornbrugh said. “At the same time, some of the newer markets CST Brands’ Director of Foodservice Jack Cushman hopes to combine may have not seen what we’re doing, so they’ve got the the breakfast daypart success of Corner Store with the lunch and dinner achievements of Nice N Easy.
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
food items fresh, in-store and made to order. Kiosks are in place to allow each order to be customized to the individual’s liking.” The flagship store will serve as the model for Ricker’s next generation of c-stores. CSn
Don’t Forget Beverages When convenience store operators begin developing a foodservice program, coffee is a no-brainer to include. Sheetz Inc., an industry foodservice standout with its
Ricker’s ¡Ahh Burritos! program started as a food truck.
Cushman told CSNews this summer. “CST is young, smart, aggressive enough and has the capital to invest. It’s exciting for me. I’ve been waiting for this kind of opportunity. I know we can enhance the overall business model at CST.” To make the most of the two chains’ strengths, CST also has already adopted several of Corner Store’s most popular offerings at Nice N Easy stores. Corner Store’s Texas pecan coffee and signature Whoopie Pies, for instance, are now available in New York State. RICkER’S
Most convenience stores operate in set locations and wait for the customers to come to them, but Ricker Oil Co. took a different approach when it launched its ¡AhhBurritos! concept as a food truck in 2013. The vehicle hit the road in central Indiana, serving Ricker’s customizable menu items including burritos, quesadillas and nachos. “We saw the relevance of mobile food for on-the-go customers in our communities, but we didn’t want it to be like fast food,” said Ricker’s President and CEO Quinn Ricker. “We developed a fresh, gourmet menu that is truly a great value.” Today, the food truck still operates and can be tracked via social media, but the made-to-order ¡AhhBurritos! program has since transitioned to an instore program as well. In March, the company opened a new flagship store in Carmel, Ind. Instead of getting their food and hitting the road, customers can order on touchscreens and sit down to eat. “We are proud to offer such a fresh, high-quality and affordable product that is also unique to the Ricker’s brand,” Ricker told CSNews. “We prepare all
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“convenience restaurant” program, upgraded its Sheetz Bros. Coffee concept when it added trained baristas and state-ofthe-art grinding and brewing equipment to more than 500 stores in August. But is adding a barista, which is considered part of an advanced-level program, crucial to foodservice success? The answer is not that simple: it depends. Hot beverage programs focused on coffee should provide a self-service coffee island with all the fixings customers need to make their drink the way they like it, especially if the local market includes a large number of commuters who prioritize speed. Retailers building a comprehensive made-to-order foodservice program, however, should give the barista idea more thought. After all, customers who are already willing to wait for a meal to be made are unlikely to balk at the time it will take for a barista to make their smoothie, milkshake or specialty coffee drink. Still, experts agree this isn’t a step most first-time foodservice programs should take without first gaining experience. “This is an area where you must have already gained brand recognition in your markets for delivering fresh food in some form,” said one member of the Convenience Store News How To Crew of foodservice experts. “As this is crewserved foodservice, customers will want to have some confidence in execution in advance.” Once both expertise and confidence are gained, staffing stores with baristas can be a matter of efficient use of resources. As QuikTrip Corp. spokesman Mike Thornbrugh noted, employees should be trained on beverages as well as food preparation, making it easy for them to act as a barista at a moment’s notice.
FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
How to Turn Women & Millennials Into Foodservice Customers By Bob Phillips
enerally speaking, the typical convenience store foodservice customer is thought to be male, blue collar and aged 30 or older. It’s a well-known fact that about 160 million customers visit convenience stores throughout the United States every day. It’s also a fact that foodservice accounts for 25 percent of Foodservice 101 all in-store (i.e., non-petroleum) • The store environment, marketing gross dollar profand staff play a big role in the its. That’s nearly overall presentation. double the margins • Understand that getting started is just of tobacco and the beginning. packaged beverages. • Women and millennials are principally “Today, and interested in health and wellness. for the foreseeable C-stores that don’t yet offer calorie future, foodservice counts and nutritional labeling would — and especially benefit from implementing these ASAP. fresh foodservice
Call tO aCtIOn:
76 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
— represents the most important category in our business,” said How To Crew expert Maurice Minno, principal of MPM Consulting Group and former executive at Circle K and Wawa. From Minno’s perspective, foodservice is the most important component in driving future sales inside convenience stores. He lists several reasons, including: • Fresh foodservice is what today’s customers not only want, but crave. Customers seek out c-store retailers who are capable of satisfying customer foodservice cravings during each daypart (from morning to late night) — cravings for innovative, fresh, quality, good value-priced foods and beverages. • It enables a c-store retailer to build a distinctive brand and operational model that can deliver truly unique experiences for consumers. Driving brand distinctiveness and delivering unique and memorable customer experiences is the key to retail success. • A focus on fresh foodservice allows c-store retailers to evolve their image from offering simply
FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
Both Women & Men Shop C-stores C-store Food & Beverage Trafc by Gender
Source: NPD Crest, Total U.S. C-stores, 12 months ending March 2014
traditional gas and “me-too” items (packaged foods, snacks, roller grill products, coffee and fountain beverages) to a Quick Service Restaurant Eatery (QSRE). Sheetz and Wawa are c-store retailers currently repositioning their businesses and creating QSREs that can effectively compete with any quick-service restaurant. • Foodservice sales led the growth of total inside retail sales in 2014: 9.7 percent for foodservice vs. just 4.6-percent growth for all other inside-store sales. • Gross profit dollar contribution from foodservice leads all other inside-store categories. tHE SHIFt tOWaRD HEaltH-COnCIOUSnESS
With perception being a major factor in the design and execution of any business operation, c-store retailers should not overlook that approximately two-thirds of Americans (64 percent) think convenience stores are currently offering “healthier, nutritious products.” In addition, 19.4 percent of all in-store sales are driven
Call tO aCtIOn:
by foodservice offerings. This opens up a huge opportunity for c-store retailers to boost store sales by attracting two ancillary demographics to their foodservice operations: women and millennials, both of which are firmly invested in the “better-for-you” category. “Women and millennials are two groups that are underserved by today’s convenience stores,” said How To Crew member Ed Burcher, president of Burcher Consulting, an Oakville, Ontario-based firm specializing in foodservice merchandising operations. According to Burcher, many products sought by women and millennials — including foodservice offerings — are the same products that appeal to your store’s core demographic. By specifically targeting women and millennials using various methods, such as in-store messaging, local advertising and social media, it is reasonable to expect increased store traffic and increased basket rings, resulting in a healthy boost in profits. Retailers should also remember that foodservice is the ideal category appealing to virtually every demographic entering your store.
MIllEnnIalS: nEW-WaVE COnSUMERS
• Build the foundation and layers necessary to succeed. This includes the processes around ensuring execution and delivery to the guest are developed and continually improved. • Differentiate your store to attract women and millennials. Millennials in particular demand a “wow” factor; environments that are unexpected and remarkable. • Maintain a sustained commitment to renewal. That is, refreshing your foodservice offerings on a steady, systematic basis.
What do we know about the amorphous demographic commonly referred to as the millennial generation, or simply millennials? From an anecdotal perspective, we know that nine out of 10 millennials (consumers aged 18-34) prefer texting over talking on the phone. We also know this generation of Americans virtually grew up online and eschew traditional media, including print media (newspapers, magazines), television and radio. We also know they’re waiting longer —
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
much longer — than their parents did to settle down, marry and start families. And while it may be true that these “new-wave” consumers are
coping with more educational debt than previous generations, evidence points to the unprecedented spending power of millennials. According to the Hartman Group, millennials
Call tO aCtIOn: Foodservice 301
• Cultivate a foodservice program that becomes a market leader rather than executing a “follow the leader” paradigm. • Utilize social media. Women and millennials enjoy collaborating with brands and want to be heard. They want to believe their opinion matters to the brands they shop frequently. • Always keep in mind that millennials demand the ability to customize; they want things the way they want them and when they want them.
accounted for approximately $1.3 trillion of all-channel consumer spending in 2014. Convenience store operators would be well-advised to recognize the profit potential in courting what was previously just thought of as an “alternative” demo. “Millennials are becoming an increasingly important target for c-store foodservice operators,” explained How To Crew member Mathew Mandeltort, vice president of foodservice strategy at convenience distributor Eby-Brown Co. Citing The NPD Group’s annual Eating Patterns in America study, he noted that convenience stores accounted for 11.1 percent of all millennial food and beverage stops in 2014, up from 7.7 percent in 2006. By comparison, fast-casual dining accounted for 6.1 percent in 2014 vs. 3.1 percent in 2006. Indeed, millennials are projected to outnumber both baby boomers (aged 51-69) and generation X (aged 35-50) by 2028. “Given the group’s size and spending power, millennials are a force to be reckoned with now and in the foreseeable future,”
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
Women More Likely Than Men to Cite a Variety of Store Experience Aspects as Important When Visiting a C-store 63% 62% 62% 59% 53% 51% 45%
The store is clean
45% 44% 50% 38% 44% 38% 29%
I feel safe there Prepackaged foods are not out-of-date Low gas prices Prepared or hot foods are not stale or soggy The restrooms are clean The aisles are uncluttered SIGNIFICANTLY HIGHER
Percent citing as extremely important Source: General Mills C-store Consumer Research
Mandeltort surmised. Convenience retailers adept at utilizing new media are far more likely to be successful in attracting millennials to their foodservice area — and growing total in-store sales and profits down the road. One such c-store retailer is York, Pa.-based Rutter’s Farm Stores. “Our kiosks allow our customers to choose what
they want and how they want it,” said new How To Crew panelist Ryan Krebs, director of foodservice at Rutter’s. “I am convinced we are way past the point of deciding what we believe the customer wants, so we allow them to build their food items to their own specifications and liking. Unlimited toppings, extra meats and cheeses, choice of breads, combos with a side and
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Don’t blend in with the same bland convenience store offerings
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In today’s hyper-competitive world, you need an edge over your competition. Fried food is an excellent solution for setting yourself apart from the microwave-crowd, while creating something cravable your customers love. CSP named foodservice the most proftable category in their 2015 State of the Industry report, attributing prepared foods with the bulk of the category’s growth. With such high proft margins, fried foods will not only increase your bottom line, but also make you a one stop destination for consumer convenience.
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Women Show Stronger Interest in Fresh, Made-to-Order & Better-for-You-Food Fresh, Made-to-Order Food Offered in Store
Better-for-You Food and Beverages
SIGNIFICANTLY HIGHER Percent would visit c-store more often Source: General Mills C-store Consumer Research
drink, grilled/toasted/Panini, multiple sauce choices. The list goes on and on. We give them all the options we can conceive and allow them to personalize to their heart’s content.” Unlike their baby boomer predecessors who were primarily driven by cost and convenience, millennials are far more interested in the health and nutritional attributes of what they put in their collective bodies. C-store operators must be cognizant of this important fact when designing their foodservice repertoire. “I won’t go into detail because the options are limitless,” continued Krebs. Nonetheless, he did offer some buzzwords to focus on: • Organic • Grass-fed • Gluten free • Dairy alternatives (such as soy, almond and coconut) • Fair-trade • Prepared on-site • Low sodium/fat/cholesterol All of these terms should be carefully considered when designing a program to attract young adults to your foodservice operation. Essentially, when courting alternative customers, make sure you have alternative products to fill their need-states. “Millennials typically are significantly less likely to purchase hot coffee, as they prefer to get their caffeine via energy drinks,” cited How To Crew expert
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In-STORE SALES CATEGORY
GROSS PROFIT DOLLAR COnTRIBUTIOn %
All Other Categories
Source: 2015 Convenience Store News Industry Report
David Bishop, managing partner of Barrington, Ill.based Balvor LLC, a sales and marketing firm. They are more likely than older consumers to purchase fresh bakery items such as doughnuts, muffins and bagels. Millennials should be factored into every convenience store retailer’s business plan, according to Bishop. “Millennials are very important, as they are the future drivers of the economy.” taRGEtInG WOMEn
Female consumers are an equally appealing segment to c-store operators. Historically, women have not been prime consumers of convenience foodservice offerings. And yet, they constitute 51 percent of the U.S. population and own approximately $7 billion of the nation’s purchasing power. This, combined with the influence they have as family dining decision-makers, should make women a prime target for growing your foodservice operation if they aren’t already. Jennifer Vespole, director of foodservice at Whitehouse Station, N.J.-based convenience store chain QuickChek Corp., thinks it’s important for convenience retailers to stay on trend with what people are eating and drinking in their individual markets. “High-quality ingredients, tasty recipes and the ability to customize are important,” noted Vespole, the lone female How To Crew board member. “We [QuickChek] offer our customers the ability to see nutritional information as they build their menu items.” While this strategy has gained some traction at QuickChek, retailers need to find a healthy balance. A convenience store, after all, will never be thought of as a mini Whole Foods — nor should it. “Honestly, people still go for the items they love that taste good,” concedes Vespole. And while presentation is an important factor in attracting women to foodservice, it is equally impor-
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tant to virtually all other demographic groups. “Don’t underestimate men,” she stated. Of course, that means a cookie-cutter approach to foodservice is definitely not in a c-store operator’s best interest. “Presentation is important to almost everyone,” continued Vespole. “If you want to become a destination for salad, you need to be able to give your customers — all your customers — the ability to customize their orders.” Mandeltort of Eby-Brown points to some societal norms generally associated with females as key to developing successful foodservice executions. “Because they are typically caregivers, healthy eating is top-of-mind, both for themselves and for their family members,” he said. According to Mandeltort, women are more likely to order: • Turkey sandwiches or turkey clubs • Ethnic (Chinese, Asian or Indian) food • Salads and side salads • Fresh fruit and non-fried vegetables “However, simply having appealing food and beverage options for female consumers is not, in and of itself, enough to move the needle for every retailer,” he cautioned. Issues such as concern for food safety and store cleanliness are paramount for women consumers. SHaRED BEHaVIORS
Millennials and women share many similarities in terms of in-store consumer behavior and that makes life easier for retailers to develop in-store executions to attract both demos and increase their overall consumer base. For instance, both groups tend to be more particular regarding what they put in their bodies than your blue-collar male consumer base. “Healthier choices are much more important to these two groups than to the typical c-store consumer,” explained Bishop. “What items should you be offering to attract them?” Many millennials are searching for healthy options at reasonable prices. “So having different types of meal deals or daily discounts could be a way to appeal to this segment as many were significantly impacted by the Great Recession,” he said. Women are looking for a broader range of betterfor-you options. “Items such as pre-cut packaged fruit or vegetables, yogurt and a limited range of fresh fruits may help with females,” Bishop continued. “And, for this to be effective, retailers need to excel at product rotation and presentation.”
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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages
In terms of marketing a healthy approach in your store to women and millennials, sometimes it’s not so much what you offer, but rather what you don’t offer. “If you were to play a game of word association with retailers and say ‘healthy,’ many will respond ‘salad,’” explained Mandeltort. But salads are not the be-all and end-all of healthy offerings. “There are so many different ways to create a healthy halo without having to rely heavily on salads. Just having ‘fresh’ food gives you a leg-up.” As Mandeltort cited, 87 percent of consumers believe fresh food is healthier and tastes better. “You can offer wraps with carriers that have healthy halos such as spinach or tomato,” he said. “You can also offer fresh fruit — whole or cut — to achieve a better-for-you selection.” While there will obviously be obstacles in developing and executing a foodservice plan that includes a wide variety of fresh, customizable offerings, it is imperative not to give up. The profit potential is just too strong, according to the How To Crew. CSn
Our How To Crew David Bishop — Balvor LLC Ed Burcher — Burcher Consulting Joseph Chiovera — XS Foodservice & Marketing Tom Cook — King-Casey Jack W. Cushman — CST Brands Inc. Dean Dirks — b2b Solutions Eric Giandelone — Mintel Foodservice Ryan Krebs — Rutter’s Farm Stores Kane Kulas — CSM Bakery Products Mathew Mandeltort — Eby-Brown Co. LLC Larry Miller — Miller Management & Consulting Services Maurice Minno — MPM Group Paul Pierce — Pure Plates Tim Powell — Think Research & Consulting Chad Prast — Murphy USA Inc. Bonnie Riggs — The NPD Group Jennifer Vespole — QuickChek Corp.
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Healthy Foods, Healthy Profts Convenience stores can benefit by investing in better-for-you products By Allison Bardic
oad Trip: Healthy Convenience Store Foods.” If you’ve been wondering about the profit potential healthy products have for your convenience store, the above headline from a recent article at Cookinglight.com should quell any doubts. “While convenience stores still have their fair share of less-than-optimal eats, many now stock a surprising selection of fresh and healthy choices,” said the article, which listed whole-grain cereal cups, energy bars, peanuts in the shell, low-fat yogurt, fresh fruit cups, single-serve bags of baby carrots, bananas and partskim string cheese sticks as healthy c-store options. That the words “healthy” and “convenience store” made it into the same sentence — in a Cooking Light magazine story, no less — underscores the sea change occurring in the convenience store industry. And it shows that carrying products with healthy nutritional profiles can be worth the investment for c-store operators. In fact, retailers that don’t increase their assortment of healthy items risk losing sales, industry data shows. For example, consumers are looking for snacks that offer a perceived health benefit, whether these snacks are salty, savory or sweet, or high-, low- or no-calorie, according to The NPD Group, a Port Washington, N.Y.-based research firm. Protein, natural, and no or less sugar are the health callouts consumers look for the most when they eat a snack, which may occur in between meals, at meals or as a meal, NPD found. The move toward snacks with a health benefit is driven by the
90 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
younger generations: generation Z, ages 0-23; millennials, ages 24-37; and generation X, ages 38-48. These generations together make up the bulk of the population, and their positive attitudes about snacking, desire to eat more healthfully and need for convenience are factors behind the growth of snacks with a perceived health benefit. Additionally, a large number of baby boomers have health conditions and tend to watch for sodium and sugar content in snacks. “Snacking today is a prevalent behavior and there is an opportunity in every snack category for manufacturers to call out the specific health benefits — from desirable ingredients to clean labeling,” said Darren Seifer, food and beverage industry analyst for NPD. “There is also a generational slant to take into account for each category when positioning and marketing snack foods.” While better-for-you, savory and sweet are the three mega snack categories, consumption of better-for-you snacks, such as fresh fruit, breakfast/sports bars and yogurt, is up 14 percent since 2006 and forecast to grow the fastest out of these three categories, according to NPD’s The Future of Eating: Who’s Eating What in 2018? report. WHAT TO OffER
Better-for-you products with c-store profit potential range from lower-calorie items, to non-genetically enhanced and gluten-free products, to vegetables and fruits, to foods generally deemed more wholesome such as yogurt and whole-grain alternatives. Low-calorie foods, in fact, are outpacing their higher-calorie counterparts throughout the food and beverage industry, according to a 2014 study conducted by The Hudson Institute, a Washington, D.C.-based think tank. The study, Lower-Calorie Foods
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and Beverages Fuel Growth at Healthy Weight Commitment Foundation (HWCF) Companies, examined sales data from 16 major food and beverage companies that are members of HWCF, a CEO-led coalition of 275-plus businesses including retailers and consumer packaged goods companies.
“You need more visibility and more space in the stores for these kind of items — otherwise you are leaving sales on the table. Visibility drives sales.” — Hank Cardello, The Hudson Institute
Results showed 99 percent of the almost $500-million sales growth over a period of five years ended Dec. 31, 2012 came from lower-calorie foods, while only 1 percent came from higher-calorie items. On the supply side, there was a 96-percent increase in the availability of lower-calorie products, the study found. “If you are not advancing and pushing these kind of products, you are not going to grow,” noted Hank Cardello, a senior fellow at The Hudson Institute. fRESH fRuIT & VEGETAblES
Increased demand for fresh produce at c-stores, combined with advances in distribution and merchandising, has created new opportunities for produce providers, distributors and convenience store retailers, according to “Building the Business Case for Produce at Convenience Stores,” a publication jointly published by NACS, the Association for Convenience & Fuel Retailing, and the United Fresh Produce Association. C-store sales of produce reached $328 million in 2013, an increase of 16.7 percent — more than double
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the overall 7.3-percent growth rate of produce in the United States, noted NACS. “A recent NACS member survey reaffirms the importance of produce: 62 percent of members say produce is important to their business plans in 2015,” added NACS Chairman Steve Loehr, vice president of operations for La Crosse, Wis.-based Kwik Trip Inc. Nielsen global snacks data, released in September 2014, also revealed that consumers want more produce. When asked which snack they would choose above all others, consumers worldwide overwhelming named fresh fruit, with chocolate a close second. WHOM TO TARGET
Not everyone who walks into a c-store, of course, wants healthy food. Cardello identified three types of c-store customers to consider as potential healthy food buyers: • Those intensely focused on healthy eating options, such as organic, gluten-free and non-GMO items; • Those who are neutral about nutritional profiles; and • Shoppers in the middle of the spectrum, who represent the biggest opportunity for growing sales of healthy items. “This [middle] group doesn’t want pure or perfect food. They just want something better,” Cardello explained. “They want a better lunch for their kids. They want a better snack. They want something a little better to drink that might not be as high in calories or loaded with sugar. They don’t necessarily need it to taste like tree bark. That to me is the quintessential group driving the growth here and that is where the opportunity lies for [c-store] operators.” PRODuCT VISIbIlITy IS KEy
Whatever c-stores decide to offer and whomever they decide to target, product visibility is key to increasing sales of yogurt, fresh fruit and other healthy products, according to Cardello. “You need more visibility and more space in the stores for these kind of items — otherwise you are leaving sales on the table. Visibility drives sales,” he said. “Anecdotally, I’ve seen a lot of the c-stores where they’ve added, let’s say fruit, by the registers and that is really incremental business. That’s just space they weren’t using before and it’s working.” If you bury better-for-you products someplace, however, “you’re burying profits.” CSN
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There’s a wealth of ways to optimize packaged, alcoholic and dispensed drinks By Angela Hanson, Melissa Kress & Don Longo
hirsty consumers are a boon for all convenience store operators, no matter where in the United States they are based. But all drinks are not created equal. While some beverage segments are on the rise in c-stores, others are struggling. And consumers have a wide variety of evolving motivations that drive them to make the purchases they do. Keeping up-to-date on the current state of beverages — packaged, alcoholic and dispensed — and
In addition to general sessions on consumer and industry trends in beverages, market experts led intimate break-out sessions on specific beverage categories.
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exploring innovative ways to draw in customers were key objectives of the 2015 Convenience Store News Beverage Retailing Summit, a two-day event held in June in St. Louis. CSNews Editorial Director Don Longo presented industry and consumer research on the packaged beverages category before leading an open discussion that touched on such topics as how suppliers can help retailers drive stronger sales, how long energy drinks will continue to grow, and the outlook for bottled water and juice/juice drinks. “Packaged beverages ranks as the third-largest category for in-store sales, behind only cigarettes and foodservice,” said Longo, noting that the category’s share of total in-store sales increased from 12.18 percent to 12.41 percent in 2014. When it comes to margin, packaged beverages has the fifth-highest average gross margin percent among the top 10 volume categories in a c-store. Compared with competitive channels, c-stores do very well in packaged beverages, Longo cited. Convenience stores lead supermarkets and drugstores in both dollar share and unit share of packaged beverages and in both cases, achieved share increases last year. Looking at the first four months of 2015, certain interesting trends revealed themselves: • While carbonated soft drink volume continues to flounder, dollar sales were up 2.5 percent, reversing a previous trend. • Dollar sales for alternative beverages were up a bit more than they were last year, and the same is true for bottled water and sports drinks. • Juice/juice drinks, ready-to-drink iced tea and enhanced water were all up double figures in percentage sales gains for the first four months of the year. Longo also shared data from CSNews’ 2015 Realities of the Aisle consumer study. “Three-quarters
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of consumers who shopped a c-store in the one month prior to the survey said they went to the store to buy some kind of beverage,” he pointed out. “That’s higher than for gasoline.” One important factor behind the success of packaged beverages at c-stores is that a drink goes hand-in-hand with prepared food. Of consumers who purchased prepared food, 50 percent of them bought a bottled/canned soda with their order. Another 42 percent said they bought bottled water, and 38 percent purchased coffee/ tea/other hot beverage. Additionally, approximately 37 percent said they bought either a salty snack or candy/ gum, and nearly 35 percent bought a fountain drink to go with their prepared food. Finally, consumers were asked where else they purchase packaged beverages. The largest percentage said supermarkets, followed by supercenter/mass merchandisers like Target or Walmart. Then, after a gap, came dollar stores and drugstores. By age, supermarkets scored higher among older consumers, aged 35 and up. Meanwhile, dollar stores appealed more to younger shoppers, aged 18-24. As might be suspected, dollar stores also did relatively better among lower-income consumers, while higher-income consumers were more likely to get their packaged beverages from a supermarket or drugstore. Dispensing prOfiTs
C-store operators who want to make the most of beverage sales at any time of day should consider instituting a loyalty program. Such programs can be particularly effective for dispensed beverages, which are a main item customers intend to purchase when they enter a c-store, according to Ira Gleser, president of Amplify Marketing Communications.
Ira Gleser, president of Amplify Marketing Communications, presented findings of a research study on dispensed beverages.
“They’re buying more and they’re spending more,” Gleser said of loyalty program participants. Dispensed beverages are already a main item customers intend to purchase when entering a c-store, with 51 percent of consumers listing it as such, according to a research study conducted by the NACS Shopper Panel and Whirley DrinkWorks. C-stores also beat out fast-food, fast-casual, specialty and local retailers when it comes to attracting habitual purchasers of coffee and fountain drinks. Loyalty programs leverage these customers and increase their average spend by more than 70 cents. While any kind of loyalty program can have a positive effect, Gleser said retailers should consider one that includes refill mugs for the following reasons: • They appeal to a variety of age groups, not just millennials or baby boomers; • Refill mug users are more likely to purchase additional items, therefore increasing basket sizes; • Men respond well to discounted refills; and • Women appreciate the functional benefits, such as protection against spills and keeping drinks hot or cold. Existing users of refill mugs cite discounts as their primary reason for purchasing the mug, followed by keeping drinks hot or cold, liking the style or design, and protecting against spills. The Whirley DrinkWorks study also found that a strong relationCans ship exists between beverage loyalty program participation and mug usage. Thirty-one percent of loyalty
Drivers of Craft Beer Growth
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Source: Nielsen Scantrack, 52 weeks ending 1/03/2015
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COLD VAULT Beer + Wine + CSDs + Energy + Water + Sports + Juice + Dairy
program participants reported having purchased a refill/travel mug at a c-store within the last six months, compared to only 13 percent of non-participants who said the same. John Zikias, chief operating officer of Holmes Oil Co., challenged attendees of the Beverage Retailing Summit to improve their dispensed beverage programs by asking themselves: What would you want to do if you knew for a fact you could not fail? He emphasized that change is necessary to succeed in today’s market. “If you think change is difficult, how do you think irrelevance feels?” Zikias posed. Dispensed beverages contribute more to profit than to sales, but still make up one-third of total foodservice sales, Zikias said. The fact that most products purchased at c-stores are consumed within an hour means “we have the on-the-go customer,” and this provides a great opportunity to meet shopper demand for refreshment and become a refreshment destination. As an example, Zikias presented Holmes Oil’s revamp of its Cruizers c-store brand. The company decided to focus on dispensed beverages because the high cost of entry would
Dispensed beverages contribute more to profit than to sales, but still make up one-third of total foodservice sales. make it difficult for competitors to jump on the bandwagon. Cruizers’ chewy ice is a key point of differentiation. Promotion through trial and community involvement, such as sponsorships, are important methods of communicating the company’s message to consumers. While Zikias acknowledged specific shopper needs and opportunities will vary by geographic location and retailer focus, he said many opportunities exist to brand dispensed beverage programs and position them in consumers’ minds. The combination of branding, promotion, trial and commitment can result in profitable growth not only within dispensed beverages, but also adjacent categories such as candy.
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John Zikias, COO of Holmes Oil, shared a case study on how the company’s Cruizers c-store chain differentiated itself.
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The economy is still the No. 1 concern for many consumers, followed by debt, and this continues to have an effect on shopping habits. However, despite lackluster growth for many consumer product goods categories in the convenience channel, alcohol remains a top performer, according to Danelle Kosmal, vice president, Beverage Alcohol Practice at Nielsen. Speaking during one of the concurrent sessions at the event, Kosmal noted that small-format and value are driving store expansion. Of the total stores opened from 2013-2014, those selling beer, wine and spirits increased 2 percent — and about half of those stores were convenience stores. Looking at off-premise, Nielsen found that consumers are drinking better but not drinking more, and c-stores trend slightly behind all outlets for beer. That being said, beer still represents 92 percent of all alcoholic beverage dollars in the convenience channel. When it comes to trends in alcoholic beverages, innovation and new packaging are still fundamental to growth. Yet, the top 10 brands represent the majority of volume. Notably, the top 10 brands in the convenience channel capture 66 percent of the volume, Kosmal said, adding that singles and six-packs are driving growth in convenience stores. A bright spot in beer remains craft, which continues to post double-digit growth. Imports are also shining, with Mexican imports driving this segment. Still, premium light beer retains its hold on the top spot in the beer category, according to Nielsen research. The key to success lies in finding the balance: paying attention to the core (premium and below premium), but adding in craft beer and imports, Kosmal explained.
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Convenience Store News 2015 Beverage retailing summit Retailers, suppliers and industry experts took the field June 24-25 at Busch Stadium, home of Major League Baseball’s St. Louis Cardinals, as the Convenience Store News Beverage Retailing Summit provided a forum for the exchange of insights, innovative beverage concepts, fresh ideas, proven strategies, and best-in-class marketing and merchandising tactics. RetaileR atteNdeeS
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Honing in on craft beer, she noted that more households are buying into the segment and making slightly more trips, which is helping to lift the overall ring as well. The average ring when craft beer is in the basket is $69 vs. $58 with overall beer. “Some of the volume is shifting, but two-thirds of the craft beer volume comes from market expansion — people who are buying more beer — and new beer buyers,” Kosmal said. When the shift occurs, it comes from below premium and premium beer, primarily driven by millennials. In addiFor more coverage tion, more wine and spirits drinkers are of the 2015 Beverage purchasing craft beer. Retailing Summit, According to Kosmal, there are four see the main trends driving craft beer’s growth: September issue of CSNews. hoppy styles, mainly driven by IPAs; more selection on the shelves; variety and seasonal packs; and the introduction of cans, though still a small portion of the segment. But what exactly does “craft” mean to consumers? Nielsen found that when it comes to beer, wine and spirits, consumers think of small independent companies and small batches. And millennial males are more influenced by “craft” in marketing. Csn
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Mike adams, ampm Chris Borota, GPM Investments LLC tom Burkemper, 7-Eleven Inc. Madalena Morgan, Bobby and Steve’s Auto World Carolynn Hieb, SuperAmerica/Northern Tier Energy LP Joey Hobson, Maverik Inc. Rich Jacobs, RaceTrac Petroleum Inc. Steven Jones, Sunoco Mid-Atlantic Jonathan Ketchum, Alon Brands LLC Steve lunderborg, Holiday Stationstores Mary Mamalakis, RaceTrac Petroleum Inc. terry Messmer, Tri Star Energy LLC Joe O’Connor, Holiday Stationstores Greer Palmer, Circle K Stores Inc. Chad Prast, Murphy USA Inc. Jamie Pukylo, Country Fair Inc. Heidi Rembecki, NOCO Express Melinda Smith, Murphy USA Inc. derric Watson, E-Z Mart Stores Inc. damian Wyatt, MAPCO Express John Zikias, Holmes Oil
PReSeNteRS laura lynn Freck, Red Bull North America ira Gleser, Amplify Marketing Communications Bonnie Herzog, Wells Fargo Securities LLC danelle Kosmal, Nielsen terence Martin, Campbell Soup Co. larry Miller, Miller Management & Consulting dean Zurliene, Anheuser-Busch
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Sources: Nielsen Convenience 52 weeks ending 8.8.15; TNS shopper study 2011
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Vape Crusades As quickly as vapor is evolving, it’s not fast enough for still-unsatisfied smokers A Convenience Store News Staff Report
ave you seen the ideal vapor product? Many define it as one that can satisfy even the most habitual smoker, and they therefore believe it’s not on the market yet. But the industry is getting closer as vapor technology continues to advance and staunch supporters continue their crusade. Consider some of the recent expert buzz on new tobacco technology overall: • The world is entering “a new era” for tobacco products with an opportunity to rewrite the rule book, according to Scott Balin, director of the Alliance for Health, Economic and Agriculture Development. He believes science, technology, innovation and new players entering the tobacco industry are all taking key roles in the new era of harm reduction. • “We have long believed technology will play a pivotal role in shaping the future of the tobacco industry,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store
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research for Wells Fargo Securities LLC. • Reduced-harm or modified-risk tobacco products “will likely be the lifeblood of the industry,” stated Jim Dillard, senior vice president of regulatory affairs and chief innovation officer at Altria Client Services. More specifically to vapor products, the wheels are quickly turning to establish product differentiation and customer satisfaction. From all corners of this quickly evolving market, the latest innovations have made leaps beyond first-generation initiatives with the intent to elevate vapor perception and performance. Wells Fargo recently reported that retailers remain excited about innovation, particularly second- and third-generation products that are now being launched in the market, which they believe could be a “catalyst for growth.” AdvAnCed Gen MOdels
Regarding hardware, advanced-generation electronic smoking devices have hit the scene fast and furiously, especially since many consumers found fault with — and, in some cases, did not come back to — some of the initial products. On the traditional electronic cigarette side, experts say the early models did not deliver enough nicotine to satisfy a smoker’s cravings. So this year, several companies ramped up their nicotine levels, such as blu eCigs and Altria’s MarkTen. NJOY uses a pharmaceutical ingredient in a new version of its device that it reports will increase vapor absorption in the lungs and elevate nicotine delivery to about 70 percent of a combustible cigarette. R.J. Reynolds Vapor Co. completed national expansion for its Vuse Digital Vapor Cigarette, which aims be on a more advanced track to solve the vapor inconsistency found in basic e-cigs. Vuse uses a “vapor delivery processor” that communicates up to 2,000 times a second with a smart memory chip to monitor and regulate each puff, counting down the puffs. The product is intended to create “the perfect puff” every time,
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according to the company. Longer battery life and increased vapor pro- “There has been tremendous trial of duction are other improvements being made vapor across cigarette smokers and the to existing products, including in the vaporizer realm. At the same time, many newer devices conversion has not been as high as we have the ability to control the temperature to would like to see, yet there is continminimize the generation of harmful or potentially harmful constituents (H/HPHCs). ued use. What that would say to us is Heat-not-burn sticks — slender, tube-like that people aren’t finding the complete devices that give users as much nicotine as the real thing by heating, not burning, tobacco — are satisfaction, either from a convenience bringing even more attention to the Big Tobacco companies that make them. Namely, Philip Morris or from a satisfaction perspective in the International and Reynolds American Inc. vapor space as of today.” The main distinction between them and — Susan Cameron, Reynolds American Inc. e-cigarettes, which use liquid nicotine, is that heat-not-burn devices contain real tobacco. Scientific studies are underway, and early reports show there is far less cell damage with heat-not-burn devices A FlATTeninG PhAse than with cigarette smoke. Still, according to a growing number of experts, The heat-not-burn initiative has also given way to despite all of this innovation and as advanced as it has other innovative ideas, such as an inhalable nicotine become, it’s still not advanced enough. The slowing of spray marketed by British American Tobacco, which segment growth shows it. late last year won approval from British drug regulaIn the convenience channel, a recent Wells Fargo tors. And specialty pharmaceutical company Ross survey of 12,500 c-stores found that: Myles Health launched Nicofi, described as a U.S.• Overall vapor category sales growth was a “solid” made “patented, fast-acting dissolvable nicotine tablet 8 percent in the first quarter of 2015, but decelintended for use as an alternative to smoking” that has erated compared to 17.4-percent growth in the been “clinically proven to deliver nicotine [about as fourth quarter of 2014; quickly as] smoking a cigarette.” The Nicofi is placed • Vapor displaced about 3 percent of combustible under the bottom of the tongue and releases a solution cigarette volume in Q1 2015, down from about 4 of nicotine directly into the bloodstream through the percent in the third and fourth quarters of 2014, lining of the mouth. One Nicofi tablet offers the equivbut remained flat year to year; alent of the nicotine delivered from one cigarette. • Repeat vapor purchases accelerated to more than 65 percent in Q1 2015, steadily increasing sequentially from 40.5 percent in Q2 2014; and • The e-cig subcategory registered about 8-percent growth in Q1 2015, slower than the 15-percent growth in Q1 2014, but up from 5-percent growth in Q4 2014. Reynolds American Inc. (RAI) President and CEO Susan Cameron has called it a “flattening in the space.” While she recognizes there has been continued growth of tanks, mods and liquids, and she sees a “dynamic” cig-alike market, she has made reference to customer dissatisfaction. “There has been tremendous trial of vapor across cigarette smokers and the conversion has not been as high as we would like to see, yet there is continued use,” Cameron stated. “What that would say to us is
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that people aren’t finding the complete satisfaction, either from a convenience or from a satisfaction perspective in the vapor space as of today.” Cameron believes there is a lot of upside in Vuse “because when we get that into the hands of cigarette smokers, or those who have [moved] to vaping, it is satisfying.” While she expects to see more trial of Vuse specifically, she also acknowledges “there are consumers who are waiting for something that isn’t out there yet.” Nik Modi, tobacco analyst and managing director of RBC Capital Markets, agrees the biggest challenge
“When the technology provides a longer battery life in a safer product that’s easy to use and delivers the experience/satisfaction of a cigarette, that’s when the industry will really be on to something.” — Cynthia Cabrera, Smoke-Free Alternatives Trade Association
to widespread success is the fact that vape technology simply is not there yet. “If you really go to a core pack-a-day smoker, they’re just not getting the efficacy from current e-cigs,” he said. “There’s nothing wrong with the vape category; it just needs to evolve.” Ask The sMOkers
It is clearly smokers who present the challenge and opportunity to the vapor segment. “I think technology will continue to develop, and better technology will yield more satisfying vapor products to the adult consumer who probably was a previous smoker. If you were not a previous smoker, then your enjoyment of vapor products is probably pretty high,” reasoned Don Burke, senior vice president of Management Science Associates, a statistical analysis and intelligence firm. But smokers are clearly not satisfied, and the question comes down to the delivery of nicotine. “Water molecules are larger than smoke molecules, so it’s not as efficient a deliverer as smoke,” Burke explained to Convenience Store News. “So, I have a feeling that once
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they figure out a way to deliver a reasonable amount of nicotine, vaping satisfaction will increase and more trial and even more repeat purchasing will be achieved by smokers in the vapor category.” Beyond nicotine delivery, vapor products need to get simpler, not more complicated, for the smoker set, according to Cynthia Cabrera, executive director of the SmokeFree Alternatives Trade Association. “I think the vapor product that will be adopted en masse hasn’t been introduced yet because the number of vapers we have now, while in the millions, is still a tiny fraction of smokers,” she told CSNews. “So if you look at the demographics of smokers, we have some products that are super technologically advanced with variable volts, etc. — this is too much for most smokers, they want products that are simple to use. They don’t want to have to refer to an instruction manual to be able to smoke, or in this case, vape.” Cabrera sees the improvements of late being adopted by the “fringe,” as she calls it. This group consists of the early adopters, the true vapers. But for the smoker set, the mainstream market in this case, she said “when the technology provides a longer battery life in a safer product that’s easy to use and delivers the experience/satisfaction of a cigarette, that’s when the industry will really be on to something.” With convenience and a largely untapped smoker base on their side, c-stores are said to have a first-row ticket to capture more vapor business, once the technology does advance. “There’s a huge opportunity in this category involving tobacco smokers switching to vapor, and the advantage there goes to c-stores,” said Herzog. “These set-in-their-ways consumers buy a pack of smokes when they fill up with gas; 65-75 percent of cigarette volume is sold in c-stores, so I imagine the channel will play an important role as this broad category continues to evolve.” In order for all this advancement to take place, though, the government will have to be onboard to allow it. The industry is still waiting for a federal regulatory framework. “I really do believe in the next one or two years, there will be a product good enough to convert pack-a-day smokers,” said Modi. “The question is: Will regulations allow it to come to market?” Csn
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Passing the Bar Today’s consumers are increasingly choosing bars for a variety of purposes By Angela Hanson
or many Americans, a truly balanced breakfast comes secondary to ease and convenience, with a simple bowl of cereal being far more common than freshly prepared eggs, sausage and pancakes for busy families to chow down on before heading to work or school. Still, even a bowl of cereal isn’t a fast-enough eat for some consumers. An increasing number of such Americans are turning to cereal bars and other types of bars for sustenance. Not only do healthy, portable snacks like cereal bars make up three of the four breakfast-type foods with the fastest-growing popularity Snack bars, cereal bars, protein bars, energy bars, granola bars, yogurt bars and nutrition bars over the past decade, but the numare on an upswing on c-store shelves. ber of households using cereal bars DeLamielleure, senior consumer insights manager increased by 50 percent in the last 10 years, according for General Mills Convenience & Foodservice, told to market research publisher Packaged Facts. Convenience Store News. “Bars offer a convenient, And it’s not just cereal bars that are creating what Dwight Richmond, global grocery purchasing coordina- portable format and appeal to c-store shoppers who are seeking out a great-tasting snack, as well as sometor at Whole Foods Market, called “a bar revolution.” thing that may be a little better for them.” Snacks bars, protein bars, energy bars, granola bars, Snack preferences are changing, and suppliers have yogurt bars and nutrition bars are on an upswing, too. taken notice. Along with manufacturers like General In fact, more than 1,000 nutrition bars are on the market today, compared to just Mills and Kellogg Co., whose cereal brands are options for bar varieties, companies better known for their 226 in 2005. candy brands have launched bar lines. “It comes down to Bars’ portability and lack of a mess are among the convenience and most attractive features for today’s consumers, who are taste,” Michelle increasingly eating on the go and willing to replace a full meal with snacking. Bars also offer a wide array of flavors for those who crave variety, and their functional benefits include weight management and easy protein replenishment. Who is buying bars? Convenience stores with an active, athletic customer base are more likely to do well
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CANDY & SNACKS Chocolate + Non-Chocolate + Gum + Salty Snacks
Meet the NutritioN by offering a variety of nutrition Bar CoNsuMer bars. High-volume consumers of High-volume users of nutritional nutrition bars are more likely to bars are more likely to say they: report they enjoy taking risks and participate in outdoor sports such as biking, mountain/rock climbing and try to stay fit by enjoy taking risks backpacking, according to Packaged engaging in Facts research. fitness activities Consumers engaged in sports such as fitness engage in outdoor and fitness activities are beginning walking and pursuits such to favor savory bars, likely due to weight training as mountain/ the fact that sweet flavors are often rock climbing, consumed earlier in the day. backpacking and As for snack and cereal bars, mountain biking while they appeal to a wide variety of demographic segments, they are the No. 1 food purchased at convenience stores to help with weight management. Customers who bought bars for this purpose cited Source: Packaged Facts, Nutritional and Cereal Bars in the U.S., 4th Edition their purchase reasoning as low calorie count, feeling good about eating them, great taste and prevention from overeating. “In terms of flavor trends, we are seeing both sweet Additionally, more bars are making use of photogand savory bars do well,” said DeLamielleure. “Both raphy of the actual product or transparent packaging millennials and generation Z are very multicultural that lets consumers see the actual product, including and love different types of ethnic cuisines and flavors. The Hershey Co.’s Brookside line of bars and General They are likely to experiment with new foods, flavors Mills’ Nature Valley Roasted Nut Crunch and Simple and dishes to broaden their horizons. Thus, the next Nut bars. crop of new bars will likely include unique flavors.” “In general, people want flavor variety in their Another up-and-coming trend in the bars segment snacks and, at the same time, they want inherently betis in the labeling and packaging instead of the prodter-for-you snacks that take the mystery out of what’s uct. Suppliers are developing simpler, cleaner ingrediin their food,” DeLamielleure added. ent labels for bars and other snacks, a move primarily This may result in a long-term shift in consumer driven by millennials but supported across all adult purchasing habits as Packaged Facts sees a permanent age groups. transition away from three square meals, combined with the desire for alternate breakfast foods and better-for-you products. What’s more, bars are an efficient platform for packaged food suppliers to respond to the latest concerns of healthy-eating consumers. The overall snack bar market, including nutrition and cereal/granola bars, is forecast to approach $8 bilMore than 1,000 nutrition bars are lion in 2019, according to Packaged Facts. on the market today, compared This is good news for c-store operators who stand to benefit from the strong profit margin of individually to just 226 in 2005. wrapped bars. Americans who consume the most bars also have the cash to do so — market intelligence agency Mintel found that higher income levels correspond with bar purchases, with households that earn between $100,000 and $149,000 consuming the most bars. CSN
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SERVICES Car Wash + Lottery + ATM + Prepaid + Financial
Scratch-Off Fever 7-Eleven, Virginia Lottery team up to drive traffic By Melissa Kress
ottery may be a staple of most convenience stores, but some retailers are not content just to have it. 7-Eleven Inc., for instance, has taken note of its customers’ desire to feel lucky and is bringing lottery to the next level through a partnership with the Virginia Lottery. The two organizations joined forces this spring in a bid to drive business on both sides of the equation — a key strategy of the Richmond-based Virginia Lottery. “We have about 5,300 retail partners. I often say lotteries don’t really sell tickets, it’s our retail partners that do,” said Paula Otto, executive director of the Virginia Lottery. Convenience stores account for the majority of the Virginia Lottery’s retail outlets, although it does have a strong presence in big grocery chains, some drugstore chains and, like many other state lotteries, “a fair amount of non-corporate stores” — some of them franchisees of the big names like 7-Eleven and some of them individually owned, mom-and-pop stores. “Convenience stores are very important to the lottery. The channel represents about 75 percent of our retailers and about 80 percent of our sales,” Otto said. “7-Eleven is our largest retailer in terms of number of stores under that name, including franchises. It is responsible for approximately 20 percent of our overall sales.” That statistic makes the Virginia Lottery’s recent partnership with 7-Eleven so notable. In March, they launched an exclusive scratch-off ticket that is only available at 7-Eleven outlets and sells for $7 — a deviation from Virginia’s usual $1, $3, $5, $10 and
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$20 scratchers. The ticket is still available in some stores, but not in all 7-Eleven locations at this point. As of Aug. 28, the lottery had sold approximately $2.2 million worth since its launch. How It woRkS
The partnership is a result of the lottery’s quest to do something different while growing its business. In the past two to three years, instead of asking its corporate partners what they can do for the lottery, the lottery has asked how it can help the corporate partners achieve their goals. As Otto explained, they’re turning the question upside down. “We know helping 7-Eleven and our other partners grow their business helps us grow our business. What 7-Eleven told us is that they are putting a huge emphasis on fresh foods. They want to be known as a destination for fresh foods,” she said. “We came up with the idea that every 7-Eleven Virginia Lottery ticket would be a winner and the prize would be one of their food items.” Specifically, the bottom of every 7-Eleven scratchoff ticket is perforated and a coupon is attached for a 7-Eleven fresh food item. “It’s a way for lottery players to try one of their food items for free when they buy a ticket,” Otto explained. The rest of the 7-Eleven scratch-off plays like a regular lottery ticket, with a prize structure that players would expect for the $7 price point. The prizes include “a very clever top prize” of $711 a day for a year, according to Otto. “We’ve had a lot of fun with the $7 price point and with the top prize,” she said, pointing out there are other prizes as well. “Lottery players generally play to win cash. Even though we give away other prizes, like soda or Slurpees or hot dogs, they are generally playing for the cash.” InStant SuCCESS
The ticket hit stores March 10. First-week sales had the
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SERVICES Car Wash + Lottery + ATM + Prepaid + Financial 7-Eleven scratch-off selling about where the Virginia Lottery expects a $5 ticket to sell — which is the closest price point. “It’s a bit unusual because we are only distributing to 700-plus stores,
so it is a little hard to compare to a ticket that is distributed to all 5,300 lottery stores,” Otto said. “We are really pleased with that, given that it is only selling at 7-Eleven and it is selling at about the same as a ticket
“Convenience stores are very important to the lottery. The channel represents about 75 percent of our retailers and about 80 percent of our sales.” — Paula Otto, Virginia Lottery
that is distributed across the state.” Meanwhile, the redemption rate for the food items was tracking at about 25 percent. wHat tHE FutuRE HoldS
According to the lottery, the scratch ticket is only one initiative under a yearlong rolling partnership between the Virginia Lottery and 7-Eleven. The evolving plan does not include another proprietary ticket at this time, but the lottery continues to collaborate with 7-Eleven to develop products, promotions, incentives and programs that benefit both parties. Given the success of the 7-Eleven partnership, the Virginia Lottery has since partnered with Home Depot Inc. The pair launched an exclusive Home Depot ticket on April 7. Since the home improvement giant is not a lottery retailer, the Home Depot ticket is for sale at the lottery’s traditional retail outlets. “We feel having a partnership with a strong brand, be it 7-Eleven or Home Depot, is good for that brand because it is bringing them exposure to potential purchases they may not otherwise have. And it’s good for us because they are strong brands, brands that people like and use every day, and it’s a way for us to potentially expose those customers to lottery,” Otto said. CSn
114 Convenience Store News | OCTOBER 2015 | WWW.CSNEWS.COM
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Recalculating: This Way to a Better Car Wash C-store operators must remember successful car wash programs don’t run on automatic By Renée M. Covino
re you navigating the most efficient and profitable car wash route? The sudsy business is gauged as a healthy one as of late, being driven by high-speed washes, consumer environmental awareness, efficient purchasing systems, loyalty programs and the value consumers place on their vehicles. There are several ways a good program can be mapped out. First and most importantly, however, c-store car wash operators must recognize that a map is necessary for success. Good car wash programs don’t run on automatic, according to top industry suppliers. Here, they offer up some of the latest category insights and best practices: • Consider that the channel is not in a growth phase, but rather a “shift” phase. “Currently, we don’t see growth with c-store car washes, we see a shift in what they’re doing. The key operators are looking at what they’re offering in types of washes and services available with that wash, and adjusting accordingly,” relayed Rob Deal, vice president of international and corporate sales for Innovative Control Systems, based in Wind Gap, Pa. “We see real movement from the in-bay automatics, which don’t move a lot of cars — maybe 12 an hour — to a conveyor system that can move 100 cars and more per hour,” he continued. “So it’s growth by volume, not by sites. They’re looking at replacing an existing model with a new model.” While this shift requires more capital investment, plus the necessary land (65 feet minimum for an ideal conveyor environment, as well as a trench/underground installation of the system), the payback is more rapid, according to Deal. “The more volume you can put through, the faster you can pay back the investment required to do this,” he explained. Charlie Zimmerman, national sales manager for
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A conveyor system can move 100 cars or more per hour.
Norcross, Ga.-based Genesis Modular Car Wash Building Systems, agrees that c-stores have embraced the “express model” and are building “short tunnels” to support it. But he also recognizes that it must first be determined that the location has the space to produce the cars to warrant the investment. • Take note that top operators have the mindset of professional car wash businesses. While many c-store operators accept the status quo of the car wash business as merely secondary income or a “stepchild” of the core operation, a growing number of success stories are coming from those who look at it from a professional car wash operator’s view. “These operators are enhancing their car wash operations by increasing their vehicle throughput, adding free vacuums, and creating loyalty and incentive-based purchasing programs,” said Kevin Collette, vice president of sales, CTO (Compact Tunnel Organization), for Sonny’s Enterprise in Tamarac, Fla. “In many instances, these sites are increasing their revenues and bottom lines by 300-400 percent.”
SERVICES Car Wash + Lottery + ATM + Prepaid + Financial
There are five basic factors to keeping a car wash successful in a convenience store environment, according to Joey Stilley, national sales manager for Autec Car Wash Systems. The site must be:
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These c-store operators run the car wash as if it were the only business on the site, creating very detailed P&Ls that serve as a true means of managing the business. “Look at other professional car washes in the area, watch how they market and, in general, compete with them,” Collette advised. According to Genesis’ Zimmerman, having a dedicated person to manage the car wash business “because it is a separate profit center from the convenience store” is another important factor in this “professional” approach. A dedicated manager should implement “real operations procedures that will keep the wash operating at the level he expects,” added Collette. “The car wash, if operated properly, can truly be the most lucrative operation of the c-store business.” • Recognize there are still improvements that can be made to a “basic” car wash setup. C-stores that have an “automatic culture” and can’t afford or don’t have the space and/or volume to upgrade to a conveyor system still have paths available for improvement. “The successful ones are including more options like tire shine, hot wax and lava to their systems to compete with tunnel washes and increase revenue,” noted Zimmerman. Utilizing customer information is also imperative in current times. Obtaining emails for marketing and monthly wash programs is a big way c-stores can boost business, he suggested. “We see coffee and food programs, apps and buying programs aimed at keeping and capturing c-store customers — these must be done with the car wash as well,” echoed Collette.
Perhaps the best improvement is to go back and evaluate the site’s “car washing potential,” Collette explained. “The location must be evaluated by traffic count, demographics (including income per family), cars per family and how much car wash competition it has. It’s not good enough today to just correlate the car wash to the gallons of fuel pumped; it does not give the retailer a true perspective of the business.” • Do the homework and choose the right supplier partnership. C-stores that run a successful car wash business recognize it takes a team effort. Choosing the right supplier partnership often makes the difference and requires research. As Genesis’ Zimmerman put it: “We become development partners, allowing c-stores to concentrate on their core businesses. Genesis Modular Car Wash Building Systems makes building car washes easy by handling the majority of the processes: design, engineering, installation and building.” Sonny’s provides its partners with the Car Wash College, which trains operators from beginning to end with hands-on experience in the lab and in the field. Sonny’s also has a “new business development” department with four full-time staffers who do nothing but evaluate car wash sites, according to Collette. Innovative Control Systems focuses on “network visibility,” offering operators and category managers access to all pertinent data as it relates to the car wash business (performance, sales, average ticket, number of washes, equipment alerts, etc.). This data is available on a dashboard that can be viewed 24/7 on any device anywhere in the world. Autec Car Wash Systems in
Statesville, N.C., provides a turnkey job. “All an operator has to provide is the concrete slab, electrical and plumbing. Everything else, we provide,” stated Joey Stilley,
national sales manager. However, the first thing Autec does is look at the location — this entails running a demographic report on a one-, three- and five-mile radius. CSN
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OPERATIONS Store Ops + Labor + HR + Real Estate + Financial + Field Ops
Minimum Wage, Maximum Concerns As workers and politicians push for pay hikes, c-stores worry about the bottom line By Melissa Kress
n Sept. 10, New York Gov. Andrew Cuomo made a push to have the Empire State become the first in the country to adopt a $15-per-hour minimum wage for all industries. The proposal came on the same day Acting State Labor Commissioner Mario J. Musolino signed an order making the $15 mark the statewide minimum wage for fast-food workers. Under Cuomo’s proposal, which has the backing of Vice President Joseph Biden, the all-industry wage would be phased in to mirror the fast-food wage order, taking full effect by Dec. 31, 2018 in New York City and July 1, 2021 for the rest of New York State. While Cuomo’s proposal is still just that, the increase in the fast-food minimum wage is a reality that convenience stores in New York have to face — either directly or indirectly. Included in the final report by the state’s Fast Food Wage Board, which was approved and adopted by the state Labor Department, there is a list of some of the establishments that would be subject to the new wage. None of them are convenience stores.
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However, some of them are branded foodservice establishments that have franchise locations within the four walls of many New York c-stores, and that’s where the uncertainty lies, according to Jim Calvin, president of the New York Association of Convenience Stores. “What remains unclear is whether a store that has a Dunkin’ Donuts or a Subway inside would have to abide by the fast-food minimum wage and, if so, would they have to abide by [the wage] only at that food counter or throughout the store?” he said. In New York, some convenience stores operate their food franchise locations, while others lease space to independent franchisees, in which case the independent franchisee and not the c-store operator pays the employees at the food counter. Neither example has been addressed — so far anyway — in the wage order, Calvin explained. Still, the issue of whether that store with a branded food franchise is subject to the fast-food minimum wage may not be as critical to the industry as the indirect impact on convenience stores because c-stores compete with McDonald’s for the same labor pool. “Even if no convenience stores under any circumstances will be covered by the fast-food minimum wage mandate, they all are going to be indirectly impacted, and severely impacted, by the fast-food wage,” Calvin pointed out. If McDonald’s has to pay its part-time, entry-level workers $15 an hour, the competing convenience store will have to pay a higher rate in order to measure up. “As one of my board members pointed out, even if we’re not included, we’re included,” he said. “While, on the one hand, we are still trying to get clarification about whether the convenience store with a Dunkin’ Donuts inside is required to pay the higher fastfood minimum wage, the bigger concern is
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State Minimum Wage Laws (as of April 1, 2015)
No minimum wage law
Lower than the federal minimum
(federal $7.25 rate applies)
(federal $7.25 rate applies)
$7.25 (federal minimum wage)
$8.50 or more
Highest state minimum wage Washington: $9.47
Five states do not have minimum wage laws: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Source: U.S. Department of Labor
$7.25 Note: Minnesota’s minimum wage of $8 is for large employers only, effective Aug. 1, 2014. Sources: National Conference of State Legislatures; state and local government labor departments.
how does the fast-food minimum wage that is implemented in other retail formats impact the labor costs for convenience stores across New York State?” $15 AcROSS ThE BOARd
If Cuomo’s proposal to increase the minimum wage to $15 across the state is implemented, the effect would be very similar to the situation convenience stores are presented with right now. “Because of the nature of our business and because of the labor pool that we draw from, the reality is either way wages are going to be driven artificially upward; sharply upward,” Calvin said. “Either way, the result is sharply higher labor costs, not only for wages but for payroll taxes, workers compensation insurance, unemployment insurance, and on and on.” Either way, the wage increase is going to have “an unprecedented impact” on convenience stores and small businesses of all kinds in New York, he added. As it is, New York employers face a $9 minimum
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The current federal minimum wage
wage as of Dec. 31. This is the third step in a multiyear phase-in that’s already seen the state’s hourly wage rise from $7.25 to $8, and then to $8.25. While Calvin acknowledged these increases are not as steep as the $15 proposal, he said they are still significant especially when there’s no corresponding increase in productivity. “Convenience stores have had to take a hard look at staffing, how many positions, how many hours and the rate of pay. In a fair number of cases, the decision — as difficult as it is to make — has been to reduce the number of positions and to reduce the number of hours for remaining employees. In some cases, stores have decided to reduce the number of hours they are open,” Calvin explained. “None of those things are good for business, but those are the realities we have been confronted with.” ThE BIggER PIcTuRE
New York is certainly not the only state pushing for higher wages; it’s just the latest. And the movement
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OPERATIONS Store Ops + Labor + HR + Real Estate + Financial + Field Ops
is not limited to the state level either. (See “On the Horizon,” right). “The minimum wage is part of a bigger trend. This, what I would call an increasingly popular trend to get whatever your agenda issue is enacted at the local level, is very difficult, frustrating and annoying for businesses to comply with,” said Tom Robinson, president of Santa Clara, Calif.-based convenience store chain Rotten Robbie. “What we end up with is a patchwork system of different ordinances, which creates compliance problems, competition problems, and additional costs to businesses and quite frankly to consumers,” he stated. Rotten Robbie, which has 34 locations in Northern California, views “governmental burdens” as par for the course. But most importantly, “we also [try] not to punish, not to hurt our employees as we attempt to deal with ordinances or legislation that can be very anti-business and anti-consumer,” Robinson said. “And a lot of the times, these things that are antibusiness are really anti-job legislation.” According to Robinson, the retailer’s main driver when it comes to the company’s wages is San Jose, Calif., which has a minimum wage rate of $10.30 an hour. Rotten Robbie pays above minimum wage and that differential expands and contracts over time. “It really has made it more challenging to deal with, especially as it evolves every year,” he noted. So far, the company has not gone to geographic starting wages. However, Robinson said he would not be surprised if the chain started doing that, and he expects more companies will start doing it as well. Generally speaking, he said, when there is an increase in the minimum wage, service companies with local competition — like Rotten Robbie — either pass along those costs to the customers or the company doesn’t survive, depending on how much cost is involved. A bigger concern for convenience store retailers is when wage boosts drive other businesses out of town, taking with them c-store customers. “That’s really the big thing. For service companies like us where our competition is local, we more or less pass
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On the Horizon
According to the National Conference of State Legislatures, several states have either enacted minimum wage increases after New Year’s Day 2015 or plan to do so over the next few years. Here is a quick look at what’s in store on the wage front: Alaska: $9.75 effective Jan. 1, 2016 Arkansas: $8 effective Jan. 1, 2016; $8.50 effective Jan. 1, 2017 California: $10 effective Jan. 1, 2016 Connecticut: $9.60 effective Jan. 1, 2016; $10.10 effective Jan. 1, 2017 Hawaii: $8.50 effective Jan. 1, 2016; $9.25 effective Jan. 1, 2017; $10.10 effective Jan. 1, 2018 Maryland: $8.25 effective July 1, 2015; $8.75 effective July 1, 2016; $9.25 effective July 1, 2017; $10.10 effective July 1, 2018 Massachusetts: $10 effective Jan. 1, 2016; $11 effective Jan. 1, 2017 Michigan: $8.50 effective Jan. 1, 2016; $8.90 effective Jan. 1, 2017; $9.25 effective Jan. 1, 2018 Minnesota: Large employers $9 effective Aug. 1, 2015 and $9.50 effective Aug. 1, 2016; small employers $7.25 effective Aug. 1, 2015 and $7.75 effective Aug. 1, 2016 Nebraska: $9 effective Jan. 1, 2016 New York: $9 effective Dec. 31, 2015 Rhode Island: $9.60 effective Jan. 1, 2016 Vermont: $9.60 effective Jan. 1, 2016; $10 effective Jan. 1, 2017; $10.50 effective Jan. 1, 2018 Washington, D.C.: $10.50 effective July 1, 2015; $11.50 effective July 1, 2016 West Virginia: $8.75 effective Dec. 31, 2015
the costs along, but the problem is complying with the patchwork,” Robinson said. “What’s really bad is [when] it’s bad enough that you start to see more significant companies that don’t have local competition move. That’s really where it hurts us.” This is not to say Robinson is against increasing wages, but he believes the tactic is a “poor substitute for generating more jobs.” “It’s not a bad deal for folks that are making the minimum wage and have a job, that won’t lose their job. It is a bad deal, I think, for workers who don’t have a job or have a part-time job. It makes it harder for them. There are winners and losers in that game,” he said. cSN
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TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence
EMV: What Now? With the Oct. 1 POS liability shift deadline passed, what can c-stores expect? By Brian Berk
stops working,” he said. “[As of] Oct. 1, their Windows XP computers will still be working and their [card] swipers are still working.” Levin did acknowledge software updates will be issued in the future, though, whereby the retailer will have to have an EMV-compliant terminal to accept credit and debit cards at the terminal. Despite the significant costs to upgrade to EMV-ready devices, retailers who have not completed the upgrade are certainly at risk. Once a cybersecurity attack happens, it could be too late. If large enough in scale, it could have the power to cripple a business financially. The amount of risk is an important question c-store retailers need to ask themselves. According to the Petroleum Marketers Association of America, fraud in the petroleum industry reached $250 million in 2014. If many retailers didn’t upgrade to EMV by the Oct. 1 deadline, the risk retailers are taking decreases due to a strength-innumbers argument, said Randy Vanderhoof, director of the EMV Migration Forum, an independent body created by the Smart Card Alliance to address issues in the payments space. “Fraud typically migrates to the least secure party,” he said. “Fraudsters will find merchants that have not made the upgrade. If there are lots of merchants that still did not upgrade to EMV, there are lots of targets for fraudsters to go to and there won’t be any major changes in the chargeback profile. But over time, merchants The number of c-store retailers who chose not to upgrade to EMV-compliant POS devices by that are lagging behind will become he first EMV (Europay, MasterCard and Visa) liability shift deadline passed on Oct. 1. Hopefully, the sky has not fallen for convenience store retailers who chose not to upgrade their in-store pointof-sale (POS) devices. The number of c-store retailers choosing not to upgrade to EMV-capable POS devices is estimated to be significant. Although not solely focused on c-store retailers, a June Cayan study of 344 small-business owners and managers concluded that 52 percent of these retailers would not be EMV compliant by the Oct. 1 deadline, with 37 percent saying they had no plans to accept EMV cards at the POS after the deadline. Ed Levin, CEO of International Point of Sale, which sells POS systems, says most of his c-store clients have yet to make the EMV upgrade at their stores. “They will only make a change if something
Oct. 1 is estimated to be significant.
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TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence
SOURCE: Courtesy of VeriFone
EMV at the ATM
Although the EMV POS liability shift deadline has passed, chatter about the overall topic is unlikely to subside any time soon. For convenience store operators who own ATMs, the next EMV liability shift deadline is coming Oct. 1, 2016. This date is when ATMs must be EMV enabled or c-store retailers could be on the hook financially for fraudulent activity, in the same manner as at the POS now. Cardtronics Inc. Chief Marketing Officer Tom Pierce stressed that only the owner of the ATM is responsible for the EMV upgrade. “Any ATM owner leaning toward not upgrading to EMV may want to reconsider that choice,” he said. “As of the MasterCard and Visa deadlines, with the first being October 2016, liability for fraudulent counterfeit card transactions will shift from the issuers of EMVenabled cards to the party that has not made the investment in EMV equipment. From a risk assessment point-of-view, when liability will essentially be assigned to the party that hasn’t upgraded to EMV, ATM owners will want to avoid being the weak link in the transaction security chain.” Upgrading ATMs to EMV is simply too important, agreed Paul Saxon, president of Brandon, Fla.-based Electronic Transaction Corp., a provider of ATM equipment, processing and services. “EMV will make a major difference in fraud that is happening,” Saxon said. “Fraudsters are all focusing on the United States right now because we are the most vulnerable country there is. They can reproduce a magnetic stripe card pretty easily and empty out a person’s bank account. You cannot do the same thing if the card has a smart chip on it.” All new ATMs that Electronic Transaction sells can be purchased along with a $130 EMV upgrade kit, an option most c-store operators choose due to its low cost, said Saxon. For c-store operators already with newer ATMs, usually defined as 10 years old or newer, the company sells upgrade kits for $289. Upgrade kits for ATMs older than 10 years typically run about $900 and must be handled by a technician, meaning the total price tag could be in the $1,100 range. Therefore, c-store operators with older ATMs may want to opt to buy a new ATM instead, with “excellent models” running in the $1,900 to $2,300 range, according to Saxon. Of the approximate 300,000 ATMs located in retail locations nationwide, about half will need to be replaced by Oct. 1, 2016, he concluded.
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increasingly higher targets.” Even though the deadline has passed, it is certainly not too late to upgrade. Regarding costs, Chris Schold, senior alliance manager at Mercury Payment Solutions, said the company’s software upgrade typically costs $250 per year, plus the cost of the hardware. “One popular [hardware solution] we are integrating at Mercury is the VeriFone VX805, which costs about $300 [per terminal],” he said. “C-stores can affordably migrate to EMV at the counter,” added James Hervey, director of petroleum product management for VeriFone Inc. “Costs vary considerably and are influenced by a number of variables, some of which include the number of sites, the number of in-store lanes, and — if they want to simultaneously update their fuel dispensers — the size of their petroleum forecourt.” If EMV upgrade costs prove too cost-prohibitive, c-store retailers can look to see if any outside help is available. For example, CITGO Petroleum Corp. implemented an initiative that helps its retailers and marketers upgrade to EMV at the POS. The fuel company is underwriting a portion of the POS upgrades and provides incentives to those under its brand to convert to EMV-compatible POS devices. Retailer participation in this program since it was first announced at a marketer meeting in January has been excellent, Kara Gunderson, CITGO’s POS manager, told Convenience Store News. “CITGO’s POS Upgrade Incentive Program is still active and we are receiving several orders each day,” she said shortly before
TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence
the EMV liability shift date. “We fully expect that the majority of the CITGO marketers will take advantage of this great program.” TO UPGRADE OR NOT UPGRADE?
To truly determine whether a c-store retailer should
upgrade its POS devices to become EMV compliant, review a chargeback profile, Schold recommended. “Take a look at the number of chargebacks you have each year and multiply that by the average amount of each chargeback,” he said. “So if you have five chargebacks related to fraudulent cards each year
EMV at the Pump Earlier this year, Jenny Bullard, chief information officer for Flash Foods Inc., revealed the 171-store chain would need to replace
are available for several of its dispensers that debuted as far back as the early 1990s, relayed Weston.
384 fuel pumps and retrofit an additional 220 pumps to be EMV complaint at the forecourt. The price tag for this effort: a whopping $9 million. Not surprisingly, Bullard said it’s a difficult decision whether to upgrade its pumps to EMV or not, especially as Flash Foods does not suffer massive fraud at the pump. Fortunately, there is some time. C-store retailers have until Oct. 1, 2017 to upgrade their pumps to EMV-capable devices at the forecourt. But since the costs of EMV forecourt upgrades are high, it’s definitely not too early to begin the upgrade process now, advised Tim Weston, senior product manager for payment at Austin, Texas-based Wayne Fueling Systems. He recommends making forecourt hardware upgrades as soon as possible, with software upgrades to take place later. “Retailers should think now about positioning EMV equipment on their forecourt,” said Weston. “Retailers can’t wait to make the changes in [the third quarter] of 2017. [Wayne] can’t make [EMVready pumps] fast enough and there won’t be enough service people to install them in the last quarter [before the liability shift deadline].” Several c-store operators have heeded this warning. Parker Burke, director of payment and marketing applications for Gilbarco Veeder-Root, confirmed retailers have in fact already begun the EMV upgrade process at the pump. In fact, Gibarco saw orders for its Applause TV with VNET dispensers reach a record high in June. Edwards Oil Co. dba Quik Mart Convenience Stores, and Sutey Oil are among those that have begun the EMV upgrade process. One good thing about the forecourt EMV upgrade is that the process should be relatively similar to what retailers have undergone at the POS, noted Weston. “The big thing to look at is extending the indoor EMV capability out to the forecourt,” he said.
“For example, our Ovation dispensers were introduced in 2003, and we have upgrade kits available for every Ovation introduced since 2003. We have upgrade kits for our Vista series dating all the way back to 1992,” he said. “But if you have dispensers from the 1980s, or ones that don’t have pay at the pump, it’s likely you need a new [dispenser].” Gilbarco Veeder-Root has upgrade kits available for many of its fuel dispensers dating back multiple years as well, according to Burke. “Gilbarco offers forecourt EMV payment terminals for existing Gilbarco The Advantage and Encore dispensers, Wayne Vista and Ovation dispensers, and Tokheim Premier B and C units,” he said. Regarding costs, c-store retailers with relatively new dispensers can often purchase EMV upgrade kits for less than $2,000, Weston reported. Upgrade kits for older dispensers can range from $4,000 to $8,000. C-store operators who need new dispensers may pay between $10,000 to $20,000 per dispenser, based upon the make and model, not including labor costs, noted Weston. The cost of new pumps can be subsidized somewhat by c-store operators opting to install media at the pump, as the electronics involved with these options — which often feature TV and advertising at the pump — can be similar to what is required to complete an EMV upgrade. Retailers who can’t or prefer not to pay upfront the full price of new pumps or upgrades have another option: they can seek financing. Kingwood, Texas-based Ascentium Capital is one such financial firm offering this option. According to Len Baccaro, senior vice president of sales for Ascentium, the financial firm not only offers significant money to retailers but offers it fast. “We can offer $250,000 on a onepage application with no financial disclosure required,” he told Convenience Store News. “We make the credit decision in less than two hours.” In addition, the firm is unique in several other ways, including that it does not require original documentation or checks, said Baccaro. Everything is done via fax and scan, making it a much simpler process for the c-store retailer.
UPGRADE KIT VS. NEW DISPENSER Should c-store retailers purchase new fuel dispensers or get an EMV upgrade kit for an existing dispenser? At Wayne, upgrade kits
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and each chargeback averages $30, the retailer will be responsible for $150 per year.” Vanderhoof stressed, however, that retailers may not be aware of the amount of chargebacks they had in the past. Because they formerly had no financial responsibility for these fraudulent incidents, issuing banks didn’t bother to alert them about it. “Retailers need to be aware they have been shielded [in the past] from these incidents because the issuer was responsible, leading them to possibly have a false sense of security,” he said. “After Oct. 1, issuing banks have the authority to chargeback any and all fraudulent transactions that are reported to them. So although fraudulent card activity may not actually rise that much, merchants might see a dramatic increase in chargebacks.” Schold relayed that only the retailer should make the decision regarding whether its POS devices are worth upgrading. And c-store retailers have a tough decision on their hands because most for-sale items have small sticker prices, compared to merchants such as Best Buy or Target that have $1,000-plus electronics items for sale. Vanderhoof offers a similar view. “Stores that sell low-value products are what fraudsters are typically going to look for,” he said. “Retailers that sell items that can be easily sold on the black market like electronics and jewelry will be at a high risk for fraud.” When trying to determine which products in the c-store are most likely to be purchased via fraud, look at any item criminals can resell quickly and easily, said Lori Stafford-Thomas, director of public relations at Vantiv Inc. Gift cards are a prime example.
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Retailers who did make EMV upgrades prior to the Oct. 1 liability shift deadline can take solace in the fact that credit and debit card purveyors will continue to handle the responsibility for fraudulent in-store transactions, assuming all their ducks are in a row within time. C-store retailers have discovered there are two phases to becoming EMV compliant at the POS. Phase one is installation of EMV-capable POS hardware, which for many was quite achievable by the Oct. 1 deadline. Phase two, software upgrades, has proven much more elusive. Flash Foods Inc., a chain of 171 convenience stores in Georgia and Florida, was set to have its EMVcapable POS pinpads in place by the liability shift date, Chief Information Officer Jenny Bullard told CSNews. However, “software updates from our POS provider and our credit card processor are still in the process of being developed and then must be certified by card networks,” she reported as this issue went to press just prior to Oct. 1. “This seems to be the case for many solution providers and processers in the industry so I’m concerned that the lineup for certification will be long and will delay many providers being able to push the updates down to us, the retailers,” Bullard continued. “And once we have these updates, we have to implement them in our locations. So, meeting that compliance date of October 2015 for inside EMV is still very elusive at this point.” Even once the hardware and software updates are in place, c-store retailers now sporting shiny
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new EMV-capable devices should in no way think they are fully protected from cyberattacks. Although EMV — combined with tokenization, which uses otherwise useless “tokens” in place of a customer’s real personal information when a transaction is being processed — is certainly a step in the right direction, cybercriminals are becoming more and more sophisticated.
“EMV only combats counterfeit card fraud,” said VeriFone’s Hervey. “It’s not a security ‘catchall’ and does nothing to prevent the types of network data breaches that have become all too familiar in the headlines. We strongly recommend that merchants take a multi-layered approach to data security that — beyond EMV — includes end-to-end encryption of payment data along with secure commerce architecture.” CSN
SOURCE: Courtesy of Cayan
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Time to Rethink the Boomers? Buying power of the 50-plus crowd still packs a punch By Allison Bardic
lthough convenience store operators are eager to embrace millennial consumers, it is still the Baby Boom generation that plays the dominant role in the U.S. economy, controlling 70 percent of the nation’s disposable income. Born between 1946 and 1964, this valuable age cohort accounts for nearly $230 billion, or 55 percent, of consumer packaged goods sales, according to New York-based Nielsen. And it’s no secret that between 2012 and 2050, the United States will experience significant growth in its older population. The U.S. population aged 65 and older is projected to reach 83.7 million in 2050, almost doubling its estimated population of 43.1 million in 2012, according to a 2014 U.S. Census Report, An Aging Nation: The Older Population in the United States.
Baby boomers are largely responsible for this increase, as the leading edge of this generation began turning 65 in 2011, the Census report noted. “Given its sheer size and economic clout, the 50-and-older demographic will remain the dominant and most influential consumer group for years to come,” said Deborah Weinswig, executive director/ head of global retail and research for Fung Business Intelligence Centre (FBIC), a Hong Kong-based market data firm. “Forward-minded companies are rethinking the tired presumptions about older customers and finding new and lucrative ways to reach them.” A recent FBIC study revealed that younger boomers outspend millennials by nearly $8,000 annually and the typical consumer by $5,000, with spending occurring across most categories. Boomers will control more than half of all dollars spent on grocery foods in 2015, with a particular focus on health and wellness. At the PumP
The significance of older consumers to the c-store industry is not lost on NACS, the Association for Convenience and Fuel Retailing. “You have close to 160 million people a day in convenience stores, at the pump or in the stores,” said Jeff Lenard, vice president of strategic industry initiatives for the trade group. “That’s half the country, and if you ignore any segment, you do it at your own peril.” As proof of baby boomers’ relevance, Lenard pointed to a recent Fuels Institute study, Driver Demographics: The American Population’s Effect on Vehicle Travel and Fuel Demand, which found boomers are offsetting the decline in millennials’ driving. Baby boomer drivers are experiencing the highest driver licensing and vehicle travel rates in history, according to the report. “While everyone wants the younger consumer, there’s
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a bit of a concern that they might not be driving as much,” Lenard said. “The only group that is seeing an increase in driver registration is older drivers. We’re at a record low of teens who have their driver’s licenses.” In addition to the frequency of baby boomers’ c-store and gas station visits, Lenard observed that operators would be wise to appeal to older consumers given their high levels of community involvement. He noted that older residents are more likely to attend the many zoning hearings required when c-store operators wish to build or change the use of their existing locations. “If [members of] the older demographic [group] see that you have all the things in your store that they want in their area, they will be more likely to work with you than against you,” Lenard said. “They may have grown up there. They have more free time. They treasure their community.” untAPPeD oPPortunities
Staying healthy remains a growing concern for the baby boomer generation and may offer an opportunity for c-store operators to woo them with more products geared toward health and wellness, as well as fresh food alternatives. The 2015 Nielsen Global Health & Wellness Survey, for example, noted that sugar-free and low-
“Given its sheer size and economic clout, the 50-and-older demographic will remain the dominant and most infuential consumer group for years to come.” — Deborah Weinswig, Fung Business Intelligence Centre
sugar products are more important to older consumers, while The NPD Group, a Port Washington, N.Y.based global information company, recently reported that more than a quarter of all boomers are dieting. Baby-boomer customers also are most likely to visit c-stores outside of the morning and evening rush hours, Lenard observed, adding that someone over the age of 50 visits a c-store more often in the mid-morning or afternoon than younger patrons. This pattern presents
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another unique opportunity for the c-store industry. “The post-morning rush hours might be a fertile opportunity to encourage that demographic to come into your store,” he said. “Everyone’s pretty familiar with Starbucks being that place where you set up meetings, so how can you encourage older consumers to use your store as a place to meet or hang out and have a cup of coffee? It’s a chance to sell some food as well.” Don’t Forget the tech
Local weekly newspapers receive high readership from older residents, making these publications one way for operators to get the word out about their c-stores. However, while older consumers may lag behind their younger counterparts in technology adoption, their usage is increasing. And this opens another outlet through which c-stores can reach these valued customers. In April 2012, the Washington D.C.-based Pew Research Center found for the first time that more than half of older adults (defined as those aged 65 or older) used the Internet. Today, 59 percent of seniors report that they go online and 47 percent say they have a high-speed broadband connection at home. In addition, 77 percent of older adults have a cell phone, up from 69 percent in April 2012. “If you think about what everyone has learned to do over the last 10 years with adapting to change, it’s astonishing,” said Lenard. “I think some of those previous beliefs about older consumers and how they might be set in their ways is changing every time you see a 70-year-old with a cell phone using it as effectively as a teen.” CSN
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Continuing the Tradition Inaugural Multicultural Retail 360 Summit provided insights for marketing not only to Hispanics, but all key demographic and cultural segments of the U.S. population By Debby Garbato
etailers today recognize the value of marketing in ways that appeal not just to a short list of well-recognized ethnic groups, but to a diverse range of cultural and minority perspectives. In August, the inaugural Multicultural Retail 360 Summit made its debut in Anaheim, Calif., as specialists in African-American and Asian marketing joined the conference’s cadre of Hispanic experts. The Armando Martin of XL Edge (left) moderated a panel of retailer giants on the importance of diversity: Rona Fourté and Martha Garnica of Walgreens, Rueben Shaffer of Kroger, and Michael Byron of Walmart. event was previously known as the Hispanic Retail 360 Summit. Held Aug. 12-15, the 11th annual summit was presented by Stagnito Business Information, publisher From Fútbol to Football of Convenience Store News and other leading retail The growth and significance of the multicultural marbusiness magazines. Attendance exceeded 450 retailket were underscored by the NFL, which discussed its ers, suppliers and other marketers that target multicommitment to growing the Latino fan base. Already, cultural consumers. 26 million Hispanics follow the sport and 63 percent Presenting companies included such market leadof all Latinos like football more than other sports, ers as Nielsen, Walmart, Walgreens, the National said Marissa Fernandez, director of fan strategy and Football League (NFL), marketing, and the summit’s keynote speaker. These Brookshire’s and Kroger. consumers represent 14.2 percent of the 188 million More than 50 speakers NFL fans nationwide. discussed subjects ranging The NFL is pairing culturally relevant messages with from cultural relevancy its all-American image. One Spanish-language ad shows beyond language, to the kids playing football; a voiceover discusses their hopes importance of indepenfor the future. “The NFL represents both the American dent grocers gaining a culture and the American dream,” said Fernandez. better understanding of The NFL is also looking to increase Spanish TV black consumers. football viewership by building Hispanic fans’ underTopics were so popustanding of the game. On ESPN Deportes, it provides lar that, by the morning both in-depth game analysis for veteran fans and “how of Aug. 13, the conferto” explanations for more novice viewers. ence had become a To reach Hispanic women, the NFL ran ads leading trend topic in featuring Dominican-born actress Diane Ramirez Marissa Fernandez, director of fan strategy Southern California on in Vogue and People en Español during 2014. This and marketing for the NFL, explained how social media site Twitter. year’s ads star Dascha Polanco, another Dominican professional football is enticing Latino fans.
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Noted multicultural experts Eddie Yoon (left) and Guy Garcia used cutting-edge insights, case studies and never-before-seen data from Nielsen to paint a dynamic portrait of modern multicultural consumers.
actress. At the grassroots level, the NFL is targeting underdeveloped markets with youth participation programs designed to foster lifetime enjoyment of football. big Names iN retail
On the retailer end, a panel of executives from top chains talked about hindrances to multicultural initiatives, the importance of companywide cooperation, and how diversity can generate additional revenue. Rona Fourté, Walgreens’ director of supplier diversity, discussed partnering with black entrepreneur Vera Moore to launch a line of African-American cosmetics. The assortment is offered by 35 Duane Reade stores in New York and via Walgreens.com. “It’s a true example of Walgreens’ commitment to diversity,” Fourté said. Walgreens also launched a bilingual freestanding insert when it began selling Hispanic groceries, said Martha Garnica, manager of multicultural marketing. The dossier is published at the beginning of the month when lowincome customers receive government benefits. Mike Byron, senior director of supplier diversity at Walmart, said the retailer now offers 3,000 products and services from diverse suppliers. In 2011, it committed to sourcing $25 billion from womenowned companies over the next five years. Byron said Walmart has already exceeded that goal by about $1 billion. “We want to imbed supplier diversity into our overall strategic directive. Everyone in charge of negating or awarding a contract touches my office.” Kroger executives utilize the input of nine associate resource groups, said Reuben Schaffer, chief diversity officer. Each is comprised of people from a specific ethnic or other group. “They tell us what it’s like to be Asian or gay,” said Schaffer. “Diversity is about the mix; inclusion
is making it work. With us, it’s in to be out.” brookshire’s New strategy
Three executives from Tyler, Texas-based Brookshire’s outlined the grocer’s cross-departmental, multicultural initiative that has increased sales by almost 30 percent over three years. Efforts involved identifying and serving customers in areas with heavy concentrations of Hispanics or African-Americans. Demographic targets are further segmented by income, lifestyle, acculturation and shopping habits. To do this, the company has relied on extensive research, outside experts and changes that touch everything from products and packaging to staffing and training. For example, Brookshire’s removed sweet Mexican bread from its packaging and placed it in self-serve cases. And it began offering beans in bulk. “It’s not just certain products they want, but the way they shop for them,” said Ivette Zavarce, multicultural marketing coordinator for the grocery chain. Outside of supermarkets, Sean Bunner, vice president of new business development at the Home Shopping Network (HSN), explained how the multi-billion interactive, multichannel retailer is using a Latina host, Ecuadorian Amy Bravo, to help gain Hispanics’ trust. Bravo came to the United States in 2000 at age 18, spoke only Spanish and was working in a sandwich shop. After being discovered by HSN, she worked as a model before becoming one of the show’s most popular hosts. “Being a host is hard,” said Bunner. “Most people who become hosts have been with HSN for years. But Amy did so well in six months that she got the attention of executive management — not just as a Latina, but as
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a host. It’s hard to gain the trust of Hispanics, but once you do, they stay.” HSN is already well entrenched in the AfricanAmerican market with cosmetic supplier Carol’s Daughter and other brands that strongly resonate with blacks.
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The Multicultural Retail 360 Summit also featured an impressive roster of research experts. Eddie Yoon, principal of The Cambridge Group, a wholly owned subsidiary of Nielsen, and Guy Garcia,
Hispanic & Asian Retailers Shine in Immersion Tour Attendees of the Multicultural Retail 360 Summit had the opportunity to sample Thai beer, moon cake, fresh tortillas and other ethnic specialties during the conference’s annual Cultural Immersion Tour on Aug. 12. This year, the Cultural Immersion Tour’s emphasis was on Hispanic and Asian retailers in the highly diverse Los Angeles/Anaheim market. The goal was to provide guests with a firsthand experience of how these chains market to multicultural consumers. Unified Grocers, a major distributor to independent retail chains, helped organize the event. The tour was sponsored by McIIhenny Co., maker of Tabasco Sauce. Stops on the tour included:
SUPER KING, Anaheim
found this confuses its customers who do not speak English fluently. Superior has also done away with bilingual signage, whose font size was too small and whose overall appearance was cluttered and further confused shoppers.
This retailer specializes in electronics, furniture and fashion. Categories are aimed at Hispanic consumers, particularly South Americans. The retailer’s true claim to fame, however, is its special services, most notably a credit program that targets people who have no traditional credit history. Hence, most items are high ticket, with lower-priced products serving as complementary add-ons. The company offers money transfers and international ordering and delivery as well. The latter serves remote parts of Latin America in any way it needs to. “We used to have donkeys on our P&L [profit and loss statement] that allowed us to deliver appliances to remote parts of the The Cultural Immersion Tour included visits world,” noted Mike Azarkman, director of to four ethnic retailers: Super King, Superior Curacao’s eBusiness Group.
This $2-million six-store chain is small in store count but heavy in foot traffic. Super King is one of the highest volume supermarket chains in Southern California. The store visited on the tour was so busy that customers were lined up outside, waiting to enter. The retailer emphasizes its fresh departments, with many customers loading their shopping carts with several pounds of proSupermarkets, 99 Ranch Markets and Curacao. duce along with large packages of meat. Offal is particularly popular, including such ethnic-centric items 99 RANCH MARKETS, Anaheim as beef lips, tendons and feet — not to mention the usual tripe This grocery chain serves various Asian cultures, with the and pig tongues. Shoppers’ close ties to their home countries Anaheim location drawing a heavy Filipino clientele, said Teresa were also reflected in self-serve bulk product displays of nuts Leung, coordinator of marketing and public relations. and other dry foods, as well as spices sold by the bag. This was evidenced by a 25-linear foot-plus assortment of head fish on ice. This display was complemented by an extenSUPERIOR SUPERMARKETS, Anaheim sive assortment of frozen seafood, including shrimp rolls, mariThe company that opened Southern California’s first warehousenated milk fish and mushroom squid balls. Tanks of live catfish style store in 1981 today operates 44 locations. The chain’s and crabs, along with Manila clams, were also part of this stores offer a more spacious, modern environment that emphastore’s huge seafood statement. sizes products for Hispanics of various acculturation levels. Other traditional foods included moon cakes, which comPre-cut fruit, for example, appeals to second- and third-genermemorate the Moon Festival. Each cake contains an egg yolk to ation Latinos, while the homemade tortillas that greet customers represent the full moon. Steamed buns containing chicken, pork, are embraced by Hispanics of multiple acculturation levels. The vegetables and red beans also commanded significant space. same is true of Hatch chilis, a coveted produce item with just a 99 Ranch was the first Asian format in Southern California to six-week season. operate as a full-service supermarket. Today, it still offers the Unlike most supermarkets, Superior does not update departlargest selection of meat and produce in the 37 stores it operment locations and adjacencies every few years. The company ates in California as well as in Nevada, Washington and Texas.
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Nuances of AfricanAmerican & Asian Shoppers
Convenience Store News Editorial Director Don Longo also serves as editorial director for the Multicultural Retail 360 Summit.
president of new mainstream initiatives at EthniFacts LLC, presented Nielsen data that uncovered some radical changes and nuances in U.S. demographics: • 381 different languages are spoken in the U.S. • One in six newlywed couples is interracial • 10,000 baby boomers turn 65 every day • 2012 was the first year that mortality exceeded births among the non-Hispanic, U.S.-born white population • Most of the white population’s growth is coming from white immigrants; Asian immigration is also high • One out of six blacks in the U.S. is an immigrant Yoon also talked about how demographics do not necessarily predict demand. With Korean TV dramas, for example, just 15 percent of viewers are Asian. And despite blacks’ love of football, more AfricanAmericans watched “Empire” than the Super Bowl. “Advertisers could have spent a lot less and reached more blacks [by using “Empire”],” said Yoon. New data developments also came from the Center for Multicultural Science. By analyzing a first-time National Grocers Association study on independent supermarkets, the Center determined 25 percent of sales ($32 billion) in this $131-billion channel are generated by retailers with a multicultural focus. (The study involved chains with sales of $2 million-plus). This information demonstrates how vast the multicultural market has become. According to Isabel Valdés, chairperson of the Center, the U.S. Hispanic market is as large as “one of the fifth or sixth largest economies in the world.” Anheuser-Busch InBev SA and PepsiCo Inc. were title sponsors of the 2015 Multicultural Retail 360 Summit. McIIhenny Co., maker of Tabasco Sauce, sponsored the Cultural Immersion Tour, a first-day conference highlight (see tour recap on page 142). CsN
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Reflecting the Multicultural Retail 360 Summit’s expanded focus this year were several presenters who focused specifically on the African-American and Asian markets. Topics ranged from cultural values and traditions, to designing advertising campaigns that meld traditions. Lan Bercu, founder and president of Lead Across Cultures International, compared Asian habits and values to those of other consumers. Asian society — as well as Hispanic society — tends to be a collective culture based on belonging to a group or family. Group needs come before individual needs. Conformity, hierarchies and common values prevail. In Anglo culture, independent thinking and self-actualization are the norm and people are seen as equals. Anglos strongly embrace humor, leisure and instant gratification. Among Asians, thrift, post-gratification and seriousness trump. Hence, Anglos are primarily concerned with the attributes and origins of a product, often researching these issues before purchasing. Asians care more about the brand and the trust it brings, with word-of-mouth having a big influence. “It’s the opposite process,” said Bercu. Switching the focus to African-American shoppers, Cynthia Perkins-Roberts, founder of Reachingblackconsumers. com and vice president of multicultural marketing, Video Advertising Bureau, outlined some of the cultural, economic and other nuances of black consumers — some subtle, some not. She also discussed how the culture is changing. At 45 million strong, blacks represent 14.3 percent of the U.S. population, accounting for 17 million households. By 2030, they will represent 19.5 percent of U.S. residents. The non-Hispanic white population, in contrast, is growing by just 0.5 percent annually. Household income among blacks is broken down as follows: • $25,000 or less: 37 percent • $25,000 to $50,000: 28 percent • $50,000 to $99,000 23 percent • $100,000-plus: 12 percent While the average household income among blacks is lower than other groups, Perkins-Roberts noted that many blacks live alone, which is rarely the case with Asians or Hispanics. Just 28 percent are married, compared to 49 percent of Latinos. Interestingly, there has been an 11-percent increase in the number of black married couples. Living mostly “in the day,” African-Americans spend 80 percent of their income, which is much more than other groups spend. They are also more receptive to mobile coupons, enjoy TV commercials and watch more television overall.
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New Name, New Look enmark rebrands to “enmarket” in its commitment to fresh food and health By Danielle Romano
nmark Stations is on a health kick. The Savannah, Ga.-based convenience store retailer has fully launched a branding change to “enmarket” in a move to align the look of its c-stores with its commitment to fresh food and health. The first store to successfully make the changeover debuted in June in the company’s hometown of Savannah. The rebranding overhaul is expected to be completed in one year. The mission of enmarket is to “enrich lives in the communities we serve,” and to do so, the retailer is starting the transformation from the inside out. The organization looks much different now than it did in the 1980s, when the first Enmark store appeared in the market, noted Houstoun Demere, vice president of enmarket. While enmarket maintains the core values the
company was founded upon, the change of branding is inspired by the evolution the company has experienced over time. The retailer was founded in 1963 as Interstate Stations and rebranded approximately 20 years later to Enmark. According to its vision statement, the organization strives to be: • A company that customers want to patronize and employees are proud to work for. • A profitable company that is involved in and appreciates the many communities in which it operates. • A company that is the envy of the competition. • A company where customer service is second to none. • A company that can react quickly to take advantage of an opportunity, as well as respond to a problem or crisis. • A company where everyone is genuinely striving to get better every day. Over the years, “we’ve maintained the core values the company was founded upon, but have morphed into something different with some significant changes in how we go to market,” Demere explained. “Most of these changes have occurred inside the walls of Enmark over the last few years — both in the stores and in the office. We felt that it was time to make some changes outside of the walls to better reflect these internal changes. This starts with our name and logo, the first thing you see when you ride by one of our stores.” What’s In a name?
the first-ever enmarket offers a growler program featuring local craft beer.
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The new enmarket brand embodies 52 years of corporate history by keeping the name “Enmark” within the new banner. “Enmark has always been recognized as a brand of friendly employees, quality fuel, and inexpensive gas and merchandise. But with the simple addition of
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as part of the rebranding, some enmarket stores will get a proprietary fresh-food program and other new product lines.
two letters, we’ve included the word ‘market’ within our name and that is more indicative of the type of stores we operate,” Demere said. “The name was sitting there in front of us the whole time, and when we realized it, it didn’t take us long to embrace the idea to make the change. It seemed like a natural progression for our brand.” With the new name comes a new look. To make enmarket stand out, the brand boasts a softened logo with some color modifications to better represent its present identity. Under the enmarket name, a banner reads “fresh choices, friendly faces,” reflecting the brand’s commitment to fresh food and customer service. “We also added a couple of leaves to the logo to accentuate the fresh and healthy elements of our brand,” noted Matt Clements, director of marketing for enmarket. A new website, www.enmarket.com, will be going live soon. neW offerInGs
As part of the rebranding effort, enmarket plans to change more than its name. Many stores will see interior remodels and reimaging — from new employee uniforms reflecting the transformation, to upgraded instore technologies for quicker transactions. Enmarket will continue to offer the same core products Enmark has always carried. However, several stores will see additional product lines. For example, 11 stores are now preparing fresh food on-site, and the company has added a new line of healthy snacks with more all-natural, organic, gluten-free and non-GMO options for customers.
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“We’ve increased our delivery frequencies for products like fresh salads, sandwiches and produce so that we are able to keep the freshest possible products on our shelves all week long,” Demere said. “We’ve also added take-home casseroles from Miss Sophie’s, rotisserie chickens and other take-home meal solutions for the customer on the go.” In addition, many enmarket stores will feature The Eatery, a proprietary food concept. The Eatery features fresh prepared foods all made to order, including burritos, sandwiches, salads, premium coffee and lattes, smoothies, rotisserie chicken and more. The Eatery also features new ordering technology that allows the customer to place their order on a selfservice kiosk. This improves order accuracy and allows cooks to prepare orders in less time, Demere noted. After submitting their order, customers can finish purchasing any other merchandise and pick up their order within minutes. “Moving forward, look for us to expand new offerings to more of our stores, and look for us to continue to find ways to make it more convenient for our customers to make healthy lifestyle choices,” said Demere. “When people are healthy, they are generally happier, less likely to become ill, more productive at work, and eager to grow and learn. So we’ve simply tried to make it easier for consumers to make healthier choices at our stores while still giving them the option to make a more indulgent purchase if they choose.” ContInued GroWth, ContInued support
Enmark currently operates 63 stores in Georgia, South Carolina and North Carolina. As enmarket, the company
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will continue its growth plans by way of mergers and acquisitions, according to Demere, the latest generation of his family to lead the organization. To further its commitment to healthy lifestyles in the community, enmarket has added bicycle service stations at two locations with heavy bike traffic, with more stores to be added in the future. Likewise, enmarket will continue to sponsor healthy lifestyle events such as the Savannah Bridge Run and the Encourage Health lunch series. “We don’t limit our focus on health to products in our stores. … Events like the Savanah Bridge Run and the Encourage Health lunch series promote healthy lifestyles, so we’re happy to sponsor them to further increase health and wellness awareness in our community,” said Demere. CSN
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Three Truths That Will Change Your Career Debra sandler’s first rule for women: “stop behaving as expected” By Joan Toth, Network of Executive Women “With belief in yourself, hard work, focus and dedication, your opportunities are limitless,” she said. “You have to be realistic, of course, but if you don’t believe your opportunities are limitless, you won’t live it.” Her words have stayed with me. How many women in this industry truly believe their career opportunities are “limitless?” Defying expectations
Debra’s words of advice are underscored by her own life story. As a Latina and African-American woman born in Venezuela and raised in the small island nation of Trinidad and Tobago, she has defied society’s — and
Debra sandler has enjoyed a barrier-busting career.
This is the fourth in a four-part series of exclusive educational columns by the Network of Executive Women (NEW), leading up to
he convenience store industry is often seen as a place where women have little (or no) upward mobility. And it’s hard to refute the obvious: The industry has many female managers, but few women in top leadership roles. But throughout my career, I have worked with exceptional women in the convenience retail industry who have moved up. They had the resilience — and courage — to forge career paths that worked for them and their companies. Their impact on what’s sold and how it’s sold has been remarkable. Their influence on gender diversity at the companies they work for has often been transformative. One such woman is Debra Sandler, past president of Mars Chocolate North America. At the Network of Executive Women (NEW) Executive Leaders Forum in July, Debra — now a board member at Gannett Co. — shared her inspiring personal story of disrupting the status quo as she successfully navigated her career to the top levels of the industry.
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the 2015 Convenience Store News Top Women in Convenience awards in October. In addition to being a presentation sponsor for the Top Women in Convenience program, NEW and CSNews have partnered to develop this series of columns directed at helping corporate leaders drive more inclusive company cultures. More than 50 of the convenience store industry’s top female executives, managers and mentors will be honored at the secondannual Top Women in Convenience awards presentation, being held during the 2015 NACS Show in Las Vegas. SPONSORED BY:
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many colleagues’ — expectations. When she left Mars earlier this year, she had risen to the position of chief health and well-being officer, a new global position ideally suited to her health care and consumer packaged goods background. Debra acknowledges that she is a rarity — and is passionate about changing that. “People don’t expect someone [like me] to be president of many things,” she told the nearly 350 invited industry leaders at the NEW Forum. “And while I’ve taken great pleasure in being ‘the first,’ after a while that gets old. Why, after 30 years, am I still the ‘first’ or ‘only’ in the room?” Debra’s advice for all women looking to step up and step into the room with her is straightforward: “Don’t be trapped into behaving a certain way. Stop behaving as expected. Do some introspection. Know what is right for you and when it is right for you.” She speaks from experience. As a young professional at PepsiCo, she enjoyed a wonderful career. But after 13 years with the company, she was expecting a child and burned out after a hard-charging decade in “up-and-coming” roles, the last of which required 80-percent travel. As vice president of marketing, she took an extended maternity break and decided not to return to work. “I didn’t know if I had the courage to do it,” she recalled. “People said I would kill my career and I would never get the momentum back. But leaving is what I needed to do at the time for me. Now, it’s called ‘off-ramping,’ but I didn’t know that fancy term at the time. There were a lot of people who made me feel I was crazy.” Two years later, when she wanted to return to work, recruiters “treated me like I had forgotten everything and had been bathing in applesauce while I was on leave. They asked me if I could read a P&L [profit and loss statement]. I said, ‘Did you read my résumé?’” Her carefully cultivated professional network became invaluable and she accepted a leading role
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with Johnson & Johnson, where she quickly rose to the positon of worldwide president of McNeil Nutritionals, overseeing the launch of Splenda. From there, she joined Mars where she served as chief consumer officer before moving up to lead the candy company’s North American chocolate business. At the NEW Forum, Debra shared three principles she’s used to drive her barrier-busting career: 1. Believe in yourself. If you lack confidence, your possibilities are limited. “You will get knocked down and you won’t get every promotion,” she said. “But how do you not stay down? How do you build resilience in yourself and in our young people? When your business gets stuck, you find a way to make the numbers. We must use that type of attitude on ourselves. When I was passed over for a promotion, when my comments were ignored, belief in myself got me through.” 2. Get a support network — both professional and personal. “It took me forever to hire someone to clean my house every other week,” Debra shared. “It made me feel like I was a bad mother or wife. I had it in my head that I was supposed to be able to run to work, get every promotion, run home, have the clean house and cook the food.” 3. Invest in career planning and take risks. “Nothing will happen if you don’t take a leap of faith,” Debra said. “So many women have no five-year plan. But if you don’t have one, they will create one for you. It may be absolutely not what you want. If you haven’t articulated a plan, then you have no one else to blame.” These are principles NEW supports as we work toward our vision of “a workplace with no limits” for all. To find out how to get involved or get more information, visit newonline.org/itstime. CSN Joan Toth is president and CEO of the Network of Executive Women, a learning and leadership community representing 10,000 members, 750 companies, 100 corporate partners and 20 regional groups in the United States and Canada. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.
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Finding Your Perfect Lender The best partner mirrors the size of your business and your aspirations for growth
ave you been thinking that your bank might not be the perfect fit for you? For example, have you turned to your bank for a loan only to find their lending capacity has hit its limit or they can’t fund that new-to-industry location or the acquisition of a local competitor? Do you like your bank representative, but he/ By John C. Flippen Jr. & John Sartory, she doesn’t seem to be Petroleum Capital & Real Estate LLC able to get their bank to understand your business? Do you sometimes feel that you can’t get your bank’s attention? If so, then this might be the time to right-size your perfect lender. THE LENDING/FINANCING MARKET
The lending/financing market is quite diverse, with
Table 1: Types of Lending/Financing Available
• • • • • • • •
Senior debt Sales leaseback financing Lines of credit/standby letters of credit SBA backed loans Asset based lending (ABL) Insurance companies Equipment leasing/financing Collateralized loan obligations
• Securitization/bonds • Junior debt • Uni-tranche • Mezzanine • Preferred equity • Equity • Bridge financing
Table 2: Sources of Capital • • • • • •
Banks Life insurance companies Private equity funds Venture capital funds Hedge funds BDC (Business Development Corporations)
• Sales leaseback providers • Credit unions • SBA (Small Business Administrations) • Mezzanine funds • SBIC (Small Business Investment Companies)
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lenders offering a broad package of financing options or opting instead to specialize in just a few. To help highlight many of the available options, we have provided a brief list (see Table 1) that covers a broad spectrum associated with the types of lending available and the sources of capital that focus on lending these types of instruments (see Table 2). EVERYTHING IN BALANCE
There are many sources of capital in the marketplace, but there is one thing they all have in common besides money — risk. All of these lenders provide loans that are priced based on the risk of the borrower. From the Fortune 500 publicly traded companies to the self-employed standalone gas station owner, each creditor has its own risk profile. Not only do capital providers price loans based on the credit profile of the borrower, but risk actually lines up quite nicely with the balance sheet of your company as demonstrated in Table 3. As you can see in the table, as you move down the balance sheet both on the Assets side and the Liabilities and Equity side, the cost of capital typically increases. Rates and terms become more costly, restrictive and sometimes punitive. Lenders typically specialize in certain areas of the balance sheet and better understand how to price in the associated risks related to those areas. Over the past few years, our firm has placed a
significant amount of “Non-Traditional” financing, such as mezzanine, preferred equity, collateralized loan obligations and bridge financing, to finance a number of major oil company divestitures and to help our clients deal with the increasing purchase multiples for assets in our industry. Although there are many types of lenders that specialize in certain areas of the balance sheet, the majority of the transactions in the convenience and gas station industry are still funded by senior lenders or banks. MORE ABOUT BANKS
“Banks” is a very broad term because “banks” can be classed into several different types and typically fall into the following four categories: Community/Local, Regional, Super Regional and Bulge Bracket/Mega Center/“Wall Street” banks.
7500 7000 6500 6000 5500
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Mar. 31, 2010
Mar. 31, 2009
Sept. 30, 2009
Mar. 31, 2008
Sept. 30, 2008
Mar. 31, 2007
Sept. 30, 2007
Mar. 31, 2006
Sept. 30, 2006
Mar. 31, 2005
Sept. 30, 2005
Mar. 31, 2004
Sept. 30, 2004
Mar. 31, 2003
Sept. 30, 2003
Mar. 31, 2002
Sept. 30, 2002
Sept. 30, 2001
Mar. 31, 2013
Number of Banks
Mar. 31, 2011
How do you find your perfect lender from all of the information provided? Well, we need a few more items that detail ways in which the four bank categories may look at Banks providing loans. The following lending characteristics are applicable and many times overlap from one bank to another: Interest Rates • Based on fixed rates, prime, LIBORbased rates, spreads over LIBOR Lending Limits • Community — Approximately $5 million lending limits; fixed rates, based on prime • Regional — Approximately $15 million sweet spot • Super Regional — Approximately $25 million-plus sweet spot • Bulge Bracket — As big as possible
Sept. 30, 2010
Table 4: Number of U.S. Commercial
Sept. 30, 2013
Mar. 31, 2012
• Line of credit • Accounts payable • Notes payable — current • Capital lease — current Total current liabilities • Notes payable • Capital leases • Other Total long-term liabilities • Equity Total long-term liabilities
The characteristics of these four categories of “banks” include: • Community/Local Bank: Operates below the state level and is typically locally owned and operated. Focuses on the needs of small business and families. Aggregate assets of less than $1 billion. Approximately 90 percent of all banks. • Regional: Covers a couple of states or a large part of one state. • Super Regional: A mid-sized bank that has a significant presence in a geographical region across multiple states. Examples are U.S. Bancorp, Bank of New York Mellon, PNC, BB&T, Capital One, Comerica, Fifth Third, SunTrust and Wells Fargo. • Bulge Bracket/Mega Center/“Wall Street” Banks: Examples include Bank of America, Citibank, JP Morgan, Goldman Sachs, Morgan Stanley and UBS. The banking industry has experienced significant changes over the past few years with the number of U.S. commercial banks declining from more than 8,000 in 2001 to less than 6,000 in 2013. There are approximately 6,320 banks in the United States and 1,065 savings banks and thrifts as of 2012, according to the Federal Deposit Insurance Corp. (FDIC). As a result of this consolidation, the majority of the assets — $5.989 billion — are held by the four largest banks, while the 6,524 community banks hold only $1.944 billion in assets (see Table 4 and Table 5).
Sept. 30, 2012
• Cash and cash equivalents • Accounts receivable • Inventory Total current assets INT. RATE/ • Property, plants and equipment TERMS • Investments in affiliates • Other intangible • Goodwill Total assets
Sept. 30, 2011
Table 3: Everything in Balance LIABILITIES & EQUITY LOW ASSETS
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Table 5: Banking Assets & Ofces
Amortizations NON-COMMUNITY NUMBER OF TOTAL ASSETS NUMBER OF • Years, mortgage style, straight line BANKING CATEGORIES ORGANIZATIONS ($ billions) OFFICES Lender Covenants Four largest banking organizations 4 5,989 18,937 • Leverage (senior debt to EBITDA); lease Banks over $100 billion 12 2,172 16,636 adjusted leverage Banks between $10 and $100 billion 76 2,430 15,112 • Real estate/asset values (LTV) Banks between $1 and $10 billion 206 764 11,368 • Available cash flow (FCCR-DSC); cash Banks under $1 billion 92 21 150 flow sweeps Community banks 6,524 1,944 36,274 • Inventory Industry totals 6,914 13,319 98,477 • Hedging options (interest rate swaps, floor, Source: FDIC 2012 ceiling, collar, etc.) • Club deals & syndication • Financial reporting requirements • Total loans in aggregate under $15 million — As you can see, there are many ways in which a Site-by-site lending based on real estate LTV with bank can price in the credit worthiness of a borrower, fixed rates; 20-year mortgage style amortizations; but each banking category seems to have their own longer terms and low debt service coverage ratios. personal perspective on how to best meet your finanPartner with community/ local banks. cial needs. As a result, it is important to size your busi• Total loans in aggregate greater than $15 million — ness/balance sheet up with the best bank/partner to Senior debt-to-EBITDA multiples; secondary reliance meet your needs now and in the future. on real estate LTV; 15- to 20-year mortgage style and straight line amortizations; five- to 10-year terms; debt service coverage ratios based on capital strucA PERFECT MATCH ture. Partner with regional/super regional banks. Generally speaking, the best lenders mirror the size of • Total loans in aggregate greater than $100 million your business and its aspirations for growth. If you (more in the billions) — Senior debt-to-EBITDA plan to operate just a few locations, then a commumultiples; cash flow sweeps; straight line amortizanity/local bank will most likely provide you with the tions; alternative financing; ancillary income. Partner most proceeds on a typical real estate-based loan. On with bulge bracket/mega center/“Wall Street” banks. the other hand, if your company is already large and In summary, if your bank is not matching your still growing, the super regional to mega center banks needs, it may just be because they aren’t the correct are going to be your best match. match for your business. All of our clients that started Based on the senior lending requests needed for out with just a few stores and have grown to control your company, the outline below provides a generalmany locations have had to change their banking catization of what might be your perfect bank: egories and relationships along the way. As you grow and/or change, your bank/lenders can become an asset to your business by bringing specialized knowledge gained from working with other clients within the same industry. Finding the perfect lender will improve the chances of reaching your strategic objectives. CSN John C. Flippen Jr. and John Sartory are managing directors of Petroleum Capital and Real Estate LLC (www.PetroCapRE.com). The firm provides buy-side acquisition, refinancing, capital restructuring and select sell-side advisory services in the convenience and gas station industry. PetroCapRE has assisted clients in completing transactions valued at more than $1.3 billion. Flippen can be reached at jflippen@PetroCapRE.com. Sartory can be reached at jsartory@PetroCapRE.com. Editor’s note: The opinions expressed in this column are the authors’ and do not necessarily reflect the views of Convenience Store News.
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Visit us at NACS: Booth # 563
Spotlighting major industry events
Blazing a Trail The McLane National Trade Show showed the way in the Mile High City By Melissa Kress
onvenience channel players from across the country trekked to Denver in early September to attend the 2015 McLane Co. Inc. National Trade Show, titled “The Sales Trail.” The event highlighted foodservice and tobacco in its category sessions and new products on the expo floor. The trade show also stressed to convenience industry insiders the need to “Find a Way,” the personal philosophy of keynote speaker Merril Hoge. Hoge, a former National Football League player and current ESPN host, took to the stage to share the lessons he’s learned from his journey to the football field and from his off-the-field battle with cancer. A key step McLane National in finding success is having Trade Show goals and staying focused on Sept. 1-3, 2015 those goals, he said. He also Denver, Colo. explained that being uncommon will get you noticed — from your boss, to your peers, to your competitors. “Everybody in here has goals and everybody in here has challenges. I don’t know what they are, but I know everybody has two tools for excellence: mental and spiritual energies,” Hoge said, defining excellence as getting the most out of everything you do. But no one can go it alone. Most of Hoge’s lessons and insights came from others. “Life is a team game and we are all teammates,” he concluded.
New products were spotlighted on the trade show floor.
BaCk Bar CLoSeup
The show delved into two vital convenience channel categories: tobacco and foodservice. Temple, Texas-based McLane is a $46-billion supply chain services provider and a wholly owned unit of Berkshire Hathaway Inc. The company provides grocery and foodservice supply chain solutions for convenience stores, mass merchants, drugstores and chain restaurants throughout the United States. Nik Modi, managing director at RBC Capital
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Markets LLC, noted that 2015 started off rough on a macro level, but as the year progressed, GDP growth revitalized, weather patterns normalized and the longterm trends are improving. U.S. consumer confidence is increasing and the low-income consumer is starting to participate in the economic recovery for the first time. In addition, he said lower gas prices are a positive for the core tobacco consumer, and c-stores’ growth is “very, very good.”
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Spotlighting major industry events
A Case for Cannabis
All of this is positive for the cigarettes category; the decline in volume has moderated while pricing has held up. Good news on the cigarette front, however, spells less than good news on the smokeless tobacco and electronic cigarette fronts. As Modi explained, most cigarette consumers are dual users with smokeless. As gas prices have fallen, these dual users have made the switch back to cigarettes. A similar trend is being seen with electronic cigarettes. In this case, though, the dual user may be gravitating back to cigarettes because the e-cigarette and vapor products currently on the market are not meeting their needs, he added. E-cigarettes are also facing headwinds as convenience retailers adjust their tobacco segment mix. “Traditional e-cigarettes are holding ground in convenience stores,” Modi said, noting that c-stores are beginning to rationalize their SKUs in this segment and “exiting vapor.” The reason is partly because the core c-store consumer does not want complicated vapor products and partly because retailers over-SKU’d on the segment. In fact, fewer retailers are looking to expand their e-cigarette offering. Specifically, 80 percent of c-stores said they were expanding their sets in December 2013, whereas only 23 percent said the same this June, according to Modi. Despite this, he still believes vapor will be a disruptive category — but not until there are product improvements. A regulatory framework also needs to be in place. FoodServiCe opporTuNiTieS
Looking at an equally vital category to the convenience channel, Kevin Miller, senior marketing manager at Tyson Foods — Convenience, detailed the key
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To date, four states — Alaska, Colorado, Oregon and Washington — plus Washington, D.C., have legalized marijuana. Looking at the numbers, being in the cannabis business appears to be good for business. According to Nik Modi, managing director of RBC Capital Markets LLC, Colorado raked in $44 million in tax revenue from legalized marijuana in 2014 and $60 million through June 2015. Further west, Washington State generated $65 million in tax revenue last year. In addition, cannabis-related offenses in Washington State declined by 95 percent. “The statistics are there,” Modi told attendees of the McLane National Trade Show. And so is the support: More of the U.S. population than not is in favor of legalizing marijuana federally, including 60 percent of millennials, he pointed out. While it may take a while for legalization to come on the federal level, more states are moving closer to legalizing marijuana every day. Massachusetts has a referendum in place to regulate marijuana in line with alcohol, and Hawaii introduced a bill for legalization earlier this year. Meanwhile, the Arizona Marijuana Legalization Initiative is rounding up support to have the measure appear on the ballot in 2016; and although California does not have a measure yet, the issue is likely to come up during the 2016 election, Modi said. Other states considered likely candidates for legalization in the near future include Missouri, Maine and Nevada, Modi added.
opportunities that retailers need to focus on to maximize their foodservice offering. When it comes to on-the-go food offerings, c-stores compete with fast-casual and quick-service restaurants and grocery deli. There is a lot of back and forth among the four, Miller explained. In a Channel Choices Study with Carbonview Research, the research division of Convenience Store News’ parent company Stagnito Business Information, Tyson found that among high-frequency c-store shoppers, only 19 percent buy prepared foods in the channel. “Ultimately, we are not getting our fair share overall,” he said. Consumers indicated that quality of food, food freshness and the price-value connection are the top attributes they look for when buying prepared food. While quality
Spotlighting major industry events
and freshness are not breaking news, “If anyone should own these Miller pointed out that c-stores need attributes, it should be conveto look at how they are communicanience,” said Miller. C-stores need ing what they do with foodservice. to “rally around what we do well.” “If we are not talking about it, C-store shoppers also say brands then we are not giving ourselves do matter when it comes to a prethe best chance to execute against pared-food purchase and the percepit,” he advised. tion of food quality. In fact, brands When looking at the top six can improve consumer perception of attributes — which also include the quality of the entire store. store cleanliness, menu choices/ But perhaps the greatest opporMcLane recreates a store environment to options and past experience — tunity for convenience stores in determine the top sellers in a retailer’s market. the Channel Choices Study showed the foodservice realm lies in the convenience stores trail the competition. That’s afternoon snack daypart. According to the Tysonnot positive news, Miller acknowledged, but once Carbonview study, 46 percent of general c-store visits c-store retailers understand what is important, they occur after 2 p.m. In addition, impulse purchases grow can do it better. and fewer visits are made by individuals alone as the Looking specifically at the convenience channel’s day goes on, Miller explained. top attributes, consumers pointed to speed of service, “The traffic is there late in the day and decisions ease of parking, on direct travel route, on the way to/ are likely to be unplanned and involve more than one from work/home, and food portability/ease of eating. person,” he said. CSN
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Tapping Into Your Hunter Instincts Convenience Distribution Business Exchange spurs attendees to think differently By Kathleen Furore
hallenged with the mandate to get attendees “riled up,” Convenience Distribution Business Exchange keynote speaker Jeremy Gutsche told audience members that while we are experiencing history’s highest rate of change, “our brain is hindered by 10,000 years of evolution as farmers.” That means we are conditioned to become complacent, repetitive and protective of past successes — the “three traps of a farmer” that cause us to repeat what we’ve done rather than adapt and make changes that would propel us to even greater success, according to the CEO of TrendHunter.com and author of the bestselling book “Better and Faster: The Proven Path to Unstoppable Ideas.” The antidote, Gutsche said, is to fight some of those farmer instincts by tapping the three “hunter instincts” that allow you to be insatiable, curious and willing to destroy. He concluded with 16 homework questions that play off the “hunter” mentality. Among them: • How often do you experiment with ideas that might not work? • How much time do you spend hunting new opportunities? • What success is blinding you from trying new ideas? • How much simpler would you design your business if you had to restart from scratch? “The next breakthrough is closer than you think,” he said. “Your own success holds you back.” Keeping with the theme of thinking differently, the welcome address of the 2015 Convenience Distribution Business Exchange focused on finding new, cutting-edge ideas. Dubbed CDBX for short, the Convenience Distribution Business Exchange took place Sept. 8-11 in Chicago and marked the first event hosted
by the Convenience Distribution Association (CDA) since its rebranding from the American Wholesale Marketers Association. Delivering the CDBX welcome address, Chairman Rob Sincavich took the opportunity to reflect on the recent enhancements the CDA has developed. He also previewed changes to come that will set the stage for future success in the convenience distribution industry. The Convenience Distribution Convenience Association is the trade organizaDistribution tion working on behalf of conBusiness Exchange venience products distributors in Sept. 8-11, 2015 the United States. Its distributor Chicago members represent more than $92 billion in U.S convenience product sales, serving a wide variety of small retail formats. The association’s new IdeaXchange — a dynamic, private, collaborative, members-only online community — was the first new initiative Sincavich highlighted. “CDA’s top priority for 2015 has been to make it easier for members to communicate with each other on an ongoing basis,” the chairman said. “The IdeaXchange accomplishes this goal by providing instant access to CDA members and a place to share articles, ask questions, meet and learn from others in the industry.” Other additions highlighted by Sincavich were: • Manufacturer’s Advisory Council; • 2017 Marketplace Planning Task Force; • Enhanced government affairs program; • New online tools to track legislation and contact lawmakers; • New interactive website (www.cdaweb.net) • New Member Relationship Manager with a single sign-on for all CDA web-based activities; and • New app for iPhone and Android users featuring Convenience Distribution magazine and real-time CDA information. CSN
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THE MEAT SNACKS
Meat snacks fill consumer need for quick protein, meal replacement S
nacking has been one of the hottest growth areas for food companies during the past decade, as both retailers and restaurants try to capture this “extra” daypart. The meat snacks category–aka jerky– has been the beneficiary of accelerated consumer demand over the past several years. No retail segment has experienced more growth in the category than c-stores. According to IBISWorld, c-stores account for 72 percent of all jerky purchases, far outpacing most retail channels. Nielsen projects the U.S. meat snack category to be worth $2.5 billion in 2015, with c-stores accounting for nearly $2 billion of the total
C-store meat snack sales on the rise Percent change in dollar sales by channel +13.7% $1,400,000,000
Latest 52 weeks ending May 2015
Latest 52 weeks ending May 2014
800,000,000 600,000,000 400,000,000
Drug Source: Nielsen
THE MEAT SNACKS
dollars. Meat snacks grew nearly 14 percent in the 52 weeks ending May 2015, outpacing the nearly 7 percent growth of the year prior, according to Nielsen. Several factors have been responsible for the explosive growth of meat snacks: Nutrition. In an age where candy, cookies and chips have been criticized for contributing to obesity and offering limited nutritional value, meat snacks are high in protein and low in fat–two important selection criteria for today’s consumers. Flavor innovation. While beef jerky still accounts for more than three-quarters of meat snack sales, options like deer, elk and bufalo have helped fuel interest and growth, along with chicken and turkey. In addition, unprocessed, all-natural “niche” flavors such as Basil Citrus and Five Peppercorn Beef Jerky have garnered loyalty. Millennials. Young adults ages 18 to 24 are more likely than any other group to consume meat snacks throughout the day, and females are also increasing
REVOLUTION their consumption, according to NPD. Grazing. Meat snacks are eaten between lunch and dinner and also as a late-night snack, providing consumers with a protein-rich, “authentic” boost of energy, according to NPD. CPG firm interest. Major consumer brands have shown interest in the category. Most recently, Hershey purchased artisanal meat snack processor Krave Pure Foods Inc. for $300 million, expanding the reach to mainstream channels. Price increases. The high demand for meat snacks has allowed retailers to raise prices and capture more revenue. Average price increases have been around 7 percent in the past year, according to Nielsen. Whether it’s the meal replacement quality or simply that meat snacks are meeting a need of the new generation, the category’s double-digit growth is not expected to taper in the short-term, even as many packaged snack categories have flat lined.
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HOTPRODUCTS Special Advertising Section
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CLASSIFIED Financial Services
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Equipment / Supplies
ADINDEX Acosta Add Systems Alon Brands Altria Group Distribution Company/NuMark American Coalition for Ethanol American Licorice Anheuser- Busch Anthony International Assembled Products Co BakeNJoy BIC Blu Cigs Boston Beer Breathe eCig Cash Depot CB Distributors Cheyenne International Coca Cola ConAgra Foods Convenience Valet DBI Distribution Del Monte Fresh Produce Delizza Display Technologies ECRS Eloma USA Ferrero USA Fit Crunch Bars Forte Product Solutions General Mills Genesis Modular Car Wash Building Syst Global Tobacco LLC Good 2Grow Hatco Corp Hershey Home Market Foods Hussmann Hunt Brothers Pizza Imageworks Display InLine Plastics Corp InnovAsian Cuisine Innovative Control Systems ITG Brands J&J Snack Foods Jelly Belly JTM Foods Kooler Ice Vending Machines Kraft Heinz Liggett Vector Brands Living Essentials Logic Technologies Manitowoc Mars Chocolate North America McCain McKee/Little Debbie McLane Co Inc Mondelez International MTI/Autofry Nat Sherman National Corn Growers Association National Tobacco Nestle Waters NVE Ojeda USA Inc Orion Food Systems Ovention Ovens Perfetti Van Melle Phillips 66 Private Label Manufacturers Association ProFoods/Champs Chicken R J Reynolds Tobacco Company Red Bull Rubbermaid Ruiz Foods S&M Brands, Inc Sabert Santa Fe Tobacco Save-A- Lot Society Insurance Subway Swedish Match Swisher International The Procter & Gamble Co Tierra Nueva Tillamook Country Smoker Inc Trimino Tyson Convenience Universal Merchant Visual Marketing Wayne Fueling Systems White Castle
www acosta com/c-store www addsys com www AlonBrands com www insightsc3m com www flexfuelforward com
133 118 129 2 60 30 www anheuser-busch com 43,170B,188 www anthonyintl com 99 www spraymastertech com 32 www bakenjoy com 153 www biclighter com 9,31 103 34 www breathecig com 114 www cdlatm com 38 www 21stCenturySmoke com CV1 www cheyenneintl com 135 www cokesolutions com 33,79 www conagrafoods com 37 darensdorf@cvalet com 65 www dbidist com 150 www freshdelmonte com 91 www poppies com 42 www Display-Technologies com 40 800 211 1172 5 www elomausa com 155 www ferrerousa com 111 sales@fitcrunchbars com 44 www forteproductsolutions com 36 www generalmillsconvenience com 25 119 888 597 6653 105 sales@good2grow com 93 www hatcocorp com 51 www hersheysconvenience com 13 www rollerbites com 81 www hussmann com 53 www huntbrotherspizza com 187 www imagworksdisplay com 61 www inlineplastics com 80 www innovasiancuisine com 143 www icsCarWashSystems com 117 17 www jjsnackfoodservice com 149 www jellybelly com 151 www jtmbakery net 145 www koolerice com 163 www kraftfoodservice com/CLFrozen 95 877 415 4100 131 www 5hourenergy com 115 www logicecig com 10-11,41 www manitowocbeverage com 97 www mars24seven com 23,29,109 www mccain4cstores com 85 www littledebbiecstores com 68-69 www mclaneco com 14-15 71 www mtiproducts com 84 www natsherman com 161 58 www V2 com 157 www wesellbottledwater com 73 19a Insert www ojedausa com 77 www info hotstuffpizza com 87 www oventionovens com 47 800 283 5988 45,139 www elevate 76fuels com 57 www plma com 49 www pfsbrands com 83 www engagetradepartners com 7,35,63 101 89 39 www SMBrands com 107 www sabert com 82 63 www save-a-lot com/own 121 www societyins com 170 Regional www subway com 123 customer service@smna com 59,113 www swisher com 21,127 159 doug whitfield@nxtphz com 165 www tcsjerky com 137 www drinktrimino com 88 75 www nynab com Outsert www AIMvmichicago com 147 www wayne con/emv-csn 55 ordings@whitecastle com 125
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The Dish on Grab & Go
Competition is stiff among c-stores, supermarkets and mass merchandisers
onvenience stores are making a name for themselves in foodservice, but they face stiff competition from other retail channels particularly when it comes to grab-and-go food, notably supermarkets and mass merchandisers. New findings from Carbonview Research, a sister company of Convenience Store News, reveal that the “where” greatly impacts the “what” and “why” among consumers. Convenience stores win big with traditional grab-and-go fare, taking the lead in hot dogs and sandwiches. However, the competition scores better with chicken, salads and bakery. More than a third of consumers indicate they don’t buy grab-and-go food at a c-store because it is unappealing or too expensive, but there is hope: An even greater number say they would think about buying if the price and selection were right.
Which of the following factors would make you think about trying convenience store food items? 51.0% Better selection 45.8% Selection of healthier items 37.5% Coupons or discount prices 34.3% Free samples 10.9% Other Base: 251 shoppers who did not purchase grab-and-go food at a c-store
What grab-and-go food items have you purchased in the past year at: ConvenienCe store
Sandwich Hot dog Frozen treat Pizza Hamburger Bakery Chicken Salad Soup Other
44.3% 38.0% 24.3% 23.3% 18.5% 17.7% 13.7% 13.4% 8.4% 6.8%
38.1% 14.5% 21.0% 25.2% 14.3% 34.1% 42.1% 39.5% 21.6% 6.5%
35.0% 15.7% 23.4% 28.5% 19.0% 28.3% 33.9% 26.5% 13.9% 3.6%
Base: Respondents who purchased grab-and-go food at each channel
The convenience channel has been making a push toward healthier options, but the message is not getting through to everyone. The belief that c-store food is unhealthy is shared by: 15.5% 17.2% 14.5%
of c-store shoppers of supermarket shoppers of mass shoppers
Why haven’t you purchased grab-and-go food items at a convenience store in the past year?
Want to collaborate and share expertise with your peers? The Council of Retail Experts (CORE) is an exclusive network of convenience store retail leaders who do just that. For more information on how to join CORE, please visit www.cvcoreinsights.com.
(Base) Convenience store food is unappealing Too expensive Convenience stores don’t have a big enough selection of food Convenience store food is unhealthy Convenience stores near me don’t offer grab-and-go food items Other I don’t shop at convenience stores
(251) 34.7% 27.1%
(198) 36.4% 27.3%
(131) 32.1% 26.7%
12.4% 3.2% n/a
12.6% 3.0% 37.4%
12.2% 4.6% 34.4%
Base: Shoppers who did not purchase grab-and-go food at each channel
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