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WHAT’S NEXT IN CONVENIENCE AND FUEL RETAILING

WHAT’S NEXT IN CONVENIENCE AND FUEL RETAILING

Inflation, supply chain issues and the ongoing labor shortage have c-store retailers and suppliers more pessimistic about this year’s business prospects.

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From Troubles to Triumph

Adaptability can be a game changer for c-store industry players in 2023

“THE HARDER THE CONFLICT, the more glorious the triumph. What we obtain too cheap, we esteem too lightly; ‘tis dearness only that gives everything its value. I love the man that can smile in trouble, that can gather strength from distress, and grow brave by reflection.”

— Thomas Paine

If the last three years have taught us anything, it’s that life — and business — are never without challenges. But as political activist, philosopher and writer Thomas Paine once said: “The harder the conflict, the more glorious the triumph.”

The convenience store industry is facing its fair share of challenges these days.

According to the findings of the 2023 Convenience Store News Forecast Study (see page 34), topping the list is the ongoing labor problem, which is multifaceted and encompasses difficulty in finding workers with the necessary skillset; increased costs to attract high-quality candidates; high turnover; increased resources needed to constantly train new employees; poor customer service; inferior site quality; and low team morale.

Inflation and national economic issues are a close second. Rising prices are eating away at profits and driving consumers to change their purchasing behavior. Even though inflation has fallen — year-over-year inflation as measured by the Consumer Price Index fell to 7.1 percent in November after peaking at 9.1 percent in June — National Retail Federation Chief Economist Jack Kleinhenz said, “It remains in the pipeline and is not going away.”

Supply chain issues also continue to plague convenience store operators and affect their sales and profitability. Not only do constant out-of-stocks require time and resources to find substitutions, but they also reflect poorly on the retailer and can prompt customers to shop elsewhere.

2023 is likely to see the continuation of these challenges, and possibly a few new ones crop up.

And though a good number of industry professionals are confident that c-store offerings are inelastic, and that the channel will continue to grow even in a tough economic climate, there are some action steps that can be taken to emerge from the current conflict in glorious triumph:

1. C-store industry players need to build contingency plans to ensure that new growth ventures (e.g., foodservice expansion, convenience-focused technologies, etc.) are not hindered by the labor and supply shortages.

2. Entering the digital space is a way for c-store industry players to compete directly with e-commerce competitors, but there needs to be a seamless user experience to match the offerings of e-commerce leaders. Don’t short-change your investment.

3. Most importantly, develop a business strategy that is flexible and adaptable, so you are able to overcome unexpected obstacles in a rapidly changing business environment.

I hope all our readers have a happy, healthy and prosperous 2023.

For comments, please contact Linda Lisanti, Editor-in-Chief, at llisanti@ensembleiq.com.

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A Legacy Like None Other

Don Zietlow is the humble genius behind Kwik Trip’s success

IT’S SELDOM THAT you meet a person as humble, direct and transparent as Don Zietlow. Zietlow announced his retirement last month after 52 years as the heart, soul and brains behind Kwik Trip Inc. (KT), the La Crosse, Wis.-based chain of more than 800 convenience stores in Wisconsin, Minnesota, Iowa, Illinois and Michigan.

Under Zietlow’s leadership, Kwik Trip grew substantially in store count from its first c-store in Eau Claire, Wis., in 1965. But his greatest contribution is probably his vision of redirecting profits back into the company and its people to create a virtually selfsustaining cycle of success that gets stronger every year.

His greatest contribution is probably his vision of redirecting profits back into the company and its people to create a virtually selfsustaining cycle of success that gets stronger every year.

The centerpiece of Zietlow’s reinvestment strategy is KT’s massive Support Center in its hometown of La Crosse. Zietlow greenlighted major capital investments in the company’s centralized dairy, kitchens and bakeries, which produce 80 percent of the products sold in its stores. In addition, the company has built an impressive central distribution center, as well as its own truck fleet to manage distribution of goods to the stores.

Like many retailers in the convenience store industry, KT increased its focus on foodservice in the early 2000s. With typical Midwestern stoicism, Zietlow was undeterred by the company’s early struggles. They stuck to it, spent more time and money, and innovated until they got it right.

By 2019, KT had won its second Foodservice Innovator of the Year award. That year, the company was a key developer of the Fresh Blends self-service smoothie machine, launched Kitchen Cravings Take Home Meals in its cold cases, and teamed up with the Partnership for a Healthier America to provide healthier food options to its customers. KT also made one of its most significant investments by introducing fresh fried chicken into its stores.

Today, foodservice accounts for 30 percent of inside sales for Kwik Trip, and 40 percent of its gross profit dollars are from food.

Most impressive, though, has been Zietlow’s relationship with his “coworkers.” When he was inducted into the Convenience Store News Hall of Fame in 2015, he said: “I am not sure I am worthy of this award, but our people are.”

Since the beginning, Kwik Trip has been sharing 40 percent of its pretax profits with employees — called coworkers — regardless of their rank or position within the company.

“Our coworkers are the greatest asset we have, they truly are,” Zietlow said during his Hall of Fame induction speech. “Good customer service, clean stores and clean bathrooms don’t happen without our coworkers taking pride in the company.”

He joked with me once that he keeps sending money into the company to force the next generation of his family members to work at Kwik Trip. Now, it is Zietlow’s son Scott who will carry on his father’s legacy. It’s a legacy that’s unsurpassed in the convenience store industry.

For comments, please contact Don Longo, Editorial Director Emeritus, at dlongo@ensembleiq.com.

FEATURES

COVER STORY

34 Feeling the Pinch

Inflation, supply chain issues and the ongoing labor shortage have c-store retailers and suppliers more pessimistic about this year’s business prospects.

35 A Lukewarm Reception for 2023 C-store retailers are largely neutral about their business prospects this year.

37 Not So Great Expectations

Inflation is pushing dollar sales up, but most retailers don’t expect considerable change in how much consumers will actually buy in the coming months.

46

Shifting Gears

Despite economic headwinds, suppliers and distributors are excited about new opportunities in 2023.

E DITOR’S NOTE 3 From Troubles to Triumph Adaptability can be a game changer for c-store industry players in 2023. VIEWPOINT 4 A Legacy Like None Other Don Zietlow is the humble genius behind Kwik Trip’s success.

SMALL OPERATOR 30 A Mixed Bag

The convenience store industry’s small operators are keeping an eye on cross-channel competition in 2023, but are prepared to boost their bottom lines.

TWIC TALK 52 Empowering Diversity & Inclusion Through Your Company Culture

A recent Convenience Store News webinar discussed how to set up organizations for success.

INSIDE THE CONSUMER MIND 70 Snacking: The All-Day Opportunity Consumers are shifting toward “hometainment” activities and away from traditional mealtimes.

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EDITORIAL

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TOP VIEWED STORIES

Casey’s Unwraps ‘24 Days of Casey’s Rewards’

From Dec. 1 through Dec. 24, Casey’s revealed surprise offers to members of the Casey’s Rewards program. Guests who participate in the program got to unwrap free and exclusive offers in the Casey’s app, including bonus points, buy-one-get-one offers, and a variety of candy, drinks and snacks.

2

Sheetz Brings Back Holiday Coffee Program

Starting Dec. 9, Sheetz Inc. offered customers one free selfserve coffee or Cup’occino each week. The offer was added weekly to each My Sheetz Rewardz member’s account every Friday through Dec. 31.

Kum & Go to Close Most Walk-Up Stores

The retailer closed four out of five of its fuel-free, urban c-store locations, as they no longer fit into the company’s long-term expansion plans. Kum & Go’s original walk-up store, located at the corner of Seventh and Locust streets in Des Moines, Iowa, will continue operations.

Couche-Tard Advances Customer-Focused Initiatives

During the second quarter of its 2023 fiscal year, Alimentation Couche-Tard Inc. expanded its data-driven assortment optimization work with a rollout to all categories in North America, President and CEO Brian Hannasch reported. The company is also preparing to expand its new loyalty program and smart checkout technology.

ONLINE

PHOTO GALLERY: Scenes From the 2022 Convenience Store News Hall of Fame Gala

Present and past members of the convenience store industry gathered in Charlotte, N.C., for the 36th annual Convenience Store News Hall of Fame awards gala. Honored at this year’s event were Retailer Hall of Fame inductee Brian Hannasch, president and CEO of Laval, Quebec-based Alimentation Couche-Tard Inc.; Supplier Hall of Fame inductee Brent Cotten, vice president of customer and industry affairs at The Hershey Co.; and Retailer Executive of the Year Doug Haugh, formerly president of Parkland USA.

New Pizza Restaurant Concept to Its Network

EG Group Adds

EXPERT VIEWPOINT

Solving the Biggest Convenience Store Maintenance Problems

Diversity in convenience store stock has multiple implications in terms of maintenance. The modern c-store, having so much to offer customers, needs to ensure that the store is continuously fit for purpose, writes Bryan Christiansen, founder and CEO of Limble CMMS.

Key steps to solve maintenance problems include having a thorough maintenance program that includes an exhaustive list of all store maintenance tasks and requirements; creating and carrying out stringent cleaning schedules; adopting technologies that fit c-stores’ specific maintenance issues and risk profile; and having a proactive maintenance regime that empowers employees regarding maintenance principles and their important role in it.

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

MOST VIEWED NEW PRODUCT

Hostess Bouncers

Hostess unveiled a new line of bite-sized snack cakes called Hostess Bouncers, offering mini variations of some of the company’s most beloved creations. These shareable treats, with creamy fillings, are available in three varieties: Glazed Twinkies, Glazed Chocolate Ding Dongs and Cinnamon Donettes. Each multipack box contains five packable, portable pouches with three Bouncers per pouch.

Hostess Brands LLC Lenexa, Kan. hostesscakes.com

Convenience Retailers Continue to Explore New Markets

Sheetz and Wawa will introduce their brands to new geographies

SHEETZ INC. AND WAWA INC., both headquartered in Pennsylvania, are preparing to grow their footprints — this time by heading farther west.

Altoona-based Sheetz will expand into Michigan, with the first store location projected to open in 2025 starting in the Detroit market.

The move into the Great Lakes State will mark the first time Sheetz has expanded into a new state in nearly two decades — when the retailer opened its first convenience store in North Carolina in 2004.

“We are thrilled to continue our growth into Michigan and bring the ultimate one-stop-shop to people across the state,” said Travis Sheetz, president and CEO of Sheetz. “Sheetz is dedicated to being a great employer and neighbor and we cannot wait to put those values into action as we expand into our first new state in two decades.”

Wawa is setting its sights on three new states as part of an expansion path: Ohio, Indiana and Kentucky.

These states are part of Wawa’s long-term expansion plan to fuel future store growth in adjacent and new markets, bringing its unique offer and experience to more communities than ever before, the company stated.

“At Wawa, growth means strengthening our existing markets, as well as expanding to both adjacent and new markets, so we can reach new friends and neighbors and welcome them as part of our extended family,” said Wawa President and CEO Chris Gheysens. “These markets are the perfect places for Wawa to expand based on their strong business communities, their family-like atmosphere, and the confidence that our unique offer and amazing associates will be welcomed by these communities. We look forward to bringing our freshly prepared food, specialty beverages, fuel and convenience services to these new areas, all while creating new jobs and meaningful community support.”

Pennsylvania continues to be a part of both Sheetz and Wawa’s growth plans, too, while the latter also has plans for new stores in Tennessee, Georgia and the Florida Panhandle.

Parkland USA Names Industry Veteran

as President

Donna Sanker takes on the role after leading Parkland Canada for three years

PARKLAND CANADA President Donna Sanker is stepping over to the company’s U.S. division as president of Charleston, S.C.-based Parkland USA following the departure of Doug Haugh in late November.

Sanker takes the reins from Interim President Jay Erickson, Parkland USA’s chief operating officer and former president of EG America. Erickson assumed the role after Haugh, Convenience Store News’ 2022 Retailer Executive of the Year, departed the company after five years in the role.

“Having led our Canadian segment since 2019, Donna has provided strong leadership and has strengthened our Canadian business. As president of our USA segment, Donna will now lead and support our U.S. team and strengthen our One Parkland culture,” Parkland Corp. said in a statement.

Prior to joining Parkland Canada, Sanker spent nearly 17 years with BP. Her roles there included

head of retail sales and marketing, chief marketing officer and chief operating officer.

Additionally, Parkland Corp. named Ian White as the new president of Parkland Canada. White has served as senior vice president, strategic marketing and innovation, since 2017. The duties of Ryan Krogmeier, senior vice president of supply, trading and refining, have also been expanded. Krogmeier, who has held this role for four years, will now lead Parkland’s U.S. supply company.

The reconfiguration of its Canadian and U.S. leadership will help strengthen the organization and culture while advancing its strategy, the company noted.

Calgary-based Parkland Corp. is an independent supplier and marketer of fuel and petroleum products and a convenience store operator. Parkland currently services customers across Canada, the United States, the Caribbean region and the Americas through three channels: retail, commercial and wholesale.

FAST FACTS 2.7% 50% 90%

In-store traffic was down 2.7 percent in the third quarter of 2022 compared to the prior year’s quarter, and 75 percent of all in-store traffic came from non-fuel customers.

— C-Store Shopper Insights Tracker, VideoMining

Nearly 50 percent of Generation Z believes snacking is most satisfying after dark. They are also twice as likely as other generations to order delivery when a snack craving hits.

— Frito-Lay U.S. Snack Index

When it comes to nonchocolate candy, 90 percent of consumers like to see seasonal colors, flavors, packaging or shapes.

— National Confectioners Association

67% of consumers said items made by a national brand would make them more likely to purchase them at a C-store.* With a cravable, wide range of quality sausages and hot dogs, and a name your customers know and trust, Johnsonville is the perfect partner to make your roller grill a success. Johnsonville, America’s #1 sausage brand.*

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INDUSTRY ROUNDUP

Eye on Growth

GPM Investments LLC closed on its $230 million acquisition of Pride Convenience Holdings LLC, which operates 31 convenience stores. The deal expands GPM’s footprint into Massachusetts.

The retailer also plans to open stores in South Jordan, Murray and Herriman, Utah, during the first half of 2023.

Kum & Go LC opened its first convenience store in the Salt Lake City market on Dec. 19. The site is the first of several Kum & Go locations set to open in the metro area over the next year.

Pops Mart Fuels LLC picked up 14 convenience stores from Anderson Oil Co. Inc. As part of the deal, Pops Mart will also acquire one c-store that is currently under construction, as well as seven wholesale fuel dealer locations.

Parker’s opened the doors to a new prototype. Inspired by Southern vernacular architecture, the Parker’s Kitchen store in Savannah, Ga., boasts an expanded retail footprint, an optimized layout for higher operational efficiency, and a lime-washed brick exterior.

QuikTrip Corp. opened a new remote travel center in Humble, Texas. It joins two additional QuikTrip remote travel centers in the greater Houston area in Conroe and Cleveland.

Stewart’s Shops kicked off December with two new store openings in upstate New York. The convenience store operator welcomed customers at new builds in West Colonie and Watertown.

No matter where people go, they always stop for Johnsonville.

Casey’s General Stores Inc. will launch Casey’s Access in 2023. The end-to-end retail media business will bring together convenience guest data alongside Casey’s pizza restaurant offering.

Circle K is teaming up with delivery startup Food Rocket to pilot the retailer’s quick delivery business model at two Charlotte, N.C., stores. Food Rocket will offer up to 7,000 SKUs through its app.

Smith Oil is enhancing its consumer engagement with a loyalty mobile app that features fuel pay and a digital customer rewards program. A pact with Liquid Barcodes will build on its current rewards program.

Trillium Energy Solutions, part of the Love’s Family of Companies, is bringing the My Love Rewards loyalty program to compressed natural gas (CNG) customers. More than 60 public Trillium stations and Love’s Travel Stops offer CNG.

MAPCO

Tenn.,

Sunshine Gasoline Distributors Inc. upgraded its mobile app with a fuel pay feature. Customers will also be prompted to buy a car wash subscription plan or single wash vouchers in the same transaction.

opened the company’s first checkout-free convenience store. Shoppers at the Brentwood,

site can skip the line by checking out via the Grabango app.

Supplier Tidbits

The resolution covers more than 5,000 cases brought by roughly 10,000 plaintiffs against Juul Labs and its officers and directors.

Juul Labs settled with plaintiffs in federal multidistrict litigation and related Juul Labs product cases that were consolidated in the United States District Court for the

Old Trapper renewed its sponsorship of the Big Ten Conference, which includes its designation as the conference’s official beef jerky. The sponsorship covers the football, men’s baseball, men’s and women’s basketball, and hockey seasons.

F’real is working with Footprint to develop a sustainable replacement for f’real’s signature dairy cup. The company is transitioning away from singleuse plastics and moving toward fully recyclable and responsibly sourced packaging.

changed its trade name to . The new name underscores the company’s mission to deliver retail supply chain solutions that help supply chain partners maximize speed, scale and sustainability.

M&M’S Caramel Cold Brew

M&M’S Caramel Cold Brew delivers a combination of smooth, robust coffee flavor and sweet, chewy caramel, covered in classic M&M’S milk chocolate and wrapped in a colorful, candy shell, according to the brand. The new M&M’S offering features the first on-pack appearance of the newest M&M’S character, Purple. M&M’S Caramel Cold Brew will be available nationwide beginning in February in single size (1.41 ounces), share size (2.83 ounces) and sharing size standup pouches (9.05 ounces). Prices will range from $1.19 to $4.99.

MARS INC. • NEWARK, N.J. • MARS.COM

King Size Chex Mix Bars

General Mills is introducing King Size Chex Mix Bars for convenience stores. Available in two varieties, Cookies & Cream and Peanut Butter Chocolate, they are the same bars available in grocery stores, but now in a larger kingsize format. The bars feature sweet and salty mix-ins such as Chex cereal, cookie pieces, pretzels and peanut butter chips. The 2.2-ounce bars will carry a suggested retail price of $2.09 when they hit c-store shelves in March.

Veggies Made Great Individually Wrapped Products

Veggies Made Great now offers individually wrapped muffins and two-pack frittatas that ship frozen and are designed to go from the freezer to microwave to warmer. Individually wrapped sweet muffin offerings include a Double Chocolate Muffin (made with zucchini and carrots), Blueberry Oat Muffin (made with zucchini and carrots), Banana Chocolate Chip Muffin (made with zucchini) and Keto Friendly Cinnamon Roll Muffin (made with zucchini and carrots). Individually wrapped two-pack savory frittatas include Plant-Based Sausage, Egg & Cheese Frittata (made with Beyond Meat sausage crumbles, cauliflower and onion), Plant-Based Bacon, Egg & Cheese Frittata (made with cauliflower and onion), Mushroom & Three Cheese Egg White Frittata (made with mushroom, cauliflower and kale) and Spinach Egg White Frittata (made with spinach, tomato, onion and bell pepper).

NEW CLASSIC COOKING LLC • RAHWAY, N.J. • VEGGIESMADEGREAT.COM/FOODSERVICE

Eco-Products Compostable Straws

Eco-Products unveils a new line of compostable straws. Made from polyhydroxyalkanoate (PHA), a plant-based plastic derived from canola oil, the straws are BPI-certified compostable and meet the ASTM D6400 standard for compostability. These PHA straws are able to biodegrade in a commercial compost facility or a home compost pile. The straws are offered in a variety of lengths from 5.5 to 10.25 inches, and are available in individually wrapped or unwrapped options. The wrapped version is clearly marked as compostable, so guests and staff know to properly dispose of it in a compost bin.

ECO-PRODUCTS • BOULDER, COLO. • ECOPRODUCTS.COM

Vision OS^

Standard AI introduces new additions to its core autonomous checkout platform that offers convenience stores the ability to understand and transform shopper behavior and in-store operations from a new lens. Sold collectively as Vision OS^, the platform has been enhanced with the addition of two new tools: Mission Control and Insights. Mission Control is an appbased dashboard that helps in-store teams better manage operations and the shopper experience. Insights provides unprecedented views into shopper behavior and operational performance, revealing revenue opportunities never before possible, according to the company. Vision OS^ is now composed of three components in one: Standard Checkout, Mission Control and Insights.

STANDARD AI • SAN FRANCISCO • STANDARD.AI

GENERAL MILLS CONVENIENCE • MINNEAPOLIS • GENERALMILLSCF.COM

Frito-Lay Minis

Frito-Lay North America introduces Frito-Lay Minis, bite-sized versions of its Doritos, Cheetos and SunChips snacks. Conveniently packaged in easy-to-pour canisters, Frito-Lay Minis make it easier than ever to snack on the go or share with friends, according to the company. The new bite-sized snacks come in a variety of options: Doritos Nacho Cheese, Doritos Cool Ranch, Cheetos Cheddar, Cheetos Flamin Hot, SunChips Harvest Cheddar and SunChips Garden Salsa. Frito-Lay Minis are now available at select retailers nationwide for a suggested price of $2.79.

FRITO-LAY NORTH AMERICA • PLANO, TEXAS • FRITOLAYMINIS.COM

Rich’s Our Specialty Treat Shop New Cookie Flavors

Rich’s expands its cookie portfolio, adding three flavors to the individually wrapped Our Specialty Treat Shop line. The new varieties — peanut butter, sugar and oatmeal raisin — round out the portfolio and will inspire indulgence on the go, alongside the original fan-favorite chocolate chip cookie, the company stated. All four flavors are available in bulk, while three are also offered in a retail-ready merchandiser: chocolate chip, oatmeal raisin and sugar. The 1.35-ounce cookies come 120 per case with a shelf life of 365 days frozen and 21 days ambient.

RICH PRODUCTS CORP. • BUFFALO, N.Y. • RICHSCONVENIENCE.COM

ONE Crunch Protein Bars

ONE Brands debuted its newest line of bars: ONE Crunch. They are described as a lighter and crunchy version of ONE’s popular protein bars. They come in three indulgent flavors: Peanut Butter Chocolate Chip, Cinnamon French Toast and Marshmallow Treat. Each bar contains 12 grams of protein and just 1 gram of sugar. ONE Crunch Bars are sold individually and in variety packs, and are available nationwide.  ONE BRANDS • BOULDER, COLO. • ONE1BRANDS.COM

Electric Era PowerNode Platform

Electric Era unveiled the PowerNode Platform, a turnkey fast charging solution for electric vehicles. Using AI-driven, high-power storage technology, the PowerNode Platform enables convenience stores to meet eligibility requirements to qualify for President Biden’s National Electric Vehicle Infrastructure Formula Program. According to the company, the PowerNode Platform reduces grid requirements and demand charges by three times, while supporting the fastest charging speeds. This allows c-stores to replicate the gas station experience while optimizing revenue and minimizing the costs of fast charging.

ELECTRIC ERA • SEATTLE • ELECTRICERATECHNOLOGIES.COM

Spacee HoverTouch Wall

The Spacee HoverTouch Wall is a new offering aimed at delivering engaging and interactive content to customers. With the technology, existing surfaces transform into a communicative and interactive digitally enabled “screen” that can engage, educate, market and entertain without physically changing that surface. With HoverTouch Wall, users engage with a 100-inch interactive wall to learn more about promotions, services, wayfinding and specific product highlights. This bridge from the physical and digital worlds can be built on any spare wall. The technology can also be used to enhance employee engagement in breakrooms, shared spaces or manufacturing environments.

SPACEE • ADDISON, TEXAS • SPACEE.COM

THERE’S

A Mixed Bag

The convenience store industry’s small operators are keeping an eye on cross-channel competition in 2023, but are prepared to boost their bottom lines

By Danielle Romano

THE LAST FEW years have been a mixed bag of expectations for the convenience store industry’s small operators. After heading into 2019 with a glass-half-empty headspace, they beamed positivity heading into 2020 as they planned to implement several new initiatives to boost their bottom lines. That momentum continued heading into 2021, despite facing one of the most unique years in history with the outbreak of the coronavirus pandemic, and industry consolidation that saw some of the channel’s biggest chains get even bigger by picking up small operators.

Last year, as 2022 approached, the c-store industry’s small operators were trepidatious, still plagued by the continual unprecedented economic pressures brought on by the COVID19 pandemic and worried about the potential impact on their business for the coming year.

The small operators surveyed for the 2023 Convenience Store News Forecast Study don’t feel much different than those who participated in last year’s study. Sixty-seven percent of this year’s respondents view the U.S. economy in a negative light, which remains unchanged from those surveyed for the 2022 forecast. Nineteen percent say they are neutral.

There is one bright spot, however. Fourteen percent report a sunny disposition on the economy, which is an 8-point increase compared to those surveyed for the 2022 forecast.

When asked about their respective businesses, a higher percentage of small operators this year than last year predict their sales will increase year over year — 60 percent vs. 50 percent a year ago. Alternatively, a higher percentage of respondents also believe their sales will decrease year over year — 19 percent vs. 11 percent a year ago. Fewer small operators this year believe their sales will stay the same year over year.

On a scale of one to five — where 1 represents “Terrible, wake me when it’s over” and 5 represents “It’s

going to be our best year ever!” — the majority of small operators (72 percent) rate their optimism for 2023 at a 3 or 4. Only 7 percent put their optimism rating for the new year at a 5, while 5 percent put it at a 1.

About a quarter of small operators (26 percent) plan to increase their store count in 2023 vs. 78 percent of large operators. Sixty-seven percent of small operators anticipate their store count will remain unchanged, while 2 percent expect a decrease in store count. Five percent of small operators expect to exit the c-store industry during the year.

Keeping an Eye Out

On a positive note, 43 percent of this year’s small-operator respondents expect that foot traffic to their stores will increase in 2023 — the highest level seen since the 2020 Forecast Study when 70 percent predicted foot traffic would improve. Forty-one percent expect the status quo. The other 16 percent are bracing for a year of decreased foot traffic.

When it comes to the factors that will impact their sales and profitability in 2023, the convenience store industry’s small and large operators share some common concerns. Not surprisingly, inflation and economic issues rank No. 1 among both groups, followed by labor turnover and hiring, and supply chain issues. Other issues that both small and large operators are weary of are fuel prices, tobacco/e-cigarette regulations, and declining foot traffic.

One area in particular that is of more concern to large operators than their smaller counterparts is the expectation

that cross-channel competition will increase in the year ahead. This was cited by 83 percent of large operators vs. 60 percent of small operators. Just 3 percent of small operators expect cross-channel competition to decrease in 2023, while 36 percent expect it to remain the same.

Small operators view dollar stores as posing the biggest threat to their business (cited by 52 percent). These retailers are also more cautious of Amazon (35 percent) and mass merchandisers (28 percent) than large operators. Interestingly, when compared to their larger counterparts, small operators are less concerned about the threat of online grocery delivery sites (38 percent vs. 53 percent) and quick-service restaurants (17 percent vs. 33 percent).

Turning Negatives Into Positives

Despite their trepidations, small operators are determined to make their stores more attractive to consumers in 2023. To keep pace with the larger c-store chains when it comes to offering “enhanced convenience” services, slightly more than threequarters of small operators (76 percent) currently offer mobile pay in-store, with 16 percent planning to add this offering in 2023. More than half of small operators (53 percent) currently offer mobile payment at the pump, with 16 percent saying this feature will be added in the coming year.

The top three initiatives planned by small operators for the new year are contactless payment using a mobile app, at-the-pump ordering for instore items and implementing a drivethru. Comparatively, large operators’ top plans for 2023 call for the implementation of third-party delivery and contactless payment via either a mobile app or AI/sensors. CSN

Inflation, supply chain issues and the ongoing labor shortage have c-store retailers and suppliers more pessimistic about this year’s business prospects

A Convenience Store News Staff Report

A YEAR AGO, the cover of Convenience Store News displayed the headline, “On the Road to Recovery.” Nearly two years into the COVID-19 pandemic, the c-store industry’s retailers, suppliers and distributors believed they had weathered the worst of it and were headed into the new year largely optimistic about their business prospects.

While 2022 proved to be somewhat of a year of recovery for the industry, it certainly was not without its obstacles. Chief among them: inflation, continued staffing challenges and ongoing supply chain issues. Unfortunately, these same problems persist today and as a result, c-store retailers and suppliers are more pessimistic about their business prospects this year.

According to the findings of the 2023 Convenience Store News Forecast Study, the overall 2023 business outlook for the convenience channel is largely neutral. On a scale of one to five — where 1 represents “Terrible, wake me when it’s over” and 5 represents “It’s going to be our best year ever!” — the largest percentage of retailers (44 percent) and the largest percentage of suppliers/distributors (also 44 percent) rate their expectations for 2023 at a 3. Last year, the foremost rating among both these groups was a 4. Read on to learn more about what the industry’s key players predict for 2023.

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A Lukewarm Reception for 2023

C-store retailers are largely neutral about their business prospects this year

By Linda Lisanti

HEADING INTO 2023, the current state of the U.S. economy is not instilling a great deal of confidence in the nation’s convenience store retailers. Nearly seven in 10 retailers who participated in the 2023 Convenience Store News Forecast Study said they have a negative outlook on the U.S. economy for 2023 — an increase of 22 points vs. a year ago.

On account of this, and other challenges the c-store industry is facing, retailers are largely neutral on their overall business outlook for the year. On a scale of one to five — where 1 represents “Terrible, wake me when it’s over” and 5 represents “It’s going to be our best year ever!” — the largest percentage of retailers (44 percent) rated their expectations for 2023 at a 3. Last year, the foremost rating was a 4.

Given the less optimistic outlook among retailers this year, it’s not surprising that fewer operators are planning to expand their store networks in 2023. The percentage who said they will increase their store count this year dropped by 13 points to 46 percent.

Last year, 94 percent of the large operators surveyed said they planned to increase their store count. This year, just 78 percent of large operators indicated the same, down 16 points.

Issues of Concern

As in past years, the 2023 CSNews Forecast Study asked retailers to weigh in on the factors that will have the biggest impact on their sales and profitability in the new year.

For the second consecutive year, c-store operators anticipate that labor turnover and hiring will have the greatest impact. Nearly three in 10 operators pegged this as their top concern, while 63 percent put it in their top three.

According to respondents, the labor problem is multifaceted and encompasses difficulty in finding workers with the necessary skillset; increased costs to attract high-quality candidates; high turnover; increased resources needed to

constantly train new employees; poor customer service; inferior site quality; and low team morale.

“I’m going to have labor flow issues to the point of having to close one or two days a week,” one retailer said. Another noted: “Customer service is an important aspect of our brand and high turnover depletes the standard we set since we have to constantly train new employees.”

Inflation and economic issues came in a close second, with 21 percent of convenience retailers identifying this as their chief concern and 63 percent ranking it in their top three. Rising prices are a double whammy for retailers as they affect what cash-strapped consumers are willing to buy and how much profit the operator makes on purchased items.

Company View of U.S. Economic Conditions in 2023

C-store operators expect rising prices to have a negative impact on their bottom line this year. While 69 percent project that their total average dollar sales per store will rise year over year, just 42 percent project that their total average profits per store will increase — marking a decline of 14 points compared to a year ago.

“Prices go up weekly. It’s hard to stay on top of the increases. I have to raise my prices or I will go out of business. The consumer believes it’s the greedy business owner raising prices,” one retailer lamented. Another added: “At some point, our prices could be high enough to force consumers to go to grocery stores.”

Supply chain issues also continue to plague convenience retailers and affect their sales and profitability. More than 50 percent of operators cited this as one of their top three concerns and 14 percent identified it as their No. 1 issue. Comments from retailers included:

• “Currently suffering from constant substitutions on popular products”;

• “Difficulty sourcing products across the board";

• “Constant out-of-stocks require additional time to substitute brand or product”; and

• “Out-of-stock issues will remain, causing customers to go elsewhere.”

Conversely, worries around the COVID-19 pandemic have lessened considerably. The top-ranked issue of 2021 and third-ranked issue last year now sits in ninth position.

“It seems finally the COVID scare is over. We hope people will be tired of staying at home and will begin to go out more often. We are making our convenience stores more friendly so that our clients feel encouraged to stop by,” one retailer shared.

C-store operators this year are also less troubled by the rise in e-commerce, which was driven by the pandemic. Ranked fifth last year, e-commerce dropped to the 10th position this year.

However, retailers are still very much concerned about cross-channel competition.

Nearly seven in 10 operators expect cross-channel competition against the convenience store industry to increase

Anticipated Impact of Issues on Sales & Profitability in 2023

(% of Total Retailers identifying as "Biggest Impact" and in Top 3)

Ranked Biggest Impact Ranked in Top 3

Labor turnover and hiring

26% 63%

Inflation and economic issues 21% 63%

Supply chain issues 14% 54%

Motor fuel prices 16% 45%

Tobacco and e-cigarette regulations

7% 20%

Declining foot traffic 3% 17%

Changing consumer expectations of "convenience" 3% 10%

Emerging technologies 0% 7%

COVID-19 pandemic 4% 6% Rise in e-commerce 3% 5%

Brick-and-mortar competition

1% 3%

Demographic changes 1% 3%

Industry consolidation 0% 3%

Source: Convenience Store News 2023 Forecast Study

in 2023. Likely due to inflation and the effect of rising prices on consumers, convenience retailers perceive dollar stores as their biggest competitive threat this year. Delivery sites for both groceries and foodservice are on their radar as well.

Areas of Opportunity

Despite the challenges facing the convenience channel, operators are bullish on the industry’s ability to weather tough times. One described it as “dedication to survival.”

Several retailers pointed out that the industry has proven itself time and again to be resilient to various economic situations, whether it be a pandemic or a recession.

“The c-store industry is very resilient due to its importance to the local community and neighborhoods. We provide food, drinks, fuel and many other necessities of life in a quick, convenient way at a reasonable cost,” one operator stated.

Forecast Study respondents also noted that the c-store industry is constantly changing and adapting. The industry is full of “smart people making good decisions and adjusting as needed due to changing market conditions,” according to one retailer.

Case in point: C-store operators are eying various initiatives to boost their sales and profitability in 2023. The top "enhanced convenience" services they plan to add are at-pump ordering for in-store items, contactless shopping via app and drive-thru service.

Foodservice expansion is also on many retailers’ to-do list for 2023 now that the convenience channel has established itself as a trusted destination for fresh food and beverages.

“Hot food innovation will continue to help grow the category,” one retailer predicted. CSN

Not So Great Expectations

Inflation is pushing dollar sales up, but most retailers don’t expect considerable change in how much consumers will actually buy in the coming months

By Angela Hanson

WHEN ASKED TO share their predictions for the coming year, it seems convenience store operators don’t need to imagine the possibilities because for many, the future is now. 2023 is likely to see the continuation of many 2022 trends, with rising prices and ongoing supply chain snags contributing to differing expectations for dollar sales and unit volume across product categories, according to the 2023 Convenience Store News Forecast Study

Prepared food is the only category for which the majority of c-store retailers expect to see both dollar sales and unit volume increase. For all others, opinions are mixed, with some categories projected to see an increase in dollar sales but not unit volume, and others projected to remain static in both measurements. Motor fuels and cigarettes have the greatest projected disparity, and cigarettes is the only category for which an outright majority of retailers expect a decrease in unit volume.

As a silver lining, some categories this year are seeing an increased percentage of retailers making positive sales predictions, indicating a level of underlying optimism among some, even if that sentiment isn’t held by the majority.

Here are the individual category forecasts for 2023, according to c-store retailers:

MOTOR FUELS

At first glance, the outlook on motor fuels is rosy: 56 percent of retailers expect average dollar sales per store to increase in 2023, while just 14 percent expect dollar sales to decrease. However, this is largely predicated on increased inflation driving costs up, as only 18 percent expect average gallons sold per store to increase and 34 percent believe gallons will decrease.

Company size makes a clear difference in expectations. More large operators than small operators predict average dollar sales will rise this year (62 percent vs. 52 percent, respectively). When it comes to gallon sales, though, 44 percent of large

operators say average gallons sold per store will decrease, compared to 26 percent of small operators.

Retailers are also in agreement that the movement toward electric vehicles and other more efficient automobiles will continue, and reshape the fuels landscape.

Although customers will continue to be sensitive to gas prices, some operators believe they can stand out by making the fueling-up process smoother and visits more valuable. “Customers increasingly have expectations of automation, ease of use and integrated loyalty programs,” another retailer pointed out.

TOBACCO

C-store operators’ expectations for cigarette sales in 2023 are largely a repeat of their predictions for 2022. Most do not think average dollar sales per store will decline, but they are once again evenly split on whether dollar sales will stay the same (37 percent) or rise (36 percent).

As with motor fuels, pessimism is higher regarding average unit volume per store. The percentage of retailers who say cigarette volume will decrease next year jumped more than 10 points to 59 percent, while just 7 percent expect unit volume to increase.

Small operators and large operators have similar projections for dollar sales, but nearly three-quarters of large operators say cigarette volume will drop, compared to half of small operators. Retailers cited not just the amount that cigarette prices are rising, but also the frequency with which price increases are occurring, as the main reason for these divergent expectations. As a result, 2023 could be a good year for sales of fourth-tier brands.

“They are pricing themselves out of the market by the constant price increases,” one retailer said.

Most operators expect to maintain the number of cigarette SKUs they currently offer and the square footage they devote to the category. However, 29 percent expect to decrease SKUs and 22 percent plan to reduce square footage. Large operators are more likely than small operators to say they will maintain vs. making positive or negative changes.

Retailers listed a wide variety of non-pricerelated trends that will affect cigarette sales in the coming year, including flavor bans and other government regulations;

emerging products that will replace traditional ones, such as low/no nicotine products and heat-not-burn items; and a continuation of the long-term decline in smoking.

“If laws pass banning disposable vapes as well as flavored cigars and menthol, I see sales decreasing,” one retailer said. “I also believe it will not change the fact that younger kids are smoking and vaping. It will just punish the adults who enjoy it. I have never smoked, but I believe this to be true.”

all c-store operators

6

less sunny about unit volume, with fewer than two in 10 retailers expecting average unit volume per store to decline, and a third expecting unit volume to increase.

Small operators and large operators project similar results for both OTP dollar sales and unit volume. Overall, retailers of all sizes expect OTP to be an inflationary category in 2023, with higher dollars generated than units sold. Most operators do not expect to make changes to the number of OTP SKUs they currently offer or the category’s square footage.

Trends expected to affect OTP this year are similar to cigarettes, with rising costs, legislative and regulatory initiatives, and growth in new product types among the most frequently cited.

The category may also benefit from tobacco consumers shifting their usual purchase habits. “More consumers are moving to OTP products to get away from smoking cigarettes,” one retailer remarked.

FOODSERVICE

Foodservice has returned to being a high-growth business in the eyes of c-store retailers, continuing the category’s rebound from the effects of the COVID-19 pandemic. While expectations still remain less than pre-pandemic predictions, seven in 10 operators expect average dollar sales per store to increase in 2023 and six in 10 expect average unit volume per store to increase.

This positive sentiment transcends

company size. Although large operators are more bullish than small operators on the prepared food segment, less than 10 percent of either large operators or small operators expect foodservice dollar sales or unit volume to decline.

Operators are mixed on how strongly rising prices will impact prepared food, with one noting that their company is “trending to keep the same offerings by selling at the same price to eliminate the mindset of inflation to the consumer.”

Large operators are more likely than small operators to say that they will invest in more prepared food SKUs in 2023 (60 percent vs. 40 percent, respectively). Large operators are also more likely to be planning increased square footage for the category, although they are still evenly split between adding space and staying the same.

C-store operators are leaning into the channel’s growing reputation for prepared food, planning improvements and expansions such as increased variety and innovation; more limited-time offers; and more healthier and fresh foods. Retailers believe that prepared food innovation and the ability to consistently offer high-value items are key differentiators to combat inflation and supply chain issues.

The c-store industry will also benefit from consumers who don’t have time to cook or don’t like to cook, but desire on-the-go options that offer quality and value, study participants believe. “People that are working will still be pressed for time,” said one retailer. “We offer a price point that is usually less than fast-food outlets with, most of the time, faster wait times.”

Dispensed beverages, which include hot, cold and frozen drinks, are also expected to have a solid 2023, albeit with more tempered expectations. Half of c-store operators expect average dollar sales per store to increase (up 17 points from one year ago), while 40 percent expect dollar sales to stay the same. Thirty-eight percent of retailers expect average unit volume per store to increase, while 51 percent expect it to stay the same.

As with prepared food, large operators and small operators have comparable expectations for both dollar sales and unit volume. Most retailers expect their dispensed beverage SKUs and square footage to remain stable in 2023, although more small operators report plans to increase both.

Category Forecast: Dispensed Beverages

Increased prices and the perceived superior value of packaged beverages serve as stumbling blocks for dispensed beverages, according to study participants. However, some expect inflationary pressures to prompt lower-income customers to switch back to the fountain.

Bean-to-cup coffee, sugar-free beverages, seltzer and flavor innovations are cited as this year’s key dispensed beverage trends. Retailers are looking at a wider variety of dispensed options along with new brewing and mixing technology to boost quality.

“[We’ll be] pushing free drinks with rewards programs tailored to the season of the year,” one operator shared.

PACKAGED BEVERAGES

Convenience stores will continue to be a destination of choice for thirsty customers who want to purchase a canned or bottled beverage this year, according to the retailers surveyed.

Fifty-seven percent of operators expect their average dollar sales per store of packaged beverages to increase in 2023, while 36 percent expect dollar sales to stay the same. Unit volume isn’t projected to do as well, with 51 percent reporting that they expect average unit volume per store to hold steady. Only 39 percent expect unit volume to increase.

Large operators and small operators have similar expectations for dollar sales, but more large operators (46 percent) predict increased unit volume, compared to small operators (35 percent). Few retailers expect either category dollar sales or unit volume to decline.

The majority of retailers expect packaged beverage SKUs and square footage to hold steady in 2023, although large operators are more likely to say they will increase both. The 24 percent of small operators and 31 percent of large operators that expect to add SKUs indicate that there is an appetite for variety among their customers.

Retailers expect to see increased packaged beverage innovation, with some expressing concern about the cannibalization of existing brands. Higher foot traffic is likely to benefit the category, but only if c-stores have the beverages customers want in stock.

“[The] supply chain will decide winners

& MALT BEVERAGES

holds steady for the most part. Among retailers that sell alcohol, 56 percent expect average dollar sales per store to increase in 2023 (up 30 points from one year ago), while nearly four in 10 expect dollar sales to stay the same.

These figures are nearly flipped for unit volume, with 35 percent projecting that average unit volume per store will increase and 52 percent expecting it to stay the same. This is still an improvement from last year, when 14 percent of retailers predicted volume would increase.

Small operators and large operators are living in different worlds when it comes to expectations for beer and malt beverage dollar sales. Nearly two-thirds of small operators believe their average dollar sales per store will increase this year, compared to 42 percent of large operators. Their expectations for unit volume are more in line, with 50 percent of small operators and 55 percent of large operators saying they expect volume to stay the same.

Most retailers industrywide expect the number of SKUs they offer and the amount of square footage they devote to beer and malt beverages to stay the same in 2023, but small operators are more open to adding new items, with 31 percent saying they expect to add SKUs.

Projected trends include increased variety and consumers shifting from drinking at bars and restaurants to buying packaged alcohol to save money. Like other segments, inflation is affecting the beer and malt beverages segment, but it may have better defenses against it.

“Alcohol does well in recessionary climates,” said one retailer. “It will be interesting to watch this against the factors that affect the other categories, and costs and retails going up and foot traffic going down.”

CANDY

The candy category is likely to remain static for another year, with most convenience store retailers expecting that sales will neither grow nor decline in 2023.

Nearly six in 10 operators expect average candy dollar sales per store to remain the same. About a third say that dollar sales will increase, but this is again likely due to rising prices, as around two-thirds of retailers predict that average unit volume per store will not change.

unit volume to increase, while large operators are more optimistic with 31 percent projecting higher unit volume.

Both candy SKUs and square footage are largely expected to stay the same this year. Retailers believe that rising prices will cause some consumers to cut back on impulse purchases, as they now view the segment as a luxury rather than an affordable treat. Although, as one operator observed, “people always like candy.”

Zero- and low-sugar products are likely to be on trend, while line extensions, flavor innovation and smart merchandising are projected to spark consumer interest. The state of the supply chain may determine whether candy sales experience growth or remain on hold.

SNACKS

Similar to the candy category, retailers have modest expectations for salty snacks in 2023.

More than half (54 percent) believe average dollar sales per store will remain the same. However, higher prices have prompted a lift in the number of retailers who expect increased dollar sales, with a healthy 44 percent saying they forecast average dollar sales per store to rise. Sixty-two percent of retailers expect average unit volume per store to stay the same, while 30 percent expect it to increase.

Large operators anticipate better results for salty snacks, as 51 percent expect an increase in dollar sales (vs. 39 percent of small operators) and 40 percent expect unit volume to increase (vs. 23 percent of small operators). Few retailers expect dollar sales or unit volume to decline.

Salty snack SKUs and square footage are also likely to remain stable across the industry in 2023, although a notable minority of retailers (23 percent) say they will add SKUs. As a result of inflation, retailers expect to see higher prices and smaller package sizes.

But the continuing shift in how consumers eat could be a boon for the segment, according to study participants. “Salty snacks are improving while hot food sales are declining. People are snacking rather than eating meals,” observed one retailer.

Healthier options, “feel-better” foods and increased variety are cited as trends to

watch this year, with new options expected to fuel trial. “Everyone has to try the new stuff at least once,” another retailer remarked.

Operators expect a similar performance from the alternative snacks segment. Rising prices again are boosting retailers’ projections for dollar sales compared to one year ago, with 35 percent expecting dollar sales per store to increase, while six in 10 operators expect no change. Most retailers (62 percent) also expect alternative snack unit volume per store to hold steady, while 29 percent expect unit volume to increase, an 11-point lift from a year ago.

Large operators and small operators have similar expectations for both dollar sales and unit volume, with a majority of both expecting little change this year.

Most retailers expect to keep their alternative snack SKUs and square footage stable in 2023. However, small operators are more likely than large operators to report plans to add SKUs (35 percent vs. 9 percent, respectively) and to up square footage (25 percent vs. 6 percent).

Health is expected to be a trend in the alternative snacks category this year, although whether that means items that are lower-calorie, vegan, gluten-free or another better-for-you attribute is likely to vary by retailer and store location.

Retailers report that although rising prices are a current challenge for the segment, they tend to view alternative snacks as a growth area for the future. “Alternative or trending snacks seem to be pushing the lines for growth in 2023,” one study participant concluded.

GROCERY

Several years after many consumers turned to convenience stores for their groceries instead of supermarkets early in the COVID-19 pandemic, shoppers have largely returned to business as usual, which is reflected in the static projections for c-store grocery in 2023.

Fifty-seven percent of retailers expect edible grocery average dollar sales per store to hold steady this year, while 29 percent expect dollar sales to increase. There is only a small difference between these expectations and those for average unit volume per store, as 63 percent expect unit volume to remain the same and 20 percent expect it to increase.

A majority of both large operators and small operators expect edible grocery sales to remain the same this year, although more large operators believe they will see a decrease in dollar sales (22 percent vs. 8 percent of small operators) and unit volume (25 percent vs. 12 percent).

Additionally, a sizeable majority of large operators expect their edible grocery SKU count and square footage to hold steady or decrease this year, yet 30 percent of small operators expect to add SKUs and 28 percent expect to add square footage.

C-store operators view dollar stores as their primary competitor that may win greater share of wallet for this category in the coming year. However, several retailers noted that most of their grocery items are purchased with EBT, which could reduce consumers’ price sensitivity.

Opinions vary on the degree to which edible grocery sales will be affected by inflation, but retailers are in agreement that consumers’ preferences for convenience and cheaper products will impact the category. Still, some have optimism. “I see a trend going to support

small businesses in the community,” said one study participant. “People prefer to shop small rather than the large box stores if they can.”

Like edible grocery, expectations for the non-edible grocery category are in line with projections from one year ago, resulting in a category that is viewed as static or declining in 2023.

Around two-thirds of retailers expect non-edible grocery dollar sales per store to stay the same this year, while 19 percent expect sales to decrease. Expectations for unit volume are even more dour: 72 percent of retailers say average unit volume per store will stay the same, while 22 percent expect it to decrease, and just 6 percent believe unit volume will rise.

As such, the vast majority of c-store retailers do not plan to make any changes to either their number of non-edible grocery SKUs or the category’s amount of square footage.

“Disinfectant and sanitizing products have slowed back to normal sales after COVID. Pet products and treats are on the increase,” one retailer pointed out.

HEALTH & BEAUTY CARE

Health and beauty care (HBC) is another category for which retailers expect little change in 2023. The number of retailers who predict more of the same rose from last year’s study.

Sixty-four percent of retailers expect average dollar sales per store of HBC to stay the same this year, up 11 points from one year ago, while 21 percent expect dollar sales to increase. Retailers are even more confident that unit volume will be static, with nearly three-quarters forecasting average unit volume per store to stay the same — a 14-point increase from a year ago.

No news may be good news for this category: although the percentage of retailers that expect both dollar sales and unit volume to stay the same is higher than last year’s study, the percentage that expect health and beauty care sales to decrease fell from last year.

Small operators and large operators have similar expectations around both dollar sales and unit volume. Both groups also expect SKU count and square footage to see little change.

C-store retailers didn’t express enthusiasm for any one particular HBC trend for 2023. However, some noted that this category could continue to do well enough simply by having a reliable offering whenever consumers find themselves in need.

“People do look at convenience stores for health and beauty aids now,” said one retailer. “The more they come in, the more they see what we sell.”

GENERAL MERCHANDISE

Despite rising prices, c-store retailers’ expectations for the general merchandise category in 2023 are close to the same as they were a year ago. More than half (56 percent) expect average dollar sales per store to stay the same, while 32 percent expect dollar sales to increase. Nearly two-thirds (64 percent) expect average unit volume per store to stay the same, while 22 percent expect it to increase.

Although most small operators and large operators alike expect general merchandise dollar sales to remain flat, small operators are more likely to expect stability in unit volume this year, with 69 percent anticipating unit volume to stay the same vs. 55 percent of large operators.

The general merchandise category is forecasted to remain fairly stagnant in terms of SKU count and square footage. Roughly seven in 10 retailers expect to make no change to either, with little difference in expectations between the industry’s small and large operators.

Retailer opinions on the future of this category are mixed, although numerous retailers noted that they see inflation having an impact on general merchandise that will favor c-store competitors. “We can’t compete with big-box price, delivery or availability,” said one retailer.

Other operators, though, are looking to expand into new category segments such as toys, apparel and branded products. “Due to declining traffic, we are more creative adding dollars to the total basket with the general merchandise category,” another retailer shared. CSN

Source: Convenience Store News 2023 Forecast Study

Shifting Gears

Despite economic headwinds, suppliers and distributors are excited about new opportunities in 2023

By Melissa Kress

CONSIDERING THAT THE past few years have brought new sets of challenges, it is logical to face 2023 with some skepticism. However, the convenience channel’s supplier and distributor communities are not letting economic headwinds — and notably, continued talks of a recession — cast a shadow of gloom over the coming year.

According to the 2023 Convenience Store News Forecast Study, the channel’s suppliers and distributors are cautiously optimistic about the new year. Even with concerns about the U.S. economy, they are neutral or somewhat positive regarding their 2023 business outlook.

Their outlook also improves when it comes to their specific product category. In fact, nearly two-thirds of respondents hold a positive category outlook heading into 2023. This is down slightly from 2022 as suppliers and distributors shift toward a more neutral viewpoint this year (16 percent of respondents), but still trumps the 21 percent who have a negative outlook.

Business conditions in the convenience channel are also promising. Threequarters of suppliers and distributors report having a positive outlook toward business conditions in convenience, an improvement of 4 points year over year. Just 14 percent have a negative outlook.

Optimism toward business conditions in dollar stores and grocery stores has also ticked up heading into 2023. Conversely, suppliers and wholesalers are feeling less confident about the mass merchant and drug store channels, the study found.

Overall, more than six in 10 suppliers and distributors expect convenience to face increased cross-channel competition in 2023, which is a slight uptick from the previous year. These respondents see the largest threats coming from dollar stores, grocery delivery sites/apps, grocery retailer sites/apps and Amazon/Amazon Fresh.

Different Sides of the Same Coin

Even armed with optimism, c-store suppliers and distributors do still have

Overall Outlook for Business in 2023

NEGATIVE NEUTRAL POSITIVE

Overall Outlook for Product Category in 2023

Impact

Ranked Biggest Impact Ranked in Top 3

Inflation and economic issues 26% 59%

Supply chain 15% 55%

Labor turnover and hiring 13% 41%

Consumer spending decline 7% 35%

Raw material costs 12% 28%

Consumer spending growth 6% 21%

Increasing regulation 4% 13%

New product development in your category 5% 12%

Retailer consolidation 2% 10%

E-commerce 4% 10%

Retailer unit expansion 4% 9%

COVID-19 pandemic 1% 5%

Emerging technologies 1% 2%

Source: Convenience Store News 2023 Forecast Study

some concerns going into the next 12 months. These concerns mirror those of their retailer partners.

When asked what issues they anticipate having an impact on sales and profitability in 2023, suppliers and distributors cite inflation and economic issues as a key concern (26 percent put this first, and 59 percent put it in their top three).

Rounding out the top five issues that are keeping suppliers and distributors up at night are supply chain (55 percent ranked this in their top three), labor turnover and hiring (41 percent), a decline in consumer spending (35 percent) and the cost of raw materials (28 percent). All in all, this is not much different than last year’s responses, though a decline in consumer spending did move up a few spots.

Additional issues suppliers and distributors anticipate having an impact on sales and profitability in 2023 revolve around regulation; product development; retailer moves — both expansion and consolidation; e-commerce; and emerging technologies.

Dollars & Cents

Given the pressures facing both businesses and consumers these days, it’s not surprising that inflation and economic issues jumped to the top of this year’s list of key concerns. Many suppliers and distributors pointed out that hesitant consumers are buying less as prices go up, and focusing their spend on essential items.

As one respondent noted: “Consumer spending is continuing to trend toward a need and survival basis vs. want and freewill. The extra has diminished.”

With consumers and businesses facing limited financial growth, the bottom line is expected to be impacted. “Less” is a recurring theme: less money to spend in-store will equal less profit, and less driving will result in less fuel purchased in the channel.

“Compressed consumer spending power is anticipated well into 2023. We expect market baskets to drop as consumers decrease impulse buys,” one respondent explained.

Areas of Opportunities

Many c-store retailers continue to grow organically through new-to-industry sites and have announced plans to enter new markets. This opens the door to new opportunities for the industry’s suppliers and distributors.

“Retailer expansion means more possible potential locations to service,” one respondent said. And yet another noted: “The greater the distribution footprint, the greater the possible revenues for the involved parties.”

Source: Convenience Store News 2023 Forecast Study

New product development also offers some hope, as “people always want new,” one respondent pointed out. And even as supply issues drive some products from the inventory mix, “getting some new items in the market will help fill the voids,” another respondent added.

E-commerce will also have an impact on business in 2023, suppliers and distributors predict. They noted that more sales are moving in that direction, albeit some product sales still depend on customers physically entering a store.

“COVID has led many consumers to prefer convenience over physical visits in many categories and while the trend has gone back to preCOVID routines, we believe e-commerce will continue to grow. More so with the creation of Meta,” one respondent observed. CSN

The 2023 Technology Hit List

Frictionless and mobile technologies top the list of priorities for c-store retailers in the new year

By Tammy Mastroberte

EVEN THOUGH IT'S been a couple of years, the convenience store industry is still seeing the effects of the pandemic, including the accelerated pace of frictionless and mobile-based technologies. In 2022, many c-store retailers focused on self-checkout options, mobile ordering and payment, and building out digital experiences. And this focus is set to continue and expand in 2023.

“Last year, we focused heavily on self-checkout and mobile ordering, adding more self-checkout units from NCR to sites, and allowing customers to order food and pick it up via mobile,” Scott Smith, senior director of IT at Parker’s Kitchen, the Savannah, Ga.-based operator of 74 stores, told Convenience Store News. “The goal was to expand it, but also make it one of the core features of the checkout experience for the customer.”

Even smaller chains are implementing self-checkout as the cost has come down, along with more integration options, noted Steve Morris, president of Retail Management Inc., based in St. Cloud, Minn., who operates stores for single-store and small chain retailers. The company implemented Gilbarco Veeder-Root's self-checkout in one store and is looking to add that to more stores this year.

“With no end in sight for the labor shortages, I can have one person at the checkout and someone else doing other things in the store, instead of two people at the checkout and needing a third person staffed,” Morris explained.

Along with self-checkout, digital and mobile will continue to be a focus in 2023, with c-store retailers looking to add “utility and value to their digital platforms,” according to Jeremie Myhren, co-founder of Onramp, a Chicago-based fleet payment company, and the former longtime chief information officer of Rockford, Ill.-based Road Ranger, operator of 70 stores.

“Everybody I talk to has a top-three project centered around that because the incentive for a customer to engage in a digital platform is utility and value. People won’t download another app unless it does something for them, so there are a lot of people working on that, and it’s a huge draw on IT budgets,” he said, pointing out that the most attended session at the 2022 NACS Show was on app development.

Not only do digital and mobile initiatives serve customers, but they also benefit the retailer

because of the data that can be collected. This data can be used to target personalized specials, coupons and more to bring customers back into the store and increase spending when they visit.

“The digital addressable guest is more valuable than one that isn’t,” said Rob Tedesco, vice president of product at Bounteous, a digital marketing agency based in Chicago. “If I have your email address, phone number or you have my app, I can learn about buying patterns, can send you push notifications and tailor messages to you. The holy grail of ownership of the customer is in the digital experience.”

In Priority Order

For a majority of convenience store retailers, the new year is bringing a continuation of their technology priorities from last year, with frictionless technology, self-checkout, mobile apps, mobile payment and mobile ordering topping the list.

“We will be continuing on the mobile and frictionless route, so our customers have an easy experience interacting with mobile technology in-store, but also making it so they can get in and out as soon as possible without slowing their day down,” said Smith.

While Parker’s already has the ability for customers to pay for fuel, activate the fuel dispenser and order food from its app, the chain will be undertaking a marketing campaign in 2023 to increase awareness of these capabilities.

“We expanded our mobile ordering menu in 2022 and this year, we plan to enhance it and add center-store items to it as well,” Smith shared, noting that the company is also investigating delivery options starting with foodservice items and then possibly expanding to all in-store products.

Mobile has become so important for all retailers, c-stores included, as customers interact with their phones more than anything else throughout the day, the Parker’s executive pointed out. The goal is to get the coveted app space on a customer’s phone and then get them to interact with your app.

“Even when people are waiting for our prepared food, they are on their phones in the store,” Smith observed, adding that the Parker’s marketing team is working to make upgrades to its website as well. “Most companies right now are finding ways to interact with customers in any digital channel they can, whether it’s mobile, website or in-store kiosks.”

Bounteous’ Tedesco echoes that the goal for many c-store retailers today is to create a digital relationship with customers and so, there is a universal focus right now on mobile-centric, digital experiences and integrating it all with technology. Many operators are working closely with marketing departments to have investment dollars go further, as they can begin targeting offers and rewarding customers for being loyalty members all within one app.

“What will have a profound effect on retailers in the future is owning a digital relationship with their customers and making sure all of the experiences on a site are tied together digitally, whether that is the fuel pump, a car wash, products inside the store and foodservice,” Tedesco explained. “The ability for a consumer to use an app or a mobile site to pay at the pump, order ahead for prepared foods or other consumer packaged goods products, pick them up in-store or curbside, pay and get loyalty points is key for the future.”

Integrating this all together will allow a chain to build a marketing infrastructure that can support it communicating with customers through email, push notification,

“Most companies right now are finding ways to interact with customers in any digital channel they can, whether it’s mobile, website or in-store kiosks.”

— Scott Smith, Parker’s Kitchen

Parker’s is focused on expanding self-checkout and mobile ordering.

SMS and more, according to Tedesco. What’s more, capturing this data will enable the “segmenting of customers to decide who should get a certain offer or reward, and at what time,” based on their behavior, likes, dislikes and other factors, he said.

“Loyalty and other customer identification strategies are about getting a customer to reveal themselves to you so, in some way, they tell you every time they are at your store and you can personalize offers back to them,” Myhren explained.

In regard to self-checkout and frictionless technology, while options have been around for a while, c-stores are adopting them at a faster pace. This is not only because the technology is more affordable these days, but also because customers are more open to these alternatives on account of their prevalence in other retail channels, according to Myhren.

“We let other industries train the customer and climatize them to it,” he said.

At Retail Management Inc., adding Gilbarco’s self-checkout allowed the company to go from three point-of-sale registers to two, with the self-checkout being the third option; and they were able to maintain the customer count with one less employee, Morris said.

“In higher-volume stores, that is a big winner,” he said, noting that self-checkout pricing has come down and is near the amount paid for a standard point-of-sale. “If a store has a good amount of volume, it’s almost a must because of the staffing and labor issues in the industry,” he added.

Along with self-checkout, Myhren pointed out that there is still a lot of interest in the industry around the frictionless checkout experience of customers simply walking in, grabbing items and then walking out — the way Amazon’s stores operate.

For example, Tulsa, Okla.-based QuikTrip Corp. announced its first “checkout-free” store powered by Amazon’s Just Walk Out technology in August 2022, and in November 2022, Chevron ExtraMile debuted a checkout-free store in San Ramon, Calif., using Grabango technology.

“We are watching the Just Walk Out technology as it emerges and expands, and looking for a way to integrate that where it works for our customers,” said Smith of Parker’s. “We don’t want to make it too cumbersome and want it to be easy to explain the process, so we have not done it yet, but are looking at it for the future.” CSN

Technologies to Watch

Beyond 2023, the convenience store industry has its eye on emerging and upcoming technologies that may have an impact on the business in the future. Here are a few retailers are watching:

LED Cooler Doors

Adopters of this cold vault option, where LED screens show the product on the shelf rather than a glass door, are able to know that products are out of stock because of built-in sensors. They also can run product advertisements on the doors themselves, according to Steve Morris, president of Retail Management Inc., who operates stores for small chain retailers.

“It will probably be five to 10 years before the costs will come down for smaller retailers, but the more accurate data collection gathered and shared from larger chains can have a downstream effect for smaller retailers when it comes to planograms because vendors will have store and market specific data that is more timely,” he said.

Electric Vehicle (EV) Charger Integration

While c-store retailers are already installing EV chargers at locations where demand calls for it, there remains a lack of integration with the other offerings at the store. This is because most EV equipment providers require customers to download their brand app to engage with the charger, said Jeremie Myhren, co-founder of Onramp, a Chicago-based fleet payment company, and the former longtime chief information officer of Rockford, Ill.-based Road Ranger, operator of 70 stores.

“We need to get EV vendors to implement charging into our store branded apps because 99.9 percent of the retailer EV implementations are completely disconnected from everything else on the site, so there are no rewards connected or the ability to pay for other things,” he said.

Foodservice Robotics

Replacing labor in the kitchen for c-stores that have proprietary foodservice offerings is a possibility thanks to the introduction of robotics. While it’s unlikely robots will be running an entire kitchen in the near future, there are emerging options that can help.

“Having robotics to make things like a cheeseburger and fries can help take labor out of the equation and do some of the mundane tasks, which is something bigger brands are doing, and we have to keep our eye on it,” advised Myhren.

Empowering Diversity & Inclusion Through Your Company Culture

A recent Convenience Store News webinar discussed how to set up organizations for success

By Danielle Romano

DIVERSITY, EQUITY AND INCLUSION — collectively known as DEI — are no longer buzzwords in the corporate world. DEI has become an integral part of organizations’ culture, and the convenience store industry’s retailers and suppliers are increasingly taking notice and taking action.

A recent webinar hosted by Convenience Store News, entitled “TWIC Talk: Empowering a Companywide Commitment to Diversity & Inclusion,” discussed important issues related to DEI practices, including eliminating barriers in the workforce for members of diverse populations, and creating a culture that empowers a companywide commitment to DEI.

A panel of representatives from three c-store retail companies, including Alimentation Couche-Tard Inc. (ACT)/ Circle K, GetGo Café+Market and Casey’s General Stores Inc. — all of which are actively working to advance DEI in their workplaces — shared their insights.

Creating a Values-Driven Culture

Establishing a strong company culture that encourages and supports equitable and inclusive environments is a must, but culture can be a very challenging thing to change.

Letty George, director of global communications for Couche-Tard, acknowledged that it’s not an easy task, but she noted that Laval, Quebec-based ACT and Circle K are committed to leveraging its team members’ voices and making a meaningful impact on its workforce.

At the company’s first Global Leadership Forum, which is an internal development program for potential leaders, ACT President and CEO Brian Hannasch challenged the team to think: “How can we define, secure and communicate our culture?”

“Participants came back with a clear answer: We need to have values in place to articulate our behavior and what we expect from one another. It’s those collective behaviors that make up our

culture and what Brian refers to as our ‘secret sauce,’” George said.

Starting with the Global Leadership Forum and passing through other versions and task groups, ACT came up with “the values we live by” that capture the company’s culture. They are: be one team; do the right thing; take ownership; and play to win.

“That approach ties into our journey in becoming a more inclusive and diverse workplace by listening, learning and engaging with our team,” George explained.

Although newer to the DEI journey, Ankeny, Iowa-based Casey’s took a similar approach to learning from its team members and readdressing its values through what Matthew Stephenson, director of learning and development, described as “grassroots-driven development.” Through surveys and focus groups among the retailer’s 44,000 team members, Casey’s enhanced its culture by moving away from “attribute values” and to “behavioral-based values.”

“The focus became going one step past the golden rule of treating others the way you want to be treated to treating others the way they want to be treated. Then, we asked how that mindset shows up across organizational policies and processes,” Stephenson said. “Through Casey’s resource groups, we’re able to gauge from teams and adjust accordingly.”

Erik Moore, director, human resources business partner at Pittsburgh-based GetGo Café+Market, noted that GetGo team members knew about DEI and the efforts the company was pursuing, but one area where they sought insight was understanding what others go through.

“Through this journey, we’ve educated ourselves and our team about shared experiences,” the HR director expressed. “That was a huge eye-opening moment for our team as they learned a little bit of empathy. The

difference between sympathy and empathy sat with us. Being able to empathize with those around you and who are closest to you, and understanding the experiences that they’ve had, motivated and energized our team to want to go after our goals.”

Communicating Change

Another area of DEI that can be difficult to achieve is ensuring the commitment permeates every level of the organization. While many companies have an appointed DEI director or leader, ACT, Casey’s and GetGo do not. Instead, all three c-store retail companies have executive leaders who sponsor employee resource groups (ERGs), which play an integral role in driving engagement and encouraging change across their organizations.

At ACT, six business resource groups (BRGs) foster a sense of belonging and inspire conversation, according to George. For example, the Women’s Council rolled out unconscious bias training as part of required training for all employees; the Race & Ethnicity BRG launched a business leadership development program to accelerate minority talent; and the Care BRG, a disability and inclusion group, introduced a program to make hearing aids affordable.

Casey’s ERGs are sponsored by executive leaders who have the ability to make rapid changes within the organization. The groups meet regularly to discuss and identify any cultural items and policy changes that should be addressed. “Employee resource groups are the grassroots initiative for us that tells us what changes we need to make in order to make sure our team members are as happy as they can be,” Stephenson noted.

GetGo has eight ERGs that are responsible for creating conversation, action and community. Among their efforts, the groups have created educational and discussion guides that each store can use, and increased awareness through activities centered around celebratory holidays and volunteer events. “It’s inspiring to see what they can accomplish by coming together. Many voices are stronger than one voice,” Moore said.

To ensure culture change reaches the store level as well as the corporate level, the panelists collectively agreed that the following are effective tools for communicating DEI accomplishments internally and externally:

• Social media — George, Stephenson and Moore echoed one another that LinkedIn is an important outlet, and there tends to be a greater return on engagement if a corporate leader posts to social media from their account to share news.

• Town halls — These open platforms help connect team members with corporate leaders who they may not otherwise engage with on a day-to-day basis. Team members can also see what progress is being made.

• Employee intranets — These internal sites engage and connect team members in one place.

• Frontline communication technology — Mobile applications such as WorkJam connect members globally in real time.

All three panelists acknowledged that change is a process and cultural shifts take time.

“The measurement of success is making progress instead of stepping backwards or staying stagnant,” Moore said.

The “TWIC Talk: Empowering a Companywide Commitment to Diversity & Inclusion” webcast was sponsored by Altria Group Distribution Co. CSN

ATMs

Snacking: The All-Day Opportunity

Consumers are shifting toward "hometainment" activities and away from traditional mealtimes

Americans are spending less on out-of-home entertainment and eating out to mitigate the impact of inflation and rising bills, according to research from NielsenIQ. As they shift toward "hometainment" activities, such as watching streaming services and playing video games, sales of products that pair well with content consumption and gaming are growing. Namely, snacks. NielsenIQ research also shows that more Americans are moving toward snacking and eating smaller meals steadily throughout the day rather than following traditional mealtimes. Other findings include:

82%

82%

of consumers surveyed for NielsenIQ’s 2022 State of Snacking report indicated that they ate more at home than away from home in the last six months.

Small meals and snacking are perceived as healthier by consumers, who believe that 68% of the products they ingest are healthy.

Across all eating occasions, 42% of respondents claimed their eating habits have become healthier vs. 12 months ago.

The days of three square meals are gone. Respondents said they consume three to four small meals steadily throughout the day from late morning to late afternoon, and snack to “recharge.”

Whether consumers are alone or with others impacts how and what they eat. Full meals are less frequent and saved for time with others; these occasions generally happen when they are happier and have more energy.

Alternatively, small meals are most often consumed alone and take place when consumers say their mood and energy are lower than during full meals.

NielsenIQ, an Advent International portfolio company, is a Chicago-based global information services company providing consumer packaged goods and retail companies with data, connected insights and predictive analytics to power their growth.