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THE RICHARDS GROUP JOB #: MTL20 048963 Franchise Print Cover Tip/Front TRIM: 7.875 x 8.875 LIVE: .25 inside trim COLORS: CMYK PUBLICATION: Convenience Store News FOR QUESTIONS CALL: Karen Newman 214-891-5875

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W H AT ’ S N E X T I N C O N V E N I E N C E A N D F U E L R E TA I L I N G

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©2020 All rights reserved. G6 Hospitality Franchising LLC. 4001 International Parkway, Carrollton, Texas 75007. This advertisement is not an offer to sell a franchise. An offer can be made only by means of a Franchise Disclosure Document that has been registered and approved by the appropriate agency in your state, if your state requires such registration. Minnesota Registration Nos. – Motel 6: F-5053; Studio 6: F-5052. *Source: Item 19 of the March 5, 2019, Motel 6 FDD. **Source: Item 19 of the March 5, 2019, Studio 6 FDD.


W H AT ’ S N E X T I N C O N V E N I E N C E A N D F U E L R E TA I L I N G

THE RISE OF FRICTIONLESS COMMERCE

A NEW M&A POWERHOUSE EG America blasts onto the Convenience Store News Top 20 Growth Chains ranking at No. 1.

MARCH 2020 CSNEWS.COM


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VIEWPOINT

Top 20 Shakeup Several new names crack Convenience Store News’ Top 20 Growth Chains ranking THIS YEAR’S Convenience Store News Top 20 Growth Chains ranking has a new leader.

EG America, the U.S. subsidiary of U.K.based EG Group, makes a huge splash in its debut on the annual Top 20 Growth Chains list — taking the No. 1 spot with the addition of 1,052 net new stores in the past year. EG Group entered the U.S. in April 2018 when it acquired The Kroger Co.’s convenience store portfolio, consisting of more than 760 stores operating under the Turkey Hill, Loaf ‘N Jug, Kwik Shop, Tom Thumb and Quik Stop banners. Originally setting up its headquarters in Cincinnati, EG America subsequently built up its presence in the U.S., reaching acquisition agreements with several regional players, including Columbus, Ohio-based Certified Oil, Syracuse, N.Y.-based Fastrac Markets and, just last year, Westborough, Mass.-based Cumberland Farms. Last June, it began to rebrand the c-stores to the new EG America banner and moved its headquarters to Cumberland’s Massachusetts location. EG America grew its store count by more than 50 percent year over year. A milder surprise gainer this year is Yesway. The Des Moines, Iowa-based c-store chain ranked No. 6 last year in net new store growth and first in percentage growth among the Top 20 Growth Chains. This year, Yesway, the operating banner of BW Gas & Convenience, leapt to No. 2 in total number of new stores added — an

amazing achievement for such a young chain. Yesway’s most recent acquisition was the highly regarded Clovis, N.M.-based Allsup’s, operator of 304 stores in Texas, New Mexico and Oklahoma. Of course, this year’s list also includes traditional acquisition-minded consolidators like Marathon Petroleum (No. 1 last year, No. 3 this year), GPM Investments (No. 4 last year, No. 5 this year), and 7-Eleven (No. 2 last year, No. 13 this year). However, missing from the list for the first time since we’ve been compiling it is Alimentation Couche-Tard, as the Canada-based parent of Circle K has been focusing on integrating the Holiday Stationstores chain it acquired in Minnesota and on international deals. Couche-Tard has been a Top 20 Growth Chain every year since the inception of the report. This year’s ranking shows several strong regional players moving up the list. Casey’s General Stores went from No. 5 last year to No. 4 this year. Wawa jumped three spots to No. 6 this year. Kwik Trip also leapt three spots to No. 9 this year. And finally, we welcome four additional newcomers to the CSNews Top 20 Growth Chains family: United Pacific, BP, Two Farms and True Energy North. The 2020 top growth chains are a truly diversified group. For comments, please contact Don Longo, Editorial Director, at (201) 855-7606 or dlongo@ensembleiq.com.

EDITORIAL EXCELLENCE AWARDS (2013-2020)

EDITORIAL ADVISORY BOARD Brett Atherton Bolla Management

2018 Jesse H. Neal National Business Journalism Award Finalist, Best Editorial Use of Data, June 2017

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

2018 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Website Business to Business, Retail, Full Issue, October 2017 Business to Business, Editorial Use of Data, June 2017 2017 Eddie Awards, Folio: magazine Winner, Business to Business, Retail, Single/Series of Articles, May 2017 Honorable Mention, Business to Business, Retail, Single/Series of Articles, June 2016 2016 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2015 Business to Business, Retail, Single/Series of Articles, August 2015 2015 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2014

2016 American Society of Business Press Editors, National Azbee Awards Gold, Best How-To Article, March 2015 Bronze, Best Original Research, June 2015

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

2016 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best How-To Article, March 2015 Silver, Best Original Research, June 2015

2013 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2012

Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Jim Hachtel Eby-Brown Co. Chris Hartman Rutter’s

Jack Lewis GPM Midwest

2015 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best Special Supplement, November 2014 Silver, Best Profile (long form), February 2014

4 Convenience Store News C S N E W S . c o m

Rick Crawford Green Valley Grocery

Ray Johnson Speedee Mart

2015 American Society of Business Press Editors, National Azbee Awards Silver, Best Profile (long form), February 2014

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

Laura Aufleger OnCue Express

2016 Trade Association Business Publications Intl. Tabbie Awards Silver, Front Cover Illustration, June 2015

Joe Lewis ExtraMile Convenience Stores Ruth Ann Lilly GPM Investments Danielle Mattiussi Maverik Inc. Vito Maurici McLane Co. Inc. Jonathan Polonsky Plaid Pantries Inc. Greg Scriver Kwik Trip Inc. Bill Stein Core-Mark Roy Strasburger StrasGlobal


s. re also supply chain fanatic h fanatics, which means we’ We can’t help it—we’re fres d safety fanatics. Sustainability fanatics. Foo s. atic fan lity qua And s. And innovation fanatic ours. g your business along with And fanatics about growin

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CONTENTS MARCH 20

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26 75

FEATURES

DEPARTMENTS

30 New Products

COVER STORY

VIEWPOINT

SMALL OPERATOR

38 A New M&A Powerhouse EG America blasts onto the Convenience Store News Top 20 Growth Chains ranking at No. 1.

4 Top 20 Shakeup Several new names crack Convenience Store News’ Top 20 Growth Chains ranking.

34 Suiting Up for the M&A Game Continuing industry consolidation has some small operators eyeing the role of buyer.

10 CSNews Online

NEW HORIZONS

CATEGORY CAPTAINS

47 All Hail the 2020 Category Captains Convenience Store News salutes 13 suppliers showing leadership in c-store category management. PRODUCT OF THE YEAR

68 New, Now & Making a Difference Why new products matter more than ever.

OUT & ABOUT

22 Bringing Clarity to a Confusing Category Tobacco Plus Expo 2020 offered insights on the changing face of tobacco, from CBD to vapor. OUT & ABOUT

68 6 Convenience Store News C S N E W S . c o m

26 7-Eleven Goes All In The c-store giant showed its cards at its annual franchisee trade show in Las Vegas.

73 #EachforEqual: Fighting Internalized Bias Eliminating gendered stereotypes starts with you. STORE SPOTLIGHT

75 Welcome to the Neighborhood Loop Neighborhood Market debuts a completely autonomous c-store and gas station. INSIDE THE CONSUMER MIND

90 How We Start the Day Consumers prioritize function and convenience in their morning consumption choices.


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CONTENTS MARCH 20

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8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631 (773) 992-4450 Fax: (773) 992-4455 www.csnews.com Direct Mailing Address for Convenience Store News: 11-43 Raymond Plaza West, 16th floor, Newark, NJ 07102 BRAND MANAGEMENT Vice President/Group Brand Director Paula Lashinsky (917) 446-4117 plashinsky@ensembleiq.com EDITORIAL Editorial Director (201) 855-7606

Don Longo dlongo@ensembleiq.com

Editor-in-Chief (201) 855-7608

Linda Lisanti llisanti@ensembleiq.com

Senior News Editor (201) 855-7618

Melissa Kress mkress@ensembleiq.com

Associate Editor (201) 855-7619

INDUSTRY ROUNDUP

CATEGORY MANAGEMENT

12 Marathon Petroleum Reportedly Mulling Speedway Sale 14 Rutter’s Experiences Security Breach

FOODSERVICE

60 Sliders, Slingers & Sandos, Oh My! 7-Eleven and Sonic see success with miniature versions of already-popular items.

14 Fast Facts FOODSERVICE

16 In the Public Eye

61 An Overlooked Opportunity C-stores can do more to make their fresh bakery offering appealing all day long.

16 Eye on Growth 18 Retailer Tidbits 18 Supplier Tidbits

Angela Hanson ahanson@ensembleiq.com

Associate Managing Editor (201) 855-7604

Danielle Romano dromano@ensembleiq.com

Contributing Editor (303) 741-3377

Renée M. Covino reneek@aol.com

Contributing Editor (201) 280-2614

Tammy Mastroberte tmastroberte@gmail.com

ADVERTISING SALES & BUSINESS Associate Brand Director & Northeast Sales Manager (508) 385-2524

Rachel McGaffigan rmcgaffigan@ensembleiq.com

Associate Brand Director & Western Sales Manager (330) 840-9557

Ron Lowy rlowy@ensembleiq.com

Associate Publisher & Midwest Sales Manager Kelly Fischer (773) 992-4464 kfischer@ensembleiq.com Account Executive & Classified Advertising Terry Kanganis (201) 855-7615 tkanganis@ensembleiq.com Classified Production Manager Mary Beth Medley (856) 809-0050 marybeth@marybethmedley.com EVENTS

61

TOBACCO

63 A “Crazy” Category 2020 is already shaping up to be an active year in new tobacco-related legislation. ALCOHOLIC BEVERAGES

65 The Fizz Phenomenon Hard seltzers are giving the alcoholic beverages category a muchneeded boost.

Executive Vice President, Events & Conferences Ed Several (860) 830-8321 eseveral@ensembleiq.com AUDIENCE List Rental (847) 492-1350 ext.318

MeritDirect Elizabeth Jackson

Subscriber Services/Single-Copy Purchases Omeda (847) 564-1468 CVN@Omeda.com PROJECT MANAGEMENT/PRODUCTION/ART Vice President, Production (877) 687-7321 Creative Director (973) 607-1320

Derek Estey destey@ensembleiq.com Colette Magliaro cmagliaro@ensembleiq.com

Advertising/Production Manager (773) 992-4418

Ed Ward eward@ensembleiq.com

Art Director (973) 607-1321

Lauren DiMeo ldimeo@ensembleiq.com

TECHNOLOGY 70 The Friction Free C-store Whether it’s via mobile app, in-store kiosk or RFID, frictionless commerce is making its way into convenience stores across the U.S.

65

CORPORATE OFFICERS Chief Executive Officer Jennifer Litterick Chief Financial Officer Dan McCarthy Chief Innovation Officer Tanner Van Dusen Chief Human Resources Officer Ann Jadown Executive Vice President, Events & Conferences Ed Several Senior Vice President, Content Joe Territo

CONVENIENCE STORE NEWS AFFILIATIONS Premier Trade Press Exhibitor

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.

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631. Subscription rates: $125 for U.S. addresses; $190 for Canadian addresses; $275 for all other addresses. Single copies (pre-paid only): $20 in the U.S. Foreign single copy sales (pre-paid only): $85.00. Periodical postage paid at Chicago, IL 60631, and additional mailing addresses. Copyright 2020 by EnsembleIQ. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or information storage and retrieval system, without permission in writing from the publisher. Reprints, permissions and licensing, please contact Wright’s Media at ensembleiq@wrightsmedia.com or (877) 652-5295. POSTMASTER: send address changes to Convenience Store News, PO Box 3200, Northbrook IL 60065-3200.

8 Convenience Store News C S N E W S . c o m


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CSNEWS ONLINE

TOP VIEWED STORIES

1

7-Eleven Inc. to Acquire Independent 7-Eleven Stores of Oklahoma

7-Eleven Inc. reached an agreement to acquire 7-Eleven Stores of Oklahoma, which has been operating 7-Eleven branded locations in central Oklahoma for nearly seven decades. Under the pact, 7-Eleven will add more than 100 independently run 7-Eleven branded stores.

2

7-Eleven Tops 70,000 Global Locations

7-Eleven Inc. reached a major growth milestone of 70,000 locations worldwide, making it the largest convenience store retailer in the world. Consumers can now visit 7-Eleven stores in 17 countries and regions around the globe.

3

GoPuff Reveals Product Winners of Super Bowl 2020

The Kansas City Chiefs weren’t the only winners in Super Bowl LIV, and the San Francisco 49ers weren’t the only losers. Digital convenience retailer goPuff released its third-annual Brand Bowl Report, detailing how consumers reacted to brands’ Super Bowl commercials and what they ordered most during the big game.

4

Casey’s Plans to Add 350 New C-stores by 2023

Casey’s General Stores Inc. is placing an emphasis on accelerated unit growth as part of its strategic planning journey. Calling it intuitive, Brian Johnson, senior vice president of store development, noted that a convenience retailer needs to have convenient locations to draw shoppers.

5

Single-Store Operators Continuing to Leave C-store Industry

The number of U.S. convenience stores dipped in 2019, with single-store operators accounting for most of the decline. According to the 2020 NACS/Nielsen Convenience Industry Store Count, there are 152,720 convenience stores operating in the United States, down slightly from last year’s 153,237 stores.

ONLINE EXCLUSIVE

Casey’s Foresees New Technology Dishing Up Big Pizza Sales Casey’s General Stores Inc. has been dishing up pizza across America’s heartland since 1984. Representing 20 percent of the $9 billion-plus retailer’s $1.1 billion foodservice business, Casey’s made-from-scratch pies have earned it a spot among the country’s top five pizza chains. However, like many c-stores, Ankeny, Iowa-based Casey’s digital ordering and delivery technology had not kept pace with that of its fellow major pizza chains or other foodservice competitors. Casey’s needed an app that befit the needs of its 2,000plus store chain serving almost 20 million pizzas annually in 16 Midwest states — along with burgers, sandwiches and other fresh fare. As part of a larger digital transformation underway, the team at Casey’s built and launched a new website and native mobile app that facilitates ordering and delivery. They also revamped customer relationship management and marketing automation capabilities, and launched the chain’s first digital loyalty program, Casey’s Rewards. For more exclusive stories, visit the Special Features section of csnews.com.

PHOTO GALLERY: Allsup’s Market Is Part C-store, Part Grocer One part convenience store, one part grocer, the new Allsup’s Market sells fresh meat, produce and more. Located in Melrose, N.M., the inaugural Allsup’s Market features expanded grocery and perishables, including fresh, never frozen meat, baby goods, and frozen foods. “We’re thrilled to be launching Allsup’s Market in Melrose,” said Tom Trkla, CEO of Yesway, which recently acquired Allsup’s. “Our customers are so important to us, which is why our aim with Allsup’s Market is to become their community store of choice for not only convenience items and fuel, but fresh groceries, fresh meat and quality food, too.”

10 Convenience Store News C S N E W S . c o m

MOST VIEWED NEW PRODUCT

Infinite CBD Vending Machine

Infinite CBD, which produces a variety of CBD products, introduces its first CBD vending machine, designed to make CBD products more accessible. Retailers can choose between options that include merchant services provided by Infinite CBD, merchant services managed by the retailer, or the ability to purchase the unit outright following a two-year contract with fully independent machine management and maintenance handled by the retailer. Infinite CBD Lakewood, Colo. (303) 562-1645 infinitecbd.com


INDUSTRY ROUNDUP

Marathon Petroleum Reportedly Mulling Speedway Sale The energy company initially planned to spin off the 4,000-store network

IN OCTOBER, Marathon Petroleum Corp. (MPC) announced plans to spin off its retail arm, Speedway LLC. Now, however, it appears those plans are not set in stone.

Reports surfaced in late January that Findlay, Ohio-based MPC is considering selling the Speedway convenience store chain after receiving several offers. With approximately 4,000 stores, Enon, Ohio-based Speedway could be worth $15 billion to $18 billion, including debt, as a standalone company. Two major players have emerged as potential suitors. According to media reports, Seven & i Holdings is working with advisors as it mulls purchasing Speedway, and TDR Capital is interested in merging the chain with one of its portfolio companies, EG Group. UK-based EG Group has been very active in the U.S. convenience channel since acquiring The Kroger Co.’s c-store portfolio in April 2018. However, on Feb. 19, new media reports revealed that Seven & i Holdings, the Tokyo-based parent company of 12 Convenience Store News C S N E W S . c o m

7-Eleven Inc., was in exclusive talks to acquire Speedway for approximately $22 billion. As of press time, MPC had yet to make a final decision on whether to sell Speedway or to stick with its original plan to spin off the retail division. “A spinoff actually creates more value for MPC shareholders than an outright sale,” Manav Gupta, an analyst at Credit Suisse AG, said in a note to investors. “However, we understand why some investors would have a strong preference for a sale over spinoff given it’s a lower-risk transaction that unlocks value a lot more quickly than a spinoff.” MPC’s initial decision to spin off Speedway followed a 10-month strategic review process. Its tie-up with Andeavor, which closed in October 2018, triggered the review. Under the spinoff plan, the new Speedway would consist of all of MPC’s company-owned and company-operated stores, which collectively generate $1.5 billion in annual EBITDA. The plan calls for Speedway to become an independent company by the end of 2020. MPC is an integrated downstream energy company that operates the nation’s largest refining system, with more than 3 million barrels per day of crude oil capacity across 16 refineries. Its marketing system includes approximately 7,800 branded locations across the United States, including approximately 5,600 Marathon brand retail outlets.


INDUSTRY ROUNDUP

FAST FACTS

1%

The number of U.S. convenience stores decreased by 1 percent from 2018 to 2019. Single-store operators drove the decline, dropping from 95,445 in 2018 to 95,108 in 2019. — 2020 NACS/Nielsen Convenience Industry Store Count

35% Only 35 percent of retail brands say their marketing technology is contributing to their ability to improve customer experience.

— Align Technology, Data and Your Organization to Deliver Customer Value, Bluecore & Forrester Consulting

2.1 billion

There were 2.1 billion servings of coffee ordered at QSR doughnut restaurants in the year ending October 2019 vs. 805 million servings of doughnuts ordered. — The NPD Group

14 Convenience Store News C S N E W S . c o m

Rutter’s Experiences Security Breach The c-store chain enhances data security following a roughly seven-month malware attack a malware attack on its payment processing system on Feb. 13, becoming just the latest convenience store chain to experience a security breach.

RUTTER’S REPORTED

The retailer launched an investigation — with the help of cybersecurity firms — after receiving reports from a third party about the possibility of unauthorized access to data from payment cards that were used at some Rutter’s stores. The York, Pa.-based company also notified law enforcement. “On Jan. 14, 2020, the investigation identified evidence indicating that an unauthorized actor may have accessed payment card data from cards used on point-of-sale (POS) devices at some fuel pumps and inside some of our convenience stores through malware installed on the payment processing systems,” the company explained in a notice posted to its website. As Rutter’s explained, the malware searched for track data — which sometimes has the cardholder name in addition to card number, expiration date, and internal verification code — read from a payment card as it was being routed through the payment processing system. The security breach timeframe varied by location; however, it generally fell between Oct. 1, 2018 and May 29, 2019. Access to card data may have started as early as Aug. 30, 2018 at one location and as early as Sept. 20, 2018 at an additional nine locations. “The malware has been removed, and we have implemented enhanced security measures. We also continue to work to evaluate additional ways to enhance the security of payment card data. In addition, we continue to support law enforcement’s investigation,” Rutter’s stated. The incident at Rutter’s follows a security breach at fellow Pennsylvaniabased convenience store chain Wawa Inc. In December, Wawa CEO Chris Gheysens reported that malware affected payment card information used at potentially all Wawa locations beginning at different points in time after March 4, 2019 and until it was contained on Dec. 12, 2019.


LONG-LASTING PROTECTION

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INDUSTRY ROUNDUP

In the Public Eye

down 4.2 percent year over year. On a positive note, same-store merchandise sales increased by 4.7 percent year over year.

Marathon Petroleum Corp., Findlay, Ohio Marathon Petroleum Corp. (MPC) converted 158 Andeavor locations to the Speedway brand in its fourth quarter of 2019. The retailer expects to convert the remaining roughly 250 locations by midyear 2020. Additionally, MPC will invest approximately $550 million in its retail segment. MPC delivered strong results in the fourth quarter, reporting adjusted EBITDA of $3.2 billion and generating $2.4 billion in cash from operations. Looking at just the retail segment, income from operations was down from $613 million in Q4 2018 to $477 million in Q4 2019, and segment EBITDA was $636 million vs. $738 million. Retail fuel margin decreased to 28.65 cents per gallon, and same-store gasoline sales volume was

Eye on Growth

7-Eleven Inc. inked a deal to purchase 7-Eleven Stores of Oklahoma, which has been independently operating 7-Eleven branded locations in central Oklahoma for nearly seven decades. The transaction will include more than 100 stores.

The transaction carries a $36-million price tag.

CrossAmerica Partners LP is acquiring retail operations at 172 sites, wholesale fuel distribution to 114 sites, and a leasehold interest in at least 53 sites. The deal is being struck with entities affiliated with Joe Topper, chairman of CrossAmerica. Refuel Operating Co. is moving into two new states with its pact to acquire Double Quick Inc. The deal includes 48 c-stores across western Mississippi and eastern Arkansas.

16 Convenience Store News C S N E W S . c o m

Murphy USA Inc., El Dorado, Ark. During its fourth-quarter 2019 earnings call, Murphy USA Inc. President and CEO and Director Andrew Clyde spotlighted the retailer’s increase in per-store fuel volume as a notable achievement of 2019, particularly when factoring in the effects of its Murphy Drive Rewards program discounts and deferrals. The rewards program also contributed to 4.8-percent growth in merchandise contribution, which reached a record $419 million. The company’s tobacco program contributed to a 4.5-percent increase in per-store tobacco volume. Looking at its portfolio, Murphy USA opened 10 new retail locations and reopened 10 raze-and-rebuild sites during Q4 2019. For the full year, it opened 17 new stores and reopened 27 raze-and-rebuild sites.

Love’s Travel Stops & Country Stores Inc. plans to open up to 40 new locations in 2020. The new travel stops will also mean the addition of approximately 40 new Love’s Truck Care Centers and Speedco service locations.

Alimentation Couche-Tard Inc. acquired Gas Stop Holiday locations. The transaction included all 17 Gas Stop Holiday stores owned by Tom and Melissa Howes in South Dakota and Minnesota. The Cigarette Store Corp. dba Smoker Friendly bought 22 Tobacco Road Outlet stores in North Carolina. The company plans to rebrand the locations as Smoker Friendly. Majors Management LLC acquired 185 retail fuel supply contracts from The McPherson Cos. Inc. The move increases Majors’ presence in Alabama, Florida, Mississippi and Tennessee.


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INDUSTRY ROUNDUP

Retailer Tidbits

Thomaston Land Co., a division of Coen Oil Co., is selling off nine Pittsburgh-area convenience stores. Three stores are being sold with real estate, and six stores have longterm leases. Shell Oil Co. launched an in-vehicle payment platform through Uconnect Market. It allows consumers to find the nearest gas station, purchase fuel and services, and save money on Shell fuel purchases. 7-Eleven Inc. is testing its first cashierless store at its corporate headquarters in Irving, Texas. During the pilot, the 700-square-foot nontraditional store is available only to 7-Eleven employees.

The logo for Pilot Co. includes a nod to the first Pilot gas station.

Enmarket rolled out Enjoy Rewards. The program features fuel discounts, a coffee club, a frozen beverage club, and a roller grill club. Club members receive a free item after six purchases, plus a birthday reward.

Pilot Flying J is moving forward under a new unified corporate name, Pilot Co. This move is intended to create synergy across the company’s growing family of brands and services.

Supplier Tidbits

Tiger Fuel is rolling out a new loyalty program and mobile app, a new online ordering system, new websites, and new exterior and interior signage. The changes come as the company marks its 29th year.

NCR Corp. acquired U.K.-based Zynstra. The companies previously launched the NCR Software Defined Store together in January 2019.

NJOY Holdings Inc. halted the sale of all of its fruit-flavored products in the U.S. The company stopped shipping these products as the Food and Drug Administration’s flavored vapor restrictions took effect Feb. 6. Core-Mark International Inc. is partnering with Solari Hemp to distribute hemp-derived CBD products through its supply chain. Offerings include tinctures, gummies, soft-gel capsules, pain creams, and muscle balms. 18 Convenience Store News C S N E W S . c o m

The report recognized PepsiCo for its transparency and ability to collaborate.

PepsiCo Inc. came out on top in Kantar’s latest U.S. PoweRanking report, marking its fourth year in a row at No. 1. The company also ranked first in all nine metrics measured by the study for the second year.

Altria Group Inc. recorded a fourth-quarter 2019 non-cash pretax impairment charge of $4.1 billion related to its stake in Juul Labs Inc. The charge was primarily driven by the number of legal cases currently pending against Juul. Kings & Convicts Brewing Co. is acquiring the Ballast Point brand from Constellation Brands Inc. The transaction is expected to close by the end of Constellation’s fiscal year 2020.


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The sale of tobacco products to minors is prohibited by law. This is an age-restricted product and age verification is required at sale. CALIFORNIA PROPOSITION 65 WARNING: This product contains chemicals known to the State of California to cause cancer and birth defects or other reproductive harm. TM and © 2020 JUUL Labs, Inc. All rights reserved.


OUT & ABOUT

Bringing Clarity to a Confusing Category Tobacco Plus Expo 2020 offered insights on the changing face of tobacco, from CBD to vapor By Don Longo & Melissa Kress

show of the year lit up Las Vegas in late January as industry players gathered for Tobacco Plus Expo (TPE) 2020.

THE FIRST TOBACCO

Greeting this year’s attendees at the entrance of the show floor was the New Product Showcase, displaying a range of exhibitors from CBD products to disposable vapor products, and new items in the cigar and premium cigarette segments. TPE 2020 also featured 25 percent more expo space, particularly in the premium tobacco segment, and drew a record number of pre-registered attendees. But it wasn’t just about the products — both new and established. With the tobacco industry facing changes at every turn, TPE’s lineup of educational sessions this year aimed to help retailers and suppliers navigate a new normal.

CBD Clarity Looking to add some clarity around an emerging category, CBD, the event’s

“Brave New World: Making the Jump Into CBD” session set out to help retailers move from talking about CBD to adding it as part of their product mix. Panelist Bethany Gomez, managing director of Brightfield Group, acknowledged the category can be overwhelming for retailers who are just starting to look at the CBD space because products run the gamut from pillows, to health and beauty items, to edibles. Among the most popular product types in smoke shops and vapor shops, she said, are tinctures, vapors and gummies. Many consumers start with CBD gummies because gummies are familiar to them. From there, they move on to tinctures, noted fellow panelist Laura Fuentes, CEO and co-founder of Green Roads. There is no denying the growing consumer interest in CBD. However, convenience stores may find it initially difficult to draw in consumers who are looking for CBD products. Jacopo D’Alessandris, president and CEO of E-Alternative Solutions (EAS), shared that the company’s research shows that c-stores and tobacco

Industry experts Chris Howard, Brittani Cushman and Dimitris Agrafiotis discussed the changing landscape for vapor.

22 Convenience Store News C S N E W S . c o m


OUT & ABOUT

Tobacco Plus Expo 2020 featured 25 percent more expo space.

shops “are not natural destinations for wellness or CBD.” However, if CBD falls in line with the products these retailers already sell — like vapor products, gummies or chewables — they can be. To that end, D’Alessandris advised convenience store retailers to think on a smaller scale. C-store shoppers will not spend $60 on a tincture bottle, for example, but they would consider pouches or two-capsule packs.

Vapor Clarity TPE 2020 tackled the changing vapor landscape as well, as the Food and Drug Administration’s (FDA) Feb. 6 ban on the sale of flavored cartridge- and pod-based vapor products, and the May 12 deadline for premarket tobacco applications (PMTA) for newly deemed products approached. The latest FDA guidance on flavored vapor products — which does not affect e-liquids or disposables — has created confusion among retailers, according to Dimitris Agrafiotis, executive director of the Tennessee Smoke Free Association, CEO of Global eVapor Consulting Inc., and founder of SEVIA USA. Many are unsure of what they are allowed to sell. The other panelists who took part in the “Waiting to Exhale: Mastering Today’s Vapor and E-Cigarette Market” session agreed. Chris Howard, vice president, general counsel and chief compliance

24 Convenience Store News C S N E W S . c o m

officer at EAS, said the company’s customers are seeking security — asking if EAS is going to file PMTAs for its vapor products by the May deadline. The answer is yes. The industry needs guidance from the FDA to help navigate the new regulatory landscape, the panelists stated. “Obviously, the PMTA [process] is a big topic,” said Brittani Cushman, senior vice president of external affairs for Turning Point Brands. “What are the standards? Who is going to file? It’s vague and cost prohibitive to many companies out there.” The new federal flavored vapor policy also will not stop some states from taking more restrictive steps. As Howard pointed out, many states do not think the ban on flavored cartridges and pods goes far enough. “If we see a softer side of the FDA, or the administration in general, we will see the states ramp up activity,” he said. In the end, an approved PMTA for a vapor product “will be the best thing to happen to this industry,” Agrafiotis maintained. “The more legitimate the industry becomes, the more willing states will be to slow down.” Billed as the first tobacco show of the year, TPE 2020 took place Jan. 29-31 at the Las Vegas Convention Center. Under the banner of Tobacco Media Group (TMG) and owned by Kretek International, Tobacco Plus Expo is an annual business-to-business trade show highlighting the full spectrum of tobacco, vapor, alternatives and general merchandise products available in the ever-evolving market. CSN


OUT & ABOUT

7-Eleven Goes All In The c-store giant showed its cards at its annual franchisee trade show in Las Vegas By Don Longo PREPARED FOOD, beverages and technology will be key drivers of growth for 7-Eleven Inc. franchisees in 2020, based on the themes revealed at this year’s 7-Eleven Experience — the convenience store retailer’s annual trade show and conference.

The event, held Feb. 5-6 at the MGM Conference Center in Las Vegas, drew a record 8,500 attendees, including franchisees and their families, corporate employees and vendor partners. This year’s 7-Eleven Experience featured 280 exhibitors representing most of the top brands sold in the c-store industry, as well as a wide spectrum of proprietary 7-Eleven products, and a Learning Center that, among other things, showed off the latest technological innovations being tested and implemented by the chain. Speaking with Convenience Store News at the event, 7-Eleven President and CEO Joseph DePinto extolled the company’s incremental progress on improving its fresh foods offering, broadening and sharpening its selection in both dispensed and packaged beverages, and building a technological platform that enables

New units will roll out later this year for self-service baked goods.

26 Convenience Store News C S N E W S . c o m

7-Eleven’s growing loyalty/rewards program, delivery service, mobile checkout, and first cashierless store. “As you know, I’m very positive and upbeat about the growth potential of the c-store industry,” said DePinto. “We are perfectly positioned to where the public is going. We are the retail channel that is closest to the customer, and we offer the most simplicity and ease of any other retail concept.” The nation’s No. 1 convenience retailer in store count, according to the latest CSNews Top 100 ranking, opened hundreds of stores last year. The company is off to a great start this year due to the recent announcement of an acquisition of 7-Eleven Stores of Oklahoma (100-plus stores in central Oklahoma) from the Brown family. DePinto shared that the retailer plans to build hundreds of additional stores that are “in the pipeline for the next two years,” and execute a significant number of remodels in 2020.

Technology Innovation DePinto, along with Senior Vice President of Merchandising and Demand Chain Jack Stout, Chief Information Officer Mani Suri, Chief Digital Officer Tarang Sethia and Head of 7NOW Raghu Mahadevan, discussed how 7-Eleven continues to push the technological envelope.

7-Eleven President and CEO Joseph DePinto addressed franchisees.


Gen Z WHY THEY MATTER At a Glance

In-depth research reveals nuances of this generation and how to make sure they are part of your customer base now and in the future. By 2020 Gen Z will make up

Born between 1996

Most diverse generation

The largest generation,

making up 26%

& 2010

of the entire population

40% of all US consumers.

General Trends VALUE-CONSCIOUS

CONVENIENCE-CONSCIOUS

65% say they want real value for their money

60% “probably would” or “definitely would” buy from a convenience store more often with delivery

BRAND-CONSCIOUS

OPPORTUNITY-CONSCIOUS

ATTENTION SPAN

62% find themselves attracted to brands viewed as “fun” or “cool”

88% overall satisfaction with a store is impacted by how much selection there is

Average attention span is 8 seconds

48%

representing racial or ethnic groups that have, historically, been considered minorities.

55%

use their smartphones 5 or more hours per day

25%+

use their smartphones for 10 or more hours per day

73%

follow at least one brand on social media

52%

follow three or more brands on social media

Tech Usage

85%

Gen Z is the first generation to be entirely made up of digital natives.

use YouTube

72%

use Instagram

They have never known a time without the internet and their lives have largely included smartphone technology.

69%

use Snapchat

Food Ordering and Delivery Since Gen Z is largely focused on both convenience and spontaneity, it makes sense that food delivery and ordering play a large role in their lives. One of the interesting points to note is how little brand loyalty currently plays into their ordering decisions.

39%

ordered 1-2 times per week

11%

ordered 3-5 times per week

25%

ordered food because of lack of time or energy

29%

ordered to satisfy a craving

58%

ordered food via a third-party app or website

23%

ordered food via restaurant websites or apps

Learn more about how to attract and retain Gen Zers. Visit Paytronix.com/GenZ to download the complete infographic – full of insights on this unique generation.


OUT & ABOUT

The company’s loyalty/rewards program is up to 27 million members, and growing. Delivery service, through the 7NOW app, is available in 47 markets and counting. “We have average delivery time down to just 28 minutes,” noted Mahadevan. In addition, the retailer’s mobile checkout store in New York City’s Manhattan borough is being rolled out to thousands of locations this year. Mobile checkout enables customers to scan and pay for their purchases without going to the checkout. And, for the ultimate in frictionless engagement, the retailer recently announced it is piloting its first cashierless store at its corporate headquarters in Irving, Texas. The 700-square-foot nontraditional store is available to 7-Eleven employees only. The store uses a proprietary mix of algorithms and predictive technology to separate and identify individual customers and their purchases from others in the store.

Food & Beverage Innovation Growing food and beverage sales is of utmost importance to the convenience giant. Among the beverage innovations on display at the 7-Eleven Experience were: new beanto-cup equipment for coffee and specialty drinks (these machines will be in thousands of stores by the end of 2020); a new softheat urn system that makes it easier for store employees to service the coffee bar; the addition of Rainforest Alliance Certified coffee beans from Kenya (50 percent of 7-Eleven’s coffee is now sustainably certified); nitro-infused, draft cold-brew coffee and tea; and several new, limitedtime Slurpee flavors described as on-trend and buzzworthy. When it comes to food, 7-Eleven continues to broaden and upgrade its proprietary prepared food offering. Most of its prepared foods, including salads, sandwiches, fruit cups, etc., are made at commissaries around the country and delivered each morning to the stores. Among the new items recently introduced or being rolled out this year are: • Boneless chicken skewers — Doing very well in tests, this portable and value-priced item is part of the retailer’s strategy to “own snacking.” • Sliders — Chicken, beef and smoked turkey sliders at a great introductory value of just 99 cents apiece are currently being tested in the Dallas market.

28 Convenience Store News C S N E W S . c o m

A record turnout of franchisees were enthused about new bean-to-cup equipment for coffee and specialty drinks.

• Hand-stretched, improved pizza — In test at 18 stores, this could be a game changer. Not frozen, this is pan-stretched pizza dough prepared and baked right in the store. 7-Eleven says it saw really strong growth in pizza sales last year, including whole pizzas, and it is one of the top-selling items where delivery is available through the 7NOW app. • New equipment and display cases — New units are planned for rollout later this year for self-service roller grill items and baked goods.

Private Label Innovation 7-Eleven continues to expand its private label 7-Select brand for packaged food and beverages, and recently launched the 24/7 Life brand for health and beauty, electronics, and general merchandise. Its current roster of approximately 1,800 private brands is being enhanced. “We’ve been moving our private labels up to premium and we haven’t seen the customer flinch,” noted Stout, explaining that the goal for 7-Eleven’s proprietary brands is to be “better than the similar national brand, provide a better price for consumers, and a better penny profit for franchisees.” Among the developments around private label are: new candy and snack items introduced under the 7-Select brand in unique flavors determined by research into consumers’ likes and wants; an organic private-label milk that will launch in March in regular, chocolate and reduced-fat varieties; a super-premium bottled water from Iceland called Skyra that also will launch in March; and line and flavor extensions for the retailer’s successful Quake energy drink are in the planning phase. CSN


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NEW PRODUCTS

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1. Bolt24 Energize Formulated to deliver advanced, all-day hydration, Bolt24 Energize is the first caffeinated beverage from Gatorade. Three flavor varieties are available: StrawberryLemon, Orange-Passion Fruit, and Cherry-Lime. Bolt24 Energize contains 50 to 75 milligrams of caffeine, varying by flavor. It delivers electrolytes from watermelon and sea salt, as well as 100 percent of the daily value of antioxidant vitamins A and C and vitamins B3, B5 and B6. The product contains no artificial sweeteners or flavors. The suggested retail price is $2.19 for a 16.9-ounce bottle.

2. Red Bull Summer Edition Watermelon

3. Sourdough Doughnut Mix

Red Bull Summer Edition Watermelon offers the wings of Red Bull with an iconic summer flavor. Building on the success of the Red Bull Summer Edition offerings, Red Bull Summer Edition Watermelon will be available starting in April in 8.4-ounce and 12-ounce cans. The limited-edition variety is designed to be the perfect complement to favorite summertime activities.

Dawn Foods’ Sourdough Doughnut Mix is a mashup of sourdough bread and a yeast-raised doughnut. The combination creates a buttery sourdough flavor with a soft, light and airy texture. This unique doughnut experience can be used in both sweet and savory offerings, such as jelly doughnuts, glazed sourdough sweet rolls, and honey butter fried chicken sandwich rolls, the company noted. 

Red Bull North America Santa Monica, Calif. energydrink-us. redbull.com/en

PepsiCo Inc. Purchase, N.Y. gatorade.com

Dawn Food Products Inc. Jackson, Mich. (800) 292-1362 questions@dawnfoods.com dawnfoods.com

4. Lorissa’s Kitchen Whole-Made Medley Bars Lorissa’s Kitchen Whole-Made Medley Bars merge two of the category’s strongest trends: nutrition bars made with wholesome ingredients, and meat protein bars. The new line features “the perfect blend of simple ingredients,” such as dried fruit, nuts, seeds, egg whites and 100 percent grassfed beef or all-natural chicken, according to the company. Featuring familiar flavors with a twist, the bars come in six varieties: Blueberry Fusion, Pineapple Teriyaki, Apple Cinnamon, Cranberry Orange, Chipotle Apricot, and Sweet Barbecue. Sold individually or in four-count multipacks, each bar delivers 10 grams of protein, is certified gluten free and dairy free, and is made with no high-fructose syrup or preservatives. Lorissa’s Kitchen Minneapolis lorissaskitchen.com

5. Encore Experience Consumer Engagement Platform Encore Experience is a cloud-based open applications platform that enables retailers to customize on-screen experiences to drive consumers from the forecourt into the convenience store. Retailers can create their own apps or use Gilbarco-built or third party-developed apps to remotely and securely deploy content and functionality to their Encore dispenser screens. Existing apps can be customized with backgrounds, icons and logos. Apps can include survey, ticker, games, couponing, and even order and purchase at the pump for c-store items. Consumer engagement can be measured to help retailers understand preferences. Gilbarco Veeder-Root  Greensboro, N.C. (336) 547-5000 gilbarco.com/us 30 Convenience Store News C S N E W S . c o m

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NEW PRODUCTS

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6. Powerade Zero-Sugar Drinks Powerade expands its product lineup for the first time in more than a decade with two new zero-sugar innovations. Powerade Ultra, available in Mixed Berry, White Cherry and Citrus Blast varieties, is he first ready-to-drink sports beverage to include shelf-stabilized creatine, a compound produced in the human body from specific amino acids and stored in the muscle.  Powerade Power Water features ION4 electrolytes and vitamins B3, B6 and B12. It is offered in three flavors — Berry Cherry, Tropical Mango and Cucumber Lime — and comes in six-unit multipacks of 16.9-ounce flatcap bottles or individual 20-ounce sport-cap bottles.

7. Uptime Sugar-Free Energy Drinks Uptime, a line of premium, better-for-you energy drinks, introduces two  new sugar-free varieties: Blueberry Pomegranate and Mango Pineapple. These new additions were selected based on flavor trends and consumer preferences. Both new varieties offer a refreshing burst of flavor, along with comfortable, sustainable energy, according to the maker. All Uptime energy drinks feature a proprietary blend of ingredients that are non-GMO and free of gluten and sodium.

8. Trolls Candy Fans Trolls characters Poppy and Branch are now available in novelty character fans by CandyRific. Each fan includes 0.53 ounces of assorted fruit-flavored dextrose candies (natural flavors and colors). The characters on the fans have a tuft of pink hair (for Poppy) or blue hair (for Branch). The suggested retail price is $4.99, and the fans ship in six 12-count displays per case or in mixed cases of Trolls Character Fans and Talkers. CandyRific Louisville, Ky. (502) 893-3626 candyrific.com

The Coca-Cola Co. Atlanta coca-colacompany.com

10. Fab 30 Urinal Screens Oxy-Gen Powered introduces Fab 30 urinal screens for men’s restrooms that are infused with high-quality fragrance and Neutra-Lox, a proprietary malodor eliminator. The screens are designed to eliminate, rather than mask, foul odors to keep urinals smelling fresh for 30 days. Fab 30’s flexible mesh design allows it to fit any urinal and keeps drains clean by trapping debris. The screens have curved ribs with added height at three endpoints and optimum space between the ribs to help eliminate urine splash-back. The product is available in 10 fragrances.

32 Convenience Store News C S N E W S . c o m

Sonny’s Chemistry by Diamond Shine introduces CERAMIC X3, an advanced ceramic coating process that produces an unparalleled polished look. ​​​​​CERAMIC X3 is a three-step ceramicinfused process applied after surface contaminants have been removed in the car wash, prime and rinse steps. Bonding at a molecular level, the CERAMIC X3 coating forms a durable shield that is resistant to dirt, bugs, bird droppings, contaminants and water, according to the company. Sonny’s Enterprises LLC Tamarac, Fla. sales@diamondshine.com diamondshine.com

UPTIME Energy Inc. Van Nuys, Calif. uptimeenergy.com

Oxy-Gen Powered Atlanta oxygenpowered.com

9. Sonny’s CERAMIC X3 Advanced Ceramic Coating

10


For trade purposes only. ©2019 Swedish Match North America LLC

CONTACT YOUR SWEDISH MATCH REPRESENTATIVE OR CALL 800-367-3677 FOR ADDITIONAL DETAILS


SMALL OPERATOR

Suiting Up for the M&A Game Continuing industry consolidation has some small operators eyeing the role of buyer By Renée M. Covino merger and acquisition (M&A) activity continuing at a rapid pace, and many of the largest chains in the industry getting even larger, small operators can’t help but wonder if they’re left with two choices: grow or go.

WITH CONVENIENCE CHANNEL

“Now that consolidation is rapid and expected, small operators are feeling the pressure. The buying clout of massive, branded convenience stores enables sharper pricing and a more professional environment,” said Don Stuart, managing partner of Cadent Consulting Group, based in Wilton, Conn. But is it really realistic to think that a small chain or a single-store owner can suit up and play competitively in the M&A game against large, seasoned acquirers? Linda Henman, author of “The Merger Mindset” and founder of Missouri-based leadership consulting firm Henman Performance Group, believes it is. “M&A deals tend to increase when two things happen: the stock market is strong, and companies have cash,” she told

34 Convenience Store News C S N E W S . c o m

Convenience Store News. “Now, more than ever before, small businesses have enough cash to put them in the M&A game.” As baby-boomer owners look to retire, their heirs are looking to expand, she explained, and buying another company is the fastest way to do that. From her viewpoint, it’s an ideal environment right now. “The timing won’t get any better than it is currently,” she reasoned. “Owners are retiring, which is putting more companies on the market. And more buyers have more cash.”

In the Buyer’s Seat To gauge whether your business is a good fit to forge forward into the M&A game, Henman advises beginning a formulation stage with two very simple questions: What do we want to do with the business? Why do we want to do that? “The answers to these two questions will then frame the discussion about the kind of ‘target’ a c-store wants to consider, and the criteria they’ll need to address before deciding on the deal,” she explained.


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SMALL OPERATOR

Questions about your retail mission is the next step in the process: Why do we exist? Who are our customers? What would they miss if we weren’t in business? As a buyer, you’ll want your potential target(s) to answer these questions in similar and compatible — or at least, not conflicting — ways to your answers. “For example, you might choose to buy a convenience store or stores that attract similar customers,” noted Henman. Stuart agrees with making synergistic comparisons, and also advises operators to take a very strategic look at potential targets, like the top performers in the industry do: • Will it enable us to achieve synergies and best practices by gaining scale? • Will we have a better foodservice operation because of it? • Will we be able to purchase fuel and merchandise more efficiently because of it? • Is there something in it beyond just scale, in terms of strategic fit? And speaking of strategic fit, Henman doesn’t believe small operators should limit themselves to other c-stores when considering potential mergers and acquisitions. “You might also think about buying synergistic gas stations, car washes, and fuel transportation companies. Or, you could consider buying one of the small companies that supplies you with a specific product, like coffee,” she relayed to CSNews. Once the target is established and the decision to proceed is carefully weighed, the small operator/ buyer should hire a “very creative” investment banker or consultants who specialize in buyer-side M&A deals, Henman advises. “Don’t rely on internal help,” she cautioned. “Those running the company need to continue to do that. Pulling your best people away from their current jobs jeopardizes the good order and discipline that will be needed to see the deal through to completion.” At the same time, having those who aren’t pivotal to the success of the day-to-day operation oversee the deal is an even worse option, she said. “Why would you send your ‘B Team’ in to make the most important decisions your company is ever likely to make?”

In the Seller’s Seat

indirectly completed more than 40 M&A transactions around the world. “Typically, they do not have the resources to be an acquirer themselves.” What’s more, the growing e-commerce presence in retail is affecting all brick-and-mortar retailers, according to Stuart. “Do you really want to be saddled with more debt when some of your business is already drifting into the e-commerce environment?” he posed. When considering the seller scenario, Cuatrecasas advises retailers to ask themselves: What assets do we have that could be attractive? If we take location out of the equation, what is it that makes our customers loyal and how might that appeal to a potential buyer? Stuart believes location could be a key part of the equation for small operators or single-store owners looking to be acquired. “The prices being paid for growing and profitable enterprises are high. If you have a growing business in the right geographic location, there’s an opportunity to become part of something bigger and benefit from synergies,” he said. For either scenario, though, taking a wait-and-see approach is not advised. “The economic run could already be in the ninth inning and there’s no guarantee there will be extra innings. It’s been 10 years of economic growth. Prices are high, and no one knows what’s coming next,” Stuart cautioned.

While the current conditions are seen as prime for the c-store industry’s small operators to become buyers, the way some see it, the truly best way for a small operator to get into the M&A game now and in the immediate future is not as the buyer, but as the target.

“Delivery robots, automated delivery vans/vehicles and drones are all coming sooner than you think, and they will completely disrupt the retail and c-store operating assumptions as we have known them for the past 20 to 30 years,” added Cuatrecasas.

“As a target, the small retailers can sell while they still maintain value,” said Paul Cuatrecasas, founder and CEO of London-based Aquaa Partners, who has directly or

While not all the experts agree on how smaller operators should suit up for the c-store M&A game, they do seem to concur that the sooner, the better. CSN

36 Convenience Store News C S N E W S . c o m


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COVER STORY

38 Convenience Store News C S N E W S . c o m


GROWTH CHAINS

TOP

A NEW M&A POWERHOUSE EG America blasts onto the Convenience Store News Top 20 Growth Chains ranking at No. 1 A Convenience Store News Staff Report

has only been a part of the U.S. convenience store industry since April 2018, but already even the most casual industry observer knows the name. EG GROUP

In under two years, the U.K.-based company has built up a sizeable presence in the U.S. market through an aggressive acquisition strategy, which kicked off with the purchase of The Kroger Co.’s convenience store portfolio and most recently took over Cumberland Farms. In the past year, the company’s U.S. subsidiary, EG America, grew its store count by more than 100 percent, earning it the top spot on this year’s Convenience Store News Top 20 Growth Chains ranking. EG America added 1,052 convenience stores between January 2019 and January 2020 — more than all of the other top 20 chains combined. How EG has managed to become a new powerhouse in the competitive mergers and acquisitions (M&A) scene boils down to two chief factors: its existing platform and its bidding strategy, according to Dennis Ruben, executive managing director of NRC Realty & Capital Advisors.

MARCH

20 20

Convenience Store News 39


TOP

GROWTH CHAINS "They had a platform in Europe to begin with, which was pretty large. I also think the company had access to equity and debt capital through some of the European and other international markets. That, coupled with exchange rates, gave them perhaps a competitive advantage over some of the domestic companies," he explained. "And secondly, I think they just plain outbid everybody else. They were willing to bid up a lot of these companies to a much higher multiple than some of the domestic companies like a Circle K or 7-Eleven," he continued. "I think most of these other companies were in the bidding on a lot of these deals, but EG Group simply outbid them." Along with Kroger’s c-stores and Cumberland Farms, EG’s other conquests have included the Minit Mart chain from TravelCenters of America Inc., Certified Oil and Fastrac Markets. Now, another headline-grabbing deal could be on the radar, as well. TDR Capital, the private equity firm behind EG Group, is reportedly interested in Marathon Petroleum Corp.’s Speedway LLC division if the company decides to sell the 4,000-store network instead of spinning it off into an independent company.

EG America added 1,052 stores between January 2019 and January 2020 — more than all of the other top 20 chains combined. "If Marathon decided to sell Speedway instead of spinning it off, I would think EG would be in the hunt on that deal — plus a lot of other major industry players,” Ruben said. “That would be a real coup for someone to pull off."

Enduring Growth Industry experts expect EG to remain a prominent M&A player in the U.S., provided that

40 Convenience Store News C S N E W S . c o m

1

NO.

EG America

WESTBOROUGH, MASS. 2020 Store Count: 2,042 2019 Store Count: 990 Increase: 1,052 (106.3%)

About the company’s growth: EG America, the U.S. subsidiary of U.K.based EG Group, grabbed the top M&A deal in the past 12 months when it closed on the acquisition of Cumberland Farms in October 2019. That transaction gave EG America 567 stores in seven Northeast states and Florida, plus a new headquarters in Westborough, Mass. During the past year, the retailer also wrapped up purchases of Fastrac Markets LLC, adding 54 stores in New York, and Certified Oil, adding 69 locations in Kentucky, West Virginia and Ohio.

2

NO.

Yesway

DES MOINES, IOWA 2020 Store Count: 417 2019 Store Count: 136 Increase: 281 (206.6%)

About the company’s growth: Yesway turned in a transformative 2019, pulling off the largest acquisition in its four-year history with the purchase of the Clovis, N.M.-based Allsup's convenience store chain. With this deal, Yesway added 304 locations and increased its presence in Texas, New Mexico and Oklahoma. Yesway is operated by BW Gas & Convenience, an affiliate of Beverly, Mass.-based Brookwood Financial Partners, a private-equity investment firm.

3

NO.

Marathon Petroleum Corp. FINDLAY, OHIO 2020 Store Count: 6,050 2019 Store Count: 5,893 Increase: 157 (2.7%)

About the company’s growth: Marathon Petroleum Corp. (MPC) may have been quieter on the M&A front in 2019 than the previous year when it closed on its strategic merger with Andeavor, but it did not sit still. The company's activities included the acquisition of 33 NOCO Express stores and a 900,000-barrel-capacity light product and asphalt terminal in Tonawanda, N.Y., from NOCO Energy. MPC began reimaging these stores to its Speedway brand this past summer.

4

NO.

GPM Investments LLC RICHMOND, VA. 2020 Store Count: 1,249 2019 Store Count: 1,162 Increase: 87 (7.5%)

About the company’s growth: GPM Investments took ownership of the Riiser convenience store chain on Dec. 3. This acquisition of 64 c-stores and gas stations marked GPM's first entry into Wisconsin, and brought into the fold such brands as RStore, Mad Max, Baltus and Jetz. In the past year, the company also acquired 18 stores from Town Star Stores, and made progress in its Southwest expansion plan with the acquisition of the Cash and Sons chain. This five-store acquisition marked GPM's second deal in Arkansas, following its E-Z Mart acquisition in 2018.

5

NO.

Casey's General Stores Inc. ANKENY, IOWA 2020 Store Count: 2,191 2019 Store Count: 2,115 Increase: 76 (3.6%)

About the company’s growth: For its 2020 fiscal year, Casey's set a goal of building 60 new convenience stores. Through its second quarter, the retailer opened 36 new stores and acquired five stores, as it reported on Dec. 10. Casey's third distribution center, currently being constructed in Joplin, Mo., will open up new markets for the retailer in the Southwest. Over the past 10 years, Casey’s has built or acquired 750 stores, and replaced or remodeled an additional 700 existing stores.


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Wawa Inc.

MEDIA, PA. 2020 Store Count: 891 2019 Store Count: 835 Increase: 56 (6.7%)

About the company’s growth: Wawa had a busy 2019. The Pennsylvania-based retailer continued to unfurl its banner across the Sunshine State, making its debut in Miami with three store grand openings on the same day, followed by a major milestone celebration in the fall for its 200th Florida store overall. To close out the year, Wawa introduced a one-of-a-kind small format location in Philadelphia. Looking to the future, the c-store operator has announced expansion plans for northern Virginia, where it expects to open 40 locations over the next 15 years, and Maryland, where it is looking to add 10 to 15 stores over the next five years.

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United Pacific

LONG BEACH, CALIF. 2020 Store Count: 300 2019 Store Count: 246 Increase: 54 (22%)

About the company’s growth: In February 2019, United Pacific picked up 39 MAC Chevron convenience stores. In the past year, the company also changed the banner at 42 of its locations from Circle K to My Goods Market. United Pacific is now one of the largest independent operators in the western United States. It offers fuel under the 76, Conoco, Shell and United Oil flags, and convenience items through the We Got It! Food Mart, My Goods Market and Circle K brands. Its retail and wholesale businesses operate in California, Nevada, Oregon, Washington and Colorado.

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BP plc

CHICAGO 2020 Store Count: 3,077 2019 Store Count: 3,033 Increase: 44 (1.5%)

About the company’s growth: Joint venture partners BP and ArcLight Capital Partners closed on an acquisition of Thorntons Inc. in early February 2019. The deal, which was announced at the end of 2018, is focused on the growth of BP’s downstream refined products segment. All of the acquired stores continue to operate under the Thorntons name.

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Kwik Trip Inc.

LA CROSSE, WIS. 2020 Store Count: 677 2019 Store Count: 637 Increase: 40 (6.3%)

About the company’s growth: Kwik Trip continues to inch closer to the 700-store milestone, adding 40 new stores in the past year, in addition to tearing down and rebuilding a handful of existing locations in its three-state footprint. When combined with strategic acquisitions, Kwik Trip is reportedly on pace to add 250 more c-stores over the next five years.

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QuikTrip Corp.

TULSA, OKLA. 2020 Store Count: 822 2019 Store Count: 789 Increase: 33 (4.2%)

About the company’s growth: Oklahoma-based QuikTrip (QT) was busy entering new markets in 2019 by way of organic growth. The retailer celebrated the opening of its 800th store in April. The milestone occurred in San Antonio, one of QT’s newest markets, which it first entered in fall 2018. Shortly after, QT took to social media to announce its move into the Denver market, stating that it chose the city because it has a large, booming population and recently dropped some restrictions on beer sales. This year, QuikTrip is expected to break ground on its first store in the state of Alabama — yet another new market for the chain.

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the company can handle integration of the various operations it’s purchased to date. "They have been aggressive buyers who are willing to pay top dollar for large chains," noted John C. Flippen Jr., co-managing director of Petroleum Capital and Real Estate LLC. "EG realizes that scale is mandatory when paying these market premiums." The way Terry Monroe of American Business Brokers & Advisors sees it, there is no doubt that EG will continue to grow and solidify its position as a formidable M&A player. In fact, he expects the company will want to eventually go public. "And size matters when you are going to go public," he pointed out. EG America noticed early on that the U.S. convenience channel is a fractured business, meaning you have a lot of players — 152,720 by NACS’ 2020 count — but not a dominant player like you do in the fast-food business, Monroe told CSNews. "EG America knew there would be tremendous economic savings as they grew. The only question now is: Can they operate a large amount of stores? My guess is that their operations team is pulling their hair out trying to digest the various acquisitions they've made and integrate these diverse operations," he added. "I'll bet there are several top-notch corporate consulting firms struggling to determine best practices across the various companies to reach some sort of consistent plans and policies. Strategic planning has to be a nightmare." Competitors looking to keep apprised of EG’s plans may want to watch out for when the retailer begins to divest lowerperforming sites. "Small divestitures by EG might be a good sign to look for to make the determination that EG has reached a slowdown in its acquisition objectives," Flippen noted. Only time will tell if EG runs the risk of getting too big, too fast in a new market. "Time will tell if their business model will work well for them. They are integrating a lot of assets very quickly," Ruben said. "Will all this acquisition lead to divestitures? I think right now, EG wants to integrate their assets and fine-tune their business plan in terms of how to execute that. I think ultimately, there is probably going to be some overlapping markets or stores that don't make sense for them."

M&A Market Dynamics This year’s Top 20 Growth Chains added 2,124 net new stores combined year over


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year — an average growth percentage of 23.1 percent. This figure lags behind last year’s count of 3,635 stores added by the top 20. As industry consolidation continues, there’s fewer large deals to be had.

"They have been aggressive buyers who are willing to pay top dollar for large chains."

Still, when reflecting on the M&A landscape in 2019, Monroe observed that it was on par with 2018, in that both were the busiest the channel has experienced in almost 20 years. With most of the moves being made by the already-large players, small operators are feeling the pressure.

— John C. Flippen Jr., Petroleum Capital and Real Estate LLC they are located or the fact they have no succession plan, and they are baby boomers and not willing to go borrow millions of dollars to expand their business with no chance of getting a return on their money due to their age.”

"You don't hear a lot about the smaller chains of stores that are being acquired by either another operator or a consolidator. My company works primarily with convenience store owners who have between 10 and 50 stores, and they are the ones in a precarious position," he said. "They are too small to be able to compete with the EGs of the world, and have a difficult time growing because of the demographics of where 23100_MDLZ_BELVITA_CSN_MAR2020_8x5.375_Trade_Ad_FNL.pdf

Monroe sees no end in sight for these challenging small-operator circumstances. Ruben agrees that 2019 was very similar to 2018 in industry M&A activity. In fact, he said it’s hard to distinguish between the two, as both were “very strong years.” 1

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RaceTrac Petroleum ATLANTA 2020 Store Count: 800 2019 Store Count: 767 Increase: 33 (4.3%)

About the company's growth: 2019 saw RaceTrac enter Tennessee with a groundbreaking in Murfreesboro, followed by multiple other sites within the state. RaceTrac is focusing on The Volunteer State to expand its footprint and has announced plans to open as many as 50 stores throughout middle Tennessee by 2023. The past year also saw RaceTrac launch a new franchising program, RT Franchising Inc. The initial focus is on identifying quality franchisee candidates in central Florida due to the brand's strong reputation and presence in that region.

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Croton Holding Co. PITTSBURGH 2020 Store Count: 134 2019 Store Count: 102 Increase: 32 (31.4%)

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About the company's growth: After reaching a milestone of 100 stores with its Par Mar Stores division in 2018, Croton Holding Co. continued the momentum in 2019, adding even more locations than the previous year (32 net new stores vs. 21). The past year’s growth included an acquisition of the 17-store Mountaineer Mart chain in West Virginia. Croton Holding Co.’s Par Mar Stores division now operates locations in Ohio, West Virginia, Pennsylvania and Kentucky.

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7-Eleven Inc.

IRVING, TEXAS 2020 Store Count: 9,300 2019 Store Count: 9,271 Increase: 29 (0.3%)

About the company's growth: 7-Eleven recently reached a global milestone of 70,000 locations worldwide. In the U.S., the retailer's expansion plans include western Pennsylvania, where it is seeking more than 20 franchisees for Pittsburgh metropolitan area stores. These locations are currently branded Sunoco APlus, purchased as part of 7-Eleven's largest-ever acquisition of 1,100 stores in 2018. In March, 7-Eleven acquired 7-Eleven Stores of Oklahoma, which has independently operated 100-plus 7-Eleven stores for nearly 70 years.

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Love's Travel Stops & Country Stores Inc. OKLAHOMA CITY 2020 Store Count: 509 2019 Store Count: 482 Increase: 27 (5.6%)

About the company's growth: Love's celebrated the milestone of 500 locations with the simultaneous openings of two travel stops in St. Clair, Mich., and Edon, Ohio, on Oct. 10. These locations were among 27 sites that Love’s added year over year. Its roadmap for 2020 is no less ambitious, as it calls for the opening of up to 40 new travel stops.

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Two Farms Inc.

BALTIMORE 2020 Store Count: 227 2019 Store Count: 202 Increase: 25 (12.4%)

About the company's growth: Two Farms Inc. dba Royal Farms grew its c-store count by more than 10 percent in the last year and took its operation past the 200-store milestone. The company recently acquired property in the Lehigh Valley region of Pennsylvania, which could signify plans to further compete in the state’s already-competitive c-store market.

44 Convenience Store News C S N E W S . c o m

Larger companies that may have been on the fence about selling saw "the market was so robust and frothy that they decided there would never be a better time to sell," he noted. And as for the acquirers, they continue to look for good real estate, good corners with a good stable cash flow that is consistent, and a good food program, according to Ruben, who added that "too much reliance on gas makes some people skittish." Today’s bidders also are taking the cost of EMV compliance and environmental compliance into account when it comes to pricing deals.

This year’s Top 20 Growth Chains added 2,124 net new stores combined year over year — an average growth percentage of 23.1 percent. "When we are doing a valuation for a potential client, we ask that question: Are you EMVcompliant in the store and at the pump? Most everybody is compliant in the stores, but a lot of companies are not yet compliant at the pump," Ruben explained. "If you have pumps that are relatively new — less than five to 10 years old — you can be compliant with a software upgrade, and that may cost $3,000 a pump. If they are older pumps, you have to replace them and that may be $25,000 a pump. The same goes for underground storage tanks. If they are older than 25 years, buyers are assuming at some point they will have to replace them and [they’re] factoring that cost into their bids." Overall, it continued to be a seller's market in 2019, with many small- to midsize retailers opting to cash out while the numbers worked in their favor.

The 2020 Outlook This year is likely to see more of the same due to interest rates being at all-time lows and the availability of financing, among other factors. "Whether the deal is pristine, average or


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challenging, there are ready, willing and able buyers across the country ready to step up and make an acquisition," said Mark Radosevich, president of PetroActive Real Estate Services LLC. "The key is to properly define and encapsulate the opportunity, properly qualify what type of deal it is, and then cast a wide enough net over targeted qualified buyers to insure timely success." The continued push to open betterquality, high-volume facilities should result in continued negative pressure on marginal scores within an affected trade area, he added. "This will ultimately challenge the traditional oil company brands to maintain market relevance. Jobberdriven dealer supply fuel distributors will be forced to grow or face consistent volume declines through dealer attrition," Radosevich explained. Looking ahead, Monroe anticipates 2020 will be an even more active year on all

"Whether the deal is pristine, average or challenging, there are ready, willing and able buyers across the country ready to step up and make an acquisition." — Mark Radosevich, PetroActive Real Estate Services LLC levels as, according to the M&A expert, it’s never been a better time to be a buyer or a seller. "It is the best time for a seller because the value of their stores has never been higher and the tax climate has never been better. Meaning you can get top dollar for your stores and pay less in taxes and put more money in your pocket," he said. "For a buyer, it has never been a better time, too, because you have lots of available money that is the cheapest we have ever seen. Yes, you have to pay a little more for your acquisition because

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GROWTH CHAINS values are high, but you get more for your money. And what difference does it make if you have to pay a little more, but you get what you want and you plan on keeping the stores for many years to come?" Ruben foresees 2020 having one key differentiator: a lack of large-scale deals. "Where I see 2020 being a little different is there are not that many big deals left and the ones that are out there, I don't think are sellers," he said. "What we are doing, and what some of our competitors in the advisory space are doing, is going down to the next group of players to take advantage of the M&A marketplace.” This group consists of midsize operators — companies with 10 to 75 stores. "They typically have difficulty competing with the larger players. Let's face it, it's getting more difficult as the big players get bigger. Couple that with a desire to get out of the retail side of the business, or a familyowned company that lacks a succession plan," he said. This shift to midsize players and smaller operators was also seen last year, and Monroe agrees it will continue. He anticipates the 2020 focus being on players with fewer than 100 stores. CSN

METHODOLOGY The Convenience Store News Top 20 Growth Chains report is based on store count figures provided by TDLinx, a service of Nielsen. This is the ninth year that CSNews has partnered with TDLinx to identify the c-store retailers that added the most convenience stores in the past year. A convenience store is defined as a store that includes a broad merchandising mix, extended hours of operation and a minimum of 500 SKUs. Fueling stations with small kiosk stores do not meet the official definition and thus are not reflected in TDLinx’s store count figures.

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True North Energy LLC BRECKSVILLE, OHIO 2020 Store Count: 126 2019 Store Count: 103 Increase: 23 (22.3%)

About the company’s growth: Making its debut on the Top 20 Growth Chains ranking, True North Energy picked up Schmuckal Oil Co.’s c-store and gas station portfolio in August 2019. The deal included 25 locations, in addition to a small wholesaler fuel and transportation business. In addition to its True North branded c-stores, the company supplies fuel to approximately 200 dealers.

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Murphy USA Inc.

EL DORADO, ARK. 2020 Store Count: 333 2019 Store Count: 312 Increase: 21 (6.7%)

About the company’s growth: Murphy USA dedicated 2019 to upping its competitive game. "We are competing for the long term and we are competing to win. With several transformative initiatives underway, we are positioning the business for further steplevel improvements in 2019 and beyond," President and CEO Andrew Clyde said during the company's fourth-quarter 2018 earnings call, held Jan. 31, 2019. Between January 2019 and January 2020, Murphy USA added 21 net new stores, many of them kiosks undergoing the raze-andrebuild process into full c-stores.

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Sheetz Inc.

ALTOONA, PA. 2020 Store Count: 603 2019 Store Count: 583 Increase: 20 (3.4%)

About the company’s growth: Sheetz celebrated a number of growth milestones in 2019. Kicking off the year, the Pennsylvania-based retailer cut the ribbon on its 100th North Carolina store — a month shy of six years since opening its 50th store in the state. Sheetz closed out 2019 with the December opening of its 600th store overall, located in Shaler Township, Pa.

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Pilot Co.

KNOXVILLE, TENN. 2020 Store Count: 713 2019 Store Count: 696 Increase: 17 (2.4%)

About the company’s growth: 2019 saw Pilot Flying J — now known as Pilot Co. — open new locations, rebuild sites and continue to make progress in its Facility Enhancement Plan (FEP), a five-year, $500-million initiative to renovate and upgrade existing locations. This year, Pilot Co. expects to open 10 to 15 new Pilot and Flying J travel centers, and complete FEP enhancements at approximately 150 locations.

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Maverik Inc.

SALT LAKE CITY 2020 Store Count: 343 2019 Store Count: 326 Increase: 17 (5.2%)

About the company’s growth: At the time of Maverik’s 300th store opening in July 2017, company executives estimated that the retailer known for its “Adventure’s First Stop” brand would reach the 400-store milestone in the next four to five years. During 2019, Maverik continued to make headway in its journey, adding 17 net new stores to its network.


FEATURE

2020

CAPTAINS

ALL HAIL THE 2020 CATEGORY CAPTAINS

Convenience Store News salutes 13 suppliers showing leadership in c-store category management By Susan E. Durtschi, Past Times Marketing

IN ORDER FOR convenience stores to win in their wide assortment of categories today, they need the aid of their leading suppliers. Category Captains step in as partners in leadership, providing solutions for c-stores that raise the health of an entire product category by leveraging consumer insights to link demand to unmet needs and marketplace opportunities.

C-store operators have been relying more and more on the expertise of their Category Captains in recent years to better understand the ever-changing roles of categories and products. Suppliers and distributors that are up-to-date with federal legalization and widespread availability of CBD products, regulatory changes around e-cigarettes and vapor products, food safety protocols and standards, the latest ecofriendly packaging, and changes in technology make these partnerships even more effective. C-stores know they have to have the latest and most accurate product information for training their employees. This year’s Convenience Store News Category Captains honorees are helping c-stores capture more than their share of consumers’ attention and dollars. The 13 suppliers recognized as 2020 Category Captains have earned convenience store retailers’ trust. Now in its seventh year, the CSNews Category Captains awards program honors outstanding category management by supplier companies. All entries were judged based on:

• Product innovation; • Creativity in merchandising, marketing, promotion and advertising; • Use of consumer insights to drive category sales; • Innovative and dynamic category management tools; • Demonstrated commitment to meeting the specific needs of retailer customers; • Efficiently lifting sales for the entire product category; and • Fact-based evidence of market-specific or account-specific results. Past Times Marketing, a consumer research and product evaluation firm based in New York, once again judged the entries based on information supplied by participating companies. This year's winners are:

Alternative Snacks: Jack Link’s Protein Snacks Jack Link’s Protein Snacks dominates the meat snacks category, which falls under alternative snacks in the Nielsen/NACS product category classifications. With a history of success in meat snacks, Jack Link’s continues to build strong strategic partnerships and expand outside the ambient meat-snack sets for category growth and captaincy. To do this, the supplier has partnered with insight solution providers to develop strategies and solutions that win in the world of “protein snacking.” Jack Link’s continues to invest in category and consumer segmentation, shopper and consumer insights, data resources and relevant insights in merchandising and shelving strategies. The company is a Category Captain for a vast number of national and regional retail accounts.

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While protein trends continue to evolve, consumers’ focus is on “real” food claims, protein sources, convenience and flavors. The No. 1 protein meat snack brand decided to expand into other categories, carving out a footprint in the refrigerated protein meat snacks space, and the bars and nutrition category as well. Using consumer insights, Jack Link's found that consumers purchase shelfstable, ambient meat snacks on different occasions than fresh meat refrigerated snacks. This presented an opportunity to reach consumers during different dayparts, and increase the cross-shopping between ambient and refrigerated meat snacks. This research led to the launch of Jack Link's Cold Crafted, a fresh, refrigerated meat snack product. Today, the fresh/refrigerated snacking category is one of the biggest bright spots in c-stores, and Jack Link's is helping drive that growth with fast-turning items. Proof of its success at encouraging crossshopping: more than one-third of shoppers bought a Jack Link's shelf-stable protein meat snack and a Jack Link's refrigerated protein meat snack in the same transaction, according to one major retailer's 2019 data.

Beer/Malt Beverages: Anheuser-Busch Anheuser-Busch’s (AB) stated mission is to "Lead Future Growth" in the category, and it has made category leadership a top priority throughout the organization. To support this in 2019, Anheuser-Busch stepped up its investment in category capabilities. First, it invested in people with the addition of a dedicated vice president of category leadership, Amanda Tilley, who led a department transformation resulting in a sizable Center of Excellence, and expanded national and regional team structures to support future growth. Then, it invested in analytic tools and technology, such as BrewBox 360, a bestin-class, end-to-end space management platform. AB also stepped up its investment in shopper insights, culminating in Ignite, a shopper-centric category growth strategy tailored to specific retailer needs. At its core, Ignite provides an understanding

48 Convenience Store News C S N E W S . c o m

of shoppers and the occasions in which they are consuming beer, today and into the future. Through mapping shoppers and occasions, AB has identified key drivers for category growth across a demand consumption landscape of key demographics and consumption moments. Ignite has helped AB become a category advisor for the majority of the top 20 retailers in convenience, including Circle K, 7-Eleven, Speedway, RaceTrac, Casey's, Murphy USA, MAPCO, Sheetz, Wawa and Maverik.

Candy: The Hershey Co. The Hershey Co. has committed itself to optimize the performance of each confection segment. The company brings tailored insights for each particular store direct to the retailer with its Mobile Customer Insights Center. One example is its work with GetGo, the Pittsburgh, Pa.-based convenience store chain. Hershey met with the retailer in the Mobile Customer Insights Center in August 2019. Discussions included space allocation, foodservice bundling and Strike Zone Optimization, a best-in-class merchandising strategy that vertically blocks brands in order of velocity. Strike Zone Optimization places the top-performing king and standard bar items in “The Strike Zone,” or the mostshopped shelves within a retailer’s candy aisle. Instant consumable candy at GetGo was 75 percent of its category sales, but was only allocated 58 percent of space in the stores. Hershey showed the financial importance of this segment to total store growth, and how it was under-spaced compared to the marketplace. Based upon the analysis, the retailer reduced its pouch/novelty candy section to expand instant consumable candy space from 8 feet to 12 feet, thus adding 35 more instant consumable items and implementing Strike Zone Optimization.


FEATURE

Early test results showed the total candy category at GetGo increased 30 percent, which validated the rollout to more than 86 stores in the fourth quarter of 2019. Results continue to come back better than projected, with instant consumable everyday candy up 38 percent in the first four weeks post-reset. In addition, king size is up 32 percent, standard bars are up 52 percent, and the total candy category is up 47 percent.

Cigars: Cheyenne International Cheyenne International has been in the filtered cigar business since 2004. As a category leader, it has not only grown to become the leading filtered cigar brand nationwide, but also has consistently represented the entire convenience channel on the regulatory front. Both independent and chain stores are an important part of Cheyenne's business.

Cheyenne employed several new programs, technologies and business systems to become a category leader in the filtered cigars category. With a retail display in hand, Cheyenne knew that visibility was the key to success for retailers. Paired with effective point-of-sale items and a beneficial incentive program, Cheyenne provided all of the tools retailers needed to rake in the profits. Cheyenne also has continued to expand its portfolio, adding SKUs to its lineup that are current with consumer trends. This provides new opportunities for retailers to gain

profits from an already established brand. However, Cheyenne took it one step further by providing unique silent salesmen programs that drive traffic to stores. This out-of-the-box strategy has proven fruitful. Offering insights into legislative issues and merchandising best practices are also some of the top reasons retailers turn to Cheyenne. When asked what Cheyenne does to set themselves apart from other vendors, Mark Hill from Go-Mart said: The company “invests in programs that facilitate growth from the customers’ internal wishes.” Chris Beaulier of Cigaret Shopper added: “Cheyenne is very customer focused. When planning or developing a program or promotion, every effort is made to ensure that a win-win proposition for both parties exists. Their strategy is to win through the customer’s success.”

E-Cigarette/Vapor Products: E-Alternative Solutions Regulatory challenges, sharpening consumer demand and rapid growth are quickly shaping emerging, alternative industries. Companies need to be positioned to succeed. E-Alternative Solutions’ (EAS) compliance expertise helps wholesalers and retailers better manage new business categories. EAS prefers to be “right to market” rather than first to market. Its product portfolio focuses on consumer needs for high-quality, trustworthy alternative solutions. EAS’ awardwinning portfolio of research-tested products, resources and trade programs help effectively maximize profitability and drive shoppers through the doors. Recent product innovations include: • Forth CBD — a comprehensive portfolio of U.S.grown, hemp-derived, full-spectrum CBD topical and edible products. All items have been tested and developed specifically for adult consumers seeking general wellness products. Form factors, price points and packaging sizes are designed to meet the needs of the typical convenience store shopper. The lineup also features an isolate CBD vape pen in two flavors. • Leap Vapor rechargeable e-cigarettes — Leap delivers an unmatched vaping experience for adult smokers who are seeking a satisfying alternative. With multiple nicotine levels and a full suite of tobacco and menthol flavors that suit the mature palate, Leap delivers a vaping experience the

50 Convenience Store News C S N E W S . c o m


FEATURE

way it was meant to be. The Leap Go e-cigarette is a perfect disposable option, enabling adult smokers to effortlessly customize their vaping experience to their flavor preference and nicotine level. Retailers rely on EAS for information on the latest legislative regulations and the company provides guidance to retailers on what they can and can't sell. Other factors that make EAS a Category Captain are: • Regular category reviews with retailers focusing on the categories’ profitability. • Work with retail accounts to develop promotional strategies to drive volume, resulting in a sales increase from $10,000 to $2.5 million in just three years at one major retailer. • Tested pilot promotional programs that were successful and used as a proof source for other manufacturers to participate. • Top-to-top meetings with accounts to develop CBD launch strategies.

Foodservice — Cold & Frozen Beverages: Frazil Frazil has transformed the frozen beverage space in a very short time with a new product backed by a significant investment in research and understanding the customer. The supplier has helped change the way retailers evaluate and manage the frozen beverages category. The category has long been plagued by high equipment costs and unpredictable service needs and costs. With the level of fixed investment required, high-performing products and programs have been necessary to achieve required targets and to clear profitability hurdles. Over the past several years, Frazil has driven disruptive growth and innovation in the category by delivering on all of retailers' needs for lower-cost equipment and dependable service. Frazil has achieved explosive growth for retailers through its “slushie-as-a-service” bundle.

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A common deterrent keeping convenience store operators out of the frozen dispensed beverage business is their lack of interest in buying equipment. Retailers have historically been required to make substantial investments in capital and equipment management to enter the category. This investment brings with it high levels of risk and requires strong program performance to ensure profitability. Frazil has unlocked the category and expanded frozen beverage to many new retailers as the leading provider of loaned equipment. Retailers who participate in Frazil’s bundle program get a machine placed in their store at no cost, ensuring they are making money from day one. Service is a constant frustration for retailers in this category. Machines often break down. Larger chains often have the scale to absorb the cost of a dedicated service team, but this is both time-consuming and expensive. For smaller operators, this often isn’t feasible. A few bad service calls can completely wipe out the profits from the category for the year. Frazil takes care of the service hassle by managing all reactive service requests with a 48-hour service guarantee window. Also, Frazil helps de-risk the service cost by absorbing all service costs. Customers pay a higher cost per case on the Frazil bundle program than if they owned the equipment and managed their own service, but retailers take comfort in knowing that they are guaranteed to make money in the category, and can focus on that. This dedication to customer service has helped make Frazil a first-time Category Captain winner. In the last two years alone, more than 6,000 new c-stores have brought Frazil into their stores. For many, this represents their first entry into the frozen beverages category.


FEATURE

Foodservice — Prepared Food: Rich Products

gourmet cookie program, which launched in November 2019, and it’s already paying dividends.

Rich Products (Rich’s) knows that to stay ahead of their competition, convenience store operators must strive to meet their consumers’ needs. So, Rich’s goes the extra mile to deliver foodservice solutions that meet the needs of all c-store operators, from large national chains to independents. Rich’s product categories span all dayparts, from baked goods to toppings and creams, to pizzas and flatbreads, sandwiches and desserts.

Another c-store operator on the West Coast collaborated with Rich’s to attain its goal of growing its in-store bakery business. The resulting program included a cookie contest between regional franchisees: the store with the highest year-over-year cookie sales won free uniforms. The company enjoyed its highest percentage increase in cookie sales during the three-month period. The retailer exceeded its goal, increasing foodservice bakery sales significantly. Bolstered by the contest, this same retailer partnered with Rich’s to develop a seasonal cookie program.

Rich’s culinary expertise is a unique benefit to the convenience channel. Its foodservice team is comprised of 20 professional chefs who not only create recipes for retailers, but also meet with operators in their stores and develop custom foodservice programs to meet their individual needs. The culinary managers have all completed training through the Culinary Institute of America (CIA), and the chefs have achieved CIA ProChef Level 1 Certification. Last September, Rich’s Foodservice launched a website dedicated to the convenience channel. RichsConvenience.com is packed with solutions for convenience stores to create, expand and maintain a thriving foodservice operation. Now, operators can access everything they need, from product training videos to equipment ordering to rebate programs. Operators also can subscribe to a quarterly newsletter so they’ll be first to know about new products and promotions. Retailers value their partnership with Rich’s. One Midwest retailer recently recognized Rich’s as a top-three finalist for its 2019 Consumer Insights Award. Rich’s was credited for providing innovative products and operator-specific consumer research that helped boost the retailer’s foodservice menu and profits. In one illustration, Rich’s retained a local university to conduct a consumer sensory study to help this retailer understand which attributes consumers preferred between its incumbent cookie program and Rich’s gourmet cookie program. As a result, the retailer decided to proceed with the new

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General Merchandise: McLane Co. Inc. As McLane enhances its relationships with novelty suppliers, the distributor has been able to offer a strong lineup of items that help fulfill retailers’ needs. McLane strives to offer a wholesale solution for these items, which are traditionally offered within a direct-store-delivery (DSD) network. Creating this offering reduces the number of trucks delivering merchandise in the retailers’ parking lots, and offers consistent deliveries throughout the week along with their normal deliveries. Although the product is not guaranteed, the program helps retailers run larger margins and minimize the exposure to their store. McLane’s category management team has used several tools to initiate interest and increase sales, including discussions in McLane's Center for Category Innovation (CCI), a recreated c-store environment at the company's headquarters in Temple, Texas. Retailers also can access special offers and educational webinars through McLane’s’ Virtual Trade Show (VTS), an Internet-based trade show. The distributor also has put additional time and effort into seeking new items and additional offerings to help retailers focus on seasonal opportunities. Through its retailer and supplier partnerships, McLane anticipates strong results in 2020. General merchandise, especially novelty, is a key driver for impulse sales in the convenience/truck travel channel. Year to date, general merchandise subcategories such as batteries, gloves, novelty, hardware and school/ office supplies are all growing at a high sales rate for McLane's retail customers, according to the company.

Health & Beauty Care: Lil’ Drug Store Products Health and beauty care (HBC) is a small, yet complex category that is typically just one of many categories assigned to a


We are Coca-Cola and so much more, offering the preferred categories and leading brands that are driving the most dollar value growth of any company across the total convenience store.* To learn more about driving your sales and profit growth with the #1 traffic driver for in-store sales,** contact your Coca-Cola representative, call 1-800-241-COKE, or visit www.ccrrc.org

Packaged Beverages Category

*Nielsen Planners, YTD 2018 thru June 30th, Total US Convenience Retail **Coca-Cola 2017 Macro Trends Shaping the Industry, Total channel historical and projected revenue growth – RNG, NARTD & KO historical revenue growth – Nielsen Databank ©2020 The Coca-Cola Company


FEATURE

c-store category manager. This category has hundreds of SKUs and multiple subcategories to manage, and experiences constant changes in item numbers, UPCs and product availability. Lil’ Drug Store Products (LDSP) provides a turnkey, unbiased and data-driven solution to help retailers and wholesalers maximize HBC sales and profit dollars. LDSP utilizes customer-specific data, coupled with syndicated national data, consumer research and a proprietary national retail database, to deliver business reviews, trend analysis and recommendations on products, retail pricing and merchandising. Retailers who partner with Lil’ Drug Store Products have seen results like a 10.2 percent increase in dollar sales and 2.2 percent increase in unit sales for a 500-plus-store national chain, and a 20 percent increase in dollar sales for a 300-plus-store chain within the first 90 days of planogram implementation. In addition to sales growth, retailers have positive things to say about the process of working with Lil’ Drug Store Products. Retailers have praised LDSP category management for its professionalism and work provided in the transition from a major competitor, calling it the best experience to date in working with another category manager. Another commented: “Your recommendations are spot on! Data is objective; follow-up is very quick; sales and profits speak for themselves.”

Packaged Beverages: The Coca-Cola Co. In 2019, Coca-Cola identified an opportunity to drive the carbonated soft drinks (CSD) category forward through flavor innovation. Research showed that about 70 percent of Coke brand drinkers also drink non-cola alternatives for a change of pace, but only 12 percent of Coke drinkers also drink Coke flavors. Creating an option that would drive Coke drinkers to add Coke flavors to their repertoire represented a significant opportunity for Coca-Cola, the CSD category and convenience store retailers.

56 Convenience Store News C S N E W S . c o m

To do this, Coca-Cola set out to launch a new Coke flavor that would satisfy consumer desire for variety and ultimately inspire incremental purchases. In taste tests, Coke Orange Vanilla outscored other successful Coca-Cola products that were driving category growth. In North America, 70 percent of category consumers rated it “unique and different,” 50 percent of Coke drinkers said they would buy it in addition to Coke (original taste), and 73 percent of Coke drinkers expressed purchase intent. Coke Orange Vanilla and Coke Orange Vanilla Zero Sugar both launched in February 2019, giving shoppers more of what they want: highly differentiated beverages that satisfy their need for variety.

Coca-Cola worked with convenience retailers to roll out the products via multiple shopper marketing strategies. In the cold vault, Coke Orange Vanilla and Coke Orange Vanilla Zero Sugar were placed prominently, accompanied by static clings and shelf strips featuring fresh-looking orange slices and a summery color scheme to grab shopper attention. In the checkout zone, eye-catching barrel coolers inspired shoppers to impulse-buy the new drink on their way out of the store. The rollout plan also successfully leveraged Coke’s partnership with NCAA March Madness by launching Coke Orange Vanilla during the basketball tournament. More than 20 national retail customers (including convenience retailers) leveraged NCAA and Coke Orange Vanilla programs for in-store execution. Beyond convenience stores, Coca-Cola significantly invested in a 360-degree consumer engagement plan for Coke Orange Vanilla, from which the convenience channel also benefitted. Marketing support included TV, out-of-home, local radio, digital, mobile, social, retail trial-driving, point-of-sale, experiential sampling, PR and influencer engagement. Coke Orange Vanilla and its zero-sugar counterpart were an immediate success, spearheading 7.3 percent revenue growth for the Coca-Cola brand, taking it to a 10-year high. The product has breathed life into the entire CSD category. As Coca-Cola’s first new flavor in more than a decade, Orange Vanilla drove 80 percent of category value growth in the convenience channel, at $9.4 million, and reached 75 percent of All Commodity Volume (ACV) within its first 10 months on the market. In one of the nation’s largest convenience chains, Coke Orange Vanilla almost tripled the growth of the entire CSD category and reached 78 percent of ACV.


FEATURE

Packaged Sweet Snacks: McKee Foods McKee Foods has recognized the importance of a strong packaged sweet snacks category in being a critical component to growing its Little Debbie, Drakes and Sunbelt Bakery Granola Bar product lines. Due to the importance of the health of the total category, the company invests in ensuring that category managers get the category insights and support they need in order to grow both the category and McKee’s brands. McKee conducts in-depth opportunity gap analysis that examines the retail dollars being missed by a retailer, and an efficient assortment analysis to show segment, brand or UPC opportunity and what brands or SKUs may be missing or underperforming in the retailer's planogram. Another category-leading program is a shipper marketing program designed to either drive consumers to the category or encourage them to increase their basket with category purchases. Packaged sweet snacks is one of the most impulsive categories in a convenience store, so it is critical for the health of the category to interrupt the customer's shopping pattern and get the category in front of them — which is often done with endcaps and secondary displays. One of McKee's biggest category accomplishments has been helping retailers understand the importance of giving space to the category on endcaps and elsewhere. McKee commissioned third-party studies to confirm the impulsiveness of the category and highlight the importance of displays. McKee also supported retail category managers with opportunity gap studies to show the negative impact on the

entire category when the product is not displayed prominently.

One of the biggest successes in 2019 came from a retailer with stores throughout the Southeast. This retailer already had a healthy category and recognized the need for the category to interrupt the shopper’s path in the store. However, they still had some opportunity for growth by ensuring the top brands had the correct SKUs in all stores at all times. McKee did an efficient assortment analysis during a top-to-top visit that showed the need for increased variety of Little Debbie products in one market, but also showed the need for a competitor’s product in another market. The retailer made some category changes based on McKee's recommendations. Since the reset, its results are up more than 20 percent in both dollar and unit growth. Also in 2019, several retailer category managers asked McKee to help grow customer baskets while shopping the category. The supplier designed multiple shopper marketing campaigns around the country designed to encourage customers to make an additional purchase, with the cashier prompting the customer at the register. These programs have been very successful, seeing unit growth between 5 percent and 12 percent for the brand, as well as total category growth. The biggest success came when secondary displays were authorized for on or near the register. Another initiative in 2019 was a program to help retailers drive customers from the pump into the stores and to the packaged sweet snacks category. McKee partnered with retailers' loyalty programs and offered free items or bundled the Little Debbie brand with other categories like hot beverage, fountain or other highaffinity items. While these programs are not expected to show significant lifts in unit or dollar sales, they do encourage consumers to get into the habit of visiting the stores and shopping the sweet snacks category.

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Salty Snacks: McLane Co. Inc. Over the last couple of years, retailers have been looking for more alternatives in the salty snacks set for larger bag options from the warehouse delivery system. One of the main drivers is that retailers are looking for these options to improve their gross profits.

Among the items in the sets are Kellogg’s Cheez-It and Pringles; Amplify Snacks’ Pirate’s Booty, Paqui and Skinny Pop; Mars’ Combos; Hershey’s & Reese’s Snack Mix; General Mills’ Chex Mix, Gardetto’s and Bugles; and Terra Chips by Hain Celestial. As more options come onboard from suppliers, this part of the category will continue to expand. With this, retailers will have more choices to merchandise and drive sales. Although McLane is still early in the process of rolling the larger bags out to retailers, the wholesaler has seen a notable uptick in both SKU count and sales. As more retailers expand warehouse-delivered chips in both small and large bags, McLane expects the category’s sales to grow along with the space allocation.

Up until recently, there have not been many choices outside of the DSD network, but this recently changed. After some brainstorming and working with its supplier network, McLane is now able to offer the larger bag options retailers are looking for in the salty snacks category. McLane created 3-foot and 4-foot endcaps to promote these new large bag choices for retailers. These endcaps are featured in the McLane Center for Category Innovation, so all retailers who visit will be able to see how this could look in their stores. The endcaps are also featured in the McLane Strategic Merchandising Solutions online magazine, which includes suggested POG for each category. Additionally, suppliers can use the McLane Virtual Trade Show as a launching platform to promote these items.

Wine & Liquor: E&J Gallo Winery The way Americans drink is changing and E&J Gallo Winery uses consumer and shopper insights to look beyond wine and explore the entire alcohol beverage category. E&J Gallo studies how values and beliefs manifest into what consumers buy, choose and consume. Innovation in the area of alternative packaging and occasions continues to be key. Wines in cans, Tetra packs and single-serve formats are helping to expand wine occasions to include instances where wine may not have been top-of-mind before. These new package options also are popular with consumers when it comes to convenience, portion control, sustainability, and occasions where alcohol is consumed at stadiums, golf courses, pools and parks. As part of its category leadership, E&J Gallo performed a Small Format Wine Assortment Expansion test last year, and the results were outstanding. In 2019, overall chain wine sales grew by 11.17 percent. Small sizes (under 500 milliliters) vs. all other sizes grew from 14 percent share to 22 percent share. Overall dollars in small format grew 26 percent, particularly driven by the company’s Barefoot Wine to Go product. CSN

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FOODSERVICE

FOOD I NSIGHT P O W E R E D B Y DATA S S E N T I A L

Sliders, Slingers & Sandos, Oh My! 7-Eleven and Sonic see success with miniature versions of already-popular items A QSR Winner Means a C-Store Opportunity Sonic’s latest entry into the “Chicken Wars” — the Classic Chicken Slinger — scores predictably low for uniqueness (as this has clearly been done before), but delivers on purchase intent. This is a clear signal that patrons can’t get enough of chicken sandwiches, and that it’s a very viable opportunity for the convenience channel to leverage.

a term with typically positive connotations. But this month, at Datassential, we’re seeing success with sliders — miniatures of some of our favorite offerings.

DOWNSIZING IS NOT

Purchase Intent + Value = Success Consumers love 7-Eleven’s new Cheeseburger Sliders. A high score in branded purchase intent means those shoppers enjoy the concept and expect it to come from 7-Eleven. And a score of 99 in value likely means they’ll come back if it delivers on taste.

Both this concept and 7-Eleven’s Cheeseburger Sliders deliver on value, too, so it is important to keep that in mind if you plan to launch a tiny treat of your own. CSN

Premium ingredients, such as fire-roasted onions and artisan Hawaiian brioche rolls, showcase not only the promise of great flavor, but also make for excellent menu copy.

OPERATOR: 7-Eleven ITEM TYPE: Limited-Time Offer

Datassential’s C-Store Keynote Report levers data from SCORES and many other tools to give you a complete trend analysis for the channel. For more information from the 2020 report, visit Datassential’s website at datassential.com and look under the Food Insights header.

DATE: December 2019 PRICE: 99 cents

DESCRIPTION: Loaded with an all-beef patty, sharp cheddar cheese, fire-roasted onions and signature secret sauce. Assembled and delivered daily on artisan Hawaiian brioche rolls from popular, award-winning local bakery, Village Baking Company.

98 unbranded PI

97 branded PI

50 uniqueness

84 frequency

43

61%

44%

38%

22%

40%

definitely or probably would buy

definitely or probably would buy

extremely or veryunique

would order the item all the time

draw

would visit somewhere just for this item

99 value

79%

excellent or good value for the dollar

99

--

65

85

58

99

versus other c-stores’ items

versus other c-stores’ items

versus other c-stores’ items

versus other c-stores’ items

versus other c-stores’ items

versus other c-stores’ items

96

--

40

83

16

98

versus other burgers

versus other burgers

versus other burgers

versus other burgers

versus other burgers

versus other burgers

100

97

45

78

57

94

versus other items from 7-Eleven

versus other items from 7-Eleven

versus other items from 7-Eleven

versus other items from 7-Eleven

versus other items from 7-Eleven

versus other items from 7-Eleven

OPERATOR: Sonic Drive-In ITEM TYPE: Limited-Time Offer

DATE: December 2019 PRICE: $2.49

DESCRIPTION: The Classic Chicken Slinger comes topped with pickles and mayo and served on a brioche slider roll.

86 unbranded PI

71 branded PI

uniqueness

21

67 frequency

34

54%

49%

29%

20%

38%

definitely or probably would buy

definitely or probably would buy

extremely or very unique

would order the item all the time

draw

would visit somewhere just for this item

94 value

67%

excellent or good value for the dollar

81

--

23

59

24

86

versus other QSR items

versus other QSR items

versus other QSR items

versus other QSR items

versus other QSR items

versus other QSR items

85

--

20

73

26

94

versus other sandwiches

versus other sandwiches

versus other sandwiches

versus other sandwiches

versus other sandwiches

versus other sandwiches

78

71

29

54

27

76

versus other items from Sonic Drive-In

versus other items from Sonic Drive-In

versus other items from Sonic Drive-In

versus other items from Sonic Drive-In

versus other items from Sonic Drive-In

versus other items from Sonic Drive-In

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FOODSERVICE

An Overlooked Opportunity C-stores can do more to make their fresh bakery offering appealing all day long By Angela Hanson

is a staple of the morning convenience store visit as busy, on-the-go customers stop in to grab a coffee and a breakfast item they can eat on the way to work, school or while running errands. But all too often, the bakery case gets forgotten after the morning rush.

THE BAKERY CASE

Savvy convenience foodservice retailers, however, are waking up and taking steps to turn the fresh bakery category from "good enough" to something that provides true added value. Step one, according to industry insiders, is to look inside — not just into the bakery case, but into the products themselves and the ingredients used to make them. "There are two universal truths about today's consumers and food. No. 1: It has to taste great. And No. 2: the fresher the better," said Jayne Kearney, director of marketing for Bake'n Joy Foods, a bakery solutions provider to the convenience channel. For Bake'n Joy, “fresh” means sourcing ingredients as close to its North Andover, Mass., manufacturing facility as possible, such as cranberries from within the state and farm fresh eggs from New Hampshire. Using a higher percentage of whole fruit, nuts and spices also contributes to product quality.

At the same time, while quality and freshness will encourage customers to make repeat purchases, c-store operators must get their attention in the first place. One way to do this is by offering unique bakery items. For instance, Irving, Texas-based convenience store giant 7-Eleven Inc. experiments with unusual flavors, such as a Piña Colada cupcake, Bourbon Maple Praline yeast doughnut, and Cinnamon Fire Bomb cake doughnut. Regional c-store chain, Valparaiso, Ind.-based Family Express Corp., makes its doughnuts square-shaped to stand out. These unique offerings don't have to be permanent additions — category experts agree that the fresh bakery segment can benefit from seasonal and limited-time offers (LTOs), just as the prepared food and dispensed beverage categories do. "Seasonal promotions may include doughnuts decorated with colorful icing, whipped toppings, cereal or candy, and other toppings," said Tom Michalewski, customer marketing manager, convenience, for the foodservice division of Rich Products Corp. "These types of specialty items may even entice a customer who doesn't typically buy a bakery item to make a bakery purchase." Indulgent baked goods that can double as snacks are also sales drivers. Filled doughnut rings and cake doughnuts featuring flavors like strawberries and cream, blueberry and pumpkin are on the rise. The key is to make a habit of experimenting with on-trend and special items. "Though the basics are the foundation of the business, special offerings are an essential constant," said Ryan Fasel, director of marketing at Family Express.

Plan Practically Along with choosing the right product assortment for their customers, c-store retailers must ensure they establish the right baking environment in which to execute their program. "Foodservice in general is complex, but baked goods are more complex than traditional prepared foods," Fasel cautioned. "A slight variation in temperature or humidity can monumentally change a recipe."

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FOODSERVICE

It is integral that retailers who desire an outstanding program be prepared to make a significant capital investment, show passionate commitment and have patience, he noted. For c-stores that bake or decorate in-store, training is just as important for fresh baked goods as it is for prepared foods. If a program is fully in-house, retailers should carefully develop their own detailed training program. C-store operators that wish to work with supplier partners in the segment should choose one that provides useful training resources. Rich Products recommends three specific steps for retailers who are serious about enhancing their fresh bakery program: 1. Personalize

it. Even retailers that have their baked goods delivered instead of baking in-store can add their own unique twist or seasonal flair by finishing off items like doughnuts with colorful icing, cereal or candy.

2. Take credit for it. If you offer fresh baked goods made in-store, let your customers know, said Michalewski. Put up signage that states “made fresh daily” to entice. 3. Market your bakery. Don't wait for customers to notice the bakery case. Window clings, store signage and other promotional materials can get them there.

Advertising bakery specials and LTOs, cross-promoting fresh baked goods with the front-of-house beverage program,

62 Convenience Store News C S N E W S . c o m

and placing the bakery case in a high-traffic area all contribute to visibility and sales. Once a new or revamped program is in operation, retailers should implement a sales-tracking program to determine the most popular individual items, instead of ringing up all items as a generic "doughnut" or "cookie." The more detailed the data in hand, the easier it is to offer the specific fresh baked products customers want and will buy. And this, in turn, allows retailers to restock the bakery case throughout the day when possible, reinforcing the idea that fresh baked goods are an all-day option. "The saddest thing to see in a c-store bakery display case is the two to three remaining muffins from the morning daypart," said Bake'n Joy’s Kearney. "We strongly suggest operators bake fresh throughout the day to stimulate the senses. The sight and smell of fresh baked muffins evokes emotion and will lead to that impulse purchase." As seen in the substitution of snacking throughout the day for three regular meals, and the adoption of all-day breakfast at chains like McDonald's, consumers are no longer playing by daypart rules when it comes to what they eat and when they eat it. Finally, c-stores should pay attention to the bakery case and avoid giving it the appearance of an afterthought, even if a store lacks on-site baking capabilities. Clean the bakery case after the lunch rush and consolidate or restock specific SKUs for the evening. “There is nothing wrong with having several empty slots in your case later in the day, but make sure the case is clean," Michalewski said. "It’s important to remember that consumers eat with their eyes and cleanliness elevates the perception of freshness." CSN


TOBACCO

A “Crazy” Category 2020 is already shaping up to be an active year in new tobacco-related legislation By Melissa Kress

NO ONE EVER said the tobacco category is boring. And that’s never been truer than in the past 12 months.

“This past year was crazy in this category, and I think this year will be even crazier,” said Don Burke, senior vice president of Management Science Associates Inc. (MSA). Discussing the category at the National Association of Tobacco Outlets (NATO) Industry Outlook during Tobacco Plus Expo 2020, Burke pointed out that convenience stores account for 57 percent of all retail stores in the United States and 71 percent of all tobacco volume. This compares to 8 percent volume through tobacco outlets, and 2 percent each through the drug and dollar channels. Looking at the numbers for the 52 weeks ending third-quarter 2019, total U.S. nicotine volume dipped 2.2 percent in convenience, which was on par with tobacco outlets, but fared much better than drugstores. That

channel saw a 15.4 percent drop — not surprisingly since major drug retailers have made the decision to either exit the tobacco business completely, or implemented Tobacco 21 policies prior to the age switch at the federal level. According to Burke, an overall decrease in total U.S. nicotine volume (all outlets combined notched a 2.4-percent decline) came in a year that saw the major tobacco manufacturers take three list price hikes. “This seems to have had an effect,” he stated. The dollar channel was the one channel that saw its total nicotine volume grow, by 4.4 percent; however, Burke cautioned that more dollar stores added tobacco to their product mix this year and the channel saw an increase in locations as well. “They added more stores, but they are not doing the tobacco business better, necessarily,” he explained. As for nicotine segment share, cigarettes’ share was down 3.1 percent, indicating that adult consumers are moving to other products to meet their nicotine needs. Among the growing segments are oral pouches — though still very small — and vapor, which captured 5.6 percent share for the period analyzed.

“This past year was crazy in this category, and I think this year will be even crazier.” — Don Burke, Management Science Associates Inc.

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TOBACCO

Taking a closer look at tobacco trends in the convenience channel, MSA’s numbers show:

NATO Executive Director Thomas Briant detailed the latest developments around local, state and federal tobacco regulation.

• Total cigarette volume decreased 5.1 percent; • Non-menthol cigarette volume decreased 5.9 percent; • Menthol cigarette volume decreased 3.8 percent; • Large cigar volume increased 3.6 percent; and • Small/filtered cigar volume decreased 5.5 percent. On the flip side, “moist [tobacco] has been a very bright spot in the industry the past few years,” Burke said, observing that the segment continues to hold steady.

Legislative Issues Lawmakers across the country have wasted no time introducing new tobacco-related legislation in 2020. By the end of January, 12 states were considering cigarette/ tobacco tax bills. “It’s still early, so this number will go up,” Thomas Briant, executive director of NATO, pointed out during his Industry Update presentation. “Usually, 25 states a year have bills.” Briant also noted that by the end of January, 15 states had electronic cigarette/vapor tax bills on their agendas. In addition, Massachusetts adopted a similar tax in November. While state excise tax bills have long been a staple of local and state legislative dockets, flavor-ban measures have been increasing in popularity over the past few months — and this trend shows no signs of slowing down. As Briant noted, flavor-ban bills have taken two forms: those that ban all flavored tobacco, including menthol; and those that ban just flavored vapor products. Massachusetts became the first state to enact a total tobacco ban, including menthol, at the end of 2019. States with 2020 flavored vapor bills and laws include Maine, New Hampshire, Pennsylvania, Florida, South Dakota, Nebraska, Oklahoma, New Mexico and Washington. Those with 2020 total flavor-ban bills and laws include Vermont, New York, Virginia, Maryland, Indiana, Illinois, California, Alaska and Hawaii. Tobacco legislation is not limited to the state level, either. Municipalities and counties are debating different tobacco ordinances as well. According to Briant, California is the most active, followed by Colorado, Oregon, Minnesota, Massachusetts and New York. The foremost local restrictions, he explained, are: • Flavored tobacco sales bans (including menthol 64 Convenience Store News C S N E W S . c o m

cigarettes, mint/wintergreen smokeless tobacco, flavored cigars, and flavored e-cigarettes); • Cigarette/other tobacco products/vapor taxes; and • A limit on the number of retail tobacco licenses. While removing flavored tobacco products from the backbar is seen as an important strategy by many policymakers, the numbers appear to show that adult tobacco consumers will find a way to get the flavors they desire. For example, San Francisco voters approved a measure to prohibit the sale of flavored tobacco products, including menthol, in June 2018. According to MSA’s analysis, tobacco sales decreased 24.2 percent in San Francisco after the ban, but the surrounding areas saw an 18.9 percent lift. “Consumers will travel outside the ban area to purchase the products,” Burke explained, advising that retailers — in and out of the ban area — should adjust their product mix accordingly.

Moving Up a Level Tobacco regulation at the federal level also ticked up as 2019 ended and 2020 began. On Dec. 20, President Donald Trump signed a series of bills that included raising the federal legal minimum age to buy tobacco products to 21, a move many states have already implemented. The Food and Drug Administration (FDA) is now required to publish its Implementing Regulation by June 17, 2020. Although the agency has time to update its regulations, the age change went into effect immediately. “It is important to understand this federal Tobacco 21 law supersedes state law,” Briant said, noting this applies to any state exemptions for military members and grandfather clauses. In addition to the new federal Tobacco 21 law, the FDA issued a policy guidance banning the sale of unauthorized flavored cartridge-based and pod-based vapor products other than tobacco and menthol. That policy went into effect Feb. 6. CSN


ALCOHOLIC BEVERAGES

The Fizz Phenomenon Hard seltzers are giving the alcoholic beverages category a much-needed boost By Renée M. Covino

fizz really taking on the industry’s beloved brews? In a word, yes.

IS SPIKED, FRUITY

Offered in flavors like black cherry, ruby grapefruit and lemon lime, hard seltzers have shaken up the alcoholic beverages category for the last two years, led by Anthony Brands’ White Claw and Boston Beer’s Truly brands. White Claw was even named one of Nielsen’s Top 25 Breakthrough Innovation winners for 2019. And the innovation doesn’t stop there. Among the latest headlines: • Anheuser-Busch, already the maker of Bon & Viv and Natty Light Seltzer, upped its stake in the fast-growing hard seltzer segment with the recent launch of Bud Light Seltzer in four fruit flavors, each containing 5 percent alcohol by volume (ABV), 100 calories, two grams of carbs, and less than one gram of sugar. • In January, Truly Hard Seltzer expanded its offer with Truly Lemonade Hard Seltzer, a mix of hard seltzer and lemonade in four varieties: Original Lemonade, Black Cherry Lemonade, Mango Lemonade, and Strawberry Lemonade. • In February, Modesto, Calif.-based Barefoot Hard Seltzer rolled out reportedly the first nationally distributed hard seltzer made with real wine. • Also in February, New York-based Pompette reportedly launched the first shareable bottled hard seltzer. Overall, the hard seltzer market is currently worth $550 million and could grow to reach $2.5 billion by 2021, according to a UBS analyst. And industry experts agree that the bubbling category is clearly beyond the fad stage and has gained critical mass and credibility. “Although seltzers started with higherincome and femaleskewing adopters, the

reality is all demographics from all age groups now drink seltzers,” said Sara Hillstrom, senior director, category development at Anheuser-Busch. The new alcohol consumer is apparently not loyal to one brand or even one category, noted Theodore Zeller, chair of Norris McLaughlin’s Liquor Law Practice Group. “Millennials don’t care if it’s malt-based, sugar-based seltzer, wine-based or spirit-based,” he said, explaining that all the categories of alcohol are now competing for the same consumers, but on “a session basis.” Zeller describes hard seltzer as “like the vitaminwater of fruit juice,” and points out that the product is easy to approach, especially for first-time drinkers. Along with attracting a diverse customer base, another attractive characteristic of hard seltzer, as cited by industry experts, is that it is not dependent on seasonality. The segment also enjoys a health halo among consumers. “It is not a craze or fad; this is a real seismic shift,” Zeller told Convenience Store News. The fact that hard seltzer is gluten free, carbohydrate free and sugar free — even though alcohol does things to affect the body’s absorption of other protein/sugar — is “incredibly attractive to a more health-aware population,” he added. Health and wellness continues to be the No. 1 driver of choice for consumers across all food and beverage categories, according to Hillstrom. This is prompting shoppers to look for new alternatives. “People are also looking for flavor variety and have started expecting the alcohol category to provide the range of flavors they find in other non-alcohol categories,” she explained.

Seizing the Moment So, how can convenience store operators best capitalize now, while consumer interest in hard seltzers is still so high? The consensus is that because flavored malt beverages are so on-trend, space needs to be radically reconfigured from beer (including craft beer) to hard seltzers. Wine is also under pressure, suffering its first decline in decades. Many observers attribute this to millennials and younger generations shifting from wine to hard seltzers. Zeller advises retailers not to follow “big beer” planograms for their hard seltzer shelf sets. “Truly and White Claw are killing it, and other craft seltzers like Two

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ALCOHOLIC BEVERAGES

Robbers are emerging. Give the category endcaps and priority shelf sets. Do not allow big beer to dictate that space, even though the pressure will be significant,” he stated. Compared to the total market, the hard seltzer business in the convenience channel is still pretty small — only 2.5 percent share of the category, compared to 5 percent for grocery, cited Ramona Giderof, vice president, convenience and military, at Anheuser-Busch. But growth in c-stores is twice as high. “So, we expect the channel to catch up,” she said. Giderof’s best strategic advice is for c-store operators to raise awareness at the shelf with well-known hard seltzer brands and then, as the segment grows, to add variety with higher-priced seltzers that give consumers a reason to trade up. “We understand that fewer than 10 percent of households have purchased seltzer so far,” so the goal is to have the right mix to encourage trial, Hillstrom added. Zeller also noted that if space permits, variety packs are the best-seller in multipacks.

“Although seltzers started with higher-income and female-skewing adopters, the reality is all demographics from all age groups now drink seltzers.” — Sara Hillstrom, Anheuser-Busch “As big brands enter the segment, bolstered by robust marketing plans, we expect awareness to increase and new people to start drinking seltzers — fueling growth for several more years,” she predicts. As for emerging products that could challenge the growth of hard seltzer, industry experts point to ready-to-drink (RTD) cocktails, canned wine and hard kombucha. Hillstrom reported that canned wine, like Babe, grew 98 percent in 2019; hard kombucha, like KomBrewCha, grew 165 percent; and RTD cocktails, like Cutwater Spirits, grew 54 percent.

Industry experts believe the hard seltzer segment has a long runway in front of it.

“Canned wine and RTD tap into convenience trends consumers are looking for, while hard kombuchas appeal to health and wellness-minded consumers who are willing to pay more,” she said.

Hillstrom believes seltzers clearly have staying power, citing that 60 percent of current sales come from repeat purchases. However, there is still a lot of room for growth, as seltzers only have 9 percent household penetration, compared to 49 percent for total beer.

Zeller foresees canned cocktails having less than a 10 percent ABV with the same carb-free, gluten-free and sugar-free properties. But as someone who has helped mold state laws within the confines of Prohibition-based models, he acknowledges that such products would present “significant distribution challenges from a regulatory perspective.” CSN

Staying Power

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THE CORONA OF HARD SELTZERS ÂŽ

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FEATURE

NEW, NOW & MAKING A DIFFERENCE Why new products matter more than ever By Gina Acosta THERE AREN’T MANY SURE things in retail these days, but one safe bet is that product innovation and quality will be as relevant to shoppers in the future as they are today. No matter how well curated the assortment or how user-friendly the online technology, shoppers won’t flock to any retailer unless it offers the possibility of discovering new, quality products.

Every generation, from baby boomers to the highly coveted cohort of Generation Z (Zoomers), is looking to retailers to offer the most innovative products inside their stores or on their websites and apps. Zoomers especially are on track to become the largest generation of consumers by the end of this year — responsible for as much as $143 billion in direct spending. And the vast majority of those sales will come from Zoomers actively on the hunt for innovative products. According to Intel Research, 73 percent of Zoomers like to discover and buy new products, especially in brick-and-mortar stores. Meanwhile, 42 percent of consumers across all generations say they love trying new products, and a further half of consumers (49 percent) can be moved to experiment with a new product via marketing, according to Nielsen. With an overwhelming majority of consumers actively looking for product innovation and quality at retail, the risks for

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retailers and brands ignoring these trends have never been greater. These attributes are the key drivers of competitive advantage for brands and retailers, and this year’s crop of Product of the Year recipients shows why. Each year, Product of the Year — in collaboration with global research company Kantar — surveys 40,000 consumers in an attempt to find truly inventive products. This year, 41 winners have been recognized in their respective categories. Product of the Year launched 30 years ago in France and 12 years ago in the United States as a way to champion brands for product quality and innovation. The program accepts entries from consumer goods that demonstrate innovation in their function, design, packaging or ingredients, and a category winner is selected through Kantar’s nationally representative study. “For Product of the Year, it’s always been about innovation; yesterday, today and tomorrow — that’s what we love, are laser-focused on and champion. Coupled with that, our unique process of asking 40,000 independent voters means shoppers, retailers and manufacturers continue to genuinely trust the seal,” said Mike Nolan, global CEO of Product of the Year Management. “2020 sees exciting new categories that reflect the ever-changing face of innovation in the U.S., delivering us another great group of winners.” This year’s winners were revealed Feb. 6 at the annual Product of the Year Awards Show, held at the Edison Ballroom in New York City. Convenience Store News’ parent company, EnsembleIQ, is the program’s exclusive B2B marketing partner in the U.S. in 2020. Many of the 2020 winners are representative of much


2020 WINNERS larger trends in the industry. For the first time, two cannabidiol (CBD) products were winners in the healthand-wellness space — an emerging category in convenience, grocery and drug stores nationwide. As more consumers adopt plant-based diets or switch to private label products, it makes sense that plantbased meatballs, veggie bowls and a number of store-brand products also made the list. What is also fundamentally evident from this year’s Product of the Year awards is that consumers are strongly bound to novel, creative, impactful products that are exciting to share on social media. To drive deeper connections with this increasingly adventurous consumer, retailers and brands must satisfy curiosity through product innovation, new experiences, and telling the story behind the product. Retailers and brands have an opportunity to generate excitement and drive sales by creating buzz around these new products. (Product of the Year winners Aunt Jemima Pancake on the Go and Mr. Clean Clean Freak went viral on Instagram shortly after launch last year.) For retailers and brands across all categories, marketing these kinds of new products to consumers will continue to be a strong driver of sales, and the lifeblood of the industries well into 2020 and beyond. CSN

METHODOLOGY Product of the Year (POY) is the world’s largest consumer-voted award for product innovation. Established more than 30 years ago in France, POY currently operates in 40-plus countries with the same purpose: guide consumers to the best products in their market and reward manufacturers for quality and innovation. Product of the Year accepts entries every year from consumer packaged goods that demonstrate innovation and were launched within the previous year. Entered products are then placed into specific categories such as food, beverages, personal care and household care, with a product then being chosen as a winner in its category through a nationally representative online study involving 40,000 consumers, conducted by Kantar TNS. Winning products are announced in February of each year and receive the right to use the POY seal in marketing communications for two years.

1. AIR CARE RENUZIT SNUGGLE Henkel 2. ALL-PURPOSE CLEANER MR. CLEAN CLEAN FREAK Procter & Gamble 3. BREAKFAST AUNT JEMIMA PANCAKE ON THE GO PepsiCo Inc. 4. CANDY BAR BABY RUTH Ferrero USA Inc. 5. CAR CARE RAIN-X SILICONE ENDURA ITW Global Brands 6. CAT CARE COMFORT ZONE CALMING DIFFUSER Central Garden & Pet 7. CBD SLEEP AID CBD PM cbdMD

16. FOOT CARE DR. SCHOLL’S STYLISH STEP Scholl’s Wellness Co. 17. FROZEN SNACK CONTADINA PIZZETTAS Del Monte Foods Inc. 18. GREEN CLEANING ART OF GREEN AlEn USA 19. GUM TRIDENT VIBES Mondelez International 20. HAIR CARE SIMPLY COLOR BY SCHWARZKOPF Henkel 21. HEALTH SYSTEMS OMNIPOD DASH INSULIN MANAGEMENT SYSTEM Insulet Corp.

8. CBD TOPICAL CBD FREEZE cbdMD

22. IMMEDIATE RELIEF ALKA SELTZER COOL ACTION HEARTBURN RELIEF GUM Bayer Consumer Health

9. CHEESE ALDI-EXCLUSIVE HAPPY FARMS DELI SLICED CHEESE ALDI Inc.

23. LAUNDRY BOOSTER DOWNY WRINKLE GUARD Procter & Gamble

10. COFFEE NICE! PREMIUM VANILLA LATTE COLD BREW Walgreens Boots Alliance

24. LAUNDRY PACS TIDE PODS 2.0 Procter & Gamble

11. CONVENIENCE MEAL DEL MONTE VEGGIEFUL VEGGIE BOWLS Del Monte Foods Inc. 12. COOKIE ALDI-EXCLUSIVE SIMPLY NATURE COCONUT CASHEW CRISPS ALDI Inc. 13. DISH CARE CASCADE FREE & CLEAR Procter & Gamble 14. DOG CARE RACHAEL RAY NUTRISH SMOOCHIES The J.M. Smucker Co. 15. FEMININE CARE PLAYTEX SPORT ODOR SHIELD Edgewell Personal Care

26. NATURAL PERSONAL CARE CARMEX COMFORT CARE LIP BALM WITH BEESWAX Carma Laboratories 27. OFFICE SUPPLIES FRIXION FINELINER ERASABLE MARKER PENS Pilot Corp. of America

29. PLANT BASED PROTEIN ALDI-EXCLUSIVE EARTH GROWN MEATLESS MEATBALLS ALDI Inc.

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31. SNACK CUPS DEL MONTE FRUIT CRUNCH PARFAIT Del Monte Foods Inc. 32. SNACK PACKS ALDI-EXCLUSIVE PARK STREET DELI SNACK SELECTS THREE PACK ALDI Inc. 33. SPIKED BEVERAGE BUZZTALLZ BuzzBallz LLC/ Southern Champion 34. SPORTS NUTRITION VEGA SPORT PROTEIN Vega 35. SPREADS ALDI-EXCLUSIVE COUNTRYSIDE CREAMERY PURE IRISH BUTTER ALDI Inc. 36. SURFACE WIPES MR. CLEAN MAGIC ERASER SHEETS Procter & Gamble

25. LIQUID LAUNDRY TIDE HEAVY DUTY LIQUID DETERGENT Procter & Gamble

28. PET CLEANING RESOLVE URINE DESTROYER RB

30. SALTY SNACKS NICE! PREMIUM CASHEW AND MACADAMIA NUT BLEND Walgreens Boots Alliance

37. TOOTHPASTE CREST GUM & SENSITIVITY Procter & Gamble 38. VACUUM HOOVER ONEPWR CORDLESS CLEANING SYSTEM TTI Floor Care North America 39. VITAMINS ONE-A-DAY FRUIT BITES Bayer Consumer Health 40. WATER NICE! PREMIUM ICELANDIC WATER 1.5L Walgreens Boots Alliance 41. WINE ALDI-EXCLUSIVE QUARTER CUT BOURBON BARREL-AGED CABERNET SAUVIGNON ALDI Inc.

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TECHNOLOGY

THE FRICTION FREE C-STORE Whether it’s via mobile app, in-store kiosk or RFID, frictionless commerce is making its way into convenience stores across the U.S. By Tammy Mastroberte

about it — “The Amazon Effect.” The company continues to disrupt the retail market, whether it’s online or with its physical stores, including its 26 Amazon Go stores in Seattle, Chicago, San Francisco and New York. The frictionless technology and just-walkout checkout experience offered in these stores is sparking interest among retailers in all channels, including convenience stores.

EVERYBODY IS TALKING

“The big driving force is Amazon, with almost half of the online spend in the United States going through them,” said Evan Shiue, vice president of finance and strategy at Standard Cognition, an artificial intelligence (AI) checkout provider based in San Francisco. “It doesn’t matter what type of retailer you are, Amazon is a competitor.” One-third of c-store operators are planning to add frictionless checkout via mobile app in 2020, and more than 40 percent plan to add in-store kiosks as a frictionless option, according to Convenience Store News’ 2020 Forecast Study, released in January. A number of c-store chains have reported working with Skip, a mobile checkout solution that gives shoppers the ability to scan their items, pay via the app, and leave AI-powered checkout provider Standard Cognition operates a store in San Francisco to demonstrate its technology.

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the store. Retailers offering this option include Cruizers, based in Chapel Hill, N.C., with 27 locations; Kwik Chek, based in Bonham, Texas, with 36 locations; and Russell’s Convenience, based in Denver, with 19 locations. “Offering a frictionless shopping experience to our customers increases the frequency of transactions,” Tom Bachrodt, Denver area regional manager for Russell's Convenience, said in a released statement. “By making the shopping experience as fast as possible, we open up more shopping opportunities to our customers that are on break or just short on time. With Skip, we can accommodate any shopper's schedule without disrupting our operations." While Amazon is playing a big part in this, experts believe there are other drivers as well. The increasing minimum wage and rise in overhead costs; competition from grocery stores offering delivery, pre-ordering and pickup at the curb; and competition from quick-service restaurants (QSRs) as c-stores continue to add food programs are all playing a role. McDonald’s now has self-service kiosks in all of its U.S. locations, and fast-casual brands like Panera Bread and Chili’s have embraced the trend as well. QSRs also have been offering online ordering for quite some time, and this is another area of interest among c-store retailers when it comes to frictionless experiences. “C-stores adding prepared food are now competing with QSRs, and many have been offering online


Executing frictionless commerce via a mobile app gives retailers the ability to gather customer data and influence purchases.

ordering,” noted Michelle Tempesta, head of marketing at Paytronix Systems Inc., based in Newton, Mass. “When you think about frictionless, online ordering is a ‘have to have.’” When talking about frictionless commerce, there are a variety of ways to accomplish it, whether it’s via a mobile app, kiosk, online ordering, delivery or artificial intelligence. At the end of the day, though, it’s about making the shopping trip easier — and that includes finding the right product, paying, and getting it quickly. “Look at Uber vs. taxi cabs for a truly frictionless experience,” said Shiue. “There are a lot of them around, they are easy to get, and everyone has their phone so they don’t need to carry a credit card or cash. For retail, walking in, getting what you want and walking out is where the market is headed.” The ultimate goal is to remove the barriers between the person and the final sale of a product, according to Tempesta. Online retailers look at removing barriers from the final checkout screen to avoid people abandoning a cart, and it’s the same with a brick-and-mortar store.

Frictionless Best Practices Currently when it comes to frictionless commerce, the area most retailers are concentrating on is the checkout experience, and this is indeed a big part of

speeding up the shopping process and making it easier for customers. Today’s consumers are in a bigger hurry than ever. They want to get their items and get out of the store as fast as possible. “From the e-commerce experience, Walmart says for every second of improvement in load time at the checkout page, there is a 2 percent improvement in conversion rate, and the same is true in-store,” Shiue pointed out. “People will ‘abandon cart’ with a long line, so investing in things to make the checkout a better experience is important.” When rolling out new technology, however, it’s important to “get it right the first time,” according to Nick Bravo, content strategist at TrendSource, a market research company based in San Diego. Rushing to get something into the store and then having it not work correctly will alienate those who might be curious about the technology; they will become frustrated. “Retailers have to understand much of the technology is still new, so make sure when you roll it out, you test the functionality,” Bravo cautioned. “It is still a developing technology overall. Amazon has been working on their experience for a year, and we have yet to see a full rollout and acceptance.” Introducing changes at a slower pace also can help with acceptance and usage of the new technology, so a step-by-step approach can be useful in this case, advised Fredrik Carlegren, executive director, global marketing, at Toshiba Global Commerce Solutions, based in Durham, N.C. The company supplies computer vision cameras and smart shelf technology to retailers moving toward a frictionless in-store experience. “We tell retailers to put the cameras in first to start tracking customer behavior around theft and inventory

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TECHNOLOGY

management, and then layer in the smart shelf technology to get further insights into the store,” Carlegren explained. “Then, in the short-term, you can still have customers go to the front-end checkout to pay or have a self-checkout option to validate everything is tracking correctly before you eliminate the front-end checkout.” Fully understanding the customer’s journey through the physical store is important because it allows retailers to see where friction might occur and find a solution for it. Whether it’s offering an in-store kiosk to order prepared food, or allowing food ordering at the pump, the goal is to reduce the barriers to the transaction, Tempesta pointed out. “Look for the opportunities where customers don’t have to take their wallet out or dig through a purse. Most people already have their phone in their hands to pay,” she said. Retailers must recognize that the c-store technology environment can be complex because of the moving parts from the pumps to in-store to loyalty systems. Taking the time to layer the technology and integrate it can be a challenge, but it is important for a successful rollout. The goal is to “reduce friction, not add friction,” Tempesta emphasized.

The Consumer View on Frictionless Younger generations, especially the millennial segment, are more open to using frictionless commerce technology than older generations, according to the 2019 Convenience Store Industry Report from TrendSource, a market research company based in San Diego. When consumers were asked why they would not be interested in an automated convenience store experience, lack of human interaction (cited by 67.9 percent) was the biggest objection, followed by nearly half (49.2 percent) opposed to machines taking jobs from humans, and about a third (32.1 percent) saying they would not trust the safety of the store. “Broadly speaking, younger generations are more open to frictionless, but there are some caveats,” Nick Bravo, content strategist at TrendSource, told Convenience Store News. “You would think younger people would be less concerned about lack of human interaction, but the millennial segment is actually the most concerned (83.3 percent).” For those who responded that they would be interested in automation, saving time is the most compelling factor (cited by 67.7 percent). Other compelling factors include: a “neat/ cool concept” (42.9 percent) and “because it might be less expensive” (32 percent). “As we dig deeper, millenials are also more willing to get over the human interaction objection,” Bravo noted. “If c-store checkouts reduce wait times or lower costs, millennials are in.”

Weighing the Options There are pros and cons to offering mobile apps and/or self-checkout kiosks. Both present generational challenges as well. So, all options should be thoroughly evaluated before jumping into anything new, according to the experts. “Broadly speaking, younger generations are more open to frictionless commerce than older ones,” Bravo noted, citing TrendSource’s 2019 Convenience Store Industry Report. In regards to kiosks, the biggest benefit is allowing the customer to either place an order or pay for items without assistance, in hopes of shortening lines — especially at the main checkout in the store, according to Carlegren. The biggest drawback is loss prevention and theft issues. “Kiosks can spread some of the crowd out for retailers, but any time you put it in the hands of the consumers, shrink can be an issue,” he acknowledged. Additionally, there needs to be the ability

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to pay with cash as there are laws being implemented in several states prohibiting cashless stores, as Tempesta pointed out. Like kiosks, mobile apps have their own pros and cons as a checkout option. The biggest issue is getting customers to download the app. Even then, it will only appeal to a certain group of customers (many in the younger generation), so there has to be other options available. “We just helped release an app at QuickChek, but it only reaches a certain percentage of customers who are tech savvy and enjoy working with an app,” said Tempesta. On the flip side, there are big benefits to interacting with customers via a mobile app, including the ability to gather data and influence purchases. Retailers can better understand each person’s purchasing habits and, in some cases, personalize offers based on that information. “Mobile apps give the retailer the opportunity to get to know who the customers are and personalize offerings. One retailer who does an amazing job at this is Starbucks,” Shiue noted. “It’s hard work because you have to get people to download the app, but once they realize the value, people are willing to make some tradeoffs.” CSN


NEW HORIZONS

#EachforEqual: Fighting Internalized Bias Eliminating gendered stereotypes starts with you. INTERNATIONAL WOMEN’S DAY (IWD), celebrated annually on March 8, is an opportunity for the global community to celebrate how far we’ve come for the rights of women — and to recognize how far we have to go. On IWD, we step back and take stock. Are we doing all we can to change the world for women?

By Sarah Alter, President & CEO, Network of Executive Women

IWD’s 2020 theme is #EachforEqual, and it represents a powerful message. Each of us can choose to fight for gender equality, but we must start with ourselves.

It’s Time to Act Many of us expect change to come from the top, as if bettering workplaces for women can only happen at the highest levels of leadership. We expect our CEO to announce that paid leave policies are being expanded. We expect that pay

equity will be achieved as if by magic, or that executives will demand an equal presence of men and women at the highest levels of leadership without any work from us. Top-down solutions may come, but they rarely come without hard work. And women can’t afford to wait for those at the top to get with the program. Acting on the things we can change creates the ripples that bring the flood. We can sometimes feel as if we lack the power to make changes ourselves, but that simply isn’t true. Individual bravery and boldness of action are what push us toward a world where #EachforEqual isn’t a rallying cry, but a fact that is taken for granted.

Doing Your Bit Think about how you can bring change

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NEW HORIZONS

within your role at your organization. Do you work in HR? Push for equitable hiring practices that strip the potential for employee bias out of the hiring process. Is your role in purchasing? Patronize woman-owned businesses to level the playing field for female entrepreneurs. Members of leadership may be able to enact more sweeping policies, but that doesn’t mean the rest of the team can’t make change. Change can start with something as small and radical as talking openly about pay equity and workplace bias. Men who speak openly about how they balance work and family are taking action — work-life balance should be, but often isn’t, seen as a gender-neutral issue. Calling attention to someone who ignores or downplays their female coworkers in meetings is powerful, and anyone can do it.

Convenience Store News is pleased to continue this series of educational columns by the Network of Executive Women (NEW), coinciding with the annual CSNews Top Women in Convenience awards given out each fall. Forty-two female managers, executives and directors who work in the convenience store industry were honored in our 2019 program. 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. 2020 SPONSORS Founding & Presenting Sponsor:

Don’t let yourself imagine that change only trickles down from the top. Change starts with you.

How You Can Take Action This year, in honor of IWD, NEW is launching our own campaign for action. NEW has laid out 15 ways you can support women and #EachforEqual, all based on our proprietary learning programs. Take a look at our action list at newonline.org/IWD. Spread the word on social media when you take a positive step for gender equity in your workplace. Honor International Women’s Day by taking action in your day-to-day life to champion #EachforEqual. CSN Sarah Alter is president and CEO of the Network of Executive Women, a learning and leadership community representing 12,400 members in 22 regional groups in the United States and Canada. Learn more at newonline.org Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News. 74 Convenience Store News C S N E W S . c o m

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STORE SPOTLIGHT

Welcome to the Neighborhood Loop Neighborhood Market debuts a completely autonomous c-store and gas station By Danielle Romano

transformation sweeps the convenience channel, an autonomous experience is no longer a nice-to-have, but a need-to-have if retailers want to keep pace with consumers’ changing lifestyles and needs.

AS A DIGITAL

At a Glance Loop Neighborhood Market NanoStore Location: 2029 S. Bascom Ave., Campbell, Calif. Size: 160 square feet Unique features: Completely autonomous; equipped with the AiFi Autonomous Store Platform and based off the company’s modular NanoStore template; a Shell gas station; a range of healthy options and life essentials; a welcoming atmosphere

That is why in its quest to deliver a satisfying, enjoyable and convenient experience, Loop Neighborhood Market introduced a totally autonomous convenience store and gas station in one of the technology capitals of the world: Silicon Valley. The San Francisco-based retailer tapped artificial intelligence (AI) technology company AiFi Inc. for its AiFi Autonomous Store Platform. Based on AiFi’s modular NanoStore template, the autonomous Loop Neighborhood Market clocks in at just 160 square feet. The store provides customers with an autonomous solution in a fun and engaging small store footprint. The format also enables the location to be open 24 hours a day, seven days a week. “The new autonomous Loop Neighborhood is a wonderful step forward for our store brand. The fast, frictionless process is delightful and helps customers get what they need to move on with their day,” said Varish Goyal, president of Loop Neighborhood Market. “We’re thrilled to

be introducing this new approach to our customers and working with AiFi to make that happen.”

Nano in Size, Big on Offers Described as the missing link between a convenience store and a vending machine, and touted as the fastest vehicle to open an autonomous store, AiFi’s NanoStore debuted in 2019. The Loop Neighborhood Market in Silicon Valley is AiFi’s first gas station collaboration. In total, the Santa Clara, Calif.-based technology company has deployed 10 autonomous stores to date — including NanoStores and traditional convenience store formats — second only to Amazon Go, according to Steve Gu, co-founder and CEO of AiFi. How it works is AiFi has a template shopping app that retailers can choose to label as their own. Under the hood, AiFi has an API that links to all payment methods, including a retailer’s own payment apps, the common payment methods of debit card and credit card, and all contactless payment methods including Apple Pay and Samsung Pay. When one or more customers enter

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the store, after registering a method of payment, they select their items and leave the store, receiving an immediate receipt for whatever they took out with them. “The entire transaction only takes seconds to complete,” Gu explained. Located at 2029 S. Bascom Ave. in Campbell, Calif., the Loop Neighborhood Market NanoStore was implemented at the retailer’s Shell gas station, and thoughtfully crafted to project a welcoming atmosphere.

“The fast, frictionless process is delightful and helps customers get what they need to move on with their day.” — Varish Goyal, Loop Neighborhood Market As with the retailer’s other 30-plus locations across Northern California, the Silicon Valley store features a range of healthy options and life essentials, which makes it distinct from snack-heavy gas station stores, Goyal pointed out. “Partnering with the same suppliers and vendors from popular grocery stores, the goods offered at each store are fresh, healthy and satisfying. Loop Marketplace is proud to support active and healthy lifestyles by carrying organic, natural and gluten-free products,” he explained. “Aside from just fresher products, Loop also offers items more specifically targeted to female and millennial customers, such as wine, gift cards and bath salts. Additionally, each location offers seating areas equipped with Wi-Fi to further enhance the experience.” In the coming months, Loop Neighborhood and AiFi plan to open more gas station NanoStores, along with deploying the AiFi Autonomous Store Platform at existing Loop convenience stores. The companies also hope to put lockers and other convenient options in the stores based on the individual neighborhood needs. CSN 76 Convenience Store News C S N E W S . c o m

The Silicon Valley store offers a range of healthy products.


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Altria Group Distribution..................................2, 3

Liggett Vector Brands.......................................25

Anheuser Busch...................................................49

Living Essentials..................................................91

Bake’n Joy Foods Inc.........................................31

MARS Chocolate Na/ Wrigley........................11

The Coca-Cola Company.................................55

Mondelez International.....................................43

Crown Imports LLC............................................67

Motel 6....................................................................1

Del Monte...............................................................5

Paytronix................................................................27

E & J Gallo Winery..............................................57

Perfetti Van Melle USA Inc..............................9

E-Alternative Solutions.....................................51

Premier Manufacturing.....................................35

Forte Products.....................................................45

Swedish Match North America LLC.............7, 33, 92

Freezing Point LLC Frazil.................................53

Swisher International, Inc.................................17, 37

Inline Plastics........................................................29

The Procter & Gamble Distributing Co.......15

ITG Brands.............................................................23, 41

United Sign Co.....................................................19

JUUL Labs..............................................................20–21

Universal Merchants...........................................Outsert

Krispy Krunchy Chicken...................................19

VOSS Water...........................................................13

MARCH

CSN_Class_Mar_2020.indd 15

2020

Convenience Store News

89

2/28/2020 5:45:49 PM


INSIDE THE CONSUMER MIND

How We Start the Day Consumers prioritize function and convenience in their morning consumption choices Breakfast remains an institution in America, but consumers’ increasingly busy schedules are driving changes in how, why and where they consume foods and beverages in the morning. Newly released research shines a light on the latest evolutions in breakfast. Among the findings:

In 2019, Americans consumed nearly

102 50 billion

billion

breakfasts

morning snack occasions

The number of in-home prepared and consumed breakfasts has declined in the last decade. However, consumers aren’t skipping this meal more often. There has been a nearly equal increase in morning snack occasions, as well as restaurant meals.

Sustained growth is expected for portable and functional categories, such as: Breakfast sandwiches

Juices with functional benefits (i.e., energy)

Categories with protein (i.e., eggs)

Consumers seek functional, convenient and enjoyable foods to meet their morning needs.

“Busy schedules, mixed with good intentions and the need for fuel, shape what we eat and drink in the morning.” — David Portalatin, NPD food industry advisor

ORDER

Easy access to food drives the decision-making process in many cases, as shown by the continued rise of mobile ordering. Source: Future of Morning, The NPD Group

90 Convenience Store News C S N E W S . c o m


2 Great Tropical Flavors Strawberry Banana & Tropical Burst ORDER TODAY! Shoppers will be encouraged to try both flavors and vote for a chance to win a trip to the tropics. Offer ends 7/31/20. Terms apply. See www.5hewin.com for details.

Advertising support runs from February to May 2020. Availability ends June 15, 2020.

www.5hourenergy.com/trade100 • email: trade@fivehour.com Individual results may vary. See www.5hourenergy.com for more details. Extra Strength 5-hour ENERGY® shots contain caffeine comparable to 12 ounces of the leading premium coffee. Limit caffeine products to avoid nervousness, sleeplessness, and occasional rapid heartbeat. ©2020 Living Essentials Marketing, LLC. All rights reserved.


COMING SOON

AVAILABLE IN 2 FOR 99¢ AND 2 FOR $1.49 FOR MORE INFORMATION CONTACT YOUR SWEDISH MATCH REPRESENTATIVE 800-367-3677 • CUSTOMER.SERVICE@SMNA.COM

GAMECIGARS.COM

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