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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

JUNE 2019 | CSNEWS.COM


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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

DON’T

LET THE

SUNNY

NUMBERS FOOL YOU

The c-store industry completes another strong year in sales and profit growth, but trouble lurks behind the scenes.

HOW TO GET STARTED IN THE CBD CATEGORY JUNE 2019 CSNEWS.COM

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your business LEGISLATION / REGULATIONS SALES STRATEGIES

COMPREHENSIVE RESOURCES

CONSUMER INSIGHTS

MERCHANDISING SOLUTIONS

SALES & PROFITS

COLLABORATION

At AGDC one of our goals is to help drive our customers’ LEADERSHIP BRANDS

success. We represent the Altria Operating Companies’ vast portfolio of industry-leading brands. We aim to develop sales strategies that align with current consumer insights and your operational goals. Work with us and take advantage of our comprehensive resources to evolve and elevate your business.

Servicing: Philip Morris USA U.S. Smokeless Tobacco Company John Middleton Nu Mark Nat Sherman

©2019 Altria Group Distribution Company | For Trade Purposes Only

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VIEWPOINT

Banner Year Doesn’t Change the Need for Change The c-store industry continues to evolve while still racking up impressive growth THERE’S NO DOUBT THAT 2018 was

an exceptionally good year for convenience store retailers. On the surface, and by many financial measures, the c-store industry sold more stuff for higher margins than ever before. However, the upbeat picture is tempered by more sobering statistics contained in this year’s 44th annual Convenience Store News Industry Report (see page 32).

I won’t go into all the troubling numbers (you can read them for yourself inside this issue), but c-store operators have to be concerned about a few statistical trends in particular: • Declining trips — This is a malady that’s affecting all retail, but c-stores are particularly feeling the pinch from fewer transactions and trips as improved automobile fuel efficiency means less trips to the gas pumps. E-commerce is also keeping shoppers at home more, and competition from small-format hybrids like Walmart and Kroger Express and dollar stores are blurring the lines and the meaning of “convenience.” • Fewer employees — The nation’s low unemployment rate is making it harder and more expensive to recruit, hire, train and retain good associates. Wages continue to be one of the fastest-growing line items among a host of rising direct-store expenses, which also include credit card transaction fees. I think it’s great that key metrics like total revenue, fuel sales, gross profits, pretax earnings and fuel margins all

increased last year. These are important measures of the financial health of the industry. But a couple of years of higher fuel prices and strong gas margins shouldn’t mask the fact that the traditional “gas, cokes and smokes” convenience store model is a dinosaur. As RaceTrac Chief Operating Officer Billy Milam pointed out at the recent 2019 NACS State of the Industry Summit, traditional industry paradigms need to change from being a fuel provider to an energy provider; from a commodity-driven business to a service-driven business; and from one-size-fits-all promotions and limited assortments to tailored, personalized experiences with a hyper-localized and differentiated assortment. One additional takeaway: Foodservice continues to increase as a percentage of c-stores’ inside sales, but the growth of this critically important category has slowed significantly in the past two years. Are c-stores reaching a ceiling on how much they can increase prepared food sales? Or is this just a pause before another growth spurt? For the past half-century, this publication has chronicled the constant evolution of the convenience store industry. One thing I know is that today’s c-store leaders, like their forebears, have no intention of resting on their laurels. For comments, please contact Don Longo, Editorial Director, at (201) 855-7606 or dlongo@ensembleiq.com.

EDITORIAL EXCELLENCE AWARDS (2013-2018)

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

EDITORIAL ADVISORY BOARD

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

Brett Atherton Bolla Management

Jack Lewis GPM Midwest

Rick Crawford Green Valley Grocery

Danielle Mattiussi Maverik Inc.

Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Jim Hachtel Eby-Brown Co. Ray Johnson Speedee Mart

Richard Mione GPM Southeast Jonathan Polonsky Plaid Pantries Inc. Greg Scriver Kwik Trip Inc. Roy Strasburger Strasburger Retail

Vito Maurici McLane Co. Inc.

2015 American Society of Business Press Editors, National Azbee Awards Silver, Best Profile (long form), February 2014 2015 American Society of Business Press Editors, Midwest Regional Azbee Awards Gold, Best Special Supplement, November 2014 Silver, Best Profile (long form), February 2014 2013 American Society of Business Press Editors, Midwest Regional Azbee Awards Bronze, Best Editorial/Commentary, July 2012

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

J UNE

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CONTENTS JUNE 19

VOLUME 55 N UMB ER 06

32 28 76 FEATURES

DEPARTMENTS

COVER STORY

VIEWPOINT

SMALL OPERATOR

32 Don’t Let the Sunny Numbers Fool You The c-store industry completes another strong year in sales and profit growth, but trouble lurks behind the scenes.

3 Banner Year Doesn’t Change the Need for Change The c-store industry continues to evolve while still racking up impressive growth.

28 Meatless Munchies The all-vegan V Marks the Shop carves out a niche in the convenience channel.

FEATURE

66 Better for You, Better for Sales Today’s consumers want access to healthy foods and beverages at all times and all places. FEATURE

72 The Human Touch Convenience store retailers are deploying technology tools to connect with employees.

66

STORE SPOTLIGHT

10 CSNews Online OUT & ABOUT

20 Technology: The Intersection of Convenience & Consumer Expectations A record number of attendees participated in the 2019 Conexxus Annual Conference to get a glimpse of the future of retail technology.

76 Convenience Curated for Diverse Lifestyles Northwestern University’s Plum Market caters to those with food allergies and dietary preferences. TWIC TALK

78 Lesley Saitta, Impact 21 The 2017 TWIC Woman of the Year says everyone can teach you something, if you just listen.

OUT & ABOUT

INSIDE THE CONSUMER MIND

22 Trendspotting at the 2019 Eby-Expo Midwest Convenience store retailers gathered to see new offerings at the distributor’s regional show.

94 What Fuels You? Consumers have a multitude of opinions when it comes to filling up.

24 New Products

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CONTENTS JUNE 19

VOLUME 55 N UMB ER 06

12

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

Angela Hanson ahanson@ensembleiq.com

Associate Managing Editor (201) 855-7604

INDUSTRY ROUNDUP 12 EG Group Moves Into New U.S. Markets 14 TravelCenters of America Zeroes In on Expansion Goals

HOW TO 52 Tap Into the CBD Market Although the FDA has yet to establish CBD guidelines for food and beverage, new products continue to flood the market and c-stores can profit.

14 Fast Facts 16 Eye on Growth

CATEGORY MANAGEMENT

16 Retailer Tidbits 18 Supplier Tidbits 18 Competitive Watch

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

FOODSERVICE

60 What’s Hot on C-store Menus? Cold treats are heating up in time for the start of summer.

Executive Vice President, Events & Conferences Ed Several (860) 830-8321 eseveral@ensembleiq.com AUDIENCE ENGAGEMENT Director, Audience and Data (224) 231-6363

Gail Reboletti greboletti@ensembleiq.com

List Rental (847) 492-1350 ext.318

FOODSERVICE

62

Danielle Romano dromano@ensembleiq.com

62 Co-Branding at Its Best Partnering with QSR brands has both back-end and front-end appeal for c-stores.

PROJECT MANAGEMENT/PRODUCTION/ART Vice President, Production (877) 687-7321 Creative Director (973) 607-1320

52

MeritDirect Elizabeth Jackson

Subscriber Services/Single-Copy Purchases (978) 671-0449 EnsembleIQ@e-circ.net 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

CORPORATE OFFICERS Executive Chairman Alan Glass Chief Executive Officer David Shanker Chief Financial Officer Dan McCarthy Chief Operating Officer Joel Hughes Chief Innovation Officer Tanner Van Dusen Chief Human Resources Officer Ann Jadown Executive Vice President, Events & Conferences Ed Several 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 2019 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.

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The Power of Summer Solutions Everything from backyard basics to big time get-togethers.

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CSNEWS ONLINE

ONLINE EXCLUSIVE

TOP VIEWED STORIES

1

Kwik Trip Gets Fresh With New Smoothie Program

2

Cumberland Farms Reportedly Exploring a Sale

3

C-store Chains Rank Among 2019 Best Employers

4

RaceTrac Offers Free Fuel for Atlanta-Area Teachers

Whether it’s building a test kitchen to increase its ability to innovate or teaming up with the Partnership for a Healthier America to expand the number of healthy options available to its customers, convenience store chain Kwik Trip Inc. has been working to improve its food and beverage offerings for years now. One of its latest initiatives, the Fresh Blends smoothie program, was prompted not by focus group testing or executive brainstorming, but rather by a weeknight trip to a Target store in the middle of winter.

Cumberland Farms could be the next name in the convenience channel to join the merger-and-acquisition arena. According to the Oil Price Information Service (OPIS), the retailer hired Bank of America to explore its options and handle any future deal.

According to Forbes magazine, Kwik Trip Inc./Kwik Star, Wawa Inc. and Big Y World Class Market are among the standout U.S. employers. The magazine teamed up with Statista, a market research firm, to compile the American Best Employers 2019 ranking.

RaceTrac Petroleum celebrated National Teacher Appreciation Week, May 6-10, with a free fuel offer for teachers in its headquarters city of Atlanta. On May 7, National Teacher Appreciation Day, all Cobb County School District teachers could visit one of two RaceTrac locations to receive a $20 gift card to fuel up upon presentation of their school ID.

5

Three Steps to Drive Fuel-Only Customers Into the C-store

During the recent “How to Drive Pump-to-Store Visits With Data” webinar, hosted by Convenience Store News and sponsored by Paytronix Systems Inc., Kimberly Otocki, content marketing specialist at Paytronix, provided pointers on how to drive fuel-only customers inside the store, where higher-margin products are and where operators can collect more data on customers to market to them effectively.

EXPERT VIEWPOINT: How to Manage Assortments to Cater to All Generations Gen Z is challenging today’s product offering in convenience stores. Making up more than a quarter of the U.S. population, 18- to 24-year-olds have influenced the rise in production of snack and convenience items. However, the snacks Gen Z wants are not the products of the generations before them — they’re looking for healthy options, according to Kevin Sterneckert, chief marketing officer at Symphony RetailAI. As consumer consumption habits continue to shift and create rifts across generational lines, convenience store retailers should consider adjusting their product assortments to meet the varied demands of changing shopper segments.

New Leaders Ready to Take QuickChek’s Foodservice to New Heights

QuickChek Corp., which has become one of the top convenience foodservice destinations in the Northeast, is doubling down on its freshfood-to-go image. Chris Smyly, the New Jersey-based chain’s new director of foodservice, and QuickChek’s new culinary specialist, Ted Kwiecien, recently chatted with Convenience Store News about the retailer’s efforts to redefine “fresh convenience” while continuing to meet the needs of its existing customer base. “We’re known for our fresh subs and fresh brewed coffee,” said Smyly, who previously served as a senior category manager. “We continue to look at fresh, healthy options. We recently introduced an exciting new fresh-brewed iced coffee offer, and we’ll soon be taking our fresh sub sandwiches offer to a whole new level with some exciting premium line extensions.” For more exclusive stories, visit the Special Features section of www.csnews.com.

MOST VIEWED NEW PRODUCT

Vitaminwater Fire & Ice

The Coca-Cola Co. introduces vitaminwater fire and vitaminwater ice, which are the first 20-calorie vitaminwater offerings. Fortified with vitamins C and B, vitaminwater fire brings mild heat with a spicy watermelon lime taste featuring a touch of jalapeno and habanero flavors that create a slight tingling sensation. Vitaminwater ice brings a refreshing blast of blueberry and lavender flavors that delivers a cooling effect. A fully integrated marketing program, including a sweepstakes, experiential sampling tour, TV commercial and an in-store merchandising campaign, will support the launch. The Coca-Cola Co. Atlanta coca-colacompany.com

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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

*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 ©2019 The Coca-Cola Company

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INDUSTRY ROUNDUP

EG Group Moves Into New U.S. Markets With Certified Oil Acquisition The 69-store purchase will expand the U.K.-based retailer’s reach to 25 states IN ITS LATEST MOVE in the U.S. convenience channel, EG Group reached a definitive agreement to acquire 69 convenience stores and gas stations from Certified Oil. The stores are located in Kentucky, West Virginia and Ohio.

Based in Columbus, Ohio, Certified Oil has been operating in the Midwest since 1939. Founded by Carlyle Baker, the company is led by his grandson Nick Lacaillade, a third-generation owner. “Our focus has been the customer and the communities we serve; our people, working in the stores, are like family,” Lacaillade said. The Certified Oil deal follows on the heels of EG’s agreement to acquire Syracuse, N.Y.-based Fastrac Markets. That transaction includes 54 convenience stores and gas stations, as well as Fastrac’s wholesale fuel business. “The connection the store teams have with the customers in the community and the locations of the stores are highly complementary to EG Group’s existing U.S. operation,” said Jay Erickson, president of EG America.

EG Group began making inroads in the U.S. convenience channel with the acquisition of Kroger Co.’s c-store business in April 2018. Those 762 sites operate under several banners: Turkey Hill, Loaf ‘N Jug, Kwik Shop, Tom Thumb and Quik Stop. As part of the Kroger transaction, EG Group established its North American headquarters in Cincinnati. In December 2018, EG Group expanded its operations to 988 convenience stores with the acquisition of the Minit Mart portfolio from Westlake, Ohio-based TravelCenters of America LLC and the opening of a new Turkey Hill store in Pennsylvania. The Certified Oil portfolio will expand EG Group’s U.S. footprint to 1,112 stores in 25 states. “This acquisition is in line with our strategy to expand in large, growing markets like the United States,” explained Mohsin Issa, founder and co-CEO, EG Group. “The acquisition of Certified Oil is an exciting value creation opportunity for the EG Group and underpins another significant step in our North American adventure. “Given the recent market interest in similar assets in the U.S., the sector presents significant growth potential. Being a leading market operator, EG Group is well positioned to take advantage of such opportunities,” he continued. “The 69-site network secured will also enable EG Group to extend its reach into new state geographies. We look forward to investing in the assets and improving the existing consumer offer.”

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How to Secure Your

c-Store’S Network Every convenience store operator wants to provide its customers with a speedy, satisfying and SAFE shopping experience. But convenience stores are increasingly being targeted by hackers seeking sensitive customer data and access to networks.

enhancing cybeRsecuRity and data pRivacy could dRive 5.4% uplift in RetaileRs’ annual Revenue.1 The current state of most convenience stores’ physical and virtual security is highly fragmented and difficult to integrate: • Analog, standalone CCTV • Older firewalls • Security at PCI minimum • Stove-piped systems

this leads to : • Costly management • Difficulty implementing EMV 90%+ of unattended payment terminals are still not EMV-compliant2 • Higher risk of breach, especially at the pump one card skimmer can: - Impact 100 to 500 consumers - Cost each consumer $1,100 to $5,0003

to boost secuRity, loweR Risk and enable emv, c-stoRes need layeRed, integRated and stRong edge-aligned secuRity. does youR netwoRk check these boxes ?

RETAIl bREACH RATES InCREASED

fRom

2.5x

2017 2018 to

4

this incReased Risk is due to : More devices on store networks More sophisticated, layered, perimeter-focused attacks: Retail’s most commonly bReached data types :

Payment data

73%

Personal data

16%

Credentials

8%5

thRee of the top 10 most-bReached devices acRoss industRies:

POS terminals

POS servers

Gas pump terminals6

robust, stateful, next-gen firewall Unified Threat Management physical security with digital ccTV rogue Wi-Fi Scanning EMV compliance via MnSp SPONSORED BY

SourceS: 1 Capgemini https://www.capgemini.com/fi-en/wp-content/uploads/sites/27/2018/05/cybersecurity-in-retail-report_v2-10.pdf | 2 Payment Source https://www.paymentssource.com/list/data-what-emv-overlooked | 3 CSN https://csnews.com/how-shut-down-fuel-thieves | 4 The 2018 Thales Data Threat Report - Retail Edition | 5 Verizon https://enterprise.verizon.com/resources/reports/dbir/ | 6 Verizon ibid

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INDUSTRY ROUNDUP

TravelCenters of America Zeroes In on Expansion Goals Franchise agreements for four TA Express sites are inked, with three more under legal review By Melissa Kress TRAVELCENTERS OF AMERICA LLC (TA) started

2019 with one

key focus: expansion. During the company’s first-quarter earnings call, held May 7, the travel center operator reported that it is making progress toward that goal. “Our site expansion program is underway and we have been successful in attracting new franchisees and potential franchisees, as well as in identifying potential acquisition targets,” CEO Andrew Rebholz explained during the call. To date, TA has signed franchise agreements for four TA Express sites, has three agreements under legal review, and “nearly a dozen sites about which we are engaged in detailed discussions or negotiations,” according to the chief executive.

“These potential acquisitions are not yet under contract and, when they are, they will continue to be subject to a number of conditions, which is a long way of saying one or more or all of them may not occur,” Rebholz acknowledged. During the first quarter of 2019, Westlake, Ohio-based TA also inked a lease agreement for a standalone truck services facility. The company expected to begin operating the site in June. “This progress, and knowing what is in our pipeline, makes me confident that we can achieve our site expansion goal this year — primarily through franchising,” Rebholz added.

The company also has roughly 50 additional sites in various phases of the franchising application and due diligence process.

Looking at the economics of the franchising program, Rebholz said the company’s travel center sites average, in royalties and payments to TA, approximately $300,000 per site. For TA Express sites, the company is conservatively estimating revenues in the range of $175,000 to $200,000.

Regarding its acquisition efforts, TA currently has letters of intent for five sites. Two are existing travel centers and three are development parcels for future TA Express locations.

There are numerous site operators — in the 50-number range — who have expressed some interest in franchising with TA, according to Rebholz.

FAST FACTS

80

%

More than 80 percent of motorists who fill up four times a month or more frequent multiple fuel and convenience brands in any given month.

Beverages dominated the most successful new products in the convenience channel in 2018, taking eight of the top 10 spots.

— GasBuddy

— IRI, 2018 New Product Pacesetters

Forty million Americans say they would be likely to consider an electric vehicle for their next car purchase, with millennials leading the pack.

The top five city metro areas with the most fast-casual restaurant chain units are Los Angeles, Dallas-Fort Worth, New York, Chicago and Washington, D.C.

— AAA Survey

— The NPD Group, Fall 2018 ReCount Restaurant Census

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INDUSTRY ROUNDUP

Eye on Growth

Parkland USA is adding nine convenience stores to its portfolio through an acquisition of Ken Bettridge Distributing Inc. (KB Oil). KB Oil will incorporate into Parkland’s Rockies Regional Operating Center, with Rhinehart Oil serving as the operating entity. Parker’s is investing $50 million to set up nine Parker’s Kitchen locations across the Charleston, S.C., area by the end of 2019. The retailer plans to open more than 40 locations in the Charleston region within four years.

This transaction marks West Oil Inc.’s exit from the c-store business.

West Oil Inc. The sale also includes two car wash properties and three vacant lots. Wawa Inc. opened its first convenience stores in Miami on May 9. A unique feature of the stores is the retailer’s first walk-up windows serving popular Hispanic espresso drinks. RaceTrac Petroleum started its journey into Tennessee with a ceremonial groundbreaking of its first planned convenience store in the state in Murfreesboro. Tennessee is the company’s first new market in 15 years. FR Refuel LLC, a portfolio company of First Reserve, is buying 25 Markette convenience stores and one Lotto Land c-store from

Retailer Tidbits

Offen Petroleum is acquiring the business assets of independent fuel distributor Allied Energy. The transaction expands Offen’s presence in Nevada, while creating new opportunities in the Arizona market.

Family Express Corp. has gone live with its new custom loyalty app, which integrates multiple vendors into one platform. The app incorporates native online ordering, seamless store content, and customer engagement.

QuikTrip is piloting the service at select stores in Tulsa, Okla., and Wichita, Kan.

QuikTrip Corp. is bringing back its former carhop service and rebranding it as carside delivery. Customers at participating stores can place orders and have their items delivered to the fuel pump.

Murphy USA brought E15 fuel to New Mexico with the opening of a new site in Albuquerque. With this expansion, E15 fuel is now offered in 31 states. GPM Investments LLC expanded its service agreement with Core-Mark Holding Co. Inc. to cover an additional 376 convenience stores. In all, the convenience distributor now services 969 GPM locations throughout 17 states.

Enmarket’s new Skip Checkout service is now live at all of its 124 stores. The retailer became the largest convenience store chain to adopt the frictionless technology to date. Weigel’s will exclusively use milk produced in Tennessee. The convenience store and dairy operator will feature a new Tennessee Milk logo on all Weigel’s milk. Wawa Inc. added a new catering service to its foodservice platform. The catering program allows customers to place pickup orders for breakfast, lunch and dinner.

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INDUSTRY ROUNDUP

Supplier Tidbits

The Food and Drug Administration approved the sale of Philip Morris International’s IQOS in the U.S. market. Under an exclusive licensing pact, Philip Morris USA will commercialize IQOS in the U.S. with three HeatStick variants. Peak Rock Capital finalized a definite agreement to acquire The Kroger Co.’s Turkey Hill business. The brand produces a full line of iced teas, fruit drinks, milk, frozen dairy treats and a variety of ice cream products. McKee Foods, maker of the Little Debbie brand of snack cakes, will acquire Prairie City Bakery. McKee Foods will continue using the Prairie City Bakery brand name and its existing distribution channels.

In the coming months, Krispy Krunchy Chicken will also debut new in-store signage and promotional graphics.

Krispy Krunchy Chicken unveiled a new logo to mark its 30th anniversary. With the new logo also comes a new brand descriptor, as the company shifts from “Cajun Recipe” to “Freshly Made • Perfectly Cajun.” Mars Wrigley Confectionery U.S. is launching the Innovative Merchandising Incubator, a national program designed to provide retailers with the opportunity to receive new, groundbreaking merchandising solutions. Anheuser-Busch InBev will add comprehensive on-pack ingredient labels to its Bud Light Lime and Bud Light Orange products. Additionally, Bud Light Orange will now be available year-round.

Competitive Watch C-store Competitors Join the Tobacco 21 Movement Retailers outside the convenience channel are switching up their tobacco sale policies WALMART, RITE AID AND WALGREENS

will stop selling tobacco products to anyone under the age of 21 as part of

efforts to combat youth access to the products. The policy change goes into effect at Walmart locations on July 1, followed by Rite-Aid in mid-July and Walgreens on Sept. 1. In addition, Walmart is in the process of discontinuing the sale of fruit- and dessert-flavored electronic cigarettes and vapor products. And Rite Aid’s latest decision follows its previous step to remove all electronic cigarettes and vapor products from its backbar. The change at Walgreens comes six months after the drugstore chain implemented a “card all” policy across its network. The policy requires verification regardless of age on all tobacco sales. The retailer is also testing “tobacco-free” stores in Illinois and Florida.

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OUT & ABOUT

Technology: The Intersection of Convenience & Consumer Expectations A record number of attendees participated in the 2019 Conexxus Annual Conference to get a glimpse of the future of retail technology By Melissa Kress can be exciting but sometimes, bells and whistles are just that. While nice, at the core of retail technology are the basics.

INNOVATION IN TECHNOLOGY

Welcoming a record number of attendees to the 2019 Conexxus Annual Conference, Gray Taylor, executive director of Conexxus, said the future landscape of retail and technology’s role in it is “simple” and boils down to a few key themes: • Technology will continue to empower fickle consumers. • Every business is in the convenience business, and the definition of “frictionless” changes daily. • Every business will be in the data business. • Traditional scale is dead weight; new scale comes from the technology and logistics pool. • IR4 technology, or the fourth industrial revolution, will eradicate distance, location and immediacy as “moats.” “The digital consumer has sky-high expectations when it comes to convenience,” Taylor said. “We have to ensure a convenient and frictionless shopping experience. Accessibility and relevance is no longer about physical location, but also about digital presence.” Kwik Chek Food Stores is just one convenience store retailer with a loaded digital agenda. Kevin Smartt, CEO of the Texasbased chain and chairman of the Conexxus board of directors, told conference attendees that his company’s innovation pipeline is full and runs the gamut from loyalty programs, to mobile app food ordering, to the testing of self-checkout and mobile checkout, to deep data and consumer analytics, to blockchain. Regardless of what is on the “to-do” list, though, it all comes down to putting systems in place that are critical to the c-store consumer, Smartt explained during the event’s opening session. “We sell a lot of stuff, but we really need to understand our consumer,” he said. “Then, we need to understand what our consumer wants.”

The Next Wave The convenience store industry has seen

A record number of attendees convened at the 2019 Conexxus Annual Conference, held April 28 to May 2 in Nashville, Tenn.

its technology move beyond the basic forecourt to the store-to-the-back-office model. With innovation, the industry is now “moving the store out into the customers’ hands” with initiatives like loyalty programs and mobile payments, Taylor said. The next generation, he believes, will include more cloudbased security, self-checkout, digital customer-related management and artificial intelligence (AI) checkout. This new wave is expected to come within the next five years. Change is never easy, though. And when it comes to the convenience channel, the same can be said about digital transformation. “Digital is not just a marketing channel or a fad,” said Ed Dzadovsky, vice president, North America IT, at Circle K, the global retail banner of Canada-based Alimentation Couche-Tard Inc. “We are trying to figure out what it means for us.” Speaking on a panel with other c-store IT leaders, Dzadovsky noted that the challenges of digital transformation are not around focusing on the customer, but rather focusing on the customer experience. Digital transformation is creating new ways to live, work and play. Dzadovsky shared several lessons he’s learned: • Standardization is key. • Flexible technology pays off when a company is ready to make a big move. • Nailing crossfunctional governance is essential. • Focus on “no regret” moves to get in the game with a minimal viable product. He also advised that it is the IT team’s responsibility to keep the executive leadership team focused on standardization and not chase “the shiny objects.” CSN

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OUT & ABOUT

Trendspotting at the 2019 Eby-Expo Midwest Convenience store retailers gathered to see new offerings at the distributor’s regional show By Angela Hanson brought convenience store operators and a wide variety of product vendors together at its annual dual trade shows: Eby-Expo East, held March 13-14 in Cleveland, Ohio, and Eby-Expo Midwest, held April 24-25 in Rosemont, Ill.

EBY-BROWN CO. LLC

Along with inviting vendors to show off their latest packaged goods, the Naperville, Ill.-based convenience distributor also highlighted foodservice offerings in a separate ballroom. Both freshly prepared and grab-and-go foodservice products were on display. Convenience Store News walked the show floor at Eby-Expo Midwest and got a peek at the latest trends and new products. Among the highlights were:

Bold Flavors Spicy and bold are still trending atop the list of flavor varieties for salty snacks. BIGS Sunflower Seeds highlighted the brand’s Buffalo Wing, Taco Supreme, Cracked Pepper and Sizzlin’ Onion varieties.

Natural Ingredients The growing focus on natural ingredients was represented by Ferrara Candy Co., which touted a new and improved recipe for its Butterfinger candy bars. The new recipe uses more natural ingredients and higher-quality chocolate, and lacks any artificial preservatives. A company representative told CSNews that there’s also a stronger peanut flavor due to a new roasting process.

Finding the New in Old Favorites New twists on old favorites continues to be a popular trend. This summer, Hershey will pit chocolate fans against peanut butter fans by introducing two different varieties of Reese’s Peanut Butter Cups. A Peanut Butter Lovers version will feature a peanut butter shell topping in addition to the peanut butter filling, instead of all chocolate. A Chocolate Lovers version will feature a higher proportion of chocolate. Each 1.1ounce package will have a suggested retail price of $1.11, while a 2.8-ounce king-size pack will retail for $1.66.

Eby-Expo Midwest showcased the latest in packaged goods and foodservice.

Salty & Sweet Do consumers like salty or sweet better? According to a Java Creations representative, the answer is: they like both. The brand’s Salted Caramel coffee is its fastestgrowing brew. Cold-brew also continues to dominate as the emerging coffee trend of the moment.

Premium Products Premium nuts and on-the-go nut snacks do not have to be mutually exclusive. A Royal Hawaiian representative pointed out that the company’s Aloha 2 Go line is the only one that offers macadamia nuts in a snack-size, grab-and-go package. Varieties include popular classics such as Natural and Sea Salt, along with unique varieties such as Hawaiian BBQ, Pomegranate Mango and Blackberry Goji. Eby-Brown is the largest privately owned convenience store distributor in the United States, serving more than 8,700 retail locations. CSN

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First fizz, now flavors. The Coca-Cola Co. introduces flavored smartwater sparkling beverages. Varieties include strawberry blood orange, fuji apple pear and raspberry rose. The flavored smartwater sparkling beverages are being sold initially in half-liter bottles (both singles and six-packs) in select cites, such as Boston, Chicago, Los Angeles, Miami, New York, Philadelphia and San Francisco. Social/digital, outdoor and in-store advertising will support the new products under the smartwater brand’s “that’s pretty smart” campaign. The Coca-Cola Co. Atlanta coca-colacompany.com/ glaceau-smartwater

S&D Coffee & Tea is launching a new line of sustainably sourced coffees as a part of its Raíz Sustainability sourcing platform. These products are the first 100-percent sustainably sourced coffees to be produced and branded with both the S&D Coffee & Tea and Raíz branding. A crisp, medium/light roast with hints of honey from Central America debuted in April and will be followed by a bright, citric and sweet medium roast from South America that will launch in September. Raíz Reserve coffees will be available exclusively as seasonal offerings to guarantee peak freshness and quality. S&D is working with clusters of farmers in multiple origins to produce the line.

4. Heinz Mayocue & Mayomust Following the viral launch of the Mayochup mashup of mayonnaise and ketchup, Heinz launched Mayocue and Mayomust, which combine mayonnaise with barbecue sauce or mustard, respectively. The new condiments are available in 16.5-ounce bottles for a suggested retail price of $3.49 each. The Kraft Heinz Co. Pittsburgh & Chicago heinz.com

the flavor offerings available in its myblu Intense nicotine salt liquidpod line. A new Mint-sation flavor features the taste of fresh peppermint blended with subtle undertones of spearmint, while a new Tobacco flavor is an authentic blend that fuses roasted tobacco flavor with nutty notes and a slight oaky finish. Both new varieties come in 3.6 percent and 2.4 percent nicotine options. All myblu Intense pods feature a proprietary nicotine salt liquid formulation, according to the maker. ITG Brands Greensboro, N.C. (888) 207-4588 blu.com/en/US

S&D Coffee & Tea Concord, N.C. (800) 933-2210 sdcoffeetea.com

5. Peatos Ranch A new Ranch variety joins the Peatos line of crunchy puffed snacks, which already includes Classic Cheese, Fiery Hot, Chili Cheese and Masala varieties. Peatos are made from pulses (peas and lentils) and contain twice the protein and three times the fiber of their mainstream puffed snack competitor, according to the maker. Designed to be “Better Than Junk Food,” Peatos are made with Non-GMO Project verified ingredients, contain no artificial flavors or synthetic colors, and have no added MSG. World Peas Brand Los Angeles worldpeasbrand.com 24 Convenience Store News C S N E W S . c o m

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NEW PRODUCTS

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8. On Top Soft Whip 9. Liquid Lightning Beverage Topping Push Beverages is reviving

line of all-fresh, ready-toeat salad kits that combine plant-based protein with original dressings and hearty, on-trend ingredients. Designed to give produce lovers a level of salad experience typically reserved for restaurants and delicatessens, Dole Bountiful Kits target flexitarian and paleo lifestyles with ready-to-eat blends of Dole lettuces and vegetables topped with an innovative Fresh Pouch packet of grains, nuts, seeds and other ingredients not often associated with this category. Dole Bountiful Kits come in four varieties: Fiesta Ranch, Lentil Cucumber, Sweet Thai and Triple Quinoa. Each kit has a suggested retail price of $4.29. Dole Food Co. Westlake Village, Calif. dole.com

On Top Soft Whip Beverage Topping is a drinkable, ready-to-use whipped topping that has a sweet cream flavor and light texture, allowing for delicious layering on beverages, according to maker Rich’s Foodservice. The topping floats on top of beverages rather than immediately dissolving, adding visual appeal. The topping comes in a 19-ounce pourable carton and can be used immediately after shaking. On Top Soft Whip Topping can add customization to beverages that do not typically get topped, such as cold brew coffee, iced tea and soda floats. The product contains no high fructose corn syrup or artificial colors and flavors. Rich’s Foodservice Buffalo, N.Y. (800) 356-7094 richsfoodservice.com/ soft-whip-topping

Sparkling Ice, part of Talking Rain Beverage Co., unveiled a brand refresh that introduces a new formula featuring naturally sourced colors and flavors, as well as an updated logo and packaging design. All single-serve bottles and multipacks of the zerosugar sparkling water now sport the new modern and unified look. To support the relaunch, an integrated campaign spotlights the new benefit of natural colors and flavors using the hashtags: #SparklingIceLife, #NATRLLY and #GetFizzy. As part of the campaign, Sparkling Ice also launched a new “Sparkling IceMaker” voice skill with Google Assistant and Amazon Alexa to provide consumers with Sparkling Ice cocktail and mocktail recipes. Talking Rain Beverage Co. Preston, Wash. (800) 734-0748 sparklingice.com

a regional favorite, Liquid Lightning Energy Drink. Featuring a light berry flavor, Liquid Lightning boasts a wide array of “energy boosters,” including D-ribose, caffeine, insositol, taurine, glucuronolactone, panax ginseng extract and high doses of B vitamins, known to help the body deal with stress and eliminate the “crash” that often occurs after the energy boost. The revival includes a can redesign and resizing (12 ounces), along with replacing high fructose corn syrup with pure cane sugar. New regular and zero-calorie versions are available. Push Beverages LLC Rockaway, N.J. (855) 787-4238 pushbeverages.com

10. Heineken Can Redesign With consumers increasingly choosing cans over bottles, Heineken introduces a new bigger, bolder look for its cans. The redesign adds a generous splash of Heineken’s iconic green color and the brand’s bold red star to help the cans pop on shelves. Heineken cans are available in 12-ounce 12-, 18- and 24-packs and single-serve 16-ounce and 24-ounce cans. The new Heineken cans, along with point-of-sale materials featuring the bold update, arrived in stores starting in May — just in time for the prime summer drinking occasions. Heineken USA White Plains, N.Y. heinekenusa.com

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

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5/31/19 11:26 10:08 AM AM 5/31/19


SMALL OPERATOR

Meatless Munchies The all-vegan V Marks the Shop carves out a niche in the convenience channel By Danielle Romano WHEN PEOPLE THINK of a convenience store, what often comes to mind is the typical c-store fare: salty snacks, candy, roller grill items, packaged beverages, grocery essentials and maybe even a take-home meal. They most likely do not think of these items being vegan. However, in today’s modern c-store space, V Marks the Shop is a newcomer looking to fill that niche.

When husband-and-wife duo Carmella Lanni-Giardina and Carlo Giardina went vegan in 2010, they wanted to start a business that would connect with their ethics as vegans: those who abstain from the use of all animal products (meat, eggs, dairy, honey, etc.). Carmella worked in business-to-consumer e-commerce/IT operations, while Carlo worked in social services. Together, they

ran a food blog called the “Food Duo,” but were looking to match their lifestyle to their blog and invest more time in the endeavor. “The original idea that Carlo had was to have a mobile vegan convenience store, but a wise friend dissuaded us from that. We talked about opening up a café and bookstore, but we kept going back to the store idea,” Carmella recalled. “We were inspired by other vegan stores in the country, as well as Carlo’s paternal grandparents owning a small grocery store in NYC [New York City]. It rather comes full circle in a way, as Carlo’s maternal grandfather was a butcher. Here we are with a vegan store with a plant-based deli case!”

Community Driven During the process of getting their first brick-and-mortar store going, the couple continued to work part-time on nights and weekends while maintaining an online store and vending at festivals and pop-up markets. They launched Philly Vegan Pop Flea, a vegan pop-up community marketplace to connect with like-minded businesses and customers. Finally, on Dec. 22, 2018, V Marks the Shop opened at 1515 McKean St. in the Newbold neighborhood of South Philadelphia. Clocking in at a modest 1,000 square feet, the c-store carries more than 300 SKUs, offering a mix of refrigerated, frozen and shelf-stable items. “It’s a bit of a shock considering the size of our store and how much fills it, while still maintaining our community space,” Carmella told Convenience Store News. With a focus on local, V Marks the Shop carries prepared food items from local purveyors such as Tattooed Mom, a local casual-dining establishment; Awesome Foods, maker of raw, organic, gluten-free foods; and Miss Rachel’s Pantry, which is known for serving a prix fixe vegan menu on Saturdays, plus light market-style bites. All of the prepared food items can be heated in a microwave for customers to eat in-store or on the go. Local vegan baked goods are also on the menu at V Marks the Shop. The store sells

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SMALL OPERATOR

items from Philly Bread, Batter & Crumbs Vegan Bakery, and Crust & Vegan Treats. When selecting what products to carry, Carmella and Carlo do as much research on the brands as possible, and give preference to smaller and local businesses. “We listen to our customers, as well as attend trade shows. We also reach out to other vegan stores to ask about some of the products they carry,” Carmella added. In a nod to Carlo’s original café and bookstore idea, V Marks the Shop has also branched out into selling books, in addition to personal care, household items and other consumer goods, such as items fit for customers’ companion animals. V Marks the Shop features indoor seating and free Wi-Fi. The store hosts a number of events, including “Sumthin’ Saturdays.” This weekly series may include product demos and samplings, “Micro Pop” markets, arts and crafts days, guest speakers and more.

Carmella emphasizes that the vegan convenience store isn’t in competition with larger chains or health-positioned supermarkets. The couple sees its business as one-of-a-kind. “We don’t see ourselves as competing with the larger chains. We’re a small business that strives to show how accessible vegan goods are within our community,” she said. “We appreciate the support we receive. We work to differentiate ourselves via our product offerings and engagement with the community.” As for the future of V Marks the Shop, Carmella and Carlo envision the store being a resource and “community connector” when it comes to vegan living and plant-based eating. Since opening, they have set a goal of procuring 50 percent of their products from local sources. The duo is even discussing how to create their own line of vegan food items.

Looking Forward

“We also would love to have a larger or separate community space to bring more and more people and businesses together to share,” Carmella noted.

Although its e-commerce site is currently on pause, the Giardinas hope to re-engage with online ordering, while adding in-store pickup and local delivery options in the future.

There is talk of additional V Mark the Shop locations, but nothing in progress just yet. CSN

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COVER STORY

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DON’T LET THE

SUNNY

NUMBERS FOOL YOU

The c-store industry completes another strong year in sales and profit growth, but trouble lurks behind the scenes BY ANGELA HANSON & DON LONGO

Behind the hoopla of another robust year of industry sales and profit growth is the sobering fact that in-store sales — an important barometer on the health of the convenience store industry — were up a paltry 1.6 percent in 2018, as both in-store and motor fuel transactions were down for the second year in a row. On top of that, sales growth in foodservice — one of the key growth categories for c-stores for the past decade — continued to slow, rising only 2.4 percent.

J UNE

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COVER STORY

Total Convenience Store Sales (in billions)

2018

Total

Motor Fuels

In-Store

$661.4 7.3% $432.0 10.7% $229.4 1.6% $616.3 9.1%

2017

$390.4 13.6% $225.9 2.1%

Source: Convenience Store News Market Research, 2019

Store Growth Analysis

Total Store Count

2018

2017

2016

2015

2014

Chains

Single Stores

153,237

37.7%

62.3% 154,958

37.0%

63.0% 154,535

36.9%

63.1%

36.9%

154,195 63.1% 152,794

37.0%

Higher gasoline prices drove motor fuel sales to a 10.7 percent increase last year, to $432 billion, the industry’s highest gas sales since 2014. Meanwhile, gallons sold were flat (down 0.1 percent) as better fuel economy vehicles require fewer fill-ups. It’s worth pointing out that a slight decline in the total number of convenience stores (from 154,958 to 153,237) deflated many of the total industry sales figures. Salesper-store results look a little better due to the 1.1-percent decrease in the number of c-stores in the United States. Nearly 80 percent of the industry’s stores sell motor fuels.

$564.9 -6.3% $343.7 -11.3% $221.2 3.8%

2016

Total convenience store industry sales rose 7.3 percent last year to $661.4 billion, the highest total revenue since 2014, according to the 44th annual Convenience Store News Industry Report, the longest-running, continuously published annual report on the financial performance of the convenience retail channel.

63.0%

Source: Nielsen TDLinx; Convenience Store News Market Research, 2019

Motor Fuel Volume 2018

2017

2016

154.1

154.3

154.7

GALLONS (billions)

GALLONS (billions)

GALLONS (billions)

% CHANGE

% CHANGE

% CHANGE

-0.1%

-0.3%

2.2%

The channel’s success last year was really based on robust motor fuel prices and margins. The average sales price per gallon rose 10.8 percent to $2.80 per gallon, and gross margin cents per gallon increased 7.8 percent to 25.5 cents. On a profitability basis, gross profits increased to $106.7 billion in 2018, up from $101.7 billion in 2017. Motor fuels comprised $42.6 billion of those profits, while in-store profits were $64 billion. Pretax profits were a record-high $9.81 billion, up 5.9 percent from 2017. On a per-store basis, pretax profits averaged $64,371 a unit, a 6.6 percent increase from the previous year. The channel’s success last year was really based on robust motor fuel prices and margins. The average sales price per gallon rose 10.8 percent to $2.80 per gallon, and gross margin cents per gallon increased 7.8 percent to 25.5 cents. In-store sales (merchandise and foodservice combined) were up 2.2 percent on a per-store basis. That’s better than the 1.5 percent per-store increase of 2017, but well below the 3.2 percent and 3.7 percent per-store sales gains achieved in 2016 and 2015, respectively. Foodservice sales (including hot, cold and frozen dispensed beverages and prepared food) totaled $37.85 billion last year. The 2.4 percent increase fell below the previous year’s 3 percent gain, and even further beneath the 6.6 percent and 7.1 percent gains of 2016 and 2015, respectively. Merchandise sales totaled $191.5 billion last year. The 1.4 percent gain was less than the previous year’s 2.1 percent increase, and even less than the 3.8 percent and 4.9 percent gains of 2016 and 2015, respectively.

Source: Convenience Store News Market Research, 2019

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COVER STORY

Industry Sales Mix

IN-STORE

Gross Profit Dollar Mix

IN-STORE

IN-STORE

IN-STORE

34.7%

36.7%

39.2%

MOTOR FUELS

MOTOR FUELS

MOTOR FUELS

65.3%

63.3%

2018

2017

IN-STORE

60.0%

IN-STORE

60.8%

62.6%

MOTOR FUELS

MOTOR FUELS

MOTOR FUELS

60.8%

40.0%

39.2%

39.2%

2016

2018

2017

2016

Source: Convenience Store News Market Research, 2019

Industry Gross Profit

Pretax Profits TOTAL INDUSTRY PRETAX PROFIT (in billions)

% CHANGE

5.9%

$64,371

6.6%

$9.26

1.8%

$60,410

2.6%

$9.10

-1.9%

$58,886

-3.9%

2017 $ BILLIONS

$64.08

$61.85

3.6%

Motor Fuels $42.63

$39.88

6.9%

2018

$9.81

TOTAL

$101.73

4.9%

2017 2016

In-Store

$106.71

% CHANGE

PRETAX PROFIT PER STORE

2018 $ BILLIONS

Source: Convenience Store News Market Research, 2019

In-Store Sales per Store 2018

Source: Convenience Store News Market Research, 2019

$1,505,376 2.2% $1,473,386

2017

1.5%

$1,451,682 3.2%

2016

Source: Convenience Store News Market Research, 2019

Total Merchandise & Foodservice Sales (in billions)

Total

Merchandise

Foodservice

2018

$229.4 1.6% $191.5 1.4% $37.9 2.4%

2017

$225.9 2.1% $188.9 1.8% $37.0 3.6%

2016

% CHANGE

$221.2 3.8% $185.5 3.8% $35.7 6.6%

Source: Convenience Store News Market Research, 2019

Packaged beverages continues to be the thirdhighest grossing in-store category at 12.71 percent of sales, up from 12.5 percent the previous year. In-Store Sales Breakdown Foodservice now accounts for 16.5 percent of all in-store sales, up from 16.38 percent a year ago. The prepared food segment’s share also grew, accounting for 11.49 percent of in-store sales in 2018, up from 11.15 percent the prior year. Although still an important category, cigarette dollar sales represented 28.5 percent of total in-store sales last year, dropping from 29.82 percent in 2017. Packaged beverages continues to be the third-highest grossing in-store category at 12.71 percent of sales, up from 12.5 percent the previous year. Other categories that gained as a percentage of in-store sales year over year include other tobacco products (6.84 percent of in-store sales), general merchandise (3.69 percent), salty snacks (2.85 percent), and wine and liquor (1.47 percent).

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Operations An increase in direct-store operating expenses and a decrease in customer trips are two of the greatest concerns to c-store retailers across the United States.

Total direct-store operating expenses were up 5.8 percent last year, driven by higher labor costs and rising credit card fees (up 8.9 percent). Wages rose 6.2 percent, representing $330,584 per store in costs. That’s up from

IN-STORE SALES BY CATEGORY PERCENT OF IN-STORE SALES

SALES PER STORE

TOTAL INDUSTRY SALES (IN MILLIONS)

2018

2017

2018

% change

2018

% change

28.50%

29.82%

$429,031

-2.3%

$65,365

-2.9%

Packaged beverages

12.71

12.50

191,347

3.9

29,153

3.2

Beer/malt beverages

9.34

9.41

140,607

1.4

21,422

0.8

Other tobacco products

6.84

5.62

102,991

24.3

15,691

23.5

Edible grocery

4.78

4.85

72,001

0.7

10,970

0.1

General merchandise

3.69

3.62

55,556

4.3

8,464

3.6

Candy

3.13

3.17

47,103

0.7

7,176

0.1

Salty snacks

2.85

2.81

42,839

3.6

6,527

2.9

Non-edible grocery

1.60

1.66

24,030

-1.8

3,661

-2.4

Wine & liquor

1.47

1.40

22,112

6.9

3,369

6.3

Fluid milk products

1.46

1.58

21,990

-5.5

3,350

-6.1

Alternative snacks

1.10

1.10

16,616

2.5

2,532

1.8

Ice cream & frozen novelties

0.88

0.91

13,288

-0.4

2,024

-1.0

Health & beauty care

0.68

0.70

10,251

-1.3

1,562

-1.9

Ice

0.46

0.49

6,996

-2.5

1,066

-3.1

Publications

0.44

0.46

6,577

-3.0

1,002

-3.6

Packaged sweet snacks

0.28

0.30

4,284

-3.7

653

-4.3

All other merchandise

3.28

3.22

49,307

3.9

7,512

3.2

83.50%

83.62%

$1,256,927

2.0%

$191,499

1.4%

11.49%

11.15%

$172,967

5.4%

$26,352

4.7%

Hot dispensed beverages

3.19

3.37

47,957

-3.4

7,307

-4.0

Cold dispensed beverages

1.29

1.33

19,482

-0.9

2,968

-1.5

Frozen dispensed beverages

0.53

0.53

8,043

3.3

1,225

2.6

FOODSERVICE SUBTOTAL

16.50%

16.38%

$248,449

3.0%

$37,852

2.4%

100.00%

100.00%

$1,505,376

2.2%

$229,352

1.6%

MERCHANDISE Cigarettes

MERCHANDISE SUBTOTAL

FOODSERVICE Prepared food (prepared on-site or off-site)

TOTAL IN-STORE

Source: Convenience Store News Market Research, 2019

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Direct-Store Operating Expenses (dollars per store) 2018

2017

Wages

$330,584

$311,284

% CHANGE

Payroll taxes

16,847

16,664

1.1

Workers compensation

13,564

12,653

7.2

Health insurance

30,651

29,331

4.5

Other benefits

5,578

5,457

2.2

Labor subtotal

$397,223

$375,389

Credit card fees

82,927

76,150

8.9

All other direct-store operating expenses

169,101

162,285

4.2

TOTAL

$649,251

$613,82

5.8%

6.2%

5.8%

Source: Convenience Store News Market Research, 2019

Five-Year Trend: Wages (dollars per store) $246,394 per store in 2014. With the current historically low unemployment rate, retailers can expect labor costs to continue to rise in 2019. Turnover of store associates was 132 percent, while manager turnover came in at 26 percent.

$330,584 2018

$311,284 2017

$285,320 2016

$264,185 2015

$246,394

2018

% change

2014

Source: Convenience Store News Market Research, 2019

Transactions

More consumers are doing their shopping over the internet or using delivery services. And greater fuel efficiency due to tougher fuel emission standards (CAFE) is resulting in fewer trips to the pump. Stronger competition from other retailers’ new hybrid convenience concepts, like Walmart and Kroger, also contributed to declining trips for c-stores.

In-store transactions per week

3,244

-1.4%

Motor fuel transactions per week

2,327

Average in-store transaction

$8.83

-1.0% fell 1.4 percent to an average of 3,244, and motor fuel 2.7% transactions declined 1 percent to 2,327 per week.

Average motor fuel transaction

$29.30

11.2%

Average gallons per transaction

9.7

9.0%

Source: Convenience Store News Market Research, 2019

C-store Square Footage 2018

Sales area

2,400

Non-sales area

800

Total store size

3,200

Total property size

27,800

2017

to 154.1 billion gallons. This marks the third year of slowly

27,800 declining gallons, compared to the 154.3 billion gallons sold in 2017 and 154.7 billion gallons sold in 2016.

2018

Source: Convenience Store News Market Research, 2019

Store size remained basically unchanged. The average sales area of a convenience store rose to 2,400 square feet last year, up slightly from 2,395.

3,205 2018, but the drop was small; declining just 0.1 percent

Employee Turnover

Store Managers

The average in-store transaction amount did increase, however, to $8.83, up from $8.60 in 2017, and the average motor fuel transaction increased 11.2 percent to $29.30, up from $26.35 the previous year.

2,395 Motor Fuels 810 The number of actual gallons of motor fuel sold fell in

Source: Convenience Store News Market Research, 2019

Store Associates

In 2018, the number of in-store transactions per week

132%

However, while drivers didn’t make a significant change to how much they gassed up, the amount they paid jumped last year, rising to $432 billion, compared to $390.4 billion in 2017.

26% On a per-gallon basis, the average sales price increased to $2.80 for a gallon of regular fuel, up from $2.53 per gallon the previous year.

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COVER STORY

Motor Fuel Sales & Margins 2018

2017

2016

Gross margin cents per gallon also rose from 23.7 cents in

Dollar sales (in billions)

$432.0

$390.4 $343.7 2017 to 25.5 cents last year.

Gallons sold (in billions)

154.1

154.3

Gross margin cents per gallon 25.5

23.7

Average sales price per gallon* $2.80

$2.53

154.7

Although the annual average price per gallon is getting

22.9 closer to the $3 benchmark, 2018 was the fourth straight

year that the average price fell below that point. Looking

$2.25. back at the last five years, 2014 saw the highest average

gallon price at $3.44, while 2016 was the lowest at $2.25.

*Weighted average, all grades and diesel Source: Convenience Store News Market Research, 2019

Total motor fuel dollar sales have mimicked the per-gallon trend over the past five years, falling from a high point of $501.4 billion in 2014 to $343.7 billion in 2016, and rising since then. Total gallons sold surpassed 150 billion every year in this time period except 2014, when the total was 147 billion gallons sold.

Retail Gasoline Prices (per gallon)

2.80

2.53

$

2.25

$

2018

$

2017

2016

The number of U.S. c-stores that sell fuel remains steady at nearly eight in 10, or 79.6 percent in 2018 compared to 79.1 percent in 2017.

Cigarettes

2.57

3.44

$

$

2015

Price includes dollars per gallon for all grades, all formulations

Cigarette sales in the convenience channel fell in 2018, with results varying significantly by segment. Average sales per store fell 2.3 percent to $429,031.

2014

Imports saw notable growth, with average sales per store rising 11.7 percent and total industry sales rising 11 percent, but the segment remains the smallest in actual dollar sales. Subgeneric/private label was the only other segment to avoid declining sales, but remained fairly flat.

Source: Convenience Store News Market Research, 2019

Five-Year Trend: Motor Fuels 2018

2017

2016

2015

2014

Dollar sales (in billions)

$432.0

$390.4

$343.7

$389.9

$501.4

Gallons sold (in billions)

154.1

154.3

154.7

151.3

147.0

Margin percentage for cigarettes remained steady in 2018, seeing a drop of less than 1 percent year over year, while cigarettes’ share of total in-store sales slipped from 29.8 percent to 28.5 percent over the same time period.

Source: Convenience Store News Market Research, 2019

Stores Selling Motor Fuels

79.6% 2018

Fourth tier cigarettes saw the biggest drop in 2018, falling 25.2 percent in average sales per store. Premium cigarettes also declined, falling 1.7 percent in average sales per store. However, the segment remains the largest in the category, with $349,376 in average sales per store.

79.1% 2017

Other Tobacco Products Other tobacco products (OTP) had a better year, with its rate of growth jumping sharply from last year. Average sales per store increased 24.3 percent in 2018 to $102,991. Electronic cigarettes hit it out of the park, with average sales per store growing by an astounding 178 percent to $26,613. Total industry sales of e-cigarettes rose 177.2 percent. While regulatory challenges are on the horizon, the segment marked itself as the growth leader for OTP. E-cigarettes also beat out cigars to be the No. 2 OTP product in both per-store and total industry sales. Smokeless tobacco saw much more modest growth — a 2.8 percent increase in average sales per store. Still, it remains the top OTP product type in actual dollar sales at $48,629 per store.

Source: Nielsen TDLinx, 2018

2018 marked a high point for OTP growth in a five-year period, rising from a low of 4.3 percent growth in total

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

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COVER STORY

Category Analysis: CIGARETTES

Five-Year Trend: Cigarettes AVERAGE SALES PER STORE

Premium

INDUSTRY TOTAL (IN MILLIONS)

2018

% change

2018

% change

$349,376

-1.7%

$53,229

-2.3%

Branded discount

65,130

-5.6

9,923

-6.2

Subgeneric/ private label

13,337

1.5

2,032

0.9

Fourth tier

1,168

-25.2

178

-25.5

Imports

20

11.7

3

11.0

TOTAL

$429,031

-2.3%

$65,365

-2.9%

OTHER TOBACCO PRODUCTS INDUSTRY TOTAL (IN MILLIONS)

2018

% change

2018

% change

$48,629

2.8%

$7,409

2.2%

Electronic cigarettes

26,613

178.0

4,055

177.2

Cigars

25,659

7.8

3,909

7.1

Papers

1,522

-4.4

232

-5.0

569

-10.2

87

-10.8

$102,991

24.3%

$15,691

23.5%

Pipe/cigarette tobacco

TOTAL

2016

2015

2014

-2.9%

1.1%

1.4%

3.9%

0.1%

Margin percentage

14.63%

14.82%

15.20%

13.36%

13.60%

Share of in-store sales

28.50%

29.82%

30.11%

30.84%

31.10%

Percent change in total sales

Source: Convenience Store News Market Research, 2019

sales in 2014 to growth of 23.5 percent last year. Margin percentage also reached a high point of 29.15 percent, as did OTP as a share of in-store sales at 6.84 percent. Foodservice continues to grow as the category becomes more crucial to success in the convenience sector. However, foodservice category growth did slow in 2018, with average sales per store rising 3 percent to $248,449.

Category Analysis:

Smokeless

2017

Foodservice

Source: Convenience Store News Market Research, 2019

AVERAGE SALES PER STORE

2018

Source: Convenience Store News Market Research, 2019

TOTAL SALES Sales rose 7.3 percent to $661.4 billion, the highest total revenue in four years. IN-STORE SALES In-store sales were up only 1.6 percent as customer transactions declined. On a per-store basis, in-store sales were up 2.2 percent, slightly better than the 1.7 percent increase of 2017, but well below the 3.2 percent and 3.7 percent gains achieved in 2016 and 2015, respectively. MOTOR FUEL BUSINESS Fuel dollar and profit gains were strong, even in the face of lower volume.

Looking back at total industry foodservice sales over the past five years, the 2.4 percent growth seen in 2018 continued a slowdown from the 7.1 percent growth high that occurred in 2015. During this period, margin percentage has remained steady, settling at virtually the same percentage three years out of five. Additionally, foodservice as a percentage of in-store sales has experienced a slow but consistent climb over the last five years, rising from 15.38 percent in 2014 to 16.5 percent in 2018. The prepared food segment led the foodservice category in both growth and actual dollar sales in 2018, with average sales per store increasing 5.4 percent to $172,967. Frozen dispensed beverages grew 3.3 percent in average sales per store to $8,043, but the segment remains the smallest in the foodservice category.

STORE COUNT The total number of U.S. convenience stores declined for the first time in years. There was an average of 1,721 fewer c-stores in operation last year. PROFITS Strong fuel margins contributed to record-high pretax profits for the industry in 2018. FOODSERVICE SALES While still a focus of many c-store chains’ improvement efforts, foodservice increased only 2.4 percent in sales last year, which is less than 2017’s 3 percent gain and even further beneath the 6.6 percent and 7.1 percent gains of 2016 and 2015, respectively.

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COVER STORY

Category Analysis: Five-Year Trend: Foodservice

FOODSERVICE AVERAGE SALES PER STORE

INDUSTRY TOTAL (IN MILLIONS)

Percent change in total sales

2018

2017

2016

2015

2014

2.4%

3.6%

6.6%

7.1%

6.3%

2018

% change

2018

% change

Prepared food (prepared on-site or off-site)

$172,967

5.4%

$26,352

4.7%

Margin percentage

43.71%

43.85%

43.70%

43.72%

44.13%

47,957

-3.4

7,307

-4.0

Share of in-store sales

16.50%

16.38%

16.14%

15.71%

15.38%

Hot dispensed beverages Cold dispensed beverages

19,482

-0.9

2,968

-1.5

Frozen dispensed beverages

8,043

3.3

1,225

2.6

$248,449

3.0%

$37,852

2.4%

TOTAL

Source: Convenience Store News Market Research, 2019

Category Analysis: INDUSTRY TOTAL (IN MILLIONS)

2018

% change

2018

% change

$55,862

12.6%

$8,500

11.9%

Carbonated soft drinks

52,056

-3.4

8,007

-3.9

Bottled water

21,397

0.8

3,260

0.2

Sports drinks

18,342

2.7

2,791

2.1

Juice/juice drinks

13,306

-7.9

2,012

-8.5

Iced tea (ready-to-drink)

10,289

-5.1

1,568

-5.7

Enhanced water

8,250

14.8

1,257

14.2

All other packaged beverages

11,845

1.9

1,758

1.2

$191,347

3.9%

$29,153

3.2%

Energy/alternative drinks

TOTAL

Source: Convenience Store News Market Research, 2019

Five-Year Trend: Packaged Beverages 2018

2017

2016

2015

2014

3.2%

0.2%

4.2%

7.3%

5.1%

Margin percentage

41.58%

41.45%

41.40%

32.80%

32.67%

Share of in-store sales

12.71%

12.50%

12.74%

12.69%

12.41%

Percent change in total sales

Source: Convenience Store News Market Research, 2019

Cold dispensed beverage sales fell slightly, declining 0.9 percent in average sales per store, while hot dispensed beverage sales dropped 3.4 percent in average sales per store. This indicates that despite coffee programs being a high-margin staple, c-store operators can do more to boost hot beverage purchases. Overall, hot dispensed beverages are still the No. 2 moneymaker in the foodservice category, at $47,957 in average sales per store in 2018.

Packaged Beverages

PACKAGED BEVERAGES AVERAGE SALES PER STORE

Source: Convenience Store News Market Research, 2019

As a category, packaged beverages was solid in 2018, with average sales per store increasing 3.9 percent to $191,347. When broken down by segment, though, changes in sales ranged wildly from significant jumps to sharp drops. The enhanced water segment saw the biggest increase at 14.8 percent growth in average sales per store and 14.2 percent growth in total industry sales. Energy/alternative drinks saw the second highest growth, increasing 12.6 percent in average sales per store and 11.9 percent in total industry sales. This growth allowed the segment to overtake carbonated soft drinks (CSDs) in both per-store and total industry sales for the first time. CSDs declined for another year, with average sales per store falling 3.4 percent and total industry sales falling 3.9 percent. Both the bottled water and sports drinks segments also saw positive growth, while sales of juice/juice drinks and ready-to-drink iced tea fell in 2018. Looking at the past five years, the 3.2 percent growth in 2018 industry sales of packaged beverages was the second lowest during the period, although it marked a major rebound from the 0.2 percent growth that occurred in 2017. Margin percentage for packaged beverages increased slightly to 41.58 percent last year — a high point within the last five years — while share of in-store sales also saw a slight uptick, reaching 12.71 percent in 2018.

Alcoholic Beverages Convenience stores that sell beer and malt beverages saw slight growth for the category last year, with average sales per store rising 1.4 percent to $187,226. Imports, flavored malt beverages and super premium beer all saw double-digit growth in both average sales per store and total industry sales. Non-alcoholic beer also grew, although it remains the smallest segment in the category.

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COVER STORY

Category Analysis: BEER/MALT BEVERAGES

Five-Year Trend: Beer/Malt Beverages

AVERAGE SALES PER STORE

INDUSTRY TOTAL (IN MILLIONS)

2018

2017

2016

2015

2014

Percent change in total sales

0.8%

0.5%

4.3%

3.1%

3.0%

Margin percentage

19.08

19.01%

19.10%

18.71%

18.57%

Share of in-store sales

9.34%

9.41%

9.56%

9.51%

9.67%

2018

% change

2018

% change

$62,769

-1.3%

$9,562

-1.9%

Imports

26,183

12.1

3,989

11.5

Budget

11,164

-3.8

1,701

-4.4

Flavored malt beverage

12,000

12.4

1,828

11.7

Popular

10,085

-10.9

1,537

-11.4

Super premium

8,859

18.5

1,350

17.8

Microbrews/craft

7,020

-10.1

1,070

-10.6

Malt liquor

2,455

-9.1

374

-9.6

FOR STORES SELLING BEER:

72

7.5

11

9.9

Average sales per store

$140,607

1.4%

$21,422

0.8%

Premium

Non-alcoholic TOTAL

CANDY INDUSTRY TOTAL (IN MILLIONS)

2018

% change

2018

% change

$18,294

1.9%

$2,787

1.3%

11,506

2.6

1,753

2.0

Gum

7,313

0.8

1,114

0.1

Novelties/seasonal

5,783

-4.0

881

-4.6

Candy rolls, mints, drops

2,356

-6.3

359

-7.0

Non-chocolate bars/ packs

1,851

2.9

282

1.5

$47,103

0.7%

$7,176

0.1%

Chocolate bars/packs

TOTAL

Source: Convenience Store News Market Research, 2019

Five-Year Trend: Candy

Percent change in total sales Margin percentage Share of in-store sales

2018

2017

2016

2015

2014

0.1%

1.60%

2.8%

3.5%

3.2%

48.62%

48.26%

47.00%

42.49%

41.20%

3.13%

3.17%

3.19%

3.22%

3.26%

Source: Convenience Store News Market Research, 2019

2018

Percent of stores selling beer Percent of in-store sales

Percent of in-store sales

75.1% 9.34% $187,226 12.4%

2017

74.7% 9.41% $184,820 12.5%

Premium remains the top beer segment, but it saw average sales per store decline, as did the budget, popular, malt liquor and microbrews/craft segments, bringing the latter’s multi-year streak of impressive growth to an end.

Category Analysis:

Bagged/repackaged peg candy

STORES SELLING BEER

Source: Convenience Store News Market Research, 2019

Source: Convenience Store News Market Research, 2019

AVERAGE SALES PER STORE

Source: Convenience Store News Market Research, 2019

2018 marked the second year in a five-year period that total sales growth for beer was less than 1 percent, down from a high of 4.3 percent growth in 2016. Margin percentage saw little year-over-year change, as did beer/ malt beverages as a share of in-store sales. The percentage of c-stores that sell beer (75.1 percent) increased slightly from 74.7 percent in 2017.

Candy Candy turned in another year of flat to minimal growth in 2018, with average sales per store rising just 0.7 percent to $47,103, despite candy’s popularity as an impulse buy. Non-chocolate bars/packs saw the strongest growth in average sales per store at 2.9 percent, followed by chocolate bars/packs, which grew 2.6 percent in average sales per store. Chocolate bars/packs also saw the strongest growth in total industry sales. Bagged/repackaged peg candy increased 1.9 percent in average sales per store and remains the top candy moneymaker. Candy rolls/mints/drops saw the largest decline, falling 6.3 percent in average sales per store. Notably, novelties/seasonal candy also dropped 4 percent in average sales per store, a sharp turnaround from 2017 when the segment grew 8.1 percent. 2018 marked the first year in a five-year period that the candy category overall saw virtually no change in total

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

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COVER STORY

Category Analysis: SALTY SNACKS

Five-Year Trend: Salty Snacks AVERAGE SALES PER STORE

INDUSTRY TOTAL (IN MILLIONS)

Percent change in total sales

2018

2017

2016

2015

2014

2.9%

4.5%

4.4%

5.8%

6.3%

38.30%

37.86%

36.60%

31.47%

31.17%

2.85%

2.81%

2.74%

2.73%

2.71%

2018

% change

2018

% change

$10,782

2.0%

$1,642

1.4%

Tortilla/corn chips

7,844

6.4

1,194

5.7

Nuts/seeds

5,361

-1.0

817

-1.6

Puffed cheese

4,224

7.5

644

6.9

Mixed

2,215

3.6

338

2.9

Crackers

1,927

-2.6

294

-3.1

industry sales, at 0.1 percent growth. Margin percentage and share of in-store sales also saw little change year over year.

Pretzels

1,602

6.9

244

6.1

Snacks

Popcorn (ready-to-eat)

1,717

2.1

262

1.4

Other salty snacks

7,167

5.7

1,092

5.0

$42,839

3.6%

$6,527

2.9%

Potato chips

TOTAL

Source: Convenience Store News Market Research, 2019

Category Analysis: ALTERNATIVE SNACKS AVERAGE SALES PER STORE

INDUSTRY TOTAL (IN MILLIONS)

2018

% change

2018

% change

$10,198

4.3%

$1,554

3.7%

Health/energy bars

4,528

-2.1

690

-2.7

Granola/yogurt bars

1,234

8.0

188

7.4

656

-2.5

100

-2.9

$16,616

2.5%

$2,532

1.8%

Meat snacks

Other alternative snacks TOTAL

Source: Convenience Store News Market Research, 2019

Five-Year Trend: Alternative Snacks Percent change in total sales Margin percentage Share of in-store sales

2018

2017

2016

2015

2014

1.80%

1.4%

6.0%

8.4%

9.9%

43.43%

44.05%

43.70%

35.91%

36.02%

1.10%

1.10%

1.10%

1.09%

1.05%

Source: Convenience Store News Market Research, 2019

Margin percentage Share of in-store sales

Source: Convenience Store News Market Research, 2019

The salty snacks category posted nearly the same growth in 2018 as in 2017, with average sales per store increasing 3.6 percent to $42,839. Nuts/seeds and crackers were the only segments to decline, with average sales per store falling 1 percent and 2.6 percent, respectively. Puffed cheese saw the strongest year-over-year growth, with average sales per store increasing 7.5 percent, followed by pretzels (up 6.9 percent), tortilla/corn chips (up 6.4 percent) and other salty snacks (up 5.7 percent). Potato chips only grew 2 percent in average sales per store, but the segment comfortably remains the category leader. Overall, salty snacks continued a five-year growth trend in total industry sales, though the 2.9 percent increase of 2018 was a notable drop compared to previous years. 2016 saw the previous low of 4.4 percent growth. Margin percentage and share of in-store sales saw slight increases. The alternative snacks category saw somewhat better growth in 2018, with average sales per store increasing 2.5 percent to $16,616. Meat snacks remained the top segment, growing 4.3 percent in average sales per store and bringing in more than twice the average dollar sales of other alternative snacks on a per-store basis. Granola/ yogurt bars reversed course from a sharp sales decline in 2017 to post the strongest growth at 8 percent in average sales per store. Looking at the five-year trend for alternative snacks, share of in-store sales remained the same for a third straight year in 2018, while margin percentage saw a slight decline. Total industry sales of alternative snacks rose 1.8 percent, a slight uptick from 1.4 percent growth in 2017, but still growth remained significantly less than what occurred in 2016 and 2015. CSN

METHODOLOGY The 44th annual Convenience Store News Industry Report features data from a variety of sources in order to provide a complete picture of the financial health of the convenience store industry. Store census data was provided by Nielsen/TDLinx, which maintains a national count of c-store locations based on NACS’ definition of a convenience store. Dollar sales and unit volume data for most categories was provided by The Nielsen Co. from its Convenience Track retail measurement service, which is based on UPC sales and other methods that are counted through the use of point-of-sale scan data, as well as from data captured via electronic invoice and sales audits. Additionally, non-UPC coded merchandise, including prepared food and hot, cold and frozen dispensed beverages, is provided by retailer surveys conducted by Convenience Store News. Government sources include the Census Bureau, Bureau of Labor Statistics, Department of Energy, and Federal Tax Administration. 50 Convenience Store News C S N E W S . c o m

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Tap Into the CBD Market Although the FDA has yet to establish CBD guidelines for food and beverage, new products continue to flood the market and c-stores can profit By Tammy Mastroberte

when the Agriculture Improvement Act of 2018 legalized CBD, or cannabidiol, derived from hemp, both manufacturers and retailers started buzzing about the possibilities. Since then, new CBD products continue to hit the market, including food items such as gummies, candy, chocolate and popcorn, and beverages like CBD infused teas and water. There are even topical CBD products, beauty products and tinctures.

IN DECEMBER 2018,

With Food and Drug Administration (FDA) regulations up in the air, however, some retailers are hesitant to jump into the CBD market. Meanwhile, other retailers who have taken the plunge can’t believe how well the products are selling for them. “I was in a mom-and-pop convenience store that was selling small packages of CBD gummies and then I went back six weeks later and there was a display of six or eight items at the checkout counter, along with a vape pen and cartridges behind the counter,” Mike Luce, co-founder of High Yield Results, a Chicago market research firm covering the cannabis industry, told Convenience Store News. “The owner said he can’t keep the items in stock.”

As of press time, hemp CBD retail sales are only permitted in 17 states, and the FDA has yet to rule on the use of CBD in food and beverages, so there is a regulatory gray area, according to Jamie Schau, CBD research manager at Brightfield Group, a predictive analytics and market research firm for the legal CBD and cannabis industries, based in Chicago. “The FDA is a huge factor here. Once the Farm Bill passed and legalized hemp CBD, the FDA said ingestible products were not permitted and that no

“CBD has huge potential for manufacturers and retailers, and will definitely be a disruptor.” — Sarah Marion, The Hartman Group Inc.

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Call to Action l First, check the laws in the states where you operate stores. The Agriculture Improvement Act of 2018 legalized CBD, or cannabidiol, derived from hemp. However, as of press time, hemp CBD retail sales were only permitted in 17 states. l Check with your distributors to see if they are carrying any CBD products currently. The top items that distributors are shipping into c-stores are gummies, oils and tinctures, and vape items that contain CBD, according to Management Science Associates Inc. l In the CBD edible space, consumers want things that are easy to consume, portable and discreet. Think gummies, chocolate, mints, snacks and beverages. l Consider stocking small graband-go or single-dose products, which are ideal for the c-store market. Such products allow consumers new to CBD to experiment without having to spend a lot, and enable users to easily manage their intake and portions.

States Where CBD Retail Sales Are Legal: Alaska Colorado Illinois Indiana Kansas Kentucky Maine Maryland Massachusetts

Nevada New Mexico Oregon South Carolina Tennessee Vermont Washington Wisconsin

medical claims can be made on a product,” Schau noted. “People are still hesitant to enter the space until there is more clarity, especially major brands and retailers. Our expectation is the FDA will create a unique channel for ingestible and topical products to be regulated.” The FDA specifically addressed food products in a recent statement, including additives and supplements, but didn’t address topicals, which is why major drugstore retailers like CVS, Rite Aid and Walgreens are adding topical products to their shelves, Schau said, noting that she’s also seen GNC and Vitamin Shoppe carrying some CBD products as well. Walmart has made a deal with New Age Beverage Co. to carry the Bob Marley line of CBD infused beverages, but it’s still unknown which Walmart stores will carry the beverages and when they will actually hit shelves. Beverage giant The CocaCola Co. has publicly stated interest in CBD, and Vita Coco is introducing a line of CBD infused sparkling coconut water. Schau believes many retailers and manufacturers across various retail channels — including convenience — are very interested, with “deals brewing behind closed doors.” In May 2019, Mondelez International Inc. CEO Dirk Van de Put shared that the company is exploring adding CBD infused snacks to its product line, which includes Oreo and Chips Ahoy cookies and Cadbury chocolate, according to a CNBC report. Even fast-food chains are jumping into the CBD market, with Carl’s Jr. announcing the test of a new burger called “Rocky Mountain High: Cheeseburger Delight” at one of its locations in Denver, Colo. The burger features a sauce infused with CBD oil. “There are questions about the legality of it, but nobody has cracked down on it yet,” Sarah Marion, director of syndicated research at The Hartman Group Inc., based in Bellevue, Wash., said about the Carl’s Jr. test. “The laws on CBD vary per state and it’s all over the map. Amazon actually pulled all the CBD products from their stock.” Once the FDA provides more clarity, the segment is expected to grow tremendously, both on the manufacturing and retailing sides, according to Schau. In fact, a February 2019 report from Cowen Research put estimated sales of CBD consumer products in 2018 at between $600 million and $2 billion, and projects it to grow to $16 billion in retail sales by 2025. “CBD has huge potential for manufacturers and retailers, and will definitely be a disruptor,” Marion said. “Right now, it’s mainly the millennials interested, but I think it will go mainstream because of the benefits for older people, too.

New Companies, New Products In states like Oregon and Colorado, where recreational marijuana became legal, the number of products with CBD began increasing from companies who already made products for the marijuana trade, as well as brand-new companies to the market, according to Greg James, owner and publisher of Marijuana Venture, a business magazine for the cannabis industry. “There are hundreds of CBD companies now, and there are

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

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products like bath bombs, pet shampoos, CBD infused water, popcorn, chocolates, gummies, creams and tinctures,” James explained. “Half of the companies are women-owned, which is something I’ve never seen before because the marijuana business is mostly men. We are seeing beauty creams to help with wrinkles and other items geared toward women.” The Hartman Group conducted a study among consumers aged 18 to 73 who live in Oregon, Washington, California and Colorado to see what the market might look like if it went nationwide, and the data showed consumers are interested in purchasing a lot of food and edibles, including brownies, candy, mints and beverages — although beverages were not as popular as the other segments, Marion cited. Also popular among the study participants were CBD concentrates or tinctures taken under the tongue, oils, pods for vaping, and topical lotions and salves. “In focus groups, we showed them ideas currently on the market and they seemed pretty enthusiastic about some of the products, like coffee with CBD,” Marion explained, noting that there are readyto-drink coffees with CBD available, as well as coffee beans. “There is also soda and beer with CBD, and for a c-store, beverages are a perfect fit because the consumer already goes to a c-store for beverage discovery and to get their favorite,” said Marion. “Also popular was mints, candy and chocolate. Consumers want things that are easy to eat, portable and discreet.” Traditionally, tinctures have dominated the CBD market. A tincture is a dropper of hemp dried CBD in a carrier oil that you place under the tongue. But with new items entering the market, tinctures may take more of a backseat, said Schau. Topicals for pain relief are seeing huge growth in the baby boomer generation looking for relief from arthritis and other muscle pain. At Healthy Roots Hemp, a supplier of CBD products based in Portland, Ore., the company’s bestselling products are its topical root butter for pain-targeted areas — with an activation time of less than five minutes — and tinctures taken orally, said owner Liz Merritt. “The tinctures and topicals go hand-in-hand for people looking for pain management because you can do the tincture from the inside and then topical on the outside,” she said.

C-store CBD Opportunities So, how can convenience store operators gain access to these products for their locations? Don Burke, senior vice president of Management

Along with convenience stores, drugstores and health stores like GNC and Vitamin Shoppe are starting to sell CBD products.

Science Associates Inc., based in Pittsburgh, Pa., advises operators to first check the laws in the states they operate, and then check with their distributors to see if they are carrying any CBD products currently. “We tracked what CBD items distributors are shipping into c-stores and the No. 1 seller is gummies; second is oil or tinctures you put under the tongue; and third is vape items that contain CBD,” Burke told CSNews. While there are products being distributed and sold in c-stores, he pointed out that some distributors have made the decision not to carry any CBD products until the government regulations have been clarified. Many manufacturers are offering small grab-and-go or single-dose products, which are ideal for the c-store segment, said Schau. For example, CBD FX offers a display designed for the point-of-sale (POS) that includes single-dose options, such as a small Chill Shot beverage. “The portable, one-dose products have been doing well according to manufacturers, and CBD FX has the Chill Shot, similar to 5-hour Energy,” noted Schau. “They also have disposable vape pens that have only 30 milligrams, capsule packets and little travel-size topical jars. Having the products right there at the POS has been really effective for them.”

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

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“There are hundreds of CBD companies now, and there are products like bath bombs, pet shampoos, CBD infused water, popcorn, chocolates, gummies, creams and tinctures.” — Greg James, Marijuana Venture Another company Schau highlighted is Green Roads, which offers single-dose products that are disposable. These products have taken off in vape shops, she said. Small-dose products are ideal for people who want to try them, but don’t want to commit to purchasing a whole bottle of something — and they’re also ideal for the c-store market, she believes. “There are plenty of reliable manufacturers producing these products, and the POS products and portable products sitting at the cash register are a great way to try them for the store and customers,” according to Schau.

Many consumers — both current users of CBD and new users just discovering the products — seem to be gravitating toward items that allow them to manage their intake and portions. This is why graband-go products are so popular, said Luce of High Yield Results. Items like chocolate, gummies, candy and even capsules allow for such control. “For people who might find vaping intimidating, chocolate, gummies or even baked goods won’t put them off in the same way,” Luce pointed out. All of the CBD product categories are anticipated to grow considerably, especially once the FDA comes out with set guidelines and the legal ambiguity is gone. Once it’s made clear that CBD can be used in food and beverage items, there will be an “onslaught of major manufacturers entering the marketplace,” and sales will reflect that in the future, Burke said. CSN THREE-PART SERIES

This is the first in a three-part series exploring the CBD opportunity for convenience stores. Look in the July issue for part two.

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

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FOODSERVICE

What’s Hot on C-store Menus? Cold treats are heating up in time for the start of summer

Datassential’s latest Dessert Trends Keynote Report showcases several trends in frozen treats, such as sweet and savory combos and indulgence.

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Both of these trends are represented in this month’s hottest item: QuickChek’s Chocolate Peanut Butter Smoothie. This frozen beverage checks off a lot of the current trend boxes, and scored indexes of 98 for both Branded Purchase Intent (PI) and Frequency.

Other Dessert Trends to Watch Additional trends revealed in Datassential’s latest Dessert Trends Keynote Report include: • Chocolate still rules as one of America’s favorite flavors, but operators are upping the ante with items like double- and triple-chocolate cake, dark chocolate pie and chocolate-dipped cookies. • Global desserts have room to grow, with 41 percent of consumers expressing interest in items like churros and macarons, but only 20 percent of operators currently offering them. • Healthful doesn’t necessarily mean low in fat or calories; dessert mentions with the health-forward descriptors of gluten-free, vegan and vegetarian have nearly doubled in the past four years. CSN

decadent smoothie — made to order with creamy yogurt and Reese’s peanut butter cups.

Convenience store shoppers clearly will come back for more of the branded Reese’s offering. Also of note, Unbranded PI is high with a score of 87 so, if you’re considering options in other regions, this could be a sweet and savory flavor combo to consider.

Don’t Forget the Classics This month’s runner-up, Stewart Shop’s Cookie Dough Rumble Ice Cream, shows the importance of having classic flavors available for those consumers less inclined to try more innovative flavors. The product has high scores in Branded PI, Unbranded PI and Frequency but, predictably, fell very short in its Uniqueness score.

Datassential, a Chicago-based food and beverage industry research and consulting firm, brings clients real-world insights on flavor trends, foodservice and consumer packaged goods, globally. 60 Convenience Store News C S N E W S . c o m

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FOODSERVICE

Co-Branding at Its Best Partnering with QSR brands has both back-end and front-end appeal for c-stores By Renée M. Covino WHEN NOURIA ENERGY CORP. launched its new retail brand, nouria, with a concept store in Lewiston, Maine, late last fall, the café area was created with the Italian food brand Amato’s, whose menu includes pizza, salads and a wide variety of sandwiches.

on real estate and shared services within the store,” Don Stuart, managing partner of Cadent Consulting Group in Wilton, Conn., told Convenience Store News. “From the front end, there is a great consumer fit: quick stop/quick service; fuel for two — your car and you; convenience; and the recognition of brand names to drive traffic and as an assurance of quality.”

Last December, GPM Investments LLC and its subsidiary Broyles Hospitality LLC unveiled a next-generation Dunkin’ store in Erwin, Tenn. This location, which offered the first look at the Dunkin’ store of the future experience, serves up signature cold beverages through an innovative eight-tap system and offers a drive-thru for quick, on-the-go convenience.

Another benefit of co-branding relates to demographics. “QSRs can attract more traffic — that is, younger, more affluent consumers — to the c-store operator, such as with Dunkin’ or Subway,” said Peter Keaney, Cadent’s senior business analyst.

This past February, a Fast Break convenience store in Denver became home to Colorado’s first Naughty Chile Taqueria, a quick-service restaurant (QSR) chain focused on fresh, authentic Mexican food. Naughty Chile’s three-daypart menu features authentic street tacos, burritos, bowls, quesadillas and nachos prepared with proprietary recipes. These are just a few examples of recent c-store/QSR marriages which, when successful, can hold both back-end and front-end appeal for the convenience store operators. “From a back-end perspective, there are significant efficiencies primarily focused

There’s also the benefit of consistency. Branded partnerships can provide a more consistent foodservice experience for c-store operators, according to Keaney. “Not everyone wants to get their ‘people fuel’ where they get their vehicle fuel, especially when it’s fresh food vs. packaged food,” he said. Margins can be higher in foodservice with a branded operation, too, because there isn’t as much waste or as much possibility of a negative health perception. Additionally, technology and consumer engagement are often part of a positive co-branding arrangement. “Quick-serve restaurants and coffee outlets like Dunkin’ and Starbucks are making incredible investments in technology and engagement through mobile apps,” noted Keaney. “C-stores may not have this same desire or ability.” Longer term, as gasoline stations evolve to electric vehicle charging stations, there may also be an opportunity for greater involvement and time with the customer.

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FOODSERVICE

Before You Leap… According to Don Stuart, managing partner of Cadent Consulting Group in Wilton, Conn., the following are key questions convenience store operators should ask in order to evaluate potential co-branded foodservice partnerships: • Is the foodservice partner on-trend in terms of menu and branding? • Are they innovative both in-store and online? • What are the start-up costs for a franchisee? • Are there incentives for new franchisees? • What are the space requirements?

“This is something all convenience store operators should consider when cobranding,” said Keaney.

A Joint Venture From the QSR perspective, it’s a case of “if you can’t beat them, join them,” as QSRs have faced increasing competition from convenience foodservice in recent years. Subway is particularly dependent on c-stores, with about 50 percent of its locations found inside convenience stores “as a way to manage risk, minimize investment and ensure optimum locations,” according to Stuart. Subway is even offering half-off royalty incentives for operators in good standing. Likewise, Checker’s is offering half-off royalty incentives, while A&W Restaurants recently launched a new franchise growth program featuring a significant discount on royalties for new U.S. franchise partners, including c-store operators. The program reduces first-year royalties for new operators from 5 percent to 2 percent, adjusted to 3 percent in the second year, and 4 percent in the third year; the royalties return to 5 percent in the fourth year. The A&W system currently includes more than 600 U.S. restaurants, including 90-plus gas and convenience units. Its growth in the c-store sector accelerated following its 2011 acquisition by a group of franchisees from Yum! Brands. At the same time, long-time convenience store partner Dunkin’ is investing in its system by updating the brand name,

introducing a cleaner and sleeker image, and attempting to break out of the morning daypart by focusing on sandwiches for the afternoon daypart. Dunkin’ is also leveraging its mobile app more extensively and delving into home delivery, both of which are becoming increasingly important consumer touchpoints. “C-store operators are trying to move to other dayparts and have increased lunch and dinner [business] by double-digits between 2010 and 2016,” Stuart cited.

Best Practices For those who opt to go the co-branded foodservice route rather than developing their own brand, foodservice consultants recommend these four best practices: 1. Leverage breakfast — that’s where the traffic is. 2. Build out lunch and dinner — that’s where the

growth is.

3. Understand the nature of co-branding and

space-sharing — decide on a separate space or a store-within-a-store approach. 4. Emphasize cleanliness — a clean restaurant is even more important than a clean convenience store. C-stores need extra cleanliness when serving fresh food. Experts also agree on some basic partnership principles: • Analyze the foodservice brand foundation: If it won’t work as a standalone restaurant, it probably won’t work within a c-store either. • Recognize the market reality: Is this a drive-by breakfast opportunity or broader? • Know your geography: A&W, for instance, is known to thrive in more rural areas, so location should be a primary consideration for c-store operators. • Assess your space appropriately: Subway has a long prep line and pizza stores require ovens, which means more space is needed for these operations. Dunkin’ is known to be more space-efficient. CSN

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Global Partners’ newest c-store concept, Alltown Fresh, is designed to showcase fresh, healthy food and beverages.

BETTER FOR YOU, BETTER FOR SALES Today’s consumers want access to healthy foods and beverages at all times and all places By Renée M. Covino FORWARD-THINKING convenience store operators across the United States are jumping onto the healthier bandwagon. In a recent survey conducted by NACS, the Association for Convenience & Fuel Retailing, 62 percent of c-store retailers said the presence of better-for-you items increased in their stores in the past year.

which was held at its Store Support Center in Irving, Texas, last fall.

In early May, c-store industry giant 7-Eleven Inc. announced that it was introducing nearly 100 new better-for-you items from 31 up-and-coming companies into select stores as part of a test. The selection, placed in 125 Los Angeles-area stores, was curated from 7-Eleven’s first “Next Up” emerging brands showcase,

“When our emerging brands team created this unique product assortment in collaboration with our category managers, the goal was to give customers drinks and snacks that they might not expect to find at a 7-Eleven store,” said 7-Eleven Vice President of New Business Development Chris Harkness. “Customers are demanding healthier options, and we know LA customers are leading the country in health and wellness trends, always willing to try the newest and most innovative products and services.”

The better-for-you product assortment includes options for powersnackers, restricted diet-followers and anyone looking for ways to incorporate more functional, better-for-you sips and snacks to keep them fueled while on the go, according to 7-Eleven. The items span keto, paleo, vegan, organic, high-protein, low-glycemic, gluten-free, nutrient-dense, plant-based and cold-pressed.

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Young consumers between the ages of 18 and 34 are particularly interested in the functional aspect of foods, according to research conducted by youth marketing and millennial research firm Y-Pulse. These consumers want products that not only satisfy their hunger, but also pack a nutritional punch. They say they enjoy eating superfoods such as dried fruits, nuts and seeds that serve specific functional purposes. Along with wanting their healthier foods to taste good, younger consumers also want healthy eating to be easy, convenient and work around their on-the-go lifestyles. Specifically, the findings of a recent Y-Pulse study showed that: • 81 percent say they shouldn’t have to try too hard to eat healthy; • 76 percent say they are likely to buy raw fruits and vegetables to eat on the go; and • 66 percent say they don’t mind paying extra for a snack if it’s a healthy option. Drilling down into specific healthy trends, GlobalWebIndex Trends Analyst Chris Beer pointed out that the market researcher’s most recent quarterly global study revealed that veganism and meat-free products are attracting a lot of attention at the moment.

Kombucha and smoothies (below) are among the better-for-you beverages available at Alltown Fresh.

“Celebrities endorse making healthier choices, like buying free-range meat or cutting down on meat altogether,” Beer told Convenience Store News. “Many food brands have bought into the vegan movement by offering alternatives to appeal to a broader customer base, such as Beyond Meat and Impossible Foods; the latter backed by Bill Gates.” Millennials aged 22 to 35 are regularly considered to be the ones driving the sustainable movement with their lifestyle and behavioral changes, Beer explained. Millennials also are reportedly more likely than any other generation to pay extra for eco-friendly products. “Generation Z is hot on their heels, and figures for this generation are only likely to grow as they come into greater disposable income,” Beer added. “It will be well worth watching how Gen Z shopping habits develop.”

Healthy & Convenient To marry convenience with health and wellness, U.S. c-store operators are trying out multiple approaches. Among the various tactics being applied are: Create a new concept store that puts healthy at the forefront — Earlier this year, Global Partners LP’s Alltown chain opened a new “fresh convenience” focused store concept aptly named Alltown Fresh. Debuting in Plymouth, Mass., Alltown Fresh’s mission is to be a go-to destination for consumers to grab healthier food for either on-the-go consumption or for sitting and enjoying the moment. “We believe our guests shouldn’t have to sacrifice healthy food for convenience,” said Eric Slifka, CEO of Global Partners. 68 Convenience Store News C S N E W S . c o m

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Join the Partnership for a Healthier America — Salt Lake City-based Maverik Inc. is just one of several convenience store chains to recently join the nonprofit Partnership for a Healthier America (PHA). In addition to providing healthier packaged and made-to-order food options, Maverik is the first PHA c-store partner to commit to healthier beverages in both the cold vault and at the fountain. “Maverik has been introducing freshly made salads, wraps, fresh sandwiches and more as part of our effort to support customers who are looking for something healthier,” said Ernie Harker, Maverik’s executive director of marketing. “Our commitment to PHA strengthens our efforts to promote an active, healthy lifestyle because adventures aren’t fun when you’re not healthy enough to enjoy them.” Partner with your local Department of Health — Aloha Petroleum Ltd.’s Aloha Island Marts chain was the first retail business in Hawaii to join the state Department of Health’s “Choose Healthy Now”

What Is Healthy, Really? Today, “healthy eating” isn’t a set of hard and fast rules, but rather a state of mind — “a continuous, aspirational approach to food with balance, flexibility and practicality,” according to Ellen Rudman, vice president of strategic planning and research for marketing agency Blue Chip Marketing Worldwide, headquartered in Northbrook, Ill. Fresh, whole and minimally processed are the current cornerstones of better-for-you. However, the definition of what is “healthy” is in constant evolution. “Having conducted quite a number of focus groups recently on this topic, what we consistently find across geographic markets and demographic groups is that better choices are typically identified with food that is either known to be fresh-made or made-to-order,” said veteran convenience store industry consultant/designer Joe Bona of Bona Design Lab. Consumers equate freshness with quality and being healthier, he added. While the definition of healthy continues to evolve, the need for convenience and “on the go” is steadfast and, in fact, stronger than ever. “Consumers demand convenience and evaluate every option through a whole new set of food values,” Rudman said. She wants c-store retailers to consider: Some consumers think it’s inconvenient to be healthy, so how can your convenience stores change that perception?

initiative. The program seeks to increase consumer access to healthy foods and beverages by labeling healthier items at the point-of-decision. Use your loyalty program for the greater good — La Crosse, Wis.-based Kwik Trip Inc., the first convenience store retailer to sign a commitment with PHA back in 2014, recently made a new PHA commitment to up its fresh food and better-for-you offerings. As part of the new commitment, Kwik Trip updated its customer loyalty program to incorporate the promotion of healthier food options. “Through our PHA commitments, we greatly expanded our fruit, vegetable and other better-for-you food offerings. While our sales of healthier foods have increased, we’ve also received positive feedback from our guests; it’s a win-win and we’re proud to take this next step in the journey toward a healthier future,” said Steve Loehr, Kwik Trip’s vice president of operations support. Cultivate your own in-house program — The Army & Air Force Exchange Service (AAFES), which operates convenience stores, gas stations, department stores, restaurants and more, has made it easier for its customers to find better-for-you food and beverage options by utilizing easy-to-spot “Healthier Choices, Healthier Lifestyle” shelf tags. To be included in AAFES’ Healthier Choices BE FIT program, items must contain: fewer than 500 calories and less than 480 milligrams of sodium for entrees; 200 calories or less and fewer than 230 milligrams of sodium for snacks; 40 percent or less of calories from fat for entrees and snacks; and fewer than 10 percent of calories from saturated fat for entrees and snacks. AAFES currently carries roughly 400 Healthier Choices BE FIT-approved items.

What’s On the Horizon? The definition of what is “healthy” and “better-for-you” is in constant flux. Looking ahead, industry experts believe the following trends will gain in consumer popularity and thus, grow in importance for convenience store operators: • Choose your own level of healthfulness. C-stores jumping on the healthier bandwagon need to provide menu options that allow for “some degree of customization and choice,” according to veteran c-store industry consultant/designer Joe Bona, president of Bona Design Lab. “…When health-

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• Protein packed. It’s widely recognized that protein keeps you full longer and can give on-the-go snacks “staying power” vs. leaving the consumer hungry an hour later, according to Ellen Rudman, vice president of strategic planning and research for marketing agency Blue Chip Marketing Worldwide. Plant-based proteins are rising in popularity, she noted, pointing specifically to pea, hemp and mixed plant proteins. 7-Eleven recently introduced nearly 100 new better-for-you items into select stores as part of a test.

minded customers are given a range of choices about the food they order, they feel more in control and believe they are making better decisions.” • Customizable better-for-you beverages. Beverages continue to lead the way in desired and perceived health benefits, Bona advised. Currently trending is macha tea, hand-shaken teas, and blended or frozen juice-based drinks.

• Meet the flexitarians. As the name suggests, a flexitarian diet is flexible and a purposeful move away from a meat-heavy or animal-based diet, Rudman explained. “As more and more consumers are opting to choose plant-based alternatives, the plantbased alternatives are mimicking the classic animal-based food we are used to, like tuna, bacon, burgers, yogurt and milk,” she said, urging c-store operators to keep pace with the flexitarian movement. CSN

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FEATURE

THE HUMAN TOUCH Convenience store retailers are deploying technology tools to connect with employees By Melissa Kress OVER THE PAST SEVERAL YEARS, there have been countless conversations around technology in the convenience channel. In fact, a record number of industry stakeholders converged in Nashville, Tenn., in late April for the 2019 Conexxus Annual Conference — lending even more proof to the growing importance of technology in the industry. However, many of the conversations revolve around consumer-facing technology. How can convenience store retailers tap into innovation to reach their shoppers? Is it through digital signage? Messaging at the pump? Loyalty programs? A mobile app? Yet, there is another side to the tech coin: employee-facing technology. A growing number of c-store operators are turning to tech solutions to manage everything from communicating with employees to scheduling.

“In technology, you are always chasing the bouncing ball because consumer expectations, and client expectations, change fast and get more demanding every time. We clearly see that in our industry. Consumers have ever-increasing expectations of what retailers can do for them,” said Rick Sales, president of Abierto Networks, a digital engagement technology provider. “But what I think is interesting, and what we are discovering, is that sometimes retailers forget that their employees are consumers, too,” he added, noting that retailers also need to look at their employees as consumers of the information they are trying to get across. “If you look at your employee as a consumer of information, then you can appreciate that, with information presented at the right time and in the right way, you can modify the behavior of an employee just as you can modify the behavior of a consumer,” he explained. Based in York, Maine, Abierto Networks began in 2005 working in point-of-sale (POS) technology and credit card technology, focused on convenience stores and c-store foodservice. The company eventually migrated to marketing technology. Today, Abierto Networks teams up with retailers that have multiple locations to implement a one-to-many environment where central office and multiple geographically located stores can connect through a single platform.

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Altoona, Pa.-based convenience store chain Sheetz Inc. is one retailer that is utilizing Abierto Networks’ employee engagement kiosks. The two companies joined forces approximately three years ago, and the kiosks are now deployed at all Sheetz stores as a key piece of the retailer’s employee engagement and internal communications strategy. “Sheetz has always been a visionary group of people. I think one of the cultural differences between Sheetz and other people is that they are open to trying many things and learning from trying,” Sales said. Sheetz approached Abierto Networks with what Sales calls “a very interesting proposition.” Since Sheetz employees are not allowed to use their personal devices at work, the challenge was to figure out how it could communicate with its employees when most people default to their mobile devices. “There is a lot of technology out there and it’s all amazing; there are many shiny objects on the beach. But at the end of the day, it’s really the combination of the technology and the understanding of the application that gives you something that works,” Sales said. “The technology by itself doesn’t know what to do.”

assistant managers would take the shifts, driving up overtime costs. Knowing there was technology out there that could help, Kum & Go connected with Branch, a mobile-first technology provider that helps organizations increase schedule and financial flexibility for hourly employees. Branch’s application helps companies pool labor, reduce employee turnover, save on overtime costs from paying other associates or managers to cover a shift at the last minute, and save on administrative costs — freeing up the manager to take care of other responsibilities, according to Atif Siddiqi, founder and CEO of Minneapolis-based Branch. “It’s been a terrific find. Branch has been great to work with. It’s a fun adventure,” said Jon Renaud, director of operations for Kum & Go. Branch is, at its core, a shift-sharing application and, according to Renaud, the c-store operator has found Branch attractive for two main reasons: 1. It works with its current scheduling system, Kronos. Through Branch,

Sheetz sought to create a curated message mix of information that combines tools for success, additional training pieces and metrics relevant to that store’s team. “In Sheetz’s brilliance, they figured out a way to have a non-friction conversation about something that is difficult to talk to people about who are not very engaged with your company: How do we do better?” Sales said. The engagement kiosks accomplish that. Sheetz can relay store metrics to employees and mix that in with other messages — such as store meetings, uniform ordering, training tips, and employee recognition like birthdays and anniversaries.

Right on Schedule Des Moines, Iowa-based Kum & Go LC is another convenience store chain that is exploring ways to use technology to make its workforce operations more efficient. With 400 sites across 11 states, the c-store retailer was challenged with finding a way to make it easier for managers to get shifts covered. Store managers or

Kum & Go utilizes Branch, a shift-sharing mobile app, to make it easier for the chain’s managers to get employee shifts covered.

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associates can find coverage for their shifts by sending notice out to everyone in the district. This opens up the shift to about 100 to 125 people. 2. Branch has a communication feed, similar to Facebook, that is internal and can be used by the district or by the store. The app’s feed is a communication tool and place for positive reinforcement, not a task manager. Kum & Go piloted the Branch app in Arkansas and saw an adoption rate in the 90-percent range very quickly, Renaud noted. In addition, general managers went from covering two to three extra shifts a week to maybe one per month. “We saw a decrease in overtime and an increase in the average number of hours our part-time associates worked. It was a win-win,” he said. “We have now rolled it out across the entire company and have seen a more than 90-percent adoption rate. It’s a terrific tool.” Chainwide, according to Siddiqi, after Kum & Go implemented the Branch app, its overtime decreased by 25 percent and employees worked, on average, an additional 2.5 hours. There was also a 10-percent reduction in turnover and managers were covering 70 percent less shifts. By decreasing employee turnover, companies also save on the cost of recruiting and onboarding new employees — which can come in around $2,500 per employee, Siddiqi cited. “We have seen success when there is good engagement from not just the employees, but managers also. It takes buy-in from all levels,” he said.

Managing Time Likewise, to improve scheduling, Golden Pantry Food Stores earlier this year selected HotSchedules, a provider of workforce and back-office solutions for the retail, restaurant and hospitality industries, to support its scheduling, forecasting and labor management initiatives. After focusing on implementation, the Watkinsville, Ga.-based operator of 37 convenience stores is now beginning to roll out the platform to its c-stores and team members. HotSchedules, which has several offices

including one in Atlanta, primarily focuses on the restaurant industry, but it is seeing a lot more interest in adjacent markets where employees have dynamic schedules as c-stores and grocery stores compete more with restaurants, explained David Cantu, co-founder and chief customer officer at HotSchedules. The technology solution is designed to work for both employees and managers. Employees can leverage HotSchedules — whether through the app or online — to request time off, trade shifts and change availability. Managers can build schedules based upon employee availability. In addition, built into the platform are compliance needs specific to state regulations like overtime, child labor and predictive scheduling. HotSchedules provides alerts to managers as to whether a team member may go into overtime or be in violation of some compliance. Built with the operator in mind, Cantu said the goal of HotSchedules is to have “a seamless system in place that becomes a system of record for everything.” “The intent was to build a more streamlined, efficient solution than an excel spreadsheet with all the information necessary for a manager to access from any computer to build a sound schedule with the employees’ needs in mind, as well as any alerts around compliance,” he said. Labor management technology has changed over the past five years, shifting from a purely manager focus to now a more holistic approach, according to Cantu. Now, it’s evolved to where employees have a lot of input as to when they can work. “It hasn’t just become labor management focused, it has become team member focused, as well as compliance focused,” he said. CSN

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Employee engagement kiosks, deployed chainwide, are a key piece of Sheetz’s internal communications strategy.

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STORE SPOTLIGHT

Convenience Curated for Diverse Lifestyles Northwestern University’s Plum Market caters to those with food allergies and dietary preferences By Danielle Romano campuses across the nation amp up their “convenience” offerings, Northwestern University’s Plum Market is going a step further. The store aims to accommodate a range of food allergies and dietary lifestyle choices by providing students and staff with a mix of natural, organic and specialty products housed in a sophisticated environment.

AS COLLEGE AND UNIVERSITY

At a Glance Plum Market Operator: Compass Group Location: Northwestern University, Evanston, Ill. Unique features: Healthful, chef-crafted recipes made from scratch; a selection of natural, organic and specialty snacks and beverages for on the go; sophisticated environment

In an effort to meet the needs of its increasingly diverse population, Northwestern University in Evanston, Ill., and its new campus foodservice provider, Compass Group PLC, welcomed Plum Market as one of several new initiatives focused on inclusive dining options. Plum Market is a privately owned, Michiganbased company that currently operates five full-service grocery stores and 10 quickservice, small-format Plum Market Kitchen locations across the Detroit and Ann Arbor, Mich., metropolitan area, as well as Chicago. Located inside Lisa’s Café in the university’s Slivka Hall, the Plum Market at Northwestern boasts the slogan, “Live Well, with Taste.” The shop is often referred to as a “mini Whole Foods.” “Plum Market’s signature level of guest service and selection sets us apart from

other retailers. Plum Market focuses on healthful, chef-crafted recipes that are made from scratch, and we’ve curated a great selection of natural and organic snacks and drinks for on the go,” explained Sarah Levesque, sustainability manager, Compass Group, at Northwestern University.

Curated Offers Plum Market began welcoming students, faculty and staff on Oct. 1. The space is modern and inviting for students to study or relax. Levesque noted that warm lighting makes it a comfortable atmosphere, perfect for students and staff to sit and enjoy their breakfast, lunch, dinner or even late-night meals. According to the sustainability manager, what differentiates the 3,000-squarefoot Plum Market from a traditional convenience store is its customized menu with items that are tailored to fit the needs of those who have food allergies or follow specific dietary lifestyles. “The biggest difference at Plum Market is our commitment to quality; from the peak-of-season ingredients used in our recipes prepared on-site, to the natural and locally crafted products we retail,” Levesque told Convenience Store News.

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Made-from-scratch prepared foods are a cornerstone of Northwestern University’s Plum Market.

“The biggest difference at Plum Market is our commitment to quality; from the peak-of-season ingredients used in our recipes prepared on-site, to the natural and locally crafted products we retail.” — Sarah Levesque, Compass Group

Focusing on the best natural and organic options, Plum Market offers signature sandwiches, fresh salads, fresh baked goods, as well as natural packaged snacks like Greek yogurts and chips. Grab-and-go breakfast and lunch items are popular with students as they need

something quick, filling and nutrient-dense to keep them fueled between classes, Levesque noted. Plum Market attempts to cover the basics, while also taking notice of what students love. Some of the most popular packaged snacks and menu items among students are breakfast sandwiches, all-natural chicken tenders and fries, craft ice cream pints from brands like Cool Haus and Ben & Jerry’s, Alo Water, and spicy snacks like Barbara’s Jalapeno Cheese Puffs. Additional features of Plum Market are: • An Intelligentsia coffee bar featuring freshly brewed coffees and other drinks; • Free Wi-Fi and ample places to plug in; and • Residence hall essentials such as paper products, health and beauty care items, and cleaning products. Open every day until 3 a.m., Northwestern University’s Plum Market is currently tracking more than 500 transactions per day, exceeding initial expectations. “Northwestern University has really embraced the Plum Market concept, especially the prepared hot-food offerings like the breakfast sandwiches and the latenight options,” said Levesque. “Plum Market enhanced the residential space (Slivka Hall) by bringing students healthful food essentials and amenities they need.” CSN J UNE

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TWIC TALK

Lesley Saitta, Impact 21 The 2017 TWIC Woman of the Year says everyone can teach you something, if you just listen By Linda Lisanti NOW IN ITS SIXTH YEAR,

the Convenience Store News Top Women in Convenience (TWIC) awards program has recognized more than 200 of the best and brightest women making a positive impact on not only the companies they work for, but also the entire convenience retail channel. TWIC is the only program that recognizes exceptional female leaders, rising stars and mentors among retailer, supplier and distributor firms in the convenience store industry, from the C-suite to the store level to the independent entrepreneur. In TWIC Talk, our bimonthly Q&A series, we interview a past TWIC winner about what it’s like to be a female leader in the convenience store industry today — the opportunities, the challenges — and get their words of wisdom for up-andcomers seeking to blaze their own trail. This month’s TWIC Talk subject is Lesley Saitta, CEO of Impact 21 Group LLC, a consulting firm specializing in the petroleum/convenience, c-store and retail markets. In 2017, Saitta was one of the five women celebrated by TWIC as Women of the Year. How would you describe the current state of affairs for gender equality in the convenience store industry? How does this compare to 10 years ago? I spent the first 15 years of my career in the chemical industry, so the convenience channel appeared to have a high degree of gender equality in comparison, even 25 years ago. Today, many of our clients have gender equality at the store-manager level, but have found it challenging to promote to district manager or to the corporate office. There are many reasons for that, but I would say the tide is turning. As an industry, there have been quite a few diverse executives coming from other industries and/or being

promoted from within, and that sends a very positive message. Many retailers are focused on understanding the needs of their workforce and providing mentors, networks and flexible career paths that help give highpotential females an opportunity to develop, perhaps in less traditional ways. It takes time, but continuing to highlight more role models within our channel will definitely attract diverse talent to the opportunities that exist. What is the most positive change you have personally witnessed? Probably one of the most visible changes I personally witnessed was the appointment of Sonya Hubbard as NACS chair in 2008. Sonya’s company had been a client of Impact 21 and she was an incredible leader, role model and advocate for our industry. Since that time, there has been a great deal of recognition within our channel for women across multiple job levels and functions, which has truly been remarkable. As women, it’s great to see the path that other female leaders have taken and learn about the remarkable contributions they have made. The Convenience Store News TWIC recognition reception is an annual reminder of these achievements. Along your career path, did you personally experience gender bias or inequality? If so, how did you overcome? As someone who started out in 1979, this went with the territory. But perhaps the most difficult part was that I was often “the only one” (female) in the room. It was sometimes hard to get my voice heard and be taken seriously. I often had to work harder than anyone else to be recognized. Fortunately, I was hardwired to take this on as a challenge and often found myself in a position to make change within my organizations that could positively impact the future for others. I worked very hard to create trust with my peers and demonstrate through hard work and results that gender simply wasn’t an issue. Most importantly, I found incredible role models and mentors throughout my career that helped me navigate new roles and identify the skills I needed to succeed. This has been true throughout my career and my life. Whether it’s a personal board of directors or professional mentors, I am constantly seeking out

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advice and support, and I encourage everyone to do this no matter how long they’ve been in their positions. What barriers to advancement do you see still existing in the c-store industry? While there really aren’t any barriers to advancement in the c-store industry today, there are still some opportunities for companies to understand that a diverse workforce may require a new way of thinking and flexibility on development and advancement opportunities. It’s not even a gender issue, but rather an employee issue. Generationally, the workforce is changing. What is your advice for other industry women looking to rise to higher ranks? I always tell other women to get as many different jobs and experiences as you can throughout your career. Apply for promotions, even if you don’t have every qualification. You can learn. Take on

B O O T H

“It’s not even a gender issue, but rather an employee issue. Generationally, the workforce is changing.” special projects and lead cross-functional teams that provide visibility to leadership and/or other parts of the company. Surround yourself with teammates and mentors that share your passion and work ethic, and don’t worry about getting credit. If you take on new responsibilities, get results and lift others up, you will be recognized. CSN

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Terry Kanganis EnsembleIQ at:

. 201-855-7615 for more details 84 Convenience Store News C S N E W S . c o m

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CLASSIFIEDS

Credit Card Processing / Merchant Services

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CLASSIFIEDS

ATMs

Air Vacs

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Credit Card Processing / Merchant Services

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CLASSIFIEDS

ATMs

Air Vacs

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CLASSIFIEDS

Age Verifier

Frozen Yogurt

Plastics

Credit Card Processors

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CLASSIFIEDS

Foodservice

ATM’s

Petroleum/Equiment

Services

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CLASSIFIEDS

Equipment / Supplies

Coffee and Tea Services

Looking for ideas to promote your product or services? Need help creating an ad that fits your needs without spending a fortune with an advertising agency?

We are here to help, whether it be in the classified ad section, an ad in the main pages, or online. Call or email with any questions or for pricing. We can handle all aspects of your ad from conception to print in a fraction of the cost that agences charge!

Our ads get results! CALL TERRY KANGANIS TODAY-

201.855.7615

tkanganis@ensembleIQ.com

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CLASSIFIEDS

For Sale

Sunglasses

Looking for ideas to promote your product or services? Need help creating an ad that fits your needs without spending a fortune with an advertising agency?

We are here to help, whether it be in the classified ad section, an ad in the main pages, or online. Call or email with any questions or for pricing. We can handle all aspects of your ad from conception to print in a fraction of the cost that agences charge!

Our ads get results! CALL TERRY KANGANIS TODAY-

201.855.7615

tkanganis@ensembleIQ.com 92 Convenience Store News C S N E W S . c o m

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CLASSIFIEDS

Equipment / Supplies

Equipment / Supplies

Equipment / Supplies

Wholesale Refrigeration

Check Guarantee Services

ADINDEX ADD Systems...........................................................65 Altria Group Distribution.....................................2 Bake’n Joy Foods...................................................7 BIC Corporation......................................................49 Blu E-Cigs..................................................................27 Bob’s Red Mill..........................................................41 Calico Brands...........................................................58 Campbell Soup Company...................................8–9 Cookies United........................................................63 Del Monte Fresh Produce Inc............................31 Essentia Water........................................................23 Easy 2 U.....................................................................19 Forte Products........................................................79 Glanbia.......................................................................71 GlaxoSmithKline Consumer Health Care.......15, 39, 67 GT’s Foods................................................................47 Goya Foods Inc.......................................................43 Heineken USA Inc..................................................45 Hughes Network Systems...................................13 Imageworks Display & Marketing Group.......55 Inline Plastics...........................................................69 J & J Snack Foods Corp......................................61 John Middleton Company..................................29 Liggett Vector Brands..........................................37 Mars Chocolate NA/ Wrigley.............................5 McLane Company..................................................96 Miracle Nutritional Products..............................53 Mondelez International........................................30 National Tobacco Company...............................21, 59 Premier Manufacturing........................................Front Cover Procter & Gamble Distributing Co...................35 Swedish Match North America LLC................25, 57 Swisher International............................................17, 51 The Coca-Cola Company....................................11 Universal Merchants Outsert ............................Outsert

8550 W. Bryn Mawr Ave, Suite 200, Chicago, IL 60631 Phone 773-992-4450 Fax 773-992-4455 www.ensembleiq.com

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6/3/2019 9:15:33 PM


INSIDE THE CONSUMER MIND

What Fuels You? Consumers have a multitude of opinions when it comes to filling up The motor fuels business is not for the faint of heart. Gas station brand loyalty has declined over the past few years. A majority of U.S. adults are concerned about the security of their financial data when they pay at gas pumps and convenience stores. And c-store competitors, particularly club stores and supermarkets with fuel programs, continue to steal away traffic. Here’s a look at some of the latest consumer insights around the fueling occasion.

82%

81

%

MIDWEST

24%

NORTHEAST

Half of U.S. drivers fill up four or more times per month. Among these drivers, 81% go to multiple brands, while only roughly one in five go exclusively to one brand.

The Midwest has the highest concentration of brand-agnostic drivers, with 82% going to multiple brands in any given month. The Northeast has the most brand-loyal drivers, with 24% visiting the same brand for all their fill-ups.

Source: Pay with GasBuddy Study, April 2019

The fact that many consumers prefer to fill up at supermarkets with fuel programs rather than gas stations should be a call-toaction for fuel and convenience brands to rethink their offers before stores with produce sections eat their lunch.

31% Among drivers who have a “regular gas station” that they frequent, 31 percent say they go there because the station’s location is convenient.

— Frank Beard, convenience store and retail trends analyst

Source: GasBuddy 2019 Pump Habits Study

More than about the

SIX IN 10 U.S. adults are concerned

security of their financial data when they

pay at gas pumps and convenience stores. Source: YouGov & ACI Worldwide Survey, April 2019

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Caetlyn Roberts Giant Food

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Advancing all women. It’s just good business.

5/30/19 2:45 PM


WOULD YOU LIKE INSTANT ACCESS TO NEW PRODUCTS, MONEY-SAVING DEALS AND MERCHANDISING SUPPORT ON PAR WITH THE BIG CHAINS? You can have it with McLane’s Strategic Merchandising Solutions. Independent Operators don’t have a host of category managers and merchandising support like the big chains. That’s why we’ve developed tools, programs, solutions and services to help boost your competitive advantage in an ever-changing, fast-paced retail market. Solutions range from a 24x7 merchandising portal and mobile virtual trade show, to Center Store profit-building programs, planogram services and store reset solutions. To learn more, visit mclaneindie.com/merchsupport

© 2019 McLane Company, Inc. All rights reserved.

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5/30/19 2:28 PM


Profile for ensembleiq

CSN - June 2019  

CSN - June 2019