Convenience Store News - March 2019 by ensembleiq

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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

Saying Yes to Growth

The rapidly expanding Yesway chain is a standout among this year’s Top 20 Growth Chains.

HOW C-STORES CAN TAKE ON AMAZON

The Yesway executive team is working toward its goal of having between 600 and 1,000 convenience stores.

MARCH 2019 CSNEWS.COM

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VIEWPOINT

Winning the Battle for Share of Stomach Exclusive consumer study to be unveiled at fourth-annual Convenience Foodservice Exchange in Dallas I’LL ADMIT THAT I’M PROBABLY NOT A REPRESENTATIVE

example of a convenience store’s core customer. I’m a baby boomer/empty nester, trying to eat healthy but usually failing. A frequent eat-out and takeout diner, but we prepare dinner at home from a meal kit at least twice a week. Seems like I’m eating on the go on a daily basis. So, I might visit such places as 7-Eleven, Wendy’s, Five Guys, several local eateries, along with dozens of convenience stores that I typically stop in during my hectic travel schedule. I make my decision on where to eat by weighing such variables as time, convenience, value, and the freshness and tastiness of the meals offered at these and other eateries. But how do others make their decisions in today’s crowded, competitive foodservice world where it seems like you can get a meal anywhere, from a train station to a bank (Capital One Cafés, for example)? A new national consumer research study from Convenience Store News’ sister company, EIQ Research Solutions, will provide important intelligence to help c-store retailers gain a competitive edge in this battle for share of stomach. In a keynote address at our fourth-annual Convenience Foodservice Exchange in June, Beth Brickel, senior research director at EIQ Research Solutions, will present consumer insights that will shed some light on how various personas make these decisions on where and when they will dine.

This year’s Convenience Foodservice Exchange — an exclusive, invitation-only conference for convenience store foodservice executives — will be held June 19-20 at the Sheraton Dallas Hotel by the Galleria. The keynote presentation will address such specific questions as: • When consumers are hungry, what retail channels do they immediately consider and desire to satisfy their hunger need-state and why? • How is convenience perceived as a prepared foods solution relative to other options, such as fast food, grocery/deli, home delivery, etc.? • What attitude, awareness and behavioral differences exist between heavy fast-food and grocery/deli consumers compared to heavy c-store consumers? • What opportunities exist to convert or gain share from heavy fast-food and grocery/deli consumers? • What aspects of the prepared foods shopping and consumption experience truly impact consumer satisfaction (i.e., actual importance vs. stated importance)? Our program this year is designed to appeal to both middle-tier convenience foodservice retailers and best-in-class chains alike. The spotlight will be on “Today’s Foodservice Challenges; Tomorrow’s Opportunities.” For more information on the 2019 Convenience Foodservice Exchange, visit https://events.ensembleiq.com/CFX19. And to request an invitation, contact me. 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

Brett Atherton Bolla Management

Vito Maurici McLane Co. Inc.

Jon Bratta Core-Mark International Inc.

Jack Lewis GPM Midwest

Rick Crawford Green Valley Grocery Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired)

Danielle Mattiussi Maverik Inc. Richard Mione GPM Southeast Jonathan Polonsky Plaid Pantries Inc. Greg Scriver Kwik Trip Inc.

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

Jim Hachtel Eby-Brown Co.

Roy Strasburger Strasburger Retail

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

Ray Johnson Speedee Mart

Frank White Yesway

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

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

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

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CONTENTS MAR 19

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FEATURES

DEPARTMENTS

COVER STORY

VIEWPOINT

STORE SPOTLIGHT

32 Saying Yes to Growth The rapidly expanding Yesway chain is a standout among this year’s Top 20 Growth Chains.

4 Winning the Battle for Share of Stomach Exclusive consumer study to be unveiled at fourth-annual Convenience Foodservice Exchange in Dallas.

80 A ‘Fresh’ Take on Convenience Alltown Fresh doesn’t want its guests to sacrifice healthy, fresh food choices for convenience.

10 CSNews Online

NEW HORIZONS

38 Finding Its Way to the Top Yesway doubled its store count in 2018, reaching the 150-store milestone in June. CATEGORY CAPTAINS

50 A Dependable Dozen Twelve c-store suppliers earn recognition for outstanding category management initiatives. FEATURE

72 Taking on Amazon With reported plans to aggressively expand its Amazon Go concept, c-store operators need to play up their competitive differences, while learning from the e-commerce giant’s success.

OUT & ABOUT

22 C-stores Get Attention at NAFEM Show 2019 Foodservice equipment suppliers are addressing the convenience channel more aggressively. 24 New Products SMALL OPERATOR

FEATURE

76 The Modern Checkout Whether it’s apps, mobile self-checkout or in-vehicle payments, payment technology is evolving faster than ever. 6 Convenience Store News C S N E W S . c o m

28 From Serving His Country to Serving His Community Burnell Cotlon’s Lower Ninth Ward Market offers more than food to a community still struggling after Hurricane Katrina.

82 Break the Glass Ceiling (or Break the Law) Pressure to increase gender diversity at the top is on the rise. GETTING TO THE CORE

98 Millennials vs. Gen X vs. Baby Boomers Usage and interest in “convenient” shopping innovations varies by generation.

CONTENTS MAR 19

VO LU M E 55 N UMB ER 03

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

CATEGORY MANAGEMENT

12 New CEO Takes the Reins as Thorntons Officially Changes Hands 14 RaceTrac’s Next Generation Takes on New Leadership Roles

Danielle Romano dromano@ensembleiq.com

Contributing Editor (303) 741-3377

Renée M. Covino reneek@aol.com

Contributing Editor (201) 280-2614

Tammy Mastroberte tmastroberte@gmail.com

FOODSERVICE

ADVERTISING SALES & BUSINESS

64 What’s Hot on C-store Menus? Top performers in 2019 continue to be indulgent items.

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

TOBACCO

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

18 U.S. Convenience Store Count Dips

66 Is Cannabis Edging Closer to the Backbar? While still illegal at the federal level, one estimate puts the U.S. cannabis market at $56B by 2025.

20 Retailer Tidbits

ALCOHOLIC BEVERAGES

AUDIENCE ENGAGEMENT

68 From Struggle Comes Innovation Trying times in the traditional beer category leads to opportunity in new segments.

Director of Audience Engagement Gail Reboletti (224) 632-8214 greboletti@ensembleiq.com

16 Fast Facts 18 Eye on Growth

GROCERY

70 Carving Out a Niche In the age of home delivery and click-and-collect, how can convenience stores preserve their spot as the quick and easy fill-in grocery destination?

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 Executive Vice President, Events & Conferences Ed Several (860) 830-8321 eseveral@ensembleiq.com

Audience Engagement Manager (215) 301-0593

Shelly Patton spatton@ensembleiq.com

List Rental (847) 492-1350 ext.318

MeritDirect Elizabeth Jackson

Subscriber Services/Single-Copy Purchases (978) 671-0449 EnsembleIQ@e-circ.net PROJECT MANAGEMENT/PRODUCTION/ART Vice President, Production (877) 687-7321 Creative Director (973) 607-1320 Advertising/Production Manager (773) 992-4418 Art Director (224) 632-8245

Derek Estey destey@ensembleiq.com Colette Magliaro cmagliaro@ensembleiq.com Ed Ward eward@ensembleiq.com Michael Escobedo mescobedo@ensembleiq.com

CORPORATE OFFICERS

Executive Chairman Alan Glass Chief Executive Officer David Shanker Chief Financial Officer Dan McCarthy Chief Digital 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. Copyright © 2019 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Chicago, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, PO Box 3200 Northbrook IL 60065-3200

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

CSNEWS ONLINE

ONLINE EXCLUSIVE

TOP 5 DAILY NEWS HEADLINES

Walmart Kicks Off 2019 With Key Moves Around Grocery Delivery & Pickup

The big-box retailer launched what it described as its largest and firstever cross-platform marketing campaign for Walmart Grocery Pickup. Currently, the service is available nationwide and will roll out to more locations this year.

Convenience Store Retail Trends: Year in Review & 2019 Outlook

2018 was a year of change for the convenience retail industry — some net positives and some challenging developments. What will last year’s changes mean for the industry in 2019? How can convenience retailers prepare, adapt and thrive in a more consolidated, more competitive environment no longer buoyed by high gas prices?

Federal Lawsuit Charges Buc-ee’s With Setting Unfair Pump Prices

A lawsuit claims that Buc-ee’s illegally priced gasoline when it opened its first Alabama travel center in January along Interstate 10 in Baldwin County. The suit, filed in federal court by Oasis Travel Center LLC, alleges that the Lake Jackson, Texas-based company violated the 35-year-old Alabama Motor Fuel Marketing Act and demands that Buc-ee’s halt its pricing strategies while the case is pending.

Starbucks Expands Delivery Service to Six Cities

Through a partnership with Uber Eats, the expansion kicked off Jan. 22 in San Francisco, with Boston, Chicago, Los Angeles, New York and Washington, D.C. to follow. In total, Starbucks Delivers will be available in seven U.S. cities by this spring, and the company remains on track to bring the service to nearly one-quarter of its U.S. company-operated stores.

What Consumers Want From Convenience Stores Today

Pilot Flying J Makes Hospitality a Major Focus

Professional truck drivers are a promiscuous bunch when it comes to brand loyalty. They go where the best deal is. Pilot Flying J is working on several fronts to ensure that the chain’s travel centers are where they choose to go time after time.

Most convenience stores have made huge strides in foodservice but are uncertain of the “next step,” according to Tom Cook of King-Casey and Mark Kuperman of Revenue Management Solutions. Quick-service restaurants (QSRs) and fast-casual brands have spent more than 50 years examining every aspect of customer behavior, so their experiences can offer c-stores a shortcut to foodservice success. QSR and fast-casual brands start by linking a well-documented menu strategy to specific business objectives. The strategy prioritizes the menu products and states how they will help the brand meet its objectives.

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

Asked to rate various popular convenience store programs and services on a scale of 1 to 5 (least important to most important), loyalty programs achieved the highest rating of 3.6 in the same study. Made-to-order foodservice was a distant second at 3.1, followed by drive-thru windows (2.7), in-store/outdoor dining area (2.7), mobile/advanced ordering (2.5), traditional delivery (2.5), curbside pickup (2.5) and drone delivery (2). For more exclusive stories, visit the Special Features section of www.csnews.com.

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EXPERT VIEWPOINT: How to Grow Your Convenience Foodservice Business With Strategic Menu Modeling

Consumers rate their experience in purchasing meals and beverages at convenience stores much better than fast-food or fast-casual restaurants in terms of speed of service and overall convenience. The majority also say that ready-to-go/serve-yourself foods, beverages and snacks are their preferred type of foodservice when they shop at a convenience store, according to a newly released Convenience Store Consumer Study by AlixPartners, a global consulting firm.

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INDUSTRY ROUNDUP

New CEO Takes the Reins as Thorntons Officially Changes Hands A joint venture between ArcLight Capital Partners and BP closed on its purchase Feb. 11 TWO MONTHS AFTER STRIKING A DEAL, the joint venture between ArcLight Capital Partners and BP closed on its acquisition of convenience store chain Thorntons Inc.

Upon completion of the transaction on Feb. 11, Simon Richards, former head of regional development at BP Products North America, became the new CEO of Louisville, Ky.based Thorntons. Richards has more than 24 years of experience in the industry, holding numerous titles at BP. He succeeds Matt Thornton, former chairman and CEO of Thorntons.

Simon Richards

Although the retail chain has new owners, all existing convenience stores will continue to operate under the Thorntons name and retain team members throughout the

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

regions they serve, including employees working out of the Store Support Center in Louisville. Thorntons first announced it reached a deal with the ArcLight Capital Partners-BP joint venture on Dec. 3. Terms of the private transaction were not disclosed. The retailer said the move would allow it to grow in the downstream refined products segment. “My family and the Thorntons team are incredibly proud of the company we have built over the last 47 years. While we are proud of where we are today, our vision extends well beyond 191 stores in six states, and we know this new joint venture will help us to accelerate store growth and serve even more guests every day,” Thornton said at the time of the announcement. “We are excited to begin this new chapter and are pleased that we are able to take these next steps in our hometown working with our existing team. This partnership is a win-win for everyone involved.” Founded by James H. Thornton in 1971, Thorntons operates 191 c-stores in Florida, Illinois, Indiana, Kentucky, Ohio and Tennessee. The company’s mission is to provide top-of-theline food and beverages, while making giving back a top priority in every market.

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INDUSTRY ROUNDUP

RaceTrac’s Next Generation Takes on New Leadership Roles The retailer also launches a new franchising program, targeted at Central Florida

RACETRAC PETROLEUM INC.’S new leadership structure continues the company’s tradition of being a family business. As part of the new executive team lineup, Natalie Morhous and Melanie Isbill, granddaughters of RaceTrac founder Carl Bolch Sr., have taken on new, larger roles.

Morhous, formerly vice president of energy dispatch, has been promoted to president. Isbill, previously executive director of marketing, has been promoted to chief marketing officer. Both will work closely with RaceTrac’s new CEO Max McBrayer, who previously served as chief financial

officer and chief supply officer. (Former RaceTrac CEO Allison Moran, sister of Morhous and Isbill, stepped down in July 2017.) With these changes, Carl Bolch Jr. returns to his role as executive chairman of RaceTrac. While he hopes to take a step back from the day-to-day running of the business, according to Morhous, Bolch Jr. remains the retailer’s top executive. And she says her father is still the “most passionate person about this business.” “Being a family business, we feel like there is a vision that my dad has set forth. With these additional responsibilities for myself and my sister, it will allow us to ensure that we’re able to continue to push RaceTrac with that vision; enabling day-to-day management to reflect his vision,” Morhous explained.

As part of the new executive team lineup, Natalie Morhous and Melanie Isbill, granddaughters of RaceTrac founder Carl Bolch Sr., have taken on new, larger roles. franchise program, RT Franchising Inc. Its first initiative is to find experienced, qualified candidates for franchise opportunities in Central Florida. RaceTrac has been operating in Central Florida for three decades and has more than 170 locations in the region. The company is seeking franchisees for three of those stores — one each in Clermont, Mt. Dora and DeLand.

While both women say they’ve been involved with RaceTrac essentially their entire lives, Morhous officially joined the family business full-time in 2012 and Isbill in 2008.

The three modern stores offer guests Swirl World frozen dessert stations; large coffee areas with a new freshly ground, freshly brewed “Crazy Good Coffee” experience; a shoppable layout; ample seating; and free Wi-Fi.

The leadership changes are not the only news coming out of the retailer’s Atlanta-based headquarters. On Feb. 19, the company announced the launch of a new

Each store also currently rings up average fuel gallon sales nearly three times the NACS industry average, the chain noted.

INDUSTRY ROUNDUP

FAST FACTS

87 percent of consumers belong to at least one loyalty program and estimate that they belong to 6.2 programs, on average. But they are only active in 3.9 programs, on average. — Blackhawk Network, A Heartto-Heart About Increasing Loyalty

Almost all brands are selling on Amazon (97 percent), and a majority of those not currently selling on the platform (84 percent), say the most compelling benefit is acquiring new customers. — Feedvisor, Brands & Amazon: Insights, Opportunities and Concerns in the Age of E-commerce

Six out of 10 restaurant digital orders are placed via mobile apps.

Beverage retailers representing roughly 23,000 c-stores expect 2019 beverage sales to be up 3.7 percent year over year.

— The NPD Group, Delivering Digital Convenience

— Wells Fargo Securities LLC, Beverage Buzz

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INDUSTRY ROUNDUP

Eye on Growth

begin testing its Propel Power EV charging network by the fourth quarter of 2019, followed by a broader rollout in 2020.

Circle K introduced Circle K fuel at 132 locations in Missouri and Illinois in January. The sites are primarily located in the St. Louis metro area, as well as the central and southern Illinois markets. Sheetz Inc. marked a historic milestone: the opening of its 100th convenience store in North Carolina. The store in High Point hosted a grand-opening event on Jan. 31. Propel Fuels plans to launch an electric vehicle (EV) charging network across California. The company will

Love’s Travel Stops & Country Stores closed out 2018 with the opening of new travel stops in North Little Rock, Ark., and Reidsville, N.C. Love’s began 2019 by welcoming customers at a new travel stop in Holland Charter Township, Mich.

Together, the new locations add 243 truck parking spaces and 205 new jobs to their communities.

A new Pilot Travel Center opened its doors in early January in Arlington, Wash. Amenities include 12 gasoline fueling positions and seven diesel lanes with high-speed pumps; PJ Fresh fresh-food offerings; an Arby’s restaurant with a drive-thru; a Cinnabon; and outdoor seating.

U.S. Convenience Store Count Dips Single-store declines, revved-up M&A activity contribute to year-over-year decrease AFTER HITTING A RECORD 154,958 STORES in 2017, the total number of convenience stores operating within the United States declined 1.1 percent last year to end 2018 at 153,237 stores.

The decrease was driven by a 2,918-unit decline in single-store operations. However, single stores still make up 62.3 percent of all U.S. c-stores (95,445

locations), according to the 2019 NACS/Nielsen Convenience Industry Store Count. Convenience stores account for more than 34.4 percent of the brick-and-mortar retail universe tracked by Nielsen in the U.S., according to NACS, the Association for Convenience & Fuel Retailing. With the exception of the dollar store channel, all other major channels had fewer units at the end of 2018. Strong merger-and-acquisition (M&A) activity remains a key trend within the U.S. convenience and fuel retailing industry, especially among existing c-store chains. For the second year in a row, 2018 saw historically large deals of this type. The number of c-stores that sell motor fuels also fell 0.5 percent (by 554 stores) to 121,998 stores, or 79.6 percent of all c-stores. This decline reflects how retailers are evolving their business models to focus on the in-store offer, as well as embracing new store formats and establishing brands in more urban, walk-up locations, according to NACS. Still, c-stores sell approximately 80 percent of all the motor fuels sold in the U.S.

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

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INDUSTRY ROUNDUP

Retailer Tidbits

Petroleum Marketing Group (PMG) is selling 14 properties in New Jersey. The sale includes 10 PMG-owned retail locations with gasoline, two convenience stores leased to Circle K franchisees without gas, and two former service stations.

Holmes Oil Co.’s Cruizers chain began a soft launch of frictionless checkout through a partnership with Skip. The Cruizers network is the first c-store chain in the southeastern U.S. to go live with Skip’s technology.

Casey’s General Stores Inc. and Nielsen expanded their contracted services agreement for data insights and analytics. Nielsen’s coverage of the convenience channel now includes census store information for all Casey’s locations.

Speedway LLC added Apple Pay to its checkout options. Apple Pay is available at all of the retailer’s roughly 3,000 c-stores across the Midwest, East Coast and Southeast.

Plaid Pantry introduced a new lineup of healthy snacks and beverages. The chain’s new website highlights these offerings under tabs such as “Work Hard, Play Hard” and “Healthy & Fresh.” Love’s Travel Stops & Country Stores held its first national hiring day on Feb. 28. The travel center operator hopes to hire more than The one-day event took place at more than 350 1,200 employees Love’s Truck Tire Care and Speedco locations. as tire technicians, mechanic apprentices and diesel mechanics.

Sheetz Inc. is teaming up with Lackawanna College to offer tuition assistance to its employees. The program will benefit fulland part-time students enrolled at the college’s main campus in Scranton, Pa., its five satellite centers and online. Tiger Fuel Co. partnered with Green Gas to allow motorists at its The Market sites in Virginia to donate to GreenTrees at the pump. Donating $1 is certified to absorb the amount of pollution emitted from the average 10-gallon fill-up.

SPONSORSHIPS ARE NOW AVAILABLE! The 2019 Convenience Store News’ Top Women in Convenience awards program recognizes the integral role women play in convenience retailing. Women will be honored from the retailer, wholesaler and supplier communities in four different categories.

SPONSORSHIPS AVAILABLE! CONTACT PAULA LASHINSKY Vice President and Brand Director 917-446-4117 • plashinsky@ensembleIQ.com

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OUT & ABOUT

C-stores Get Attention at NAFEM Show 2019 Foodservice equipment suppliers are addressing the convenience channel more aggressively By Don Longo WITH FOODSERVICE NOW an

established and still-growing product category at convenience stores nationwide, foodservice equipment suppliers are addressing the channel more aggressively with new preparation, cooking and beverage dispensing options that deliver greater flexibility, speed and other enhancements over standard kitchen equipment.

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This was on display at the 2019 NAFEM Show, hosted Feb. 7-9 by the North American Association of Food Equipment Manufacturers, at the Orange County Convention Center in Orlando, Fla. The increase in convenience store solutions was particularly illustrated at this year’s “What’s Hot! What’s Cool! What Works!” pavilions on the show floor. Among the featured exhibits was Fresh Blender by Multiplex, a Welbilt Co. Created for a Midwest c-store chain that needed an appliance that could serve freshly blended iced drinks without the oversight of an employee and in a small footprint, the Fresh Blender was first developed and tested in the chain’s headquarters and then installed at 29 stores. The self-serve beverage dispenser was a hit with the chain’s customers and achieved full return on investment in less than eight months. Another c-store success story spotlighted was Pak-a-Sak’s implementation of the Horizon Elite 2110 Series Ice Machine by Follett. To solve the problem of harsh local water conditions, which required the 22-store chain to descale its ice machines every six weeks, the retailer tested Intelligent Heated Display this high-capacity ice maker that Cabinet by Hatco dramatically reduced scale buildup with a fraction of the water usage of a comparable cube ice machine. Pak-a-Sak was able to go a full 18 months with no descaling, saving $1,200 in annual maintenance costs. Other c-store solutions showcased at the 2019 NAFEM Show were: • Antunes — New this year was a mini egg station that allows operators to flexibly serve fresh, made-to-order eggs for all dayparts with a small footprint and no vent. Egg Station Mini makes it easy to prepare perfectly cooked eggs, omelets and scrambles in two minutes. • Curtis — New items shown this year included the Curtis Nitro Infuser for making consistent and delicious nitrogen-infused cold brew coffee, and the Chill-X Frozen Beverage Machine, perfect for slushies and frozen dairy beverages. • Fetco — Its Twin 3.5-Gallon Tea Brewer combines the simplicity of a touchscreen with new features such as the

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

innovative “intelligent brew basket” for quick, efficient operation and producing flavorful taste profiles. With twin brewers, one side could be used for brewing iced tea and the other side for a variety of beverages, such as cold brew tea or cold brew coffee. • Franke — The A800 allows c-store operators to launch a successful fresh brew coffee program. It produces barista-quality coffee with each cup brewed to order, but with less waste and labor. With the ability to use three different bean types, every customer gets a custom coffee. The elevated user experience means it takes just a touch of a finger to brew the perfect cup. • Hatco — Available in stainless steel or optional designer black, Hatco’s Intelligent Heated Display Cabinet regulates air temperature and simultaneously balances humidity to provide the best environment for holding pizza or other c-store food options. • Restaurant Technologies — Its newest technology, AutoMist, mitigates the risk of catastrophic fire by automatically cleaning hoods, flues and fans daily through a spray mixture of detergent and water. • Schaerer — The Schaerer Coffee Art C provides fresh hot and iced coffee on demand at the push of a button. Other benefits include: real iced coffee without sacrificing taste (no melting of ice or dilution); consistent brew cycles and product ground straight from the bean for unsurpassed freshness, aroma and taste; and faster than a traditional drip brewer without recovery time. • Taylor — The Model 708-SHAKE heat treatment shake freezer is a countertop, shake-only version of its popular soft-serve freezer that allows customers to draw their own shakes, doing away with labor-intensive and time-consuming methods of blending hand-dipped ice cream. • Vitamix — “The Quiet One” is a powerful, premium blender with exceptional noise-reducing qualities. Created for coffee shops, smoothie shops and high-end bars, this mixer is also perfect for c-stores contemplating a barista-style coffee/smoothie drink bar. CSN

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NEW PRODUCTS

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1. Hemptails Flavored 2. Bear Naked Malt Beverages Chunky Almond Butter Bars FIFCO USA, formerly North American Breweries, is launching Hemptails, a new line of ready-to-drink alcoholic beverages aimed at consumers looking to embrace the hemp movement in their drinking experience. With an 8-percent ABV, Hemptails are made with organic, sterilized hemp seeds and contain no psychoactive ingredients, allowing consumers to enjoy an herbal hemp aroma and flavor in a delicious flavored malt beverage, the company stated. Hemptails are available nationwide in three varieties that balance the earthy quality of hemp with a light, fruity taste: Hemp’d, Citrus Gold and Passionfruit Express. The beverages come in both single-serve 23.5-ounce cans and fourpacks of 16-ounce cans. FIFCO USA Rochester, N.Y. fifcousa.com

Kellogg’s Bear Naked brand introduces a filling bar to energize the health-andwellness snack set. Bear Naked Chunky Almond Butter Bars are made with almond butter and jampacked with visible chunks of delicious ingredients with great texture and unique flavors consumers seek, according to the maker. Two varieties are available: Chocolate Chip Banana and Dark Chocolate Mocha. With protein from nuts and nut butters as the first ingredient, Bear Naked Almond Butter Bars deliver nine to 10 grams of protein and have 11 grams or less of sugar per bar. The product is also NonGMO Project verified, gluten free and made with simple ingredients including Fair Trade chocolate. Kellogg Co. Battle Creek, Mich.

3. Mtn Dew Amp Game Fuel

4. Swisher Sweets Sweet Cream

Mtn Dew Amp Game Fuel is a new beverage line made just for gamers. The brand is available in 16-ounce cans in four vitamin-charged and caffeine-boosted varieties: Charged Cherry Burst, Charged Berry Blast, Charged Tropical Strike and Charged Original Dew. Mtn Dew Amp Game Fuel cans have a resealable lid that helps keep the beverage cold and fresh longer, and a no-slip grip texture similar to gaming hardware to prevent spills. The drinks contain caffeine and theanine, which together have been shown to improve accuracy and alertness. PepsiCo Inc. Purchase, N.Y. gamefuel.com

Swisher Sweets Sweet Cream cigarillos, the brand’s newest limited edition, feature a blend of cream and vanilla flavors for the ultimate sweet taste, according to the maker. Available for a limited time in a resealable two-count pouch with the “Sealed Fresh” guarantee, Swisher Sweets Sweet Cream cigarillos are ready for shipment to stores nationwide. They are offered in “2 for 99 cents”, “Save on 2” and “2 for $1.49” options. Additionally, in select markets, the product is available in a “2 for $1.29” option as well. Swisher International Inc. Darien, Conn. (800) 874-9720 swisher.com

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5. Oikos Oh! Double Cream Yogurt Crafted with premium ingredients and made with double the cream of regular whole-milk yogurts, Oikos Oh! yogurts aim to deliver a one-of-a-kind thick and luscious texture. The product is available in four artisanal flavor combinations: Lemon Sweet Cream Delight, Magnificent Mixed Berry Rhubarb, Salt-Dusted Caramel Crème and Honey Drizzled Blueberry. All varieties are Non-GMO Project verified. The 5.3ounce cups come single-serve with a suggested retail price of $1.49, or in four-packs with a suggested retail price of $4.49. The Dannon Co. White Plains, N.Y. oikosyogurt.com 24 Convenience Store News C S N E W S . c o m

NEW PRODUCTS

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6. Bare Strawberry Banana Chips

7. Del Monte Fruit & Oats

8. Nescafé Coffee Protein Smoothies

9. Strongbow 100-Calorie Slim Cans

Bare Strawberry Banana Chips are made by slowly baking ripe bananas that are then lightly dusted with crushed strawberries. They contain no added oil or sugar, and no artificial ingredients. They are also Non-GMO Project verified, gluten free, fat free and a good source of fiber. Each 2.7-ounce bag is available for a suggested price of $4.29. The bags are resealable, making Bare Strawberry Banana Chips suitable for on-the-go snacking. Bare Snacks San Francisco (509) 554-5550

Del Monte Fruit & Oats is the first ready-to-eat oatmeal with one full serving of fruit, according to the company. Fruit & Oats comes in three varieties: Pear Maple, Peach Cinnamon Spice and Apple Cinnamon. The oatmeal can be eaten hot or cold, and is packed with wholesome nutrition — 400 milligrams of omega-3s, 20 grams of whole grains per serving and one full serving of fruit. The product contains no high fructose corn syrup, artificial flavors or artificial sweeteners. Del Monte Foods Inc. San Francisco delmonte.com

Made with real 100-percent Columbian Arabica coffee, oats and almond butter, the Nescafé Coffee Protein Smoothie line aims to reinvent the morning routine. With 15 grams of plant protein, these smoothies provide fulfilling and convenient nutrition that gets you going in the morning — all with a non-dairy and no artificial sweetener formula, according to the company. They are available in singleserve 11-ounce bottles in two varieties: banana and cocoa. Nescafé USA Arlington, Va. nescafeusa.com

Strongbow Hard Ciders debuts 100-calorie slim cans in a new variety pack. Each pack contains 12 8.5-ounce cans, at just 100 calories per can. Included in the variety pack are three easy-to-drink flavors: Strongbow’s newest variety, Dry Pear, a mildly sweet pear-apple cider; the highly rated Rosé Apple; and the recently relaunched fan-favorite Original Dry. All Strongbow products contain no artificial flavors or colors. Heineken USA White Plains, N.Y. (855) 787-2437 strongbow.com

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10. Dessert Dippers Rich’s Foodservice introduces Dessert Dippers, dippable pairings of shortbread cookies and indulgent icing packaged to satisfy on-the-go customers. Each 5.1ounce container includes 16 cookies and one luscious icing. Dessert Dippers are available in three varieties: Chocolate Buttercreme (chocolate shortbread cookies with chocolate buttercreme icing); Vanilla Buttercreme (vanilla shortbread cookies with vanilla buttercreme icing); and Cookies ‘n Crème Made with Oreo Whipped (chocolate shortbread cookies with cookies ‘n creme whipped icing made with Oreo cookie pieces). The containers have a suggested retail price of $2.99 and come 18 to a case. Rich’s Foodservice Buffalo, N.Y. (800) 356-7094 richsfoodservice.com 26 Convenience Store News C S N E W S . c o m

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From Serving His Country to Serving His Community Burnell Cotlon’s Lower Ninth Ward Market offers more than food to a community still struggling after Hurricane Katrina By Danielle Romano IMAGINE HAVING TO TAKE THREE CITY BUSES

to get to your closest grocery store just to pick up a gallon of milk, a loaf of bread and some other essentials after a devastating hurricane has ravaged your belongings. For many, it seems unimaginable. But for those living in the Lower Ninth Ward, a neighborhood of New Orleans, it was a reality — a reality that resident Burnell Cotlon wouldn’t stand for.

After spending 11 years in the U.S. Army serving his country, Cotlon returned home to the Lower Ninth Ward, took out a home loan to build his house and thought he would live happily ever after until Hurricane Katrina destroyed Florida and Louisiana, particularly New Orleans, in 2005 and wiped out everything in its path. Cotlon was one of the first Lower Ninth Ward residents to return after the hurricane to rebuild. He didn’t have a neighbor for four years. Then one day, an elderly woman exiting a taxi cab with bags of groceries caught his eye. When he asked her why she had taken a cab, she responded that the closest grocer was a Walmart in the next city, which required three bus rides to get to. Cotlon drove up and down the Lower Ninth Ward and, sure enough, found zero grocers in the area, let alone much infrastructure left at all. “To me, that was an undue hardship. I begged bigger-box stores to come to the Lower Ninth Ward, but they said no because the Lower Ninth Ward was a ‘food desert,’ and there weren’t enough people here for the company to be sustainable,” he recalled. “I decided to do something about it and open up the first — and to this day — the only grocery store in my neighborhood. I went from serving my country to serving my community.”

Stocking Up Using his entire life savings, Cotlon purchased and rebuilt a 6,000-square-foot building at 2036 Caffin Ave., which today houses the Lower Ninth Ward Market, a barber shop and beauty salon, a sweets shop and, soon, a community internet café, all of which Cotlon manages. Established in 2014, the Lower Ninth Ward Market sells everything someone in the community might need, from staples like milk, bread and eggs to candy, clothing and even hair weaves. The market also has a hot food menu, offering po’boys, pizza, fried shrimp and burgers. When it comes to keeping the store stocked, Cotlon seeks out the Sunday newspaper to see what stores are having deals for the week. Then, he makes a trip to Sam’s Club, Restaurant Depot or Walmart to buy items and bring them back to his store.

The Lower Ninth Ward Market aims to stock everything someone in the community might need, from grocery staples to hair weaves.

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

“I’m still learning as I go. Now that I’m somewhat established, I listen to my customers. Sometimes, someone will come in and ask for item X, Y and Z, and sometimes I can get it for them within a couple of days; other times, it takes me a couple of months, but I’ll get it,” Cotlon said. “For example, a customer once asked me for an ATM machine and it took me a couple of months, but now we have the first ATM machine in the Lower Ninth Ward. So, I listen to my customers’ wants and needs, and I go out and get it.”

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Cotlon can’t verify the number of items he carries in the store at any given time because “there’s too many to count, depending on what customers want and are asking for.” Regardless of the item, he makes sure to keep prices low. For example, two tomatoes are priced at $1, three bananas are $1 and a loaf of bread is $1.99. “We’re not trying to hurt anybody,” he expressed. The Lower Ninth Ward Market is also focused on providing nutritious options to its community. Cotlon

The efforts of Burnell Cotlon (middle) have caught the attention of celebrities, such as Facebook founder Mark Zuckerberg (left).

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joined the New Orleans Healthy Corner Store Collaborative, which works with New Orleans corner store operators to maximize their business sustainability and increase the amount of fresh, healthy food they offer in-store. The Collaborative supplies healthy food and drinks to the store once a week. “I take care of my body and one day, I was eating a yogurt and a little girl came in and asked what I was eating. She didn’t even know what a yogurt was. So, I gave her one and she fell in love with it. This just showed me that a lot of people are unaware that you can eat healthy and it doesn’t have to be expensive,” he said. “Urban areas need more education.”

concept came to him one night after closing when he discovered a little girl sitting at the back of the building on her tablet at 9:30 p.m. doing her homework. Cotlon let the young girl into the store so she could finish. When he asked her why she was at his store to do her homework, she told him that she liked that the store played loud music and had free Wi-Fi. “I decided to do something about that, so I bought another Katrina-damaged building — which used to be a house — right behind the market to build an internet café,” Cotlon explained. The café will open in the near future and he’s already bought a few computers for it.

Community Services

In a New York Second

After opening the Lower Ninth Ward Market, Cotlon quickly realized there were more needs in the community that had to be met. Chief among them: a laundromat.

Cotlon admits that essentially being a one-man show is harder than he thought it would be, but says the experience has been humbling and a lot of fun.

“One night, a gentleman rode to the store on his bike with two garbage bags. He purchased two items: laundry detergent and a Coca-Cola. When I asked him what was in the bags, he showed me that it was he and his daughter’s dirty clothes,” Cotlon recounted. “I started to cry and here’s why: I have a laundry machine at my house and he didn’t. I told him ‘I don’t know how and I don’t know when, but I’m going to get you a laundry room here.’”

“It cost me my entire life savings, but I would do this again in a New York second because the amount of people we service is incredible. Life is about helping others, not about what you can do to help yourself,” he told Convenience Store News. “It’s harder than I thought it was going to be, but I have to keep going because it’s something that I started and between my mother and the military, it’s been instilled in me that if you start something, you have to see it through.”

Thereafter, TV host Ellen DeGeneres — who was born in Metairie, a part of the New Orleans metropolitan area — heard about Cotlon’s story and decided to help out by having him on her show and donating three washer/dryer sets to the store.

Looking to bring more awareness about the Lower Ninth Ward’s state of affairs, Cotlon has created a nonprofit organization, Make It a Home Foundation, to further help the community by rebuilding homes and daycare centers, among other infrastructure.

“I had no idea that was going to happen, so immediately I started building to add a space as part of the market to get the service going. Now every day, people come in like clockwork,” he said. “I’ve expanded the service with three more machines.”

“A lot of people come in and beg me to do more, and I don’t mind them asking. I just wish I had more funding to do more, like finish electrical work and put the second level back on top of my building. Anyone can call me at (504) 319-5886 if they want to help me out. If there’s anything I learned in the military, it’s that any is plenty,” he said. CSN

Another service Cotlon is excited to soon introduce is an internet café. The

Yesway's leadership team: (seated, L to R) Thomas Nicholas Trkla, chairman and CEO, and Thomas W. Brown, president and director of real estate acquisitions; (standing, L to R) Derek J. Gaskins, senior VP of merchandising and procurement; Ericka L. Ayles, managing director and CFO; Mark J. Daniels, managing director and chief strategy officer; Jayne M. Rice, managing director and director of institutional sales, marketing and investor relations; and Darrin Samaha, VP and brand manager

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

COVER STORY

Saying Yes to Growth

The rapidly expanding Yesway chain is a standout among this year’s Top 20 Growth Chains By Linda Lisanti

48.7 PERCENT. That’s how much West Des Moines, Iowa-based Yesway grew its store count between January 2018 and January 2019. Through a series of smaller, but calculated, acquisitions — 13 stores here, 11 stores there, 26 stores here, and so on — the convenience store chain went from 77 locations to 150. This impressive year-over-year expansion makes Yesway a standout among the 2019 Convenience Store News Top 20 Growth Chains. It achieved the highest percentage growth of all the companies on this year’s ranking.

Joining Yesway in the spotlight is Findlay, Ohio-based Marathon Petroleum Corp. — the parent company of Speedway LLC — which added the highest number of stores year over year, earning it the No. 1 spot on the top 20 ranking. In fact, Marathon’s addition of 1,492 locations accounted for more than 40 percent of the 3,635 stores overall added by the top 20. The road to growth for Yesway and Marathon could not be more different, albeit the fact that both companies achieved expansion through acquisition. Whereas Yesway found its growth through multiple smaller deals, Marathon found its growth through one mega-deal: its $23.3-billion purchase of Andeavor. This move has expanded Marathon’s operations across key markets nationwide, combining the strong position it has historically enjoyed east of the Mississippi with the western U.S. presence that Andeavor had built up over time. Big deals, small deals and midsize deals all combined to make 2018 another very active year in terms of convenience channel M&A activity. Terry Monroe, president of American Business Brokers, says he believes 2018 was the most active M&A year since the early 2000s. “Nothing could compare to the activity that we encountered in 2018, and the momentum we experienced in 2018 is continuing in 2019,” Monroe told CSNews. Deals that grabbed headlines in the past year included: 7-Eleven Inc.’s purchase of nearly all of Sunoco LP’s convenience stores — roughly 1,000 — propelling 7-Eleven to the No. 2 spot on this year’s Top 20 Growth Chains ranking; Alimentation Couche-Tard Inc.’s purchase of Holiday Stationstores’ 522 locations; GPM Investments LLC’s purchase of E-Z Mart Stores Inc. and its 273 locations; and Giant Eagle Inc.’s purchase of Ricker Oil Co. and its 56 c-stores.

MAR

20 1 9

Convenience Store News

COVER STORY

“We have witnessed two or three years of large and medium-size transactions being closed. This has been due to a relatively low interest rate environment and the newly enacted tax bill, which gave operators incentives to pursue acquisitions they may not have explored previously,” noted Dennis Ruben, executive managing director of NRC Realty & Capital Advisors. Furthermore, with purchase price multiples being at the highest level in years, many smaller and midsize operators are deciding to sell — meaning more deals to be had. These operators, realizing they can’t compete with the big players, are opting instead to exit the business and take advantage of the sky-high prices being paid for companies, Ruben explained. “As the big chains get bigger, it has become increasingly difficult for the smaller operators to compete with the larger players,” he added. “…I believe we will continue to see a number of smaller and midsize operators putting their companies or portions of their portfolios up for sale in 2019.” Mark Radosevich, president of PetroActive Real Estate Services LLC — a firm that generally focuses on the traditional multi-generational marketer segment — said the way he sees it, the midsized chain owners who opted to exit the business this past year reached a point

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

where their choices were either to: double-down and grow (and all that comes with that in terms of financing, operational scale and geographic expansion); or take advantage of the high consolidation appetite coupled with healthy valuation multiples. “For many, the choice was clear: cash in their chips and move on to the next phase of their respective lives,” he said. On the flip side, those midsized chains opting to stay in the convenience and fuel retailing business are realizing they need to grow their networks in order to stay competitive. In general, midsize chains have become more sophisticated operators, John C. Flippen Jr., managing director of Petroleum Capital & Real Estate LLC, told CSNews. “Midsize companies understand that growth does not typically occur in a linear fashion and understand the substantial investments in people, time, money and technology that need to be made to become a much larger operator,” observed Flippen.

A Seller’s Market Overall, it is still a “seller’s market,” according to Robert L. Valentine, managing director of Trefethen Advisors LLC. He notes that as the number of attractive retail opportunities diminishes, buyers have become more flexible in various ways. “Previously, if you were a seller and wanted to retain real estate, there were limited opportunities to exit. Buyers have become flexible for the right assets. They are willing to enter into long-term leases and buy the business,” Valentine cited. “Additionally, the need to bifurcate a sale of retail and wholesale assets is often not necessary — a large number of buyers have developed multiple classes of trade: salary operated, consignment, pure supply, etc.”

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COVER STORY

These days, as the quest to find more assets continues with companies seeking to accrete higher earnings and spread operating costs among increasingly larger store counts, buyers are looking to acquire portfolios that are big, small and everything in between, acknowledged Ken Shriber, managing director and CEO of Petroleum Equity Group. “As an example, my M&A advisory firm, which by some comparisons is small, specializes in sell-side representation of portfolios ranging from three to five sites, up to 50 locations. Yet, when we approach potential buyers, we experience a uniformly excited reception no matter whether it’s from the large household names and consolidators that we work with daily, or from regional fuel distribution companies or smaller local players,” Shriber shared. “This speaks volumes about the intense approach to acquire that all the companies we deal with exhibit, and across the size spectrum.”

Big deals, small deals and midsize deals all combined to make 2018 another very active year in terms of convenience channel M&A activity. M&A in the Year Ahead When asked whether they expect convenience channel M&A activity to remain as robust in 2019, the experts CSNews spoke with seem to agree on three things: 1. Yes, the M&A environment will remain very active; 2. It’s getting harder to find “quality” acquisitions in the industry; and 3. With almost all of the large chains having already consolidated, there’s not likely to be as many large deals going forward; rather, the focus is now shifting to the midsize chains that are left and smaller operators with between 10 and 100 stores.

ACQUISITION AHEAD

It’s getting harder to find larger, multi-store, regional deals, especially those with quality store operations, Radosevich pointed out. He foresees much of the M&A activity ahead being among the 10- to 30-store operators, but said the challenge for buyers will be to match these opportunities with their established growth plans and geographic preferences. “Look at the top 100 chains of stores and you will notice there is only a handful of chains who have a hundred stores or more. But there are a lot of chains in the 35 to 100 area and this is where you are going to see a lot more of the consolidation,” Monroe echoed. Valentine agrees, but his prediction is a bit narrower. He foresees robust M&A activity around chains operating between 10 and 50 stores. Operators of this size need to grow and/or innovate, he said, but the reality is that the return of investment in a new-to-industry or remodeled site vs. a sale of existing stores is outweighed by the multiples that are being paid at this time. “It is purely a numbers game,” he said. “If you are looking to acquire a chain with more than 100 stores, there are not a lot of options. The number of deals will increase with smaller store counts.”

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

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COVER STORY

Finding Its Way to the Top Yesway doubled its store count in 2018, reaching the 150-store milestone in June By Melissa Kress LOOKING BACK,

2018 could be considered a banner year for Yesway. In May, the convenience store retailer built up its portfolio to 100 stores with the acquisition of 11 Pick-A-Dilly locations in northeast Missouri. One month later, the Des Moines-based retailer reached the 150store milestone by purchasing Fresh Start stores. That deal also expanded Yesway’s footprint into three more states: South Dakota, Wyoming and Nebraska. Those transactions were part of the driving force that pushed Yesway to No. 6 on the 2019 Convenience Store News Top 20 Growth Chains ranking, as it added 73 locations year over year and saw a 48.7-percent increase in store count. Yesway achieved the highest percentage growth of all the companies on this year’s ranking. Not too shabby for a company that only entered the convenience channel three years ago.

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

Yesway is operated by BW Gas & Convenience, an affiliate of Beverly, Mass.-based Brookwood Financial Partners, a private-equity investment firm. Since its inception, the executive team behind Yesway has set its goal as having a portfolio of between 600 and 1,000 c-stores. Chairman and CEO Thomas Nicholas Trkla said that goal is still very much in its sights. “We still believe that we can reach our goal of 600 to 1,000 stores, with the expectation that we will move beyond our stated goal,” Trkla told CSNews. Yesway began modestly, acquiring the 10-site Country Stores portfolio in western Iowa in December 2015. The retailer in 2016 boosted its presence to 31 locations across the state. One year later, Yesway grew again through acquisitions that expanded its reach to four more states: Texas and Oklahoma through its purchase of the Wes-T-Go and Chillerz portfolios, Kansas with its pickup of the Pic Quik portfolio, and Missouri with a two-store buy. 2018 saw Yesway make its way to South Dakota, Nebraska,

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COVER STORY

Wyoming and New Mexico with the acquisitions of the Fresh Start and Chisum’s portfolios. “Along the way, we completed 18 other c-store acquisitions, bringing our total number of stores and adjacent businesses to over 150,” Trkla noted. With roots now planted in nine states, Yesway intends to concentrate on further growth within its existing geographical footprint. “Our focus for 2019 and beyond will be on increasing our presence within our current geography, rather than expanding our footprint further,” Trkla explained. “We still plan to grow as quickly as possible, but our growth will likely be doubling-down in a number of our existing markets before we explore any new states.”

“We are here to stay and fully expect to be one of the more active buyers of c-stores in the country.” — Thomas Nicholas Trkla, Yesway

Sharpening Its Focus The executives behind Yesway welcomed Convenience Store News editors to its headquarters in summer 2016 for an in-depth cover story on the startup. At the time, Trkla explained that Brookwood had no intentions of buying distressed assets only to fix them up and flip them. “We like the convenience store business a great deal. We spent years studying its trends and economics. Our goal is to build a world-class company,” he stated back then. And that is still the game plan. “With the acquisition of the Fresh Start and Chisum’s portfolios, we added South Dakota, Wyoming, Nebraska and New Mexico to our geographic footprint,” the chief executive said. “Our acquisition focus is still on an expanded Midwest

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

Marathon Petroleum Corp. Findlay, Ohio 2019 Store Count: 5,893 2018 Store Count: 4,401 Increase: 1,492 (25.3%)

No. 1

About the company’s growth: On Oct. 1, Findlay-based Marathon Petroleum Corp. (MPC) and San Antonio-based Andeavor closed on its $23.3-billion merger, whereby MPC acquired all of the outstanding shares of Andeavor. The deal gave Marathon a nationwide retail and marketing business of approximately 4,000 company-owned and -operated locations and approximately 7,800 branded locations. MPC has begun converting the Andeavor company-owned and -operated SuperAmerica stores to its Speedway brand. By the end of 2018, the company expected to have approximately 200 sites rebranded.

7-Eleven Inc.

Irving, Texas 2019 Store Count: 9,271 2018 Store Count: 8,338 Increase: 933 (10.1%)

No. 2

About the company’s growth: 7-Eleven closed on the biggest acquisition in its history when it purchased nearly all of Sunoco LP’s convenience stores in a more than $3-billion deal. On Jan. 23, 2018, 7-Eleven took ownership of approximately 1,030 Sunoco c-stores in 17 states. The transaction closed days after an agreement with the Federal Trade Commission required 7-Eleven to sell 26 retail fuel outlets it owned to Sunoco, and Sunoco to retain 33 fuel outlets that 7-Eleven otherwise would have acquired. Sunoco’s sale to 7-Eleven was a strategic divestiture on its part as the company shifts its focus to fuel distribution and logistics.

Alimentation Couche-Tard Inc. Tempe, Ariz. (U.S. headquarters) 2019 Store Count: 7,131 2018 Store Count: 6,597 Increase: 534 (7.5%)

No. 3

About the company’s growth: Fiscal year 2018 was “a notable year for acquisitions,” according to Couche-Tard President and CEO Brian Hannasch. In particular, the parent company of Circle K acquired all of the issued and outstanding shares of Bloomington, Minn.-based Holiday Cos. Inc. and certain affiliated companies. Holiday’s main assets consisted of 522 company-operated and franchise locations in 10 U.S. states, two food commissaries and a fuel terminal. To address antitrust concerns, Couche-Tard and its affiliate CrossAmerica Partners LP were required to divest 10 fuel stations in Minnesota and Wisconsin. CoucheTard and CrossAmerica also reached an asset-exchange agreement in December that will see 265 sites change hands in a series of transactions to come.

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COVER STORY

footprint, with the stated investment strategy of acquiring portfolios of 20 to 50 stores and backfilling around the portfolios with smaller store acquisitions.” However, along its journey to 150 locations, two things happened. “First, we now have an established platform to take on more sizeable portfolio acquisitions, and because of our rapid growth, we are generating renewed interest from a number of potential sellers with whom we had previously spoken, but who were taking a ‘waitand-see’ attitude to this upstart c-store firm,” Trkla said. “We are here to stay and fully expect to be one of the more active buyers of c-stores in the country.” While the big merger-and-acquisition plays in the convenience channel grab headlines for their eye-popping numbers — think Marathon Petroleum Corp. and Andeavor’s $23.3-billion deal or 7-Eleven Inc.’s $3-billion payout for the majority of Sunoco LP’s retail assets — Yesway has been quietly placing its banner on c-stores in small towns across the United States. According to Trkla, Yesway’s strategy specifically calls for the targeting of stores in smaller suburban or rural communities, typically populations of 5,000 to 50,000 people. This approach is rather unique in the industry, the chief executive acknowledged. Many potential acquirers are instead focused on large-footprint and

GPM Investments LLC Richmond, Va. 2019 Store Count: 1,187 2018 Store Count: 933 Increase: 254 (21.4%)

No. 4

About the company’s growth: GPM Investments dedicated 2018 to expanding its national retail footprint through multiple deals. The first occurred in March when its GPM Southeast subsidiary acquired four South Carolina convenience stores that previously operated under the Crenco Food Stores banner and one truck stop. In the spring, GPM acquired E-Z Mart Stores Inc. and its 273 stores across Texas, Oklahoma, Louisiana and Arkansas. The E-Z Mart deal marked GPM’s entry into the Southwest. Lastly, in mid-June, GPM’s existing Midwest portfolio got a boost with the purchase of 11 1-Stop Food Stores from DMJ Corp. in Michigan.

Casey’s General Stores Inc. Ankeny, Iowa 2019 Store Count: 2,215 2018 Store Count: 2,020 Increase: 95 (4.5%)

No. 5

About the company’s growth: In the early days of 2018, JCP Investment Management LLC, BLR Partners LP and Joshua E. Schechter issued an open letter to Casey’s shareholders pushing for a strategic review of the company. In response, the retailer unveiled a roadmap to drive store growth and increase company value through its 2021 fiscal year. As part of the value creation plan, Casey’s set a target for fiscal year 2019 to build 60 new stores and acquire 20 locations. At the six-month mark, the company had opened 25 new stores, acquired three stores and had 23 additional stores under agreement to purchase. As of December, it had 36 stores under construction and 95 more sites in its land bank. 2018 also saw Casey’s celebrate the opening of its 2,000th store, and its first locations in Michigan and Ohio.

Yesway

Des Moines, Iowa 2019 Store Count: 150 2018 Store Count: 77 Increase: 73 (48.7%)

No. 6

About the company’s growth: Yesway notched the highest growth percentage wise of all the Top 20 Growth Chains, nearly doubling its footprint in 12 months. In June, the operating banner of BW Gas & Convenience hit 150 convenience stores with the acquisition of 26 Fresh Start stores, which expanded its footprint into three more states: South Dakota, Wyoming and Nebraska. Throughout the year, Yesway also picked up 11 Pick-A-Dilly stores in northeast Missouri, and 13 Chisum Travel Center and Fast Stop convenience stores in Texas. The retailer now operates stores in nine states.

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

COVER STORY

high-volume stores, which are generally found in much more populated regions. As a result, Yesway sees far fewer deals from organized brokerages than in other industries, and the company experiences uneven deal flow, said Trkla. “On the positive side, however, we are faced with less competition than is typical for larger, urban acquisitions,” he noted. “In many cases, our sellers are approaching retirement age and are motivated to sell, and we find ourselves in the position of being a viable exit opportunity for their business that will take care of their employees, their communities and their legacy.”

With roots now planted in nine states, Yesway intends to concentrate on further growth within its existing geographical footprint. Yesway’s acquisition criteria includes regions with positive recent and historic trends in: • Gross domestic product; • Population growth; and • Total gas consumption. In terms of fuel branding, Trkla said the company is “initially agnostic,” but favors stores and properties without an in-place fuel supply pact or one nearing the end so that Yesway can add value through selling unbranded fuel or signing favorable contracts with major suppliers. “We want stores with consistent yearover-year sales and operations, and strong current cash flow — but in areas where we can understand the competitive landscape and identify areas of growth. As part of that growth, we actively seek out properties with real estate where we can utilize our proven value-add strategy,” he explained. Industry watchers may have noticed that all of Yesway’s growth has come from acquisitions — and that is by design. The company has been able to unlock great value from

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

Giant Eagle Inc.

Pittsburgh 2019 Store Count: 219 2018 Store Count: 158 Increase: 61 (27.9%)

No. 7

About the company’s growth: Giant Eagle grew its convenience store portfolio in 2018 with the acquisition of 56 Ricker’s convenience stores in central Indiana, the retail arm of Anderson, Ind.-based Ricker Oil Co. The deal, which officially closed Dec. 3, will allow Giant Eagle to bring together the best of its GetGo Café + Market brand with the best of the Ricker’s brand. The acquisition also included Ricker’s wholesale fuels distribution business of approximately 80 branded supply accounts in Indiana, Illinois and Kentucky.

Pester Marketing Co. Denver 2019 Store Count: 113 2018 Store Count: 69 Increase: 45 (39.8%)

No. 8

About the company’s growth: Pester Marketing’s growth was largely driven by its acquisition of Western Convenience Stores Inc. The 43-site deal gave the retailer new stores in and around Denver, Colorado Springs, Pueblo, Grand Junction, Colorado mountain resort locations, and western Nebraska. In 2018, it also purchased the eightstore Kwik Stop chain based in Canon City, Colo., and formed a five-store joint venture with R.H. Smith Distributing Co. Inc. in Washington State. Pester Marketing operates under the Alta Convenience banner.

Wawa Inc.

Wawa, Pa. 2019 Store Count: 835 2018 Store Count: 791 Increase: 44 (5.3%)

No. 9

About the company’s growth: Wawa continues to outdo itself. In 2018, the c-store chain beat its previous largest store (9,200 square feet, in Washington, D.C.) with the opening of an 11,300-square-foot location near Philadelphia’s Independence Mall. The past year also saw Wawa welcome customers to its 800th store when it cut the ribbon on a new location in Wilmington, Del., in May. The retailer quickly blew past that milestone, however, as it continued to build up its presence in Florida and strengthen its Mid-Atlantic stronghold.

Source: January 2018 and January 2019 store counts provided by TDLinx, a service of Nielsen

COVER STORY

the existing properties and locations it has added to its portfolio. “We have stuck to our initial strategy: that by acquiring rural and suburban locations, we can add value through capital improvements, streamlining operations, and improving foodservice and product offerings,” Trkla said. “While we plan to continue targeting smaller acquisitions, we will work within the confines of our strategy to explore building out those locations that are particularly compelling, like truck stop locations and potential raze-and-rebuilds,” he added. CSN

Global Partners LP/ Alliance Energy LLC Waltham, Mass. 2019 Store Count: 276 2018 Store Count: 241 Increase: 35 (12.7%)

No. No.10 9

Oklahoma City 2019 Store Count: 482 2018 Store Count: 452 Increase: 30 (6.2%)

more than 40 new locations, adding thousands of new truck parking spaces, and expanding on-site truck and tire care services.

La Crosse, Wis. 2019 Store Count: 637 2018 Store Count: 607 Increase: 30 (4.7%)

No. 11

No. 12

About the company’s growth: Over the past five years, Kwik Trip has steadily — and quietly — established its presence among the top growth chains in the convenience channel. The Midwest chain has appeared on CSNews’ Top 20 Growth Chains ranking every year since 2015, reaching as high as No. 4 last year. This year, Kwik Trip finds itself at No. 12, adding 30 stores year over year. The retailer operates stores under the Kwik Trip banner in Wisconsin and Minnesota, and under the Kwik Star banner in Iowa.

RaceTrac Petroleum Inc.

About the company’s growth: 2018 was Love’s biggest year of network growth to date. The chain opened 35 new travel stop locations in such locales as: North Little Rock, Ark.; Reidsville, N.C.; Bastian, Va.; Ellisville, Fla.; Statesville, N.C.; Las Vegas; Denton, Texas; and Mills County, Iowa. Look for Love’s to go even bigger in 2019 — if all goes according to plan, its location count will top 500 nationwide. The plan for this year calls for opening

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

— Thomas Nicholas Trkla, Yesway

Kwik Trip Inc.

About the company’s growth: Global Partners and its subsidiary Alliance Energy grew its presence in the convenience channel with somewhat of a buying spree this past spring. Global Partners inked an agreement to acquire the retail fuel and convenience store assets of Vermont-based Champlain Oil Co. Inc. for approximately $134 million. The transaction included 37 company-operated gas stations with Jiffy Mart-branded stores in Vermont and New Hampshire, and approximately 24 fuel sites that are either owned or leased, including lessee dealer and commission agent locations. The company followed up that move with a deal to purchase Cheshire Oil Co. LLC’s 10 T-Bird Mini Marts in New Hampshire and Brattleboro, Vt. Both transactions closed in July.

Love’s Travel Stops & Country Stores Inc.

“We have stuck to our initial strategy: that by acquiring rural and suburban locations, we can add value through capital improvements, streamlining operations, and improving foodservice and product offerings.”

Atlanta 2019 Store Count: 767 2018 Store Count: 737 Increase: 30 (3.9%)

No. 13

About the company’s growth: As 2018 drew to a close, RaceTrac celebrated the opening of its 500th store when it welcomed customers to a new location in Hapeville, Ga., on Dec. 5. (RaceTrac also operates a division of Raceway stores.) The same week, RaceTrac added three new locations in Louisiana, Florida and Georgia. RaceTrac plans to continue its growth in 2019 with the brand opening its inaugural store in Tennessee, its first new market in more than 15 years. By 2023, the company expects to have up to 50 stores open in Tennessee.

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COVER STORY

Pilot Flying J

Knoxville, Tenn. 2019 Store Count: 696 2018 Store Count: 671 Increase: 25 (3.6%)

No. 14

About the company’s growth: Pilot Flying J celebrated its 60th anniversary with steady network growth throughout 2018. The travel center operator noted in its year-end review that the brand opened 21 new locations in the U.S. (19) and Canada (two), which included expansion across 10 states. Pilot Flying J also completed eight acquisitions in the U.S. (six) and Canada (two), which included expansion in four states. One notable area of growth was West Texas, one of the most important oil and gas-producing areas in the nation.

Murphy USA Inc.

El Dorado, Ark. 2019 Store Count: 312 2018 Store Count: 290 Increase: 22 (7.1%)

No. 15

About the company’s growth: Five years after its spinoff from Murphy Oil Corp., Murphy USA tackled an ambitious growth year, with openings split between new builds and raze-and-rebuild sites that went from kiosks to full convenience stores. The company in 2018 focused on expanding within its strongest markets, with the goal of opening stores ahead of the summer driving season to maximize the seasonal benefits.

Croton Holding Co. Pittsburgh 2019 Store Count: 102 2018 Store Count: 81 Increase: 21 (20.6%)

No. 16

About the company’s growth: Croton Holding Co.’s Par Mar Stores division cracked the 100-store ceiling in 2018, celebrating the milestone as it commemorated 51 years in business. Par Mar Stores, based in Marietta, Ohio, now operates locations in West Virginia, Ohio, Pennsylvania and Kentucky. The expansion of Par Mar Stores was a significant contributor to Croton’s growth of 21 stores — a more than 20-percent increase in store count year over year. Croton acquired Par Mar Stores and its parent company Par Mar Oil Co. in 2016.

Sheetz Inc.

Altoona, Pa. 2019 Store Count: 583 2018 Store Count: 565 Increase: 18 (3.1%)

No. 17

About the company’s growth: Sheetz notched another year of steady, organic growth. Its addition of 18 locations

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

fell just short of the 21-store gain it experienced the previous year. Sheetz recently celebrated the opening of its 100th store in North Carolina. It entered the state in 2003 with the goal being to develop a strong presence in the Tar Heel State. Sheetz also operates in Pennsylvania, West Virginia, Virginia, Maryland and Ohio.

Enmarket

Savannah, Ga. 2019 Store Count: 111 2018 Store Count: 96 Increase: 15 (13.5%)

No. 18

About the company’s growth: Enmarket is in the midst of a growth spurt. The retailer is building a new 22,000-square-foot headquarters in Savannah as its store count continues to expand. Enmarket has been growing through acquisitions as of late, but company executives say new-to-industry sites are also part of its expansion plans.

Maverik Inc.

Salt Lake City 2019 Store Count: 326 2018 Store Count: 312 Increase: 14 (4.3%)

No. 19

About the company’s growth: Maverik’s growth in 2018 came from a combination of new-build stores and the acquisition of the four-store Best Stop chain. Purchasing Best Stop has built up its existing presence in the Cache Valley of northern Utah and southeast Idaho. Maverik plans to remodel the locations to its Adventure’s First Stop concept.

QuikTrip Corp.

Tulsa, Okla. 2019 Store Count: 789 2018 Store Count: 775 Increase: 14 (1.8%)

No. 20

About the company’s growth: QuikTrip’s growth slowed in the past year, but the company opened the door to a major new market by welcoming its first San Antonio store. QuikTrip has reportedly completed at least $10 million in land purchases in San Antonio for future expansion. Plans call for roughly 60 QuikTrip stores in San Antonio and 40 in Austin, Texas, as well as a smaller number along Interstate 35, which connects the cities. QuikTrip made the move due to the region’s population growth and high number of commuters.

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S N I A T CAP

A Dependable Dozen Twelve c-store suppliers earn recognition for outstanding category management initiatives By Susan Durtschi, Past Times Marketing LED BY EIGHT REPEAT WINNERS FROM LAST YEAR,

12 convenience channel suppliers earned kudos this year in the sixth-annual Convenience Store News Category Captains awards program, which recognizes leading suppliers for outstanding category management initiatives that have demonstrably enhanced overall category sales and profits for the retailers they serve. This year’s repeat winners include AnheuserBusch, Convenience Valet, McLane Co. Inc., Swisher International Inc., The Hershey Co., The Coca-Cola Co. and Tyson Convenience. S. Abraham & Sons Inc., which won last year in the General Merchandise category, is the winner this year in the Foodservice/Hot Beverages category. All entries for this year’s contest were judged based on: • Product innovation; • Creativity in merchandising, marketing, promotion and advertising; • Use of consumer insights to drive category sales; • Innovative and dynamic category management tools; • Demonstrated commitment to meeting the specific needs of retailer customers; • Efficiently lifting sales for the entire product category; and • Fact-based evidence of market-specific or account-specific results.

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

Past Times Marketing, a consumer research and product evaluation firm based in New York, once again facilitated the judging based on information supplied by participating companies. Here’s an in-depth look at the 2019 Category Captains:

ALTERNATIVE SNACKS: General Mills General Mills has taken snack bar research to a new level by spelling out new trends in consumer behavior. Alternative snacks is a large and growing category in convenience stores. Although fueled primarily by meat snacks (which make up about 60 percent of the share), the category generates sizeable sales of nutrition bars and granola bars. Despite low levels of awareness and engagement for bars in the convenience channel (four out of five shoppers walk past the section without even slowing, compared to salty snacks where one out of two shoppers will engage), this segment has continued to grow in dollar sales, warranting breaking out and adding dedicated space for nutrition bars. Seeing the growth potential in this space, General Mills invested in research to better understand the category dynamics from a truly consumer-first lens. Leveraging a proprietary snack bar segmentation study, a deep dive into the c-store path to purchase and an extensive in-store audit, General Mills has positioned itself to bring retail and distributor partners a more robust and holistic understanding of this important category. This category leadership has allowed General Mills to maintain category captaincy across its key partners — providing

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

Packaged Beverages Category

*Nielsen Planners, YTD 2018 thru June 30th, Total US Convenience Retail **Coca-Cola 2017 Macro Trends Shaping the Industry, Total channel historical and projected revenue growth – RNG, NARTD & KO historical revenue growth – Nielsen Databank ©2019 The Coca-Cola Company

TAINS P A C

Syndicated Alternative Snack Sales Sales Contribution

Sales Change

Units Change

Meat Snacks

The AB Category Management Department’s mission statement is: “Create mutually profitable growth within and beyond beer as the most trusted partner by providing insight-led thought leadership to enhance the shopper experience.” The supplier does this in five distinct ways:

Health/Energy Bars Total Units (2.0%)

Other Alternative Snacks

Granola/Yogurt Bars 0.0%

40.0%

80.0%

-10.0%

-5.0%

0.0%

5.0%

Source: Nielsen

space and assortment recommendations customized to specific growth strategies. For some retailers, ensuring they had the top-turning SKUs in their relatively small set that combined cookies, crackers, breakfast bars and nutrition bars was enough to impact growth. For other retail partners, who were strategically working to expand both their perception of better-for-you options and the variety to support it, General Mills recommended space dedicated only to nutrition bars or other portable-type formats, such as high-protein cookies or high-protein meat bars. General Mills has identified, and illustrated for its customers, the shift in the bars category, which quite closely mirrors what the company is seeing more broadly with snacking trends moving toward overall wellness. As consumers look to cleaner, more simplified ingredients, both better-for-you and indulgent offerings that better meet this need, and especially those that can be easily taken on the go, are growing. Using these learnings, General Mills has recommended shelf sets and assortments that better reflect consumer needs. As these sets are being implemented over the next few months, General Mills anticipates that shoppers — particularly women, who may not be as likely to purchase their snacks in the convenience channel — will become more exposed to the variety of options in this space.

BEER/MALT BEVERAGES: Anheuser-Busch Anheuser-Busch (AB) currently has roughly 70 percent category captaincy across the top 50 c-store chains, in accounts where captaincy is not shared among multiple brewers. Everything that the AB category team does is centered on supporting the shopper and retailer. AB knows solving both of their pain points and needs will ultimately lead to growth in the category.

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1. Category Growth Framework: Last year, AB shared with retailers a globally proven framework for expanding category growth. The approach first identifies industry headwinds and tailwinds driven by demographic shifts and unstable consumer trends, and then connects said challenges and opportunities back to a new view of the market more clearly delineated by style and price partition in order to identify areas for future growth. The key priorities identified are: evolve core lagers to retain drinkers; trade up consumers with premiumization; expand beer styles into new occasions; recruit LDAs (legal drinking age) and females with beyond beer; and manage affordability to increase frequency and drive trips. 2. Shopper Insights: AB prioritizes working with retailers to help them better understand how shoppers interact with product in their store and across channels. The supplier helps retailers understand shopper conversion opportunities, as well as lost sales through shopper leakage to other retailers or channels, and provides recommendations based on sales drivers to capture identified dollar opportunities. 3. Hyper-Local Cold Space Management: AB is a leader in the hyper-local, data-driven assortment and space process. Through management of complex data sets and advanced space tools, AB has been able to execute planograms reflective of store- and market-level demand on time with great accuracy. 4. BrewBox 360: AB launched a revolutionary nextgeneration category platform in 2017, which inspires partnership through mobilizing data, streamlining store validations and enhancing overall experience of all participants of the reset process (including retailer corporate office, retailer store level, distributors and vendors). It allows for up-to-the-minute tracking of progression and monitoring across an entire chain, no matter geographic location. Additionally, it allows for live feedback. Last year, AB leveraged the flexibility of its BrewBox 360 technology to continue to evolve the platform based on retailer and stakeholder feedback to continue raising the bar on defining a best-in-class category platform solution. 5. Custom Retailer Scorecards: AB’s category management team continues to be the leader in helping retailers review and understand the day-today results of category performance through custom scorecards provided from the retailer’s scan data. AB currently produces custom scan data reports for MAPCO, RaceTrac Petroleum, Cumberland Farms, Wawa, Dunne Manning, Tri-Star Energy/Twice Daily, Sprint Mart, Pilot Flying J, Sheetz, GPM Investments and Spinx.

TAINS P A C

CANDY: The Hershey Co. Hershey has become a snack powerhouse, built on its deep confection category expertise. A great example of its snack retail leadership is Hershey’s Global Customer Insights Center (GCIC) in Hershey, Pa., where retail customers have been visiting since 2006 to learn and partner on the next big category growth initiatives. However, bringing every customer in the convenience channel to Hershey to experience the GCIC and its physical assets is impossible. So, in September 2018, Hershey launched the Mobile Customer Insights Center (MCIC) — an extension of the GCIC built to serve convenience store retailers.

the world. Most of the remaining time together is spent discussing the category growth initiatives to partner on and focus on executing in the coming year. Among the topics that might be discussed are: • Under the Counter Merchandising initiative, which has consistently driven 10-12 percent category growth for the retailers that have executed it; • Candy Aisle Strike Zone Optimization, which realigns pack types to position the best-selling items and brands on higher shelves, which continues to deliver 4-5 percent annual growth; • Queue Line Merchandising in Convenience, which at all pay points has improved the shopper experience and delivered growth in overall transactions where candy is in the basket by 16 percent or more; • Cross-merchandising candy with foodservice, fountain beverage and coffee; and • Upcoming product innovations.

CIGARETTES: McLane Co. Inc. By focusing on understanding and sharing its knowledge of consumer, industry and regulatory trends, McLane is able to ensure that its retail customers can make the most out of the declining cigarettes category. The McLane merchandising team manages a large volume of different cigarette brands across all of the various price and type segments. With a combined total of 150-plus years of experience, the team is extremely knowledgeable on all segments of the category. The MCIC is a 53-foot expandable tractor-trailer that enables Hershey to bring its shopper insights and snacks category expertise directly to its retail partners’ parking lots across the country. When fully expanded, the MCIC is three times the width of a traditional trailer, opening up to a collaborative work space that can seat up to 15 people. The trailer is intended to deliver the same quality strategic insights and snacking expertise that retailers have experienced at the GCIC. In its first four months on the road, the MCIC met with 25 retailers, spending time with all levels of those organizations and learning more about their strategies and how Hershey can align to develop category growth initiatives that are mutually beneficial. The MCIC houses best-in-class category growth driving initiatives, many of which have previously been recognized in CSNews’ Category Captains awards program. A typical day kicks off with an introduction to what makes the candy category so valuable. Then, time is spent learning about the retailer and what’s important to them, followed by sharing the rich history of The Hershey Co. and its purpose-driven mission of bringing goodness to

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

With the huge scope and size of its procurement, along with daily deliveries in many cases, the McLane merchandising team is able to ensure that the freshest product lands in the retailers’ stores — resulting in the best possible experience for adult cigarette purchasers. The cigarettes category is under constant scrutiny by government and health organizations. To assist retailers in understanding the many changing local, federal and state ordinances and regulations, McLane works closely with manufacturers, industry organizations and government affairs groups. By doing this, the wholesaler is able to ensure compliance in delivery of product from McLane and keep retailers current in their understanding of the regulatory changes. The McLane merchandising team also aligns with cigarette manufacturers on all promotions, ensuring that items are set up, ordered and received in every division to guarantee on-time delivery for the start of those promotions. By receiving cigarette promotions in a timely fashion, retailers are ensured the maximum number of selling days during the promotional period and, therefore, the highest potential for incremental sales.

Bringing Goodness o 1894

2019

TAINS P A C

E-CIGARETTE/VAPOR PRODUCTS: E-Alternative Solutions E-Alternative Solutions (EAS) is at the forefront in supporting retail and wholesale customers in category growth through maintaining and growing the core vaping business, while expanding with innovative technology that meets adult consumers’ needs and high expectations. An independent, family-owned provider of electronic alternatives to cigarettes, EAS’ vapor products are research-tested, U.S. made (with domestic and imported ingredients) and marketed only to adult smokers. The company is committed to innovation, category growth and, ultimately, leading the industry into the promise of “A World Beyond Smoking.”

The additional depth of experience at EAS is layered on top of robust analysis to help top national accounts reinvigorate their investment in vaping and help mitigate the volatility of unclear regulatory guidelines, thereby rebuilding a fast-growing category within their tobacco sections. EAS has also advocated for recategorization of data to properly reflect the current vaping market, including nicotine salt, disposables and sub-ohm vapor systems, so that customers have the tools and options needed to meet and exceed adult consumer preferences in their stores. Training of store staff and discussions on space (category) management and adult consumer preferences then ensure results. In two years, EAS has captured more than 20 percent of the vaping category business in large chains.

FOODSERVICE/HOT BEVERAGES: S. Abraham & Sons Inc.

Together with its sister company Swisher International Inc., EAS brings decades of collective experience — and an intimate understanding of tobacco industry shortfalls — to design programs that can be customized to business models and consumer bases.

Coffee generates more than 77 percent of overall hot beverage sales at c-stores. S. Abraham & Sons’ (SAS) Beantown Gourmet Coffee is sold at 500-plus locations from Wisconsin to Maine. SAS is leading the hot beverage industry as a wholesale distributor with unrivaled digital menu solutions as part of its refreshed program, launched in the third quarter of 2018.

EAS has undertaken a leadership role in the creation of sensible industry standards and regulations, helping to formulate the Vapor Technology Association (VTA) marketing standards. Its work on the VTA board of directors advances the interests of the industry’s manufacturers, wholesalers, small business owners and entrepreneurs.

SAS is engaging retailers to create better customer experiences through digital communication solutions. Customers perceive digital environments as modern and clean, which can impact return visits and encourage brand loyalty. Dynamically designed menus foster a consistent message and schedule, and can achieve 100 percent brand compliance. This is reflected in increased profits and customer loyalty with a premium brand coffee program offering a wide variety of marketing solutions. The “best practices” within a premium brand encourage and engage customers from the pump to the cash register and create a coffee shop atmosphere with pumptoppers, premium signage and wall coverings that shout “freshly brewed.”

Widely considered authorities on the rapidly evolving regulatory landscape, EAS executives are frequently sought to speak on the complex legal issues facing the industry, including such topics as responsible marketing practices, understanding and meeting Food and Drug Administration (FDA) requirements and how to navigate the plethora of state laws regarding the vapor category. In the past five years, most EAS accounts have experienced both the highs and lows of the vaping category, and the supplier has stepped in to help lessen the uncertainty in the market with solid advice and retail support, such as by guaranteeing its product.

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Beantown Gourmet Coffees are comprised of 100 percent Arabica beans and produced by a third-generation, family-owned coffee roaster with more than 85 years of

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experience. The flavor profile has been refined to match the demands of today’s coffee drinker with precise “drop weights” developed for each roast — delivering great coffee, batch after batch. Portioned packages of ground coffee ensure consistent brewing, efficient cleanup and maximized profits. With 15 distinct coffee roasts and 11 flavors of cappuccino, retailers can build a portfolio to meet and target their customers’ unique desires. The new flagship program also launched with updated and redesigned attractive insulated paper cups — available in four sizes — that carry the Beantown name and spread awareness of the premium brand. The comprehensive gourmet Beantown hot beverage program is available to SAS retailers without any additional franchise fees. Participating SAS retail locations are outfitted with high-quality Bunn coffee equipment and serviced regularly at no charge. The SAS and Bunn teams work with store personnel to help train their teams on the steps to brew and maintain a delicious pot every time. Menu format choices are either: traditional printed boards or modern digital displays. Digital screens with custom menu designs are supplied at no additional charge. Not only do these offerings shelter retailers from otherwise expensive static menu costs, but the total return-on-investment of digital menuboards extends to numerous other aspects. SAS partners who opt for the digital offerings instantly increase the visibility of merchandising messages, creating twofold opportunities to increase sales margins by maximizing seasonal offerings and/or special limitedtime-only flavors.

FOODSERVICE/PREPARED FOOD: Tyson Convenience The Tyson Convenience team offers its customers turnkey product solutions, including labor-saving fully cooked proteins, packaged sandwiches and handheld prepared foods with branded packaging in the display case. The supplier also provides sales support to its customers by providing digital images and assets to leverage in their marketing efforts. Tyson Convenience offers equipment options to fit retailers’ needs across the foodservice spectrum, from retailers new to foodservice to more experienced retailers interested in expanding their offering. From roller grills to warmers, Tyson provides options for any space, along with a variety of accessories. In-store support includes branded merchandising from its portfolio of products and brands,

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providing retailers with the means to serve leading brands. In addition, Tyson Convenience strives to provide its customers with insights and in-store support that will assist in managing today’s ever-changing convenience channel. In 2018, Tyson expanded its turnkey product solutions, including the NAE (No Antibiotics Ever) Tyson Red Label poultry offering. The supplier also made efforts to simplify retailers’ need to order, stock and manage inventory separately by integrating branded packaging into the protein purchases. Retailers saw the value in offering Tysonbranded products that were prepared fresh in-store. Also in 2018, Tyson Convenience introduced new product innovations and on-trend offerings, including: Jimmy Dean Stuffed Hash Browns; four new Skinless Smoked Sausage flavors from Hillshire Farm; Tyson Red Label Wings in bone-in varieties; and the BIG AZ Kick Az Croissant Sandwich made with fiery sriracha glazed sausage. Tyson Convenience positions itself as a trusted partner in the convenience channel dedicated to innovation for the benefit of retailers of all sizes by providing a broad and continually expanding portfolio of products and leading brands, as well as unparalleled support.

GENERAL MERCHANDISE: Eby-Brown Co. LLC Eby-Brown delivers center-of-store general merchandising growth opportunities, at no cost, through its proprietary category management solution called SmartProcess, whereby the wholesaler gains an intimate knowledge of its customers’ stores through leveraging a survey methodology for each store’s sales data within the chain. This captures the configuration of fixtures and the size of each category in the center store, enabling recommendations that custom-fit each store’s needs. Another element of the data analysis methodology is leveraging best-of-breed syndicated regional/national industry

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data. Eby-Brown analyzes three leading industry data sources to develop the assortment recommendations and pivot tables that provide the foundation for building the most effective planograms for its customers. Coupling the customer’s point-of-sale scan data and the industry data with Eby-Brown’s MSA data assists in the identification of gaps and allows optimal development of assortments for each category and planogram size. And, by partnering with valued vendor partners as category captains and validators, Eby-Brown provides its customers with additional thought leadership in each category to produce planograms for the new set assortments. Every planogram is built to create success and opportunity for every store in the customer’s portfolio. One size does not fit all, so planograms are customized by specific store location and fixture size. Another key differentiator is Eby-Brown’s SmartStore, which emulates the planogram setup for each customer that goes through the process. During a two-day category review meeting with each customer, Eby-Brown provides insight into performance and trends, and planogram recommendations. The retailer experiences the planogram in a live c-store setting and has the opportunity to make changes to take full ownership. Still, the best planogram can’t drive results unless it is correctly implemented. Retailers complete the initial step of implementing the new planogram at the retail location by leveraging Eby-Brown’s third-party, professional c-store merchandising experts to ensure all categories are reset quickly and accurately without placing an added burden on the customer. The company does not stop at the initial implementation and setup, either. Eby-Brown updates the planograms quarterly, which is key to keeping the customer sets relevant and performing throughout the year. It then conducts an annual review of the results for each customer and goes through the process again. During the first year, customers experience an average 15.8-percent sales increase in center-store sales.

HEALTH & BEAUTY CARE: Convenience Valet Brand-name selections are key to success in the health and beauty care (HBC) category. Convenience Valet’s (CV) category management strategy provides a comprehensive approach to ensure that the best-selling HBC brands (in graduated sizes) are conveniently available on retail shelves across America. The vast majority of typical HBC purchases in the c-store industry are to address immediate needs of the customer; often to mitigate an ailment.

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BEFORE

AFTER

Internally, the CV category management approach is trademarked as RAD2: an acronym that stands for Retailer Aligned Data Driven. This acronym underlines CV’s overarching philosophy around collaborating with retailers to meet their objectives and then using datadriven insights to deliver the best set for the consumers that shop their stores. In convenience stores, where the HBC category typically is limited to just 4 feet, the retailer must make precise and unbiased product selections to maximize sales and profits. To do this, they must take into account: various consumer need-states; data showing that roughly seven out of 10 consumers are looking for known HBC national brands; and data showing that the average c-store HBC consumer spends a mere 5-8 seconds making their purchase decision. While the shopping landscape is very different at big-box retailers where private-label products are more widely offered, convenience store customers still strongly rely on national brands. Convenience Valet has applied this logic to its overarching company strategy. Best-selling brands make up its planograms to maximize retailers’ profits and satisfy consumer needs. CV also relies heavily on Nielsen and/or IRI national syndicated c-store (primary) plus AOC (secondary) data to provide an unbiased analysis of category and SKU performance. Then, working directly with retailers and within its seven-step category management framework, the supplier creates new planograms or optimizes existing ones to maximize sales and customer satisfaction for the defined category space. While 4-foot planograms are the most common, CV develops retail sections of all sizes, up to 12-feet wide. All in all, Convenience Valet looks at the entire process through a detailed category management lens, ensuring that the core categories are addressed with the national brands that consumers want, while addressing regional influences and various additional need-states of the smaller subcategories as space allows. This unbiased approach has enabled CV to consistently deliver double-digit category increases for its retailer customers.

The Leader in Category Management CORPORATE OFFICE 1415 W. Diehl Road, Suite 300N Naperville, IL 60563

TO LEARN MORE Call your Eby-Brown representative, visit www.eby-brown.com, or call 800-553-8249.

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OTHER TOBACCO PRODUCTS: Swisher International Inc. Swisher has been on the forefront of implementing category management principles within the other tobacco products (OTP) sections of the company’s valued trade partners, which has been a key driver of category growth. Retailers and OTP manufacturers have prospered through category management integration despite facing headwinds from federal, state and local government regulation. However, recent activities from the federal government and FDA impacting the vapor segment have put buyers on edge. Through this, Swisher has remained a reliable source of information and support for retailers. The foundation of Swisher’s approach has been a balanced portfolio, with an intense focus on innovation, analytics, space planning and execution of winning strategies that allow for the continued success of the other tobacco products category. In 2018, Swisher expanded its Space Planning Department by investing in JDA software to assist its trade partners in building a profitable OTP category. With five team members holding Level 1 JDA Certification and two team members holding Level 2 JDA Certification, Swisher can assist in all aspects of OTP space planning. Space Planning Department team members have built OTP sets both remotely and in-person at account headquarter points. The team utilizes JDA’s software, which can integrate multiple data sources, including MSAi, store-level scan data and other syndicated data, to build planograms that represent retailer strategy, current trends and local adult consumer demand. After implementation, Swisher and its partners can gauge the effectiveness of the sets through multiple KPIs — including but not limited to distribution gaps, days of supply, and category volume and dollar growth. Since the launch of the Space Planning Department in late 2017, Swisher’s team has produced more than 5,000 planograms that have been implemented in the market. The results have been impressive, as partners utilizing Swisher Space Planning in aggregate have experienced 9.6 percent growth in large cigar volume, outpacing total U.S. chain category growth of 8 percent.

in sales. Nielsen data shows that more than half of consumers are changing their diet by cutting sugar. Commanding nearly half of the diet SSD category volume share, The Coca-Cola Co. saw an opportunity to turn the diet SSD decline around by providing shoppers with more of what they want — a great-tasting, low-calorie beverage option that fits into healthy, balanced lifestyles — through the reformulation and launch of a leading SSD brand: Coca-Cola Zero. While Coca-Cola Zero always contained zero calories and zero sugar, research showed that many consumers were unaware of the “zero sugar” aspect. Through the launch of Coca-Cola Zero Sugar, the company was able to leverage the consumer desire to cut sugar and address the “no sugar” misconception head-on with a new formula, new name and new messaging to help reinvigorate the category and drive sales for retailers. The name change from Coca-Cola Zero to Coca-Cola Zero Sugar clearly communicated to the more than half of consumers who are cutting sugar that this is a product for them. The company also reformulated the product to taste more like Coca-Cola. Knowing how important taste is to the sought-after millennial audience, the CocaCola Zero Sugar launch campaign focused on the new-and-improved taste of the product, calling on consumers to try the “best-tasting zero-sugar Coca-Cola yet” for themselves. As part of the launch, which was supported nationally from the fourth quarter of 2017 into the first quarter of 2018, The Coca-Cola Co. expanded availability of CocaCola Zero Sugar in convenience retail, ensuring the beverage would always be within an arm’s reach of desire. About one-third of consumers who tried Coca-Cola Zero Sugar during the launch had never tried a Coca-Cola before, and consumer satisfaction with the new formula post-trial was above 80 percent. These new consumers were younger, more multicultural and switched from brands outside of diet colas — all of which challenged conventional wisdom about the diet SSD category and aligned well with the core convenience store shopper. Nielsen data for total U.S. convenience stores Jan. 1 to Dec. 8, 2018 showed that Coca-Cola Zero Sugar delivered: a $31-million increase in dollar sales (a 17.5-percent gain compared to the previous year); a 1.8-percent increase in low-/ no-calorie SSD dollar share; and a 3-percent increase in distribution (on an already high base of 94 percent). As a result, the low-/no-calorie SSD segment in convenience retail also increased by $25 million, a gain of 1.6 percent vs. last year.

PACKAGED BEVERAGES: The Coca-Cola Co. It’s no secret that the diet sparkling soft drink (SSD) category has faced significant headwinds in recent years, with continuous declines

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SALTY SNACKS: Kellogg Co. Kellogg’s developed its Pringles 7-Layer Dip exclusive flavor in partnership with 7-Eleven Inc., the

nation’s largest convenience store chain, as part of its “Pop More Score More” promotion. This promotion leveraged the football watching occasion and focused on consumers with an affinity for salty snacks with bold flavors. This limited-edition flavor was available solely at participating 7-Eleven locations, bringing the stores unique Pringles news and allowing them to meet consumers’ on-the-go snacking needs, since the resealable, take-anywhere, iconic Pringles can favors anytime snacking. Consumers were encouraged to purchase two cans of Pringles and scan their 7Rewards app at checkout for entry, which not only drove product purchase, but also boosted app usage. The promotion was featured on the “Deals” page of the 7Rewards app, including details on how to participate. Promotion participation gave 7-Eleven operators a chance to win a HD Smart TV and their consumers an opportunity to win The Ultimate Football Viewing Package. Kellogg’s supported the program with media outreach, which was picked up by more than 10 online outlets,

including social media channels, with more than 18 million total impressions. Pringles saw dollar, unit and velocity growth at 7-Eleven — a direct result of 7-Layer Dip in the marketplace. During the eight-week limited-time offer event, 7-Layer Dip was the No. 5 Pringles standard can offering at 7-Eleven. Pringles experienced a 36-point improvement in dollar sales vs. the prior eight weeks and a 47-percent improvement in dollar sales vs. a year ago. While 7-Layer Dip Pringles contributed to 25 percent of the growth dollars for Pringles at 7-Eleven during the time in-market, more importantly for 7-Eleven, the retailer saw its overall take-home snacks segment experience mid-single-digit point change for the overall category during the event. The growth continued after the promotion concluded. In the eight weeks after the limited-time offer was in-store, Pringles sales continued to move faster than before and overall, Pringles continued to grow double-digits at 7-Eleven vs. a year ago. Overall, the execution and performance of the Pringles 7-Layer Dip limited-time offering was a success for both 7-Eleven and its supplier partner. CSN

UNLOCKING THE FUTURE OF COMMERCE FOR ENTERPRISE GROWTH

November 12-14, 2019 Hyatt Regency Chicago An official event of:

Produced by:

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3/1/19 7:1363 PM Convenience Store News

FOODSERVICE

What’s Hot on C-store Menus? Top performers in 2019 continue to be indulgent items AT A TIME when winning concepts are typically healthier options, the top performers in Datassential’s SCORES survey continue to be indulgent items. Two rose to the top in the latest survey: Casey’s Pepperoni Meatball Pizza and Maverik’s Bavarian Cream Donut.

Purchase Intent Rules OPERATOR: Maverik Inc. ITEM TYPE: Limited-Time Offer DATE: January 2019 PRICE: 2 for $2.50 Your morning just got a little better with our brand new Bavarian Cream donuts. Try a couple today. They’re only $2.50 for two for a limited time.

Consumers indicate intent to buy based on two SCORES that measure whether the chain or supplier brand is driving demand. Branded Purchase Intent (PI) delivers an ownable item consumers feel matches with the chain’s experience. Casey’s Pepperoni Meatball Pizza earned a 96 on this metric, as well as on Draw — which shows shoppers will stop there just for this item.

Unbranded PI Means Opportunity This month’s runner-up is another indulgent doughnut concept that over-delivers on Unbranded Purchase Intent with a score of 97. So, while the Bavarian Cream Donut is a great limited-time offer (LTO) for Maverik Inc., it is also a concept that could work for your operation.

OPERATOR: Casey’s General Stores Inc. ITEM TYPE: Limited-Time Offer DATE: January 2019 PRICE: $13.99 Topped with flavorful meatballs and our classic pepperoni, this brand-new pizza is here for a limited time only.

Casey’s General Stores Inc.

Maverik Inc.

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.

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

prepared Delivering the nuanced insights and proprietary shopper research needed to thrive in today’s CPG and Retail industries.

DISCOVER WHAT YOU’VE BEEN MISSING.

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10/2/18 11:58 AM

TOBACCO

Is Cannabis Edging Closer to the Backbar? While still illegal at the federal level, one estimate puts the U.S. cannabis market at $56B by 2025 By Melissa Kress WITH CHANGING CONSUMER PREFERENCES,

alternative tobacco products are securing more space behind the backbar. One that remains on the edge — but could offer convenience store operators a huge opportunity — is cannabis. The federal legalization of medical and adult-use cannabis would create a $56-billion annual U.S. cannabis market by 2025, and $86 billion in additional U.S. tax revenue between 2019 and 2025, according to Washington, D.C.-based New Frontier Data, an independent, technology-driven analytics company that specializes in the cannabis industry. Currently, 33 states have enacted legal state cannabis programs. Another 14 have approved use of cannabidiol (CBD), while support among other states continues to grow, the firm noted. Among New Frontier Data’s findings and projections: There are an estimated 272 million cannabis consumers globally, equivalent to 4 percent of the world’s population. These consumers collectively spend roughly $356 billion each year on cannabis — across both the legal and illicit markets. Looking at the United States alone, more than 24 million, or 9.9 percent of adults aged 18 and older, use cannabis regularly. A total of 115 million, or 48.2 percent of adults aged 18 and up, report using cannabis at some point in their lifetime.

Those figures are enticing, but are they enough for cannabis to become a viable product category in the convenience channel? The answer may lie with the federal government.

Legal or Illegal? Colorado became the first state to legalize marijuana for adults and regulate it like alcohol with the passage of Amendment 64 in 2012. The move was followed by several other states, including Alaska, Maine, Massachusetts, Michigan and Nevada. To date, according to the Marijuana Policy Project, nine states have enacted laws regulating and taxing marijuana for adult use. In addition, Vermont and Washington, D.C. have enacted laws making marijuana possession and cultivation legal for adults, and their governments are now considering proposals to regulate commercial production and sales. That number could increase this year. In early February, Maryland legislators introduced bills to regulate and tax cannabis for adults over 21 years old. Another legislator, Delegate David Moon (D-20th), filed a constitutional amendment, HB0632, which would establish a similar system. If enacted, it would be placed on the ballot and decided by Maryland voters in November. However, while cannabis is gaining ground at the state level, it still remains illegal at the federal level — giving some convenience store retailers pause.

C-stores & Cannabis The convenience channel is taking notice of the possibilities around cannabis. At the 2018 NACS Show, held in Las Vegas this past October, a standing-room-only crowd attended an education session titled “Marijuana: Capitalizing on a Budding Opportunity.” This was the first time that NACS, the Association for Convenience & Fuel Retailing, included marijuana in the annual show’s agenda. One of the session presenters was Keelan Gallagher, director of trade marketing and brands at Smoker Friendly International. Based in Boulder, Colo., the company is well acquainted with the potential of legalized marijuana. While Smoker Friendly

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has opted not to sell cannabis at this time, the retailer is embracing it from the accessories angle. At Smoker Friendly stores, marijuana-related items fall under the umbrella of the “Alternative” category. Within that category, herbal remedies account for 43 percent, pipes account for 37 percent, smoking accessories account for 12 percent and butane accounts for 8 percent, according to Gallagher’s figures from the summer. There are some things he said retailers should keep in mind if they enter the cannabis segment: • Retailers are responsible for knowing the laws at the federal, state and local levels; • They need to know their customer base and if carrying any cannabis-related items will offend their consumers; and • Retailers need to know how their employees will react to selling the items.

U.S. Suppliers & the Canadian Cannabis Market This past fall, widespread legalization of recreational cannabis moved closer to home when the Cannabis Act went into effect in Canada on Oct. 18 — four months after the Parliament of Canada approved it. The measure created a legal and regulatory framework for controlling the production, distribution, sale and possession of cannabis in Canada. It didn’t take long for U.S. companies to take notice, and action. On Nov. 1, Constellation Brands Inc. closed on a $5-billion investment in Ontario’s Canopy Growth Corp. Victor, N.Y.-based Constellation Brands is an international producer and marketer of beer, wine and spirits. Its imported brands include Corona, Modelo and Pacifico. The investment gives Canopy Growth the funding needed to build scale in more than 30 countries that are pursuing federally permissible medical cannabis programs and establishes the foundation needed to supply new recreational adult-use markets as cannabis becomes legal in additional markets around the world. “We’re excited to expand our strategic partnership with Canopy Growth and begin helping them build the global scale needed to win long-term,” said Rob Sands, CEO of Constellation Brands. “The global cannabis market presents a significant growth opportunity and Canopy Growth is well-positioned to establish a strong leadership position in this fast-evolving category.”

Source: Marijuana Policy Project

Election Day 2018 saw voters weigh in on adult-use legalization initiatives in Michigan and North Dakota and medical marijuana measures in Utah and Missouri.

call on Jan. 31, Altria Chairman and CEO Howard Willard explained the move gives it exposure to new growth opportunities, while also further diversifying its future income streams. Cronos’ cannabis business complements Altria’s core tobacco businesses and pushes Altria’s income opportunity beyond the United States, Willard added. “We believe the growth opportunities are significant and will extend across the globe as cannabis markets open. Selecting the right partner in this category was critical and we’ve done just that. Cronos’ strong management team has built unique capabilities to compete globally across the medicinal, recreational and nutraceutical categories,” he explained. “Our investment will allow Cronos to more quickly expand its global footprint and production capacity,” he continued. “We also expect it to accelerate the execution of its strategic initiatives, including investments in cannabinoid innovation and developing differentiated products and brands across medicinal and recreational categories.” CSN

In December, leading U.S. tobacco company Altria Group Inc. announced that it was taking a minority stake in Toronto-based Cronos Group Inc., a cannabis company. The transaction, which is expected to close in the first half of this year, represents a 45-percent equity stake in Cronos Group for an aggregate investment by Altria of approximately $1.8 billion. During the Richmond, Va.-based company’s earnings

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ALCOHOLIC BEVERAGES

From Struggle Comes Innovation Trying times in the traditional beer category leads to opportunity in new segments By Renée M. Covino IN THE ALCOHOLIC BEVERAGE ARENA, “hard times” can be a positive thing. While the traditional beer category continues to struggle, new innovation in the form of hard seltzers, teas, ciders and more are opening up emerging opportunities for the convenience channel.

The new offerings, with clever marketing behind them, are being met with strong growth and good consumer interest. With an appetite for newness, consumers like choices. To take full advantage of today’s emerging alcoholic beverage trends, here are some quick takes and questions for convenience store operators to consider:

Established Players Are Embracing the New Segments Despite slowed category growth, the overall U.S. beer market continues to expand in terms of product assortment. The average liquor store today has just under 1,400 beer items in stock at any given time, up from just over 1,300 in 2014, according to Nielsen TDLinx. And it’s not just new entrants churning out new products. The large, established players in the market are embracing the emerging segments, too. Constellation Brands, known for its Mexican premium import beers such as Corona and Modelo, is rolling out a flavored malt beverage version of Corona and a Svedka-branded premium spiked seltzer. It estimates the size of the U.S. alcohol alternatives segment at $3 billion and forecasts growth of $20 million over the next two to three years.

Corona Refresca, which comes in guava lime and passionfruit lime varieties, is marketed as a “premium spiked refresher,” targeting women aged 25-29. The Svedka spiked seltzer borrows the name of Svedka vodka, which is owned by Constellation. The cocktail-inspired drink is available in such flavors as strawberry elderflower, tangerine hibiscus and cucumber basil. Both brands check in at a relatively light 4.5 percent ABV. Wells Fargo Securities LLC believes the national launch of Corona Refresca (in early fiscal year 2020) will add further momentum to the brand and the overall category. Bonnie Herzog, managing director of tobacco, beverage and convenience store research, cites that recent market tests of Refresca suggest it could be more than 80 percent incremental to Constellation Brands’ core business due to the fact that it appeals to a totally different consumer base. Wells Fargo Securities is also “very optimistic” about the Svedka spiked seltzer, which Herzog said has been performing “in a positive manner” vs. the vodka category. Dave Burwick, president and CEO of The Boston Beer Co., supports the notion that the emerging segments can attract a different consumer base. He beliees the company’s Truly Spiked & Sparkling hard seltzer line and its Angry Orchard Rosé hard cider are attracting new drinkers to their categories from wine and spirits. Takeaway No. 1: Convenience stores can expand their shopper demographic with the alcohol alternatives segment.

The Appealing Attributes of Hard Cider Globally, the cider market is expected reach more than $16 billion by 2023, growing at a compound annual growth rate of 6.1 percent from 2017 to 2023, predicts Allied Market Research. Europe is currently the dominant region, holding more than half of the cider market share, but North America has the highest growth rate and is expected to keep growing the fastest, with a compound annual growth rate of 10.6 percent through 2023. Hard cider growth is being driven by the high demand for gluten-free drinks and the rise in preference for low-alcohol beverages, according to Allied Market Research. An increase in health concerns in the global population and concerns over the risks associated with alcohol consumption are also fueling demand. Takeaway No. 2: C-stores should be merchandising to all of the appealing attributes of hard cider.

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There’s No Canning Cider’s Potential Packaging is very much a part of the innovation equation.

Year-Over-Year Dollar Sales Growth: U.S. Beer

Can packaging is anticipated to grow at the highest rate within the cider market. Often boasting “craft branding,” cans cool down faster compared to glass bottles and are infinitely recyclable, thus supporting sustainable growth.

TOTAL BEER/FMB/CIDER

In January, Strongbow Hard Ciders introduced an 8.5ounce, 100-calorie slim can, which is being featured in a 12-can variety pack of three flavors containing just 100 calories each. The variety pack includes Strongbow’s newest flavor, Dry Pear, along with the highly-rated Rosé Apple and the recently relaunched favorite Original Dry. According to Strongbow, its 100 Calorie Slim Can is positioned “at the intersection of cider, canned wine and hard seltzer” to offer a crisp alternative. Takeaway No. 3: Make space for new packaging options such as slim cans and variety packs.

Single Varietal Ciders Elevate the Segment Cider now joins the ranks of wine, coffee, honey and olive oil in boasting single varietals.

*As of Aug. 31, 2018; FMB: Flavored malt beverages Source: Nielsen Scantrack, Nielsen U.S. xAOC

Year-Over-Year Dollar Sales Growth By Product Segment WEEK ENDED JUNE 17, 2017 - WEEK ENDED JUNE 16, 2018

In the fourth quarter of 2018, Original Sin Hard Cider announced it was releasing a series of unfiltered single varietal ciders made with freshly pressed New York State apples. New York is reportedly the second-largest apple producing state in the U.S. and boasts the most diverse selection of apple varieties in the country. The first in the series launched in December — Original Sin Unfiltered McIntosh Cider

4.6%

-3.8%

1.1%

The unfiltered single varietal line is designed to enable consumers to experience the unique flavor characteristics of a range of classic apples, the brand noted. Takeaway No. 4: Forward-thinking c-stores should play up the origin of the ciders they sell, similar to what’s done now with wine.

-1.0%

4.1%

*FMB: Flavored malt beverages Source: Nielsen U.S. xAOC

Craft Influence Comes to Hard Seltzer Nationally, the hard seltzer category is dominated by such big brands as White Claw (from Mark Anthony Brands), Truly Spiked & Sparkling (The Boston Beer Co.), Svedka Spiked Premium Seltzer (Constellation Brands), SpikedSeltzer (Anheuser-Busch InBev) and Smirnoff Hard Sparkling (Diageo). However, the segment is beginning to see some craft influence, similar to what happened with the craft beer segment. New craft hard seltzer offerings from regional breweries include Nauti Seltzer (from Wachusett Brewing Co.), Sound Hard Seltzer (Two Beers Brewing), HRD WTR (M.I.A Beer Co.) and Wild Basin Boozy Sparkling Water (Oskar Blues Brewery). Oskar Blues Brewery designed its new Wild Basin Boozy Sparkling Water to appeal to “active lifestyle consumers who value the outdoors, socializing with friends and

healthier living,” explained Patrick Daugherty, chief marketing officer of the Longmont, Colo.-based brewery, which is part of the Canarchy Craft Brewery Collective. The 100-calorie, 5 percent ABV hard seltzer is a gluten-free product that contains just one carb and zero sugar. It will be available in four varieties: Classic Lime, Cucumber Peach, Lemon Agave Hibiscus and Melon Basil. “Our goal is to introduce something that can help grow the category and give drinkers a true craft option in hard seltzer,” Daugherty commented. Takeaway No. 5: Take advantage of the “local” trend by stocking craft hard seltzer offerings exclusive to your area. CSN

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GROCERY

Carving Out a Niche In the age of home delivery and click-and-collect, how can convenience stores preserve their spot as the quick and easy fill-in grocery destination? By Renée M. Covino STORM COMING AND YOU NEED MILK? Baking

something and you forgot to get butter? The neighborhood convenience store used to be top of mind for consumers in a pinch, but today the proliferation of click-andcollect and on-demand delivery is threatening c-stores’ spot as the quick and easy fill-in grocery destination. “Convenience stores need to continue to emphasize their namesake and be more convenient than other options available

to consumers,” said Brad Christian, chief customer officer at Peachtree Corners, Ga.-based Market Force Information, which executes several industry-specific consumer research studies each year. Christian told Convenience Store News that c-stores cannot lower the level of quality of their offering if they are going to compete effectively. “Quality offers with high levels of convenience are resonating with today’s consumer,” he advised. “We are seeing this in the restaurant space with delivery services such as DoorDash, GrubHub and Uber Eats. We are also seeing it with the proliferation of mobile apps that are making the whole aspect of doing business with brands far more simple and convenient.” Wawa Inc., according to Christian, is a great example of a c-store chain that is providing quality and convenience. The Pennsylvania-based retailer placed first in consumer preference in Market Force Information’s 2018 QSR/Fast Casual Consumer Preference Study in the sandwich category — the first time in the study’s history that a convenience store took the top place in any category. “Consumers in our study felt more positively about Wawa’s delivery of quality and convenience than did consumers who patronized other brands such as Subway, Jersey Mike’s, Jimmy John’s and others,” said Christian.

The C-Niche While high-quality sandwiches are a niche that Wawa has carved out, there are plenty of other niches for c-stores to tap into, including better-for-you snacks and heat-and-eat foods. “C-stores can continue to expand fresh, high-quality, betterfor-you snack foods to increase trips, trip frequency, store loyalty and bring more female shoppers into the store,” said Paul Weitzel, vice president of analytics at Winston-Salem, N.C.-based Inmar, which applies technology and data science to improve outcomes for consumers and those who serve them. “In particular, c-stores can expand grocery variety to make it more of a neighborhood convenience fill-in location.” Weitzel also believes there is an opportunity for c-stores to improve their RTE/RTH (ready to eat/ready to heat) food offerings, providing items that are lower in shrink and leveraging local commissaries that can make fresh foods in a centralized environment. “This maintains consistency and improves quality and safety,” he said. Market Force’s Christian echoes that ready-to-cook home meal solutions is a niche just waiting for more c-stores

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to strike. “The preassembled and ready-to-cook meal has tremendous value for those with families who may be getting home from work and are time-starved to prepare a meal,” reasoned Christian. C-stores can cut into this market by offering similar options as grocery stores, but emphasizing their ease of parking and speedier checkout time. Interestingly, Market Force Information’s 2018 Grocery Benchmark Study found that consumers say “convenient location” is the No. 1 factor in determining at which grocery store they spend the majority of their grocery budget. However, offering cheap alternatives to maximize margin on emergency grocery items is not a good strategy to create loyalty, Weitzel cautioned. Instead, he suggests c-store operators pick three grocery areas they want to “win in and be better than anyone else.” Focus on the experience, he added. “Over the next decade, experience will become a driving force of where and how consumers shop,” he noted.

The D-Force Is it feasible for c-stores to have a delivery service the way some grocers do? “This may not be viable due to a more limited assortment of products, but much like the restaurant industry, convenience stores could use [third-party] delivery services to ensure that consumers have a variety of means of getting their products to consumers’ homes and places of work,” Christian explained. Internal delivery services do not make a lot of sense for c-stores, Weitzel agreed. “Grocery stores are averaging $150 per order in their e-commerce programs today and they are challenged to make money at those numbers,” he said. Rather, c-stores should partner with companies like GrubHub and Instacart that are

already servicing the community and can handle home delivery with more scale, he suggested. “Providing home delivery services and e-commerce, in general, is very expensive to do and requires significant scale,” Weitzel said. “This is a huge hurdle for c-stores where orders today only average two units. Grocery e-commerce orders are closer to 50 units. It requires large baskets with more margin to offset the incremental handling and delivery costs.” Some c-stores have already partnered up with delivery services such as DoorDash and Postmates. Pervez Pir, chief operating officer for Loop Neighborhood stores, believes c-stores will ultimately deliver themselves once demand and basket size increases. “It isn’t a big business right now, but it can grow as the demand increases,” he said.

A Is for Payment App While the jury is out on delivery service for c-stores, most agree that it is more feasible for the convenience channel to substantially tap into quick pay apps and other speed-oriented payment options to compete in the fill-in grocery space. “It is the future, and mobile wallet is here to stay,” said Pir. “Convenience stores will develop their own apps where customers can order, pay and pick up in-store.” Fast pay with self-checkout near the register is another viable option, according to Weitzel, although “shrink/theft would have to be studied before a decision is made.” The way Christian sees it, quickpay apps make a lot of sense for c-stores, especially if they can be paired with home delivery service. “Order the food, drinks and snacks, pay on the app and have them delivered,” he said. “It doesn’t get much more convenient than that.” CSN

Grocers vs. C-stores Loop Neighborhood’s Pervez Pir views the competitive space a little differently How does Loop Neighborhood, operator of 27 convenience stores across northern California, carve out its grocery niche? By stocking betterfor-you, healthy snacks; offering fresh salad bars and soups; and having a kitchen that can offer freshly made sandwiches, according to Pervez Pir, chief operating officer. In his opinion, convenience stores are not in competition with supermarkets when it comes to the grocery category because they are two different customer types: those who plan and pantry-load at the grocery store vs. those who buy on impulse and destination shop at c-stores. “Our customers want a smaller format that allows them to get in and get out without waiting in long lines,” Pir told Convenience Store News. “They want parking that is right in front of our doors and a familiar face they see daily. They want to be able to visit their favorite store multiple times a day, and they like that we constantly are introducing new items and programs.” Pir is closely watching the grocery trends he expects to play out in 2019: order and pick up in-store; deliver-toyou, autonomous vehicles; and selfserve kiosks whereby customers scan items with an app throughout the store and then checkout in one transaction. He believes convenience stores can get a piece of the action by evolving with grocery and offering similar payment methods and delivery options.

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FEATURE

TAKING ON

amazon

With reported plans to aggressively expand its Amazon Go concept, c-store operators need to play up their competitive differences, while learning from the e-commerce giantâ&#x20AC;&#x2122;s success By Tammy Mastroberte

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DEBUTING ITS CASHIERLESS STORE CONCEPT in

December 2016, Amazon entered the convenience space with Amazon Go. Now, with nine locations open as of press time in Seattle, Chicago and San Francisco, the e-commerce giant is looking to possibly open as many as 3,000 Amazon Go locations over the next few years, with as many as 50 locations in major metropolitan areas by the end of 2019, according to recent news reports. What does this mean for convenience stores? Should c-store operators be concerned about this affecting their own stores and sales?

“When you look at what Amazon is accomplishing, it doesn’t paint a pretty picture for the c-store industry. Don’t mock this. Study this and become a student of it. To defend yourself, you have to learn. You can’t defend yourself until you know what they are doing.”

Stand Out to Compete Despite its deep pockets and innovative technology, there are things Amazon and Amazon Go can’t offer that c-stores can — and these advantages should be highlighted and celebrated. They include community, unique loyalty and rewards programs, and the employee/customer connection.

The short answer is “yes.” “Right now, it’s not an immediate problem, but if they can accomplish opening 3,000 stores in the next couple of years, that is definitely something to worry about,” Kimberly Otocki, c-store content marketing specialist at Paytronix, a provider of loyalty and customer engagement solutions for restaurants, retail chains and convenience stores, based in Newton, Mass., told Convenience Store News. “I think c-stores have a leg-up because of the fuel component, which means there will always be foot traffic to pull in from the pump.” Since the Amazon Go concept is going after foot traffic in urban areas, highway and local neighborhood stores won’t necessarily be in direct competition — but those with locations in urban, walk-up neighborhoods could find one opening in their area down the line. “The stores are in densely populated, urban markets and the traffic drawn into the stores is foot traffic from pedestrians walking by or in close proximity on their way to work,” said David Bishop, partner at consultancy Brick Meets Click, based in Barrington, Ill. He believes the Amazon Go stores are “absolutely a threat” to the c-store industry. “For c-stores, it targets the on-the-go shopper and if you look at most of the assortment they offer, it’s grab-and-go and prepackaged items,” he noted. Bishop predicts Amazon will continue to look for highfoot-traffic locations, such as Times Square or Penn Station in New York. Eventually, Amazon could potentially saturate the top 50 or 100 metro markets, the way he sees it. “Amazon is looking at foot-traffic patterns and trying to intercept the foot traffic with these stores, so they will likely pop up by train stations and bus depots,” he said. Even those not in direct competition with Amazon Go in terms of location, though, should be paying attention to what the company is doing in the space and understand it will still have an effect on them and their stores. Amazon is already offering two-hour delivery in big cities for e-commerce orders and free delivery to customer vehicles in 37 cities. “Change is coming, and it’s coming fast,” said Kevin Struthers, senior consultant at W. Capra Consulting, based in Chicago.

“C-stores are part of the local community and connect more with the local customers than Amazon Go,” Otocki of Paytronix pointed out. “They can partner with local businesses to provide more offerings, which is a great way for them to remain a big part of their communities” Although Amazon Go has employees in its stores to check IDs and restock shelves, there is not a personal connection like the ones created in neighborhood c-stores. In fact, there is no interaction at all upon checkout at Amazon Go stores. C-stores can use this as an opportunity to gain customer loyalty through personal relationships. “You have to exploit what you have, and retailers have built strong value propositions because of their people,” Struthers noted. “There are people at the Amazon Go store, but you don’t interact with them. That is a missing piece.” Additionally, Amazon Go offers prepacked, commissarydelivered and pre-portioned food products, which is their way of delivering fresh food. Conversely, c-stores with robust foodservice programs can stand out by focusing on the quality and freshness of their made-toorder items and other unique foodservice offerings, said Bishop. This also includes hot and cold dispensed beverages, which Amazon Go stores don’t currently offer. “Made-to-order is going to be different for each retailer, but what they need to ask themselves is: If one of these stores moves into my market, how am I compelling customers to visit my store?” Bishop explained. “Having a selection of quality dispensed beverages differentiates them, as well as made-to-order, customized and personalized food offerings.” Highlighting unique differences is a way to not only compete with Amazon, but also all stores nearby. It could be foodservice, a unique coffee program or a beer growler station. Even offering seating for those customers who don’t want to grab and go can help a c-store stand apart from the crowd. “It’s not about copying Amazon, but creating differentiation so there is less direct competition for consumer dollars, and more compelling reasons someone wants to shop your store,” Bishop said.

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FEATURE

Lessons to Be Learned While c-stores should definitely find ways to differentiate themselves from Amazon Go, there are some aspects of both Amazon as a company and Amazon Go that should be studied and applied throughout the convenience channel. One of these is Amazon’s use of data, which is an advantage it gained from starting online and growing its Amazon Prime loyalty program. The company knows who is buying what and where they are located, and can tailor assortments and testing of products accordingly. “When customers shop with Amazon online, the company uses that market intelligence to tailor product assortment because they know where people are and what they buy,” said Bishop, noting that of the Amazon Go stores currently open, only two offer beer and wine, and only one in San Francisco sells sushi. Amazon knows a lot about its customers, so c-stores can compete by gathering as much data as they can on their customers as well. This can be done through a variety of ways, including a loyalty program or mobile payment, Otocki explained. “Loyalty programs are a great way to get customers identified, but this can also be done through mobile payment and tokenization of credit cards, as well as phone SMS and email programs,” she

said. “If you can get the data on your customers like Amazon does and then harness it through relevant offers and more, a c-store will be in a better place to compete.” Technology is another area where Amazon and Amazon Go excels, using cameras and shelf sensors, along with an app, to offer a frictionless shopping experience with no need to checkout with a cashier. While some c-stores are offering self-checkout options, there are other ways they can utilize technology to create “an experience” in their stores. “C-stores have to get their mind around digitally interacting with customers. Amazon is already there because they started off in e-commerce,” Struthers said. “Look at how to digitally engage because this is where the sticky relationship comes from — to draw them in and engage them to visit the store.” He pointed to Kum and Go’s use of geofencing and location-based ads, drawing in customers when they get within a certain range of the store. Frictionless payment is another area to consider, as 7-Eleven Inc. is doing now in a scan-and-go concept trial, according to Struthers. “You don’t necessarily have to do scan-and-go for the whole store; it could be a grab-and-go section,” he advised. Furthermore, there are ideas within Amazon’s product offerings that c-stores can take note of. For example, two Amazon Go stores have started testing the sale of alcohol and, depending on how consumers respond, the company may expand that, hitting another major c-store territory, Bishop noted. The select Amazon Go stores are offering single-serve beer and a selection of six- and 12-packs, with an average of 85 SKUs. The stores are also offering approximately 100 SKUs of wine in take-home, single-serve cans and 375-milliliter bottles. “C-stores know wine is a growing interest,” said Bishop. “How are operators approaching it? Are they just offering 750 milliliters and take-home solutions, or is there a single-serve opportunity they can tap into the same way they sell beer?” Amazon Go also has a focus on all dayparts for meals, including breakfast, lunch and dinner. Although all the offerings are prepackaged, Bishop said Amazon Go for dinner is serving as a “provisional pantry for the house,” with take-home meal kits designed to be brought home and prepared. “C-stores have done a great job with breakfast and lunch, but dinner has been somewhat elusive, and there is a growing trend in meal kits,” he explained. “Stores can devise some take-home solutions to create new categories for their to-go business.”

E-commerce giant Amazon is reportedly looking into opening as many as 3,000 Amazon Go stores in the new few years.

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It’s important as well not to overlook the “surprise and delight” experience of the Amazon Go stores with their use of technology. When talking to Amazon Go customers and reading reviews, the technology is what people are focused on, according to Bishop.

“The technology enables this seamless shopping experience where you can just walk out of the store, and that is what people are talking about,” he said. “They are not talking about the fact that they have the best pastries or sandwiches. What is surprising and delighting people today is the technology.” The mistake many retailers are making is underestimating Amazon. The size of the organization and the talent pool the company has access to, combined with the amount of money it has to spend, makes Amazon a threat to a variety of retail industries, acknowledged Struthers. Staying competitive is about staying ahead of the curve and adopting technology to improve the customer experience and gain more insight into purchasing behavior and needs. “It’s about getting ahead of it and making sure you are providing the level of convenience customers are asking for, whether it’s mobile payment, scan-and-go or loyalty,” Otocki agreed. “Meeting Amazon Go with a more frictionless experience, including mobile ordering ahead, where people can pull into a parking spot and have items delivered — like McDonald’s does now — this would be especially good for fuel-only customers sitting at the forecourt.” CSN

At Amazon Go, cameras in the ceiling track customers as they shop. The brand’s advanced technology is surprising and delighting shoppers.

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Convenience Store News

FEATURE

THE MODERN CHECKOUT Whether it’s apps, mobile self-checkout or in-vehicle payments, payment technology is evolving faster than ever By Tammy Mastroberte Choice Market customers have the option of traditional checkout or self-checkout, whereby they can order food and scan grocery items into an iPad.

locations; Jiffy Trip, based in Cherokee, Okla., operating 28 stores; and Enmarket, based in Savannah, Ga., with 123 stores. “Consumer interest in mobile self-checkout is already there, especially given the marketing hype around Amazon Go,” said Patrick T. Raycroft, a consultant at Chicago-based W. Capra Consulting Group, specializing in c-store and petroleum, quick-service restaurant and specialty retail, as well as digital commerce technologies. All of the new payment options today are meant to make the checkout process easier and more convenient. Consumer adoption of such technology is increasing fast.

THE CHECKOUT PROCESS IS EVER-CHANGING in

all areas of retail, whether it’s big-box, apparel, grocery or convenience stores. The standard cash, credit or debit payment methods are now accompanied by mobile payment, Apple Pay, Google Pay, Samsung Pay, Chase Pay, and even taking the entire checkout process mobile. Consumers are also being given the ability to pay right from their vehicles with in-car payment technologies in select newer vehicles. “Consumers have told us they want speed, ease, value and security, as well as convenient access to a variety of payment types,” Albert Rivas, head of North American marketing technology for Shell Retail, based in Houston, told Convenience Store News. “Adding these different payment platforms and forms of payment delivers a simplified, differentiated and personalized customer experience while driving loyalty.” Amazon introduced a cashierless checkout experience with its Amazon Go stores, and frictionless checkout options are now popping up at other retailers, including c-stores. 7-Eleven Inc. is piloting mobile self-checkout using its own app at a handful of stores in the Dallas area, while several other chains are using a third-party service, Skip mobile self-checkout, to offer a frictionless checkout experience. These chains include Domino’s Food and Fuel, a subsidiary of Elmer Smith Oil Co., based in Clinton, Okla., with 17 stores; Ricker’s, based in Anderson, Ind., operating 58

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In the convenience and fuel retailing industry, fuel brands and c-store brands are rolling out their own branded apps, tying payments into them along with loyalty programs, and continually updating and expanding upon them to keep pace. “In October 2018, Shell rolled out a new Shell app with a variety of payment options,” Rivas explained, noting that Shell’s Fuel Rewards program is integrated into the app, allowing customers to gain benefits by using mobile payment. “In December 2018, we added Shell branded credit cards and Masterpass within the Shell app. We now offer

WINNER

FEATURE

Choice Market will soon offer its customers a frictionless checkout option that uses an app to complete payment.

customers the ability to pay in a wide variety of ways, including Chase Pay, card on file (Mastercard, Visa, American Express, Discover), S-Pay (linked to a checking account), Shell branded credit cards and Masterpass.” Some companies, like Chevron, are even including Paypal as an option for fuel payments. As technology innovation continues, consumer expectations keep rising based not just on what they see in the c-store industry, but in other industries as well, according to Kevin Grieve, North America payments lead at Accenture, a consulting firm based in Dublin, Ireland. This encompasses Netflix, Amazon, Airbnb and Starbucks, to name a few. “When Starbucks launched mobile payments, they didn’t just offer payments,” Grieve explained as an example of what consumers will expect from other industries. “They added a loyalty program on top of

it, so they offered convenience and value. If it was just a payment system, there might have been less interest. Now, they added mobile ordering, which is another value-added component.” Simply offering mobile payment is not going to alone drive adoption of mobile commerce, although it is necessary to offer options in today’s world. Rather, Raycroft believes it’s about the experience given to a consumer using the mobile platform, with payment being only a piece of it. “It could be offering rewards or a loyalty program, but there has to be something that brings them to that experience because just being able to pay on my phone doesn’t do it the way people anticipated,” he said.

Frictionless Checkout When it comes to the checkout process, consumers are looking for flexibility in payment methods, ease and speed. In the c-store industry, customers used to go into the store to checkout for fuel, but then pay at the pump was added. Now, customers are gaining the ability to pay from inside their cars and, of course, use their mobile phones, Grieve pointed out. “The critical shift is payments have moved into the cloud, so there is no more POS [point-of-sale] terminal if you think about it,” he said. “Look at Uber — the POS is on the phone and in the cloud. Customers have stored credentials and just go into the app, add tips and get out. The POS is gone. It’s all in the cloud and all software.” The first step is the “hybrid,” where people still use their mobile phones to pay in the store, such as Starbucks scanning the phone at the register. The next step is with mobile order ahead, where people can just go inside, pick up their coffee and go, according to Grieve. “With Amazon Go and other industries and retailers, including Walmart, moving to self-checkout, it’s about removing the friction for people,” he explained. At Choice Market, a new convenience store concept in Denver, Colo. (with one location open and two more in development), the POS is in the form of iPads. A kiosk

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feature allows for self-checkout. Customers can order food and scan grocery items into the iPad. “One of our newest stores will be the first test of a truly frictionless checkout and that will be our prototype for future stores,” said founder and CEO Mike Fogarty, noting that the retailer is partnering with Ava Retail and using artificial intelligence, computer vision and Internet of Things (IoT) to track customer purchases. “They will be able to check in on the app, scan and add things to their receipt, and also order ahead.” Choice Market’s new frictionless checkout experience using the app will allow customers to purchase anything, even coffee and bagels without a UPC code, and the system will know what it is, Fogarty said. The Ava Retail technology will integrate with the POS and using camera sensors and artificial intelligence, it will connect each shopper with the items pulled off the shelf in real time. While Choice Market offers an app now, the company will debut a new app in the third quarter of 2019 to allow for all the changes it is making. “Part of the app will be click and select, order ahead or scan a code when you come into the store. Once you check in, you can purchase anything in the store, including prepared food, and it will add it to your cart in the app,” he said. “We have 40 percent of our transactions coming through self-checkout and people really enjoy using it with the UPC items now.” At the c-store chains tapping into third-party apps like Skip, customers scan items and pay on their mobile phones, creating a frictionless environment. Skip integrates with several POS and loyalty providers, and is willing to build integrations where necessary, according to its website. “Frictionless makes the customer’s journey and experience enjoyable and efficient, and we are a customer-centric company,” Fogarty said. “We are not looking at frictionless from a labor savings standpoint because we will just adjust our labor as ambassadors on the floor helping customers or in the kitchen. We are thinking about it through the lens of the customer.”

In-Vehicle Payments One of the newest payment options to hit the market, and specifically the c-store industry, is in-vehicle payments. Shell has partnered with General Motors for the automotive industry’s first-ever embedded, in-dash fuel payment and loyalty experience. At Shell-branded gas stations, customers who fuel eligible Chevrolet, Buick, GMC and Cadillac brands can use their vehicle’s in-dash app to pay and earn and redeem Fuel Rewards savings. “Customers can use Shell Pay & Save within the GM Marketplace to pay for their fuel directly from their vehicles’ infotainment screen, and earn and redeem Fuel Rewards savings in the process,” Rivas detailed. Once a customer selects Shell Pay & Save in the vehicle’s Marketplace, instructions to sign up are emailed to them so they can register. Then, they simply enter the

pump number at the Shell station and receive a three-digit code to enter into the dispenser.

Shell recently partnered with General Motors to enable in-vehicle payment.

And Shell isn’t the only fuel company offering this option. Chevron Products Co., a division of Chevron U.S.A. Inc., is partnering with Honda Innovations’ Honda Developer Studio to offer in-vehicle payment, allowing customers to pay for fuel and make c-store purchases from inside their vehicle. In addition, Wex Inc.’s payment solution DriverDash is currently available at more than 11,000 Exxon- and Mobil-branded gas stations across the United States, enabling fleet drivers to authorize fuel transactions from inside their vehicles. “It works similarly to a mobile app but it’s in the car’s navigation system,” said Raycroft. “What this really brings to the table is a significant amount of consumer data not captured from a mobile device to help create more personalized experiences, including odometer readings, traffic routes and average mile per hour. My perspective is it’s the future.” Mobile payment, in general, is really the “end game,” according to Grieve, and while the United States has been slower to adopt compared to other countries like China, where nearly half of all commerce is mobile, he believes U.S. adoption will continue to grow. “Mobile payment is definitely a place that is experiencing innovation and we expect the appetite for mobile payment solutions will only grow in the future,” Rivas agreed. CSN

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STORE SPOTLIGHT

A ‘Fresh’ Take on Convenience Alltown Fresh doesn’t want its guests to sacrifice healthy, fresh food choices for convenience By Danielle Romano

Alltown Fresh is committed to “fresh convenience.” This means fresh-food alternatives that are organic, natural, gluten-free, vegan and locally sourced.

ALLTOWN FRESH, A NEW CONVENIENCE STORE

concept from Global Partners LP that’s committed to “fresh convenience,” is proof that good things take time. Debuting Jan. 16 in Plymouth, Mass., the prototype took roughly 18-24 months to launch from concept to fruition, requiring a process more complex than a typical c-store opening and more like a restaurant opening than anything else.

At a Glance

Alltown Fresh Location: 22 Long Pond Road, Plymouth, Mass. Size: 4,800 square feet Unique features: Aesthetics similar to that of a local farm stand; organic, natural, vegan, vegetarian, gluten-free and locally sourced alternatives; a rush-free environment

“Special attention was given to each ingredient in every menu item. Local supply chains were established in order to offer fresh, locally sourced products, and construction required a very specific design to create the exact vision we anticipated,” an Alltown Fresh representative told Convenience Store News. “While it was more strenuous than previous launches, the results speak for themselves.” With years’ worth of industry data and consumer behavior data showing that shoppers are looking for healthier on-the-go options, Alltown Fresh seeks to align with what its guests are looking for without them having to sacrifice healthy, fresh food choices for convenience. “Alltown Fresh is the antithesis of today’s convenience store experience. When people think of convenience stores, they

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instantly think of quick, stale and unhealthy products,” the representative explained. “Alltown Fresh offers guests a completely different experience through healthy, fresh food choices and made-to-order meals — including organic, natural, vegan, vegetarian, gluten-free and locally sourced alternatives — all in a rush-free environment where guests can hang out with one another. Designed to be more of a local marketplace than a standard convenience store, Alltown Fresh has created a community spot for everyone in the area.”

Local Tie-Ins Plymouth was chosen for the debut of Alltown Fresh because the town is tightly aligned with the c-store banner’s target psychographic and demographic: millennials focused on fresh food and moms looking for healthy choices for their kids. In addition, the location is in a high-traffic area with people commuting back and forth from Cape Cod. “The local, tightknit community also just made it feel right,” the Alltown Fresh rep noted. Throughout the launch of Alltown Fresh, design was a significant aspect taken into consideration. The team wanted a modest design that could still achieve all of the goals for elevated amenities and offerings. For example, the team debated whether to

go with television monitors to display product offerings, but instead chose menuboards that someone could come in and hand-write for a more local, handmade feel. The resulting effect is aesthetics similar to that of a local farm stand. Housed within the 4,800-square-foot Alltown Fresh store are healthy, fresh food choices and made-to-order meals, as well as classic fare that reinvents what it means to shop and eat in a convenience store, such as: Healthy classics: Made-to-order meals feature all organic produce and fresh, on-site roasted vegetables. Examples of curated breakfast options include the Green Smash avocado toast, specialty protein bowls like the Teriyaki Tease, wholesome sandwiches like the Fresh Pilgrim, and flavorful salads like the Minty Moroccan. Healthier grab-and-go alternatives like Vegan Rob’s Cauliflower Puffs and Unreal chocolate products are also available. Fresh smoothies: Blended on-site using all organic produce, guests have a choice of milk, such as almond and coconut, and a choice of yogurt, such as Greek and cashew alternatives. Smoothie varieties include Escape, which offers a refreshing, hydrating blend rich in vitamin C; Power, which offers a balance of carbs, fiber and fat for sustained energy; and Awake, which is blended with cold brew coffee for a boost of energy with protein and fiber. Organic beverages on tap: All-natural kombucha, sourced from Vermont’s Aqua ViTea, and organic soda, courtesy of Maine Root Soda and Tractor Soda, offer a seasonal rotation of “clean” beverage alternatives in flavors such as Hibiscus Ginger Lime, Blood Orange and Ginger Beer. Craft coffee: Swiss made bean-to-cup coffee machines offer instant brewing of small batch, locally roasted coffee beans for fresh hot or iced coffee in blends from around

the world, such as fair trade and organic Monadnock Blend, Stratton Blend and Guatemala San Marcos. Madeto-order coffee classics like macchiatos and lattes are available as well. Alltown Fresh also incorporates amenities found in boutique grocery stores and coffee shops: • Self-order kiosks for customizable ordering; • An open grill for efficient, on-demand meal preparation; • Indoor and outdoor seating where guests can hang out and enjoy their meals; • Free Wi-Fi; and • A pet relief area for guests with animals. On the forecourt, the retailer offers 12 regular fueling positions; three high-speed diesel fueling stations; a RV pump-out station; and four Electrify America direct-current fast chargers — two 350 kilowatts and two 150 kilowatts — for guests with electric vehicles.

Expansion on the Horizon As the Alltown Fresh team moves forward, it plans to continue refining the current model in Plymouth. Additionally, there are a number of new Alltown Fresh sites in development. “The Alltown Fresh concept is innovative and disruptive, so the brand is working on a multi-year program, and looking forward to rolling out new sites in 2019 and beyond,” the Alltown Fresh representative told CSNews. Along with the rollout of new sites, Global Partners is looking at a variety of expansion options, including, but not limited to, the conversion of current Alltown Market convenience stores in areas that align with Alltown Fresh’s targeted demographic. Alltown Market is another c-store banner operated by Waltham, Mass.-based Global Partners. CSN

Kombucha on tap, fresh smoothies and craft coffee are among the ways Alltown Fresh is reinventing the convenience store experience. MAR

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Convenience Store News

NEW HORIZONS

Break the Glass Ceiling (or Break the Law) Pressure to increase gender diversity at the top is on the rise became the first state to pass a law requiring publicly traded corporations to add women to their boards. Hmm, “All male? Go to jail.” Not quite.

LAST FALL, CALIFORNIA

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

The state law requires publicly traded companies headquartered in California to appoint at least one woman to their boards by the end of this year. By the end of 2021, a minimum of two women must sit on boards with five members. There must be at least three women on boards with six or more members. Companies that fail to comply face fines between $100,000 and $300,000. “People would prefer that you wouldn’t have to mandate,” Tierney Remick, vice chairman and co-leader of Korn Ferry’s board and CEO Services practice, said at the time the law passed. “But in reality, [progress is] not moving fast.” As counted just before the law passed, 377 California companies tracked by the Russell 3000 Index (the largest U.S. stock-traded companies) must add at least one woman to their boards to comply with the law,

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according to Board Governance Research LLC. In total, nearly 700 women must be seated in the next three years. These figures don’t reflect the scarcity of women on boards of smaller public companies headquartered in the state, many of which are likely to have all-male boards, Board of Governance Research CEO Annalisa Barrett told The Associated Press. “Smaller companies haven’t had as much pressure on them to take advantage of the benefits of having a diversified board,” she noted. What does it say about deeply entrenched bias in corporate America that the threat of a $300,000 penalty will do more to move the needle on gender equality than the myriad proven competitive and bottom-line benefits associated with women’s leadership? Scores of studies have shown the business benefits of greater representation of women at the most senior levels. Gender diversity and inclusion bring better decision-making, higher returns on investment, improved efficiency and lower turnover.

One report, by Lehigh University’s Corinne Post and Georgia State University’s Kris Byron, found that women tend to think more broadly and holistically, and companies with women board members are more socially responsible. When that type of thinking is brought to the boardroom, decision-making implications for employees and the communities where companies do business are more likely to be given a voice. Women’s preparedness — fueled by feelings that their qualifications may be questioned — has an effect on male board members, Post told Forbes.com. “When women participate on boards, the attendance of male directors goes up, too,” she said. “There might be some type of contagion effect where if women come better prepared, then everybody starts preparing better. That can help in making better decisions overall.”

Pressure for Progress At the current rate of progress, though, true equality at the senior level is decades away. The glacial movement is caused, in part, by the many men and women who are satisfied with so little progress. Nearly half the men and a third of the women surveyed for McKinsey’s Women in the Workplace 2018 study believe women are well represented at the senior level when they fill just one in 10 roles. Even so, the California law comes at a time when public, shareholder and institutional investor pressure to increase gender diversity at the top is on the rise. Other states — including Illinois, Massachusetts, Pennsylvania, Ohio and Colorado — have issued resolutions encouraging gender diversity on corporate boards.

Convenience Store News is pleased to continue this series of educational columns by the Network of Executive Women (NEW), coinciding with the annual CSNews Top Women in Convenience awards given out each fall. Forty-five female managers, executives and directors who work in the convenience store industry were honored in our 2018 program. In addition to being a presentation sponsor for the Top Women in Convenience program, NEW and CSNews have partnered to develop this series of columns directed at helping corporate leaders drive more inclusive company cultures. 2019 SPONSORS Founding & Presenting Sponsor:

More than 80 percent of institutional investors surveyed by the EY Center for Board Matters reported board composition, with a focus on diversity, would be a top priority last year. “This may include gender, race and ethnicity, age, nationality and geography, socio-economic backgrounds or other forms of diversity, but gender was most commonly cited, partly due to the lack of consistent disclosure on any other characteristic,” EY reported.

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In February 2018, BlackRock Inc., the world’s largest asset manager, announced it wanted its portfolio companies to have diverse boards, noting “we would normally expect to see at least two women directors on every board.” The firm also asked some 300 companies in the Russell 1000 that have fewer than two women on their boards to disclose their approach to boardroom and employee diversity. Still, California’s law has been opposed by nearly three dozen business groups and will most certainly be challenged in court, likely by the California Chamber of Commerce.

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But if it takes a state mandate and fine to break down barriers and move toward gender equality, I say, “One down, 49 to go.” CSN Sarah Alter is president and CEO of the Network of Executive Women, a learning and leadership community representing more than 12,000 members in 22 regional groups in the United States and Canada. Learn more at newonline.org. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

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Caetlyn Roberts Giant Food

Great companies need great women

ntry and mid-level women are leaving our industry at nearly twice the rate of men — senior-level women are leaving at nearly four times the rate of men.* NEW provides solutions that retain and develop great women leaders. Our learning programs, career development, conferences and local events help tens of thousands of women advance each year. Our insights, best practices and advocacy help transform organizations and create a better industry workplace for all. Join our movement today at newonline.org. * Download our report

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ADINDEX Altria Group Distribution ....................................................2-3 Anheuser-Busch Inc. ............................................................53 Atkins Nutritionals Inc. ........................................................14-15 BIC Corporation ......................................................................37 Coca Cola Ltd. .........................................................................51 Cookies United ........................................................................9 Core-Mark International.......................................................43 E-Alternative Solutions ........................................................57 Eby-Brown LLC .......................................................................61 Forte Products ........................................................................16 Home Market Foods..............................................................35 Horizon Food Group .............................................................45 J&J Snack Foods Corp. .......................................................19 Jelly Belly Candy Company ..............................................5 John Middleton Company...................................................29 JUUL Labs ................................................................................Back Cover Liggett Vector Brands ..........................................................31 National Confectioners Association ...............................23 Nestle Professional ................................................................27 Paytronix Systems .................................................................77 Premier Manufacturing ........................................................41 Paytronix ...................................................................................19-22 Smoker Friendly Intl. .............................................................25 Swedish Match North America LLC ................................13, 99 Swisher International ............................................................21, 49 The Hershey Company .........................................................55 The Wonderful Company...................................................7 TransAct Technologies .........................................................11 Tyson Foods .............................................................................59 Universal Merchants ..............................................................Outsert VP Racing Fuels & Lubricants ...........................................Front Cover White Castle Food Products, LLC ...................................39

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Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 8550 W, Bryn Mawr Chicago, Il 60631. Copyright Â© 2018 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

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GETTING TO THE CORE

Millennials vs. Gen X vs. Baby Boomers Usage and interest in “convenient” shopping innovations varies by generation A “convenient” shopping option no longer means just a trip to the local convenience store. Today, convenient shopping options include home delivery, curbside pickup, drive-thru, self-checkout and more. EIQ Research Solutions, sister company of Convenience Store News, surveyed 1,000-plus convenience store shoppers in January 2019 to determine their interest and likelihood to use different shopping options when frequenting c-stores. The findings revealed interesting differences between the millennial, Gen X and baby boomer generations.

Convenience store shoppers across generations have tried similar services, but a larger proportion of millennials have experienced mobile-based options. % of Shoppers That Have Tried at a Convenience Store (By Generation)

Key Takeaway While generations shop c-stores at a similar frequency, millennials appear to have tried most of the services at a higher rate than Generation X and baby boomers. As retail channels like mass, grocery and QSR/fast food increasingly provide these services, younger and future shoppers will come to view them as basic, everyday necessities rather than unique and cutting-edge.

Different generations have comparable priorities in the services they would be likely to try at convenience stores, but the order is slightly unique. % of Shoppers Ranking Likelihood They Would Use at a Convenience Store if Available (Items ranked from 1–8 where 1 is “Most Likely” and 8 is “Least Likely”) Key Takeaway All three generations rank the same three innovations in the list of services they are most likely to try if they are available at a c-store. Where millennials’ top 3 are selected by a similar percentage (45-48%), three of five Gen X and baby boomer shoppers rate self-checkout at register as their top choice, indicating a need to be in-store (vs. curbside or drive-thru), and a goal to save time by not having to wait for an open cashier.

Want to collaborate and share expertise with your peers? The Council of Retail Experts (CORE) is an exclusive network of convenience store retail leaders who do just that. For more information on how to join CORE, please visit www.cvcoreinsights.com.

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Survey respondents sourced via ProdegeMR, reinventing the market research process by taking a respondent first approach. Visit prodegemr.com/ensembleiq for more info.

The survey was conducted among 1,000-plus convenience store shoppers in January 2019

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