NACS Magazine June 2022 by NACS Magazine

JUNE 2022

Advancing Convenience & Fuel Retailing

SHOPPER INSIGHTS What they want right now PRIVATE LABEL Why your c-store needs its own brand

Behind the Numbers NACS State of the Industry data reveal a resilient and successful industry.

3.1% U.S. GDP

$277.9

Billion

$705.7 Billion convenience.org

IF YOU DON’T ADVOCATE FOR YOUR BUSINESS, WHO WILL? Now is the time to join the 7,000 store owners across the country who are fighting for fair tobacco policies! Learn more at TobaccoIssues.com

ONTENTS NACS / JUNE 2022 FEATURES

28 Numbers Check

70 A Private Offer

Three years of performance data show the industry is recovering as new headwinds emerge.

Sales of private-label products in convenience stores outpace growth of national brands.

38 How to Face

76 Almost Back

an Overheating Economy Create an inflation war room to triage the impacts of rising prices, stay flexible and invest in employees.

44 Packaged Beverages

Power the Cold Vault The core players are carbonated soft drinks, energy drinks, water and sports drinks.

50 The State of On the cover: Flas100/Shutterstock. This page: Arina P Habich/Shutterstock

Cigarettes and OTP There are opportunities to win a crucial but challenging convenience category.

56 Alcohol Boom Fizzles Following a historic year for beer, wine and liquor, sales slowed in 2021 but are holding their own.

Recapturing lost coffee sales—and morning daypart traffic—just might pull foodservice out of the pandemic slump.

86 Regional Breakouts Leading retailers broke down the data specific to their geographic areas

92 Small and Mighty A Q&A with Ty.

94 Fuels Outlook 2022 There’s some optimism, but the return to “normal” will be slow.

100 What Shoppers Want Four things to watch now: digital, spend, value and fundamentals.

A Sweet—and Salty—Deal Gum and mints hit refresh, while salty snacks regain their crunch.

STAY CONNECTED WITH NACS @nacsonline facebook.com/nacsonline instragram.com/nacs_online

Subscribe to NACS Daily—an indispensable “quick read” of industry headlines and legislative and regulatory news, along with knowledge and resources from NACS, delivered to your inbox every weekday. Subscribe at www.convenience.org/NACSdaily.

linkedin.com/company/nacs NACS JUNE 2022 1

ONTENTS NACS / JUNE 2022 DEPARTMENTS 06 From the Editor 08 T he Big Question 10 NACS News 16 Convenience Cares 18 Inside Washington

Marijuana legalization has support in Congress, but will anything happen?; Congress cracks down on synthetic nicotine.

26 I deas 2 Go

Street Corner scaled down its Express stores to fit smaller floorplans in busy foot traffic areas.

108 C ool New Procuts 112 G as Station

Gourmet At Knoxville Store, good food and a fun vibe—plus a water wheel—are worth the stop.

114 C ategory Close-Up

Cold dispensed beverage bars see new flavors and functional drinks; beer continues to bring profits and foot traffic to c-stores.

IT’S A FACT

$3,043

128 B y the Numbers

CATEGORY CLOSE-UP PAGE 114

PLEASE RECYCLE THIS MAGAZINE 2 JUNE 2022 convenience.org

The presence of an article in our magazine should not be permitted to constitute an expression of the association’s view.

Eshma/Getty Images

Average monthly sales per store for cold dispensed beverages in 2021.

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/ JUNE 2022 EDITORIAL

NACS BOARD OF DIRECTORS

Kim Stewart Editor-in-Chief (703) 518-4279 kstewart@convenience.org

CHAIR: Jared Scheeler, The Hub Convenience Stores Inc.

Lisa King Managing Editor (703) 518-4281 lking@convenience.org

Where is your next big idea coming from? With a NACS membership, you’ll network with the best and the brightest of the convenience industry. With leading retailers, and the suppliers and manufacturers of products known and loved the world over.

Plug in. Power up. Perform. convenience.org/membership

Lauren Brooks Digital Content Manager (703) 518-4283 lbrooks@convenience.org CONTRIBUTING WRITERS Terri Allan, Sara Counihan, Sarah Hamaker, Al Hebert, Pat Pape, Keith Reid, Melissa Vonder Haar DESIGN Imagination www.imaginepub.com

ADVERTISING Stacey Dodge Advertising Director/ Southeast (703) 518-4211 sdodge@convenience.org

OFFICERS: Lisa Dell’Alba, Square One Markets Inc.; Varish Goyal, Loop Neighborhood Markets; Brian Hannasch, Alimentation Couche-Tard Inc.; Chuck Maggelet, Maverik Inc.; Ken Parent, Pilot Flying J LLC; Victor Paterno, Philippine Seven Corp. dba 7-Eleven Convenience Store; Don Rhoads, The Convenience Group LLC PAST CHAIRMEN: Julie Jackowski, formerly Casey’s General Stores Inc.; Kevin Smartt, TXB MEMBERS: Chris Bambury, Bambury Inc.; Frederick Chaveyriat, MAPCO Express Inc.; Andrew Clyde, Murphy USA; Chris Coborn, Coborn’s Inc. Little Dukes; George Fournier, EG America LLC

CHAIRMAN: Brent Cotten, The Hershey Company

Ted Asprooth National Sales Manager/ Midwest, West (703) 518-4277 tasprooth@convenience.org

VICE CHAIRMEN: David Charles, Cash Depot; George Ubing, E&J Gallo Winery

Erin Pressley Publisher and Vice President, Education & Media (703) 518-4208 epressley@convenience.org Rose Johnson Audience Development and Production Manager (703) 518-4218 rjohnson@convenience.org

SUPPLIER BOARD REPRESENTATIVES: Brent Cotten, The Hershey Company; Kevin Farley, GSP STAFF LIAISON: Henry Armour, NACS GENERAL COUNSEL: Doug Kantor, NACS

NACS SUPPLIER BOARD

Jennifer Nichols Leidich National Advertising Manager/Northeast (703) 518-4276 jleidich@convenience.org

PUBLISHING

Terry Gallagher, Gasamat Oil/Smoker Friendly; Anne Gauthier, St. Romain Oil Company LLC; Douglas S. Haugh, Parkland Fuel Corp.; Raymond M. Huff, HJB Convenience Corp. dba Russell’s Convenience; Ina (Missy) Matthews, Childers Oil Co.; Charles McIlvaine, Coen Markets Inc.; Lonnie McQuirter, 36 Lyn Refuel Station; Jigar Patel, Hari 1 LLC, dba Fish River Food Mart; Elizabeth Pierce, Applegreen PLC; Glenn M. Plumby, 7-Eleven Inc.; Robert Razowsky, Rmarts LLC; Richard Wood III, Wawa Inc.

CHAIRMAN-ELECT: Kevin Farley, GSP

PAST CHAIRMEN: Rick Brindle, Mondele-z International; Drew Mize, PDI MEMBERS: Tony Battaglia, Juul Labs; Alicia Cleary, AnheuserBusch InBev; Matt Domingo, Reynolds; Mike Gilroy, Mars Wrigley; Josh Halpern, FIFCO USA; Danielle Holloway, Altria Group Distribution Company; Jim Hughes, Molson Coors

Beverage Company; David Jeffco, Dirty Dough Cookies; Kevin M. LeMoyne, Coca-Cola Company; TJ Lynch, Hospeco Brands Group; Bryan Morrow, PepsiCo Inc.; Lesley D. Saitta, Impact 21; John Thomas, iSEE Store Innovations LLC; Sarah Vilim, Keurig Dr Pepper; Dean Zurliene, Monster Energy Company RETAIL BOARD REPRESENTATIVES: Steve Loehr, Kwik Trip Inc.; Chuck Maggelet, Maverik Inc. STAFF LIAISON: Bob Hughes, NACS SUPPLIER BOARD NOMINATING CHAIRMAN: Brad McGuinness, PDI

NACS Magazine (ISSN 1939-4780) is published monthly by the National Association of Convenience Stores (NACS), Alexandria, Virginia, USA. Subscriptions are included in the dues paid by NACS member companies. Subscriptions are also available to qualified recipients. The publisher reserves the right to limit the number of free subscriptions and to set related qualifications criteria. Subscription requests: nacsmagazine@convenience.org POSTMASTER: Send address changes to NACS Magazine, 1600 Duke Street, Alexandria, VA, 22314-2792 USA. Contents © 2022 by the National Association of Convenience Stores. Periodicals postage paid at Alexandria VA and additional mailing offices.

1600 Duke Street, Alexandria, VA, 22314-2792

Premier Manufacturing: Brands Built on Integrity Owned by a cooperative of proud American farmers using the best U.S.-grown tobacco blends among their competitors, Premier provides high-quality, value-priced cigarette brands for the adult consumer. C-stores across the country are buying in.

Commitment to Quality Premier Manufacturing, Inc. is the consumer products division of U.S. Tobacco Cooperative Inc. (USTC), an American grower-owned marketing cooperative based in Raleigh, NC.

500+ member farmers throughout the Southeast

Members maintain GAP Connections Trackable process includes all aspects of manufacturing under one roof Certification Standards Ensures sustainable, ethical agricultural practices Tobacco processing & stemmery Primary blending / Cigarette finishing

All products made in USA & 100% guaranteed

Robust Partnerships

A Cut Above the Rest

Premier’s support staff prides itself on meeting customer goals with seamless execution in achieving the highest regulatory standards.

Premier products use only top-end tobacco blends.

• Provides sales/service support across the U.S. • Develops POS materials for high visibility • Creates custom sales & merchandising programs • Maintains strong relationships with top distributors

• Partners with top national and regional retail chains

The finest flue-cured tobacco in the world • All U.S. grown • Environmentally sustainable • Compliant with every regulation The best blend among competitors • Highest concentration of flue-cured tobacco • Vibrant color • Blends provide exceptional aroma and flavor experience Manufactured on industry-leading equipment • Laser perforation • Inked code dating • Latest high-tech advancements

Your Trusted Premier Brands Choose the brand that suits your loyal consumers. Each brand features a variety of styles to satisfy every taste. Contact PremierManufacturing today! www.gopremier.com/contact

UP FRONT FROM THE EDITOR

Not Just a Number

fter the 2022 NACS State of the Industry Summit in April, I had some time to kill in Chicago’s O’Hare airport waiting for my plane back to Virginia. My main mission was to secure kettle popcorn for my family—done at Garrett Popcorn Shops. On the way to Garrett’s, I happened across an interesting assortment of four automated kiosks lined up in the terminal: Kylie Jenner makeup, Sprinkles Cupcakes, CVS health and beauty items (including COVID-19 test kits) and Apple accessories. Then across the corridor I spied a Farmer’s Fridge vending machine. Several people were queued up waiting to select a grab-and-go salad, bowl or sandwich from the bright and quirky looking kiosk, which was positioned in a part of the terminal devoid of other food offers. I watched an airline employee enter his order on the touchscreen and seconds later, a salad emerged in a clear container in which the fresh-looking ingredients themselves were all the marketing needed. Apart from transportation hubs, a smart vending machine like Farmer’s Fridge could work in a high-traffic c-store as a complement to other turnkey foodservice programs like pizza and chicken—and might be a way to tap into a customer base that doesn’t typically shop convenience stores. From foodservice to tobacco to fuels, this issue is packed with our exclusive coverage of the NACS SOI Summit and the benchmarking data shared there. One of the unique features of this year’s SOI Summit—the first since 2019 and the first fielded solely by NACS—was the regional breakout sessions in which leading retailers presented deep dives of metrics and shared the trends affecting their respective areas of the U.S. 6 JUNE 2022 convenience.org

Don’t miss “The Big Question” interview with industry thought leader and Coen Markets CEO Charlie McIlvaine, who highlighted the key takeaways from the SOI Summit that convenience retailers need to understand to move forward. A favorite quote from my interview with him is this: “Don’t get paralyzed by change. We can’t allow ourselves to be stymied by the dynamic environment. Use this time as an opportunity.” This was only my second live NACS SOI Summit since I took the helm of this magazine in March 2019. That pre-pandemic SOI Summit is really where my introduction to the convenience and fuel retailing industry began, and even though much of what I heard discussed that first year went over my head, I learned so much and met some wonderful people. Now, three years and 39 issues of NACS Magazine (and countless NACS Daily e-newsletters) later, I have a much better understanding of the business but still so much to learn. Call me grateful to be a part of this dynamic industry. Happy reading, my friends!

Kim Stewart, Editor-In-Chief

Farmer’s Fridge could work in a high-traffic c-store.

This issue is packed with our exclusive NACS State of the Industry benchmarking data.

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UP FRONT THE BIG QUESTION

What lessons should convenience retailers take from the NACS State of the Industry Summit to build on the future?

One of the big messages for our industry is this: We have to embrace our reality. Until we do, we can’t move forward. We are in a transitional state. We are coming out of the pandemic and pandemic-related crises into something we don’t know yet as the new normal. First, our in-store transactions and fuel gallons are down versus 2019. Revenues are up, but you can’t get addicted to cents per gallon. If your business model depends fully on fuel, that’s at your peril. Today, we’re not quite there on the inside-store model. Second, we’re in the middle of the labor crisis. We’re up 17% versus 2019 in terms of wages and labor. That’s a big number. There’s a supply and demand problem. People have taken themselves out of the workforce, and we are at a negative birth rate. When the stimulus came in, the savings rate went up, and credit card debt went down. Now, the savings rate is going down, and credit card debt is going up, so people will start to bridge the difference with a paycheck. That should put some more economic pressure on people to go back into the workforce. Third, we know what good looks like, and what we can do is take some of the lessons from the top decile performers and try to apply them. Only the top four deciles make money inside the store. By deciles, I mean that we took all the participants who submitted data to the NACS SOI Survey, and we cut them in tenths. When we look at in-store operating profit, revenues minus expenses, 8 JUNE 2022 convenience.org

 Charlie McIlvaine, Chairman and CEO, Coen Markets Inc., Canonsburg, Pennsylvania

for the top decile relative to the other ones, it’s a huge difference. Foodservice is a major component of it. The top decile has nearly six times the amount of foodservice sales versus the bottom decile. The fourth lesson is, don’t get paralyzed by change. We can’t allow ourselves to be stymied by the dynamic environment. Use this time as an opportunity. EV, for instance, is probably slower to adopt than some may think. Regionally it’s a real factor, especially on the U.S. coasts, but the adoption curve may not be as steep. Convenience does not have a money-making business model on EV today. We’re laying the groundwork for the future. Many people are holding back because there’s no technology available that can get that broad cross-section of potential users with the time dimension that they’re looking for. Maybe there’s

only a limited number of c-stores that really make sense for EVs. As we’ve done in the past, we should go back to the future and remind ourselves that adaptation is a big component to convenience, and we’ve adapted several times in the past. Another important thing to remember is what convenience is. It’s a powerhouse of a retail channel in American life. Every day, half of America goes into convenience stores. That’s almost 165,000 transactions a day, and 90% of America lives within 10 minutes of a convenience store. About 80% of our customers are repeat customers, and they want that human touch. So, we offer convenience. We offer community connection. We have relevance to American society. We need to teach, continue to show and convince customers what good is. Good is us.”

THE COMPETITION DOESN’T STACK UP.

TIN

78%

of all nicotine pouch dollars come from

22%

10.5%

on! ogue Velo

6% 5.5%

Competition NI

TIN

UP FRONT NACS NEWS

Read Our Annual Report What our industry has accomplished together is a story that’s worth sharing. Attendees at the NACS State of the Industry Summit were the first to see and navigate the first all-digital NACS Annual Report, aptly titled “A Look Back At Where We’re Going.” The report is the first published by NACS since 2002—and a lot within the convenience and fuel retailing industry has changed since: from convenience retail formats and in-store offers, to customer expectations, advocacy issues, industry growth and innovation. “Customers have redefined what they want from convenience. They want convenience wherever they are, not wherever you are,” said Jared Scheeler, CEO of The Hub Convenience Stores (Dickinson, N.D.) and 2021-22 NACS chairman, after showing the digital report’s opening video at the SOI Summit. 10 JUNE 2022 convenience.org

“In today’s incredibly competitive retail landscape, it’s important to pause and look back on the amazing accomplishments and strides our industry is making—all while keeping an eye on the future, which I am equally excited about,” said NACS President and CEO Henry Armour. “We are proud to share our industry’s positive stories because they matter.” Each section showcases why NACS matters and its commitment to serve and advance the industry: • Advocacy During a Global Pandemic: NACS members’ voices are heard before the U.S. Supreme Court. • Industry Headwinds: The long road ahead continues into 2022 and beyond. • Stronger Together: Supporting first responders and medical personnel when they need us most. • We Got This: The 2021 NACS Show exceeded expectations and brought our industry together. • Food Is Our Future: Convenience stores are evolving to great places to eat that happen to sell fuel. • Keeping Consumers Fueled: Our industry is responsible for 80% of the

fuels purchased in the United States. • Learning and Growing Together: At 60 years young, our industry is just getting started. • Where We’re Heading: “We can do amazing things together, and it doesn’t matter how many stores you own.” • Investing in Our Industry: NACS is here to help. And lastly, the report concludes with the Top 10 Highlights of 2021 that addressed the ever-changing regulations, rapidly evolving consumer preferences and a slew of new challenges impacting the industry. “The annual report is our way of saying thank you to our members for what they do for our industry and the communities they serve,” said Armour, adding, “Your commitment to our industry drives us to do more, and we are excited about the opportunities before us in 2022.” Visit the NACS Annual Report at nacsannualreport.convenience.org and help us celebrate our industry’s successes and path forward with your network via social. Look for the social buttons within each section.

Find Cool New Products Online Each year more than 30,000 new products enter the market, giving convenience retailers ample opportunities to surprise and delight their customers with the hottest flavor and packaging trends. And with innovation representing about 20% of a convenience store’s set, new products can help drive sales and build excitement in your stores. We’re excited to launch the Cool New Products Discovery Center, an online resource that streamlines everything retailers need to know about what’s cool and new for our industry. The Discovery Center gives the long-standing and popular NACS Cool New Products brand a more robust digital presence and is home to:

• On-demand Cool New Products webinars: In 20 minutes, catch up on all the latest industry trends. • Cool New Products: From A to Z, search our library of products and services found at the NACS Show, in NACS Magazine and NACS Daily that showcase new packaging solutions, merchandising displays, technology, product designs and exciting new flavors. Retailers can also subscribe to the new Cool New Products Innovations Box at the Discovery Center. These curated collections of relevant and unique instore products are essential for building excitement within the channel and are delivered via mail.

Calendar of Events

Ivan Bajic/Getty Images

JUNE NACS Convenience Leaders Exchange – South Africa June 10 | Johannesburg, South Africa JULY NACS Financial Leadership Program at Wharton July 17-22 | The Wharton School, University of Pennsylvania | Philadelphia, PA

NACS Wins ENERGY STAR Award NACS is proud to announce that it has received the 2022 ENERGY STAR Marketing Award from the U.S. Environmental Protection Agency and the U.S. Department of Energy. “We know it’s going to take all of us working together to tackle the climate crisis, and the 2022 ENERGY STAR award-winning partners are demonstrating what it takes to build a more sustainable future,” said EPA Administrator Michael S. Regan. “These companies are showing once again that taking action in support of a clean energy economy can be good not only for the environment, but also for business and customers.” Each year, the ENERGY STAR program honors a group of businesses and organizations that have made outstanding contributions to protecting the environment through superior energy achievements. ENERGY STAR award winners lead their industries in the production, sale and adoption of energy-efficient products, homes, buildings, services and strategies. These efforts are essential to fighting the climate crisis and protecting public health. Winners are selected from a network of thousands of ENERGY STAR partners. For a complete list of 2022 winners and more information about ENERGY STAR’s awards program, visit energystar.gov/ awardwinners.

NACS Marketing Leadership Program at Kellogg July 24-29 | Kellogg School of Management, Northwestern University | Evanston, IL NACS Executive Leadership Program at Cornell July 31-August 04 | Dyson School, Cornell University | Ithaca, NY NACS Convenience Summit Asia July 19-21 | Singapore

For a full listing of events and information visit www.convenience.org/events.

NACS JUNE 2022 11

UP FRONT NACS NEWS

New Members

NACS welcomes the following companies that joined the association in March 2022. NACS membership is company-wide, so we encourage employees of member companies to create a username by visiting www.convenience.org/ Create-Login. All members receive access to the NACS Online Membership directory, latest industry news, information and resources. For more information about NACS membership, call (703) 684-3600. NEW RETAIL MEMBERS Garage Rejean Guy Beloeil, Quebec, Canada www.garagerejeanguy.com Malbon Brothers Citgo Virginia Beach, VA www.malbonbrothersbbq.com Stone Ridge Station Santa Claus, IN NEW HUNTER CLUB MEMBERS IRI Group Chicago, IL www.iri.com Strategy & Execution Inc. Dayton, OH www.strategycpg.com NEW SUPPLIER MEMBERS 104 sales group Pinecrest, FL www.104salesgroup.com AAA Beverage Company Manhattan Beach, CA www.drinkintelligent.com Agua Bonita Hanford, CA www.drinkaguabonita.com Amazon Go Technologies www.justwalkout.com BioSafe Distributors Omaha, NE www.biosafedistributors.com Buffalo Rock Company Birmingham, AL www.buffalorock.com CandyASAP www.candyasap.com Checkers and Rally’s Restaurant Inc. Tampa, FL www.checkersfranchising.com Cloud Cover Music El Segundo, CA www.cloudcovermusic.com Constellation Baltimore, MD www.constellation.com/set 12 JUNE 2022 convenience.org

Crown Distributing LLC Dallas, TX www.crowndistributing.org DAHA Hyperautomation Trafford, PA www.dahahyperautomation.com Diageo Spirits New York, NY www.diageo.com Dot It Fort Worth, TX www.dotit.com Endless West San Francisco, CA www.endlesswest.com

HYLA US Holdco Limited Houston, TX www.hyladistribution.com KPI Concepts West Burlington, IA www.kpiconcepts.com Liquid I.V. El Segundo, CA www.liquid-iv.com Lytikapay Montreal, Quebec Canada www.lytikapay.com MYLE Vape Inc Ridgefield, NJ www.mylevape.com Pasta Noodles LLC Leesburg, VA www.pastanoodles.com Pastel Cartel Pflugerville, TX Plasticade Des Plaines, IL www.plasticade.com Premier American Transport Desoto, TX

Ethel’s Baking Company Saint Clair Shores, MI

Sahlen Packing Co. Buffalo, NY www.b2b.sahlen.com

EverGreen USA LLC Union City, NJ www.evergreenusa.co

Salsa God New York, NY www.salsagod.com

EVunited Dublin, OH www.evunited.com

Sands Investment Group Austin, TX www.signnn.com

Frankford Candy & Chocolate Company Philadelphia, PA

SMOOD LLC New York, NY www.mysmood.com

Fresh Fresheners Las Vegas, NV www.freshfresheners.com

Spiik Inc. Milton, ON www.iicing.ca

Gather Foods LLC dba Thunderbird Real Food Bars Austin, TX www.thunderbirdbar.com Golden West Food Group Vernon, CA www.gwfg.com

SuperSonic POS/Petro Outlet Stuart, FL www.petrooutlet.com T Lines Design, Supply & Build Milford, CT www.tlines.us The Imagine Group Shakopee, MN www.theimaginegroup.com

Harbinger Sign Jacksonville, FL www.harbingersign.com

The Monster Group Orlando, FL www.monstergrp.com

Harry & David Medford, OR www.harryanddavid.com

Think Jerky Chicago, IL www.thinkjerky.com

HPI Dunwoody, GA www.hpi.net

Waterco LLC East Northport, NY www.gowaterco.com

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UP FRONT NACS NEWS

Member News RETAILERS

SUPPLIERS

Dale Boyett has been named chief executive officer of Modesto, California-based Boyett Petroleum. Boyett, whose Dale Boyett family started in the industry in 1940, has served as Boyett Petroleum president since 2004. His father, Carl Boyett, who passed away in November 2015, was the company’s last CEO.

Ramiro Fernández has been named chief financial officer of PIM Brands Inc. Fernández joins PIM from snackRamiro food maker, Herr Fernández Foods, where he was CFO. During his 30-year career, he has served in a wide range of leadership roles including finance manager, Kellogg’s; director of finance, Frito-Lay Mid-Atlantic; director of finance, PepsiCo North America; and CFO Chocolate and Petcare, Mars Caribbean and Central America.

Scott Castle succeeds Dale Boyett as the new president of Boyett Petroleum. Castle joined the company in 2001 Scott Castle and was promoted to serve as Boyett Petroleum’s vice president of retail operations in 2004. Enmarket announced that Matt Clements has been appointed president. His responsibilities will Matt Clements include oversight of Savannahbased Enmarket’s operations, marketing, construction, real estate, accounting and fuel pricing. Clements joined the company as director of marketing in 2012. He also served for 11 years on the board of directors of the Georgia Association of Convenience Stores. Gopuff has tapped Maria Renz as senior vice president of North America. Renz will oversee Gopuff’s strategy and Maria Renz execution in the U.S. as the instant commerce pioneer continues to expand and deepen its presence across markets. Renz joins Gopuff from SoFi. 14 JUNE 2022 convenience.org

Susan Miller was named chief human resources officer, PIM Brands. Miller joins PIM with over 20 years of experience in Susan Miller senior leadership roles at global manufacturing companies including Evonik Corp., where she served as head of future work. Jagannathan Ramachandran has been tapped as vice president, manufacturing at PIM Brands. With over 20 years Jagannathan of experience, Ramachandran Ramachandran will be responsible for manufacturing operations at the company’s Somerset, New Jersey, production facilities. Prior to PIM, Ramachandran spent 11 years with the Campbell Soup Company in operations and continuous improvement leadership roles. KUDOS Dave Onorato, vice president of convenience sales for The Hershey Company, will retire this year. Onorato has been a mentor and trusted teammate to so many throughout his 38 years. His connection to convenience store

sales spans more than two decades since he first assumed the role of national director of convenience Dave Onorato store sales in 2002. Onorato has been widely recognized for both his work in sales and for advancing diversity within the industry. In 2012, he was elected to the NCSA Candy Hall of Fame and most recently was inducted into the Convenience Store News Hall of Fame in 2020. The New York Association of Convenience Stores presented Molly Slingerland, managing Molly Slingerland director of regional government affairs, Altria Client Services LLC, with NYACS’ 2022 Carl Tripi Award. NYACS established the Carl Tripi Award in 2006 to recognize “low-profile, high-impact” contributions to NYACS and the convenience store industry. The award is named for the late Carl Tripi, who was chairman of Buffalo New Yorkbased wholesale distributor Tripifoods Inc. Peter Tamburro of Cliff’s Local Markets, Marcy, New York, received the 2022 NYACS John MacDougall Peter Tamburro Leadership Award. NYACS, in partnership with the John and Elaine MacDougall Foundation, created the John MacDougall Leadership Award in 2017 to honor the late NYACS co-founder and CEO of Nice N Easy Grocery Shoppes. The award is presented annually to the individual or company who best demonstrates qualities that characterized John’s career: success in the convenience store business, industry leadership, a commitment to relationship building and active involvement in NYACS.

SEE YOU AT THE

NACS SHOW

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1528 NORTH HALL

POWERING C-STORE COMMERCE Our dedicated c-store channel experts deliver custom, data-driven solutions that drive demand, increase sales and lower costs for brands, chain retailers, independents, foodservice operators, wholesalers and redistributors.

Headquarter Sales Cultivating stronger, more strategic partnerships between brands and retailers

Analytics, Insights and Intelligence Delivering actionable shopper, market, category and competitive insights

Retail Services Providing superior ROI through dynamic routing and custom coverage

Business Process Outsourcing Improving customer relations and cash flow while reducing costs

advantagesales.net

SOCIAL SHARES NACS encourages retailers to share their giving-back news on social media using #ConvenienceCares.

CONVENIENCE CARES

Kum & Go Supports Suicide Prevention I

t’s OK to not be OK. That’s the message Des Moines, Iowa-based Kum & Go is spreading through a new partnership with Please Pass The Love. Together, the two groups are collaborating on the “Stick By Me” suicide prevention initiative. The stickers, featuring crisis lifelines and resources via text, phone and QR code, are shared with students and educators at more than 1,000 schools across Iowa for no cost through Please Pass The Love. Kum & Go also will display the stickers in restroom stalls at its 400-plus stores in 11 states. “I’m not shy in talking about my own mental health journey,” said Kum & Go CEO Tanner Krause. “These past few years have brought a tremendous 16 JUNE 2022 convenience.org

amount of stress and pressure on all of us. I’m proud to say I’ve sought out my own mental health resources which have provided me valuable guidance on how to live my life.” (Read our interview with Krause in the September 2021 issue.) “Stick By Me” was launched in February 2022 as an urgent community response to numerous suicides of young Des Moines area students. Please Pass The Love used its leading role in Iowa as an education-focused advocacy organization to provide suicide prevention resources to educators and students of all ages by sharing crisis information and encouraging them to talk about their mental health and well-being.

Through “Stick By Me” messaging, Please Pass The Love is asking schools, businesses and other service-based nonprofits to display the stickers and make the support resources available to their communities. Kum & Go stores and restrooms offer a heavily trafficked display for countless community members who may be in need. “Please Pass the Love’s focus on transforming mental health and suicide prevention in youth is the perfect alignment with Kum & Go’s core values and purpose,” said Reed Rainey, COO at Kum & Go. “We are honored to play a role and positively impact the communities in which we serve, live and do business by being a partner in their Stick By Me initiative.”

In The Community Every year, the convenience and fuel retailing industry dedicates billions of dollars to advancing the futures of individuals and families in our communities. The NACS Foundation unifies and builds on NACS members’ charitable efforts to amplify their work in communities across America and to share these powerful stories. Learn more at www.conveniencecares.org.

RAISE A CUP TO FOLDS OF HONOR 1 Stillwater, Oklahoma-based OnCue and Folds of Honor teamed up again to offer a limited-edition fundraiser cup. OnCue is donating 50 cents for each cup purchased through June 30, and proceeds will go to Folds of Honor, a nonprofit that provides academic scholarships to spouses and children of America’s fallen or disabled service members. “Folds of Honor aligns with our community mission to support children through education, and with both organizations having Oklahoma roots, it just made sense,” said Laura Aufleger, president of OnCue. “It’s a privilege to work with Folds of Honor again and give thanks to our veterans and their families for their sacrifices.” The two groups partnered in 2019 and raised $10,000 in scholarship money through sales of the cups. “Helping to provide an education to the spouses and children of America’s heroes truly changes lives. OnCue understands that, and we’re excited to be working with them on this important mission,” said Brandon Baker, the regional impact officer in Oklahoma for Folds of Honor.

ENMARKET DONATES FUEL TO ASSIST WITH TORNADO CLEANUP 2 After a devastating tornado struck Bryan County, Georgia, in early April, Savannah-based Enmarket donated 500 gallons of diesel fuel to assist residents with cleanup efforts in areas around Pembroke and Black Creek. Enmarket partnered with Badger Rental Services to help fuel fleets of trucks, tractors and construction equipment provided by volunteers who helped clean up trees and storm debris. “Because of Enmarket’s generosity, we loaded up and refueled the good people who are giving their time for our neighbors,” said Garrett Shurling, president and CEP of Badger Rental Services. “Tons of pickups, trailers, skid steers, tractors and excavators have been showing up every day, and you would not believe the difference in just a few days after the hard work of so many. Although some places are still in total devastation, our neighbors have restored a kind of new normal to tons of families.”

ENERGY NORTH SUPPORTS MDA FOR 18TH YEAR 3 Energy North Group (ENG) of Lawrence, Massachusetts, hosted its annual St. Patrick’s Day Shamrock fundraiser campaign in March to support the Muscular Dystrophy Association. This year the company marked its 18th year

of support for MDA by raising $101,415 for the organization. “This is an initiative that brings people together for good,” said Pat O’Connell, executive vice president, ENG. “The MDA makes a tremendous difference in the lives of all those affected by neuromuscular diseases.” ENG, Haffner’s and Tradewinds gas stations, car washes and convenience stores made MDA Shamrocks available for customers to purchase as direct donations. ENG also donated $2 for every car wash purchased.

WAWA LOVES NURSES 4 The Wawa Community Care Vehicle made a special visit to nominated hospitals in the Mid-Atlantic during Nurses Week, May 6-12, to serve up to 300 cups of coffee per visit as a way of extending Wawa’s appreciation to health-care heroes. “We appreciate the tireless efforts and ongoing commitment nurses have shown these last challenging years and want to continue doing our part of showing appreciation to healthcare heroes with the Coffee & Care Tour,” said Chris Gheysens, president and CEO, Wawa, based in Pennsylvania. “We hope our visit brightens the days of thousands of nurses in the community and lets the healthcare community know they can always count on Wawa.”

NACS JUNE 2022 17

INSIDE WASHINGTON

Lots of Smoke but Little Fire Marijuana legalization has support in Congress, but significant legislation is unlikely to pass this year. BY JON TAETS

Key Figures

66%

of Americans say recreational marijuana use should be legal under federal law

37%

of Americans say they use marijuana either regularly/occasionally/ hardly ever Source: March 2022 CBS News/YouGov poll

18 JUNE 2022 convenience.org

Banking in a larger comprehensive marijuana legalization bill led by Senate Majority Leader Chuck Schumer (D-NY). Schumer, and others, appear to be concerned that passing SAFE Banking on its own would make passing more comprehensive legislation that much more difficult in a narrowly divided chamber. THE MORE ACT Beyond SAFE Banking, the House has also passed legislation sponsored by House Judiciary Committee Chairman Jerrold Nadler (D-NY). The Marijuana Opportunity Reinvestment and Expungement Act (MORE) passed the House on a largely party line vote on April 1. The MORE Act goes significantly further than SAFE Banking by legalizing marijuana on the federal level and seeks to expunge many existing criminal records related to federal marijuana offenses. Previous iterations of the MORE Act have passed the House in prior Congresses but have never seen Senate action, and there is little reason

Bet_Noire/Getty Images

search for legislation introduced in the 117th Congress containing the words “marijuana” or “cannabis” will return a few hundred results. That said, just a few pieces of legislation are truly notable, and only two measures have passed in either chamber. The legislation that garners the most attention is the Secure and Fair Enforcement Banking Act (SAFE), which is the only bill to pass the House with significant bipartisan support. The SAFE Banking Act cleared the House on April 19, 2021, with all Democrats present and 106 Republicans voting in support. The legislation removes the federal banking regulations that prevent federally chartered banks from providing banking services to businesses engaged in marijuana markets in states where it is legal. Despite the broad bipartisan support in the lower chamber, the legislation’s future in the Senate remains murky. In that chamber Democrat leaders are hoping to include a version of SAFE

ONE VOICE

Danielle Holloway, senior director, industry engagement, Altria Group Distribution Company

to believe that this most recent version of the bill will fare differently. While opinions on legalizing marijuana may be softening on the Republican side of the aisle, many view the MORE Act as tilted toward social justice measures rather than legalization itself. GOP LEGISLATION The first piece of Republican-led legislation was introduced in November 2021 by freshman South Carolina Rep. Nancy Mace (R-SC). Her bill, the States Reform Act, would legalize marijuana and create a federal regulatory structure to treat cannabis much the same way as alcohol. This approach would leave the final decisions on whether or not to allow marijuana use to state governments. Federal regulation of marijuana production would be housed at the U.S. Department of Agriculture, and the U.S. Food and Drug Administration would regulate marijuana products in the same way it does those containing alcohol. Rep. Mace was joined by four other GOP representatives at introduction.

The States Reform Act isn’t likely to move in the Democrat-controlled Congress but stands as a marker for potential Republican interest in marijuana legalization legislation should Republicans gain control of the House in the 2022 midterm elections. A second Republican-led bill doesn’t go as far as Mace’s bill but does show Republican interest in sensible federal regulation of legal marijuana. Representative Dave Joyce (R-OH) introduced the Preparing Regulators Effectively for a Post-Prohibition Adult-Use Regulated Environment Act (PREPARE), alongside Florida Republican Brian Mast (RFL) and New York Democrat Hakeem Jeffries (D-NY) on April 14, 2022. The PREPARE Act doesn’t legalize marijuana but focuses on ensuring that federal regulators are able to quickly issue relevant rules should legalization happen. Experts nominated by the majority and minority leaders in the House and Senate, as well as the principals or designees from various federal departments and agencies with relevant

What does NACS political engagement mean to you, and what benefits have you experienced from being politically engaged? Political engagement is very important for the industry, particularly in the tobacco space. I support NACS’ advocacy efforts because it is the most effective way I can show my customers that I care about ALL of their issues. What federal legislative or regulatory issues keep you up at night (with respect to the convenience store industry)? Regulations on menthol, excessive taxation on tobacco products, product or flavor bans are all on top of the list. I also care about other priority c-store issues like swipe fees, labor costs and fuel. What c-store product could you not live without? If I am being literal, it is water, but some of my other favorites are gummy bears, Cheez-Its and Diet Dr Pepper.

NACS JUNE 2022 19

INSIDE WASHINGTON

authorities, would sit on a PREPARE commission. It also would include experts from two states that have legalized marijuana for adult use and one representative from a trade association or other nonprofit with members from multiple, highly regulated adult-use product companies. The commission would be required to issue recommendations to the federal government within one year of its formation. The future of the PREPARE Act in the House is unclear as well. SCHUMER’S CAOA ACT While all of this action has taken place on the House side, the most anticipated legislation is yet to be introduced in the Senate. In July 2021, Sen. Schumer, along with Sens. Ron Wyden (D-OR) and Cory Booker (D-NJ), released a draft of their Cannabis Administration and Opportunity Act (CAOA). Despite lacking a Republican co-sponsor, the legislation remains notable because the Senate majority leader is the prime sponsor. No other legalization legislation has such a high-ranking congressional leader directly involved. 20 JUNE 2022 convenience.org

Congress Cracks Down on Synthetic Nicotine BY ANNA READY BLOM Congress passed legislation this spring that places synthetic nicotine under the authority of the Food & Drug Administration (FDA). This brings with it requirements for manufacturers, distributors and retailers of the products. The FDA has had regulatory and enforcement authority over tobacco products since 2009 when Congress passed the Tobacco Control Act. This new measure will give the FDA the same authority over products that contain nicotine not derived from tobacco but made in a lab, known as synthetic nicotine. Starting on April 14, 2022, manufacturers, distributors, importers and retailers of synthetic nicotine products must comply with requirements such as: • Not selling these products to persons under 21 years of age (both in-person and online); • Not marketing these products as modified risk tobacco products without FDA authorization; and • Not distributing free samples of these products.

Since the products are now regulated by the FDA, the manufacturers must go through the premarket tobacco application (PMTA) process. Manufacturers of synthetic nicotine products had to submit PMTAs by May 14 or pull their products from the market. Any retailer selling synthetic nicotine products should contact the manufacturers of the products and ask them to verify that they submitted PMTAs by the deadline. If they didn’t, retailers must stop selling the products or else they could be subject to FDA enforcement. If a manufacturer submits a PMTA by the deadline, it can continue marketing its products until July 13, 2022. After that date, the products must be removed from retail shelves unless the FDA has issued a marketing granted order. Anna Ready Blom is NACS director of government relations. She can be reached at ablom@ convenience.org.

Neydtstock/Getty IMages

Despite the broad bipartisan support in the lower chamber, the legislation’s future in the Senate remains murky.

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INSIDE WASHINGTON

CAOA is meant to be a catchall, comprehensive legalization bill which would de-schedule marijuana, deal with many of the same social justice issues that the MORE Act addresses, as well as set up a federal regulatory structure for adultuse marijuana. The sponsors released the draft last year and opened it up for interested parties to provide comment. NACS assisted in providing comments on the parts of the legislation that seek to set up a federal regulatory structure through the Coalition for Cannabis Policy, Education and Regulation (CPEAR). While introduction of the legislation had been expected sooner, Sen. Schumer announced in April that he hopes to introduce it ahead of the August recess,

22 JUNE 2022 convenience.org

which begins on August 8. Even with the backing of the majority leader, the legislation is unlikely to move this year as the calendar ticks closer to the midterm elections in November. All this is to say that while the federal legalization of marijuana likely has never had such a positive reception or crowded list of legislation seeking it in Congress, its passage remains unlikely in the short term. The increased level of Republican interest raises the prospect of Congress considering some kind of marijuana legislation should that party take control for the 118th Congress. The other wild card is President Biden. While the president has expressed a belief that existing federal marijuana laws

are outdated at best, he hasn’t offered clear support for full legalization. After the House passage of the MORE Act in April, White House Press Secretary Jen Psaki would not explicitly state whether or not Biden supports the bill. For the time being, most of the concrete action on adult-use marijuana will remain at the state level as more and more states consider legalization either through legislation, or more commonly, ballot initiatives. Jon Taets is NACS director of government relations. He can be reached at jtaets@ convenience.org.

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INSIDE WASHINGTON NACSPAC DONORS NACSPAC was created in 1979 by NACS as the entity through which the association can legally contribute funds to political candidates supportive of our industry’s issues. For more information about NACSPAC and how political action committees (PACs) work, go to www.convenience.org/nacspac. NACSPAC donors who made contributions April 1-30, 2022, are: George Abdoo Imperial Trading Company

Jay Erickson Parkland USA

Doug Middlebrooks Advantage Solutions

Niki Adams Bounteous + Hathway

Marty Feldman Lucas Oil Products

Tony Miller Delek

Richard Amador Capital One Bank

Darshan Gad Delek

Drew Mize PDI

Brad Anderson Weigel’s Stores

Rob Gallo Impact 21

Toby Awalt Mashgin

Ramona Giderof Anheuser-Busch

Brandon Mohr Altria Group Distribution Company

Dave Baker GoSkip

Jeffrey Gonzalez Capital One Bank

Frank Beard Standard AI

Josh Halpern JRS Hospitality

Chad Beck Core-Mark & Eby-Brown

Lisa Ham Yesway

Seth Bertucci RowLogic

Jeffry Harrison Rovertown

Ben Boyd Tyson Foods

Brad Heetland Advantage Solutions

TJ Boz Bozied Oil Company

John Hill Utah Petroleum Marketers Association

Eric Breiding Stewart’s Enterprises Rick Brindle Mondele- z International Alicia Cleary Anheuser-Busch James Clifford Delek Chris Coborn Coborn’s Chris Cope Pilot Travel Centers Matt Danzig good2grow Kerstin Deppe Bounteous + Hathway Matt Domingo Reynolds Tony El-Nemr Nouria Energy Corp. Don Emery CHS

24 JUNE 2022 convenience.org

Christian Stein Center Independent Oil Stores Barry Stevens Farmer Brothers Kim Stewart NACS Brandon Thurber IDT

Natalie Morhous RaceTrac

Megan Vargin SEB Professional

Jason Noll Capital One Bank

Sarah Vilim Keurig Dr Pepper

Brendan Nugent The Spinx Company

Tyler Walter iSee Store Innovations

John Oakley Taiga Data

Scott Walters Rovertown

JP Patel SAASOA

CJ Watson Vivazen

Alex Plant Standard AI

Edward Wazney Han-Dee Hugo’s

Gabriel Purvis The Convenience Group

Jim Weber The Spinx Company

Jack Hogan Mashgin

Paula Rankin United Refining Company

Paula Weeks Coca-Cola Company

Mike Hudkins NCR Corporation

Dan Razowsky Rmarts

Geoffrey Wigner Nashville Wire Products

Jim Hughes Molson Coors

Dan Reilly SRP Companies

Casey Williams Vivazen

Bill Ivers Taiga Data

Adam Rowan Cargill

Mike Wilson Cubby’s

Brad Jones Vivazen

Andrew Rupert MarketDial

Marie Wise Imperial Trading Company

Charley Jones Stinker Stores

Jeff Sandlin Imperial Trading Company

Doug Woodward CROSSMARK

Dave Kuwada GoSkip

Joe Sheetz Sheetz

Michele Yeeles Anheuser-Busch

Steve Loehr Kwik Trip

Jeffrey Smith Han-Dee Hugo’s

Garrett Young CBH Cooperative

Kevin Martello Keurig Dr Pepper

Kirk Spencer Farmer Brothers

Bryan Zeiger The Spinx Company

Brandon Mayer The Hershey Company

Bob Stein Clear Demand

Jeffrey Ziegler Midwest Petroleum Company

Gregory Merlo Anheuser-Busch

The perfect combination of

Two leaders in convenience are stronger together. Together as one, Core-Mark and Eby-Brown are delivering a best-in-class experience and innovation at scale to over 50,000 locations across the U.S. and Canada.

To learn more, visit www.core-mark.com and www.eby-brown.com or contact your representative today.

IDEAS 2 GO

Rethinking Space Street Corner scaled down its Express stores to fit smaller floorplans in busy foot-traffic areas. BY SARAH HAMAKER Name of company: Street Corner Date founded: 1987 # of stores: 38 Website: www.streetcorner.com

26 JUNE 2022 convenience.org

Mixed residential and commerce sites are one of the hottest commodities in real estate these days, and Street Corner has seized the opportunity to downsize its convenience concept into smaller footprints in these kinds of buildings. “The Express model caters to urban development multiuse buildings and locations on college campuses,” said Vikram Dhillon, CEO of Street Corner, which has 40 franchisee-owned locations in 19 states. “Those stores have a heavier focus on fresh grab-and-go food, local products and organic items as well as our own 100% organic coffee brand.” While Street Corner has been around since the late 1980s, the store has been branching out both into smaller and larger footprints. “We started as a convenience chain with locations mostly in airports and shopping malls—that’s what we were known as,” he said. “But seven years ago, we debuted our Urban Market concept as an upscale c-store and a few years later added the Express model as well.”

THE DIVERSIFICATION For Street Corner, the key to its continued success has been to develop specific concepts to fit several location spaces. The company currently has three different convenience stores— Street Corner with full-service gas stations and drive-thrus (3,000 to 5,000 square feet); Urban Market, similar to Street Corner but without fuel (3,000 to 5,000 square feet); and Street Corner Express, no fuel and in office buildings or multiuse residential buildings (800 to 1,200 square feet). “Our background is tight spaces, with our first stores in shopping malls,” Dhillon said of the newer Express concept. “So, we know how to maximize the footprint to provide what the customers want in a smaller setting.” For example, Express stores revolve around organic coffee and fresh food in grab-and-go coolers, beer and wine, snacks and health and beauty. There’s no space for kitchens, so a vendor supplies the fresh packaged sandwiches, yogurt parfaits, salads, fruit, wraps and meal prep kits. “We have 50% of products from major brands, with the other 50% local and healthy products,” Dhillon said. “Our goal is definitely to promote a healthy lifestyle.” To that end, tobacco products are featured less in all stores but especially the Express ones. Currently, there are two Express models open, with one in a San Diego office complex and the other in a mixed residential building in Corona, California. “These stores also have the capability for self-checkout and for ordering via an app, too,” he said. The company would like to open more Express models on college campuses, in hospitals and at airports. The availability of these smaller retail spaces has been fueled by the expansion of mixed-use development

across the country. “Landlords of these developments want different businesses, and with the Express model, we can provide both a unique concept to the retail mix and a needed service to the complex residents,” he said. THE VIBE All of Street Corner’s concepts have an upscale vibe. “We focus heavily on music as well, and all of our new stores have a good sound system,” Dhillon said. “We want customers walking in to have this cool vibe, to feel positive and want to grab something healthy.” The stores have a contemporary design with sleek, straight lines. “The green logo expresses the urban feel,” he said. “We have a lot of green inside our stores, along with murals designed to fit the local demographics.” In keeping with that aesthetic, the company encourages franchisees to create their own local promotions on social media. “As a company, we have a Facebook and Instagram presence, but we don’t do any national campaigns,” he said. Instead, each store usually runs local social media campaigns, which Dhillon said has proved to be more effective. Overall, everything Street Corner does with its concepts is geared toward changing the image customers have of convenience stores. “Not every c-store is the same,” he said. “We want our customers to have a very positive experience when they visit our stores and think this is the way every convenience store should be.” Sarah Hamaker is a freelance writer and NACS Magazine contributor based in Fairfax, Virginia. Visit her online at sarahhamakerfiction.com.

BRIGHT IDEAS With a small store, it’s even more important to maximize shelf space while still creating an inviting environment for shoppers. With its Express models, Street Corner “didn’t want to clutter the store with a lot of displays but rather focus on the heavy hitters to earn the best dollar per square foot,” said Vikram Dhillon, CEO of Street Corner. To do that, the company only brings in the top sellers in the most popular categories, as well as eliminates categories that don’t make sense for the urban locations. “For example, Express stores don’t have automotive sections because most people living in the mixeduse buildings don’t have cars or don’t drive their vehicles very often,” he explained. Express stores also have more fresh food in open-air cases for graband-go options. “We work closely with vendors to determine what’s selling in the local area so we’re sure to stock those items, as well as the national best-sellers,” he said.

Ideas 2 Go showcases how retailers today are operating the convenience store of tomorrow. To see videos of the c-stores we profiled in 2021 and earlier, go to www.convenience.org/Ideas2Go. NACS JUNE 2022 27

3.1% U.S. We are not out of the woods.”

Dive Into the Data The NACS State of the Industry Report of 2021 Data is the essential guide for convenience and fuel retailers to benchmark their performance in 2021. NACS is now in its 52nd year of publishing the report, which is available for purchase in a digital-only format. The report highlights the business-critical categories of finance, store operations, merchandising and fuel sales. Purchase your digital copy today at www.convenience.org/SOIreport.

28 JUNE 2022 convenience.org

$277.9

$705.7 GDP Billion

Three years of performance data show the industry is recovering as new headwinds emerge. BY CHRISSY BLASINSKY

Jared Scheeler moved from his home state of North Dakota nearly 25 years ago to attend college at the University of Minnesota. He, like many college students, took a part-time job at a convenience store to earn some extra spending cash. The rest, as they say, is history. Scheeler, the 2021-22 NACS Chairman and CEO of The Hub Convenience Stores in Dickinson, North Dakota, credits his tenure at Minneapolis-based Bobby and Steve’s Auto World for introducing him to NACS. It’s also when he attended his first NACS State of the Industry Summit. “I made money for my former company before I had even walked out the door of my first SOI Summit,” he said, adding, “I can confidently say that the SOI Summit brought a seven-figure return to my former company over a five-year stretch. Without that knowledge and operational precision, I wouldn’t have been able to start my own company.” This year from April 12-14 in Chicago, NACS hosted its first live and in-person SOI Summit in three years—and the first Summit hosted exclusively by NACS. More than half of attendees raised their hands when Chuck

Maggelet, NACS vice chairman of research and chief adventure guide at Maverik Inc., asked who was attending their first Summit. Retailer and supplier attendees were also first to witness the impressive 2021 industry numbers: • Total in-store sales increased to a record $277.9 billion. • Total industry sales reached $705.7 billion. • The average in-store basket size increased 6.3% to $7.59. From in-store categories to fuel, labor, supply chain concerns and inflation, NACS Research and Technology Committee members and convenience channel category experts delved into the past three years of data, trends and performance metrics to gauge how the industry is bouncing back since the pandemic. They shared positive news, watchouts and obvious headwinds gusting in the wrong direction. Charlie McIlvaine, chairman and CEO of Coen Markets Inc., revealed the convenience and fuel retailing industry’s financial and operational performance metrics, beginning with two that every retailer should keep in mind: Inside transactions were down 6.9%,

Flas100/Shutterstock

Billion

Numbers Check

NACS JUNE 2022 29

Jared Scheeler, 2021-22 NACS chairman and CEO of The Hub Convenience Stores

Annie St. Romain Gauthier, CFO, co-CEO, St. Romain Oil Co. and Y-Not Stop

Although Sales Increased, Fuel Gallons and Transaction Counts Did Not Reach 2019 Levels 2021

2021 vs. 2020

2021 vs. 2019

Total All Sales

$694,471

34.6%

9.5%

Fuel Sales

$486,158

46.7%

6.0%

161,202

7.0%

(8.7)%

$3.02

37.1%

16.1%

$220,714

12.6%

13.8%

Foodservice

$49,765

24.1%

10.6%

Merchandise

$171,827

9.1%

16.1%

M erchandise less cigarettes

$110,790

11.6%

18.7%

Cigarettes

$61,550

4.2%

6.6%

Total transactions

39,959

8.3%

(6.2)%

Per Store/Per Month

Fuel gallons Average selling price Inside Sales

Source: CSX

Fuel Margins in Cents Per Gallon and Cigarette Gross Profit Dollars Declined in 2021 vs. 2020 2021

2021 vs. 2020

2021 vs. 2019

Total Gross Profit

$136,667

10.4%

20.5%

Fuel

Per Store/Per Month

$56,710

5.0%

27.9%

P ool margin (cents per gallon)

35.18

(1.9)%

40.1%

Margin – credit card fees

28.57

(5.5)%

48.4%

$75,776

16.2%

16.3%

Foodservice

$26,914

25.8%

11.3%

Merchandise

$49,337

10.6%

18.0%

$41,069

15.4%

21.2%

C igarettes

$8,401

(9.0)%

5.2%

Other Income

$6,819

4.3%

19.8%

In-Store

M erchandise less cigarettes

Source: CSX 30 JUNE 2022 convenience.org

and fuel gallons were down 7.2% in 2021 versus 2019. “This suggests that we are not out of the woods,” he said. INDUSTRY EXPENSES Overall, the industry paid or collected $159 billion in taxes in 2021 and exceeded 22% of industry sales, which translates to this: For every $1 of pretax profit earned in the convenience retail channel, the government made 9.2 times that in revenue. “We are a major revenue generator for the government, which should motivate us to use our voice,” said McIlvaine. Direct store operating expense (DSOE) growth outpaced inside gross profit dollars in 2020 and 2019; however, this shifted in 2021: Gross profit dollars outpaced DSOE growth to offset costs, particularly inflation. Total DSOE was up 14.3% in 2021 versus 2020 and up 15.6% in 2021 versus 2019. “I don’t suspect anyone in the room remembers an economic time like this where inflation and pandemic-impacted demand are forcing business model shifts,” said McIlvaine. LABOR HEADWINDS Digging deeper in DSOE, nearly every category was up double digits, with the largest gains coming from wages and benefits: up 10.7% in 2021 versus 2020 and up 17.1% in 2021 versus 2019. The convenience retailing industry provided 2.38 million jobs across the United States in 2021, but there are still “a lot of people on the sidelines,” said McIlvaine, noting that there were more than 11 million U.S. job openings at the end of 2021.

Compared to total U.S. compensation, the convenience retail industry “outspent” employers on average to get and keep employees. However, even with higher wages, turnover did not improve: Nearly 7 out of 10 separations were due to voluntary quits, up 12.4% in 2021 versus 2019. Average wages increased 10.5% for fulltime and 12.3% for part-time employees to $13.14 per hour and $12.45 per hour, respectively. Total industry turnover in 2021 was 150%—the highest it has been since 2012, according to the NACS State of the Industry Compensation Report of 2021 Data. “There is real employee displacement risk with other retailers descending on our employee base,” suggested McIlvaine. During the pandemic, personal savings for individuals increased while credit card debt decreased due to COVID-19 stimulus checks, less spending outside the home amid lockdowns, reduced travel, etc. That gap, however, is becoming smaller, which suggests that those who may have opted out of work are now running thin financially. The solution? Re-enter the workforce. Unfortunately, there is no silver bullet or quick fix to a long-term issue. The labor force participation rate has been declining for the past decade. Today, 50% of the U.S. population is over the age of 55 and retired— the demographic with three-quarters of the country’s wealth. There is also concern about new workforce entrants. According to U.S. Census data, between 2000 and 2019, the number of daily births fell by an average of 0.39% a year. This pace of decline grew between 2010 and 2019, when the number of daily births dropped on average 0.96% a year. This 32 JUNE 2022 convenience.org

Categories to Watch

Here are other industry operational and financial performance highlights: Food After taking a hit in 2020, foodservice is back on track: Sales grew 24.1% in 2021 and were 10.6% higher than 2019 levels. Overall, foodservice accounted for 22.5% of in-store sales in 2021—significantly higher than the 16.8% reported a decade ago—and now accounts for 35.5% of in-store gross profits, compared with 29.2% in 2011. Sales of prepared food, which declined 8.5% in 2020, surged 25.9% in 2021 and were 15.2% higher than in 2019. Meanwhile, hot dispensed beverages (coffee, tea, hot chocolate) have not recovered to pre-pandemic levels but continue to represent the second-largest segment of foodservice sales at 13.2%, followed by cold dispensed beverages (7.8%), commissary (6.6%) and frozen dispensed beverages (5.8%). Fuel Total industry fuel sales were driven by a 39% increase in gas price and a 4.4% bump in volume, which was 46% higher in 2021 than 2020. As noted, fuel volume was down 7.2% compared with 2019, and it remains to be seen whether the industry will reach 2019 levels in the coming years amid market pressures like high gasoline prices not seen since 2014, oil trading at $100-plus per barrel, record inflation, supply chain and labor challenges, and Russia’s war in Ukraine.

DSOE Skyrocketed, Led by Personnel Expenses and Card Fees Billions of Dollars

$71.7

Wages and Benefits

$64.8

$60.9

Card Fees Pretax Profit

$11.8 2019

$11.9

$10.7 2020

$16.0

$13.5

$17.5

2021

Source: NACS and CSX

The NACS Research team: (L to R) Lori Stillman, Chris Rapanick, Patrick Loftus, Leroy Kelsey and Jayme Gough.

decline grew even steeper during the pandemic: The average number of daily births in 2020 was 4.06% lower than in 2019. “How do we replace an increasing rate of retirees, a high labor force dropout rate and a lower birthrate? We need to use our voice,” McIlvaine said, suggesting that our industry is best positioned to help shape business-friendly policies like immigration and energy in Washington.

Chuck Maggelet, NACS vice chairman of research and chief adventure guide at Maverik

RISING INFLATION Consumer spending is being impacted by inflation, which hit a 40-year high of 8.5% in

Every DSOE Category Increased vs. 2020 and 2019 Per Store/Per Month

I don’t suspect anyone in the room remembers an economic time like this where inflation and pandemicimpacted demand are forcing business model shifts.”

Wages & benefits

2021

2021 vs. 2020 2021 vs. 2019

$40,789

10.7%

17.1%

Card fees

$8,760

26.3%

3.4%

Utilities

$3,646

8.2%

4.7%

Repairs & maintenance

$5,207

9.4%

13.9%

$73,848

14.3%

15.6%

Facility expense

$17,958

3.5%

7.3%

Total DSOE & facility expense

$91,806

12.0%

13.9%

Total DSOE

Source: CSX

Taxes Collected and Contributed by U.S. Convenience Stores Approached 23% of Total Industry Sales in 2021 Percentage of Taxes Paid by Segment

Operations Property, Payroll, Corporate

12% 40%

Merchandise

Total Tax

Industry Sales

$159B

$705B Total Inside Sales

Beer, Tobacco, Foodservice, etc.

$287B 48%

9.2X Taxes Paid vs. C-Store Pre-Tax Income

Fuels Federal, State, Local

Source: CSX and Tax Foundation.org 34 JUNE 2022 convenience.org

2021 industry labor costs are up 17.1% versus 2019, so workers are making more, but inflation is eating into their purchasing power.”

April, according to the Bureau of Labor Statistics. Inflation impacts three expense buckets: food, housing and energy. Compared with 2019, food inflation was up 7%, home costs were up 5.2% and energy was up 9.7% in 2021. “For perspective, the 2021 versus 2019 labor costs for the industry are up 17.1%, so workers are making more, but inflation is eating into their purchasing power,” said McIlvaine. Change, as they say, is opportunity. Amid the headwinds facing convenience retailers and customers, people still crave human interaction—and our industry is best positioned to provide it. There are more than

148,000 convenience stores in the United States, and half the U.S. population frequents a store each day. “Every two days all of America enters a convenience store, and 90% of Americans are within 10 minutes of a convenience store. This is our differentiator,” said McIlvaine, adding, “People want personal connections.” Chrissy Blasinsky is the NACS content communications strategist and attended her first SOI Summit in 2005.

National Financial and Operational Performance Scorecard Metric (Per Store/Per Month)

2021

2021 vs. 2020 2021 vs. 2019

Inside transactions

29,092

5.8%

(6.9)%

Inside store operating profit

$(606)

80.3%

(1.2)%

Non-manager turnover (annual)

122.6%

27.7 pts

15.5 pts

Manager turnover (annual)

45.8%

15.1 pts

13.1 pts

In-store GP$ per labor hour

$38.79

16.7%

11.9%

Wages as % of GP$

23.4%

(0.38) pts

1.28 pts Source: CSX

SOI Firms Ranked by Store Operating Profit Show Top Quartile Companies Considerably Outperforming the Average

2.0x

Store Operating Profit by Quartile Per Store Per Month

$53,323 Store Operating Profit Includes Fuel Expenses and Fuel Gross Profit Dollars

$26,548 $18,392 $10,382

Bottom

Second

Third

Top

Source: CSX 36 JUNE 2022 convenience.org

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Companies need to ask themselves ‘How do we make ourselves the employer of choice in the industry?’”

What to Watch Here are 7 areas to look for clues to where the economy is headed, according to AlixPartners.

Inflation: When will inflation peak? Watch the Consumer Price Index.

Interest rates: How aggressive will the Fed need to be to combat rising prices? Watch the Federal Open Market Committee.

38 JUNE 2022 convenience.org

Energy prices: How high will crude oil reach?

Labor market: Will the market begin to normalize? Look at the Bureau of Labor Statistics jobs report.

Supply chain disruption: Watch port and labor negotiations for an indication of shipping backlog status.

Geopolitical tensions: What curveballs lie ahead? Watch Russia and Ukraine, China and Taiwan, U.S. elections, cyberwarfare, etc.

COVID-19 variants: Are we out of the woods yet?

How to Face an Overheating Economy Create an inflation war room to triage the impacts of rising prices, stay flexible and invest in employees. BY SARA COUNIHAN

Convenience retailers need to gird themselves for battle to address the inflation, labor, supply chain and growth challenges confronting the U.S. That’s one of the takeaways from the NACS State of the Industry Summit’s “Convenience Industry Economic Outlook for 2022 and Beyond” session. “Looking back on the first quarter of 2022, I have to say it was a tremendously tumultuous quarter,” said John Benson, a director at AlixPartners. “It was probably the most tumultuous quarter in decades. It’s been quite some time since we’ve had so many economic and political trends all converging at one time with interconnected outcomes that have uncertain economic impacts.” On April 12 when Benson addressed the NACS SOI Summit audience, GDP growth was up 5.7% overall for 2021, the unemployment rate was at 3.6% for March, inflation was at 8.5% and the Conference Board Expectations Index was down 5.2%. “The fundamentals of the economy are strong, but you could argue that it’s too strong; it’s overheating,” said Benson, who pointed to GDP growth that accelerated in the fourth quarter of 2021 to 6.9%. (At press time, GDP had plunged to 1.4% for the first quarter.) The strong GDP momentum in 2021 was driven mainly by unprecedented fiscal stimulus over the past two years, as $5 trillion in federal fiscal stimulus poured into the econo-

my. Historically low federal interest rates, as well as $120 billion monthly asset purchases injected into the economy, also have fanned the economic flames. Inflation stands at a 40-year high of 8.5% and is the highest it has been since 1981—and Benson does not see an end in sight. “We do think that this is going to have a significant impact on consumers and is going to continue to impact [them],” he said. “For every 10% increase in the retail price of gasoline, there is a $23 billion hit to consumers. They now have to spend $23 billion more to maintain the same level of spending.” RISING COSTS Supply chain challenges also remain a major driver for cost inflation for retailers and consumers, and 69% of CEOs surveyed by Bloomberg are concerned about the impact of supply chain disruption. Benson also noted that some investors are wanting to take advantage of the inflationary environment of raw materials, which could lead to a 40% surge in commodity costs over the next six months if investors start allocating more of their portfolios to raw materials, he said. Overall, the outlook on the economy is a bit unclear, according to Benson, and there is good evidence that prices will continue to rise, and economists suggest that inflation could hit 10% over the course of 2022. NACS JUNE 2022 39

John Benson, AlixPartners

In response to the economic environment, 95% of companies are raising prices, but companies need to get more creative, as raising prices will only work to a degree, Benson said. “There’s a limit to how much consumers can absorb the increases,” he said. Benson suggests that retailers establish a plan against inflation and commodity cost increases, including creating an “inflation war room,” which should consist of a cross-functional team that can tackle inflation head on. “As suppliers are increasing their prices, understand what the impact has on your finances and then triage the impacts. Ask yourself, ‘What areas are we going to focus on?’ You can’t address everything, so ask yourself, ‘Where is this having the biggest impact?’” said Benson. LABOR PAINS The labor market is “red hot,” said Benson, and 4 out of 5 CEOs surveyed fear that the current labor shortages may become permanent. At the time of his April SOI Summit

presentation, the job openings rate was 7%— the highest level since at least 2000. “It’s an incredibly tight labor market, but the problem for workers is that, yes, there is a 5.6% nominal wage growth, and they have a tremendous amount of power at the moment, but at the same time they see the 8.5% inflation rate, and when combined, they are seeing a negative 2.9% real wage growth,” said Benson. “Workers are feeling poor.” Benson said that CEOs’ fear of a permanent labor shortage may be correct, as COVID-19 accelerated the baby boomer exit from the workforce, and the birth rate has decreased. “The economy has long benefited from steady population growth with relatively cheap labor,” said Benson. “It was changing before the pandemic, and then [the pandemic] supercharged it.” Benson said that in order to maintain the current GDP rate, the U.S. will need to increase productivity by 80%, and although some recent forces for wage hikes may be temporary, the long-term effect of the shrinking workforce will entail higher wages.

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As suppliers are increasing their prices, understand what the impact has on your finances and then triage the impacts.”

42 JUNE 2022 convenience.org

“Companies need to ask themselves, ‘How do we make ourselves the employer of choice in the industry?’” he said. “We can expect major dislocations as traditional companies that do not reinvent fast enough get sidelined and squeezed.” 6 KEY STRATEGIES Benson noted six key priorities for industry leaders to focus on in 2022: 1. Build flexibility and agility into business plans. Be prepared to adapt to an ever-changing business environment. 2. Establish an inflation war room that reinforces procurement’s role, secures supply and increases visibility of future costs. 3. Invest in employees by taking active steps to become the employer of choice (think: culture, flexible hours, wages, bonuses, benefits). 4. Get the most out of the people that you have by focusing on labor optimization, including organization and operating model design and investments in digital tools.

5. Re-evaluate your customers. Engage with consumers digitally (e.g., loyalty), through new channels (e.g., delivery), and look to create new occasions (non-fuel related). 6. Develop an electrification strategy and transformation plan. How will the energy transition impact your company, and how do you need to respond? “In 2022 and beyond, there are going to be winners and losers,” said Benson. “Certainly, the winners are not going to be the ones who are slow, reactive and resistant to change— quite the opposite. Those that are front footed on these issues, proactive and willing to attack these challenges head-on are the ones who are going to get through 2022 and beyond successfully.”

Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@convenience.org.

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Packaged beverages contributed 16.3% of in-store sales and

20.2%

Evgeniya Pavlova/Getty Images

of in-store gross margin

44 JUNE 2022 convenience.org

Packaged Beverages Power the Cold Vault The core players are carbonated soft drinks, energy drinks, water and sports drinks. BY SARA COUNIHAN Packaged beverages are driving merchandise performance in conveniences stores, with the category experiencing 10 consecutive years of growth. In 2021, the packaged beverages category increased 16.5% in sales dollars over 2020 and delivered an average gross margin of 42.71%. “Packaged beverage has been a bright spot among c-store categories despite a challenging two years,” said Mary Mamalakis, director of packaged beverages, RaceTrac. The category represents 16.3% of inside sales and is only second to the cigarette category in sales percentage contribution. When looking at profitability, packaged beverages was the No. 1 gross profit dollar contributor at 20.2% of

in-store gross margin dollars in 2021. Looking at the eight subcategories that make up the packaged beverages category, all eight experienced growth in 2021. Energy drinks were up an impressive 14.2% in 2021 year over year, and the subcategory commands one-third of category dollars. “Energy drinks provide lift to the profitability of the entire category with higher-than-category-average margins at 44% versus 43% for the category,” said Mamalakis. The carbonated soft drinks subcategory delivered double-digit growth in 2021 at 10.8% year over year, while sports drinks grew the most of all subcategories last year at 27.2%

NACS JUNE 2022 45

46 JUNE 2022 convenience.org

tions in response to supply challenges. “Demand outpaced sales forecasts causing supply issues, plus the labor shortage both on the store side and vendor side led to out of stocks more than ever in 2021,” said Mamalakis. “It’s more critical than ever to communicate with your suppliers so you can know what to expect.”

WHAT SHOPPERS WANT The 2021 NACS Convenience Voices survey found that the top reason consumers visited a particular c-store was because they were thirsty and wanted something to drink right then—46.3% of respondents. “Our cold vault assortment is a point of differentiation versus our competitors, and shoppers look to us as a destination for quenching their thirst, all while providing unbelievable variety,” said Mamalakis. She also noted that shoppers are becoming more experimental. The percentage of respondents who said they visited a c-store because they wanted to “look around and find something new and interesting” was up almost two points. This was a departure from behavior patterns during the height of the Packaged Beverage Subcategory pandemic when consumSales Contribution ers prioritized known and trusted brands above Energy Drinks 31.1% all else, said Mamalakis. “Discovery definitely has Carbonated Soft Drinks 24.5% new legs,” she said. Water 12.2% Despite energy drinks being up over 14% in Sports Drinks 10.5% 2021, c-store retailers report supply chain Other Packaged Beverages 6.6% stress and out of stocks Iced Tea 6.5% in top-selling energy drink brands, including Juice/Juice Drinks 6.3% Monster and Red Bull, so retailers have been forced Enhanced Water 2.3% to throttle down promo-

malerapaso/Getty Images

TRENDS TO WATCH Shopper trends for 2021 in the packaged beverage category included new energy drink flavors, new releases and limited or exclusive options. “[The energy drink category] has been discussed over the past few years, but it’s important—energy drinks are delivering significant growth to the category. This type of growth would not be possible without strong years from the name brands in this space,” said Mamalakis, adding that Celsius delivered explosive growth last year that should continue into 2022. Sports drinks benefited from consumer demand for nutrition-filled, low-calorie options with clean labels, while at the same time, they shifted back to “trusted” big brands even through the supply chain disruptions. “We cannot forget about the core brands that consumers are looking for year after year

Source: CSX; www.csxllc.com

Energy drinks provide lift to the profitability of the entire category with higher-thancategoryaverage margins at 44% versus 43% for the category.”

compared with 2020. “Sports drinks already challenge water in size and sales contribution. If its growth continues, it could overtake water in the coming years,” said Mamalakis. Water grew 20.6% in 2021 year over year and makes up 12.2% of the category, while sports drinks are 10.5% of the packaged beverages category.

Total Packaged Beverages Grew 16.5% in Dollars and Delivered an Average Gross Margin of 42.71%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG

GM%

50.0% 40.0% 30.0% 20.0%

Iced Tea

2.8%

11.0%

Juice/Juice Drinks

10.8% Water

20.6% Other Packaged Beverages (Non-alcoholic)

6.2%

Sports Drinks

27.2%

Energy Drinks

14.2%

Carbonated Soft Drinks

10.8%

10.0% 0.0% -5.0%

We cannot forget about the core brands that consumers are looking for year after year in large volumes.”

0.0%

5.0%

10.0%

Sales

in large volumes. These products delivered in 2021 and helped lead the category to that 16.5% growth,” Mamalakis said. For 2022, trends in the packaged beverages category include core-brand line extensions and new entrants into the category. The key packaged beverage priorities for this year, according to Mamalakis, include merchandising, assortment, pricing and promotion, and space allocation. HOW TO MERCHANDISE Mamalakis encouraged retailers to think through the merchandising flow across the cold vault, and how the consumer thinks through each of the subcategories. Retailers should anchor their cooler with the core subcategories that are driving people to c-stores: carbonated soft drinks, energy drinks, water and sports drinks. Then retailers should think about how the other subcategories interact with these core subcategories. “Does ready-to-drink coffee belong next to energy since it’s also a source of caffeine? Or should you set it beside dairy since there’s milk in that product?” asked Mamalakis. She also said that packaged beverages inspire valuable attachments and incremental sales. For instance, 62.3% of consumers are pairing their packaged beverages with pre-packaged sandwiches and wraps, and 45.7% of them are buying a packaged beverage alongside their grab-and-go meal. Candy is paired with a packaged beverage 43% of the time.

48 JUNE 2022 convenience.org

15.0%

25.0%

30.0%

35.0%

40.0%

vs. 2020

“Packaged beverages are a natural ally to foodservice, snacks, confection and other high margin categories,” said Mamalakis. Additionally, having a vast assortment of packaged beverages puts the c-store channel at a competitive advantage. “Failure to meet [consumers’] needs can result in a lost sale 34% of the time,” said Mamalakis. “We are the channel for that cold-drink assortment, and the core is very important, but also lean into innovation to have that discovery brand.” She said retailers should look to other channels for emerging innovation and to develop distributor networks. “Build relationships with [distributors] so you can be mutually successful to keep the store in stock,” said Mamalakis. Looking at price and promotions, shoppers want to get and do more on every trip, she said. In 2020, bogos gave way to bundles as the No. 1 promotion that c-store shoppers noticed because shoppers consolidated trips and stocked up in 2020. However, in 2021, bogos reclaimed the No. 1 spot. “Guests seek out beverages, and when [beverages] are in our stores, they are adding to that basket,” said Mamalakis. “They’re adding different products throughout different dayparts. Continue to add value for them through these rising costs.” Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@ convenience.org.

Source: CSX; www.csxllc.com

60.0%

Indicates category average

Enhanced Water

ed t u trib n o sc e t t s are ale g s i C re o t s n- and n of i rgi a ss m o r eg r o -st n i of

% 7 7 . 27 % 4 0 11.

Premium is not just the biggest category, it was the only subcategory that saw positive sales growth in 2021.” 50 JUNE 2022 convenience.org

The State of Cigarettes and OTP There are opportunities to win a crucial but challenging convenience category.

blackcatimaging/Getty Images

BY MELISSA VONDER HAAR Taxes, cost increases, age verification, regulations that go so far as to outright ban the sale of current products ... the tobacco category is not for the faint of heart. “I really am blessed to run this category,” joked Kevin Majewski, senior category manager of cigarettes for 7-Eleven, while presenting the cigarettes and OTP data at the NACS State of the Industry Summit. “It’s so easy, [it] practically runs itself!” The year 2021 was certainly interesting for cigarettes, thanks to the continuation of remote work and government assistance that helped boost sales in 2020. “In 2021, cigarettes built on the strong momentum we saw in 2020,” he said. But “strong headwinds started appearing toward the end of the year.” Specifically, the fourth quarter of 2021 saw cigarette dollar sales down 1.5% and units down 8.6% year over year, trends that Majewski said continued into the first quarter of 2022. The other part of the back bar was more positive. “OTP was up double digits, with smokeless and cigars growing the most dollars year over year,” said Majewski, noting that smokeless sales were driven by nicotine pouches.

Here’s a look at the NACS State of the Industry numbers, as well as challenges and opportunities, within cigarettes and OTP. PREMIUM CIGARETTES DOMINATE Cigarettes are undoubtedly an important but complicated category for the convenience channel. In 2021, they remained the largest driver of in-store sales (27.7%) but contributed far less to in-store gross profit margins (11.04%). “It’s a difficult conversation to have from an operational perspective: 28% sales vs. 11% margin,” Majewski said. “But cigarette consumers are frequent, loyal shoppers—they probably shop convenience every other day.” In terms of the subcategories, premium cigarettes continued to dominate (84.7%), followed by subgeneric/ private label (8.5%), branded discount (3.4%), imported (2.7%) and fourth tier (0.7%). “Premium is not just the biggest category, it was the only subcategory that saw positive sales growth in 2021,” Majewski said. Premium cigarettes were up 7.6% compared with 2020, leading all cigarettes to be up 4.2%. While some of the other subcategories have higher gross profit margins—cigarettes come in at a 13.4% margin—Majewski pointed out that premium cigarettes almost always have a higher penny profit for retailers. “Sell a subgeneric pack at four dollars making 19% margin, that premium pack at $8 per pack is still going to generate more money,” he said. “You can make $1.10 a pack or 90 cents a pack. Which would you prefer?” Premium will likely remain the majority of cigarette sales, though inflation and gas prices could shift dynamics toward lower-priced options in the short term, Majewski said. “If economic conditions do show that consumers are trading down, we may see total cigarette margins go up, but overall profitability go down.” NACS JUNE 2022 51

Premium Cigarettes’ 7.6% YoY Growth Boosted Category Sales

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates category average

Premium 7.6%

20.0%

Branded Discount -22.1%

Imported 14.7%

Subgeneric/Private Label -7.9%

0.0%

-20.0% Fourth Tier -16.0%

-40.0% -30.0%

-20.0%

-10.0%

0.0%

Sales

10.0%

20.0%

vs. 2020

3 of 4 Top Subcategories See Growth to Push OTP Sales Up 10.2% YoY

Source: CSX; www.csxllc.com

GM%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG

30.0% 20.0%

Pipes -9.9%

Indicates category average

Pipe/Cigarette Tobacco -2.0% Cigars 19.7%

Papers 1.2% Smokeless 17.2%

10.0%

OTP contributed

7.60% of in-store sales and

6.43% of in-store

gross margin

52 JUNE 2022 convenience.org

Other Tobacco 34.6%

0.0% -20.0%

0.0%

20.0%

Sales

SMOKELESS LEADS OTP From a sales dollar vs. profit margin perspective, OTP fares much better than its back-bar counterpart: The category accounted for 7.6% of in-store sales dollars and 6.43% of gross profit margins. Promisingly, it was up 10.2% year over year. “The biggest challenge with OTP is we don’t have the trips yet,” said Majewski. “But they’re coming. 2022 should be very solid with people returning to offices.” Smokeless continues to lead OTP sales (33.1% total), followed by e-cigarettes (27.7%), cigars (18.9%), “other” (12%), papers (0.9%), pipes (0.7%) and pipe/cigarette tobacco (0.7%). Smokeless—which includes snuff, moist and nicotine pouches—was up 17.2% compared with 2020, thanks to nicotine pouches. Majewski described the spitless alternative as a “great unifier” with cigarette, e-cigarette and dip consumers all exploring pouches. Majewski said deep promotions and distribution by major manufacturers, coupled with

40.0%

vs. 2020

pouches’ unique ability to be used without social stigma means “continued growth is all but assured, provided possible taxes and flavor bans don’t impact too greatly.” E-cigarettes had a drastically different experience in 2021, down 8.6% year over year. “2020 saw a double whammy of Tobacco 21 and flavor bans,” Majewski said, adding that the U.S. Food and Drug Administration was expected to rule on premarket tobacco applications that would have allowed flavors back in 2021. “Well, the PMTA approvals are still pretty much pending, and we don’t have any flavors back,” he said. Even with all the challenges, Majewski expressed optimism about the segment. “E-cigs still come in with the largest margin percentage,” he said. “Couple that with their high average retail and your e-cigs still provide the highest profit per pack of anything on the back bar.” Majewski described the cigar customer as also “very important for us,” which is welcome

gbrundin/Getty Images

40.0%

E-cigarettes -8.6%

Source: CSX; www.csxllc.com

GM%

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84.7%

Premium

Source: CSX; www.csxllc.com

Cigarette Subcategory Sales Contribution gressional action granted the FDA oversight of synthetic nicotine products, which had allowed synthetics a “loophole” to keep flavors on the 3.4% Branded Discount market without submitting a PMTA. “Manufacturers will have until mid-May to submit 2.7% Imported PMTAs,” Majewski said. “Once submitted, the Fourth Tier 0.7% FDA will have until mid-July to approve—if they don’t, manufacturers will have to remove from retail.” For all the headwinds, Majewski sees a slew OTP Subcategory Sales Contribution of opportunities for retailers to “win” in these important categories, including: 39.1% Smokeless • Walgreens/Walmart exits: Recent reports 27.7% E-Cigarettes suggest both Walgreens and Walmart may nix tobacco sales in their many stores nationwide. 18.9% Cigars “There is some opportunity to pick up share depending on your geographic location,” Ma12% Other Tobacco jewski said. 0.9% Papers • Poly-usage: As Americans return to in-office work, there is a huge opportunity 0.7% Pipes for cross-category usage. “I can’t stress it 0.7% Pipe/Cigarette Tobacco enough: Poly-usage is a huge win for OTP (and even cigarettes),” said Majewski. “Customers moving into OTP are primarily coming from news as the subcategory grew 19.7% year over cigarettes—this is a huge customer base that year, thanks to improved supply chain dynamyou cannot lose!” ics. While cigars accounted for slightly less • Nicotine pouches: Pouches continue to gain than 20% of OTP sales, cigar units made up distribution and usage, though Majewski notnearly 50% of OTP volumes. ed a lot of growth is coming from promotions. “What that means is lots of small trips with “This heavy promotion can’t go on forever, and low rings, but lots of trips equals a lot of associmany chains are already destinations for these ated sales,” he said. “You may be able to recover pouches,” he said. “Now is the time to begin from the 99-cent cigarillo purchase, but can you capturing this customer base if you haven’t sustain the loss on the 20-ounce Dew or Doritos already started.” or the fuel they used to purchase?” • Loyalty: Majewski described “loyalty” as not just loyalty programs but also leveragCHALLENGES AND OPPORTUNITIES ing store and brand loyalty. “Loyalty is your In terms of challenges, regulatory concerns best defense against downtrading,” he said. remain “a constant” for tobacco. “We had a cou“Customers knowing that you’ll always have ple issues that were really big,” Majewski said, the best deals, the best prices and their brands specifically pointing to: keeps them coming in.” Majewski said that • Taxes: “For 2022, nicotine pouches and when executed properly, loyalty can help grow e-cigs (to a lesser extent) are most at risk for store trips, basket size (both in tobacco and cross-category purchases), market share and either net new taxes or increases,” Majewski opportunities for poly-usage. said. “That being said, there’s always that Amid a challenging environment, Majewski possibility of increases to state and federal encouraged SOI Summit attendees to remember excise taxes on cigarettes.” one thing: “It’s still a $60 billion business. We • Menthol bans: Certain parts of the counhave challenges, but we still have opportunities try have reached “epidemic levels” of local to ‘win’ this category.” menthol bans, but Majewski also cited a statewide referendum on menthol proposed in California, and the possibility of a nationwide ban. “Don’t be afraid to speak up Melissa Vonder Haar is the to your local representatives,” he said. “They marketing director for iSEE Store may not be aware of how their decisions Innovations. Follow her on Twitter at @iSeeMelissaV. impact your local business.” • Synthetic nicotine oversight: Recent con8.5%

Source: CSX; www.csxllc.com

Subgeneric/Private Label

OTP was up double digits, with smokeless and cigars growing the most dollars year over year.”

54 JUNE 2022 convenience.org

Lean into sparkling wines as they are the highest movers within traditional wine, growing in both dollars and units.”

56 JUNE 2022 convenience.org

Alcohol Boom Fizzles Following a historic year for beer, wine and liquor, sales slowed in 2021 but are holding their own. BY CHRISSY BLASINSKY

As the post-pandemic world made its way toward normalcy, convenience retailers felt another shift in consumer purchasing behavior after experiencing an unprecedented 2020 for beer, wine and liquor sales. The 2020 alcohol sales boom fizzled in 2021 due to restaurants and bars reopening, as well as labor shortages and supply chain disruptions—particularly for aluminum cans. Beer sales were slightly down but maintained some of their 18% sales growth from the prior year, while wine and liquor sales both declined in 2021. The sales boom was good while it lasted, but 2021 was not all doom and gloom. Thanks to product innovation and new customers— the “pandemic drinkers” who had nowhere else to go but their local c-store to fulfill their adult-beverage needs—continuing to shop the channel, all signs point up. POP A TOP In 2020, average in-store sales of beer jumped 18.1%. Flavored malt beverages (FMBs) emerged as a category superstar, with average store sales surging 70.5%. In 2021, beer held onto some of its sales growth and finished the year at 6.82% of in-store sales and 3.99%

Beer contributed 6.82%

of in-store sales and

3.99%

of in-store gross margin

Wine contributed 0.35%

of in-store sales and

0.29%

of in-store gross margin

Liquor contributed 0.79%

of in-store sales and

0.73%

of in-store gross margin

NACS JUNE 2022 57

Beer

Premium

Subcategory Sales Contribution

32.7%

Flavored Malt

19.6%

Imports

16.0%

Budget

11.9%

Super Premium

8.0%

Popular

5.3%

Microbrews/Craft

5.2%

Malt Liquor Non-Alcoholic

1.1% 0.2%

Beer Sales Declined After 2020’s Unprecedented Growth

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates category average

Microbrews/Craft -15.9%

Malt Liquor -28.6% Popular -25.0%

20.0%

Imports 0.9%

Flavored Malt 12.3%

Premium -2.2%

Budget -24.5%

10.0%

Non-Alcoholic -0.4%

Super Premium -3.9%

0.0% -30.0%

-10.0%

10.0%

Avg. Sales/Store Change vs. YAG

Source: CSX; csxllc.com

30.0%

Wine

Subcategory Sales Contribution

Table/Varietal Wine

33.8%

Other Wine

27.7% 20.7%

Coolers/Wine Cocktails Fortified Wine

11.1%

Champagne/Sparkling Wine

Wine Sales Fell Across Nearly All Subcategories Nationally

6.7%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates category average

Fortified Wine -9.0%

40.0% 30.0% 20.0%

Cooler/Wine Cocktails -21.3%

Other Wine 14.0%

Champagne/Sparkling Wine -2.6%

10.0% 0.0% -40.0%

-20.0%

0.0%

Avg. Sales/Store Change vs. YAG

58 JUNE 2022 convenience.org

20.0%

Source: CSX; csxllc.com

Table/Varietal Wine -40.9%

of gross margin contribution. Both premium and flavored malt beverages (FMBs) held the No. 1 and No. 2 spots, respectively, while the No. 3 segment may be the one to watch: “You can’t read an industry article without it mentioning the growth of imports, specifically Mexican imports, and then specifically Modelo,” said Julie Farmer, adult beverage category manager, Circle K. “Today, Modelo is my No. 1 brand in Nevada and No. 2 in Arizona, and it’s growing. If you haven’t experienced the rise of Mexican imports in your area, it’s coming,” Farmer said. The category lines are blurring among hard seltzers, hard sodas and ready-to-drink FMBs. If the product is malt-based, even if it carries a wellknown spirits brand like Jim Beam, it’s an FMB. The category blur is also occurring around national beverage brands not typically associated with licensed beverages entering the space, like Hard Mountain Dew and Topo Chico Hard Seltzer. “We will see more collaborations between beverage and alcohol companies that will open up more occasions for consumers to shop our channel,” said Farmer. The big takeaway for beer is that although the total category declined 2.8% from 2020, it’s still up 13.4% compared to 2019. “As we all know, beer experienced unprecedented growth over the pandemic. The fact that we’ve been able to maintain a lot of that growth is admirable,” said Farmer. NO SOUR GRAPES Wine is a small category in convenience at just 0.35% of in-store sales and 0.29% of in-store gross margin. Despite its size, there is huge product innovation and new entrants to the market that are a great fit for the convenience channel. Table/varietal wine represents most of the category’s sales (33.8%), but there are opportunities coming from canned wine, it’s rosé every day and white sparkling wine in on-the-go four-packs. “Lean into sparkling wines as they are the highest movers within

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Liquor Subcategory Sales Contribution traditional wine, growing in both dollars and units,” suggested Farmer.

Other Liquor

14.6%

Cordials/Brandy/Cognac

13.5%

Prepared Cocktails

4.5%

Cocktail Mixes

2.8%

Prepared Cocktails Were Bright Spot for Liquor Category

WHAT’S NEXT? Next-generation drinkers are starting to mold the adult beverage categories, including those who prefer alcohol-free cocktails—and we’re not talking about club soda and Shirley Temples. Near-beer and non-alcoholic wine products surged in 2021, and although a very small segment, with events like Dry January becoming more popular, retailers might want to capitalize on the 31-day booze-free trend. Wine may be a small category, but it is mighty in innovation. Canned wines in smaller four-pack sizes in 187 ml. and 250 ml. servings are great for convenience stores. Liquor, for retailers who can sell it, can be profitable, but the key is to toss the template and create sets that best reflect the store’s demographics. “Test and learn,” advised Farmer. There will always be adult consumers of the adult beverage categories.

Chrissy Blasinsky is the NACS content communications strategist and has been at NACS for 17 years. She can be reached at cblasinsky@convenience.org. 60 JUNE 2022 convenience.org

64.6%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates category average

50.0% 40.0% 30.0%

Cocktail Mixes 52.5% Distilled Spirits Cordials/Brandy/Cognac -70.4% -23.4%

Prepared Cocktails 234.8%

20.0% Other Liquor 43.6%

10.0% 0.0% -100.0%

0.0%

100.0%

200.0%

300.0%

Avg. Sales/Store Change vs. YAG

If you haven’t experienced the rise of Mexican imports in your area, it’s coming.”

Source: CSX; csxllc.com

CANNED COCKTAILS ARE HOT Depending on region and how easy (as in complicated) it is to secure a liquor license, distilled spirits are a small segment of the adult beverage space. The segment represents barely 1% of in-store sales (0.79%) and gross margin contribution (0.73%) and did not sustain its 2020 sales growth. The movers and shakers in the overall liquor category are tequila and canned ready-to-drink (RTD) cocktails. “With all the movement between categories, retailers need to have an open mind when it comes to merchandising” RTD cocktails in the cold space, suggested Farmer. “Pay attention to consumer trial and syndicated data— our customers will dictate what our cold box should look like,” she said.

Distilled Spirits

BuzzBallz.com

To learn more, visit: www.UptownCocktails.com

Candy contributed 3.26%

of in-store sales and

4.66%

of in-store gross margin

Salty snacks contributed 4.22% of in-store sales and

4.93%

of in-store gross margin

62 JUNE 2022 convenience.org

A Sweet —and Salty— Deal Gum and mints hit refresh, while salty snacks regain their crunch.

Arina P Habich/Shutterstock

BY SARA COUNIHAN Candy and salty snacks continue to dominate c-store inside sales, according to Tim Young, category marketing manager, Newcomb Oil. “Collectively they both put up huge numbers,” said Young. “Both categories are in the top 10 in sales and in gross profit dollars, with candy delivering the third-highest gross margin percentage of all the merchandise categories behind ice and health and beauty care. Both candy and salty snacks drive trips, and they help build baskets.” Candy and snacks also respond well to promotional offers, according to Young, because they are impulse driven, and they are known as an expandable consumption, which is consumption built on demand. Here’s how these two categories fared in 2021. CANDY BUILDS BASKETS Candy represented 3.26% of in-store sales at convenience stores and 4.66% of in-store

gross margin contribution in 2021. The total candy category grew 16.8% in dollar sales last year over 2020 and delivered an average gross margin of 49.51%. Looking closer into the candy category, chocolate bars and packs continue to drive the category, said Young, commanding more than 45% of category dollars. However, the subcategory only posted sales gains of 10.9% year over year, lagging the category average, but the subcategory delivers an impressive gross margin of 47.8%. The non-chocolate subcategory, while only 23.6% of the candy category, showed strong growth in 2021—up 26.7% in sales over 2020. Another small subcategory, seasonal candy, also posted impressive sales growth of 37.2% year over year. Sales of gum and candy/rolls/mints/drops recovered last year from a sales decline in 2020 due to the loss of commuter traffic during the COVID-19 pandemic—the subcategories were up 11.7% and 10.2% year over NACS JUNE 2022 63

Candy

Subcategory Sales Contribution 45.3%

Chocolate Bars/Packs 23.6%

Non-Chocolate Bars/Packs

13.0%

Bagged or Repacked Peg Candy

Candy/Rolls/Mints/Drops

3.7%

Novelties/Seasonal

2.0%

Change Makers/Penny/Bulk

1.8%

Total Candy Grew 16.8% in Dollars, Delivering an Average Gross Margin of 49.51%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates Category Average GM

GM%

40.0%

Gum 11.7%

Bulk Candy -11.4%

Chocolate Bars/Packs

0.0% -20.0%

-10.0%

0.0%

28.5% Bagged or Repacked Peg Candy

Novelties/Seasonal 37.2%

26.3%

10.9%

20.0%

Non-Chocolate Bars/Packs 26.7% Change Makers/Penny Candy

10.0%

Sales

20.0%

vs. 2020

30.0%

40.0%

50.0%

year, respectively. The change makers/penny candy subcategory also saw sales gains last year of 28.5% over 2020 results; however, bulk candy is beginning to lose relevance with c-store shoppers—down 11.4% year over year. “Candy sales definitely helped sweeten some of the challenges in 2021 by making ordinary moments more special,” said Young. “I’m firmly convinced that convenience stores are just concession stands for adults.” Young said 2021 saw innovations in the category, including new packaging, mixed textures and better-for-you options. “Innovation is very important to this category. It brings new shoppers, it builds bigger baskets, and it creates excitement,” said Young. Merchandising candy should be a key priority for the category this year, said Young. 64 JUNE 2022 convenience.org

Valentina_G/Getty Images; ImagePixel/Getty Images

Candy Rolls/Mints/Drops 10.2%

60.0%

Source: CSX; www.csxllc.com

Candy sales definitely helped sweeten some of the challenges in 2021 by making ordinary moments more special.”

10.6%

Gum

Salty Snacks Subcategory Sales Contribution

Other Salty Snacks

29.3%

Potato Chips

26.1%

Tortilla/Corn Chips Nuts/Seeds Puffed Cheese

15.8% 9.4% 5.4%

Packaged Ready-to-Eat Popcorn

4.1%

Crackers

3.8%

Mixed

3.2%

Pretzels

3.0%

Salty Snacks Rebounded in 2021, Growing 12.7%; Margins Averaged 40.7%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG

20.0%

Other Salty Snacks 41.2%

Puffed Cheese 9.7%

0.0% -60.0%

-40.0%

-20.0%

Sales

0.0%

Tortilla/Corn Chips 17.9% Pkg. RTE Popcorn 19.0% 20.0%

40.0%

50.0%

vs. 2020

Dayparts matter, and it’s important to create an experience when customers visit a c-store. “We’ve come a long way over the years,” said Young. “From the days of Cokes and smokes to now, we’re truly a food destination that sells fuel, but also, we’re in the entertainment business, and we are creating an experience.” He added that not all days are equal and not all hours within a day are equal, so retailers should look at the relevant dayparts and add programming that speaks to a given day. Retailers should

also make sure that digital and forecourt marketing connects with in-store offers and take steps to eliminate the clutter in stores overall— make the product as easy as possible to find, he advised. Assortment should also be priority in 2022, said Young. Limited-time offers drive excitement, and retailers should consider the digital and loyalty shelf for added offerings. Betterfor-you candy and portion control options are a major trend right now, so satisfy shoppers seeking these products by calling them out in store.

dr3amer/Getty Images; Annabelle Breakey/Getty Images

Nuts/Seeds 9.9% Potato Chips 16.5%

40.0%

66 JUNE 2022 convenience.org

Crackers 20.8% Pretzels 26.7%

Mixed 9.7%

60.0%

Source: CSX; www.csxllc.com

Indicates category average

GM%

68 JUNE 2022 convenience.org

SALTY SNACKS RECOVER Salty snacks represented 4.22% of in-store sales and 4.93% of in-store gross margin contribution in 2021. The category rebounded in 2021, growing 12.7% year over year, and gross margins averaged 40.7%. The other salty snacks subcategory (i.e., puffed vegetables, extruded onion rings, pork rinds) continued to be the largest segment of salty snacks at 29.3% of the category. It also was a heavy hitter—up 41.2% in sales year over year. The next largest subcategory was potato chips, which made up 26.1% of the salty snacks category and grew 16.5% over 2020. Both segments comprised more than 55% of category dollars. Tortilla chips, along with nuts/seeds, together comprised a quarter of category sales, with the remaining sales delivered by puffed cheese, ready-to-eat popcorn, crackers, pretzels and mixed snacks. “Salty snacks continue to evolve to meet diverse needs of shoppers across all lifestyles

Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@ convenience.org.

Juanmonino/Getty Images

Do a foodservice bundle where the customer can choose between a salty or sweet option as a top off.”

“Don’t forget about pricing and promotion on candy,” said Young. “Cross-category promotions and pricing, like coffee and gum/mints or coffee and a candy bar, drive impulse.” He added that bundled pricing and club offers build bigger baskets. “Do a foodservice bundle where the customer can choose between a salty or sweet option as a top off,” said Young.

and groups,” said Young. Suppliers have done a great job going bold with flavors, such as Paqui’s chips and its Haunted Ghost Pepper flavor, as well as potato chips that offer unique flavors like cheeseburger and Korean street tacos. “As snacking versus meals becomes a more routine diet for many, the appeal of products that pack a lot of protein is also important,” said Young. “We’ve seen the explosion of alternative snacks bring growth to flavored meat sticks and jerky, but we’re also seeing more routine chips promote the satiety that comes with added protein.” Also, less-traditional key ingredients found their way into salty snacks, such as chickpeas and kale, and some plant-based entrants accurately mimicked long-standing category flavors, such as Pig-Out’s plantbased pork rinds. Trends that will affect salty snacks this year include supply chain challenges, pricing and merchandising. “No doubt we have seen supply chain challenges,” said Young. “We’re seeing this in all trades, so find out how strong your vendor pipeline is because this will impact your assortment and promotional activity.” Pricing becomes a challenge because retailers have margin number expectations, but utilizing loyalty programs can help offset some pricing issues, according to Young. When it comes to merchandising, it’s all about dollars per square inch, Young said, and he encourages retailers to think differently about merchandising and promotions. “Don’t be afraid to test and learn with ideas,” he said. “Get outside of your bubble and visit the competition.”

A Private Offer Sales of private-label products in convenience stores outpace growth of national brands. BY SARA COUNIHAN With inflation and gasoline prices at record highs, the American consumer is feeling the pinch of rising costs. Eighty percent of consumers are looking for ways to save money, and shoppers are targeting less expensive brands, according to Kristine Modugno, director of category management, Nouria, based in Worcester, Massachusetts. Nearly one-third of shoppers report buying more private-label products now than they once did. Modugno shared that private-label sales in the convenience channel were robust in 2021, up 17.8% year over year, outpacing national brands, which only saw 4% sales growth. C-stores also outpaced private-label growth in all other channels, which combined saw a -0.7% growth. “These are great numbers, especially when we take into account the decrease in new private-label introductions,” said Modugno. “Compared to 2020, c-stores introduced 27% fewer products in 2021. This was due in part to manufacturers not willing to take on new product lines or customers amid the challenges of COVID-19.”

70 JUNE 2022 convenience.org

SALTY AND SWEET SNACKING Private-label salty snacks represented a small (1.8%) but growing portion of the category’s sales. Private-label salty snacks sales experienced 16.4% year-over-year growth compared with other channels, which were down nearly 4%. “This is a great space to add unique and signature flavors and enhance the offering in your store rather than duplicate the brands,” said Modugno. Private-label alternative snacks sales growth was far higher in convenience than in other channels, said Modugno. Alternative snacks sales in the channel were up 45.6%. All other channels combined were at 7.8%. Meat snacks were the top driver from both a dollar and percent change standpoint, with the subcategory’s sales up 60% year over year in convenience stores versus all other channels, which clocked in at 9.3%. “I have seen several c-store chains bring in this category last year, so it’s definitely a [sales] driver, but [meat snacks are] also a higher ticket item. The timing was perfect with

laylandmasuda/Getty Images

consumers looking to save,” said Modugno. Private-label pretzels grew 41%, while private-label energy bars, potato chips and other salty snacks were all up over 30%. When it comes to private-label packaged sweet snacks, year-over-year sales at c-stores were comparable to all other channels at 20.8% and 15.0%, respectively. Looking into the subcategories, snack cakes/pastries and muffins/donuts drove the year-over-year growth. “The data showed that grab-and-go smaller [package] sizes drove the increase versus take-home sizes,” said Modugno. “This is another category that is perfect for developing your own recipes and avoiding duplication.”

Sports drinks performed exceptionally well, said Modugno, up over 60% year over year, despite being a small percentage of the total category. “I am sure some of the branded shortages help fuel this, and we also have several retailers with great programs,” said Modugno, who pointed to 7-Eleven for its innovation in the subcategory with its Replenish private-label sports drink line. “It’s important that we continue to offer value and promos in our stores, whether it’s through private label or branded promotions,” said Modugno. “It’s not easy given all of the cost increases we are seeing, but you can get creative as it’s really a perceived value.”

COMMISSARY AND SPORTS DRINKS Convenience private-label commissary was up 29.8% and had the largest dollar growth of all categories as well as the largest share of sales at 60%, which also outpaced all other channels, according to Modugno. While experiencing robust year-over-year sales growth (46%), private-label ready-to-eat meals and salads/sides decreased slightly in terms of share of convenience sales. All other channels outpaced the convenience channel’s year-over-year increase in sandwiches, salads and sides. Another top private-label category for c-stores was packaged beverages with yearover-year sales at 18.2%, compared to all other channels (3.8%)—that’s five times higher.

DRIVING LOYALTY According to a consumer survey from the Food Marketing Institute and IRI, 46% of consumers say store brands influence their store choice, which is up 11% over three years earlier. “I think this is amazing,” said Modugno. “This really shows that private label drives loyalty.” Eleven percent of consumers purchased more private products instead of known brands in 2021 versus 2020, and the top reason that consumers buy private label is because

This is a great space to add unique and signature flavors and enhance the offering in your store rather than duplicate the brands.” NACS JUNE 2022 71

they believe the products are equal quality for less money, according to a McKinsey & Company State of Grocery Consumer Survey. “Consumers trust private label more than ever,” said Modugno. “This is due to the consistency in quality we are seeing across every channel, and it’s also because the number

Awareness of Convenience Private Label Is Strong Percentage of shoppers who would purchase private label by category Beverages

79%

50%

Candy

50%

of shoppers

are aware that convenience stores sell store-branded products

63%

Salty, Savory or Packaged Sweet Snacks

Prepackaged or Prepared Foods

44%

Grocery

34%

General Merchandise/ Non-edible Grocery/HBC

26%

Cigarettes

16%

Other Tobacco Products

Likelihood of purchasing conveniencestore-branded products

37%

34%

25%

3% Extremely Likely

Likely

Neither Unlikely Extremely Likely nor Unlikely Unlikely

Source: 2021 NACS Convenience Voices survey 72 JUNE 2022 convenience.org

Juanmonino/Getty Images

Consumers trust private label more than ever.”

of retailers that are innovating on their private-label brands is elevating the quality perception for all of us.” Modugno said that when shoppers were asked what would make them shop convenience retail, a lower price was by far the most selected factor at 55%, which was more than double the next closest factor, according to the 2021 NACS Convenience Voices survey. “Yes, we are perceived as being a highpriced channel, but the lower cost of private-label products can help to change that perception,” said Modugno. “Keep in mind your shoppers have your store as a frame of reference when it comes to price. When they are inside your store, offering more promos on your private label, ‘two-for’ deals, anything can help them perceive lower price. If the consumer sees the value, it can help you maintain better margins.” According to the NACS Consumer Voices survey, when shoppers were asked why they chose to shop at a particular convenience store, nearly 30% cited “products” as a reason. Of those shoppers who selected a store based on products, 18% said that store brands, generic or private labels helped to influence their store selection. “While that’s a good percentage, there is opportunity to attract more shoppers and make your stores a destination for your private label,” said Modugno, who added that the convenience channel is similar to the grocery channel—both share the same customers, and 46% of grocery shoppers said store brands influence their store choice. Seventy-nine percent of shoppers say they are aware that convenience stores sell private-label products, and more than 70% say they’re likely to buy private label at c-stores. The top three categories that shoppers say they would purchase are beverages, snacks and candy. Modugno also said the point of entry for private labels is open to convenience stores of all sizes. Sometimes smaller c-stores can’t meet the minimum amount of production from manufacturers for their private-label

you’re gonna wanna sit down for this The fastest selling impulse item in the world. For information please call Peter Olbrys.

Phone: 630-432-3329 email: polbrys@tymail.com

Private-Label Sales Growth Outpaced National Brands in Convenience Sales % Change 2021 vs. 2020

2021 % of Total Channel Sales

45.6%

3.7%

18.2%

3.0%

What categories are contributing to the growth in private-label sales?

4.1% National Convenience

17.8%

2.2%

10.6%

-0.7% Private Label All Other Channels

18.5%

7.8%

Overall Private Label*

3.8%

Alternative Snacks

12.3%

Packaged Beverages

2.6% National All Other Channels

12.7%

11.1%

* Excludes cigarettes & OTP

10.6%

Give your brand premium and ample space in your stores. talevr/Getty Images

products, so she encouraged retailers to reach out to smaller manufacturers so both companies can grow together. “If you want to be a strong brand and you want your brand to become a destination then act like a national brand,” said Modugno. “Innovate. Give your brand premium and ample space in your stores. Market it like national brands do. If you want your guests to believe in your brand then show them that you do.” Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@ convenience.org. 74 JUNE 2022 convenience.org

Source: NielsenIQ Total U.S. Convenience, 52 Weeks Ended January 1, 2022

17.8% Private Label Convenience

NACS JUNE 2022 74

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Foodservice contributed 23% of in-store sales and

54.18%

Turning around the coffee business might help.” 76 JUNE 2022 convenience.org

PsychoBeard/Getty Images

of in-store gross margin

Almost Back

Recapturing lost coffee sales—and morning daypart traffic—just might pull foodservice out of the pandemic slump. BY KIM STEWART

Depending on the benchmark, the foodservice category in 2021 had a great year—or just an OK one. Compared with 2021 NACS State of the Industry (SOI) data, things are looking good overall, but throw 2019’s pre-pandemic performance in the mix, and it’s clear that things aren’t entirely back to normal. Foodservice sales averaged at slightly over $50,000 on a per store, per month basis in 2021 and represented 23% of in-store sales, the largest component of total in-store sales and a 2.2-percentage-point uptick from 2020. “We’re behind just a little bit,” Matt High, senior category sales manager for made to order, Sheetz, said of foodservice performance last year. “Compared with 2019, we’re still off about a sixth of a point of in-store sales overall as a percentage of sales.” Similarly, foodservice gross margin of 54.18% in 2021 gained 0.74 point over 2020 but was still 0.35 point lower than 2019’s gross margin. “Turning around the coffee business might help,” High said, pointing to the subcategory that accounts for the second largest portion of foodservice sales at 13.2% behind prepared food at 66.7%. Hot dispensed beverage sales are still down 21% compared with 2019, highlighting the fact that the

morning daypart hasn’t recovered for all retailers. On an annual basis, foodservice sales increased 24.3% to $609,048 from $490,224 in 2020 but just 10.7% better than 2019’s $549,948 in total sales. Gross profit dollars increased 26.0% to $335,352 in 2021 from $261,828 in 2020 and represented 22.3% of total gross profits. Gross profit performance for 2021 eclipsed 2019’s total of $296,028 by 13.3%. Prepared food turned in the strongest year-over-year sales growth in foodservice as shoppers in 2021 chose prepared food items more than the prepackaged commissary items they gravitated toward in 2020. Commissary—which enjoyed strong sales growth in 2020—saw the smallest increase in year-over-year sales. Prepared food remains the largest sales and gross profit driver within the foodservice category, accounting for two-thirds (67%) of the category’s sales in 2021 at $37,333 on a per-store, per-month basis. This compares with nearly 65% of sales in 2020. DISPENSED BEVERAGES Across all foodservice categories for 2021, gross margin percentage was 54.18%, led by hot dispensed beverages at 65.95% and frozen dispensed beverages at 65.23%.

NACS JUNE 2022 77

Prepared Food Percentage of Foodservice Sales by Category

66.7%

Prepared Food 13.2%

Hot Dispensed Beverages Cold Dispensed Beverages

7.8%

Commissary

6.6%

Frozen Dispensed Beverages

5.8%

Prepared Food Sales Recovered by Over 25% in 2021 GM%

Hot Dispensed Beverages

70.0%

Frozen Dispensed Beverages

15.2%

29.8%

60.0% Prepared Food Cold Dispensed Beverages

50.0%

25.9%

13.9%

40.0%

Commissary

6.7%

30.0% 20.0%

Size of Bubble = Avg.Sales/Store Avg. Sales/Store YoY % Change

10.0%

Indicates Category Average

0.0% 0%

10%

15%

20%

25%

30%

35%

Source: CSX; www.csxllc.com

Consider expanding breakfast into other dayparts.”

80.0%

Commissary had the lowest gross margin percentage at 35.97%. Within the hot dispensed beverages category, sales of coffee at c-stores in the NACS SOI data set fell 4.5% in 2021 relative to 2020, while cappuccino rose 18.9%, and hot chocolate sales jumped 48.2%. Gross margin percentage is highest for cappuccino/ specialty coffee beverages at just over 73%, while coffee brings a 57% gross margin. Benchmarking against 2019 data, though, most hot dispensed beverage sales are still down. Coffee sales on a per-store basis were 45% lower in 2021 compared with 2019, and cappuccino sales were 68% lower in 2021 compared with 2019. Over on the soda fountain, carbonated 78 JUNE 2022 convenience.org

cold dispensed beverage sales have remained relatively steady over the past two years, representing 63.8% of category sales, and seeing a 5.3% uptick in sales in 2021 compared with 2020 and a 4.2% increase over 2019 sales. Other cold dispensed beverage sales (which include iced coffee/cappuccino, cold brew, kombucha and others) climbed 61% in 2021 compared with 2020. In the frozen dispensed category, noncarbonated and carbonated beverage sales both grew in 2021 by nearly 30% and carried strong margins of nearly 60%. Compared with 2019, however, frozen carbonated beverages sales are 43% lower, but non-carbonated sales are 34% higher than before the pandemic.

LauriPatterson/Getty Images

Avg. Sales/Store % Change vs 2020

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Hot Dispensed Beverages Percentage of Hot Dispensed Beverages Sales by Subcategory 65.4%

Coffee 14.9%

Cappucino/Specialty Coffee

13.6%

Hot Chocolate Refills

2.8%

Other Hot Dispensed Beverages

2.8%

Coffee Club Mugs

0.3%

Hot Tea

0.2%

Hot Dispensed Beverages Subcategory Performance GM%

60.0% 50.0% 40.0%

18.9%

Refills -12.1%

Coffee -4.5%

Hot Tea -37.2%

Hot Chocolate 48.2%

Coffee Club 29.0%

Other Hot Dispensed Beverages 86.8%

30.0% 20.0% 10.0% 0.0% -50.0%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates category average

-30.0%

-10.0%

10.0%

Sales

The NACS State of the Industry Report of 2021 Data is available for purchase in a digital format at www. convenience.org/ SOIreport.

“We’ve seen a little bit of transitional movement between frozen carbonated (still the biggest part of the subcategory) and frozen non-carbonated (which is growing), creating some gross margin wins for us,” High said. COMMISSARY Commissary makes up the smallest percentage of sales within foodservice, but the subcategory has become an engine for growth over the past two pandemic years. Commissary subcategory sales in 2021 climbed more than 47% on a year-over-year basis. The subcategory’s sales are split across ready-to-eat meals (roughly $900 in sales per store, per month), sandwiches/wraps (roughly $800 in sales per store, per month) and

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30.0%

50.0%

70.0%

90.0%

vs. 2020

thaw/heat/eat meals at nearly $650 per store, per month. Of note: Sales of sandwiches/ wraps increased nearly 21% in 2021 vs. 2019. “I suspect that you all have gotten into this business over the past couple years to provide meals for folks to take home,” High said. “And we’ve met that need. To me that’s a great opportunity, and that’s going to drive the commissary business for the next several years.” The gross margin percentage for commissary subcategories remains lower than other foodservice categories at 36.2%, although sides and salads carry gross margins of more than 44%. Compared with 2019, all commissary subcategories were up sharply. OPPORTUNITIES AND CHALLENGES Prepared foods and commissary remain a

Peter Dazeley/Getty Images

70.0%

Source: CSX; www.csxllc.com

Cappuccino/Specialty Coffee

80.0%

GROWING CUSTOMER LOYALTY WITH COFFEE Growing customer loyalty while navigating a pandemic is challenging. According to the NACS State of the Industry Report of 2020 Data, the average number of weekly trips has continued to fall, resulting in an erosion of 1.3 trips per shopper per week since 2016. C-Stores have strengthened customer loyalty through an effective coffee program, which leads to greater trip frequency. What if there was a way to upgrade and build excitement around your beverage program? By providing a full-scale, top-quality coffee program, you are laying the foundation for enhanced breakfast offerings, as well as reliable hot and cold coffee options all day long!

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Cold Dispensed Beverages Percentage of Cold Dispensed Beverage Sales by Subcategory

63.8%

Carbonated 34.6%

Other Cold Dispensed Beverages Refills

1.6%

Cold Dispensed Beverages Subcategory Performance GM% 80.0% 70.0% 60.0%

Other Cold Dispensed Beverages Carbonated 5.3%

61.0%

30.0%

Refills 9.7% Size of Bubble = Avg. Sales/Store

20.0%

Avg. Sales/Store Change vs. YAG

10.0%

Indicates category average

0.0% -10.0%

10.0%

30.0%

Sales

terrific opportunity for growth for convenience retailers, High noted. “Convenience still has a substantial opportunity to keep shopper spend, especially that middle shopper spend,” he said. Data from the 2021 NACS Convenience Voices survey indicate that more than 1 in 10 c-store shoppers surveyed are looking for a meal for now (12.4%) or to take home (9%) when they visit a convenience store. Convincing consumers to stay on site, though, is a challenge as 28.4% of c-store shoppers surveyed said they planned to buy a quick-serve or fast-food meal somewhere else in the next 30 minutes. “They are coming in, they are standing with us, we are looking at them eye to eye, and they leave

50.0%

70.0%

90.0%

vs. 2020

and plan to go to McDonald’s, Chick fil-A or somewhere else,” High said. “They may even buy a soda from us. Why?” It’s mainly due to a lack of variety or not having the specific food items that shoppers want. “Out of nine responses, six of them are telling us that we have an opportunity with our assortment,” High said. “I don’t know about you guys but 30% seems like a huge number to dive into.” Besides competition from QSRs, other challenges that foodservice operators need to manage over the next year include supply chain snarls, labor issues, daypart growth and foodservice variety. When it comes to the supply chain issues and out-of-stocks that have plagued all of

We’ve seen a little bit of transitional movement between frozen carbonated and frozen noncarbonated, creating some gross margin wins for us.” 82 JUNE 2022 convenience.org

fotofermer/Getty Images

40.0%

Source: CSX; www.csxllc.com

50.0%

Frozen Dispensed Beverages Percentage of Frozen Dispensed Beverage Sales by Subcategory 79.2%

Frozen Non-Carbonated 12.6%

Other Frozen Dispensed Beverages

8.2%

Frozen Carbonated

Frozen Dispensed Beverages Subcategory Performance GM% 80.0%

Other Frozen Dispensed Beverages 5.7%

50.0% 40.0%

Frozen Carbonated 27.5%

30.0% 20.0% 10.0%

Size of Bubble = Avg. Sales/Store Avg. Sales/Store Change vs. YAG Indicates category average

0.0% -10.0% -5.0%

0.0%

5.0%

10.0%% 15.0%

Sales

retail, High advises category managers to identify opportunities for replacements and substitutions. “We should always be on the lookout for other products,” he said. Pay attention to food waste. “You can’t afford to lose it now, especially when you’re paying more for it.” Think about using the same components across multiple offerings to reduce waste. The current labor shortage has big implications for foodservice. Inflation is outstripping the benefits of higher wages, so get creative with incentives to keep your workforce. Things to consider: same-day pay models, flexible schedules for students or four-hour midday schedules for working parents, free or discounted nearby child care and even pet insurance. What to do about dayparts and expanding foodservice offerings? Dayparts are still tilting toward evening foodservice, but that doesn’t mean that those customers only want snacks or dinner items. 84 JUNE 2022 convenience.org

20.0% 25.0%

30.0% 35.0%

40.0%

vs. 2020

“Consider expanding breakfast into other dayparts. Look at how you can meet the customers’ needs where they are when they are there,” High said, sharing that Sheetz offers most of its traditional daypart-specific favorites all day. Highlight promotional pricing like happy hour offers or everyday low prices to tout value. Offer fresh fruit as a signal that foodservice offerings are also fresh. Develop regional or locale-specific food items, plus restricted diet options to expand the menu appeal. “We are still missing some pre-COVID shoppers,” particularly people who used to stop by regularly for coffee and dispensed beverages. “Reach out to those customers and tell them that you miss them,” High said. Kim Stewart is editorial director of NACS and editorin-chief of NACS Magazine. She can be reached at kstewart@convenience.org.

viennetta/Getty Images

60.0%

Source: CSX; www.csxllc.com

Frozen Non-Carbonated 28.9%

70.0%

Regional Breakouts Leading retailers broke down the data specific to their geographic areas. BY CHRISSY BLASINSKY, SARA COUNIHAN AND LISA KING

One of the unique aspects of the 2021 NACS State of the Industry Summit were the six regional breakout sessions led by retailers who looked at geographic-specific SOI data for the leading categories in convenience sales. The Northeast region, or Region 1, remained strong in 2021, posting higher profits than the national average with foodservice leading the way. Lisa Dell’Alba, president and CEO of Square One Markets, based in Bethlehem, Pennsylvania, gave an overview of the region’s performance. In Region 1, total sales grew 32.3% year over year, with fuel sales up 45.7% and inside sales up 14%. While fuel consumption is up, it has yet to recover to reach 2019 levels. That could be because of reduced vacation traffic and a significant concentration of people working from home or participating in a hybrid model of work, said Dell’Alba.

Industry-wide total foodservice sales grew 18.2% year over year, reflecting demand for the fresh, on-the-go food that shoppers craved. Foodservice led Region 1 in-store gross profits with a 28.9% increase over 2020 and a 11.6% increase over 2019. “In Region 1, this is our thing. This is what we do really, really well. We are masters at foodservice,” Dell’Alba said. The region is second in the country for registered EVs (19.1%) as drivers in the Northeast have adopted EVs faster than other parts of the country, except for the West Coast (Region 6), which accounts for 54% of the entire U.S. EV fleet. “Think of the state you are doing business in—does it need more chargers? There are still plenty of opportunities to serve our customers in a meaningful way in this area,” said Dell’Alba. It is no surprise that direct store operating expenses skyrocketed in 2021. The problem is that operating expenses outpaced inside gross profit growth—increasing 21.8% year over year. Increases in DSOE were driven by familiar line items—wages and benefits and credit card swipe fees—which climbed 24% in the region last year compared with 2020. Wages and benefits in total increased 12.6% over 2020. A relatively new line item in the wages and benefits section is other benefits, the line that generally holds expenses like training hours, employee retention and referral bonuses. Each component has increased since the beginning of the COVID-19 pandemic, which drove up already-high employee turnover. Wages specifically increased 9.7%, while other benefits grew 45.6% in 2021. Still, the additional spending did not slow employee

Lisa Dell’Alba, president and CEO, Square One Markets

turnover, where 70% of departures were voluntary quits, compared with 68.3% for the nation. While turnover increased for both manager (up 9.1 points) and non-manager (up 21.1 points) roles, Region 1 was still significantly lower than the national averages for both employee groups at 23% and 89.5%, respectively. “People are really looking at what brings them value. People are looking for work that has meaning. As employers, it’s our job to make sure our workers know our mission, and that they are essential to it,” said Dell’Alba. SOUTHEAST In Region 2, operating profit topped 2019, but the Southeast region, which includes Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee, faced some headwinds that most of the country also saw. “2021 was a really good year for Region 2,” said Jon Rier, CFO of Refuel Operating Company, based in Mt. Pleasant, South Carolina. “Profits were driven by solid fuel performance, and we made great strides inside the

2021 was a really good year for Region 2.” Jon Rier, CFO, Refuel Operating Company

store with foodservice. But on the flip side, there were some real challenges we faced like employee turnover and inflation.” The average store operating profit per store, per month last year was up 9.3% over 2020 and up an impressive 66.4% over 2019; however, store operating profit in 2021 was down 7% in Region 2 compared with the national average. The non-manager turnover rate was 181.3% in Region 2, which was up 44.1 percentage points over 2020 and up 38.6 points over 2019. Compared with the rest of the country, the non-manager turnover rate was 58.7 percentage points higher in Region 2. “The national average [non-manager turnover rate] was high (122.6%), but it was a specific concern in our region,” said Rier. However, the manager turnover rate was 36% in Region 2, which was 9.79 percentage points lower than the national average. Total direct store operating expenses for the average store in Region 2 were $60,080 last year—10.9% higher than in 2020 and 14.9% higher than in 2019. A major factor for the increase in direct store operating expenses was credit card fees, which rose 26.8% last year in Region 2.

In Region 1, this is our thing. We are masters at foodservice.”

MIDWEST In Region 3, Art Sebastian, vice president of digital experiences, Casey’s, said “things are looking pretty positive” in the Midwest, and he is optimistic about where the industry is heading with its recovery from the pandemic. Amid high turnover, an issue plaguing most industries across the United States, Region 3 financial performance measures were lower compared with the national average in 2021. However, when looking at the same financial measures on a year-over-year basis and comparing them to 2019, Region 3 is doing well from a financial standpoint. Region 3 store operating profit and EBITDA were up 13.3% and 13.4%, respectively, in 2021 compared with 2020, and substantially higher than 2019 (46.9% and 23.1%, respectively). Breakeven cents per gallon were down compared to 2020 (-24.7%) but slightly higher compared with 2019 (3.9%). The total quit rate for this region surged in 2021 compared with 2020 and 2019. In 2021, the quit rate was slightly above the national average, which could be an indicator that there are more available job opportunities in Region 3 states compared to the rest of the country. Manager turnover was 69.5%, while non-manager turnover was 167.2%. NACS JUNE 2022 87

Art Sebastian, vice president digital experiences, Casey’s

Sebastian noted that Casey’s began spending more time in exit interviews at the store level to find out why people choose to leave, and what they could do about it. One issue they heard was that the process for closing a store took too long, a signal that Casey’s could explore and implement time-saving measures that would help automate and streamline the tasks.

Region 4 is still chasing the national average but gained lots of ground in 2021.”

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Annie St. Romain Gauthier, CFO and co-CEO, St. Romain Oil Co. and Y-Not Stop

SOUTH CENTRAL Overall, Region 4, which includes Arkansas, Louisiana, New Mexico, Oklahoma and Texas, performed below the national average, said Annie St. Romain Gauthier, CFO and coCEO, St. Romain Oil Co. The average store operating profit per store, per month for Region 4 was $24,641 last year—43.3% lower than the national average, and EBIDTA per store on average was $17,914 last year in Region 4, which was 59% lower than the rest of the country. A bright spot for Region 4 was that the manager turnover rate of 24.6% was 21.2 percentage points lower in 2021 than the national average of 45.8%. “Despite generally performing below the national average, Region 4 showed improvement over the past two years, especially when we compare last year to 2019,” said Gauthier. Average store operating profit per store, per month in Region 4 was up 14.8% last year compared with 2019. EBITDA per store, per month was up 21.7%, driving pretax profit in 2021 up 13.9% over 2019’s result.

Total all-sales per store, per month in Region 4 stood at $515,919 in 2021—up 41.4% compared with 2020 and up 14.2% compared with 2019. Fuel sales were at $370,092 per store, per month in 2021, which was a whopping 59.3% increase versus 2020 and up 13.8% compared with 2019. “Total sales growth was driven by fuel price, but inside sales growth was strong last year versus 2020 and 2019,” said Gauthier. Average inside sales per store, per month in Region 4 last year were $148,687—up 11.2% compared with 2020 and up 14.% over 2019. The category leader within inside sales was foodservice, which averaged $29,128 per store, per month in 2021, up 17.4% versus 2020 and up 15.3% compared with 2019. Transactions were also up in Region 4 last year by 14.4% over 2020 and up 3.3% versus 2019. “Region 4 is still chasing the national average but gained lots of ground in 2021,” said Gauthier. CENTRAL In the Central region, Stuart Taylor, vice president, Kum & Go, noted that comparing Region 5 metrics to the national level provides a good starting point for retailers to better understand their relative strengths and weaknesses. The good news for Region 5 is that the workforce has largely returned to work and is outperforming the national average. Heading into 2021, the region, at roughly 4% unemployment, was lower than the national average and stayed that way throughout the remainder of the year, keeping a two-point lower gap versus the national average. The total quit rate is also below the national average, but like Region 3, folks in Region 5 now have more choices than they had during the pandemic of where to work. “People held onto jobs when they didn’t know how secure they would be, but now we are seeing a market where employees have more choices than ever before,” Taylor said. The manager turnover rate was 24.1%, and the non-manager turnover rate was 112.3%. “I challenge you, if you are not already doing so, to take a look at your separations and how they stack up,” said Taylor. “There is a lot to think on in terms of pay, benefits, childcare, etc. However, as the saying goes, people don’t quit bad jobs—they quit bad managers.” Direct store operating expenses and facility expenses for Region 5 rose 10.1% in 2021 compared with 2020, and rose 16.8% compared with 2019. These expenses were driven

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Stuart Taylor, vice president, Kum & Go

We have been taking advantage of California grants to build our own network of Level 3 EV charging locations.”

by wages and benefits and swipe fees, which increased 26% in 2021 versus 2020. Inside the store, prepared food and commissary were two bright spots within the foodservice segment. Prepared food gross profit increased 23% on a year-over-year basis, and commissary increased 54.9% year over year. WEST In Region 6, c-store profits were shy of the national average, but staff turnover posted better than the national average, Varish Goyal, CEO, Loop Neighborhood Markets, based in Fremont, California, shared in the West regional breakout. Still, hiring and retaining staff remain a top issue for all retailers. Region 6 makes up about 15.3% of the total c-store landscape in the U.S. C-store profits show lower numbers than the national average, with store operating profits 18.4% below the national average. Although consumption has not returned to pre-pandemic levels, it has recovered significantly. Total sales grew 33.8% year over year, bolstered by fuel sales that grew four times the rate of 2020, up 44.5%. Fuel sales growth was driven by a 33.1% increase in average selling price. Inside sales showed a solid performance, up 6.5% year over year, and transactions bounced back, up 10.4% but still 5% off pre-pandemic levels. The West leads the U.S. in terms of the number of registered electric vehicles. RegisVarish Goyal, CEO, Loop Neighborhood Markets

tered EVs and EV sales were up 5% in 2021 in the region. This offers great opportunities for retailers to focus on customer charging needs and grow larger baskets, Goyal said. California represents 42% of the entire EV fleet nationally at 930,811 EVs registered, and Region 6 contributes 54% of the entire EV fleet at 1,159,650. “As you look at the states in which you operate, there might be an opportunity to develop charging infrastructure where there are gaps,” said Goyal. “We have been taking advantage of California grants to build our own network of Level 3 EV charging locations.” The race for EV charging will bring new competitors, indicated Goyal. Starbucks has partnered with Volvo and Charge Point to pilot EV charging stations in parking lots along a 1,350-mile stretch from Denver to Seattle. The route currently has few options for charging. While charging times vary depending on the vehicle, longer dwell times are attractive for opportunities to drive inside sales. “Our opportunity is to find ways to keep drivers entertained or busy while their vehicles are charging,” Goyal said. Staff turnover posted better than the national average; however, labor issues and retaining staff remain a top issue for all retailers. In Region 6, non-manager turnover of 111.2% was up slightly (four percentage points); however, at 40.5%, manager turnover was up 19.1 percentage points year over year. Region 6 manager turnover is historically lower than the national average, but burnout from lean staffing and labor market conditions may have caused the gap to close to within five percentage points.

Chrissy Blasinsky is the content communications strategist at NACS. She can be reached at cblasinsky@ convenience.org.

Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@ convenience.org. Lisa King is managing editor of NACS Magazine. She can be reached at lking@ convenience.org.

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Small and Mighty Unique general merchandise products can help you stay trendy and relevant in your market.

TY IS A WORLDWIDE BRAND AND OVER THE PAST FEW YEARS HAS BEEN POPPING UP IN C-STORES. WHY ARE THESE GENERAL MERCHANDISE PRODUCTS A GREAT FIT FOR C-STORES? In the early 90s Ty became a household name with its world-famous Beanie Babies. Since then, Ty has also created Beanie Boo’s, Beanie Squishies and other categories that, along with Beanie Babies, continue to be at the top of the market year after year. Ty provides beautifully designed branded product for a great price, which allows stores to make a 50%-plus margin. Ty distributes to over 150 countries and provides product for over 45,000 U.S. locations ... and growing. Five years ago, we were fortunate enough to partner up with 7-Eleven and Circle K, which showed us that Ty retails well in convenience stores. Since then, we are growing daily and now work with close to 20,000 c-stores. Consumers know our name, and when they see our Ty heart, they know they are getting the best plush in the world. One of the most surprising things for c-stores to learn is that we are not just a holiday item—we sell 365 days a year. Mom, dad, grandma, sister, brother, cousin,

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friend and even children buy our product. We often hear stories about people buying one of our items and how it put a smile on someone’s face. SPACE IS AT A PREMIUM FOR RETAILERS, SO HOW CAN TY PRODUCTS WORK IN A SMALL FOOTPRINT? Space is critical, but why would you not carry Ty? Our product will make a 50%-plus margin for you. We provide free displays in various sizes to choose from and ship the displays for free. The popular 24-inch round on wheels is where vertical space comes into play and can turn out to be the most profitable 24-inch round in your center of store. I have seen displays sell out in two to three weeks. Our fulltime sales force visits your locations every 30 days to help merchandise the product, clean the display—yes, I have sales people who carry feather dusters!—inventory and then discuss reorders. ARE THE GROSS MARGINS HEALTHY? Ty has not raised prices in over 20 years. All through the shipping crisis and pandemic we have not raised prices on product or shipping or added surcharges.

This interview is brought to you by Ty, a NACS member. ®

Nobody matches our quality, designs and pricing. This allows retailers to make a fantastic margin averaging around 53%. And because we are priced well and branded, our turns are excellent. WHO IS THE TYPICAL TY CUSTOMER? Who is our typical end user? Probably that 4- to 12-year-old boy and girl. But who is our typical customer? Everyone is our customer. I am in stores, and I see who is buying. It’s a guy buying an energy drink, tobacco and picking up a Beanie! At c-stores everyone is a buyer: the trucker who has been on the road for two days, the construction worker who missed his daughter’s soccer game, the boyfriend who knows his girlfriend likes cats or unicorns, the student who is buying a gift for his teacher—it goes on. Ty is a great impulse item! ARE THERE SEASONAL SALES OPPORTUNITIES? We certainly make holiday items, but our focus is day-to-day business. Ty creates items that sell 365 days a year. Our holiday focus is on holiday travel and making sure stores have full displays prior to and during travel times. Whether it’s a long weekend or summer traffic, full displays mean product is go-

Carolyn Jenkins/Alamy

“We are not just a holiday item—we sell 365 days a year.”

ing to be turning, stores are going to be making their margins, and we are going to grow together. In addition to holidays, Ty releases special edition products to raise awareness of and generate funds for charities. A philanthropist, Ty Warner (owner and founder of Ty) has donated more than $300 million to a variety of charities. Most recently, Warner Peter Olbrys released Max the dog Beanie Baby, Vice President with 100% of profits being donated of Convenience Division to NEXT for Autism to raise aware- Ty Inc. www.Ty.com ness of autism support. In April 2020, the United Way Worldwide COVID-19 Fund received 100% of the profits from the sale of Hope, a limited-edition praying bear. Other charities that have benefited from Warner’s philanthropy efforts include Children’s Hunger Fund, World Vision, Toy Bank, International Toy Bank, Today Show, Children’s Miracle Network, Operation Iraqi Freedom, Toys for Tots, Princess of Wales Foundation, Andre Agassi Foundation, American Red Cross, Save the Children, Elizabeth Glaser Pediatric AIDS Foundation, NY Police and Fire Widow’s Fund, Ronald McDonald House, USO, Mayo Clinic and UNICEF.

NACS JUNE 2022 93

There’s an estimated 5.8 million barrels a day of capacity that are going to be added globally through 2026.”

JamesBrey/Getty Images

Fuels Outlook 2022

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There’s some optimism, but the return to “normal” will be slow. BY KEITH REID As the Fuels Outlook session kicked off April 15 at the NACS State of the Industry Summit, both prices and volatility were high for crude oil and the refined products produced from it. While that’s still the case, the good news is that the industry is actively trying to meet these challenges. Denton Cinquegrana, chief oil analyst, OPIS, a Dow Jones Company, covered the fuels outlook from crude oil, then downstream to refining and refined products. Crude is the natural starting point because its price is the overwhelming factor in the ultimate price of a gallon of gasoline or diesel fuel. Oil demand has recovered from the depressed levels seen during the pandemic, but production hasn’t kept up with the shift, Cinquegrana noted. And then there are the disruptions caused by Russia’s late February invasion of Ukraine. Domestically, the rig count is rising to meet the opportunity presented by higher oil prices, but as Cinquegrana noted, “You can’t just snap your fingers and make it happen.” Canadian production has also increased significantly. OPEC promised monthly increases of 400,000 barrels per day of production, which is moderate but should assist in easing prices if the goals are met. Also, while Russia faces oil sanctions, it is still finding markets for its oil, which is easing the global supply crunch. However, there are some headwinds buffeting the increase in domestic production. One factor is that the shareholders for the producers want to see some return on their investments. Cinquegrana expects the crude market to settle out at somewhere between $90 a barrel and $140 a barrel over the summer as increased production gradually comes online. REFINING CAPACITY On the refining front, Cinquegrana stated that “profitability looks strong.” There will be tightness and short supply in some regions, with some of that being driven by shifts at refiners to renewable

diesel. The East Coast, Gulf and Europe have experienced refinery closures as well, though a large new refinery under construction in Nigeria promises to cover some of the shortfall with even more capacity looming on the horizon. “There’s an estimated 5.8 million barrels a day of capacity that are going to be added globally through 2026,” Cinquegrana said. Refineries in the U.S. will be running at high utilization rates throughout the year. Which brings us to expectations for refined products over the summer and throughout 2022. Retail prices have already hit record highs, and it is going to be a bumpy ride moving forward. “Even before the Russian invasion, we had expected a wild second quarter,” said Cinquegrana. “Markets have become incredibly volatile, and disconnects have emerged in the spot markets.” The East Coast and West Coast will be the most susceptible to the disconnects, most likely related to diesel. He noted that gasoline inventories heading into the summer driving season are either close to or below seasonal norms. Imports of gasoline and components are not expected with much consistency. U.S. releases from the Strategic Petroleum Reserve as well as state gas tax holidays could help offset fuel prices for consumers, but their long-term effectiveness remains to be determined. What’s more, hurricane season has yet to arrive, with the uncertainties it brings. Supply chain issues continue to impact the industry, along with labor shortages, particularly in trucking. Illustrating the severity of the situation, Walmart is offering drivers $95,000-$105,000 salaries with another $10,000 on top of that in California. MARGINS AND PROFITABILITY OPIS data show rack-to-retail margins were $0.341 in the first quarter compared to $0.207 in pre-pandemic 2019.

NACS JUNE 2022 95

OPIS Average Monthly Retail Volume/Site Q1 90,000 85,921

85,000

79,078

75,000

70,000

69,483

69,523

Q1 2022

Q1 2021

65,000 Q1 2020

Q1 2019

Source: OPIS, a Dow Jones Company

Gallons

80,000

OPIS Average Rack-to-Retail Margin Q1 0.45 0.40

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0.25

0.239 0.207

0.20 0.15 Q1 2019

Q1 2020

Excessive volatility began to take off in late February (with the invasion of Ukraine) and was ongoing as the SOI Summit took place. Volume has not quite returned to pre-pandemic levels, and questions remain over the long-term impact of things like how the rise in telecommuting will play out moving forward. The average retail volume stood at 69,483 gallons in the first quarter of 2022, compared with 85,921 gallons in the first quarter of 2019. The OPIS average monthly profit per site in gasoline sales was $23,694 in the first quarter of 2022, compared with $17,786 in the first

Q1 2021

Q1 2022

quarter of 2019. For the prime pandemic years, it peaked at $30,999 in the first quarter of 2020 but cratered to $16,616 in the first quarter of 2021. Retail margin is up 64.7% compared with 2019, while volume is currently 19.1% below that seen in the first quarter of 2019. As a low-price leader, Costco is pricing nearly $0.30 less than the local competition, keeping with its hypermarket fuel philosophy. Customers are waiting in lines sometimes for 30 minutes or more to fill up their tanks. Meanwhile, Cinquegrana said, “For all the talk of EVs, CAFE standards will have the most profound impact on gasoline demand

anusorn nakdee/Getty Images

0.30

Source: OPIS, a Dow Jones Company

0.341

0.35 Gallons

Gasoline inventories heading into the summer driving season are either close to or below seasonal norms.

0.392

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OPIS Average Monthly Profit/Site Gasoline Sales Q1 $35,000 $30,999

$25,000

$23,694

$20,000 $17,786 $16,616

$15,000 Q1 2019

Q1 2020

Q1 2021

Q1 2022

Source: OPIS, a Dow Jones Company

$30,000

OPIS Change in Retail Volumes, Margins & Profits Q1 80.0% 64.7%

60.0%

98 JUNE 2022 convenience.org

42.7%

42.6%

40.0%

33.2%

20.0% 0.0% -20.0%

-0.1% -12.1%

-13.0%

-19.1%

-23.6%

-40.0% Volume Change

Margin Change vs. Q1 2019

in the near future.” The National Highway Traffic Safety Administration finalized Corporate Average Fuel Economy standards in March. The standards require an industry-wide fleet average of about 49 miles per gallon for passenger cars and light trucks in model year 2026. Cinquegrana noted that rising wages make $4 per gallon in 2022 very different than $4 per gallon in 2008, when we previously saw such high prices. He expects E15 to gain some

vs. Q1 2020

Profit Change

vs. Q1 2021

traction this year, as the major brands are becoming more receptive to the product. And global shortages may keep refiners in a “max diesel” mode.

Keith Reid is editorial director of Fuels Market News and editor-in-chief of Fuels Market News Magazine. He can be reached at kreid@ fmnweb.com.

Source: OPIS, a Dow Jones Company

The average retail volume stood at 69,483 gallons in the first quarter of 2022, compared with 85,921 gallons in the first quarter of 2019.

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48%

of conveniencestore shoppers

18-34

Your customer is becoming more discerning, demanding, thoughtful and deliberate.” 100 JUNE 2022 convenience.org

Ridofranz/Getty Images

ages have an e-commerce subscription

What Shoppers Want Four things to watch now: digital, spend, value and fundamentals. BY SARA COUNIHAN There are four convenience shopper trends that will drive growth in 2022, according to the 2021 NACS Convenience Voices survey, which provides “moment of truth” insights from convenience store shoppers. The first trend that will influence shoppers is digital. “Digital will continue to influence every stage of the customer journey, and a fully integrated loyalty and digital platform is not optional,” said Leroy Kelsey, NACS research director. Where and when shoppers decide to purchase is made up of three segments: premeditated, en route to or from somewhere else, and on site. Only 19% of purchasing decisions happen on site, according to the Convenience Voices survey. Convenience shopping is highly premeditated by nature, said Kelsey, with 43% of shoppers deciding to shop convenience before they leave for the store and another 38% deciding on the way to or from somewhere else, meaning that over 80% of a decision to make a purchase at a c-store happens before the customer sets foot in a store. “Your customer is becoming more discerning, demanding, thoughtful and deliberate,” said Kelsey.

“They are basing their decisions on your historic brand value and your brand promise,” he said. “Why would you leave 80% of the runway open to chance for other brands to sneak into that space you need to control? Digital is going to get you that capability.” Digital is extending the retail runway, according to Kelsey, and a c-store brand’s relationship with a customer is no longer confined to four walls. In the 2021 NACS survey, 19% of c-store shoppers used digital search for products and services to select a c-store, and 79% of those digital devices were mobile. “We can no longer leave that 80% open. We have to have a brand presence there, and we have to be more thoughtful about how to communicate with our shoppers,” said Kelsey. WATCHING EXPENSES The second c-store shopper trend is that consumers are rationalizing discretionary expenses. Consumers intend to spend more on staples in 2022, such as utilities and groceries. However, the food delivery/takeaway and transportation costs categories are right on the line of whether customers will spend more money on them this year.

NACS JUNE 2022 101

Consumers Intend to Spend Less Out of Home in 2022 Is Your 2022 Strategy Above or Below the Line?

Spending Intentions for the Next 12 Months

Transport costs Food delivery/takeaway Electronics/technology Home improvements/décor Gym/sports/club memberships Holidays: domestic Clothing/apparel Holidays: international Out-of-home (entertainment) -31% Out-of -home (dining/eating) -31%

Leroy Kelsey, director, research, NACS

Shoppers indicated that they are looking for value.”

102 JUNE 2022 convenience.org

18% 14% 6% 3% 3% 3% 1% -1% -3% -7% -11% -15% -18% -19%

-23%

Kelsey says this means only the most efficient and effective operators in these categories will cause customers to spend more in those categories this year. Subscriptions will continue to dominate shopper buying behaviors this year. The average household in 2021 had eight e-commerce subscriptions, and in families where the head of the household is 18-34 years old, that amount balloons to 11 subscriptions on average. Forty-eight percent of convenience-store shoppers ages 18-34 have an e-commerce subscription. “Prior to the pandemic, c-store shopper e-commerce membership was 32% and growing by about 5% each year,” said Kelsey. “The lockdown and busy lifestyles doubled that type of engagement to 68.9% in 2020.” Kelsey said that convenience retailers are leaning into subscription models to skirt shopper resistance to premiums. Subscriptions make upselling, cross-selling and basket-building easier. They also reduce the cost to acquire customers and streamline sales forecasting, plus they build loyalty and make revenue predictable. SEEKING VALUE The third shopper trend is the search for value. Thirty-one percent of customers selected a c-store based on price alone, according to the survey.

“Even though they are looking for a site based on price, it’s experience that is going to have more influence than on price alone,” said Kelsey. According to the Convenience Voices survey, the No. 1 reason why shoppers selected a location to buy fuel was because they were running low on gas. Nearly 37% (36.8%) of those surveyed responded this way, but 35.7% of customers selected the location because of their familiarity with it—only one percentage point less. “When we talk about your brand promise and your exchange of value, that includes price and whether you’re competitive in your shoppers’ eyes—that is going to be key moving forward,” said Kelsey. Kelsey also noted that loyalty rewards and incentives ranked higher as a reason to visit a fueling location than fuel brand preference. “Shoppers indicated that they are looking for value. They want to connect with means that can serve their resources, and this is going to continue as inflation increases,” he said. When asked why shoppers didn’t buy products inside a convenience store, the No. 1 reason was because they didn’t need anything from the store today. The next three reasons cited were not enough time, limited/strict budget and too expensive. Kelsey said retailers need to optimize customers’ time—19% of surveyed shoppers

Source: NielsenIQ Consumer Outlook 2022 Survey, Dec. 2021

23%

Groceries Utilities Education: self/children’s Childcare Financial services Rent/mortgage In-home entertainment Paying off debt (e.g., credit cards, loans)

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Mission/Need State

% of Shoppers

Chg YoY (PPTs)

NPS 2021

Thirsty now (drink)

46.3%

(0.9)

48.5

Hungry now (snack)

32.9%

(0.6)

50.1

My treat/indulgent

16.4%

(1.3)

52.1

Store services (lottery, car wash, etc.)

15.2%

0.6

43.5

Specific urgent need

17.0%

0.6

43.8

Multiple throughout day

11.0%

(1.6)

46.4

Restroom

17.3%

1.7

44.0

Meal for now (hot/cold)

12.4%

(0.5)

50.1

Gathering of friends/family

4.6%

(2.2)

35.3

Meal to take home/away (hot/cold)

9.0%

(1.6)

59.9

Fill in a few items

5.6%

0.2

39.2

Stock up

5.9%

0.3

50.6

Find something new and interesting

7.1%

1.7

42.1

100%

(10.2)

44.5

All occasions (total sample)

31%

of customers selected a c-store based on price alone

indicated that curbside influenced their site selection, and 26% said that they were interested in drive-thru service. Additionally, retailers should customize promotions that speak to the customer and communicate value and relevance, Kelsey said. Thirty percent of shoppers noticed a store promotion, according to the survey, and of those 30% who saw a promo, 15% noticed a mobile promotion. “The opportunities abound in reconnecting with the shopper, and digital gives us the means to connect in a highly customized way,” said Kelsey. HIGH EXPECTATIONS The fourth c-store shopper trend is that c-store expectations are highly elevated at every interaction, and this going to continue, according to Kelsey. Despite strong c-store industry sales numbers, the Net Promoter Score (NPS) for the industry is 44.5. “We had a challenging two years, and I’ll be the first to say that this is not because of lack of effort. It’s because we’ve been kicking into the wind,” Kelsey said. He said the industry must calibrate and adjust. But where do c-stores start? Kelsey said

NACS Convenience Voices is packed with valuable, proprietary insights you can only get from NACS. Leveraging the ubiquity of mobile technology enables more precise targeting, expanded geographic reporting, powerful multimedia feedback and more. Visit www.convenience. org/voices to learn how to participate. 104 JUNE 2022 convenience.org

Shoppers are looking for us to perform on a fundamental level, so refocus on the fundamentals.” to begin with the customer missions with below-average NPS scores, which include store services, specific urgent needs and restroom, among others. Looking at these below-average missions, they are the fundamentals of our industry, said Kelsey. “Shoppers are looking for us to perform on a fundamental level, so refocus on the fundamentals.” He added that it’s all about keeping up the consistent experience drumbeat. Despite a below-average NPS for 2021, the score is up 47% over the past 12 years. “We have continued to raise the profile of the shopping experience despite short-term setbacks,” said Kelsey. “We can’t lose focus. We need to drive our future. Look how far we’ve come, but even more importantly, oh the places we will go.” Sara Counihan is contributing editor of NACS Magazine and NACS Daily. She can be reached at scounihan@ convenience.org.

Source: NACS Convenience Voices 2021

Start With Missions Below the Overall Average

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July 17-22, 2022

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July 31-August 4, 2022

The Wharton School University of Pennsylvania

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The Dyson School Cornell University

Endowed by:

Questions? Contact: Brandi Mauro NACS Education Program Manager (703) 518-4223 bmauro@convenience.org

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MIT Sloan School of Management Massachusetts Institute of Technology

Yale School of Management Yale University

Supported by:

Endowed by:

Join the Masters. Earn the exclusive Master of Convenience designation by completing 3 of our 5 programs. convenience.org/NACSMaster

Cool New Products Guide This advertorial-style guide of services and packaging appears monthly and is an information-packed tour of ideas and approaches that can change how consumers view your store or choose your brand. It spotlights the newest thinking in convenience and fuel retailing and gives you an advance look at ways of staying in front of industry trends. Products are categorized the same way we organize the Cool New Products Preview Room at the NACS Show each year in October— New Design, New to the Industry, New Flavors, Health & Wellness, Green (EcoFriendly), New Services and New Technology. Products are considered “new” this year if they’ve been introduced since October 2021. The products featured here also can be seen in the Cool New Products Discovery Center at www.convenience.org/coolnewproducts.

NEW TO THE INDUSTRY

Ty Inc. Squishy Beanies

Want to carry our product? Please contact Peter Olbrys at 630.432.3329 or polbrys@tymail.com about bringing Ty into your locations.

108 JUNE 2022 convenience.org

NEW TO THE INDUSTRY

Stewart’s Enterprises, Inc.

Bidi Vapor, LLC

Hard Rock 19.2oz

BIDI® Stick – 11 Flavors With Nicotine From Tobacco

Let’s Get The Party Started

Premium Vape Pen – 11 Flavors

It’s time to go big! We amped up our game with the all new 19.2oz Hard Rock cans. At 10% ABV, we launched with two flavors. You can find Hard Rock’s signature cocktail, the Hurricane, as well as the fan favorite Long Island Iced Tea. It’s time to turn your next party up to 10!

Premium, innovative, and sustainable. These are key qualities of the BIDI® Stick, a disposable e-cigarette that is available in 11 flavor variants with nicotine derived from tobacco. Designed and engineered to deliver adult consumers 21 and over a unique and premium vaping experience, the device comes in a single pack, 10-pack cartons and a 100-pack acrylic display case. The components of the BIDI® Stick are 60%-95% recyclable, utilizing only high-grade, high-quality, sustainable components. For more information, visit http://wholesale.bidivapor.com.

For inquiries, please contact Eric Breiding at eric.breiding@stewartspiked.com!

NEW TO THE INDUSTRY

NEW FLAVORS

Scooter’s Coffee

Diageo Beer Company

Scooter’s Coffee Grab ‘N Go Almond Milk Lattes

Lone River Ranch Rita

Grab ‘N Go Lattes Available Now!

Grab one for now, for later, for anytime you crave our world-class 100% arabica coffee blended with smooth, dairy-free almond milk and all-natural flavors! Brent Bird, Sr. Mgr. National Accounts brent.bird@scooterscoffee.com

New Lone River Ranch Rita is a deliciously light-tasting premium brewed Margaritastyle beverage made with lime juice* and organic agave nectar. Lone River is already a category leader with a great-tasting, high-quality seltzer that consumers love. Now with Ranch Rita, we are creating a full-Flavored yet equally refreshing tasting spin on the #1 cocktail in the US. For more info, contact your local Lone River distributor or go to loneriverbevco.com Follow us @ranchwater. PLEASE DRINK RESPONSIBLY. Lone River Ranch Water Hard Seltzer. Far West Spirits LLC, Houston, TX *from concentrate NACS JUNE 2022 109

NEW FLAVORS

Rich Products Rich’s® Fully Finished Donut Portfolio

A DONUT FOR EVERY CRAVING.

Irresistible taste. Unmatched quality. Maximum satisfaction. Capitalize on a shelf life that lasts 2X longer than other bakery options with Rich’s Fully Finished Donuts. With our vast portfolio, you won’t miss an opportunity to satisfy any donut craving – glazed or iced, yeast or cake, specialty or filled, plain or sprinkled. Our new chocolate- and vanilla-iced donuts add delectable decadence to your donut selection. Add a pop of color to your display with our rainbow sprinkled iced donuts, and satisfy extra indulgent cravings with filled favorites like raspberry jelly and Bavarian creme. Learn more: richsusa.com/fully-finished-donuts

NEW FLAVORS

Monster Energy Company

Juice Monster Aussie Style Lemonade

Monster Energy UItra Peachy Keen

New Aussie Style Lemonade!

New Ultra Peachy Keen!

Inspired by the land down under with over 10,000 beaches, the Great Barrier Reef, and home to some of the most exotic citrus on earth comes Juice Monster Aussie Style Lemonade. Monster’s twist on classic lemonade, we hit the ideal balance of tart and sweet with a burst of fresh citrus flavor. As always, it’s chockers with our world-famous Monster Energy Blend. Crack a coldie and give it a go! For more information, call (800) 426-7367 and visit www.monsterenergy.com

The summer of love was about hope, peace and connecting to something bigger than yourself. A time of carefree fun, limitless possibilities and believing anyone but the man. So don’t take our word for it, check it out yourself ‘cause it’s all good when you’re sippin’ Ultra Peachy Keen. Zero sugar, juicy peach flavor and the Monster Energy blend from our secret stash. Everyone from boomers to zoomers is down with that. For more information, call (800) 426-7367 and visit www.monsterenergy.com

110 JUNE 2022 convenience.org

NEW DESIGN

Anchor Packaging

E&J Gallo Winery

Crisp Food Technologies® Containers

High Noon Big Can (700ml)

Keep Hot to Go Hot & Crispy

Go BIG With High Noon!

Only Crisp Food Technologies® keeps prepared food hot, crispy, and ready to go. The

New High Noon 700ml Big Cans are now available! This new size is available in both Pineapple and Peach flavors. Give people more of what they love this summer with these exciting offerings!

award-winning, patented design provides appealing visibility while removing excess moisture to preserve temperature, texture, and taste for hours in the hot case and 30 minutes on the go. Your customers get a great-tasting meal, and you get repeat orders. Available in a full assortment of shapes and sizes. For more information, please visit www.anchorpac.com/crispy

NEW DESIGN

D|13 Group D25 Sink System

Elevate Your Restroom Experience

Eliminate the need for messy and costly paper towels and keep people coming back by installing the brand new D25 Sink System, featuring the XLERATORsync® Hand Dryer from Excel Dryer in your business’ restroom. The sleek D25 will enhance any modern restroom as it provides a streamlined and touchless experience for people to conveniently wash, rinse and dry their hands hygienically and effectively—all in one place. The D25 Sink System is available for a quick and easy purchase and a speedy installation. Reach out to us online (www. exceldryer.com/contact) or call 1-888-670-3107 to learn more. NACS JUNE 2022 111

GAS STATION GOURMET

Rustic Charm

At Knoxville Store, good food and a fun vibe—plus a water wheel—are worth the stop. BY AL HEBERT

t might seem odd to travelers that in Knoxville, Georgia, the Texas state flag flies over the courthouse. The idea for the star came from a local woman named Joanna Troutman. Locals are proud of this. The founder of Coca-Cola was born in Knoxville, but the big attraction here is the food at Knoxville Store. “We never intended on being a restaurant,” Jessie Pyles, Knoxville Store co-owner said. “My dad, Bryant Pyles, framed houses. One day he decided to build a store. I didn’t think he’d do it. The next thing you know, he built it.” That was 2005.

Jessie Pyles is co-owner of Knoxville Store in Roberta, Georgia. Her father built the c-store. 112 JUNE 2022 convenience.org

It doesn’t look like a typical c-store. It’s an inviting, rustic wooden structure that appears homey and rather cozy. Customers were drawn to it, but soon, they wanted more than fuel and snacks. “People started asking for different things, and we try to accommodate them. We started doing breakfast. We got Hunt Brothers Pizza about 10 years ago,” said Pyles, adding, “We do quick and easy grab and go. We patty up our own hamburger meat on site and make quick sandwiches.” The key to the popularity of Knoxville Store’s burgers is fresh ingredients. “We use fresh ground beef. We don’t buy the frozen stuff. The burgers are seasoned on the grill. It’s a good size and a good burger, and we put whatever they want on it,” she said. The Chuck Wagon is becoming a popular menu item that came out of necessity. “It’s kind of funny. My husband was talking about a steak sandwich at work. The next week we couldn’t get our chicken patties. We just got this new breaded steak in. It was high quality. I said, ‘We’ll just throw this on a bun and see how it goes.’ The customers liked it, and we kept it going,” Pyles said. THINK OUTSIDE THE PIZZA BOX Pyles and her team took Hunt Brothers Pizza Wing Bites, added a few things and built a popular menu item. “We

From the buck-head trophies above the cold vault to the outdoor gazebo with a water wheel, Knoxville Store has character. One component of the c-store’s robust foodservice program is Hunt Brothers Pizza.

put those on a sub roll, add ranch and mozzarella cheese and run it through the oven. We call it the Buffalo Chicken Ranch Sub. Pyles said, “The omelets are phenomenal. We do them on the grill, and with Hunt Brothers Pizza, we can put anything we want on them. We use the ground sausage or diced ham and all the different vegetables, onions, etc.” Not long ago, the c-store decided to try a Grilled Chicken Philly Sandwich. “We grill the chicken with peppers and onions and put it on a Philly roll. We put it on Facebook, people saw it and came in to try it,” she said. “My staff asked, ‘Why’d you put that on Facebook? Now we have to make a hundred of them.’ When we put something on Facebook, it trends well. We get a good bit of feedback. People come in and try it.”

WATER WHEEL “You have to see the store,” Pyles said. “My dad cut down the trees and milled the wood himself. I tell people we’ve only been here 17 years. People say it looks like it’s been here forever,” explained Pyles. This might be the perfect location for a c-store. It’s nestled between two highways, away from big cities. It’s a frequent stop for motorcyclists riding the backroads. They enjoy the surroundings and simply watching the water wheel turn. “We have a natural spring that runs under the store, and we have to pump the water out to keep the ground dry. One day my Dad said, ‘We have to do something to make sure the pump

is pumping,’ so my Dad built a water wheel. It’s added to the aesthetics, and it’s become an attraction. People love sitting in the gazebo above the wheel. It’s just real cool,” she said. If one doesn’t sense the country charm, simply look up. “We have a wall of deer heads above the cooler. My cousin Gary shot all those deer. He had a farm in Butts County, and he ended up giving us all of them. Hunters come in and admire. It’s a pretty good attraction,” she said. SENSE OF HOME Pyles gives her employees credit for much of the success. “I have the best staff. There are a handful of girls who

have been with me for a long time. They grew up out here. They make the atmosphere fun and welcoming.” The c-store’s sense of fun is a big draw for locals. Trying new menu items adds to the adventure, like those salmon patties for breakfast on Sundays. “We’ve tried so many things. We just like to have and give people something different,” said Pyles. Knoxville Store is one of those wonderful places where the same folks visit each day for great food and that sense of home. Pyles promises that if you want something, all you have to do is ask, and her team will prepare a meal that will have you coming back for more. Pyles describes Knoxville Store as “a typical c-store.” This Crawford County gem is anything but typical. It’s a place where a French fry is supersized and transformed into a Tater Log. This is a piece of the American fabric that needs to be experienced. Al Hebert is the Gas Station Gourmet, showcasing America’s hidden culinary treasures. Find him at www. GasStationGourmet.com. NACS JUNE 2022 113

Beer accounted for

CATEGORY CLOSE-UP BEER

5.73% of in-store gross margin in 2021.

Source: NACS State of the Industry Report of 2021 Data

Category Clout

Despite slower growth, beer continues to bring profits and foot traffic to c-stores.

hile convenience store sales of beer slowed considerably last year as compared to 2020, the category remains at its highest level in years. And retailers and beer marketers are optimistic that the momentum that has lifted the segment in recent years, coupled with category innovation, means continued good health for c-store beer sales in 2022 and into the foreseeable future. According to Jayme Gough, NACS research manager, CSX data pointed to a small increase in beer sales in 2021, “which is actually good news, when you consider the big gain in 2020, and the fact that beer had been showing slower growth in recent years.” In 2021, average monthly sales per store of beer stood at $20,345, NACS State of the Industry Report of 2021 Data indicate. That’s up 2.6% from 2020’s stellar year when the category benefited from closures of on-premise venues and a consumer-buying frenzy, which sent sales surging 18.1% over 2019.

114 JUNE 2022 convenience.org

While 2021 was marked by a slowdown in sales growth, suppliers said c-stores were among their strongest performers. Ryan Calong, national accounts director, convenience, at Pabst Brewing Co., reported that convenience outperformed other channels in terms of dollar sales trends last year, driven by imported brews and flavored malt beverages (FMBs). And the category has remained a top performer for c-stores, too. Michelle Yeeles, senior director, small format category leadership, at Anheuser-Busch, citing IRI data, noted, “Over the past two years, beer has led total c-store growth as the No. 1 growth category, delivering more than $3.7 billion in growth.” At Coen Markets, which sells beer in 15 of its roughly 60 locations in Pennsylvania, Ohio and West Virginia, beer sales softened a bit last year, a result of “more consumers in restaurants,” Colin Dornish, senior director of operations, said. Still, thanks to strong performances for alcoholic seltzers, flavored malt bev-

Andreas Berheide/EyeEm/Getty Images

BY TERRI ALLAN

erages and “renewed interest in domestic light beers,” Dornish is bullish on the category’s prospects. “We see opportunity for beer,” he remarked. “That’s why we’re building out our beer caves and adding beer in Pennsylvania stores where we can. We’re becoming a destination for beer.” Dornish credits the pandemic for helping to build his stores’ reputation for beer. “We provided credibility. Customers liked that they could come in when buying gas and pick up beer. As a result, we’re working to give beer the proper space it deserves,” he said. Pat Determan, owner of Lyons Filling Station in Clinton, Iowa, agreed that the pandemic has had a favorable impact on beer sales. “Drinking at home, not going out has become part of people’s lifestyles,” said the retailer, adding, “I haven’t seen any slowdown since the pandemic.” Moreover, customers at his store are trading up. “I’m selling more crafts and specialty beers than ever,” Determan noted. “My customers like the variety.”

Industry Sales % of In-Store Sales

9.34% 8.79% 2020

2021

Avg. Monthly Sales/Store

$19,830 $20,345 2020

2021

% of Stores Selling

73.5% 85.0% 2020

2021

Source: NACS State of the Industry Report of 2021 Data

retouchman/Getty Images

RETURN TO NORMALCY Following a year of nearly insatiable demand for beer, 2021 marked a return to normalcy, Gough said. “Restaurants are open, COVID-19 concerns have started to wane, people are going back into offices,” she remarked. Still, the news hasn’t been all good. Supply-chain issues abounded within consumer package categories, and beer wasn’t immune. Major beer suppliers conceded that the challenges—ranging from shortages of packaging supplies to labor to transportation—hampered their overall businesses, and those concerns have continued this year. Convenience retailers, however, are encouraged by recent trends for some beer subcategories and package formats.

“There’s been so much innovation in the hard seltzer space,” said Dornish. “Topo Chico, Truly and White Claw are still on fire in our stores.” Calong pointed to opportunity for FMBs that feature spirits-branded labels, such as Jack Daniel’s Country Cocktails, which Pabst distributes via a partnership with brand owner Brown-Forman. With liquor continuing to gain in popularity, products like Country Cocktails allow c-stores to leverage the trend, particularly if they can’t legally compete in spirits sales, he said. Another spirits-branded product, the Smirnoff Seltzer line from Diageo Beer Co., is also seeking to capitalize on the spirits boom and will soon relaunch with a “flavor-forward distinctive role,” according to the company. Among other subcategories, craft beer continues to gain, c-store operators reported. At Mighty Moose Mart in Keene, New Hampshire, craft accounts for the majority of the store’s beer sales, Chris Rietmann, owner, reported. “Craft dollar sales are trending 2-to-1 versus mainstream domestic beers,” he said. “IPAs, double IPAs and hazy IPAs are the biggest drivers.” To maximize the trend, Rietmann takes the time to educate himself about the locally produced beers. Looking ahead, he said, “we’ll continue to expand and curate our craft line.” Yeeles agreed that premiumization is a big factor for the beer category in c-stores. “Consumers are looking for options that enable self-expression, self-reward and elevated connections with product attributes

NACS JUNE 2022 115

CATEGORY CLOSE-UP BEER Per Store, Per Month Sales

n 2018

$25,000

n 2019

n 2020

n 2021

$19,785

$20,000

$15,000

$10,000

$5,000 JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Source: CSX LLC; csxllc.com

CSX, the engine behind category metrics and NACS State of the Industry data, provides current and customizable tools for financial and operational reporting and analysis in the convenience industry. Retailers can measure their company by any of the myriad metrics generated via our live database. Contact Chris Rapanick at (703) 518–4253 or crapanick@ convenience.org for a complimentary executive walkthrough.

116 JUNE 2022 convenience.org

that deliver on quality, authenticity and are purpose driven,” she said. Last year also saw a return to normalized packaging preferences among c-store beer shoppers. While multipack sales surged in 2020 as consumers loaded up, “shoppers returned to traditional convenience-sized packages, such as 12-packs and singles, versus larger packs,” Calong said. Retailers confirmed strong trends for high-margin singles, particularly brews packaged in 19.2-, 24- and 25-ounce cans. “Singles do extremely well at our store,” said Rietmann, pointing to crafts like Bell’s Two Hearted and New Belgium’s Voodoo Ranger in 19.2-ounce cans. To make room for the packages, Mighty Moose recently removed some hard seltzers from its cold box that weren’t performing well. And at Tank-N-Tummy in Cleveland, Oklahoma, owner DeAnn Tracy promotes value by pricing 25-ounce singles at the same price as their 24-ounce counterpart. Indeed, A-B’s Yeeles advised retailers that to maximize singles’ “profit-

I’m selling more crafts and specialty beers than ever. able trip-driver attributes,” they should ensure optimized SKU mix, clear price buckets and communication. ROOM TO EXPAND While beer remains a top category for c-stores—accounting for 8.8% of in-store sales in 2021, according to NACS SOI data—there’s certainly room to expand. Gough pointed to opportunity to market to Gen Z consumers, many of whom are closing in on legal drinking age. “Research has found that they’re drinking FMBs and RTDs and less traditional beer,” she noted, as well as low- and non-alcoholic brews. Indeed, A-B, Diageo Beer and a host of other beer marketers have recently launched new non-alcoholic brews to appeal to younger and older consumers seeking more

ansonsaw/Getty Images

The Power of CSX Data

CATEGORY CLOSE-UP BEER

Subcategory Data Per Store, Per Month BEER

% of In-Store Sales 2020

2021

Avg. Sales/Store

Avg. GP$/Store

2020

2021

2020

2021

Gross Margin % 2021

Premium

27.4%

27.6%

$5,424

$5,609

$1,034

$1,083

19.06%

19.30%

Imports

22.9%

24.5%

$4,535

$4,989

$1,049

$1,179

23.12%

23.63%

Flavored Malt

14.3%

15.4%

$2,831

$3,134

$758

$850

26.76%

27.12%

Super Premium

10.0%

9.9%

$1,989

$2,016

$499

$505

25.07%

25.03%

Popular

8.4%

7.9%

$1,675

$1,601

$324

$291

19.33%

18.17%

Budget

8.9%

7.8%

$1,757

$1,592

$338

$311

19.22%

19.55%

Microbrews/Craft

5.2%

5.1%

$1,030

$1,046

$266

$274

25.82%

26.24%

Malt Liquor

2.9%

1.6%

$578

$321

$153

$95

26.53%

29.72%

Non-alcoholic Beer Total

0.1%

0.2%

$11

$37

22.69%

23.71%

100.0%

$19,830

$20,345

$4,422

$4,597

22.30%

22.59%

Source: NACS State of the Industry Report of 2021 Data

mindful options to traditional beer. Beer marketers offer a number of tips to convenience retailers to keep the category’s momentum going. Yeeles and Calong pointed to the importance of a balanced product selection and proportionate space. “As beer demand continues to be elevated, retailers should be looking to meet evolving shopper expectations, balancing both volume and variety,” the A-B executive said. According to Calong, “Beer is the largest alcohol category in terms of volume sales and has the highest percentage of exclusive shoppers. It’s a staple that 118 JUNE 2022 convenience.org

Terri Allan is a New Jersey-based freelance writer, specializing in the beverage industry. She can be reached at terri4beer@aol.com and on Twitter at @terriallan.

i_arnaudov/Getty Images

Topo Chico, Truly and White Claw are still on fire in our stores.

delivers on convenience, versatility and variety, trends that are important to convenience store shoppers.” Lucienne Castillo, consumer insights and strategy director at Pabst, added that one of the biggest challenges for c-stores is “a high price/value perception. C-store operators have the opportunity to reframe value in shoppers’ minds and use creative messaging that shifts away from price toward motivation.” While rising inflation could play a part in c-store shoppers’ shopping habits this year, retailers and suppliers share a positive outlook. “Remember, beer traditionally offers value and convenience to consumers,” said Calong. “Beer has always been an affordable luxury for the convenience shopper.”

Stacks on stacks of ﬂavor And stacks on stacks of potential profits too. Smirnoff FMBs and Seltzers have always focused on shopper-pleasing flavors and varieties—more ways for you to capture more profits. For more information, call your Smirnoff Ice distributor. PLEASE DRINK RESPONSIBLY. SMIRNOFF ICE Premium Flavored Malt Beverage. The Smirnoff Co., New York, NY.

For more info: smirnoff.com. Follow us @smirnoff

CATEGORY CLOSE-UP COLD DISPENSED BEVERAGES

Fountain Refresh

Some stores are jazzing up their beverage bars with new flavors and functional drinks. BY PAT PAPE

per month, likely has more to do with this offering being available for a full year versus being available for only part of 2020,” he said. “The decline in carbonated fountain is possibly due to a shift of shopper preference to non-carbonated beverages.” Cold dispensed beverages represented 6.6% of foodservice sales in 2021, down from 7.2% of foodservice sales in 2020, NACS State of the Industry data indicate. Carbonated beverages accounted for 62.7% of cold dispensed beverage sales, down from 69.8% in 2020. According to a recent report from Mintel, carbonated soft drinks make up the nation’s largest non-alcoholic beverage category, topping $39 billion in sales and with more than half of U.S. adults consuming them several times a week. But to grow the category, retailers and manufacturers must increase consumption frequency among lighter users, the research organization said. Because a well-managed fountain bar can generate a 50% or higher margin, many convenience retailers are adding new offerings to tempt thirsty customers.

83% of c-store shoppers are willing to pay more for dispensed beverages with functional benefits, but they aren’t willing to sacrifice great flavor in that pursuit.” 120 JUNE 2022 convenience.org

Eshma/Getty Images

ales of cold dispensed beverages improved in 2021 from 2020’s pandemic-battered performance as consumers returned to the soda fountain to see out their favorite selfserve drinks. In all, average sales of cold dispensed beverages grew 7.4% on a perstore, per-month basis in 2021, NACS State of the Industry data indicate. Gross margin improved to 46.41% in 2021 compared with 42.71% in 2020. Within this category of foodservice, the performance was uneven across subcategories. The average monthly sales of carbonated beverages per store slipped to $1,907 in 2021 from $1,976 in 2020. However, category sales share of “other” fountain beverages rose to 28.7% in 2021 compared with 19.1% the previous year. This segment includes drinks such as iced tea, iced coffee and kombucha. Comparing consumer behaviors and sales figures of 2020 to those of 2021 can be hard to evaluate, said Patrick Loftus, survey research and data visualization manager, NACS. “Overall, the increase in cold dispensed beverage sales per store,

Industry Sales % of In-Store Sales

Avg. Sales/Store/Month

2020

1.97% 1.82% 2021

$2,833 $3,043 2021

% of Stores Selling

98.1% 97.6% 2020

2021

Source: NACS State of the Industry Report of 2021 Data

NEW FLAVORS Neon Marketplace, based in Cranston, Rhode Island, caters to customers on the go by selling 79-cent fountain drinks every day. To offer variety as the weather warms up, “we’re introducing a line of enhanced energy drinks,” said Peter Rasmussen, director of operations, Neon Marketplace. “We’ve worked with product development, culinary experts and Red Bull to build some incredible concoctions, and we’re looking forward to introducing them to consumers who want a premium energy drink experience beyond just a can.” Rasmussen notes that consumers have become increasingly price conscious. “During the pandemic, family sized ready-to-drink and 12-packs sold well,” Rasmussen said. “The difference now is that fountain is growing, and on the packaged beverage side, there is less brand loyalty. We’re seeing higher take rates on lower-price-point products in the category.”

piikcoro/Getty Images

Cold dispensed beverages had average monthly sales per store of

$3,043

and gross margins of 46.41% in 2021. Source: NACS State of the Industry Report of 2021 Data

Last summer, 7-Eleven, based in Irving, Texas, added several new drinks to the fountain, including AHA sparkling water, craft lemonade, vitaminwater zero, Replenish Zero and an energy drink by Quake. Customer response was positive. “We continue to expand and evolve what is available on our fountain with a focus on new and exclusive products,” said Megan Edwards, senior category manager of propriety beverages, 7-Eleven. “Our market research and testing tell us customers are looking for fruity and flavor-forward options, as well as interesting, unexpected combinations.” One example is the MTN DEW Major Melon Slurpee, which was the most popular limited-edition flavor for 7-Eleven in 2021. “Because of this, we will be adding it to our Big Gulp lineup this spring, combining a distinct watermelon flavor with classic MTN DEW,” Edwards said. “Customers can also try the limited-time-only Brisk Blood Orange, which boasts the unique taste of Brisk Iced Tea mashed with the intense flavor of blood orange.” BETTER FOR ME The pandemic produced plenty of changes in consumer behavior and attitudes. A large percentage of shoppers say they’ve become more conscious of the importance of good health, and as a result, many are seeking functional beverages, such as energy and sports drinks, fortified juices and enhanced waters, when they want cold refreshment. NACS JUNE 2022 121

CATEGORY CLOSE-UP COLD DISPENSED BEVERAGES

Per Store, Per Month Sales

n 2018

n 2019

n 2020

n 2021

$4,679

$5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Customers are looking for fruity and flavor-forward options, as well as interesting, unexpected combinations.”

122 JUNE 2022 convenience.org

In fact, “71% of shoppers say the pandemic made them re-think their priorities,” said Carlton Austin, director of convenience retail strategy and commercialization, Coca-Cola. “Their top three desires are now more time with family and friends, improved physical health and improved mental health. “We’ve found that 83% of c-store shoppers are willing to pay more for dispensed beverages with functional benefits, but they aren’t willing to sacrifice great flavor in that pursuit,” he said. “We are finding success with several functional dispensed options that offer great taste and unique benefits that are low- or no-sugar.” Some of these are AHA sparkling water, which comes in a variety of flavors from natural sources; POWERADE, a functional sports drink containing vitamins B3, B6 and B12;

IrenevanderMeijs/Getty Images

Source: CSX LLC; csxllc.com

As Convenience Grows, the World is Getting Smaller

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31 May – 02 June 2023

July 19-21, 2022

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CATEGORY CLOSE-UP COLD DISPENSED BEVERAGES Subcategory Data Per Store, Per Month

Percent of Sales

Avg. Sales/Store

Avg. GP$/Store

Gross Margin %

Cold Dispensed Beverages

2020

2021

2020

2021

2020

2021

2020

2021

Carbonated

69.8%

62.7%

$1,976

$1,907

$742

$793

37.56%

41.59%

Other Cold Dispensed Beverages

19.1%

28.7%

$541

$872

$308

$470

56.96%

53.89%

Refills

4.8%

2.8%

$135

$86

$56

$42

41.28%

49.03%

Non-carbonated

6.3%

5.8%

$178

$177

$102

$106

57.28%

60.12%

Fountain Club Mugs

0.1%

Sports Drinks Total Cold Dispensed Beverages

100%

$2,833

$3,043

$1,210

$1,412

60.38% 64.68% 42.71%

46.41%

Source: NACS State of the Industry Report of 2021 Data

While innovation is important, retailers should also be sure to market traditional favorites.” and a selection of Minute Maid Zero Sugar Lemonades made with real lemons. Other summer beverage offerings from Coca-Cola are Fanta’s new LTO fountain program, Barista Bros. iced coffees for the fountain and a variety of bubbler beverages. “While innovation is important, retailers should also be sure to market traditional favorites, such as 124 JUNE 2022 convenience.org

GREAT EXPERIENCE One of the best ways to give convenience customers a premium in-store experience is to maintain a consistent schedule of cleaning and maintenance throughout the store, especially in areas where food and drinks are merchandised. With sanitation and convenience in mind, Coca-Cola has created a high-tech but contact-free way for shoppers to get their favorite fountain drinks. The Coca-Cola Freestyle 7100 beverage dispenser features more than 80 beverages across six categories, including more than 30 low- and no-calorie options and 40-plus caffeine-free choices. It is equipped with a camera and Bluetooth connection for future consumer engagement capabilities and has the option to add new categories and alternatively sweetened beverages through bag-in-the-box lines. “As the COVID-19 pandemic reshaped the world and shifted consumer

nyvltart/Getty Images

Coca-Cola, Diet Coke and Sprite,” said Austin. “They drive a substantial portion of the convenience-store beverage business, so it’s critical to place an emphasis on both.”

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CATEGORY CLOSE-UP COLD DISPENSED BEVERAGES

behavior, we developed a touch-free innovation for Coca-Cola Freestyle units,” Austin said. “Guests scan a QR code on the Freestyle machine with their internet-connected smartphones without having to download an application or share any personal information. Scanning the code prompts a digital experience like that of the Freestyle touchscreen, allowing them to select their beverages and pour them—all without touching the machine’s screen.”

Contact Information

Page

Contact Information

Pat Pape worked in the convenience store industry for more than 20 years before becoming a full-time writer. See more of her articles at patpape.wordpress.com.

Thank you to these advertisers who have demonstrated their support of the convenience and fuel retailing industry by investing in NACS Magazine. Page

Contact Information

Page

ADD Systems...............................................................................................................40 www.addsys.com

Dover Fueling Solutions..............................................................97 www.doverfuelingsolutions.com

NACS Show..............................................................................................125 www.nacsshow.com

Advantage Solutions....................................................................15 www.advantagesales.net

ElectrolitUSA............................................................................................47 www.electrolit.com

OPIS..............................................................................................99 www.opisnet.com

Altria Group Distribution Company................ Inside Front Cover AGDCTradeRelations@Altria.com www.altria.com www.tobaccoissues.com

FIJI Water................................................................................................. 75 (888) 426-3454 www.FIJIWater.com

PIM Brands Inc.............................................................................67 (800) 369-7391 www.pimbrands.com

BIC Corp.........................................................................................13 www.shopbic.com/newinquiry

GOYA Foods Inc........................................................................................ 41 salesinfo@goya.com www.GoyaTrade.com

Premier Manufacturing Inc..............................................................5 & 89 www.gopremier.com

Black Buffalo...............................................................................53 wholesale@blackbuffalo.com

The Hershey Company................................................................65 www.hersheysolutions.com

Calico Brands Inc. (Scripto)....................................................................42 (800) 544-4837 www.calicobrands.com

Home Market Foods................................................................................79 www.homemarketfoods.com

Cash Depot.....................................................................................3. (800) 776-8834 sales@cdlatm.com www.cdlatm.com

Hostess Brands LLC...................................................................... 91 www.hostessbrands.com ITG Brands....................................................................................35 www.itgbrands.com

REVTEA Acquisition LLC..............................................................127 www.revolutiontea.com Reynolds......................................................................................56 www.reynoldsamerican.com/brands Ruiz Food Products Inc...............................................................85 newcustomer@ruizfoods.com www.RuizFoodservice.com SEB Professional.......................................................................... 81 www.wmf-coffeemachines.com www.schaererusa.com www.wilburcurtis.com

Charleys Philly Steaks.............................................................................24 www.charleys.com

Johnsonville Sausage LLC..................................................................... 103 www.johnsonville.com

Cheyenne International LLC....................................................................33 (866) 254-6975 www.4THTIERLEADER.com

Krispy Krunchy Foods LLC...........................................................83 www.krispykrunchy.com

SiriusXM................................................................................................... 37 (800) 684-7050 www.siriusxm.com/business

Liggett Vector brands Inc............................................................31 (877) 415-4100 www.liggettvectorbrands.com

Southern Champion (Buzzballz LLC)...................................................... 61 www.buzzballz.com

Mars Wrigley................................................................................69 www.mars.com

Sunny Sky Products....................................................................49 (877) 235-6466 www.sunnyskyproducts.com

Cool New Products Guide..........................................................108-111 www.convenience.org/Media/NACS-Magazine/Cool-New-Products

Core-Mark & Eby-Brown.............................................................25 www.core-mark.com www.eby-brown.com CROSSMARK ................................................................................43 www.comcrossmark.com Diaego Beer Company USA.................................................................... 119 (Smirnoff Ice) www.smirnoff.com Diaego Beer Company USA.....................................................................59 (Lone River Ranch Rita) www.loneriverbevco.com DMF Bait Company..................................................................................23 (800) 332-2248 orders@dmfbait.com www.dmfbait.com 126 JUNE 2022 convenience.org

Matrix Capital Markets Group Inc..................... Inside Back Cover www.matrixcmg.com McLane Company ......................................................... Back Cover www.mclaneco.com Molson Coors Beverage Company ............................................ 117 www.molsoncoors.com NACS Membership.....................................................................................4 www.convenience.org/membership NACS Global ...........................................................................................123 www.convenience.org/world NACS Executive Education............................................................. 106-107 www.convenience.org/Master

Swedish Match North America (General SNUS)......................... 21 (800) 367-3677 www.smna.com Swedish Match North America (Zyn)...........................................9 (800) 367-3677 www.smna.com Trion Industries Inc...................................................................................7 (800) 444-4665 www.triononline.com TY Inc........................................................................................................ 73 www.ty.com Tyson Foods Inc......................................................................... 105 www.tysonfoods.com

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ADVERTISER INDEX

Convenience-store traffic has not yet returned to pre-pandemic levels. But according to Coca-Cola’s research, “spend per trip is up 39% or $4 per trip, as shoppers are looking to accomplish more in a single trip,” he added.

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BY THE NUMBERS

Morale Trouble over the previous year, a more concerning metric is the decline of involuntary turnover for many hourly positions in comparison to 2020. This trend may prove problematic for many operators in terms of cultural morale, which can deteriorate when underperforming employees are not terminated and other employees are forced to pick up the slack. Some managers may be reluctant to fire problematic employees for fear of not being able to hire and train replacements. At the manager level, total turnover for store managers increased to 28.0% and assistant store manager turnover climbed to 50.6%.

In 2021, full-time store associate turnover was 118.8%, and part-time associate turnover jumped to 181.6%, according to the NACS State of the Industry Compensation Report of 2021 Data. Both of these turnover rates represent significant increases from the prior year and reflect a year which coined the phrase “the Great Resignation.” A deeper look into the data, however, shows a shift in the ratio of voluntary to involuntary turnover. While voluntary resignations increased in many c-store roles

TURNOVER BY POSITION Store-Level Staff—Managerial Total Turnover Average

Involuntary Terminations

Voluntary Resignations

Store Manager

28.0%

9.9%

18.4%

Assistant Store Manager

50.6%

21.4%

38.3%

Foodservice Manager

38.6%

10.0%

31.5%

Data Entry/Bookkeeper

30.1%

4.8%

25.3%

Total Turnover Average

Involuntary Terminations

Voluntary Resignations

118.8&

38.6%

76.6%

Part-Time Sales Associate

181.6%

36.3%

141.5%

Foodservice Associate

147.7%

23.6%

100.7%

Other Full-Time Employees

82.5%

16.8%

58.9%

Other Part-Time Employees

66.7%

2.0%

65.7%

Other Operations Personnel

27.4%

10.8%

22.2%

Store-Level Staff—Hourly

Full-Time Sales Associate

Source: NACS State of the Industry Compensation Report of 2021 Data

Considered an essential guide for HR professionals for more than 40 years, the NACS State of the Industry Compensation Report® is the industry’s premier compensation benchmarking report for the convenience channel. The digital report provides the latest data, trends and best practices on compensation, benefits, recruitment and turnover as reported by retail companies. The report can be purchased at www.convenience.org/store. 128 JUNE 2022 convenience.org

champja/Getty Images

Note: Values are averaged from firms reporting each line. Where applicable, total turnover will not sum evenly.

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