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VIEWPOINT By Don Longo, Editorial Director

Going Mobile C-stores need to speed adoption of new technology to shore up customer visits

hile many c-store retailers will achieve record in-store sales and profits this year, many of them must be concerned that customer shopping frequency appears to have leveled off, or slightly declined, in recent months. According to the just-released, exclusive 2016 Convenience Store News Realities of the Aisle consumer research study (see page 24), roughly 72 percent of c-store shoppers surveyed said they visited a convenience store daily or weekly over the past month. That’s a bit below last year’s 73.9 percent. Conducted among a 2.5-millionstrong panel, with 1,501 respondents who shopped at a c-store in the past 30 days, our annual Realities of the Aisle study is the most comprehensive, proprietary For comments, please contact research on why consumDon Longo, Editorial Director, ers shop at c-stores, what types of at (201) 855-7606 or products they buy and what infludlongo@stagnitomail.com. ences their purchasing decisions. One of the more interesting findings of this year’s survey offers a potential solution to the problem of flat or declining c-store visits. Asked what influenced their decision to visit a convenience store, almost 16 percent of shoppers said word-of-mouth, up slightly from 15 percent a year ago. Mobile apps, hardly mentioned a year ago, ranked third after coupons,

with about 11 percent of respondents citing a retailer’s mobile app as an influencer. Mobile app usage was pretty much the same by gender, but 16.7 percent of higher-income consumers (with yearly household incomes of between $75,000 and $100,000) drove the increase in mobile app use this year. So did younger consumers, aged 18-24 (18.3 percent using) and aged 25-34 (16.4 percent using). It’s obvious we’re witnessing major shifts in how consumers shop and spend their money. Therefore, it’s vital for retailers to have sound strategies to leverage new innovations like mobile apps and other digital marketing tools to drive stronger results. All that is my way of pointing out that you must read our industry-first Digital Marketing Study, the result of a unique collaboration between Convenience Store News, sales and marketing firm Balvor and industry consulting firm Brick Meets Click (turn to page 62). This study examines how U.S. convenience retailers are using new marketing technologies and, more importantly, how they are measuring the performance of these technologies. Hint: Less than half of retailers give their own company a “B” grade or higher for doing a solid or outstanding job of evaluating their own digital marketing activities. And, I’ll leave you with a final thought: One-half of 1 percent of the shoppers surveyed in our Realities of the Aisle study actually paid for their c-store purchase with a mobile app. One wonders how much this figure will increase over the next year.

CSNews has been recognized with more editorial awards, including the prestigious Jesse H. Neal Award for business journalism, in the past six years than any other industry publication. 2013 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2012 2013 Jesse H. Neal National Business Journalism Award Finalist, Best Profile, August 2012 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007 2010 Trade Association Business Publications Intl. Tabbie Awards Honorable Mention, Front Cover Illustration, October 2009 2009 Trade Association Business Publications Intl. Tabbie Awards Gold, Front Cover Illustration, February 2008 Honorable Mention, Best Single Issue, October 2008

2015 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2014 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2013 2013 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2012 2011 Silver Eddie Award, Folio: magazine Business to Business, Retail, Full Issue, October 2010 2011 Silver Eddie Award, Folio: magazine Business to Business, Retail, Best Single Article, October 2010 2009 Gold Ozzie Award, Folio: magazine Best Use of Illustration, October 2008 2009 Silver Eddie Award, Folio: magazine Business to Business, Retail, Full Issue, October 2008 2009 Bronze Eddie Award, Folio: magazine Business to Business, Retail, Website

4 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

2015 American Society of Business Publication Editors, National Silver Azbee Award Best Profile (long form), February 2014 2015 American Society of Business Publication Editors, Midwest Regional Gold Azbee Award Best Special Supplement, November 2014 2015 American Society of Business Publication Editors, Midwest Regional Silver Azbee Award Best Profile (long form), February 2014 2013 American Society of Business Publication Editors, Midwest Regional Bronze Azbee Award Best Editorial/Commentary, July 2012 2010 American Society of Business Publication Editors, Northeast Regional Silver Azbee Award Feature Article Design, November 2010

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CONTENTS FEBRUARY 2016

VOLUME 52/NUMBER 2

24 | COVER STORY Bring Your ‘A’ Game

Our exclusive research shows lower prices, better quality would get more shoppers into the store.

INDUSTRY ROUNDUP 14 | CST Pursuing Real Estate Venture to Raise Capital 16 | A Busy January for GPM Investments 18 | Eye on Growth

30 | Motor Fuels

38 | Candy

18 | Retailer Tidbits

32 | Tobacco

40 | Snacks

19 | Marketing Moves

34 | Foodservice

40 | Methodology

19 | Supplier Tidbits

36 | Cold Vault

19 | In Memoriam

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by S Stagnito Business Information, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright © 2016 by Stagnito Business Information. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

6 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Proﬁts are stacking up nicely. You know what else is stacking up nicely —the line at the register after customers see our new pre-packed display shipper. It’s no wonder, considering W∑nderful is now among the top-selling snack nut items. We also ranked 11th among all salty snacks, including potato chips. Our multi-SKU shipper offers all of our W∑nderful Pistachios and W∑nderful Almonds in one convenient and compact ﬂoor display. How’s that for stacking up against the competition? Available through McLane, Core-Mark, US Foods, Sysco and regional distributors. Contact sales at 1-800-528- UTS (6887).

Scientiﬁc evidence suggests but does not prove that eating 1.5 ounces per day of most nuts, such as pistachios or almonds, as part of a diet low in saturated fat and cholesterol may reduce the risk of heart disease. See nutrition information for fat content. ©2016 Wonderful Pistachios & Almonds LLC. All Rights Reserved. WONDERFUL, GET CRACKIN’, the Package Design and accompanying logos are registered trademarks of Wonderful Pistachios & Almonds LLC. MB14815 Source: IRI Convenience 12 weeks ending 12-13-15.

CONTENTS CATEGORY MANAGEMENT

111 Town Square Place, Suite 400, Jersey City, NJ 07310 (201) 855-7600 Fax: (201) 855-7373 www.csnews.com

BRAND MANAGEMENT

FOODSERVICE

42 | Playing Chicken This foodservice staple is not just for c-stores in the South and Southeast. 48 | Kickstarting the Kitchen C-stores are leveraging equipment innovation to gain an advantage over the competition. 52 | Why the C-store Segment Cannot Afford Food Safety Breaches Any “hiccups” could cause irreversible damage for the channel. TOBACCO

56 | More Time for Tobacco This year’s Tobacco Plus Expo International features expanded show hours.

Group Brand Director (330) 840-9557

Ron Lowy rlowy@stagnitomail.com

EDITORIAL Editorial Director (201) 855-7606 Editor-in-Chief (201) 855-7608 Managing Editor (201) 855-7614 Senior Editor (201) 855-7618 Associate Editor (201) 855-7619 Assistant Editor (201) 855-7604 Contributing Editor (303) 741-3377 Contributing Editor (201) 280-2614 Art Director (224) 632-8245 Director of Market Research (201) 855-7605

Don Longo dlongo@stagnitomail.com Linda Lisanti llisanti@stagnitomail.com Brian Berk bberk@stagnitomail.com Melissa Kress mkress@stagnitomail.com Angela Hanson ahanson@stagnitomail.com Danielle Romano dromano@stagnitomail.com Renée M. Covino reneek@aol.com Tammy Mastroberte tmastroberte@gmail.com Michael Escobedo mescobedo@stagnitomail.com Debra Chanil dchanil@stagnitomail.com

MARKETING & PROMOTION MOTOR FUELS

58 | Get Big, Get Great or Get Out CSNews Fuels & Tech Summit drives home the importance of these two categories.

Audience Development Manager Shelly Patton (646) 217-1045 spatton@stagnitomail.com List Rental The Information Refinery (800) 529-9020 Brian Clotworthy Reprints and Licensing Wright’s Media (877) 652-5295 sales@wrightsmedia.com Subscriber Services/Single-Copy Purchases (978) 671-0449 Stagnito@e-circ.net

TECHNOLOGY

62 | The State of C-store Industry Digital Marketing Exclusive research shows less than half of retailers give their own company a “B” grade or higher.

DEPARTMENTS VIEWPOINT

4 | Going Mobile C-stores need to speed adoption of new technology to shore up customer visits. 12 | CSNews Online

20 | New Products

STORE SPOTLIGHT

EVENTS • MEDIA • RESEARCH • INFORMATION UNITED STATES MARKETS Convenience • Grocery/Drug/Mass Store Brands • Specialty Gourmet Multicultural • Green

CANADIAN MARKETS Convenience Pharmacy Foodservice

President & CEO Harry Stagnito Chief Information Officer Kollin Stagnito Vice President & CFO Kyle Stagnito Senior Vice President, Partner Ned Bardic Chief Brand Officer Korry Stagnito Vice President/Custom Media Division Pierce Hollingsworth (224) 632-8229 phollingsworth@stagnitomail.com Production Manager Anngail Norris Human Resources Manager Sandy Berndt Strategic Marketing Director Bruce Hendrickson (224) 632-8214 bhendrickson@stagnitomail.com Director of Events Ken Romeo (203) 295-7058 kromeo@stagnitomail.com Director of Digital Strategy Matt McGuire (224) 632-8180 mmcguire@stagnitomail.com

68 | Corner Store Is Reborn Brand overhaul centers on new service promise of “Simply Fresh. Always Friendly.”

CONVENIENCE STORE NEWS AFFILIATIONS

OUT & ABOUT

EDITORIAL ADVISORY BOARD

76 | Retailing in the Digital Age Engaging customers via digital communication dominated 2016 NRF Show talk. 90 | Getting to the Core

8 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Premier Trade Press Exhibitor Brett L. Atherton Bolla Management Rick Crawford Green Valley Grocery Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Ray Johnson Speedee Mart

Jack Lewis Village Pantry LLC

Jonathan Polonsky Plaid Pantries Inc.

Kyle McKeen Alon Brands Inc.

Roy Strasburger Convenience Management Services Inc.

Richard Mione GPM Southeast Matt Paduano Nice N Easy Grocery Shoppes

Jon Urbanik CST Brands Inc.

The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations.

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CSNEWS.COM ONLINE EXCLUSIVE

TOP 5 Daily News Headlines The most viewed articles online. 1 | Western Convenience Stores Files for Bankruptcy The Colorado and Nebraska-based chain made the move on Dec. 28 after a creditor claimed the gas station operator defaulted on a 2014 agreement and moved to take over 37 of its 43 gas station businesses, according to court documents. Western Convenience Stores reported about $250 million in gross sales for 2014. 2 | Circle K Acquires 62 Stores Across Nine States The convenience store retailer purchased 62 stores from Greatstone Equities Inc., a Las Vegas investment firm. Locations in Arizona, California, Florida, Louisiana, Nevada, New Mexico, North Carolina, Texas and Washington were part of the deal. 3 | TA’s Vision for Minit Mart: ‘Bright & Cheery’ TravelCenters of America LLC (TA) is moving full steam ahead with plans to expand its Minit Mart convenience store banner. In its latest step, TA closed its previously announced purchase of four c-stores in Kansas and Missouri. The sites, which previously carried the Meiners banner, will be rebranded as Minit Mart c-stores and undergo improvements in the next few months. 4 | CST Making Several Changes to Leadership Team The parent company of Corner Store created the position of president, retail operations, naming Hal Adams to the post. Additionally, Stéphane Trudel, CST’s senior vice president, mergers and acquisitions, will fill the newly created position of senior vice president, growth and strategy.

POLL

5 | Cumberland Farms Closes Sale of Gulf Oil Gulf Oil LP has officially changed hands. Chelsea Petroleum Products Holdings LLC, an affiliate of ArcLight Capital Partners, completed the purchase of Gulf Oil from Cumberland Farms Inc. in late December. In a related transaction, Blue Hills Fuels LLC, another ArcLight affiliate, purchased Gulf’s Assured Dealers business.

How confident are you that favorable changes will be made to the FDA’s menu labeling rules for c-stores?

How to Turn Impulsive, Emotional Consumer Needs Into Sales

Understanding what motivates consumers to make a purchase will not only help drive sales, but also influence the way convenience stores position products. Two highly motivating consumer needs that retailers can tap into are habit and indulgence, according to the 2015 Tyson Convenience and Anheuser-Busch PM Snack Study. To capitalize on these consumer needs, convenience store retailers must offer new products and product combinations in innovative and fun ways in order to communicate the product benefits to consumers. For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT The most viewed New Product online.

GasBuddy for Business

GasBuddy, the price-comparison gas app, now offers GasBuddy for Business, a new platform solution that provides independent retailers access to GasBuddy’s robust consumer network. The new offering allows retailers to claim, manage and curate their individual station sites on the GasBuddy app and website. Using GasBuddy for Business, retailers can enhance their mobile presence and gain access to an instant network of consumers to drive in-store traffic using digital deals, according to the company. The platform also alerts station owners of nearby competitors’ price changes. GasBuddy/OpenStore LLC Gaithersburg, Md. (866) 266-5658 sales@openstoreloyalty.com www.gasbuddy.com

56%

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13%

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12 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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INDUSTRYROUNDUP FAST FACT

Only one-quarter of convenience store shoppers said they have a c-store app on their mobile device. You’re most likely to find one on smartphones owned by consumers aged 25-34. Source: Carbonview Research (page 90)

QUOTABLES

“You need to have 1,000 stores to really compete. You can have less, but you need 1,000 for economy of scale.” — Joseph Petrowski, Mercantor Partners (page 58)

CST Pursuing Real Estate Venture to Raise Capital Sale-leaseback move follows shareholder criticism over weak returns

ST Brands Inc.’s board of directors authorized company management to pursue a new real estate venture. The parent of Corner Store convenience stores has been evaluating alternative financial structures to monetize its new-toindustry real estate and fund its accelerated new-store growth plan. “After reviewing various alternatives with the assistance of its financial and legal advisors, the company has decided to pursue a real estate venture structure to achieve these goals,” CST reported in early January. “Through saleleaseback leverage, the company expects the venture will substantially enhance its newstore return on investment from unleveraged returns of 15 percent to over 30 percent under the new venture structure (after the customary maturity period of one to three years). Beginning in 2017, the company expects that new stores will be constructed as build-to-suit locations directly funded by the venture.” The San Antonio-based operator of more than 1,000 U.S. convenience stores expects the real estate venture to significantly lower CST’s cost of capital and provide an attractive financial platform to accelerate new store growth, help fund future acquisitions and potentially purchase existing real estate from CST and master limited partnership sister company CrossAmerica Partners LP, according to Kim Lubel, CST chairman,

14 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

CEO and president. “We expect this innovative structure will free up substantial capital that will enhance the company’s ability to pursue its strategic growth initiatives, while also providing an opportunity to unlock additional long-term value for CST stockholders from potential upside in the company’s ownership interest in the real estate venture,” Lubel explained. CST’s pipeline of future new-to-industry

construction in the United States is estimated to be in the range of $1.1 billion to $1.2 billion in real property costs during the next five years. This announcement comes after two venture capital firms, Engine Capital LP and JCP Investment Management LLC, both sent letters to the c-store retailer in December recommending the company either dramatically improve operations or put itself up for sale due to weak shareholder returns since it was spun off from Valero Energy Corp. on May 1, 2013. Both venture capital firms are CST shareholders. CST has retained RBC Capital Markets as financial advisor for this matter.

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INDUSTRYROUNDUP

A Busy January for GPM Investments Retailer kicks off 2016 with a new fuel subsidiary and Southeast acquisition

PM Investments LLC is off to a strong start in the new year. To begin with, the Richmond, Va.-based company closed a $70-million minority private equity investment by an investment company concentrating on the energy sector, which will pave the way for a new wholly owned fuel subsidiary for GPM. This subsidiary will purchase motor fuel from major integrated oil companies and independent refiners and distribute fuel to GPM at a fixed margin. “We are delighted to announce this equity raise from a strong partner for our newly operating subsidiary. GPM is now in an even stronger position to continue its acquisition growth strategy in the convenience store and wholesale fuel distribution sector,” said Arie Kotler, president and CEO of GPM. “This is an exciting transaction for everyone involved and will provide a tremendous capital base for GPM’s next stage of growth.” GPM also arranged a credit facility with $110 mil-

16 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

“This is an exciting transaction for everyone involved and will provide a tremendous capital base for GPM’s next stage of growth.” — Arie Kotler, GPM Investments

lion of availability and a $110-million accordion to fund acquisitions, subject to obtaining additional commitments from lenders or other banks. Raymond James & Associates Inc. served as sole financial advisor. The retailer wasted no time making its first acquisition of 2016. Continuing to boost its regional presence in the Southeast, GPM announced its purchase of nearly 70 Apple Market locations in Virginia and Kentucky. The company signed an agreement to acquire the 42 convenience stores with gasoline and approximately 25 dealer-operated stores from Fuel USA LLC. The transaction is expected to close in the first quarter of 2016, and GPM anticipates extending an offer to employees of the acquired stores to join the GPM family. “We are thrilled to continue our path of expansion and we view this store acquisition as a very important part of our growth plan,” Kotler said. “We have enjoyed serving our loyal customers in Virginia and Kentucky, and we look forward to making these locations a new part of the GPM family.” Fuel USA acquired the Apple Market c-stores from Workman Oil Co. in July. It marked the company’s first move into the convenience channel.

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INDUSTRYROUNDUP

eye on growth n Western Refining Inc. will acquire all outstanding

common units of Northern Tier Energy LP it does not already own. Western Refining owns 38 percent of the common units and 100 percent of the general partnership interest in Northern Tier. n CrossAmerica Partners LP inked a deal

with SSG Corp. to acquire 31 franchise Holiday Stationstores locations in Wisconsin and Minnesota. The transaction carries a $48.5-million price tag. n The Parker’s convenience store

chain is rapidly expanding in South Carolina, opening three new stores in the state in one month. The new sites are in Hardeeville, Bluffton and Hilton Head. Parker’s views coastal South Carolina as a major growth area. n Love’s Travel Stops & Country Stores Inc. plans to

open more than 40 new locations and more than 3,200 truck parking spaces this year. The retailer’s agenda for 2016 also includes three new restaurant concepts and 10 more hotel locations.

n Wawa Inc. held three store

grand openings in Virginia on Dec. 18, the first time the retailer pulled off a trifecta in the state and the first time it welcomed customers in Fairfax County. The new locations are in Chantilly, Hampton and Suffolk. n Big Y Foods Inc. entered into an agreement to acquire

the operating assets of three O’Connell Convenience Plus Stations in Massachusetts. Big Y expected to start operating the sites in late January, with plans to convert them to the Big Y Express banner throughout the winter. n Stewart’s Shops Corp. has set a $30-million capital

budget for expansion and new store construction this year. Plans call for renovating existing c-stores as it outfits more locations with the tools necessary for a larger foodservice selection. n Gordy’s Market and Mega Co-op finalized an alli-

ance. Mega Co-op grocery stores will become Gordy’s Markets, and the Gordy’s Express convenience stores and gas stations will become Mega Holidays under this new partnership.

retailer tidbits n Some c-store retailers are upping

their minimum wage. Sheetz is investing $15 million to boost the pay of its associates, and Wawa is increasing its starting pay to $10 an hour. n RaceTrac Petroleum Inc. cre-

ated a new fuel hub at the Port Manatee terminal in Florida. The hub services a nine-county region encompassing more than 30 RaceTrac stores.

pilot program represents the first national petroleum company to partner with U-GLOVE. n The Mission Market store in Fullerton,

Calif., and the Mission Market Express store in Anaheim, Calif., are no longer using pennies in cash transactions. Cashiers will accept and give back pennies only on request. n Thorntons Inc. broke ground on a new headquarters,

which the company refers to as its Store Support Center. The $27.8-million building in Louisville, Ky., will be approximately 92,000 square feet.

n CITGO Petroleum Corp.’s

Retail Concept Center in Houston now offers U-GLOVE disposable gloves for consumers to use at the fuel pumps. The

18 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

n Speedway LLC renewed a deal for Eby-Brown

Co. LLC to remain its exclusive Midwest supplier. Speedway and Eby-Brown have been partners for more than 30 years.

marketing moves n BP North America Inc., in a partnership with the

NBA’s Milwaukee Bucks, launched the C’mon Back Club. The promotion gives customers the opportunity to earn Bucks tickets in exchange for fuel purchases made at participating BP locations. n For the 24th

consecutive year, QuickChek Corp. will serve as title sponsor of the annual New Jersey Festival of Ballooning. This sponsorship by the c-store chain is

the longest-running sponsorship of any festival in the United States. n RaceTrac Petroleum Inc. selected Resource/Ammirati as

its new lead creative agency. The agency will be responsible for the retailer’s integrated brand strategy, advertising and all mobile, digital and social media initiatives. n 7-Eleven Inc. is adding an age verification system to its

7Rewards mobile app program. Adult consumers will now be able to receive offers on age-restricted items such as alcoholic beverages, tobacco and lottery.

supplier tidbits n Reynolds American Inc. created a new subsidiary, RAI

Innovations Co., which will focus on product development, innovation and commercialization of next-generation vapor and nicotine products. n Anheuser-Busch acquired three craft

brewers in December: Four Peaks Brewing Co. in Arizona, Breckenridge Brewery in Colorado, and the United Kingdom’s Camden Town Brewery. A-B’s The High End, the company’s business unit providing unique craft and import brands, already includes Goose Island Beer Co., Blue Point Brewing Co., 10 Barrel Brewing, Elysian Brewing Co. and Golden Road Brewing. n AdvancePierre Foods opened an Innovation & Research

Center co-located with its Cincinnati processing facility. The center combines lab space and meeting rooms.

n Mars Chocolate North America

and Wrigley launched their first joint selling program. Designed to help retailers drive sales around the Super Bowl, the program runs through Feb. 29. n Mondelez International’s Oreo brand unveiled a

new globally integrated marketing campaign entitled “Open Up with Oreo.” The campaign will launch in more than 50 countries during the first half of 2016. n Heineken Premium Lager is

teaming up this year with the UEFA Champions League and Major League Soccer to launch the “Soccer Is Here” retail and on-premise program. The campaign begins March 1.

in memoriam Hunt Brothers Pizza co-founder James “Jim” Stocker Hunt passed away on Jan. 3. The lifelong avid outdoorsman died while working outside his home in Lexington, Ky. Hunt and his three brothers took a local, family-operated pizza business in the 1970s and

turned it into Hunt Brothers Pizza, which today is the nation’s largest brand of made-to-order pizza in the convenience store industry with more than 7,000 locations. According to family members, Hunt’s core business principles consisted of placing God first in all decisions, investing in people and duplicating the best qualities in them.

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 19

NEWPRODUCTS MasonWays Mixed Recycling Center The MasonWays Mixed Recycling Center is a dual mixed recycling and trash unit. Two separate inner liners segregate mixed recyclables and trash, while hooded tops prevent rain from entering the unit. Icons make it easy for consumers to recycle, and chained lids prevent loss. The unit also features side advertising poster frames to drive sales in-store with promotions. Manufactured in the United States, the Mixed Recycling Center is coated in UV protectant, anti-microbial and made with USDA-approved polyethylene plastic. In addition, the unit is impervious to weather, chemicals and cleaners; heavy-duty; economically priced; will not chip or crack; and is easy to clean, according to the company. MasonWays Indestructible Plastics LLC West Palm Beach, Fla. (800) 837-2881 judd.ettinger@masonways.com masonways.com

SIRISfood Foodservice Ordering Program SIRISfood is a simple, at-the-pump ordering program that allows customers to easily order food while they get gas. SIRIS is a 10-inch tablet installed onto the front of an existing Wayne Ovation or Gilbarco Encore fuel dispenser. A customer can use the tablet to tap in an order, which is immediately sent to the kitchen inside the store and printed out on a thermal printer. A receipt of the order is simultaneously sent to the customer via text. Signal Peak Designs Lawrence, Kan. (714) 230-0076 info@siristablet.com siristablet.com

PDI/Enterprise 8 Software PDI introduced its newest software offering, PDI/Enterprise 8. This software offers a new â&#x20AC;&#x153;big dataâ&#x20AC;? merchandise ordering system and forecasting tools to anticipate inventory adjustments based on long-term historical trends, seasonal demand, holidays, events and promotions. A new dashboard gives retailers increased store-level visibility, allowing them to proactively address inventory issues, according to the company. Other features include: a point-of-sale trickle feed journal collector to facilitate real-time inventory, accurate ordering, optimal staffing levels, transaction-level promotional reporting for suppliers and enhanced market basket reporting; a customer portal for petroleum marketers, including forecasting tools for more accurate ordering, fleet card maintenance and reporting, and warehouse price notices; and an unified platform to manage critical parts of their operations from one place. The platform also reduces the software deployment requirements for current customers, PDI stated. PDI Temple, Texas (254) 771-7100 info@profdata.com profdata.com

TeenyMates Big Sip NFL Character Cups TeenyMates Big Sip is a line of 16-ounce character cups that feature a unique 3D NFL-themed design. Available in a variety of NFL team uniforms, each Big Sip cup is BPA-free and made with 100-percent safe materials, according to maker Party Animal. A straw and stop cap are included with each cup. Party Animal Inc. Westlake, Ohio (800) 456-0145 sales@partyanimalinc.com partyanimalinc.com

Peeps Spring Varieties This spring, the Peeps brand will release several popular flavors in new convenient-count packaging, including Blue Raspberry and Sour Watermelon. Blue Raspberry-flavored Peeps marshmallow chicks combine sweet and tart flavors, while Sour Watermelon Peeps are green chicks with a blush pink center that deliver sweet and sour flavors with a burst of watermelon. The five-count packages have a suggested retail price of 99 cents to $1.25, depending on the market. The Peeps brand is also introducing playful Decorated Marshmallow Eggs and large Marshmallow Bunnies, which the maker says are shareable and fun-to-eat treats perfect for Easter baskets. Just Born Inc. Bethlehem, Pa. (800) 445-5787 justborn.com 20 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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NEWPRODUCTS Celsius Sparkling Energy Drinks New to the Celsius line of energy drinks, Sparkling Watermelon and Sparkling Grape Rush were developed with the consumer in mind, according to the company. Sparkling Grape Rush is a twist on the classic flavor, featuring a refreshing, crisp taste. Sparkling Watermelon offers a splash of summer no matter the season. Like all Celsius varieties, these two new flavors contain no sugar, high-fructose corn syrup, aspartame, preservatives, or artificial flavors or colors. They are gluten-free, vegan and low in sodium. Celsius Sparkling Watermelon and Celsius Sparkling Grape Rush are available in single cans and four-packs beginning this month. Celsius Holdings LLC Boca Raton, Fla. (866) 423-5748 celsius.com

SoftGloss MAXX 3 In-Bay Wash System Ryko Solutions Inc.’s newest in-bay wash system, the SoftGloss MAXX 3, provides customers with two wash options in one bay. Features include: two wash systems that offer customers the MAXX Choice to choose brush only, touchless or a combination wash; quality brushes made of a proprietary-designed wash material; MAXX track floor design, an easy-to-service modular track design that eliminates downtime for track maintenance; and a reclaim system that reduces chemical and water usage by up to 80 percent. Customization is available for new LED premium light packages, multiple colors of FoamBrite wash material and cover panel options. The spacious bay design is 108 inches wide and 90 inches tall, with powerful on-board dryer fans. Ryko Solutions Grimes, Iowa (515) 986-3700 ryko.com

Early Risers Fiesta Bold Chorizo Early Risers Fiesta Bold Chorizo Stuffed Hash Brown Patties can be served as a snack or mini meal, and are ideal for consumers seeking a convenient breakfast or morning snack, according to maker McCain Foods USA Inc. Each patty is packed with savory potato, white American cheese, egg and chorizo in a cornflake crust with red and green pepper flakes. The product can be baked in a convection oven or fried. McCain Foods USA Inc. Lisle, Ill. (800) 938-7799 mccainusa.com

MaCoca Gold Chill-Out Vapor LKR Imports introduces its exclusive MaCoca Gold Chill-Out Vapor additive with CBD hemp oil. Available in a unique twist-off cap, MaCoca Gold can be vaped alone or added to any flavor. It delivers a calming and relaxing experience that is 100-percent legal in all 50 states, according to the company. The product is THC-, synthetic-, nicotine- and tar-free. LKR Imports Inc. Hollywood, Fla. (866) 470-7640 info@macoca.com macoca.com

Orchard’s Edge Series by Angry Orchard Angry Orchard introduces Orchard’s Edge, a new cider project that will develop ciders inspired by unexpected ingredients and aging processes. The first two ciders in the Orchard’s Edge series are Knotty Pear and The Old Fashioned, both of which are aged on American oak and feature non-apple fruit like pears and oranges combined with exotic spices like cardamom to work with and enhance the cider’s main ingredient, the apple. Knotty Edge Pear has a golden hue, bright appearance and a dry, subtly spicy flavor with notes of citrus and mint, while showcasing a fresh acidity and baked pear aroma. The Old Fashioned is deep golden in color, has a bright apple flavor and slight vanilla from the aged American oak, and is blended with dried tart cherries, California navel orange peel and charred bourbon barrel staves. Both varieties are available year-round starting this month in six-packs for a suggested retail price of $11.99. Angry Orchard Cider Co. Cincinnati, Ohio (800) 362-7110 angryorchard.com

22 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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Cover Story

Bring Your

‘A’ Game

Our exclusive research shows lower prices, better quality would get more shoppers into the store

A Convenience Store News Staff Report onvenience store shoppers want lower prices, cleaner aisles, friendlier service, better-quality coffee and rewarding loyalty programs from the c-stores they frequent. Verbatim comments like these were frequently cited by the c-store shoppers polled in Convenience Store News’ 2016 Realities of the Aisle consumer research study: “What would make me go more often? Lower prices on gas, cigarettes, energy drinks, good customer service and a reward program with discounts.” “I’d shop more often if the stores were cleaner. Also, if they had a reward program that takes cents off gas and other items.” “I would definitely go there more often if the coffee was better.” In short, consumers say they would visit a convenience store more often if the shopping experience was better. While c-store trips for prepared foods increased significantly year over year, overall visits to convenience stores are slightly down, according to this year’s study, which marks the seventh annual CSNews Realities report. This finding should be especially concerning to c-store operators since the lower gasoline prices of late don’t seem to be luring a greater number of fuel

24 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

purchasers into the store. The percentage of consumers who say they stop at a c-store to fill their tank and then buy something inside the store is flat this year compared to 2015. About 33 percent of shoppers surveyed said they “always” or “almost always” buy merchandise in the store when they stop for gas, almost the identical percentage as last year. Lower gas prices, however, are having an impact on the frequency in which lower-income consumers combine gas and in-store shopping. Nearly three out of 10 c-store shoppers with household incomes under $35,000 per year said they buy in-store merchandise at the same time they purchase gas. That’s a nearly 5-percentage-point increase from a year ago. This phenomenon is repeated regionally and by age. Shoppers in the Midwest increased their frequency of in-store purchases by almost 5 percentage points, and shoppers aged 45-54 saw an increase of 6 percentage points in in-store shopping frequency when buying gas. Overall C-stOre visits DOwn

Overall visits to convenience stores are slightly down this year, with 72 percent of surveyed shoppers saying they visit a c-store daily or weekly. This is a bit below last year’s 73.9 percent.

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 25

Cover Story

At what time(s) of day do you typically Shopping for snacks and beverages are the most frequent reashop at convenience stores? sons for in-store visits. Among by gender TOTAL MALe FeMALe consumers who visited a 6 a.m. - 8:59 a.m. 33.5% 36.6% 29.2% c-store in the past month, 55 9 a.m. - 10:59 a.m. 27.0% 26.5% 27.9% percent said they shopped 11 a.m. - 1:59 p.m. 32.8% 31.0% 35.4% for packaged beverages (an 2 p.m. - 3:59 p.m. 33.8% 31.1% 37.5% increase from 39 percent last 4 p.m. - 6:59 p.m. 50.1% 48.6% 52.2% year), 54.3 percent shopped 7 p.m. - 10 p.m. 34.8% 34.5% 35.1% for snacks (about the same After 10 p.m. 13.3% 13.0% 13.8% Don’t know 4.3% 4.1% 4.5% as the 55 percent last year), Multiple responses accepted 43.8 percent shopped for cold Base: 1,501 respondents who shopped at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016 or frozen fountain drinks (up from 41 percent), 39.9 percent shopped for candy/gum (holding steady from the 40 percent a year year said they typically shop at a c-store while running ago), and 39 percent shopped for hot beverages (up other errands (up from 55 percent a year ago) and from 35 percent last year). 61 percent do so while traveling to or from work or school (also up from 55 percent last year). Fifty-eight percent said they typically shop at a prepareD fOODs On the rise c-store while traveling for pleasure, while 43 percent A strong 43.7 percent of consumers said they’ve said they make special trips to the store from home recently shopped a c-store for prepared foods or fast (down from 45 percent last year). food for immediate consumption. That’s a significant increase from 37 percent who said they went to a c-store for prepared foods last year. time-Of-Day variatiOns Despite the increase, many consumers still think The largest percentage of shopper visits to a c-store c-stores have to up their game in the foodservice occur between 4 p.m. and 10 p.m. (indicated by 66 category. “I’d like to see better-quality fast food for percent of those surveyed), followed by the morning a reasonable price, or at least better-quality coffee hours of 6 a.m. to 11 a.m. (54 percent). Men comprise drinks,” said one respondent whose comment echoed the majority of shoppers during these two most heavily many others. trafficked time periods. Women outnumber men in the Other comment themes were requests for more 11 a.m.-to-4 p.m. timeframe. healthy food items, better meals for on the go, a Traffic at convenience stores is lightest from 7 p.m. greater variety of Asian food, and a few requests for a onward (39 percent of visits), with men outnumbering drive-thru window. women shoppers during the late-night hours. This year’s findings also show that even more than last year, c-store shoppers are visiting the stores while spreaDing the wOrD on the go. Sixty-two percent of c-store customers this Word-of-mouth is still the most often cited element

How often do you buy any in-store merchandise when you stop for gas at a c-store? TOTAL

Every time Almost every time Some of the time Rarely Never

7.3% 25.7 49.2 16.5 1.4

by incOMe: Less ThAn $35,000

$35,000 $49,999

$50,000 $74,999

$75,000 $99,999

$100,000 Or MOre

5.9% 23.4 50.6 18.4 1.6

7.7% 26.6 48.4 16.5 0.8

6.8% 27.4 49.0 14.7 2.1

11.0% 32.6 42.5 13.3 0.6

6.2% 19.2 54.4 18.7 1.6

Base: 1,234 respondents who purchased gasoline at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016

26 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Cover Story

that’s influenced a consumer’s decision to visit a convenience store. However, mobile apps made an impressive showing this year. Almost 16 percent of shoppers cited word-of-mouth as influencing their shopping decision, up slightly from 15 percent a year ago. Mobile apps, hardly mentioned a year ago, ranked third after coupons, with about 11 percent of respondents citing a retailer’s app as an influencer. at yOur serviCe

Have any of the following elements influenced your decision to visit a convenience store? Word-of-mouth Coupon Mobile app offer from c-store Radio or TV advertisement Billboard Promotion or message on social media (Facebook, Twitter, etc.) Print circular Text message Email Other

TOTAL

by Age: 18-24

25-34

35-44

45-54

55+

15.7% 12.3% 10.9% 9.5% 7.5%

18.8% 14.7% 18.3% 9.4% 7.9%

18.8% 12.2% 16.4% 14.3% 12.9%

18.8% 12.7% 11.5% 11.5% 8.5%

13.3% 12.5% 12.9% 6.3% 6.3%

11.4% 10.7% 2.1% 6.6% 3.8%

7.3% 5.7% 5.7% 4.9% 3.6%

9.9% 2.1% 8.4% 3.7% 1.0%

15.0% 7.7% 11.8% 7.3% 1.4%

7.6% 7.6% 4.8% 4.5% 2.7%

3.7% 5.2% 3.3% 5.5% 4.8%

2.8% 5.0% 2.4% 3.6% 6.2%

A solid 55 percent of customers use one or more of a dozen or Multiple responses accepted so services offered by a typical Base: 1,501 respondents who shopped at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016 c-store. The most widely used service is an ATM, with 37 percent saying they use the ATM machine at c-stores (up slightly from 35 percent a year ago). their favorite c-store’s loyalty or frequent shopper proThis was followed by car wash (19 percent, gram, compared to just one in four last year. up 1 percentage point); DVD rental (11 percent, Another third said they would enroll if their c-store down 1 point); money orders had a program. About 15 percent acknowledged they The complete Convenience (10 percent, up 2 points); are aware their c-store has a program, but they haven’t Store News 2016 Realities Internet/Wi-Fi access (7 persigned up for it. of the Aisle consumer cent, up 1 point); and check research study, with breakcashing (5 percent, down 1 spenDing & payment patterns outs by gender, household percentage point). About half of the transactions at convenience stores income, region, age and Women are the heaviest users are $9 or less (28.1 percent of surveyed shoppers said children vs. no children in of ATM, DVD rental and money they spend between $5 and $9 per visit; 21.8 percent household, will be available orders, outnumbering men 40 spend less than $5). Last year, only 43 percent of for purchase online at percent to 34 percent, 13 percent transactions were $9 or less. www.csnews.com. to 9 percent, and 12 percent to 8 Another 16 percent of consumers polled this year percent, respectively. said they spend between $10 and $16 with each c-store visit. Last year, 19 percent spent this amount. Four out of 10 shoppers pay for their in-store nOw that’s lOyal purchases with cash. That’s down from 47 percent a “Loyalty rewards would influence my decision to visit year ago. Meanwhile, 32 percent use a debit card (up a store more often,” said more than one respondent in from 28 percent) and 22 percent use a credit card (up this year’s CSNews Realities research. slightly from 21 percent last year). The percentage of consumers enrolled in a c-store’s Women are more likely to use a debit card than loyalty program increased significantly in the past year. men (a difference of 10 percentage points). Almost a third of shoppers said they are enrolled in

28 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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Motor Fuels

“C

made such a purchase. One in every four shoppers surveyed said they purchase fuel exclusively at a convenience store. For the three-quarters that also buy elsewhere, the highest He Said, SHe Said percentage visit Three-quarters of females say gas-only locaprice is “extremely important” tions, followed by when deciding where to pursupercenter/mass merchandisers, chase motor fuel, compared to wholesale clubs, slightly more than two-thirds of supermarkets and men who said the same. truck stop plazas. Interestingly, in most cases, the percentage of consumers visiting each of these non-c-store locations for fuel rises in ascending order as income level rises. For example, 40 percent of those earning $35,000 or less visited gas-only locations in the past month, compared to 46.4 percent of those in the $35,000$49,999 income group, 52.4 percent in the $50,000Did you purchase motor fuel at a $74,999 group; 55.2 percent in the $75,000-$99,999 convenience store in the past month? group, and 56.5 percent in the $100,000-plus group. yes no Despite c-stores gaining more fuel customers year over year, this is not translating into more in-store vistotaL chiLDren in hoUsehoLD no chiLDren its. Among those who purchased c-store fuel, a major7.9% 13.2% ity (55.1 percent) said no promotional marketing tool 17.1% influenced them to make an in-store purchase. On the positive side, though, this figure is down from 56.7 percent who answered the same way last year. 82.9% 82 86.8% 86 92.1% 92 Among those who were influenced, loyalty programs proved the most impactful — one-sixth of Base: 1,501 total respondents consumers (16.7 percent) said this marketing method Source: Convenience Store News Realities of the Aisle Study, 2016 influenced their decision to purchase in-store products, compared Where else do you purchase motor fuel to just 13.8 percent last year. in an average month? Banners/window signs are becomby income: Less than $35,000 $50,000 $75,000 $100,000 ing more effective as well, with totaL $35,000 $49,999 $74,999 $99,999 or more 15.3 percent of those surveyed Purchase at other outlets (net) 75.7% 67.8% 74.2% 78.4% 78.5% 83.9% saying these promotional vehicles Gas-only location 49.0% 40.0% 46.4% 52.4% 55.2% 56.5% influenced them to go inside the Supercenter/mass merchandiser (Walmart, Target, etc.) 21.5% 25.0% 22.6% 23.3% 16.6% 16.1% store, vs. 12.7 percent last year. Wholesale club When asked specifically about (BJ’s, Costco, Sam’s Club, etc.) 17.0% 8.4% 13.7% 18.5% 26.0% 24.9% promotional messages at the pump, Supermarket 16.8% 13.4% 16.9% 19.5% 19.3% 15.5% 44.9 percent of respondents said Truck stop plaza 7.1% 6.9% 5.2% 8.6% 8.3% 6.2% Other 0.5% 1.6% 0 0.3% 0 0 they were influenced to go in-store, I only purchase motor fuel at a 1.6-percentage-point increase coma convenience store 24.3% 32.2% 25.8% 21.6% 21.5% 16.1% pared to 2015. onsistently low gas prices are most important to me,” remarked one consumer who participated in this year’s CSNews Realities of the Aisle study. Thanks to the favorable fuel environment, convenience stores have been able to deliver on this desire over the past year, and thus have gained more fuel customers year over year. The findings of our research show 86.8 percent of shoppers surveyed purchased fuel at a c-store in the past month, a robust 7.7-percentage-point gain compared to 2015. Those with children were much more likely than those without children to purchase gas at a c-store in the last month (92.1 percent vs. 82.9 percent, respectively). Low gas prices are surely opening up more opportunities for family road trips. Looking at c-store fuel purchasing by income, it is strong across all income levels except one. Only 77.8 percent of those with incomes of $35,000 or less said they made a c-store fuel purchase in the past month. However, among all other income levels, at least 89 percent of respondents in each bracket indicated they

Multiple responses accepted Base: 1,234 respondents who purchased gasoline at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016

30 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Tobacco

special promotion. ome may call consumers fickle, but not when Cigarettes remain a key traffic driver for the conit comes to their cigarettes. According to venience channel. Roughly one-third CSNews’ 2016 Realities of the Aisle study, of total respondents in this year’s 53.8 percent of c-store cigarette buystudy indicated their most ers purchase the same brand every time. This recent c-store visit was to number is down from last year, but still A TAle for The Ages buy cigarettes. represents the majority. Brand loyalty Consumers, however, is especially strong with younger adult While only 7.1 percent of consumers frequent c-stores for all smokers, with 79.1 percent of 18- to cite convenience as a factor when their tobacco needs, 24-year-olds pointing to brand loyalty as buying cigarettes at a c-store, the albeit at a lesser rate a key factor when buying cigarettes at a number doubles for those aged 45 than for cigarettes — c-store. On the other end of the spectrum, and older. 7.3 percent said they consumers aged 45 and older place a greater go to c-stores for cigars/ emphasis on convenience and location when snuff/chewing tobacco and making a cigarette purchase. 4.9 percent go for electronic Loyalty aside, consumers overall take cost into cigarettes and vapor products. This consideration. Specifically, 45.6 percent of surveyed disparity could be an indicator that shoppers said they were influenced by a good price/ current products available at c-stores are value when buying cigarettes at a convenience store. On top of that, nearly 19 percent were impacted by a not meeting consumers’ satisfaction. Those who purchase cigarettes at convenience stores do so frequently, maintaining the category’s staIn an average month, where do tus as big business for the channel. In fact, one-quarter you purchase cigarettes? of these shoppers say they buy cigarettes at a convenience store 15 times or more a month. This number total jumps up to 30 percent among 35- to 44-year-olds. Purchase at c-stores and other outlets (net) 70.4% It comes as no surprise then that those visiting the Tobacco store 34.6% Supermarket 27.4% most are spending the most. Approximately 30 percent Supercenter/mass merchandiser (Walmart, Target, etc.) 23.8% of c-store cigarette purchasers spent $100 or more in Drugstore 21.0% the past month. The majority of these consumers earn Dollar store (Family Dollar, Dollar General, Dollar Tree, etc.) 14.9% less than $50,000 a year. Lower gas prices are likely Wholesale club (BJ’s, Costco, Sam’s Club, etc.) 6.5% playing a role in spending as consumers find more disOther 1.5% posable dollars in their pockets. I only purchase cigarettes at a convenience store 29.6% While c-stores are still the go-to place to buy cigaMultiple responses accepted Base: 460 respondents who purchased cigarettes at a c-store in the past month rettes, other retail channels are ringing up their fair Source: Convenience Store News Realities of the Aisle Study, 2016 share. Tobacco stores, supermarkets and supercenters rank as the top three competitors. How many times in the past month did you It’s interesting to note that even purchase cigarettes at a convenience store? though males generally buy more by age: total 18-24 25-34 35-44 45-54 55+ cigarettes than females, the gen1 time 6.3% 4.8% 8.9% 5.0% 3.6% 9.2% der stats run fairly even in regards 2 times 13.9% 16.7% 11.1% 13.3% 11.8% 18.4% to the other channels where they 3 times 10.7% 14.3% 8.9% 6.7% 17.3% 8.2% purchase cigarettes. The excep4 times 12.6% 4.8% 16.7% 12.5% 9.1% 16.3% tion is supercenters and mass mer5-9 times (net) 19.8% 28.6% 16.7% 18.3% 20.0% 20.4% chandisers — 8.6 percent of males 10-14 times (net) 11.3% 2.4% 12.2% 14.2% 10.9% 11.2% compared to 3.8 percent of females 15 times or more (net) 25.4% 28.6% 25.6% 30.0% 27.3% 16.3% Mean 9.51 10.14 9.69 10.60 9.62 7.63 pick up their smokes at places like Median 5.00 5.00 5.00 8.00 5.50 4.00 Walmart and Target. Base: 460 respondents who purchased cigarettes at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016

32 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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Foodservice

tant to them when buying prepared food at a c-store, onvenience stores that have invested in price/value was the No. 2 attribute mentioned (cited their foodservice programs are seeing posiby 71.2 percent). Food quality (76.6 percent) was No. tive results in the form of repeat customers. 1, and taste (65.6 percent) rounded out the top three. Marking an improvement from one year C-store customers are also willing to put their money ago, 60.8 percent of shoppers surveyed for the 2016 where their mouths are, with 17.6 percent saying they Realities study said they bought prepared food at a spent between $25 and c-store at least once in the past month. Most of $49 on c-store prethese consumers made repeat purchases. pared food in the last A quarter of those who bought c-store I Want It My Way month (this was the prepared food did so twice in a month, Made-to-order is the most preferred most-cited spending while nearly half did so four times or type of prepared food among current range). The average more. The average number of purchases c-store foodservice buyers (cited by amount spent in a in one month was 4.78. 41.9 percent). However, retailers should month was $40.44. Hungry consumers aren’t only looknot overlook prepackaged/grab-andStill, some customing for a cheap meal when they go to ers are considerably c-stores. When study participants were go fare (cited by 39.5 percent). Many more frugal; 17.2 asked to name the attributes most imporcustomers will buy both types. percent said they spent only $5 to $9. Lunchtime is the busiest time for How many times in the past month c-store foodservice purchases, with 23.8 did you purchase prepared food at a percent of surveyed shoppers making a purchase from 11 a.m. to 1:59 p.m. convenience store? Interestingly, for all the talk of c-stores missing the 1 time 2 times 3 times 4 times dinner mark, the 4 p.m.-6:59 p.m. daypart ranked 5-9 times (net) 10-14 times (net) 15 times or more (net) second at 22.6 percent. While only 5 percent bought prepared food after 10 totAl MAlE FEMAlE p.m., this is double the 2.4 percent who said the same 5.3% 12.4% 4.5% 11.6% 4.0% 11.0% last year, indicating that late night may be worth keep24.0% ing an eye on. 225.1% 7.9% 226.7% 9.2% 10.1% Hot dogs, deli/sandwiches, breakfast sandwiches and pizza remain the most popular prepared foods 114.5% 17.1% 19.6% 14.4% 14 21.3%% 14.3% 14 purchased at c-stores. The number of customers who 15.0% 16.3% 15.6% said they bought deli/sandwiches increased by 4.6 perBase: 885 respondents who purchased foodservice at a c-store in the past month centage points from one year ago. Source: Convenience Store News Realities of the Aisle Study, 2016 Reflecting the busy lifestyle of consumers today, 45.3 percent said they ate their last c-store What time of day did you last purchase prepared food purchase inside the prepared food at a c-store? car, followed by 33.3 percent who by AGE: totAl 18-24 25-34 35-44 45-54 55+ took it home to eat. This prefer6 a.m. - 8:59 a.m. 12.1% 13.0% 11.5% 15.1% 14.5% 7.4% ence for food that’s easy to eat on 9 a.m. - 10:59 a.m. 7.9% 6.5% 5.7% 8.8% 8.2% 9.8% the go and portable is also reflect11 a.m. - 1:59 p.m. 23.8% 22.2% 19.1% 20.0% 22.0% 34.8% ed in c-stores’ primary foodser2 p.m. - 3:59 p.m. 14.9% 20.4% 13.4% 16.6% 15.7% 11.3% vice competitor — two-thirds of 4 p.m. - 6:59 p.m. 22.6% 15.7% 25.8% 22.4% 24.5% 21.6% consumers said they would most 7 p.m. - 10 p.m. 12.0% 11.1% 14.8% 13.2% 10.1% 9.8% After 10 p.m. 5.0% 10.2% 7.2% 2.9% 3.1% 3.4% likely have purchased food at a Don’t know 1.7% 0.9% 2.4% 1.0% 1.9% 2.0% fast-food restaurant had they not Base: 885 respondents who purchased foodservice at a c-store in the past month gone to the c-store. Source: Convenience Store News Realities of the Aisle Study, 2016

34 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Cold Vault

Room foR ImpRovement

chase just once a While consumers are loyal to the conmonth. Rather, 19.3 percent venience channel for their beer/malt say they make beverage purchases, when asked two purchases a what can be improved, they most ofmonth and 21.7 ten cited a better selection, carrying percent make five their preferred brand and lower prices. to nine purchases. When it comes to what types of packaged beverages c-store shoppers are purchasing, canned/ bottled soda reigns supreme at 53.3 percent, followed by bottled water at 40.2 percent. Sports drinks are also popular at 25.9 percent, while energy drinks (23.6 percent) and 100-percent fruit juice (23.7 percent) lag slightly behind. While all the aforementioned segments saw increases in purchasing during the last year, bottled/canned iced tea experienced a slight decrease at 19.3 percent this year compared to 19.7 percent one year ago. Despite the high number of packaged beverage purchases, only 23.5 percent of surveyed shoppers said How many times in the past month they spent $5 to $9 in a month, less than last year’s 24.1 percent. And those spending less than $5 per did you purchase packaged month increased from 19.7 percent to 23.9 percent. beverages at a convenience store? When it comes to beer and malt beverage purchas1 time 2 times 3 times 4 times es, 16.3 percent of those surveyed spent $10 to $14 5-9 times (net) 10-14 times (net) 15 times or more (net) at a c-store in the past month, while only 3.3 percent spent less than $5. total Male FeMale If not buying their beer/malt beverages at a c-store, 12.6% 13.6% 14.4% more female shoppers than men (54.2 percent vs. 41.4 17.1% 8.2% 9.6% 221.0% 11.4% 119.3% percent) will purchase these products at a supermarket. C-store shoppers overall also turn to supermarkets 10.7% 7.4% 9.2% 13.0% 112.6% 112.3% to make packaged beverage purchases (65.8 percent). 22.5% 21.0% 12.5% Unlike with beer/malt beverages, however, male shop21.7% 14.0% 15.9% 15 pers are more likely than their female counterparts to purchase packaged beverages at supermarkets. Base: 1,094 respondents who purchased packaged beverages at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016 A third of shoppers surveyed cited being “extremely” satisfied with their most recent c-store How satisfied were you with your last beer/malt packaged beverage purchase (38.6 beverage purchase at a c-store? percent) and c-store beer/malt by age: beverage purchase (36.3 percent). total 18-24 25-34 35-44 45-54 55+ Interestingly, millennials aged 18-24 Extremely satisfied 36.3% 30.0% 40.4% 37.9% 39.1% 29.3% Very satisfied 45.8 41.7 47.1 44.8 41.4 52.2 were the most satisfied of all age Somewhat satisfied 15.3 18.3 11.8 14.7 17.2 17.4 groups in the packaged beverages Not very satisfied 2.0 8.3 0.0 2.6 1.1 1.1 category (47.5 percent), but they Not at all satisfied 0.6 1.7 0.7 0.0 1.1 0.0 were less satisfied in the beer/malt Base: 491 respondents who purchased beer/malt beverages at a c-store in the past month beverages category (30 percent). Source: Convenience Store News Realities of the Aisle Study, 2016 here’s no denying the cold vault is a top destination for convenience store shoppers. “To buy beverages” is second only to buying motor fuel as the reason customers come to a c-store. According to the 2016 Realities of the Aisle study, female c-store shoppers are more likely to purchase a packaged beverage (59.4 percent) or a fountain/frozen beverage (51.4 percent) vs. their male counterparts (51.9 percent and 38.4 percent, respectively). Females are also more likely than males to purchase a c-store hot beverage (41.9 percent vs. 36.9 percent). Age also is a factor. Young millennials aged 18-24 lead all age groups in c-store packaged beverage purchases (66 percent), while those aged 25-34 and 35-44 are just about neck-in-neck in second place (57.1 percent and 57.6 percent, respectively). The majority of c-store shoppers who purchase packaged beverages do so multiple times a month. Only 13.6 percent of those surveyed make this pur-

36 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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purchases, as 79.4 percent of those with children said early everyone has a sweet tooth, whether they bought candy or gum in the last month, while or not they give in to it regularly. Thatâ&#x20AC;&#x2122;s only 55.8 percent of those without chilwhat the data shows regarding candy purdren did. chases at convenience stores, which Younger adult consumare made by a majority of the young and ers are the most likely of old, the rich and poor, and residents of The SweeTer Gender all the age groups to every region in the United States. buy candy, with 76.4 Approximately 66 percent of the When shopping at convenience percent of those aged consumers surveyed for this yearâ&#x20AC;&#x2122;s study stores, women are heavier candy 18-24 and 76.7 percent reported they bought candy or gum purchasers than men at 72 percent of those aged 25-34 from a c-store within the last month, a vs. 61.6 percent, respectively. having done so in the slight increase over one year ago. Women past month. Meanwhile, are heavier candy purchasers than men at income level and geo72 percent vs. 61.6 percent, respectively. graphic placement do not The presence of children in the household has appear to strongly affect c-store a noticeable effect on the likelihood of c-store candy candy purchases, although those living in the West and those earning $75,000 to $99,999 each year are the most How many times in the past month likely to indulge themselves. did you purchase candy at a Consumersâ&#x20AC;&#x2122; average frequency of purchase shows convenience store? that candy remains a regular but not excessive 1 time 2 times 3 times 4 times indulgence for most. A quarter of consumers report5-9 times (net) 10-14 times (net) 15 times or more (net) ed buying candy or gum at a c-store twice in the last month, while 18.6 percent made a single purchase chiLdren in househoLd and 17.3 percent made three. Still, it is not extremetotaL yes no 2.0% ly uncommon for shoppers to make more frequent 3.7% 5.1% 14.6% 23.0% 18.6% candy purchases: 16.9 percent reported doing so five 4.6% 225.2% 5.7% 23.0% 2 to nine times in a month, and 12.6 percent made 6.8% 14.8% four purchases. 16.9% 227.6% 18.9% Along with being a regular but not excessive indul17.2% 17 10.6% 17.3% 12.6% 17 gence, candy is also an affordable indulgence for many 17.4% 14.4% shoppers. Overall, 36.7 percent of those surveyed said mean 4.18 4.84 3.48 they spent less than $5 on candy or gum at c-stores in median 3.00 3.00 2.00 the last month and 26.2 percent spent $5 to $9. Base: 940 respondents who purchased candy at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016 C-stores are a top destination for candy, as 39.9 percent of consumers list buying candy/gum as a reason Approximately how much did you spend last to visit. In addition, 39.8 percent month on candy at a c-store? listed candy/gum as something they by income: Less than $35,000 $50,000 $75,000 $100,000 purchased alongside prepared food totaL $35,000 $49,999 $74,999 $99,999 or more in the last month. Less than $5 36.7% 41.0% 34.9% 36.2% 28.4% 39.3% When asked where else they pur$5 - $9 26.2 26.7 28.0 25.2 25.4 25.2 chase candy or gum in an average $10 - $14 14.8 12.8 18.0 16.2 12.7 14.1 $15 - $19 5.6 4.8 3.7 6.2 9.0 5.9 month, 57 percent said supercent$20 - $49 12.0 11.4 11.6 12.4 14.2 11.1 ers or mass merchandisers such as $50 or more 4.7 3.3 3.7 3.8 10.4 4.5 Walmart or Target; 55.2 percent Mean $15.53 $10.42 $11.16 $11.58 $24.07 $19.73 cited the supermarket; 34.2 percent Median $5.00 $5.00 $5.00 $5.00 $7.00 $5.00 said a drugstore; and 33.5 percent Base: 940 respondents who purchased candy at a c-store in the past month Source: Convenience Store News Realities of the Aisle Study, 2016 said a dollar store.

38 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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Snacks

women are more likely to buy every type of snack. hen it comes to buying snacks at conFor instance, 50.6 percent of female c-store shoppers venience stores, children may be callbuy packaged salty snacks vs. 40.1 percent of men. ing the shots. And the numbers for packaged sweet snacks tell a While 44 percent of the overall similar story: 41.2 percent of women vs. 30.8 percent consumers surveyed for CSNews’ 2016 Realities of of men are likely to pick up such items. The gender the Aisle study purchased a packaged salty snack at a gap narrows for meat snacks and energy/ c-store in the past month, the number nutrition bars. jumps even higher among shopWhatever the snack, pers with children (49.1 percent for Bundling up the majority of consumthose with vs. 41 percent for those C-store shoppers are looking for that ers are looking to the without). In addition, 43.8 percent extra treat to complete their meals. Of convenience channel to of shoppers with children purchased those who purchased prepared food in find the offering. Nearly a c-store packaged sweet snack in the past month, 36.8 percent also pur55 percent of surveyed the past month, significantly more shoppers said they typithan the 28.6 percent for households chased packaged salty snacks and 27.8 cally shop at a c-store without kids. percent purchased packaged sweet “to buy snacks” — only Snacking also appears to be snacks as a complementary item. motor-fuel purchasing more popular with female c-store and buying beverages shoppers. This year’s findings show were cited more. The research also highlights Did you purchase snacks at a convenience that younger consumers are key store in the past month? to the success of c-store snacks. (Percent of respondents who purchased, by snack type) Approximately 70 percent of the by gender: Children in household: total Male FeMale yes no 18- to 24-year-olds surveyed said Packaged salty snacks (e.g. potato chips, pretzels) 44.4% 40.1% 50.6% 49.1% 41.0% they pick up snacks at a convePackaged sweet snacks (e.g. cookies, doughnuts) 35.1% 30.8% 41.2% 43.8% 28.6% nience store. This figure far outMeat snacks (e.g. beef jerky) 22.7% 21.7% 24.2% 31.3% 16.3% paces the 42.4 percent of consumers Energy/nutrition bars 9.5% 8.9% 10.3% 12.8% 7.0% aged 55 and older who said they Base: 1,501 total respondents Source: Convenience Store News Realities of the Aisle Study, 2016 typically go to a c-store for snacks.

Methodology

he seventh-annual Convenience Store News Realities of the Aisle consumer research study was implemented by Carbonview Research, a custom, primary market research and analysis firm owned by CSNews’ parent company Stagnito Business Information. The sample of respondents was obtained from a national panel, representing the total population, based on gender, age, region, income and presence of children in the household. Electronic interviews were conducted with 1,501 consumers who shop at a convenience store at least once a month. The survey asked c-store shoppers how often they shopped, why they shopped, when they shopped, what they purchased and how much they spent. CSN

40 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Playing Chicken This foodservice staple is not just for c-stores in the South and Southeast By Bob Phillips

hicken is one of America’s favorite foods. In convenience stores, chicken programs have long been strong in the Deep South and Southeast, and they are slowly starting to build in popularity in areas north and west as well. According to the latest Convenience Store News Foodservice Study, published in August 2015, average per-store sales of chicken grew by $17,296 in 2014 — a healthy 7.2-percent increase vs. the previous year. That put chicken at No. 4 among prepared foods in the channel. Long-time convenience store industry expert Paul Pierce, with prior experience at such convenience store chains as 7-Eleven Inc. and MAPCO, corroborated CSNews’ research, citing that chicken breakfast sandwiches/wraps as a percentage of breakfast entrees grew from 3.1 percent in 2014 to 3.3 percent in 2015, and they grew from 3.6 percent to 4.2 percent as a percentage of breakfast handheld sandwiches. In fact, Pierce, the new vice president of national sales for convenience distributor Eby-Brown Co. LLC, noted that chicken breakfast sandwiches/wraps have moved into the top 10 in the overall breakfast sandwich category, currently sitting at No. 9. A study conducted by Tyson in 2014 showed that chicken products such as tenders, nuggets and strips offered a similar sales profile to other popular graband-go convenience store food items, such as breakfast sandwiches and hot dogs. “Chicken is a great addition that allows convenience store retailers to increase their hot food offerings,” said Rob Ramsey, senior manager, channel marketing for Tyson Convenience. “It also provides them with additional items for the afternoon snacking daypart.” The Broaster Co., another major player in this category, sees a strong trend toward chicken in the

42 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

convenience channel. The Beloit, Wis.-based company manufactures pressure fryers and other chicken/foodservice-related equipment and distributes fresh product through a network of local distributors. “Being in the business of branded chicken products, both on the fresh side with our Broaster Express line as well as the grab-and-go side of the business, we have seen a strong trend in foodservice in c-stores,” observed Chad Vendette, director of marketing at The Broaster Co. “With declining margins in gasoline, cigarettes, beer and other things, c-store operators are trying to boost profits and foodservice is a good way.” UnIVERSal appEal

A big reason why convenience stores are taking a serious look at chicken is the product’s target market: people who breathe. Chicken is widely consumed across the globe, traversing geographic, cultural and religious customs. What better way to appeal to your current customers (and bring in new customers) than offering a variety of chicken products in your foodservice operation that fulfill their needs? This can be done via any platform — grab-and-go, made-to-order, fried or fresh chicken products. “Convenience store retailers have an opportunity

to offer a chicken program that appeals to their specific customers’ needs,” advised Tyson’s Ramsey. “For example, portable handheld offerings like chicken tenders or boneless wings fit behaviors prominent among many convenience store consumers.” Through research and direct experience, Broaster has found the chicken market to be “extremely broad,” Vendette agreed. “It encompasses everyone from travelers to manual laborers to moms grabbing something quick for their kids. It really seems limitless.” In fact, chicken has too many things going for it to ignore, industry insiders contend. “It has a very wide appeal, there are many ways to prepare it, and there aren’t many religious or cultural restrictions on chicken consumption,” noted Vendette. “That increases its appeal.” He sees on-the-go motorists as the primary consumer of chicken tenders from c-stores, making this an ideal product to promote at the fuel pumps to entice a person who thought he or she was just stopping to fill his car’s tank to perhaps step into the store to fill his own tank. “People on the move need some quick protein and don’t mind that it’s fried,” said Vendette. A chicken meal fits virtually everyone’s budget, too. “A few chicken tenders and potato wedges, and for $3.99 you’re out the door,” he continued. “And I can’t think of a more car-friendly food outside of a banana.” WIDE WORlD OF FlaVORS

While some consumers are looking for just the basics, others — particularly teens and millennials — are what Vendette calls “big dippers.” They want a variety of seasonings and sauces to spice up their orders. This means c-stores offering chicken should provide accoutrements that appeal to a broad range of tastes and ethnic preferences. “Chicken nuggets, wings and tenders lend themselves to on-trend, customer-driven customization,” he said. “This can include incorporating a variety of ethnic or regionally based sauces/glazes that customers can use to enhance the basic product offering.” Sriracha still seems to be the hot flavor of late, but Chad Prast, senior category manager of fresh foods and dispensed beverages for convenience store chain Murphy

“Retailers would benefit from exploring different breaded/battered coatings such as tortilla crumbs, beer batter, parmesan crust, panko (Japanese bread crumbs), coconut, sriracha, or even whole-grain for retailers looking to take a better-for-you position.” — Mathew Mandeltort, Eby-Brown Co.

USA Inc., said he can see sriracha slowing down in 2016 as other spicy flavors take over. Mathew Mandeltort, Eby-Brown’s director of foodservice, agrees with the strategy of offering flavors that appeal to the widest possible customer base. Such flavors may include the following condiments, depending on the ethnic makeup of a store’s neighborhood: • Regional barbecue sauce • Teriyaki sauce • Sweet chili sauce • Buffalo sauce • Salsa • Cheese • Korean barbecue sauce These condiments can be offered through a variety of methods, including squeeze bottles, portion-control packets or cups, and available either for dipping or full coating. “Also, retailers would benefit from exploring different breaded/battered coatings such as tortilla crumbs, beer batter, parmesan crust, panko (Japanese bread crumbs), coconut, sriracha, or even whole-grain for retailers looking to take a better-for-you position,” said Mandeltort. “Though this increases the number of SKUs, it may be a good strategy to employ for LTOs [limited-time offers] as a means to avoid category fatigue and keep customers engaged with new, innovative products.” StaRtUp COStS

The initial investment for a chicken program can be steep depending on your goals, strategy and execution. However, if you are just looking to test the waters, tenders are the way to go. “You’re talking between $50,000 and $100,000 to get into the fried

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 43

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chicken business,” advised foodserin, wings and tenders, which could vice consultant Joseph Chiovera of run side-by-side with other madeXS Foodservice & Marketing. to-order programs (sandwiches, Most of that investment subs, etc.) and grab-and-go is in equipment and, items, such a steep initial most importantly, investment is not installing an at all necessary adequate venfor c-stores just tilation system wanting to test the that will meet chicken market. code. “That’s “A chicken tender your biggest startup offering is one of the cost. And chicken fryers easiest first steps a conveare quite expensive,” connience store retailer can take tinued Chiovera, pointing to Henny when expanding their foodservice Penny and BKI units, which can range offerings,” explained Tyson’s from just under $1,000 to more than Ramsey. “For the convenience $20,000 depending on the brand, store consumer, chicken tenders grade and style of the unit. work well as they are handheld, Then, there’s all the moving parts associated — frying station, dumping station, the bins needed “Chicken nuggets, wings and to clean the chicken, bins to store the chicken, a dedicated sink area tenders lend themselves to to wash the chicken safely and, of on-trend, customer-driven course, your oil and oil-removal customization. This can products. “And don’t forget the cost involved in powering the include incorporating a variety fryers. You probably don’t have of ethnic or regionally based that power in the store already,” he added. “So from scratch, sauces/glazes that customers you’re probably talking between $30,000 and $60,000 to get into can use to enhance the basic the business.” product offering.” From there, retailers have to — Chad Vendette, The Broaster Co. then merchandise the category and train their people how to safely handle raw ingredients. “It’s portable and familiar given they not for the faint of heart,” Chiovera are already part of the quick-sercautioned. vice and fast-casual landscapes. For Translation: Although the iniconvenience store retailers, chicken tial investment for a fried, bone-in tenders are an item that heats easprogram may be worth its while in ily and offers a quality product.” Mobile, Ala., it wouldn’t necessarily Broaster’s Vendette agrees tenbe the right move in Rutland, Vt. ders are probably the way for many c-stores to start. “Startup costs with a tenders program can be less tEnDER MERCIES because of the equipment requireWhile it’s true that a heavy investments, but a bone-in program is ment may be required for a full fried not that much more expensive,” chicken program that includes bone-

44 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

he noted. “Where a bone-in program becomes a decision point is: Are you willing and capable of handling fresh chicken?” There is a shelf-life issue with fresh-cooked chicken, not to mention health code requirements that vary from state to state. “If a c-store has already been doing [a fresh program, fresh-cooked chicken] fits in perfectly,” Vendette said. “If not, they have to get the methods in place to make sure they are handling it and producing it correctly.” As for his estimate on exactly how much of a financial investment is required for a viable c-store chicken program, he noted that Broaster produces a wide variety of equipment, giving c-store retailers an array of options from which to choose. “On the low end of the spectrum, an operator who is looking to see if the program works before committing to a full-package program can get in for a

“A chicken tender offering is one of the easiest first steps a convenience store retailer can take when expanding their foodservice offerings. For the convenience store consumer, chicken tenders work well as they are handheld, portable and familiar given they are already part of the quick-service and fast-casual landscapes. For convenience store retailers, chicken tenders are an item that heats easily and offers a quality product.” — Rob Ramsey, Tyson Convenience

a large dedicated footprint. “Chicken makes a great additional offering to any existing hot grab-and-go operation,” he said. “Convenience store retailers can easily add fully cooked chicken to the menu with a small investment in an oven and a warming cabinet, beyond what’s necessary to meet local health codes.” GEttInG thE WORD OUt

relatively low number,” according to Vendette. Startup costs for such a retailer could be less than $10,000. “Mid-four figures,” he said. “That includes equipment, some food and minimal branding.” Vendette recalled one retailer close to Broaster’s Beloit home base that started precisely that way. This retailer “was a bit skeptical at first,” he acknowledged. Since Broaster sells its chicken products through local distributors, the retailer’s distributor explained the enormous potential upside of a successful chicken program, so he went in with a minimal investment. “Within a year, [chicken] was his overall best-selling item and increased his store traffic,” Vendette shared. “After that, he bumped up the program and bought more equipment and signage and branding.” Tyson’s Ramsey also noted that another benefit of launching a chicken program is that it won’t require

46 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Once you’ve made your investment, either in a low-cost tenders program or a higher-end bone-in program, how do you get the word out in your community? Well, for starters, industry experts simply advise: Let them know what you’ve got. Some stores might do best appealing to customers looking for a full meal for their families. This could mean offering products like full-size chicken sandwiches or an eight-piece chicken dinner with sides — products you might normally associate with supermarkets. “Additionally, convenience store retailers should promote other factors that impact consumers’ decisions about where to purchase on-the-go foods by highlighting product quality, freshness and value,” Ramsey pointed out. Branded visibility goes a long way in the consumer’s mind, noted Vendette. In c-stores, “you don’t have a lot of browsers; they’re usually on a mission. And a properly branded program helps the consumer be comfortable in making that impulsive decision.” CSn

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Kickstarting the Kitchen C-stores are leveraging equipment innovation to gain an advantage over the competition By Angela Hanson

onvenience store foodservice has made an enormous leap in quality and variety over the past five years, but coming up with tasty new recipes isn’t the only way retailers are getting ahead in the category. The equipment used to prepare food and beverages can also provide an edge, as a number of c-store chains are leveraging the latest advancements to reach the next level. One way c-stores can improve upon their hot beverage offering is to develop a coffee program that includes more than a few varieties of self-serve brewed java. Sheetz Inc. installed state-of-the-art grinding and

Wholly-automatic espresso makers were recently added to Kwik Trip’s 500 stores.

brewing equipment and added trained baristas as part of its “Kick in the Beanz” coffee program upgrade — something that garnered it the Best Hot Beverages Innovator title in the 2015 Convenience Store News Foodservice Innovators Awards program. (Go to http://foodserviceinnovators.csnews.com/index for videos of Sheetz and the other 2015 winners). Even c-stores without baristas, however, can improve their coffee program with the right equipment. Kwik Trip Inc., which does not have a made-toorder foodservice program like Sheetz, made a positive

48 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

change a little more than a year ago when it added wholly-automatic espresso makers from Franke Coffee Systems to all of its 500 convenience stores and introduced the Karuba Gold premium espresso line. “We can now do an espresso-quality mocha, latte or cappuccino in all of our stores,” Paul Servais, Kwik Trip’s retail foodservice director, told CSNews. “That was huge for us.” Kwik Trip is now more competitive vs. other convenience store operators catering to rushed, on-the-go customers, as well as against more upscale coffee retailers. The addition of the espresso machines brings “that gourmet style, that Starbucks quality,” Servais said. “What we [are] trying to do with that piece of equipment is to get the millennials to come into our store, that younger generation.” A platform that combines ease of use, robust construction and flexibility in beverage offering is something many c-store retailers are looking for today, according to Ray Peden, president of Franke Coffee Systems. Ease of use includes backend upkeep that may be required. Referring to Franke’s more recent equipment innovation, Peden said, “Key components are designed for easy replacement, even by an untrained operator. This removes the need for a service technician to visit the store for routine maintenance.” On the cold beverage side, customers can also act as their own barista and create customized drinks using the new generation of fountain machines. Executives at convenience store chains Rutter’s Farm Stores, operator of roughly 60 stores in Pennsylvania, and Murphy USA Inc., operator of 1,300 stores in 23 states, have praised the Coca-Cola Freestyle and Pepsi Spire fountain units, which offer hundreds of flavor combinations in a relatively small footprint. These units also have touchscreen interfaces, which customers generally find easily intuitive. Each company demands exclusivity, though, which prevents retailers from using both the Freestyle and Spire to provide maximum choice.

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

QUICK COOKING

Another way c-stores are upgrading their foodservice programs is through the addition of high-speed ovens. Such models allow chains that rely on the sale of made-to-order or cooked-on-site items to avoid backed-up lines and attract customers who demand quick service. New advancements in high-speed ovens were among the top innovations spotted by CSNews at the 2015 National Association of Foodservice Equipment Manufacturers (NAFEM) Show. “It allows us to keep the volume going,” Servais said of Kwik Trip’s investment in high-speed ovens. The chain uses Turbo Chef models HHB and I3. Additionally, these ovens’ high speeds allow Kwik Trip to better cope with rush periods, including those that come unexpectedly. Kwik Trip’s stores throughout the Midwest feature the “Hot Spot,” where customers can find the chain’s proprietary Cheese Mountain pizza, Kitchen Cravings subs, soups, chili and other classics like cheeseburgers

and chicken sandwiches. Unlike self-serve espresso machines, cooking equipment that’s fast-working and easy to use primarily benefits frontline employees and the managers who train them rather than customers. What c-stores need most is “equipment which can be operated by any skill-level employee,” explained Thomas Stegmaier, president of Eloma North America, maker of professional cooking and baking equipment. “Therefore, ease of use, automatic cooking programs and reliability are a few of the key points they are hunting for.” THE NEXT UPGRADE

Still, no matter the advances both retailers and equipment manufacturers have made in recent years, the business is always moving forward, so savvy c-store operators have to continually be on the lookout for what will get them to that next level of success. When scoping out the latest and greatest equipment on display at the various industry trade shows, it can

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be a challenge figuring out the right fit. To narrow down the choices, members of the CSNews How To Crew of foodservice experts recommend retailers visualize and document the steps needed to produce each menu item in the physical space available. “What are you trying to achieve with your customers and your product? This has a tremendous effect on what type of equipment you specify,” noted c-store foodservice veteran and consultant Joseph Chiovera of XS Foodservice & Marketing. “If you are looking to do made-to-order food, your choices as far as what equipment to spec becomes somewhat easier, but your execution becomes harder and more demanding.” Looking at 2016 and beyond, some retailers like Kwik Trip’s Servais point to software as the mostdesired area of supplier innovation in the foodservice category. “As we get closer to the menu labeling laws, we’re really going to need software that’s driven around allowing a c-store to build an item and [then] all that

Kwik Trip’s stores feature the “Hot Spot.” Hot foods are prepared on-site using TurboChef ovens.

information is extrapolated to create the right calorie count,” Servais said. “That would be wonderful. Last year at the NRA Show and IDDBA, I spent a lot of time looking for that. It doesn’t exist.” CSN

ergonomic reach removable false bottom ample space for signage casters for easy mobility holds loads of bottles or cans keeps ice frozen for over 48 hours

Call 816 813 3337 www.forteproduCtsolutions.Com

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 51

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

EXPERT’S VIEW

Why the C-store Segment Cannot Afford Food Safety Breaches Any “hiccups” could cause irreversible damage for the channel

hipotle has long been the darling of Wall Street, the media and business schools. Even in the face of adversity, it has thus far withstood multiple food outbreaks dating back to the fall of 2015 without shuttering stores permanently. The theory is that a pocket of its fiercely loyal customers has outwardly expressed they are willing to “get sick” on its food as a cost of the company’s commitment to saving the earth. In effect, its patrons (sick or otherwise) are its lobbyists. Unfortunately, the convenience store segment has no such luxury. In Q1 By Paul Clarke, Q1 research, general foodservice consumConsulting Services ers rank c-store food slightly higher in freshness than a vending machine, though the channel has lobbied extensively in the past decade to prove it provides restaurant-quality food. Still, the perception lingers of gas station food, with cashiers “pumping gas and handling food.” Approximately 70 percent of consumers surveyed are extremely or very concerned about food safety in all venues, not just convenience stores. More applicable to c-stores, when the data is cut by two of its frequent user characteristics — males and incomes in the $35,000-$49,000 range — the level of concern increases. Perhaps the reason for the collective shrug from Chipotle’s customers could be that its user base — females and millennials — are slightly less concerned than the average. As a segment rising in the foodservice space in both perception and traffic, c-stores must avoid any “hic-

cups” that could cause irreversible damage (both from the media and consumers). A relevant lesson is Jack in the Box. In 1993, the chain sickened 583 people across four states with E. coli because it cooked its meat at an unsafe temperature. Nearly 200 people were hospitalized and five people died. The company lost approximately $160 million in the 18 months following the outbreak and lawsuits totaled $50 million. There have been other examples with similar outcomes since — including Taco Bell, Blue Bell and Jeni’s Ice Cream. Furthermore, c-stores offering and expanding foodservice must be aware of the culprits of most foodborne illnesses, particularly produce, fruits and dairy products. The good news is most of the foodborne-illness outbreaks can be avoided by simply followHow Concerned Are You About Food Safety? concern all millennials $35 - 49k $50k - $75k ing strict guidelines — in every store, every level consumers (18-34) male female income income day. This includes proper staff food-handling Extremely 28% 27% 30% 26% 32% 25% techniques, cleaning equipment to avoid cross Very 41 42 44 39 47 36 contamination, cooking foods to a safe temTotal 70% 69% 74% 65% 79% 61% perature, and discarding foods after an unsafe Source: Q1 Consulting Services Consumer Survey, October 2015

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

holding time (parfaits in the cold case, for example). Finally, and perhaps most challenging for c-stores, is to regularly monitor the supply chain. As commissaries become more important in expanding menus and delivering fresh prepared foods to units, the sources must be vetted rigorously to ensure food safety procedures are followed. This has been the cause of Chipotle’s ills and there is no excuse for multiple outbreaks from multiple suppliers. In the case of the c-store segment, prevention is really the only defense. CSN Paul Clarke is director of business development at Q1 Consulting Services, the consulting unit of Q1 Productions that offers custom business solutions to executives working in the life science and food and beverages industries. Clarke brings more than 20 years of foodservice experience, including 12 years delivering consumer insights to chain restaurants and foodservice suppliers. He previously spearheaded business development and marketing for Sandelman, where he worked with such key clients as Subway, McDonald’s and Panera Bread. Prior to that, he was director of marketing at Technomic Information Services. Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.

Ten Foods That Account for 40 Percent of Foodservice Outbreaks 1. leafy greens 2. eggs 3. Tuna 4. oysters 5. Potatoes Source: CDC/FDA

6. cheese 7. ice cream 8. Tomatoes 9. sprouts 10. Berries

TOBACCO Cigarettes + Cigars + Smokeless + E-Cigs + Other OTP

More Time for Tobacco This year’s Tobacco Plus Expo International features expanded show hours By Melissa Kress

espite its challenges, tobacco remains a leading business driver of the convenience channel, and several events annually aim to bring together both sides of the retail equation. One of the first of these industry events this year is Tobacco Plus Expo International 2016 (TPE). Attendees of the expo will notice two changes right off the bat. First, TPE will take place March 16-18 at the Las Vegas Convention Center. While the venue is the same, the event has been held the last week of January for the past several years. This year’s show is also spread out across an additional day to give attendees more time on the floor with expanded show hours.

TPE 2016 AgEndA March 15: Opening reception at the Westgate Las Vegas Resort & Casino, 6 p.m. March 16 & 17: Exhibit hall hours from 9 a.m. to 5 p.m. March 18: Exhibit hall hours from 9 a.m. to 2 p.m.

Second, attendees will notice a major shift on the show floor, where the product lineup will now also include machinery for vapor and tobacco manufacturers and suppliers. With these additional displays, the show will increase its footprint in South Hall 3 and South Hall 4 of the convention center. As of Jan. 22, there were approximately 300 confirmed exhibitors. Expansion into the machinery segment for both tobacco and vapor was a natural progression for an event that covers the tobacco industry, according to Reuter Exposition Services, which manages the annual

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Tobacco Plus Expo International. “We look forward to bringing the entire industry together in one place for three days of buying, selling and networking within the industry,” Reuter Exposition Services stated when announcing the format change in October. Still, the key elements of TPE will remain the same this year as in past years. Buyers at the show will represent retail stores, smoke shops, vape shops, wholesalers and distributors. Import/export representatives, legal analysts and consultants will be on hand as well. TPE 2016 will once again feature the popular Cigar Bar & Lounge and the Vapor Lounge, where attendees can sit and discuss business with associates. As always, new offerings in the tobacco retailing space will be on display in the New Product Showcase. Traditionally one of the first stops for those attending the event, the showcase features products that exhibitors launched in the past 12 months. All products included in the showcase are eligible for the 2016 TPE New Product Awards. Categories this year are Best New Tobacco Product, Best New NonTobacco Product, Best New Tobacco Accessory, and Best New Vapor Product. Winners will be announced March 17 at 3 p.m. in the Cigar Bar & Lounge. CSN

MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric

Get Big, Get Great or Get Out CSNews Fuels & Tech Summit drives home the importance of these two categories By Brian Berk & Don Longo Former CEO of The Cumberland Gulf Group Joe Petrowski said c-store operators need 1,000 stores for economy of scale.

he second-annual Convenience Store News Fuels & Tech Summit was chock full of information about both categories, but it was the overall c-store industry commentary provided by Joseph Petrowski, former CEO of The Cumberland Gulf Group and current managing director of private equity group Mercantor Partners, that stole the most headlines. In his trademark candid and conversational style, Petrowski delivered the event’s keynote speech to a room filled with 27 c-store retailers from across the country. In order to survive, he said convenience store operators must “get big, get great or get out.” The industry veteran further explained that having 1,000 sites at a minimum is important to support a retailer’s information technology, human resources, procurement and finance departments. “You need to have 1,000 stores to really compete,” Petrowski said. “You can have less, but you need 1,000 for economy of scale.” During the Summit sponsored by Growth Energy, Warren Rogers and ZipLine, he went on to say that c-store retailers should aim to sell 2 million gallons of fuel per site per year as a benchmark. In-store, each location should generate a minimum of $340,000 in annual cash flow. Shifting gears to the mergers and acquisitions market, Petrowski predicted that whether big or small, c-store retailers can expect continued contact about being acquired. Even as stocks of master limited partnerships decline, he expects M&A activity to be hot in 2016. One group in particular that will keep calling on c-store retailers about potential M&A activity is private equity groups, which have $1.6 trillion under management, according to the executive.

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FUELS IN FOCUS

Considering his keynote speech was entitled “The Future of Fuels,” Petrowski discussed this topic at length as well. Offering his outlook on the category, he garnered even more headlines by predicting hydrogen to be a “significant fuel of the future.” He believes hydrogen has a tremendous future as an alternative fuel for many reasons, including its local abundance, ability to provide the same fueling experience for customers in terms of fill-up times, and mouth-watering profit margins for convenience store retailers — as much as $5 per fill-up. Additionally, hydrogen produces superior gas mileage compared to traditional gasoline, and the “fire marshal says it’s safer than CNG and LNG [natural gas],” he noted. He did acknowledge, though, that hydrogen fueling may not take off immediately since consumers cannot retrofit a gasoline vehicle to accept hydrogen; they must purchase a specific hydrogen vehicle. Additionally, on the retailer side, building the infrastructure for a hydrogen fueling station — which can service four vehicles at one time — carries a price tag of approximately $200,000. There are only a few hydrogen fueling stations thus far in the United States, but Petrowski said the number has begun to grow.

Another alternative fuel, E15, was also the subject of much discussion at the Summit. The blend of 15-percent ethanol and 85-percent gasoline — approved for use in 2001 and newer vehicles — appears to have a bright future based on exclusive research presented at the event. Just a few years ago, some convenience store retailers and consumers alike were hesitant to sell and purchase E15 fuel, respectively, due to misfueling concerns and allegations that the blend could cause damage to vehicle engines. Today, the thought process about E15 has changed. Approximately 175 convenience stores in 19 states sold E15 as of December, and consumers are increasingly favoring it as a fueling option, according to the research conducted by Carbonview Research, a sister company of Convenience Store News. Carbonview surveyed 942 fuel decisionmakers aged 18-64 in eight Midwest cities ripe with E15 expansion. Randi Etzkin, manager of client research for Carbonview, shared the results: • 55 percent of respondents want to find out more about E15; • 44 percent find E15 “appealing;” • 35 percent want to use E15 for their car; and • 34 percent said E15 is “believable.” Price is the biggest factor consumers use to determine whether to purchase E15 (cited by 71 percent of respondents). If E15 — which carries an 88 octane — was sold at the pump at the same price as traditional E10 petroleum, 38 percent of those surveyed said they would likely buy the alternative fuel, Etzkin pointed out. The percentage goes up as the price differential goes up. If E15 was priced 5 cents less, 49 percent said they would likely buy it. A 10-cent difference would entice 60 percent of consumers to purchase E15 over the traditional E10. TECHNOLOGY TALK

Shifting the focus from fuels to technology, c-store tech veteran Ed Collupy presented a session in which he addressed an important topic in the world of IT: implementation. Collupy, the former top IT executive at The Pantry Inc. before its acquisition by Circle K parent Alimentation Couche-Tard Inc. last year, is now an executive consultant with W. Capra Consulting Group. While at The Pantry, Collupy directed, managed and supported all of the retailer’s store systems and technology efforts, with a focus on bringing system solutions to the chain as it grew from 400 stores to

Simply the Best The second-annual Convenience Store News Fuels & Tech Summit kicked off with a dinner and awards presentation honoring outstanding innovation in the both the fuels and technology segments of the convenience store industry. • Phil Schwartz, manager of I/S credit card systems POS app support for Valero Payment Services Co., received the 2015 Technology Executive of the Year award. In addition to his outstanding work at Valero, Schwartz, who plans to retire in March, was lauded for his contributions to industry association Conexxus. •Michael Lorenz, executive vice president of petroleum supply for Sheetz Inc., received the 2015 Alternative Fuels Leader of the Year award. Lorenz was honored for guiding Sheetz’s decision to offer E15 at 60 North Carolina stores by spring 2016. • 7-Eleven Inc. was presented with the 2015 Technology Implementation of the Year award. 7-Eleven was chosen for its mobile-first strategy, including its 7Rewards loyalty program that has led to incredible results thus far. • Sunoco LP was presented with the 2015 Fuels Innovator of the Year award. Sunoco was chosen for its newly reopened APlus convenience store near Pittsburgh International Airport that features three alternative fuels: compressed natural gas, liquid propane and electric charging.

more than 1,500 during his tenure. Drawing on his experience, Collupy shared tips on how to simplify even the most complicated technology implementations with: • Thorough planning; • Setting a top priority (not a lot of important todos; only one thing can be priority); • Trusting in your people; and • Effective communication about the project to both management and users. Also on the subject of technology, the CSNews Summit featured a case study on Cumberland Farms’ successful SmartPay mobile payment and loyalty card rollout, presented by Roger Brooks and Danny Portal of Zipline, the retailer’s partner on the initiative. The Zipline executives noted the main objective of Cumberland Farms’ SmartPay project was to change consumer behavior and increase customer spending. Other goals included reducing dependency on Visa/Mastercard/American Express, thereby reducing transaction fees, and leveraging alternative payments

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MOTOR FUELS Gasoline + Diesel + Ethanol + LNG/CNG + Electric

Convenience Store News 2015 Fuels & Tech Summit The second-annual Convenience Store News Fuels & Tech Summit brought together 27 top fuels and technology executives from 24 retail companies across the nation. The event took place Dec. 7-8 at the Palm Beach Marriott Singer Island Beach Resort & Spa in Riviera Beach, Fla.

Matthew Baum, Michael Lorenz, Phil Schwartz and Steve Holland (from L to R) celebrated awards in both the fuels and technology sectors.

technology into a merchant-to-consumer connection that would drive adoption and loyalty. Portal explained that SmartPay functions like an electronic check, is branded to the merchant, and the payment is processed via an ACH (automated clearing house) system. The retailer is charged a flat fee per transaction and there are no chargebacks. Cumberland Farms originally piloted the SmartPay program in a 200-store test with PayPal in 2012. However, since it was a mobile-only strategy then, consumer adoption was low with less than 1-percent penetration and no in-store payment option. In February 2013, SmartPay was converted to Zipline and relaunched with the SmartPay Card, instore payment and a significant marketing campaign that incorporated television, radio, digital and store signage. The theme of the campaign was “Save 10 cents on every gallon, every day.” The results were phenomenal. The retailer’s fourmonth enrollment target was reached in just four weeks, according to the Zipline execs. About 100,000 people enrolled within the first six months, with a peak of 3,000 enrollments in one day. Today, nearly 700,000 members are enrolled in SmartPay, with about 15,000 new members added every month. Roughly 80 percent of members are active in the program. Having both the SmartPay Card and mobile payment available has been the driving factor in the program’s success, the presenters stated. About 67 percent of the program’s sales are made on the card and 33 percent are made via a mobile device. Cumberland Farms has seen a 5-percent chainwide sales lift due to SmartPay, and it has become the second-leading payment method after Visa. CSN

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REtaIL tEch attEndEES Jenny Bullard, Flash Foods Inc. Tom Colbert, Kwik Trip Inc. Dion Crider, Love’s Travel Stops & Country Stores Inc. Maria Fidelibus, QuickChek Corp. Bernie Frazer, Rutter’s Farm Stores Steve Holland, 7-Eleven Inc. Howard Hyche, Double Quick Derrick Louis, RaceTrac Petroleum Inc. Jeremie Myhren, Road Ranger LLC Joyce Pingel, Kum & Go LC Phil Schwartz, Valero Payment Services Co. Cheryl Szczesniak, Spinx Co. REtaIL FuELS attEndEES Matthew Baum, Sunoco Logistics/Sunoco Inc. Debbie Butler, Fuel South Inc. Tony Castro, CST Brands Inc. Ed Crawford, Crawford Oil Co. Neal Hoff, Hoff Brothers Inc. Lance Klatt, Minnesota Gas Station & Convenience Store Assocation Eric Lewis, Love’s Fuel Mike Lorenz, Sheetz Inc. Kyle McKeen, Alon Brands Scott Minton, OnCue Express Manuel Rodriguez, Murphy USA Inc. Jeff Shields, Sunoco Logistics/Sunoco Inc. Cory Schneider, Ricker Oil Co. Scott Zaremba, Zarco USA Brian Zeiger, Spinx Co. PRESEntERS & ModERatoRS Brian Berk, Convenience Store News Roger Brooks, Zipline Ed Collupy, W. Capra Consulting Group Randi Etzkin, Carbonview Research Don Longo, Convenience Store News Larry Miller, Miller Management & Consulting Services Joseph Petrowski, Mercantor Partners Danny Portal, Zipline SPonSoRS

TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence

The State of C-store Industry Digital Marketing Exclusive research shows less than half of retailers give their own company a “B” grade or higher By David Bishop, Balvor LLC

echnology continues to shape the way we live and work. Personal computers in the ‘80s, the Worldwide Web in the ‘90s, and the modern-day smartphone in 2007 each had a profound impact on how we form new connections, communicate with others and conduct commerce. Convenience store retailers are adapting how they engage consumers in this evolving environment. For example, more than one-third now have a mobile app. However, the mobile app is neither the first nor the last technology convenience retailers will apply to marketing. Retailers recognize such tools have the potential to enhance experiences, strengthen relationships and generate value. We’re already witnessing shifts in how consumers and brands spend their money. Therefore, it’s vital for retailers to have sound strategies guiding how innovations are leveraged. So, what should c-store retailers do to drive stronger results? Convenience Store News, sales and marketing firm Balvor LLC and industry consulting firm Brick Meets Click collaborated to examine this question. This article draws on the insights we gained by engaging U.S. convenience retailers and understanding their views on and usage of marketing technologies — or what is commonly referred to as digital marketing.

TABLE 1

Digital Media Channels channels

Email Mobile Social Text Web

platform examples

Branded emails Apps (proprietary, third-party) Facebook, Instagram, You Tube SMS Website, search, review sites

Souce: Balvor Digital Media Matrix

TABLE 2

Primary Marketing Strategy channels

Email Mobile Social Text

drive create enhance traffic excitement image

77% 47% 31% 80%

14% 24% 41% 10%

5% 12% 24% 0%

build basket

5% 18% 3% 5%

defend turf

0% 0% 0% 5%

Note: Rows may not equal 100% due to rounding Source: Convenience Store News/Balvor/Brick Meets Click, 2015

“Devices,” whether a computer, mobile phone, tablet, etc., allow consumers to access platforms in order to, at a minimum, receive messages. “Technologies,” such as beacons, geofencing or even shopper reward programs, are tools that enable more targeted communications. UsaGE

DEfiNiTiONs

“Digital marketing” refers to the use of digital media channels in support of broader marketing and business objectives. These “digital media channels” are defined in a similar manner as traditional media — like radio, print or billboards — based on how the message is broadcast. Each channel (see Table 1) may consist of multiple “platforms” that support different forms of content (e.g., text, image, video) and types of content (e.g., owned, paid, shared).

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The website has typically served as the digital hub. However, it appears some c-store retailers are now assigning that role to social media. Today, more use social media than a website (see Figure 1). The social channel’s presence has grown since 2011 when usage stood at 46 percent, according to earlier joint research conducted by CSNews and Balvor. Nowhere is social media’s growth trend more evident than with c-store retailers operating 50 or fewer locations. In fact, between 2011 and 2015, usage grew from 28 percent to 53 percent among retailers with

TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence

one to 10 stores, while it increased from 54 percent to 86 percent for operators of 11 to 50 locations. In this area, small and medium-sized convenience store chains have played catchup with the bigger retailers because well over 90 percent of the larger c-store chains were FIGURE 1

Current Usage of Digital Media Channels (Percent of c-store retailers using) 67%

social

57%

49%

Web

40%

text

already using social media in 2011. The lower usage rate for mobile (36 percent) is understandable since mobile has been in the market for less time, requires a different level of investment, and may not be a good fit for all retailers. It’s also interesting that only 40 percent of retailers use texting even though it’s the least complex and has the broadest consumer reach. PErfOrmaNCE

36%

mobile

Source: Convenience Store News/Balvor/Brick Meets Click, 2015

FIGURE 2

Description of Execution (Percent of c-store retailers indicating)

Best-in-class Working well

12%

36%

39%

30%

social

mobile

text

Source: Convenience Store News/Balvor/Brick Meets Click, 2015

When retailers describe how well digital channels support their marketing strategies, social media performs the best (see Figure 2). Nearly half of those using it indicate their efforts are working well or are best-inclass. But these views are affected by how performance is evaluated, which helps to explain the lower scores that email and text both receive. It’s clear based on the primary strategy used with each channel that retailers are relying on different metrics to evaluate social media, and mobile to a lesser extent (see Table 2). We found that 41 percent of retailers focus on creating excitement with social media, while 47 percent attempt to drive traffic with mobile. Whereas, retailers are leveraging text (80 percent) and email (77 percent) to drive traffic. What retailers actually know about performance is also influencing their perceptions. It turns out less than half of the retailers surveyed give their own company a “B” grade or higher for doing a solid or outstanding job in the area of effectively evaluating digital marketing activities on a consistent basis (see Figure 3). In other words, there’s an opportunity for retailers to better understand which indicators they should measure and how often these indicators should be monitored. sTraTEGY

Evaluation Grade — “B” or Higher (Percent of c-store retailers indicating)

47%

44%

FIGURE 3

41% 32%

mobile

text

social

Source: Convenience Store News/Balvor/Brick Meets Click, 2015

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Only one in five c-store retailers surveyed (22 percent) have a sound, strategic framework guiding what their company and team members are doing in digital marketing. However, when a sound framework is present, retailers have significantly stronger organizational alignment with category managers and vendor partners (see Figure 4) because the framework fosters collaboration, improves coordination and clarifies choices. Establishing lines of authority and assigning accountability are other foundational components of a framework. Our research reveals that retailers who have a sound framework are dramatically more likely to have well-developed roles and responsibilities

TECHNOLOGY Enterprise + POS + Digital + Payment Systems + Business Intelligence

(73 percent vs. 33 percent), as well as planning and budgeting processes (68 percent vs. 21 percent). These specific aspects help to minimize conflict and ensure the appropriate allocation of resources. CaPabiLiTiEs

Strategy is about making choices based on fit and competitive positioning. The level of success attained is dependent on doing many things well that are consistent with overall strategic direction, reinforce other activities and optimize the shopper’s experience. Analyzing a range of capabilities — from identifying opportunities to consider, through monitoring the effectiveness of activities — retailers with a sound framework perform at 73 percent of effectiveness while those without are trailing at 47 percent. As far as the specific capabilities, retailers are strongest relative to rolling out and promoting activities; whereas, developing the business case is generally the weakest. It’s not surprising that rolling out receives the strongest score as retailers are very good at getting consumers to like, follow, subscribe or download via promotional offers. The challenge is ensuring digital marketing activities are generating the desired outcomes and to do that, requires retailers to work on the business case and moniFIGURE 4 Presence/Absence of Sound Framework (Percent of c-store retailers agreeing) Present

Absent

20% 82%

We do a good job gaining vendor participation

32%

Source: Convenience Store News/Balvor/Brick Meets Click, 2015

FIGURE 5

Consumer-Targeting Tactics (Percent of c-store retailers already doing)

31%

29% 23% 11%

time

static location

customer

TarGETiNG

Digital media possesses the potential to broadcast more relevant messages, which retailers may define based on geographical, personal, spatial or temporal measures. However, the benefit of targeting is only as good as the retailer’s capabilities, or if it fits with the overall strategies as we learned. Time (e.g., seasonal event, day of week or time of day) is the most common targeting tactic, used by 31 percent of the retailers surveyed (see Figure 5). It is a standard feature of most digital platforms. When it comes to geographical targeting, nearly 30 percent of retailers use a static location set by the consumer, like their preferred store. Meanwhile, 11 percent use dynamic locations that depend on consumers opting to share their location and receive notifications. This appears to be a still-emerging opportunity. In terms of targeting by customer, just shy of onequarter of c-store retailers are doing this today. While a sophisticated shopper reward program is beneficial, retailers can still leverage this tactic by using other assignable attributes that help to segment shoppers, such as past-deal redemptions or user preferences. Otherwise, while some tactics may possess more potential to deliver more relevant messages, retailers need to focus on the bigger picture of how it creates value for the consumer. OPPOrTUNiTiEs

64%

Managers understand how it supports category planning

tor efforts to assess gaps between plan and actual results.

dynamic location

Source: Convenience Store News/Balvor/Brick Meets Click, 2015

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As technology continues to change, having a framework that guides which innovations to pursue and how activities are coordinated is becoming ever more vital. Whether a retailer does or does not have a sound framework today, 60 percent of all those surveyed believe that developing more effective ways of evaluating what to do and how to do it will be very or extremely helpful going forward. This research is only beginning to reveal these latent opportunities and our goal is to continue exploring these areas so that we may be able to share additional insights that, when applied, will help drive stronger results in the convenience channel. CsN David Bishop is managing partner of sales and marketing firm Balvor LLC and segment leader at industry consulting firm Brick Meets Click. At Balvor, Bishop has worked with supermarket and convenience store retailers in evaluating integrated marketing programs across digital and traditional communication channels. At Brick Meets Click, he has led shopper research initiatives with retailers, examining how technological and digital innovations are impacting the way consumers shop in-store and online. For more information, he can be contacted at davidbishop@balvor.com.

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STORESPOTLIGHT Corner Store

Corner Store Is Reborn Brand overhaul centers on new service promise of “Simply Fresh. Always Friendly.” By Danielle Romano

orner Store convenience stores are embarking on an era of change. As part of parent company CST Brands Inc.’s 2020 strategic plan, the Corner Store brand is getting an overhaul starting in its hometown of San Antonio and spreading outward. The new initiative focuses on growth in food choices and in-store sales. Given the increase in fuel efficiency in the automotive fleet these days, people are stopping less to refuel. In spite

of this, CST still wants Corner Store customers to come into the store every day, Kim Lubel, CST’s chairman, president and CEO, told Convenience Store News. “Fuel is essential to our business, but behind this rebranding strategy is a move to make our stores — not our fuel — the chief customer driver,” she explained. “Over the next five years, as we plan on building hundreds of stores, we want customers across the country to cheer when a Corner Store opens in their neighborhood. They will know what we stand for and why they want to shop with us.” BRAND IDENTITY

Vibrant colors, a new logo and fun signage are part of Corner Store’s new look.

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The first step in CST’s 2020 strategic plan is to rebrand and reimage both its new-to-industry stores and its legacy stores with a new Corner Store logo and new brand promise of “Simply Fresh. Always Friendly.” In addition, its larger-format stores that offer more extensive fresh food and grocery selections will do business now as Corner Store Markets. “Our brand promise will come to life across our network,” Lubel told CSNews. The decision to rebrand Corner Store was not a hasty one. CST began an extensive process nearly two years ago, shortly after it became an independent company spun off from Valero Energy Corp. CST talked to customers to gather their perceptions and insights on its 1,000-plus U.S. stores, and then conducted several focus groups and roundtables. The research showed Corner Store had little identity outside of the branded fuel it sold, the same fuel sold by other operators as well, according to Lubel. “However, the research also told us that once our customers visited our stores, they wanted to come back more often to our stores than our competitors,” she shared. “That was exciting, and we recognized that we needed to build around that finding and make sure customers could distinguish Corner Store from other similarly branded fuel operators and also fully

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STORESPOTLIGHT Corner Store

know what Corner Store offers.” The rebrand of Corner Store is rooted in CST’s core values — Servant Leadership, Strategic Thinking, Entrepreneurial Spirit and Innovation — in every way, Lubel noted. “The work is innovative, took strategic thinking and an entrepreneurial spirit. And the ‘Simply Fresh. Always Friendly.’ promise fits perfectly with the value of servant leadership,” she said. SIMPLE, FRIENDLY & FRESH

Over the past year, CST worked with Prophet, a global brand and marketing consultancy, to create a uniform banner for Corner Store locations. Vibrant colors, a new logo, fun signage and a refreshed, clean appearance show off the new side of Corner Store’s personality. “We also made the store layout simpler to meet the needs of our on-the-go customers,” Lubel pointed out. “The look is refreshing, neighborly and in touch with the modern consumer looking for convenience and quality.” Based on this new architecture, signage and packaging, the Prophet team and CST collaborated to come up with a service promise that would most accurately describe what the brand wanted to deliver to its customers. They arrived at “Simply Fresh. Always Friendly.” “We decided those four words perfectly captured who we are and who we aspire to be,” Lubel told CSNews, adding that CST believes “fresh” applies to more than just food. “Fresh is an attitude in the way the whole environment looks in the store. When the store looks and feels fresh, the customer is more apt to try the food choices,” the chief executive further explained. “Friendly means we treat our customers as neighbors; they are always greeted with a smile and warm welcome. Our research showed us that our friendly manner was the No. 1 reason our customers returned to Corner Stores. Simple is part of our DNA as a convenience store: We know our customers want to get in and out quickly. Our new large-format stores allow them to easily find what they need and get on their way.” Although CST ideally hopes to reach all demographics with its newly rebranded Corner Stores, its research showed millennial customers are among the most frequent and most loyal spenders inside the stores. And so, the retailer wants to meet and anticipate millennial needs. “We believe our focus on fresh, friendly and simple, as well as having convenient choices for meals on the go, appeals to that audience,” Lubel said.

70 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Larger-format Corner Store Market locations include a made-to-order food program.

The new Corner Store — as a benefit of CST’s 2014 acquisition of New York-based Nice N Easy Grocery Shoppes — has imported Nice N Easy’s popular madeto-order food program to Texas. The new Corner Store Market format features such menu items as pizza, sandwiches, soups and salads. Customers also find Corner Store’s already-popular kolaches, tacos and whoopie pies. The Corner Store Market logo is featured on all fresh, perishable products including coffee. LOOKING AROUND THE CORNER

CST unveiled its first Corner Store Market built from the ground up in North San Antonio in November and the company expected to have three more rebranded Corner Store Markets open by the end of 2015, with a fifth store opened in January. The goal for this year is have all of its San Antonio Corner Stores rebranded by the end of 2016, according to Lubel. From there, the overhaul will continue into other markets. Within three years, the retailer anticipates the entire Corner Store network will be completed. At the same time, CST plans to keep expanding its current network of more than 1,000 stores across the United States (it also operates in Canada) through new store builds and strategic acquisitions that add value. Case in point: The company earlier this month acquired the 164-store Flash Foods chain that operates in Georgia and Florida. “We learn so much from the chains that have been brought to our network and we actively seek to acquire chains — such as our recent acquisition of Flash Foods — from which we can learn,” Lubel said. CSN

ADVERTORIAL

A At

hard look hard sodA:

Root beer is a shining star in the beer/malt beverage category EvErything old is nEw again. It’s an adage that can be applied to hard root beer, a popular 18th century libation that started showing up on store shelves again just a few short years ago. Now, from Boise, Idaho, to Buffalo, N.Y., and most everywhere in between, retailers are embracing hard sodas in general and hard root beer in particular—a rising star in the beer/malt beverage category. “We blew through ours,” Boise Co-op beer buyer Matt Gelsthorpe told the Idaho Statesman in September 2015. The co-op sold its first allotment of 15 to 20 cases at a pace of about 2-1/2 cases per day, Gelsthorpe said. There was similar news out of Buffalo, where stores including Tops Markets, Consumers Beverages, Dash’s Market and Wegmans fought to keep enough hard root beer in stock.

“We’re getting in trailer load on top of trailer load, and we can’t keep it on the shelves,” Brad Menza, marketing manager at Consumers Beverages, told the Buffalo News last July. “It’s going right from our trucks into people’s shopping carts.” And it’s not just supermarkets and liquor stores brewing up profits with hard sodas; convenience stores are jumping on the bandwagon too. “NOCO Express does carry some of the hard sodas. We got out early with Not Your Father’s [Root Beer] and Coney Island [Hard Root Beer], and we added Best Damn [Root Beer] in the fall,” reported Heidi Rembecki, director of merchandising at the chain of 36 c-stores throughout western New York state. “Merchandise-wise, we brought in warm stacks initially, and then added on to displays where there was room as a tie-in sale with the premium lights and other beers on display.”

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 71

ADVERTORIAL

CatEgory drivErs The burgeoning craft beer movement, consumers’ growing preference for sweet flavors, and a hankering for all things nostalgic (think vinyl records and root beer stands) are converging to create a market that’s ripe for hard sodas. Craft beer’s share of the $33 billion beer industry, for example, is expected to increase from 7.5 percent in 2010 to 15 percent in 2016, IBISWorld data show. Hard sodas are a natural extension of these brews, since many craft beers featuring sweet profiles, such as chocolate stout, have been on the market for several years. Hard sodas’ appeal, however, goes beyond the craft beer movement. “We talk about this product like it’s craft beer, but this speaks to drinkers outside of craft beer,” Pat Brophy, corporate beer buyer for Binny’s Beverage Depot, the Chicago area’s biggest beer vendor, told the Chicago Tribune in October 2015. “There are way, way, way more people than we think who want to consume alcohol but don’t want to taste the alcohol or any bitterness.” Many of those consumers belong to the coveted Millennial generation. This group of young consumers grew up drinking sodas and enjoy the sweet flavors they deliver—a fact not lost on big brewers hoping to regain market share. According to a Jan. 12, 2016 article from Bloomberg Business, beer lost 10 percentage points of U.S. alcohol market share to wine and hard liquor over the past decade. “To claw it back, the companies are buying up craft brewers and launching new lines of alcoholic sodas in an effort to appear cooler to the roughly 115 million Americans born from 1980 to 2000,” reported Bloomberg Business. skyroCkEting ovErall salEs One look at recent sales data demonstrates why hard soda is a category c-stores should consider carrying. Before 2015, the market for hard sodas was in its infancy and experimental at best: A variety of products came into the market over time; some stayed, while others quietly exited after unimpressive sales. Then 2015 hit, and the category exploded onto the alcoholic beverage scene.

HARD SODA DOLLAR SALES BY CHANNEL

Dollar sales 52 weeks ending: 1/17/15 1/16/16 % change

C-STORE SUPERMARKET DRUG TOTaL

$208,953

$56,268,896

1,671,108 99,610

85,542,330 5,088,528

26,829% 5,019% 5,008%

146,899,754

7,320%

1,979,671

Source: Nielsen

72 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Nielsen reported total hard soda dollar sales at cconvenience, supermarket and drug channels of $147 million for the 52 weeks ending Jan. 16, 2016— $ an unprecedented jump of 7,320 percent from the a $2 million reported for the 52 weeks ending $ Jan. 17, 2015. During that same period, the supermarket channel brought in $86 million, with convenience stores following at $56 million in total dollar sales—a 26,829 percent jump from $208,953. Far below was the drug store channel, with hard soda totaling $5 million in sales, up from $99,610. Hard root beer took first place honors in a list of Top 10 hard soda flavors ranked on dollar sales at convenience, supermarket and drug channels for the same 52-week period. It came in with $127 million in sales, followed by pineapple with $14 million in sales. Rounding out the list, in order of total dollar sales: ginger ale, ginger beer, spiced orange ginger beer, apple pie, orange cream, orange soda, raspberry ginger ale, and black cherry cream.

TOP 10 HARD SODA FLAVORS AT ALL CHANNELS Dollar sales 52 weeks ending: 1/17/15 1/16/16 % change

1 ROOT BEER

$1,168,369

$126,734,839

1,0747%

2 PINEAPPLE

704

14,467,887

2,054,998%

3 GINGER ALE

3,159,655

n/a

4 SPICED ORANGE GINGER BEER

295,018

1,081,628

267%

5 GINGER BEER

328,596

968,369

195%

87,740

n/a

5,676

72,173

1,172%

8 ORANGE SODA

58,820

n/a

9 RASPBERRY GINGER ALE

45,116

n/a

2,433

44,331

1,722%

146,899,754

7,320%

6 APPLE PIE 7 ORANGE CREAM

10 BLACK CHERRY CREAM TOTaL hard SOda

1,979,671

Ranked by dollar sales at U.S. convenience, food and drug for 52 weeks ending 01/16/16 Source: Nielsen

thE hard numbErs: C-storE ChannEl Turning from overall sales to the c-store channel provides another perspective on how the market for hard sodas has expanded and evolved.

ADVERTORIAL

C-stores had only an 11 percent share of hard soda dollar sales for the 52 weeks HARD SODA DOLLAR SHARE ending Jan. 17, 2015—a share that jumped C-Store C-Store to 38 percent for the 52 weeks ending 38% Jan. 16, 2016. Meanwhile, supermarkets’ 11% Drug 5% Drug 4% share during that same time frame dropped from 84 percent to 58 percent. In addition, the drug channel reported just 52 weeks 52 weeks 4 percent of hard soda dollar sales for ending 1/17/15 ending 1/16/16 the 52 weeks ending Jan. 16, 2016—down from 5 percent for the 52 weeks ending 84% 58% Supermarket Supermarket Jan. 17, 2015. Source: Nielsen But total dollar figures don’t paint a complete picture of the products driving this upswing in sales. Future questions Pineapple-flavored beverages, for example, ranked Will hard soda’s star continue to shine? Or is it a fad that will No. 2 in a list of the Top 10 hard soda flavors by dollar quickly fade the way once-bright products like wine coolers sales at U.S. c-stores for the 52 weeks ending Jan. 16, 2016. have during the past several years? They accounted for $13.2 million of the total $14 million While eater.com editor Ian Harrison predicts the segment that Nielsen reports for all channels. will “explode in 2016 as new players enter the fray,” other However, there is some debate about whether pineapple industry experts aren’t as bullish on the sweet, malty brews. fits the definition of a “hard soda” since it more closely Describing “the boozy soda rage” as a distinctly American resembles a cider than a soft drink. Consequently, removing phenomenon, industry analyst Spiros Malandrakis told the pineapple from the c-store Top 10 list would delete 23 percent Chicago Tribune that the product category’s ability to sustain of category sales. Even so, hard root beer is its current momentum is “open for debate.” clearly at the head of the pack: C-store sales Indeed, there are signs that momentum might be slowing. of hard root beer totaled $42 million for the “NOCO saw a huge push in the fall for the products, 52 weeks ending Jan. 16, 2016, up 41,900 but it seems to have quieted down a bit as supply is now b percent from $100,654 in the previous 52more steady, so customers don’t have to look hard to m week period. ffind them,” Rembecki said. Those numbers far outpace the other But with brewers large and small introducing new varieties of hard sodas sweetening the products, there is no sign that hard soda’s end is imminent. p c-store pot. Those flavors, in order of sales, NOCO Express, for one, remains committed to include ginger ale, ginger beer, orange soda, tthe category. spiced orange ginger beer, raspberry ginger Said Rembecki: “We are in the process of looking at and ale, apple pie, lemon lime, and cherry cola. adding additional brands into some of our spring sets.” l

2015

2016

TOP 10 HARD SODA FLAVORS AT C-STORES 1/17/15

1 2 3 4 5 6 7 8 9 10

ROOT BEER PINEAPPLE GINGER ALE GINGER BEER ORANGE SODA SPICED ORANGE GINGER BEER RASPBERRY GINGER ALE APPLE PIE LEMON LIME CHERRY COLA TOTaL hard SOda

Dollar sales 52 weeks ending: 1/16/16 % change

1/17/15

Unit volume 52 weeks ending: 1/16/16 % change

$100,654

$42,274,398

677 33,797 24,108 -

13,169,311 564,234 79,681 53,918 36,617 20,437 17,155 15,424 14,928

41,900% 1,945,059% n/a 136% n/a 52% n/a n/a n/a n/a

46,415 143 8,452 4,280 -

4,198,823 5,976,909 71,141 14,311 30,238 4,371 14,356 2,722 9,059 8,700

8,946% 4,179,557% n/a 69% n/a 2% n/a n/a n/a n/a

56,268,896

26,829%

67,371

10,339,856

15,248%

208,953

Ranked by dollar sales at U.S. convenience, food and drug for 52 weeks ending 01/16/16 Source: Nielsen

74 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

IT’S TIME SOMEONE put

THE BEER IN ROOT BEER. that’s best damn

there are over 2,000 root beer brands in the u.s. today with consumers aged 21-34 the most liKEly age group to have had one in the past 7 days.1 THESE MILLENNIAL CONSUMERS ARE CONSISTENTLY SEEKING VARIETY IN THEIR FLAVOR CHOICES.2 THEY ARE: • 33% MORE LIKELY TO HAVE TRIED A BEER FOR THE FIRST TIME RECENTLY. • 61% MORE LIKELY TO TRY A FMB. Best Damn Root Beer delivers a fresh take on the classic & sweet soda fountain taste with a brand that embraces the perfectly imperfect while remaining approachable and infectiously positive.

that’s the best damn root beer you have to offer in 2016. Scarborough Multi-Market 2015

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! W NE

OUTABOUT &

Spotlighting major industry events

Retailing in the Digital Age Engaging customers via digital communication dominated 2016 NRF Show talk By Brian Berk

echnology changes fast, and this was certainly apparent at the 2016 National Retail Federation (NRF) Annual Convention & Expo, taking place Jan. 17-20 at New York’s Jacob K. Javits Convention Center. Last year, EMV — an acronym for Europay, MasterCard and Visa, the three companies that originally created the security standard — was the talk of the show. Although security still held a prominent place at the 2016 NRF Show, its spotlight was shared by plenty of discussion regarding digital communication and how to build customer relationships in this new environment. This topic was the subject of several educational sessions, including one entitled “Creating Lasting Relationships in a Digital Age.” According to session speaker Jim Barnes, CEO of Enspire Commerce, the digital National Retail age will not go away any time Federation Annual soon. The main question is how Convention & Expo retailers can convert customers Jan. 17-20, 2016 as times change. New York The first mistake retailers make is having separate brickand-mortar and digital strategies, Barnes told a standing-room-only crowd. Retailers must think about creating intimacy in a digital environment, he added. The way to do this is via “clienteling,” the art of helping a customer buy vs. selling to them. To create more in-store engagement, Barnes recommends retailers do the following three things: 1. Develop a customer service roadmap. Start with an end goal in mind and know how customers buy products in the retailer’s store. 2. Change mindset. Salespeople should become personal shoppers for their customers. Be a brand ambassador. 3. Evaluate enabling technologies. “Is new technology the answer?” asked Barnes. “Yes and no.

76 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Approximately 33,500 people attended the 2016 National Retail Federation Annual Convention & Expo.

Technology can also be an inhibitor.” Sales associates should have a “personal ‘black book,’” concluded Barnes. “You need to have oneon-one relationships. Contact [customers] via text for example and tell them they bought a certain item and maybe they’ll like this [other] item.” Of course, you can’t talk about digital communication without talking about smartphones. “Capitalizing on Key Consumer Moments at Retail,” featuring session speakers Russell Young, senior vice president, marketing and creative services for Stratacache, and Josh Johnson, senior manager, digital innovation for AT&T Inc., noted smartphones are ubiquitous and retailers need to connect to mobile customers both instore and outside the store. “The challenge is creating tech-enabled moments and turning these moments into a story,” said Young. “We need to remind customers the value they have.” Retailers should take a four-step process when trying to attract digitally active customers: • Create an experience for customers; • Test and establish goals; • Learn and refine a program based on takeaways; and • Scale and deploy in rapid fashion for the most impact. CSN

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HOTPRODUCTS Special Advertising Section

Car Wash Program

General Merchandise

78 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

HOTPRODUCTS Gourmet Pet Treats

Special Advertising Section

Postage Program

FOR ALL YOUR NEW PRODUCTS AND SERVICES ADVERTISE IN

CSN

HOT PRODUCTS

CALL

TERRY KANGANIS

201.855.7615

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 79

CLASSIFIED POS/Equipment/Supplies

80 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

CLASSIFIED Credit Card Processing / Merchant Services

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 81

CLASSIFIED Pre-Paid/Cellular Products

ATMs

82 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

CLASSIFIED Air Vacs

Pos/Supplies

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 83

CLASSIFIED Help Wanted

ATMs

84 Convenience Store News | FEBRUARY 2016| WWW.CSNEWS.COM

CLASSIFIED Plastics

Services

C-Store Recruiters

Age Verifier

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 85

CLASSIFIED ATMs

of retailers

who read Convenience Store News do so because they want to find out about new products. Reach those important hard to reach retailers by advertising here in the Hot Products Section of Convenience Store News by contacting:

Terry Kanganis at Stagnito Media at 201-855-7615 for more details.

Scales

General Merchandise

DAVY CROCKETT HATS SELL BY THE TENS OF THOUSANDS AT $4.00 EACH. Silver Fox tails are a good seller!

You Can Scan We have: Red Fox tails, Coyote tails, White tails, Racoon tails, etc.

Leopard Rabbit Skin

Rabbit skins come in White, Natural colors, Cheetah, Tiger, Leopard, Ocelot and Black.

LARGEST FUR TAIL DEALER WITH OVER A MILLION TAILS AT LOW WHOLESALE ONLY PRICES. $100 MIN. FREE PRICE LIST.

Strips Inc. Tel.: (718) 786-3381 Fax: (718) 786-0203 http://stripsinc.tripod.com 86 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

CLASSIFIED Age Verifier / POS

Equipment/Supplies

Plastics

Pre Paid Kiosks

WWW.CSNEWS.COM | FEBRUARY 2016 | Convenience Store News 87

CLASSIFIED For Sale

Petroleum/Equiment

FOR ALL YOUR NEW PRODUCTS AND SERVICES ADVERTISE IN

CSN

HOT PRODUCTS

CALL

TERRY KANGANIS

201.855.7615

Check Guarantee Services

Wholesale Refrigeration

88 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

Equipment / Supplies

ADINDEX

HOTPRODUCTS Special Advertising Section

Advance Pierre

Supplement

Altria Group Distribution Co

2,3

www advancepierre com www insightsc3m com

Anheuser-Busch

www anheuser-busch com

BakeNJoy

www bakenjoy com ww BIClighter com

BIC

Supplement

Boston Beer/Samuel Adams

Cash Depot

Dr Pepper

Supplement

Ernest & Julio Gallo Winery

Supplement

Forte Product Solutions

www forteproductsolutions com

General Mills

www generalmillsconvenience com

www cdlatm com

Growth Energy

www ethanolretailer com

Heineken

23,37

www enjoyheinekenresponsibly com

Hersheyâ&#x20AC;&#x2122;s

www hersheysconvenience com

Home Market Foods

www rollerbites com

Hunt Brothers Pizza

www huntbrotherspizza com

Imageworks Display

www imageworksdisplay com

ITG Brands

35,57

J T International

www JTI-usa coom

Krispy Krunchy Chicken

45& Supplement

www krispykrunchychicken com

KT&G

63,65

877 580 5506

Liggett Vector Brands

Supplement

877 415 4100

Logic Technologies

CV1, 10-11

www logicecig com

MarsUSA

Supplement

www mars24seven com

McKee/Little Debbie

Supplement

www littledebbiecstore com

McLane Co

Supplement

www mclaneco com

MTI/Autofry

www mtiproducts com

Nestle Professional Beverage

www nestleprofessional us

Organic Valley

www organicvalley coop

Pepsico/Gatorade

www gatorade com/fuelbar

Perfetti Van Melle

39,Supplement

800 283 5988

Procter & Gamble

R J Reynolds Tobacco Company

Red Bull

Supplement

Save-A-Lot

www save-a-lot com

Small Town Brewery/Pabst

www smalltownbrewery com

Society Insurance

77 Regional

www societyinsurance com

Subway

www subway com

Swedish Match

customer service@smna com

Swisher International

Supplement

www swishersweets com

Tillamook Country Smoker

www tcsjerky com

Tyson Foods

47,53

www tysonconvenience com

Universal Merchant

Outsert

www nynab com

US Smokeless Tobacco

White Castle

Supplement

The Wonderful Co/Pistachios

570 Lake Cook Road, Suite 310, Deerfield IL 60015 Phone (224) 632-8200 Fax (224) 632-8266 www.stagnitobusinessinformation.com

Harry Stagnito President and CEO 224-632-8217 hstagnito@stagnitomail.com Kollin Stagnito Chief Operating Officer 224-632-8226 kollinstagnito@stagnitomail.com Ned Bardic Senior Vice President/Partner 224-632-8244 nbardic@stagnitomail.com Korry Stagnito Chief Brand Officer 224-632-8171 kstagnito@stagnitomail.com Ron Lowy Group Brand Director 330-840-9557 rlowy@stagnitomail.com Michael Hatherill Business Development Manager 201-855-7610 mhatherhill@stagnitomail.com Steve Lichtenstein Vice President/Southeast Regional Manager 201-855-7613 slichtenstein@stagnitomail.com

www engagetradepartners com

Terry Kanganis Account Executive & Classified Advertising 201-855-7615 tkanganis@stagnitomail.com Rachel McGaffigan Northeast Regional Sales Manager 508-385-2524 rmcgaffgan@stagnitomail.com Roz Gilman Ad Manager 314-403-4753 rgilman@stagnitomail.com

800 528 NUTS

Stagnito Business Information U.S. brands: Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by Stagnito Business Information, 570 Lake Cook Rd Deerfield, IL 60015 Copyright ÂŠ 2016 by Stagnito Business Information All rights reserved Subscriptions: One year, $93; two years, $152 One year, Canada, $110; two years, Canada, $175 One year, foreign, $150 Payable in advance with a bank draft drawn on a U S bank in U S funds Single copies, $10, except foreign, where postage will be added Printed in U S A Periodicals postage paid at Deerfield, IL, and at additional mailing offices POSTMASTER: Send address changes to Convenience Store News, P O Box 1842, Lowell, MA 01853

WWW.CSNEWS.COM | FEBRUARY WWW.CSNEWS.COM | JANUARY 2016 2014 || Convenience Convenience Store Store News News 89 13

GETTINGTOTHECORE

Getting App-y Usage of convenience store apps has room to grow

ven with the proliferation of smartphones, only one-quarter of convenience store foodservice shoppers surveyed by Carbonview Research, a sister company of Convenience Store News, said they currently have a c-store app on their device. This, despite the fact that more than 50 percent of the same surveyed shoppers belong to at least one c-store loyalty program.

Convenience at Your Fingertips When consumers were asked what

Do you currently have any convenience store apps on your smartphone? Yes No

total

by age: 18-24

25-34

35-44

45-54

55-64

65+

24.6% 75.4%

25.0% 75.0%

34.2% 65.8%

29.5% 70.5%

20.0% 80.0%

20.3% 79.7%

10.6% 89.4%

store apps they use, 7-Eleven and Speedway ranked among those used most widely. Competitively speaking, though, Walmart sits at the top.

Youâ&#x20AC;&#x2122;re most likely to find a convenience store app on smartphones owned by consumers aged 25-34.

Base: 589 c-store foodservice shoppers

Earned rewards/freebies are the overall favorite feature of c-store app users, particularly among consumers earning between $50,000 and $74,999.

What features of apps do you use? Product discounts Store locator Gas price look-up Advance ordering Pay by phone Earned rewards/freebies Games

total

by income: less than $15,000

$15,000$24,999

$25,000$34,999

$35,000$49,999

$50,000$74,999

$75,000$99,999

$100,000$149,999

$150,000 and over

50.7% 42.4% 37.5% 25.0% 27.8% 57.6% 25.0%

33.3% 58.3% 41.7% 25.0% 33.3% 58.3% 41.7%

50.0% 75.0% 25.0% 50.0% 25.0% 62.5% 12.5%

54.5% 18.2% 9.1% 18.2% 36.4% 45.5% 9.1%

70.6% 17.6% 41.2% 23.5% 11.8% 47.1% 17.6%

41.2% 38.2% 35.3% 23.5% 17.6% 73.5% 17.6%

52.6% 39.5% 39.5% 28.9% 28.9% 57.9% 31.6%

52.9% 64.7% 41.2% 11.8% 47.1% 58.8% 35.3%

57.1% 57.1% 71.4% 28.6% 42.9% 14.3% 28.6%

Base: 144 c-store foodservice shoppers who use apps

GAME ON

Nearly one-third of male consumers say they like to play games on their c-store apps.

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

90 Convenience Store News | FEBRUARY 2016 | WWW.CSNEWS.COM

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EDITOR’S NOTE

Are You Ready for

CatMan 2.0? C-stores need to stay on top of changes in shopper analysis to keep pace in a competitive market

ith apologies to the late, great David Bowie, ch-chch-changes are coming fast to the way convenience stores use data and technology to grow category sales. Category management has been around almost since the time I first started covering retailing 30 years ago. It started in the grocery industry and was effective for measuring shelf-space productivity. But soon, as retailers and manufacturers began collecting more and more data from both shopper research and point-of-sale, category management grew and evolved to affect pricing decisions, inventory levels and assortments, shopping basket analysis, profit contribution, trip missions and more. In today’s fast-moving retail environment, it’s imperative that convenience store retailers don’t get left behind as their competitors leverage technology and shopper insights to meet changing consumer needs. This is especially important as practitioners are poised to take category management to the next level. If the current form of category management can be described as CatMan 1.0, the new tools and concepts being implemented today constitute CatMan 2.0. “Today, the miracle of the Internet gives the shopper more information and more choices than could have been imagined 20 years ago,” said Category Management Association’s (CMA) Director of Best Practices Gordon Wade. “The Internet gives the retailer and manufacturer an opportunity to engage in a two-way ‘conversation’ with the shopper. This capability changes

the dynamic of the CPG [consumer packaged goods] marketing environment.” We at Convenience Store News are big believers in category management, and I’m pleased that our parent company, Stagnito Business Information, is partnering with CMA to For comments, please contact Don Longo, Editorial Director, help roll out CatMan 2.0. Our cover story for this at (201) 855-7606 or dlongo@stagnitomail.com. special Guide to Category Management (see page 6) not only defines category management in the convenience channel, but also provides a wealth of tips on how to utilize catman techniques across the store, from foodservice and tobacco to candy and health and beauty care. Our second-annual Guide also includes profiles of our 2016 Category Captains winners (see page 21). Now in its third year, the CSNews Category Captains awards program recognizes supplier and wholesaler companies for their category management prowess, demonstrated through their partnerships with convenience store retailers, and highlights their most innovative partnering programs with c-store retailers. Across all channels and retail formats, category management is driving store differentiation, shopping experience and store growth through highervalue trips and shoppers, Brian DeLong from marketing agency Catapult, notes in our cover story. I couldn’t agree more, and c-stores cannot be left behind. CSN

WWW.CSNEWS.COM | Guide to Category Management 3

CONTENTS

EDITOR’S NOTE

FEATURES

3 | Are You Ready for CatMan 2.0?

16 | Cross-Channel Category

C-stores need to stay on top of changes in shopper analysis to keep pace in a competitive market. COVER STORY

6 | What Does ‘Category

Management’ Really Mean? Industry insiders evaluate the practice’s place in the convenience channel.

4 Guide to Category Management | WWW.CSNEWS.COM

Wins & Losses

C-stores still lead the way in tobacco and packaged beverages, while there’s room for improvement in beer and fuid milk.

21 | 2016 Category Captains

Our third-annual awards honor 10 c-store vendor partners maximizing category management.

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*IRI data 24 Weeks Ending Oct 25, 2015, Total US Convenience

Cover Story

What Does

‘Category Management’

Really Mean?

Industry insiders evaluate the practice’s place in the convenience channel By Renée M. Covino

6 Guide to Category Management

ategory management has been around for decades — except in the convenience channel where strategic advancements are only more recently gaining traction, but often with points to ponder. When a c-store buyer or merchandiser morphs into a category manager, does that mean the chain is practicing top-down category management? Does a category management title equate to category management training? How about the differences among c-store types such as neighborhood stores, commuter stores and interstate stores? Are the distinguishing characteristics and demographics of each taken into category management consideration? And what about the increasing industry consolidation — the restructuring of c-store chains that buy out other chains — how do the category management practices of one get aligned with the other? These are just some of the questions offered up by category management experts who are working to better educate and evolve the convenience channel as it moves forward on the two basic words — category and management — that, when put together as a retail business concept, add up to complex and differing definitions. While most industry professionals agree on the prize — increased profit and customer satisfaction — the ambiguity over the practice of category management starts with the fact that it lacks a single, clear definition. The Nielsen Co. has labeled it a process that involves managing product categories as business units and customizing them (on a store-by-store basis) to satisfy customer needs. The grocery industry, where the practice of category management began, originally defined it as the strategic management of product groups through trade partnerships that aims to maximize sales and profit by satisfying consumer and shopper needs. More recently, category management at its core has become a discipline that allows retailers to manage merchandise productivity through sales analytics, as Brian DeLong, senior vice president of marketing agency Catapult, told Convenience Store News. Traditionally, the key metric has been space to dollars, with category managers answering the question: How productive is this amount of shelf space? DeLong

explained that category footprint and assortment, along with some pricing decisions, were often based on this simple efficiency model. “But it has become so much more complicated with the addition of store operations, transaction composition, item incrementality, shelf presentation, shopability, profit contribution and trip missions,” he said. “Across retail channels and formats, category management is being used for more than simple management of shelf productivity,” he continued. “It is responsible for driving store differentiation, shopping experience and store growth through higher-value trips and shoppers.” ConvenienCe Complexities

Many believe even more “catman” complexity surrounds the convenience channel, which has lagged behind in the practice. The reason for this, according to experts, is partly the significant differences in convenience store types, such as the aforementioned neighborhood store vs. the highway store. These differences were not addressed in the traditional category management practices outlined for supermarket retailers decades ago. Another reason for c-stores’ slow crawl into category management initially was the fact that easy-tomanipulate data was so scarce in this channel. The way Category Management Knowledge Group (CMKG) President Sue Nicholls views category management in the convenience channel, it is used by the larger chains, “but not all individuals with category management titles have undergone category management training,” she emphasized to CSNews. She further

Category Management 101:

FoodserviCe

• If you’re going to have fresh food, make sure it conveys fresh. • Utilize wholesaler programs that go beyond cookie-cutter approaches. • Match the proper refrigerated displays to the proper product assortment, taking advantage of vendor-supplied fixtures. • Cover all the dayparts. • Don’t take on foodservice until you strategize deliveries and how to manage operational complexities.

WWW.CSNEWS.COM | Guide to Category Management 7

Cover Story

observes that many mid-sized and small retailers either do not utilize the practice or they use it on a limited basis. “They may also outsource it to their suppliers vs. participating as a team with the retailer as the leader,” she stated. Overall in the convenience channel, internal data is underutilized and “retailers rely too much on thirdparty information and input in their decision-making,” according to Nicholls. She sees the opportunity for c-stores “to create their own internal category management strategies and best practices (including defining their target shopper); train their team on the strategy and how to make morealigned and fact-based decisions in their jobs; and lead the charge instead of being led to ensure they are making the best choices for their stores and shoppers.” Recognizing the opportunity to “convenienceize” its certified category management training, CMKG recently partnered

Category Management 101:

PaCkaged Beverages

• Organize the proliferation of choice with a logical strategy. • Be mindful of the continued move toward betterfor-you and healthier beverages. • Loyalty programs have a positive effect here. • Pay attention to packaging and packaging size advancements. • Utilize promotional magnets such as branded share bins, secondary displays and point-of-sale materials.

Category Management 101:

Beer/Malt Beverages

• Go for a good base strategy, providing variety in smaller sizes in cold-case displays. • Focus on high-volume brands in larger sizes. • The goal is to encourage trade-up to more premium items and to larger pack sizes. • Consider a mix-and-match “twofer” strategy on singles across all brands. • Keep shelf tagging clear and consistent. Each shelf should follow the same pricing bucket with parallel signs on each shelf.

8 Guide to Category Management | WWW.CSNEWS.COM

Category Management 101:

toBaCCo

• Think outside the contracts. • Carry a cigarette assortment with a range of price points. • Organize the back bar meticulously and visibly; it’s imperative to keep it in stock. • Less is more in vapor and electronic cigarettes now. • Train staff in new vapor items and let them try them; suggestive-selling works well here. • Look to eliminate overstocks and replace with some new SKUs, limited editions, accessories, etc.

with b2b Solutions LLC in developing a new online category management training program that’s tailored specifically for convenience and small-store retailers, based on needs identified by the NACS category management standards for c-stores. Nicholls said she is “blown away” by how many retailers don’t buy into category management training and she identified this as one of the convenience channel’s biggest barriers to establishing an effective category management foundation. Another barrier is that c-store category managers are limited until they are armed with a strong strategic direction and a documented retail positioning from senior management. Among the overarching strategies that senior management must effectively articulate are: vendor collaboration, the target shopper, competition and private label brands, Nicholls advises. suppliers Weigh in

One of the best strategies often is to lean on product manufacturers and distributors to aid in gathering the insights and analytics needed to make better planogram and visual merchandising choices, according to DeLong. “They have the breadth of working across multiple retailers, and often across competing channels, to help inform you of what works and what doesn’t,” he said. “But remember, as the merchant, it is the c-store operator’s responsibility to make sure you are serving your shoppers best for their expectations of your store experience.” Food industry supplier ConAgra Foods sees its primary role in the category management process with c-stores as “adding insights into consumer behavior within the categories we compete in, as well as providing advice on

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Cover Story

Category Management 101: optimal mix of items with a healthy blend of new items, along with a core assortment that has the highest level of overall category sales incrementally,” stated Terry Hancock, field category leadership manager. “We analyze categories to determine optimal assortments based upon their overall contribution to category sales and make recommendations on which items will deliver the highest return for a specific retailer.” Speedway LLC is one c-store chain with whom ConAgra reports a collaborative success in category management. Speedway identified a growth opportunity with its meats snacks category, the retailer’s fourth-largest category within snacks, according to Hancock. By integrating frequent shopper card data with current sales data, Speedway identified a need for increased space and easier navigation to significantly grow meat snacks. “Over the past three years, [meat snack] sales have grown double digits over and above the market growth levels at Speedway,” reported Hancock. “During the same timeframe, Slim Jim growth significantly outpaced category growth and improved overall shopability with our laydown rack.” Slim Jim is a ConAgra brand. Meanwhile, in the beer/malt beverages segment, Samuel Adams maker The Boston Beer Co. has watched as the category’s evolving variety has led to category management challenges. “There are more breweries than ever before brewing a lot of great beers and offering variety. With this growth comes a unique set of challenges,” said George Ward, director of off-premise national accounts. However, he also pointed out that “one positive development has been that many progressive c-stores are listening to more than just two voices from larger brewers and are bringing more voices into the category management process, producing better results and ultimately profit.”

Category Management 101:

Candy

• Like packaged beverages, this category needs to be easy to navigate. • Variety is imperative. • Grouping by form and flavor profile, then organizing by size, is a popular formula. • For larger stores and high-volume candy outlets, dual-location strategies can accelerate growth. • The space allocation recommendation by one top c-store candy supplier is 75 percent candy, 19 percent gum and 6 percent mints.

10 Guide to Category Management | WWW.CSNEWS.COM

snaCks

• Get in on the better-for-you product shift. • Protein options continue to change the face of the category. • Assortment can be highly specialized here. • Everyday low price models are effective in the snacks category. • Emerging demographics such as millennials and Hispanics can have a big influence with a unique assortment.

In the health and beauty care (HBC) arena, Lil’ Drug Store Products Inc. says it takes an overarching sub-category approach (it identifies 30 sub-categories in HBC including analgesics, gastro-intestinal, oral care, eye care, cough/cold, feminine hygiene, first aid and antacids). The supplier recognizes it’s a “fine balancing act” to determine the right mix of what’s bestselling currently, what sold within the past year, and what can be. “If you always manage to the past numbers, you aren’t giving yourself an opportunity to venture into new sub-categories,” reasoned Beth Noteman, Lil’ Drug Store Products’ senior director of category management. “We also look at customer-specific data and geographicspecific data to maximize what is best within the walls of a particular store and its customers.” Noteman relayed that Lil’ Drug Store is acutely aware of the different types of stores within the convenience channel and takes into consideration the various demographics and purposes of different store types, such as truck stops vs. inner-city stores. Truck stops, for instance, typically stock a more robust mix of full-size HBC products because truckers “like to take the full-size items on the road with them,” according to Noteman. more evolution AheAd

As category management is evolving in the convenience arena, so too is the shopper. “Digital media has played havoc on any traditional understanding of shoppers; they have become much more complex than in the past,” said Category Management Knowledge Group’s Nicholls. “Retailers need to continually identify, monitor and adjust their target shopper and identify how to meet their changing needs.” The tools for effective category management are also evolving. More data is available than ever before, with some retailers accessing store-level and hourly point-of-

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Cover Story

Category Management 101: sale scan data, transactional data and shopper data. The next evolution? Big data, according to Nicholls. What’s more, with more data comes improved technologies. “Ultimately, retailers are going to require less technologies that integrate more data sources for a more effective view of the data,” Nicholls explained. “The harnessing of big data and subsequent insights will evolve to further improve shopper understanding.” Collaborations between retailers and vendors are evolving, too. “This partnership goes beyond category captains and represents an opportunity for most retailers and vendors,” Nicholls maintains. Vendors that sell to the convenience channel “need to ground themselves in the foundations of category management and realize the significant differences not only vs. other channels they may sell in, but across store types and formats within the channel,” she said. “There are some common practices evidenced in the c-store channel that have too much focus on contracts, negotiations and ‘the way it’s always been done’ and not enough focus on the shopper and what the retailer is trying to accomplish,” she stressed. DeLong of Catapult agrees that the discipline of category management is now more focused on utilizing insights with analytics than ever before. “This is leading to more sophisticated adjacencies, shelf flows and visual merchandising experiences,” he said. Virtual reality platforms are helping forwardthinking suppliers and wholesalers be more relevant in category management. Jason Smith, vice president of customer success at InContext Solutions, a virtual reality technology company for retailers and consumer packaged goods manufacturers, said the most effective supplier and wholesaler companies are now working further upstream with the retailers to collaborate on ideas and changes. “Many times, suppliers only have one opportunity a year to recommend category changes to the

Category Management 101:

groCery

• Look to traditional grocery items to find more incremental sales. • Neighborhood stores might benefit from key pantry items for quick fill-ins. • Stores with high commuter traffic may win with grab-andgo breakfast and lunch items. • Truck stops should carry larger package sizes.

12 Guide to Category Management | WWW.CSNEWS.COM

general MerChandise • • • •

Get the clutter out. Create visual groupings of like items. Manage space on a seasonal basis. Leverage shelf organization systems to make this category more productive. • Don’t be afraid to try something completely different.

Category Management 101:

health & Beauty Care

• Don’t let this take a back seat in the store. • Avoid rolling it into general merchandise. • Focus on small product sizes presented in a clean and easy-to-shop organization. • The goal is to get shoppers to trust that the products are safe and effective.

store,” Smith told CSNews. “This change is typically very tactical — i.e., item assortment/arrangement, promotional strategy. The truly best-in-class suppliers are now working further out to come up with big strategic initiatives that will benefit the entire store.” Instead of thinking, “How can I get one more facing for my brand,” suppliers are now thinking, “How can I merchandise my category/department in the store to drive a higher overall basket ring.” With virtual reality, companies can not only test this impact, but also visualize their concept in a way that can be much easier to understand, Smith stated. “These suppliers are now becoming a more valued partner to the retailer because they have the retailer’s best interest in mind,” he said. The way Lil’ Drug Store’s Noteman sees it, the very traits that delayed c-stores from diving into category management initially are now much of what offers its best future potential. “The wild elements about c-stores, the fact that they are so varied in store size and store purpose, these are what offer it so many caveats and possibilities in the practice,” she said. “More and more c-store retailers are looking to maximize their business day in and day out without basing it on contracts. I believe it’s going the right way. This isn’t rocket science, but if you’re going to do it, you might as well use the evolving science and the tools instead of your gut and past history.” CSN

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Feature

Cross-Channel Category

Wins & Losses

C-stores still lead the way in tobacco and packaged beverages, while there’s room for improvement in beer and fluid milk By Tammy Mastroberte

upermarket, drug, dollar and big-box stores continue to compete against convenience stores for customers in a variety of product categories. While c-stores are missing the mark in some ways, they are coming out on top in other ways. Industry insiders cite that today’s c-stores are getting it right when it comes to immediate consumables, and they’re winning the breakfast and lunch dayparts. “C-stores have done a good job building the immediate consumable business, and the morning drive time and lunch time anchors around the fountain program and prepared foods, whether it’s made-to-order or roller grill,” said David Bishop, managing partner at Balvor LLC, a sales and marketing firm based in Barrington, Ill. “That is an area supermarkets continue to try and find the balance for, but when they think of immediate consumption, [supermarkets] think of meal solutions and dinner. As a consequence, they don’t drive as much business in the morning or lunchtime

How often do convenience store shoppers also shop at: Daily/weekly (net) Daily Weekly Once a month Once every 6 months Yearly Less often than a year Never

Convenience

Supermarket

Supercenter

72.0% 19.9 52.2 28.0 n/a n/a n/a n/a

79.9% 10.2 69.8 14.9 2.5 0.6 0.7 1.4

66.5% 8.4 58.1 26.2 4.7 0.8 1.1 0.7

Base: 1,501 respondents who shopped at a c-store at least once in the past month Source: Convenience Store News Realities of the Aisle Study, 2016

16 Guide to Category Management | WWW.CSNEWS.COM

because they don’t have the same food offerings as c-stores do.” Along with prepared foods, immediate consumption at c-stores also includes packaged goods, such as a candy bar or salty snacks. Because of this, on-the-go cravings, breakfast, lunch and snacks really distinguish the convenience channel from other retail channels. This is where c-store operators need to continue to improve and expand. “While there has been a lot of talk around dinner as an opportunity, I believe the upside is greatest for the other two [dayparts],” noted Steven Montgomery, president of b2b Solutions LLC, a c-store consulting team based in Lake Forest, Ill. “Breakfast and lunch are something people buy on the go. Dinner/supper is something most people make at home.” Additionally, a recent study by The Hartman Group Inc. based in Bellevue, Wash., Food Shopping in America, examined food shopping behavior across nine retail channels, including grocery, club, dollar, convenience and drug. The results revealed that although food and beverage shoppers visited c-stores four times per month, only 18 percent of them went purely for food or beverage shopping. “Most shoppers are buying indulgent items, such as snacks and sweets, for immediate consumption,” said David Wright, senior manager of marketing for The Hartman Group. Proprietary consumer research conducted recently by Convenience Store News surveyed consumers who shopped a c-store at least once in the past 30 days. The majority of these shoppers (52.2 percent) indicated they visit a c-store weekly, compared to 69.8 percent who visit supermarkets weekly and 58.1 percent who visit supercenters weekly. A key difference of convenience vs. the other retail

Feature

channels is seen in the number of shoppers who visit a c-store every day. According to CSNews’ 2016 Realities of the Aisle study, 19.9 percent shop a c-store daily, compared to 10.2 percent making daily trips to the supermarket and 8.4 percent to a supercenter. “Almost all of the trips to a c-store fall into quick trips, and when we look at that, we can dissect the trip missions into what they are actually buying and much of it is immediate consumption — a coffee, a hot dog and fountain drink,” said Bishop. “In a typical week, there are many more reasons someone will go to the supermarket, and [it’s] usually part of a weekly shopping trip.”

sis of Nielsen data for the 52 weeks ended Nov. 21, 2015. In fact, in both these categories, only supermarkets saw a gain in market share. “Craft beers are growing and unfortunately most c-stores are not well positioned to handle their explosive growth,” Montgomery reasoned. “To grow craft beers, the customer has to be exposed to a large variety and that requires display space. Supermarkets can do this with both warm and cold displays, while most c-stores have limited cooler space and much of that is allocated by actual or implied contractual obligations. Furthermore, few c-stores display warm beer in six-packs because of concerns regarding minors and other issues.” Supermarkets also are sometimes more aggressive Room foR ImpRovement with promotional activity and discount levels to drive The convenience channel continues to gain market traffic around beer/malt beverage purchases. They are share in dollar sales and unit volume across all major focused on driving traffic vs. profiting and will offer categories with the exception of beer/malt beverages and fluid milk products, according to a CSNews analy- competitive prices on cases, Bishop noted. “There has been a shift toward ciders and malts and Convenience Channel Market Share by Category c-stores just don’t have the space Share of Dollar Sales for 52 weeks ending: Share of Unit Volume for 52 weeks ending: 11/21/15 11/22/14 Point change 11/21/15 11/22/14 Point change to present and merchandise the Cigarettes 88.43% 86.74% 1.69 89.71% 88.13% 1.58 same assortment or package Packaged beverages 52.93 51.73 1.20 56.54 55.69 0.84 sizes as supermarkets, so they Other tobacco products 91.60 90.46 1.14 93.44 92.62 0.82 tend to focus on the best-seller,” Liquor 15.60 14.85 0.74 31.13 28.13 3.00 he shared. Packaged ice cream/frozen novelties 15.52 14.93 0.59 18.99 18.85 0.13 Still, convenience holds the Salty snacks 25.81 25.27 0.54 35.29 34.80 0.49 largest market share of beer/ Candy/gum 38.89 38.52 0.37 44.34 44.12 0.22 malt beverages at 60.6 percent Wine 7.17 6.97 0.20 8.95 8.52 0.43 of dollar sales and 72.4 percent Health & beauty care 5.89 5.84 0.06 11.72 11.66 0.06 of unit volume. When it comes Beer/malt beverages 60.59 60.64 -0.04 72.42 72.42 0.00 to the liquor category, superFluid milk products 14.92 15.00 -0.09 16.55 16.74 -0.19 markets hold the largest market Source: The Nielsen Co. share at 68.4 percent of dollar sales and 53.6 percent of volume. Supermarket Channel Market Share by Category Supermarkets also lead the way Share of Dollar Sales for 52 weeks ending: Share of Unit Volume for 52 weeks ending: in the wine category with more 11/21/15 11/22/14 Point change 11/21/15 11/22/14 Point change than 80 percent of share in both Beer/malt beverages 35.03% 34.61% 0.42 24.55% 24.29% 0.26 dollar sales and units. Liquor 68.36 67.99 0.36 53.55 55.26 -1.71 In the milk category, superFluid milk products 81.66 81.36 0.30 80.08 79.66 0.43 markets take the lead as well. Health & beauty care 33.89 33.79 0.11 40.41 40.07 0.34 C-stores come in second place Cigarettes 6.77 6.68 0.09 5.86 5.73 0.12 in terms of overall milk share, Wine 85.21 85.14 0.08 82.09 82.10 -0.01 followed by drugstores. C-stores Candy/gum 39.85 39.81 0.04 35.61 35.35 0.27 often sell more single-serve Other tobacco products 6.10 6.35 -0.25 4.95 5.14 -0.19 milk than gallons, and when Salty snacks 69.53 70.05 -0.52 59.98 60.29 -0.32 the price of milk goes up, conPackaged ice cream/frozen novelties 80.40 80.94 -0.54 77.35 77.32 0.02 sumers become more sensiPackaged beverages 42.74 43.74 -1.00 39.23 39.88 -0.66 tive to price changes and will Source: The Nielsen Co.

18 Guide to Category Management | WWW.CSNEWS.COM

Drug Channel Market Share by Category

go to supermarkets that tend to Share of Dollar Sales for 52 weeks ending: Share of Unit Volume for 52 weeks ending: have the best prices, according to 11/21/15 11/22/14 Point change 11/21/15 11/22/14 Point change Bishop. He also noted the lack Salty snacks 4.66% 4.69% -0.02 4.73% 4.90% -0.17 Packaged ice cream/frozen novelties 4.08 4.13 -0.05 3.67 3.82 -0.16 of volume movement in the galHealth & beauty care 60.21 60.38 -0.16 47.87 48.27 -0.40 lon sizes will often effect sales Packaged beverages 4.34 4.53 -0.20 4.24 4.42 -0.18 because the expiration dates will Fluid milk products 3.42 3.64 -0.22 3.37 3.60 -0.23 not be as far out in a c-store. Wine 7.62 7.89 -0.28 8.96 9.38 -0.42 Midwest convenience store Beer/malt beverages 4.37 4.75 -0.38 3.03 3.29 -0.26 chain Kwik Trip Inc., based in Candy/gum 21.26 21.67 -0.41 20.05 20.54 -0.49 Wisconsin, owns its own dairy Other tobacco products 2.30 3.19 -0.89 1.61 2.25 -0.63 farm and has a strong dairy proLiquor 16.04 17.15 -1.11 15.32 16.61 -1.29 gram. It can offer 14 days before Cigarettes 4.80 6.58 -1.78 4.43 6.13 -1.71 expiration on milk, whereas Source: The Nielsen Co. other c-stores may only be able to offer half that, said Bishop. “The code date perpetuates the volume and the explained. “Being able to have those fresh products volume dictates the code dates,” he explained. “It’s a and sell through that inventory is incredibly important vicious cycle and c-stores need to look at their supply on top brands. C-stores also use twofers in the categochain and find ways to get milk to the market faster or ry like buy two and save a dollar, and they have priced more economically.” aggressively to grow and maintain their share of this business. The volume has allowed them to maintain the freshness compared to other retailers and on par GettInG It RIGht On the other end of the spectrum, one area where con- with tobacco shops.” Packaged beverages is another category where venience stores are dominant against the other chanc-stores are building on their lead, with roughly nels is tobacco. C-stores hold a more than 88-percent share in both the cigarettes and other tobacco products 1-point increases in share of both dollar sales and unit volume, according to Nielsen. (OTP) categories. C-stores have an advantage in packaged beverAnd the channel keeps growing share. Convenience ages because new products are often introduced in the saw a 1.7-percentage-point increase in cigarette dollar channel; the single-serve sales opportunity allows supshare over the 52 weeks ended Nov. 21, compared to an increase of less than 1 point for supermarkets and a plier companies to trial products. New products bring excitement and interest to the category, which continloss of almost 2 percentage points in the drug channel. ues to transform, according to Bishop. “While seen as a declining category, cigarettes are “What retailers can capitalize on is the innovation still a key category for c-stores,” Montgomery said. pipeline and bringing those categories to market more “The supermarkets and other large-box retailers don’t quickly to introduce them to consumers and build that sell them, or if they do, do so poorly. Some drug business,” he noted. “C-stores can do it more rapidly chains like CVS/pharmacy have stopped selling them all together, and others sell them as a convenience item than larger-box stores because of the way they are structured and go to market.” but may not price competitively.” Interestingly, convenience stores are gaining more In OTP, convenience stores are already the clear of the health and beauty care market — albeit a slight leader, yet the channel continues to gain more market jump — with gains of less than 1 percentage point in share. C-stores saw a 1.1-percentage-point increase in both dollar and unit share. Drugstores saw a slight OTP dollar share compared to decreases in the superdecline in both metrics, according to Nielsen. market and drug sectors. In addition to the lessened “What is most likely happening is drugstores are emphasis on tobacco in supermarkets and drugstores, losing health and beauty care business to online cuswhen it comes to the OTP category, freshness of the product is key and c-stores do a better job in this area, tomers and ecommerce,” said Bishop. “If we look across c-store, drug, supercenters and grocery, conveBishop said. nience tends to be the most insulated from the macro “Freshness is one of the things that is as important trends of sales leakage for ecommerce.” CSN to an OTP consumer as milk expiration dates,” he

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Who are 2016â&#x20AC;&#x2122;s

Convenience Store News is seeking nominees for our third annual Top Women in Convenience awards program, which recognizes the integral role women play across all areas of the dynamic c-store industry. We will be saluting women from the retailer, wholesaler and supplier communities in six categories: WOMEN OF THE YEAR:

Retailer, supplier or wholesaler executives of any rank who have had an exceptional impact on the success or direction of their company as well as a positive impact on the convenience store industry as a whole.

SENIOR-LEVEL LEADERS:

Retailer, suppliers and wholesaler executives who have executed strategy and transformed their business.

RISING STARS:

Retailers, suppliers and wholesalers, with job titles above store managers but below VP, who are making their mark at an early stage of their careers.

MENTORS:

Retailers, suppliers and wholesalers who have had extraordinary impact on the careers of others.

STORE MANAGERS:

Outstanding store managers at chains.

SINGLE STORE OWNERS:

Successful women entrepreneurs.

2016 TOP WOMEN IN CONVENIENCE ADVISORY BOARD Jenny Bullard, Chief Information Ofcer, Flash Foods Inc. Kimberli Carroll, Senior Vice President, Foodservice Division, Ruiz Food Products Tammy Floyd, Vice President/Controller, CST Brands Inc. Stacy Loretz-Congdon, Senior VP/Chief Financial Ofcer, Core-Mark International Sandra Morgenstern, President/CEO, Par Mar Oil Co. Joan Toth, CEO, Network of Executive Women Blake Benefel, Trade & State Relations, Training & Compliance, Altria Distribution Company David Riser, Vice President of External Relations/Trade Marketing, R.J. Reynolds Tobacco Company Pat Cordle, Vice President, Field Sales, BIC Consumer Products

DEADLINE FOR SUBMISSIONS: APRIL 1, 2016 Visit www.csnews.com/twic2016 to nominate a deserving woman for recognition, download a nomination form and complete details. Presenting Sponsor:

FEATURE

Our third-annual awards honor 10 c-store vendor partners maximizing category management By Susan Durtschi, Past Times Marketing

ategory captains are in your customers’ brains. These category leaders not only know what consumers want to eat, but they also know the texture, the size, the smell, time of day, tipping-point price, impulse control and other characteristics that shape shopping behavior. By leveraging the latest technology, winners of the 2016 Convenience Store News Category Captains awards program bring to light many of the industry’s most innovative category management initiatives so that retailers and vendors alike can benefit from new ideas and best practices. These are the experts who deliver on the quickly changing consumer needs and wants, with both low-tech and high-tech solutions to drive business and retain customers. Ten suppliers and distributors in 11 product categories have been chosen as this year’s Category Captains honorees. These vendors have won convenience store retailers’ trust to help manage and grow an entire product category’s sales and profits, not just the vendor’s own product line. They also make sure a retailer’s strategy is not driven by a supplier agenda. Instead, these companies work with the retailer to ensure that the category’s product assortment and pricing meet the needs of that retailer’s target shoppers. Now in its third year, the CSNews Category Captains awards program applauds the outstanding category management initiatives implemented in the convenience channel over the past 12 months. All entries were judged by product development experts at consumer research firm Past Times Marketing based on the information supplied by participating companies. Entries were judged based on product innovation; creativity in merchandising, marketing, promotion and advertising; use of consumer insights; innovative and

dynamic category management tools; demonstrated commitment to meeting retail customers’ specific needs; effectiveness at lifting sales for a brand’s products in the category; effectiveness at lifting an entire category’s sales for a retailer or retailers; and fact-based evidence of market-specific or account-specific sales results. This year, one c-store industry distributor McLane Co. Inc. achieved category captaincy in two different categories: general merchandise and foodservice/ hot beverages. Additionally, this year saw some repeat winners in the same category: The Hershey Co. for candy; AdvancePierre Foods for foodservice/prepared food; Swisher International Inc. for other tobacco products; McKee Foods Corp. for packaged sweet snacks; and E. & J. Gallo Winery for wine and liquor. Across the in-store spectrum, the 2016 CSNews Category Captains demonstrate their understanding of retailers’ needs to address shopper demands, and the execution of solutions.

AlternAtive SnAckS:

General Mills convenience By breaking out a growing subcategory to enhance “shopability,” General Mills Convenience wants to

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FEATURE

make the alternative snacks category easier to shop, including putting more energy and space toward breakfast and nutrition — incorporating treat bars, granola and cup cereal. Nutrition/energy bars are growing more than 15 percent per year and from a dollar share perspective, contribute 64 percent of the category. This reinforces the importance of breaking away from the traditional cookie, cracker and bar set, according to General Mills. Retailers should move crackers to be with salty items, creating a separate sweet section and a separate breakfast/nutrition section. With shoppers spending less than three minutes on average in the store, retailers need to make it easier for consumers to find what they are looking for. To learn more about how to make the alternative snacks category more shopable, General Mills tapped its Category First team of dedicated category management experts, who deliver relevant and actionable industry insights to deepen strategic customer reach and provide enhanced business analytics to drive sales. From tapping General Mills’ Consumer Insights team for recommendations based on shopping behavior and buying patterns, to its ability to access multiple sources of data and its proprietary tools, Category First assists c-stores with holistic assortment and merchandising guidance to drive growth in alternative snacks. Some of the key insights uncovered by Category First on alternative snacks are: • Consumers base their purchase decisions according to the type of bar (i.e., energy, protein, grain, treat) and the specific benefits it provides them. For example, satiety (filling) and health attributes (better for you) are key differentiators. C-store bar shoppers rate “bar type” first and brand second over all other attributes when making their purchase decisions. • Consumers generally consider bars to be a great on-the-go snack that can be enjoyed as a treat or to fill up until the next meal. Consumers purchase and eat bars across all dayparts, but choose which type of bar based on their need. Three-quarters of bars purchased are con-

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sumed in the morning (as breakfast or a morning snack). General Mills Convenience is proving there are ways to break out the alternative snacks category to enhance shopability and increase conversion. As an advisor to more than 20 large, strategic retailers and numerous distributors, this category captain is influencing retailers to move away from the traditional cookie/cracker/bar combined set to a separate sweet section and breaking new ground with a breakfast/nutrition area. This breakfast/nutrition area includes cup cereal, pastries, granola bars and energy bars. A separate afternoon/indulgent section may include crackers, cookies, bakery items and treat bars organized by segment and brand. Retailers that have worked with General Mills to break out breakfast and nutrition have experienced double-digit growth, the company said. Another aspect of the alternative snacks category that challenges retailers is the bar set. General Mills is helping several retailers ensure the right assortment of products is shelved in the most shopable way. For example, based on Category First’s research, General Mills recommends retailers arrange bars and shelve them by daypart, such as breakfast-on-the-go, and place these impulsive morning product purchases near the top of the shelf and place destination bars (such as high-protein bars) closer to the bottom. Further, the company suggests organizing the set by the type of bar, followed by brand blocking. The sweet planogram should consist of cookies, brownies and treat bars. Sweet consumers make their decisions first based on time of day and second on whether or not they are in the mood for a sugar fix or something more indulgent (chocolate). The last step in the decision-making process for sweet snacks is whether they need a small snack to tide them over or something more substantial to fill them up. A separate sweet section provides shoppers solutions for their need state, offering indulgent items and satisfying cravings. Category First’s recommendation is to organize the sweet section by segment (cookies, bakery and treats) and by brand, placing like items together to make it easy for consumers. Retailers should try to group non-chocolate sweet items together and then transition into bakery-type items, leading into a move to chocolate/indulgent offerings. For example, cookies should be grouped together and organized by brand and flavor. Treat bars, which are mainly purchased and consumed in the afternoon, should be merchandised in the sweet set with other indulgent items, not with breakfast items. They make a great anchor for the section.

cAndy:

the Hershey co. Helping to capture the seasonal shopper in a time of decreased store traffic, Hershey has found that retailers need to rely on incremental items and basket building as important levers of growth. Hershey has been leveraging insights and core brands to help retailers drive seasonal sales and is confident that retailers have not hit a plateau on the seasonal opportunity. The convenience channel sold more than $137 million of seasonal product in the last 52 weeks, with an 8-percent CAGR during the past four years, according to Hershey. Seasonals have grown three times faster than everyday candy/mint/gum for the last three years. Even with all this growth, there is an estimated $162 million fair-share gap opportunity in instant consumable seasonal items still left to be captured in the convenience channel. With the four core seasonal-selling windows — Halloween, Holiday, Valentine’s and Easter — covering up to 65 percent of the year, there is a lot of time to capture that seasonal shopper. Confection household penetration peaks in seasonal months as infrequent candy shoppers have an enhanced permissibility, formed by traditions and emotional connectivity with seasons. Hershey has done extensive research to understand the seasonal shopper and the elements that drive each season. Because the role of confection increases in a consumer’s life during seasons, seasonal products are highly incremental. In fact, the top single-serve item in all seasons, Reese’s Shape King Size, is more than 95 percent incremental to the same everyday item. In 2010, Hershey leveraged insights of c-store trip missions around the Christmas holiday and uncovered a “gifting” trip mission. This brought the Reese’s 1-pound bar to the convenience channel. The gifting trend has continued to grow every year and proven to be an incremental, high retail purchase leading to more innovation from both Hershey

and other manufacturers. Gifting items have also proven to be basket builders, along with gift cards and other items. In fact, seasonal candy shoppers in general spend up to 37 percent more in-store than those buying just everyday confection. Hershey believes the key to a retailer’s success with seasons relies on three things: • Timing: Early execution is important as more than 60 percent of seasonal sales are unplanned purchases in the first few weeks of the season. All seasons have a recommended display period of two months leading up to the season except for Easter, which consumers start seeking out three months before. • Assortment: 70 percent of seasonal sales occur in the top five items of every season, so there isn’t a need to go too deep into assortment without beginning to cannibalize. • Execution: The most successful seasonal retailers have a designated area for seasonal products that shows consumers the retailer is in the season. Retailers that have implemented dedicated seasonal space have shown growth six times the volume, compared to placing seasonal product randomly throughout the store. Hershey continues to see tremendous opportunity to not only help retailers that are participating in seasons currently find more growth, but to also gain new retailer participation from those that have never carried seasonal product before.

FoodService/cold & Frozen BeverAGeS:

the coca-cola co. The Coca-Cola Freestyle family of ice-cooled beverage dispensers has been a success with consumers ever since entering the marketplace. The availability of Coca-Cola Freestyle in c-stores makes it a special destination for shoppers, with 89 percent of consumers saying they are much more likely to visit a c-store with a Freestyle because “they have brands and flavors I can’t get anywhere else.” Company research has also revealed about the Freestyle that: • Guests are 1.5 times more likely to visit a c-store that offers Coca-Cola Freestyle; • 82 percent of c-store guests say Freestyle offers a beverage for every type of occasion; • 90 percent find it more appealing than other fountain dispensers; and

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FEATURE

• 84 percent say it’s easy to find the beverage they’re searching for with Freestyle. The average consumer today seeks and expects a wide variety of options from retailers, and Coca-Cola Freestyle offers c-store shoppers unprecedented variety and choice of beverages and flavors. Coca-Cola’s proprietary research shows that more choices lead to more sales, with 42 percent of Freestyle consumption coming from brands that are otherwise not readily available. With the Coca-Cola Freestyle 9000, customers have the option to choose from more than 100 beverages, including 70 low- or no-calorie options and more than 90 caffeine-free choices. Examples include Coke Cherry Vanilla, Caffeine-Free Diet Coke with Raspberry, Sprite Zero with Vanilla and Fanta Peach. The smaller CocaCola Freestyle 7000 provides the same benefits as the original, offering more than 60 beverages to retailers with space limitations. Both units meet consumers’ need for variety and choice, while offering a fun and engaging experience. Coca-Cola Freestyle uses proprietary Purepour Technology, which employs “micro-dosing” to deliver a wide range of beverages on demand. The space-maximizing technology does not require syrup, but instead uses concentrated ingredients stored in cartridges inside the Coca-Cola Freestyle cabinet to dispense and meter fluids with a high degree of accuracy. The system leverages daily consumption data information from each dispenser to forecast and create product order recommendations for every customer outlet. The dispensers “phone home” daily, reporting all 8-ounce pours by brand and time of day. This information can help retailers efficiently optimize and manage their beverage inventory, ensuring they minimize their amount of on-hand inventory while always keeping the right brands in stock. Coca-Cola continuously introduces new supportive technology to make retailers’ jobs easier as they operate their Coca-Cola Freestyle dispenser. One example is iLearn crew training videos. These interactive, update-able and effective training videos are made specifically to walk retailers’ crews through each step in operating and maintaining the Freestyle system. In addition, all Coca-Cola Freestyle cartridges

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began transitioning from existing hard-shell plastic to new paperboard packaging, called SmartPAK, in April 2015. These space-saving cartridges are easy to change out and recycle in-outlet, promoting an eco-friendly supply chain by further reducing packaging waste and ingredient cost, the company noted. To help retailers promote Freestyle, Coca-Cola offers specialized merchandising solutions for retailers to place in key areas around the store: door clings in the entrance zone; register toppers and counter mats in the counter zone; and ceiling danglers and table tents in the beverage zone. These pieces include specific messaging based on shopper marketing research for each zone. Another unique opportunity for shopper engagement is the Coca-Cola Freestyle mobile app, through which shoppers can create their own beverage mix and transmit it directly to a Freestyle dispenser, which will pour the mix on the spot. This function is available on all self-serve Freestyle 9000 dispensers. Initial testing showed that 97 percent of app users share their custom mixes on social media, and 94 percent say mixing makes the beverage experience more enjoyable. The Coca-Cola Freestyle not only drives shopper preference, but also drives increases in total store profitability. C-stores with a Freestyle saw increased sales in all package formats, with bottled-beverage servings and frozen servings increasing by 2 percent and fountain servings growing by 12 percent, the company reported. Coca-Cola Freestyle provides convenience store retailers with an attractive and successful tool that drives total beverage sales and traffic, creates an instore destination for shoppers and offers innovative ways to meet retailers’ business needs.

FoodService/Hot BeverAGeS:

Mclane co. inc. Collaboration and customization drive coffee category growth for retailers, which is why McLane Kitchen partners with JCX Coffee to provide a turnkey program that enables operators to offer hand-roasted specialty coffee in a strategic merchandising setting custom-fit to each environment. JCX Coffee was built on the belief that everyone deserves a great cup of coffee no matter where they choose to buy it. The coffees are sourced worldwide and many are sustainably certified: Rainforest Alliance, Fair Trade, USDA Organic and Direct Trade. Not only does the JCX Coffee program offer a variety of specialty coffee and coffee products, but it

FEATURE

is designed with a solution for every detail of a coffee program, McLane noted. Along with its coffee supplier Java City, McLane starts by evaluating an operator’s existing coffee offer to understand the execution and performance of a retailer’s current program as well as the estimated potential of the operator’s future coffee program. Once the evaluation is complete, the category management team provides product and merchandising recommendations to the operator. Once agreed upon, the goal in the transition is to make the changes as seamless as possible, installing state-of-the-art equipment, compelling graphics, point-of-purchase (POP) and bringing the right products at the right price to jumpstart the new and profitable program. JCX Coffee branding includes coffee, condiments, cups and paper products from McLane. The program allows for customization within the product line to create a targeted offering. This level of customization allows the operator to regionalize their offering to create a stronger product appeal to their target demographic. For example, JCX Coffee offers a sweet, cinnamon-flavored coffee that is typically labeled “Cinnamon Toast,” but for regions with a heavy Hispanic population, it can be offered as “Café de Olla.” Customized marketing allows the operator to speak directly to its target demographic, resulting in higher sales. JCX Coffee continues to keep its program fresh and on trend. At the end of 2015, it officially launched a new look and feel designed to detail the handroasted specialty coffee offering. In addition, a full line of sustainably certified coffee was added to the program. Sustainable coffee offerings are easily identified with their corresponding certification. According to McLane, research continues to show the growing importance of health and sustainability when consumers decide what brands to buy. The redesign and extended product offering is a direct response to this. The program also offers traditional branded POP, including pumptoppers, window clings and frequentpurchase punch cards. McLane Kitchen distribution

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trucks feature enticing imagery of JCX Coffee that can be seen on all the major U.S. highways. By utilizing the JCX Coffee program supplied by McLane Kitchen, hundreds of locations have implemented a turnkey program that’s resulted in more than 20 pounds of coffee sold per location per week. Compared to direct-service-delivery coffee programs, operators are selling more while garnering efficiencies associated with fewer invoices and deliveries, McLane said. Operators reap more profits with the JCX Coffee program because there are no royalty fees and the specialty offering allows for a higher retail price. Operators of the JCX Coffee program typically see a 55-percent gross margin per cup on hot beverages.

FoodService/PrePAred Food:

AdvancePierre Foods Building on the growth and popularity of its BIG AZ brand and consumers’ increasing demand for breakfast and big value, AdvancePierre recently expanded this brand into the breakfast sandwich category. With the successful launch of three breakfast sandwich items last year, the BIG AZ brand has brought big value to the morning daypart while the company continues to grow its established Hot ‘n’ Ready breakfast sales with new items and locations. AdvancePierre supports its retail offerings with pieces including warmer and cooler programs, shelf trays, wobblers and signage, and often works with customers to create custom pieces to meet their needs and promotions. With the recent acquisition of the Landshire family of products, AdvancePierre has brought into its portfolio a variety of hot and cold sandwiches with extended refrigerated shelf life, as well as hand-wrapped, upscale, deli-style sandwiches with a fresh look and appeal. Pairing these offerings with the full line of AdvancePierre products, programs and distribution network, the company has enabled significant growth and expanded market reach. AdvancePierre’s consumer insights team monitors food trends and regularly conducts consumer-level

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FEATURE

product evaluations and taste panels to ensure the brand continues to provide leading-edge products, satisfying taste profiles and high-performing products for the retail environment. Its research and development team includes experts in sandwich development as well as bakery and meat science, and its product testing facilities include a variety of heating and preparation equipment to ensure that it can validate preparation instructions and performance for different in-store applications. AdvancePierre supplies a full line of assembled and packaged sandwiches in a variety of flavors, sizes, price points, brands and package formats. The acquisition of the Landshire sandwich brands and its Caseyville, Ill., sandwich facility and Better Bakery Co. earlier in 2015 enabled AdvancePierre to increase its portfolio of packaged sandwiches to include a broad selection of deli-style sliced meat and salad sandwiches, and enrobed pretzel melt sandwiches. With four sandwich assembly and two bakery plants, AdvancePierre is vertically integrated, baking much of the breads used in its sandwich assembly on-site. In addition, as an added value, the company develops, processes and cooks most of the meats used in its sandwiches at its six protein processing facilities.

GenerAl MercHAndiSe:

Mclane co. inc. McLane took the initiative last year to seek out valued novelty suppliers and offer a great lineup of items to fit the retailer’s needs on an in/out basis. Overall, McLane recognized the opportunity to offer a wholesale solution to the direct-store-delivery novelty networks currently in c-stores. Not only does this reduce the number of trucks delivering merchandise in the retailer’s parking lot, but it gives customers ease of mind that these great items can be delivered throughout the week with their normal deliveries and reduces the opportunity for out-of-stocks. McLane’s category management team used several tools to initiate interest and increase sales throughout the year, including the McLane Virtual Tradeshow, discussions in McLane’s Center for Category Innovation (formerly the McLane Lab Store), and educational webinars with the McLane sales team in order to help gain awareness of the offerings and highlight the featured vendors. Additional time and effort has also been put into seeking new items and additional offerings for the past

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several months related to new movie-themed merchandise, college football and other seasonal occasion treasures. These efforts yielded great results in 2015 both in dollars and units, and as a result, McLane anticipates this category will continue to grow significantly in 2016. In general merchandise, novelty is an especially key driver for impulse sales in convenience/truck travel. Year to date, general merchandise subcategories such as batteries, novelty, hardware and school/office supplies are all growing for McLane, which has seen an 8-percent increase in sales across the category overall and triple-digit growth on key vendors for novelty through use of the marketing platforms mentioned.

otHer toBAcco ProductS:

Swisher international inc. One of the most significant challenges in the other tobacco products (OTP) category during the past two years has been the expansion of limited-time offerings (LTOs) being promoted by multiple manufacturers. The Swisher category management team worked proactively to understand this task from both an analytical and channel perspective to determine proper space allocation by segment in this changing environment. Swisher found that despite competitive pricing, the overall category has delivered healthy growth on the strength of a “Right Items in the Right Stores” category management strategy. It has incorporated both a detailed and high-level approach to assist retailers in analyzing adult consumer preferences and purchase patterns. By utilizing MSAi distributor-to-retailer data, the company has been able to develop specific, tailored analytics for its retail partners in an immediate fashion. Swisher works vigorously on innovative responses to adult consumers’ preferences across all of its major brands, including Swisher Sweets and Kayak. Swisher Sweets launched a limited-edition line of large cigars with a goal to create unique and creative blend profiles, and generate adult consumer excitement in the category. Due to the popularity of Sticky Sweets and Summer Twist, Swisher Sweets has continued the trend

of releasing new and intriguing blends including Calypso Cream and Wild Rush. Most notable in terms of innovation was the January 2015 launch of unsweet Swisher Diamonds, which has become the No. 4-selling large cigar based on the MSAi database as of Nov. 28, 2015. Last year, Swisher finalized the purchase of Drew Estate, a premium cigar company. In collaboration, Swisher introduced the ACID Cigarillo in three distinct blends. These brands offer enhanced profits for distributors and retailers. With premium brands like ACID Cigarillo and ACID G-Fresh, Swisher hopes to grow the premium category in the c-store market. The foundation of Swisher’s category management efforts is a balanced portfolio approach with an intense focus on innovation, analytics, and execution of winning strategies focused on the success of the entire OTP category. Utilizing MSAi insights, programs and planograms are customized to meet specific customer goals and adult consumer demands. The Partners in Profit program is a perfect example of the execution of this strategy. The category captain provides its partners with revenue-generating products and promotions in all of its OTP lines with the objective to grow not only Swisher sales, but the full OTP category in every store. Retailers who have participated in Partners in Profit have increased volume by 23 percent in the large cigar category based on the MSAi database as of Nov. 28. Swisher believes one of the key pillars of category management is people. It provides highly trained individuals, including certified national account managers, to develop proven category recommendations that are actionable for retailers. Swisher was one of the first companies in OTP to become involved in category management certification.

PAckAGed BeverAGeS:

dr Pepper Snapple Group Despite growth in the channel, there are some trends working against convenience stores. Chiefly among them are the trend toward fewer fuel trips driven by the growth in fuel efficiency and the generational shift in driving habits, as well as the declining trend in smoking.

In spite of the declines in these two trip drivers, however, there is a bright spot: Beverage and food trips have increased, with 58 percent of c-store visitors now saying that beverages and food are the primary reasons for their trip, according to Dr Pepper Snapple Group. Inside the beverage business, there has been a shift in the importance of the categories. Over the last decade, energy has grown from a niche part of the business to the second-largest category. Many retailers have given it the lion’s share of their attention and, in many cases, the largest share of their space. With that said, the largest category continues to be carbonated soft drinks (CSDs), selling almost twice as many units as energy, according to Nielsen. With beverages becoming the driver of trip growth and CSDs remaining the largest category within that business, it is critical that retailers ensure their CSD business is healthy. With the focus on energy and new beverage categories, many shoppers have begun to feel as if variety is suffering with a net of 27 percent stating they would like to see more variety in the category vs. 4 percent who would like to see more energy, Dr Pepper Snapple Group cited. Research also shows that variety in CSD flavors is a significant driver of the business, with 39 percent of shoppers saying they would travel to a different store if the variety they are seeking isn’t available. In fact, within the category, Dr Pepper has seen the explosion of the importance of variety, with non-cola CSDs now making up 57.3 percent of total CSD sales. Still, most c-store operators continue to place colaflavored beverages in the most prominent position in the cold doors, the “Strike Zone,” even though suppliers have found that non-colas are the most impulsive CSDs, with 30 percent of purchases unplanned vs. 15 percent for colas. Based on the sum of its knowledge, Dr Pepper Snapple Group proposed to several of its retail partners the implementation of what it calls the “Flavor Zone.” The implementation of the Flavor Zone, in theory, is very simple: Non-colas and colas are separated, with non-colas placed in the Strike Zone position, therefore not requiring the reallocation of space or the addition or deletion of any SKUs. Despite the simplicity, there was initial reluctance to adoption because of the longstanding reliance upon

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manufacturer contracts in the allocation and positioning of CSDs. However, “a handful of progressive retailers prioritized their shoppers over contracts or the status quo, and implemented the recommendation,” the company explained. For retailers that have implemented the Flavor Zone, there has been category results by growing their 20-ounce CSD dollar sales 6 percent more than accounts without a Flavor Zone implementation. Equally important, the growth has not been limited to non-cola CSDs. Cola CSDs have grown at a 5.7-percent greater pace vs. accounts without Flavor Zone. These results affirmed the company’s hypothesis that moving colas — a much more heavily planned purchase — out of the Strike Zone would not negatively impact sales, and would be offset by the increased traffic to the CSD cold doors due to the perception that there was greater variety. In addition, video monitoring by VideoMining has shown conversion rates for Flavor Zone stores increased by 2 percent for the category, cross-purchases for colas with non-colas increased by 2 percent, total basket increased by 2 percent, and CSDs within the basket increased by 2.5 percent. Shopper intercepts also proved that Flavor Zone implementation resulted in greater customer satisfaction with 90 percent of respondents stating the new arrangement made shopping easier and 69 percent saying they were more satisfied with the new arrangement. The Flavor Zone also decreased the total time spent shopping the CSD door by 16 percent, from 12.6 seconds to 10.6 seconds on average, giving shoppers back more time to shop the rest of the store.

PAckAGed Sweet SnAckS:

Mckee Foods corp. Across the country, the baked sweet goods (BSG) category has grown by more than 30 percent in c-stores thanks in large part to premium coffee being offered. McKee Foods has taken the lead in ensuring its retail partners are positioning themselves to capitalize on category growth. For McKee, this means providing everything from monthly category scorecard updates and insights, to planograms and other space management recommendations, to shopper marketing cam-

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paigns that align to the retailer’s strategy which oftentimes is to reward loyal shoppers while attempting to grow the BSG category. One of the primary services McKee provides its retail partners — including Pilot Flying J, Kroger Convenience and headquarters, and MAPCO — is a monthly category scorecard update. Each scorecard is customized to the retailer’s specific requests for information, but all include the top-performing brands for the category and the performance of each subcategory over the past four weeks, 12 weeks, 52 weeks and yearto-date metrics. By examining the scorecard over these time periods, McKee Foods is able to determine which brands and subcategories are leading or lagging in the category and make recommendations to the retailers that will help grow the category. The McKee Category Insights Team has been working with one large, multi-division c-store chain to assist it in centralizing its operations through consistent communication with the retailer’s category manager, individual banner category managers, and a space management consulting firm. With this retailer, McKee provides SKU rationalization for each planogram to ensure the BSG category remains strong. For example, McKee recommended one of the retailer’s banners introduce Bimbo to the category because the brand is very popular with first-generation Hispanics. Hispanics make up one-third of the retailer’s trading territory. In the summer of 2015, McKee also approached c-store retailer Twice Daily with shopper marketing ideas to help it grow the BSG category. The focus was to put the shopper at the center of McKee’s marketing efforts, while providing better selling opportunities to the wholesale distributors, all while supporting the strategic goals of Twice Daily’s category manager. The Twice Daily category manager was interested in targeting loyal shoppers and driving customers inside the stores. McKee conducted a Text Living shopper marketing campaign where loyal customers who signed up for a text alert were notified that they would receive a free Coffee House Café item by simply going into the store and presenting the text message. The campaign was the most successful text shopper marketing program Twice

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Daily had done, with a 6.1-percent redemption rate, beating a previous energy drink campaign. In the fall of 2015, McKee was approached by c-store chain Thorntons Inc., which asked for insights on millennial shoppers. McKee’s Category Insights Team worked closely with the retailer’s in-house consumer insights department and provided a 14-slide presentation that answered all of Thorntons’ questions and also explained what efforts McKee was making in targeting millennials. Thorntons was so pleased with the presentation that the retailer invited McKee to conduct a full category review in early 2016 to better help grow its BSG category. According to McKee, it understands that a strong, profitable BSG category overall is good for its Little Debbie brand and thus it has made a commitment to helping category managers grow their business. The autonomy McKee gives its Category Insights Team shows the commitment to growing the category as a whole, and not just growing Little Debbie in the short term.

SAlty SnAckS:

the kellogg co. Snacking occasions are blurring. The number of choices for snacking is rapidly increasing. This shift in behavior means planned snacking at home is on the decline and being replaced by immediate, on-the-go snacking. The convenience channel is the sweet spot for this change in consumer behavior. More than twothirds of immediate-consumption shoppers purchase weekly and many of these shoppers buy on impulse. Millennials and Hispanics are also key c-store targets as they are heavy on-the-go snack buyers. Knowing that salty snacks are the No. 1 in-store category growth driver for c-stores, Kellogg took a unique approach looking at salty snacks in 2015. Kellogg understood that convenience shoppers wanted more than just a potato chip for a salty snack. Cheese crackers and snack mixes are strong convenience segments and had untapped potential. Kellogg repositioned its Cheez-It portfolio to meet this untapped consumer demand for on-the-go options

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in salty snacks. In addition to the traditional cheese crackers Cheez-It is already known for, Kellogg helped convenience store retailers realize even greater basket rings with the iconic brand by expanding the line with new flavors and food forms; a right price strategy; consumer offers; and creative in-store marketing support. The Cheez-It salty snacks portfolio now features eight Cheez-It branded snacks that can be merchandised together to drive impulse and multiple purchases, including Cheez-It Duoz (available in Cheddar Jack/ Baby Swiss and Sharp Cheddar/Parmesan varieties), Cheez-It Snack Mixes (available in Original and Double Cheese) and Cheez-It Grooves, a lighter, chiplike snack (available in Zesty Cheddar Ranch and Sharp White Cheddar). To gain attention and drive excitement and increased purchases of this brand set, Kellogg encouraged retailers to implement and promote an everyday value pricing strategy of $1.99 per bag. This initiative included placement of placards to assist retailers with their salty snack planograms (stickers placed on Cheez-It salty snacks called attention to the new right price), a 22-cents-off consumer coupon, and in-aisle point-of-sale. Additionally, Kellogg provided customizable POS along with creative, traffic-stopping, in-store marketing kits to drive bundle purchases of Cheez-It with the choice of a fountain drink. During the promotion period, when consumers purchased any one single-serving size of Cheez-It Grooves with any-size fountain drink, they would save up to 75 cents on their purchase. The kit included table tents, posters, fountain-drink-station stickers and product shelf marketing. This repositioning gave convenience store shoppers choices outside of the traditional salty snacks and helped drive category growth for Kellogg’s retailer partners. The company is committed to supporting and evolving the Cheez-It brand by continuing to deliver consumer-preferred, high-performing innovation, category insights, impactful marketing strategies and the consumer advertising needed to drive excitement and greater turns and profit.

wine & liquor:

e. & J. Gallo winery As the wine category continues to grow within adult beverage, so do the number of retailers that offer wine. It seems each day a new chain or independent retailer wants to offer a wine selection in their store. However, there is one channel that has offered wine for many

FEATURE

years, but still struggles to generate awareness with consumers. RaceTrac Petroleum Inc. recognizes this and is determined to increase wine conversion in the convenience channel. Since 2008, E. & J. Gallo Winery has been collecting data to understand the convenience shopper. One striking discovery is, on average, 55 percent of wine drinkers are unaware that c-stores sell wine. Additionally, many current beer customers are also wine drinkers, but the majority remain unaware that wine is also sold in convenience stores. To tackle this, RaceTrac and Gallo partnered in 2015 to grow overall wine awareness with the goal to make RaceTrac the c-store destination for wine. With knowledge that the typical convenience wine shopper is male, younger, more affluent and educated, and claims to be very confident and knowledgeable about wine, Gallo started by ensuring RaceTrac was offering the correct assortment of wine. By using a custom weighing system with RaceTrac data and IRI Market+ Convenience data, each item was given an overall score, which was used to make sure the best products from the chain, the market and the convenience channel would be offered in the RaceTrac set. RaceTrac also utilized internal scan data to provide Top Brand, an “all you need to know about the category” report that used Gallo’s customized systems. Using this report, the partners could quickly analyze the business and make sure to capture the right opportunities. Once Gallo presented a best-in-class assortment to RaceTrac, a “Power of 3” set philosophy was used to drive awareness at the shelf. Knowing c-store wine customers consider themselves somewhat knowledgeable about wine, Gallo felt this solution would offer shoppers quick guidance using signage, so they could quickly and confidently make their selection. The set flow revolves around the concept that we are constantly surrounded by things in groups of three. For example, we learn our ABCs and 123s. When we purchase fuel for our car, we decide between unleaded, premium and super premium. The same concept is applied to a wine set displaying good, everyday wines;

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premium, great quality wines; and award-winning, best wines. With quality signage, this simplifies the decision process for the consumer. Gallo’s research also revealed that: • The c-store wine buyer enjoys wine frequently, but they generally buy for immediate consumption, or on impulse; • They are two to three times more likely to purchase wine on sale or display than any other wine retail outlet; • Of those buying wine within c-stores, approximately half are finding their wine within the standard wine section; the rest are shopping the cold box and displays. These findings were used to launch a national programming calendar to include impactful displays. Each program was designed to be merchandised outside the wine section to increase wine awareness. Substantial sales lifts occurred across all brands programmed. One such program utilized the Liberty Creek brand and its tetra package in Texas. The program ran for 90 days and was displayed in a three-tier wire rack. This particular item saw 477-percent growth over the average 90-day depletion number, immediately making Liberty Creek the No. 1-selling new item and No. 3 growth item in Texas RaceTrac stores, Gallo cited. Gallo’s strong distributor sales network also helped provide more local expertise, particularly about foot traffic within the stores and factors that affected the type of shoppers. Is it a rural or city store? What other businesses surround this account? Is it near a beach or major theme park? What kinds of nationalities are prominent in that particular area? Such insights allowed for custom programming and even varied assortment if and where needed. By utilizing these features, RaceTrac’s total revenue has increased, far exceeding the c-store channel’s national growth of 8.7 percent in dollars and 6.3 percent in volume. “As RaceTrac continues to deliver on our mission of making people’s lives simpler and more enjoyable, it has become increasingly important to offer a number of wine varietals that reflect our guests’ preferences,” said Rich Jacobs, director of packaged beverages and tobacco at RaceTrac. “Gallo has been a valuable partner as we have revamped our adult beverage strategy.” CSN Susan Durtschi is president and CEO of Past Times Marketing, a consumer research firm. For the third consecutive year, Convenience Store News partnered with Past Times Marketing to conduct the Category Captains awards program. For more information, go to www.pasttimesmarketing.com.

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