CSN - Feb 2019 by ensembleiq

W H AT â&#x20AC;&#x2122; S N E X T I N C O N V E N I E N C E A N D F U E L R E TA I L I N G

The Food and Drug Administration is shifting its tobacco policy. What will this mean for the c-store industry?

OPPORTUNITY KNOCKS: OUR 2018 GUIDE TO CONSUMER INSIGHTS

FEBRUARY 2018 CSNEWS.COM

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your business

With a unique drive to constantly innovate in every aspect of AGDC, we bring the smartest strategies and comprehensive resources to retailers. We are committed to evolve with the latest industry trends and consumer insights so that we can help elevate your business.

VIEWPOINT

TWIC Celebrates Women’s Advancement in C-store Industry Led by Allison Moran, 2018 Advisory Board will take program to new heights IN THE WAKE OF REPORTS of sexual harassment and gender discrimination across the political, entertainment and business landscapes, many media outlets have declared 2018 the Year of the Woman.

This may seem like a tipping point for women, but to many in the retailing and c-store industries, the role of women as leaders and participants in strategy and business decisions has been evolving steadily for years. When Convenience Store News launched its Top Women in Convenience (TWIC) awards program in 2014, few would have argued that women had achieved an equal seat with men in either management ranks or the boardroom. This month, as we open nominations for the 2018 TWIC awards program, I am heartened by the progress women have made in the convenience store industry (go to www.csnews.com to nominate a deserving woman). In the past four years, more than 200 exceptional women who work for retailers, distributors and suppliers have been recognized. Winners have run the gamut from CEOs to administrative assistants. All of these winners have exhibited the grit and determination necessary to make a positive contribution to their companies and the industry. I’m also proud to announce our 2018 TWIC Advisory Board, which will help steer this

year’s awards program: • Karla Ahlert, RaceTrac Petroleum Inc. • Sarah Alter, Network of Executive Women • Blake Benefiel, Altria Group Distribution Co. • Kimberli Carroll, Ruiz Foods • Pat Cordle, BIC • Elisa Goria, Circle K Stores Inc. • Ruth Ann Lilly, GPM Investments LLC • Alicia Logan, Chevron ExtraMile • Dave Riser, R.J. Reynolds Tobacco Co. • Lesley Saitta, Impact 21 • Diane Wallace, Coca-Cola North America In addition, Allison Moran, former CEO of RaceTrac Petroleum and the 2017 Convenience Store News Retailer Executive of the Year, has agreed to serve as chairperson of the 2018 TWIC Advisory Board. Moran was one of the first recipients of CSNews’ TWIC awards when she was named one of the five Women of the Year in 2014. With the help of our esteemed advisors, we will expand and grow the TWIC program to both recognize women for their contributions to the c-store industry, while also providing training and encouragement to advance women’s careers in the industry. Help us make 2018 not just the Year of the Woman, but also the beginning of a real transformation in our efforts to advance the careers of women in our industry. For comments, please contact Don Longo, Editorial Director, at (201) 855-7606 or dlongo@ensembleiq.com.

EDITORIAL ADVISORY BOARD

EDITORIAL EXCELLENCE AWARDS (2013-2017)

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

2013 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

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

2017 Eddie Awards, Folio: magazine Winner, Business to Business, Retail, Single/Series of Articles, May 2017 Honorable Mention, Business to Business, Retail, Single/Series of Articles, June 2016 2016 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2015 Business to Business, Retail, Single/Series of Articles, August 2015 2015 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Single Article, February 2014 2014 Eddie Award Honorable Mention, Folio: magazine Business to Business, Retail, Full Issue, October 2013 Business to Business, Retail, Single Article, February 2013

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

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

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

Brett Atherton Bolla Management

Jack Lewis GPM Midwest

Jon Bratta Core-Mark International Inc.

Danielle Mattiussi Maverik Inc.

Rick Crawford Green Valley Grocery Edward Davidson ER Davidson & Associates (7-Eleven Inc., retired) Jim Hachtel Eby-Brown Co. Ray Johnson Speedee Mart Kirk Leff McLane Co. Inc.

Kyle McKeen Alon Brands Inc. Richard Mione GPM Southeast Jonathan Polonsky Plaid Pantries Inc. Greg Scriver Kwik Trip Inc. Roy Strasburger Convenience Management Services Inc.

Eye-catching designs, safety, quality, and reliability make BIC® America’s #1 Lighter*. BIC® Full-Size Lighter Only

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*Source: Information Resources, Inc. C-MULO 52 weeks ending 08-27-17

CONTENTS FEB 18

VO LU ME 54 N UMB ER 02

FEATURES

DEPARTMENTS

COVER STORY

VIEWPOINT

STORE SPOTLIGHT

4 TWIC Celebrates Women’s Advancement in C-store Industry Led by Allison Moran, 2018 Advisory Board will take program to new heights.

82 Wawa Goes to Washington The retailer’s inaugural location in the District is also its largest yet.

32 Roadmap to Change The Food and Drug Administration is shifting its tobacco policy. What will this mean for the c-store industry? 40 2018: A Pivotal Year for Tobacco From heat-not-burn products to various regulatory and legislative moves, times they are a changin’.

TWIC TALK

10 CSNews Online OUT & ABOUT

COMPETITIVE WATCH

76 CAUTION: Fierce Competition Ahead Experts predict it’s going to be a rocky year on the convenience retail competitive front.

22 Tech Providers Show Their Stuff at NRF 2018 Retail’s Big Show revealed hot technology solutions for upbeat retailers. 24 New Products SMALL OPERATOR

28 Looking at Your Store With Fresh Eyes How to determine whether you need a turnaround.

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

84 Barbara Poremba, The Coca-Cola Co. The 2014 TWIC Woman of the Year says all leaders have the opportunity to do things differently. GETTING TO THE CORE

98 Resolutions for a Healthier 2018 C-store shoppers place importance on maintaining a healthy diet and lifestyle.

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CONTENTS FEB 18

VO LU M E 54 N UMB ER 02 8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631 (773) 992-4450 Fax: (773) 992-4455 www.csnews.com Direct Mailing Address for Convenience Store News: 11-43 Raymond Plaza West, 16th floor, Newark, NJ 07102 BRAND MANAGEMENT Vice President/Group Brand Director Paula Lashinsky (917) 446-4117 plashinsky@ensembleiq.com EDITORIAL Editorial Director (201) 855-7606

Don Longo dlongo@ensembleiq.com

Editor-in-Chief (201) 855-7608

Linda Lisanti llisanti@ensembleiq.com

Senior News Editor (201) 855-7618

Melissa Kress mkress@ensembleiq.com

Associate Editor (201) 855-7619

INDUSTRY ROUNDUP

CATEGORY MANAGEMENT

Angela Hanson ahanson@ensembleiq.com

Associate Managing Editor (201) 855-7604

Danielle Romano dromano@ensembleiq.com

Assistant Editor (201) 855-7614

FOODSERVICE

14 Fast Facts

52 Getting Better Equipped Advances in equipment and related technology are changing how c-stores do foodservice, but where should retailers invest in upgrades?

16 Eye on Growth

PACKAGED BEVERAGES

12 Immigration Agents Raid Nearly 100 7-Eleven Stores 14 Par Pacific Making the Move Into Pacific Northwest

18 Seen on Social Media 20 People on the Move 21 Supplier Tidbits

58 RTD Ready Six reasons why your stores need to be shelf-solid with ready-to-drink coffee and tea this year.

Chelsea Regan cregan@ensembleiq.com

Contributing Editor (303) 741-3377

Renée M. Covino reneek@aol.com

Contributing Editor (201) 280-2614

Tammy Mastroberte tmastroberte@gmail.com

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

Rachel McGaffigan rmcgaffigan@ensembleiq.com

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

Ron Lowy rlowy@ensembleiq.com

Associate Publisher & Midwest Sales Manager Kelly Fischer (773) 992-4464 kfischer@ensembleiq.com Account Executive, Southeast (803) 315-0694

Cindy DeBerry cdeberry@ensembleiq.com

Account Executive & Classified Advertising Terry Kanganis (201) 855-7615 tkanganis@ensembleiq.com Classified Production Manager Mary Beth Medley (856) 809-0050 marybeth@marybethmedley.com EVENTS Senior Vice President, Events & Conferences Maureen Macke (773) 992-4413 mmacke@ensembleiq.com

HOW TO

GUIDE TO CONSUMER INSIGHTS

46 Create a Personalized C-store for Every Customer Consumers today are demanding a more customized shopping experience, or they’ll go elsewhere.

63 Opportunity Knocks Our 2018 Guide to Consumer Insights spotlights four opportunity segments for c-stores.

CUSTOM MEDIA General Manager, Custom Media (224) 632-8244 AUDIENCE DEVELOPMENT Director of Audience Development Gail Reboletti (224) 632-8214 greboletti@ensembleiq.com List Rental (800) 529-9020

ART/PRODUCTION

66 Millennials of the Moment Paying attention to this largest segment of the population will be key for the industry’s future.

Art Director (224) 632-8245

72 Health-Conscious, But Not Healthy-Reliant Consumers who care about better-for-you products are already regular c-store shoppers, but they want more options.

The Information Refinery Brian Clotworthy

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

64 Step Aside, Bubba Female shoppers are gaining traction in the convenience channel.

70 Hail Hispanics! They are growing in number and in buying power, and they like convenience stores.

Kathy Colwell kcolwell@ensembleiq.com

Director of Production (973) 358-4875 Creative Director (973) 607-1320 Advertising/Production Manager (314) 403-4753

Kathryn Homenick khomenick@ensembleiq.com Colette Magliaro cmagliaro@ensembleiq.com Roz Gilman rgilman@ensembleiq.com Michael Escobedo mescobedo@ensembleiq.com

CORPORATE OFFICERS Executive Chairman Chief Operating Officer & Chief Brand Officer Chief Business Development Officer President of Enterprise Solutions/ Chief Revenue Officer President & Executive Director, P2Pi Chief Digital Officer Chief Human Resources Officer

Alan Glass Rich Rivera Korry Stagnito Ned Bardic Mike McMahon Joel Hughes Jennifer Turner

CONVENIENCE STORE NEWS AFFILIATIONS Premier Trade Press Exhibitor

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

Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by EnsembleIQ, 8550 W. Bryn Mawr Ave., Ste. 200, Chicago, IL 60631. Copyright © 2018 by EnsembleIQ. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Chicago, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

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

NEW LOOK. CLASSIC BLEND. Contact your RAI Trade Marketing Services representative or go to EngageTradePartners.com to learn more.

CSNEWS ONLINE

TOP 5 DAILY NEWS HEADLINES

Speedway Adding 1,000 New Management Positions

On Jan. 17, Speedway held open interviews throughout all 21 states in which it operates. The management roles being added will offer significant advancement opportunities in the future, according to the retailer.

Philip Morris International’s 2018 Resolution Is to Give Up Cigarettes

The tobacco company took out full-page ads in several newspapers in the United Kingdom stating its New Year’s resolution for 2018 is to “stop selling cigarettes in the U.K.” Its goal is to replace cigarettes with alternatives like electronic cigarettes and heat-not-burn products.

QuikTrip, Wawa Lead New Ranking of Top 100 U.S. Pit Stops

The Top 100 Pit Stops in the United States in 2017 list, compiled by GasBuddy, highlighted the best of the best, where drivers can enjoy pleasant customer service, perk themselves up with amazing coffee, use the restroom in peace, and enjoy a perfect pumping experience.

Half of Target’s Stores Will Offer Same-Day Delivery by Early 2018

Target Corp.’s purchase of internet-based grocery delivery service Shipt will enable the big-box retailer to roll out same-day delivery to approximately half of its stores across the country in the very near future. By the end of 2019, the Minneapolis-based company plans to offer all of its major product categories through the service.

What’s In Store: Kum & Go, Love’s, NOCO & Sheetz

These retailers opened new builds and remodeled locations across the country in recent months. Many of the stores include upgraded amenities and expanded foodservice offerings.

EXPERT VIEWPOINT: Increasing the Value of Your Business Underperforming stores are liabilities. They open us up to lots of bad exposure we don’t need when we are working to build a strong and profitable company for ourselves and our family, says Terry Monroe, president and founder of American Business Brokers & Advisors. When you have underperforming stores, you open yourself and your company up to potential claims and lawsuits from employees and customers for all sorts of things that can go wrong in the store, whether they be labor issues, thefts, environmental issues, or slip and falls.

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

ONLINE EXCLUSIVE

8 Consumer Trends for 2018 Smart retailers keep an ear close to the ground to keep up with the latest trends. Consumer trends, in particular, will drive many of the business decisions convenience store operators will make in the coming year. To help you anticipate what’s next, Convenience Store News curated multiple forecasts from leading research and consulting firms to bring you our “8 Consumer Trends for 2018.” These are hardly the only consumer trends to watch for in 2018, but they seem to be the ones most heavily mentioned by prognosticators. For more exclusive stories, visit the Special Features section of www.csnews.com.

MOST VIEWED NEW PRODUCT

Oh Snap! Pretty Peas The newest pickled veggie available under GLK Foods’ Oh Snap! brand are Pretty Peas. Available in single-serve packaging, Oh Snap! Pretty Peas are pickled snap peas fresh-packed with no added brine for a superior crunch, great taste and less mess, according to the maker. They are gluten-free, fat-free and made with non-GMO snap peas. Pretty Peas join Cool Beans and Carrot Cuties in the Oh Snap! line, along with four varieties of fresh-packed, single-serve pickles. Oh Snap! Pickling Co. Appleton, Wis. (855) 572-8800 www.ohsnappickles.com

Moneybags. W∑ nderful Pistachios is the fastest-growing snack brand in the country1 To match record-breaking demand, we’re investing $55 million in marketing Protein-powered, healthy and delicious, they’ve got everything convenience store customers crave To order, call your W∑nderful Sales Representative or 800-528- UTS (6887).

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INDUSTRY ROUNDUP

Immigration Agents Raid Nearly 100 7-Eleven Stores The Jan. 10 action at franchised locations resulted in 21 arrests

U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT (ICE) AGENTS arrived at 98 7-Eleven conve-

nience stores in 17 states and Washington, D.C. to check employees’ immigration statuses in the early morning hours of Jan. 10. They delivered audit notifications and conducted interviews with workers. The initiative was the largest operation against an employer since President Donald Trump took office, according to the agency. Twenty-one people suspected of being in the United States illegally were arrested. The audits could lead to criminal charges or fines over the stores’ hiring practices.

“We are going to be doing more of this work and dedicating more resources to make sure businesses are complying with the law.”

7-Eleven stores were temporarily shut down in California, Colorado, Delaware, Florida, Illinois, Indiana, Maryland, Michigan, Missouri, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas and Washington, as well as Washington, D.C. In response, 7-Eleven Inc. issued a statement saying that the company is not responsible for individual franchise owners’ hiring decisions. “7-Eleven franchisees are independent business owners and are solely responsible for their employees, including deciding who to hire and verifying their eligibility to work in the United States,” the company said in its statement. “As part of the 7-Eleven franchise agreement, 7-Eleven requires all franchise business owners to comply with all federal, state and local employment laws,” the statement continued. “7-Eleven takes compliance with immigration laws seriously and has terminated the franchise agreements of franchisees convicted of violating these laws.”

— Dani Bennett, ICE spokeswoman

Dani Bennett, spokeswoman for ICE, said the 7-Eleven operation would not be an isolated incident. “We are going to be doing more of this work and dedicating more resources to make sure businesses are complying with the law,” Bennett said. “This is a demonstration of our commitment to enforcing the law.”

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

ICE called the Jan. 10 sweep a follow-up to the 2013 raid that lead to the arrests of nine 7-Eleven franchise owners and managers. They were charged with “conspiring to commit wire fraud, stealing identities, and concealing and harboring illegal aliens employed at their stores,” according to the organization. Eight have since plead guilty and were ordered to pay more than $2.6 million in back wages.

INDUSTRY ROUNDUP

Par Pacific Making the Move Into Pacific Northwest Its pending purchase of 33 Cenex Zip Trip stores in Washington and Idaho is just the first step By Melissa Kress

FAST FACTS

Roughly two-thirds of convenience store retailers identify lunchtime traffic as their biggest opportunity.

PAR PACIFIC HOLDINGS INC.

entered into an agreement with CHS Inc. to acquire 33 Cenex Zip Trip-branded convenience stores in the Pacific Northwest for $70 million, plus the value of inventory. The transaction is expected to close during the first quarter.

Par Pacific will also enter into a multiyear fuel supply agreement with CHS to provide refined products to each other throughout their operating regions of Wyoming, South Dakota, Montana, Idaho, and eastern Washington.

“This is an important strategic step as we build on the success of our Wyoming refinery acquisition, which we expect will generate adjusted EBITDA of $50 million in the first full year of our operations,” Par Pacific President and CEO William Pate said during a company conference call held Jan. 10.

“Over time, this acquisition is expected to help manage the natural link of our Wyoming gasoline and diesel production by providing another outlet for our refined products,” Pate said.

This move will give Houston-based Par Pacific a foothold in the eastern Washington and northwest Idaho markets and expand its retail presence outside of Hawaii. It will also further diversify the company’s business unit earnings profile by increasing the contribution of its retail business segment. “We think Spokane and the surrounding communities represent an attractive niche market that is logistically complicated in terms of transportation fuel supply,” the chief executive said. “There are no refineries in the immediate vicinity, so the majority of refined product is supplied from either the Billings, Mont., or Salt Lake City, Utah, refineries.” According to Pate, the Cenex fuel brand is the second-largest brand in terms of area locations. Part of the transaction with CHS is a multi-year agreement to continue to market Cenex-branded fuel principally from CHS’ Billings-area refinery.

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

In addition, “this acquisition will build on our successful Hawaii fuel retail franchise, leveraging our managerial resources in Hawaii and Houston to manage these new retail activities,” he continued. This could be just the first of several retail merger and acquisition moves in the Pacific Northwest region by Par Pacific. “Having a small retail portfolio in Spokane — which we view as an attractive market — gives us our first step into the Rocky Mountains outside of the Wyoming refinery and logistics operations, and it gives us an opportunity to think about growth beyond these retail locations,” Pate said. “As we’ve always said, we felt Wyoming was an attractive refining market. We think Rapid City is an attractive retail market. We would like to continue to grow in that region and we like the characteristics of the Rocky Mountain region, in general, and also the Pacific Northwest,” he added.

— December 2017 quarterly NACS Retailer Sentiment Survey

The number of retail stations offering flex fuels like E85 increased 238 percent from 1,208 in 2007 to 4,077 in 2017. — Renewable Fuels Association’s The RFS2: Then and Now report

Among 2017’s top 10 packaged grocery categories, beverages captured four spots, with liquid tea landing in the No. 1 spot. — The Nielsen Co.

INDUSTRY ROUNDUP

Eye on Growth

Love’s Travel Stops & Country Stores plans to open more than 40 new locations, add thousands of new truck parking spaces, and expand onsite truck and tire care services in 2018. The company also plans to add three hotels in its Love’s Hospitality division. Cleo Bustamante Enterprises Inc. sold eight convenience stores to Kwik Chek Convenience Stores. Five of the stores are co-branded with quick-service restaurants.

The Spinx Co. opened its largest convenience store to date, boasting 18 fuel pumps, a truck diesel island, and more than 40 parking Its latest outlet in Moncks Corner, spaces. The S.C., will soon feature the company’s first express tunnel car wash, too. 6,188-squarefoot Spinx store features a full-service kitchen. Wawa Inc. took up residence in northeast Florida on Dec. 3, when it opened its first two stores in Duval and Clay counties. Dozens more are expected to follow in the next few years.

Convenience store chain Kwik Stop of Fremont County, Colo., was purchased by Alta Convenience. The sale closed in early January.

HUGE SELECTION

Pilot Flying J opened three more locations to close out 2017. New Pilot Travel Center sites welcomed customers in Bensenville, Ill., and Rhome, Texas, while a new Flying J Travel Center rang up its first sales in Tehachapi, Calif.

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INDUSTRY ROUNDUP

Seen on Social Media

Rutter’s, York, Pa. Here we grow again! Rutter’s is hiring Roving Restaurant Managers to be part of our award winning team! Apply Today! #ruttersjobs

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The Spinx Co., Greenville, S.C. Spinx will be hosting a Leadership Fair on Tuesday, January 23rd at The Courtyard by Marriot, located at 115 The Parkway, Greenville, SC 29615 from 9 am - 4 pm There will be open interviews for our General Manager, Assistant General Manager, and Food & Beverage Manager positions. Pay up to $60,000 and great benefits included! Resumes are not required, but are recommended!

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RaceTrac Petroleum Inc., Atlanta Celebrate #GivingTuesday by fueling up at pump #1 at any RaceTrac location today! During the entire month of November, 5% of fuel earnings will be donated to The Michael J. Fox Foundation for Parkinson’s Research!

INDUSTRY ROUNDUP

People on the Move

New Year, New Leadership Several c-store industry players see changes at the top

MULTIPLE COMPANIES IN THE CONVENIENCE CHANNEL came into 2018 with new leadership,

as longtime executives stepped down from their posts. At TravelCenters of America LLC, Andrew Rebholz, a 20-year company veteran and TA’s former executive vice president, chief financial officer and treasurer, took on the role of CEO as former President and CEO Thomas O’Brien resigned effective Dec. 31. O’Brien will remain an employee until June 30 to assist with the transition of his duties. Also at TravelCenters, Barry Richards, a 17-year company veteran and former executive vice president, assumed the title of president and chief operating officer; and William Myers, former senior vice president and chief accounting officer, moved to the position of executive vice president, chief financial officer and treasurer.

development officer for Sunoco from October 2015 to this past June. He was responsible for all business development, and merger and acquisition activities across the partnership. In late December, enmarket named Brett Giesick as its new president. He joined the retailer in February. In his new role, Giesick now has top- and bottom-line responsibility for enmarket and leads marketing, operations, accounting, foodservice, training, fuel procurement, logistics, pricing, real estate and construction, facilities, safety and security, and all other support teams. Lastly, in another notable move, Weigel’s promoted Ken McMullen to CEO. McMullen became the first non-family member to serve as president when he took on that role in 2001. He joined Weigel’s in 1981 as operations manager and his additional roles with the company included vice president of operations and executive vice president.

Sunoco LP welcomed Joe Kim, who has been serving as president and chief operating officer since June, as its new CEO effective Jan. 1. The c-suite change came as former CEO Bob Owens retired at the end of 2017. Owens will continue to serve as a consultant through 2019.

Weigel’s also promoted Douglas Yawberry to president and chief operations officer, moving him from his previous post as vice president of operations. With this change, Yawberry becomes the second non-family member to assume the role of president.

Prior to his most recent appointment, Kim was executive vice president and chief

William B. Weigel, son of one of the company’s founders, now serves as chairman.

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

Supplier Tidbits Nestlé agreed to sell its U.S. confectionery business to Ferrero for $2.8 billion in cash. The transaction is expected to close around the end of the first quarter. Nestlé’s U.S. confectionery business represents about 3 percent of U.S. Nestlé Group sales.

International Smoke Expo November 28-29, 2018 Rosemont, IL

Conagra Brands Inc. is buying Sandwich Bros. of Wisconsin in a deal expected to close in early 2018. The transaction will bring Conagra’s strengths to the frozen handheld category. The Coca-Cola Co. is re-energizing Diet Coke with new packaging, the debut of four new flavors, and a new marketing campaign. The new flavors are Ginger Coca-Cola spoke to more than 10,000 Lime, Feisty Cherry, consumers for ideas and input during Zesty Blood Orange, and a two-year innovation process. Twisted Mango. The Hershey Co. is acquiring Amplify Snack Brands Inc. for $1.6 billion. The deal will broaden Hershey’s portfolio of innovative savory snacking brands. Samuel Adams is now the official beer of the Boston Red Sox. The multi-year pact includes two experiential bar areas at Fenway Park, new brew launches, and visible signage throughout the ballpark. General Mills refreshed its logo to add a red heart atop the familiar cursive “G.” This marks the sixth official company logo in its history. Mark VII Equipment Inc. is partnering with Wash-NShine Car Wash Systems to sell and service Mark VII products in Kentucky, eastern Indiana and southwestern Ohio. The company sees significant growth opportunity in these markets.

A Global Marketplace for Industry Buyers Cigars • Cigarettes • Hookah • E-Liquids Vapor Glass • POS • Shisha • Charcoal RYO • Papers • Machinery • Labeling Stamping • Alternative Products Packaging & Accessories

www.ismokexpo.com To Exhibit: Call Marilene Ramos (203) 483-5774 or marilene@reuterexpo.com To Attend/General Information: info@reuterexpo.com (203) 483-5774

A&W Restaurants Inc. launched an expanded, multifaceted franchising strategy that builds on its success since its acquisition by Yum! Brands. The centerpiece of the campaign is an all-new franchise information website. CSN

20 1 8

Convenience Store News

OUT & ABOUT

Tech Providers Show Their Stuff at NRF 2018 Retail’s Big Show revealed hot technology solutions for upbeat retailers By Don Longo & Chelsea Regan COMING OFF A STELLAR HOLIDAY SEASON,

the nation’s leading retailers gathered in New York City last month for NRF 2018, Retail’s Big Show, the annual technology conference of the National Retail Federation (NRF). This year’s show, held Jan. 14-16 at the Jacob K. Javits Convention Center, featured speakers from major brick-and-mortar and omnichannel retailers like Walmart, CVS, Macy’s and QVC; major service providers like Mastercard, IBM, Microsoft and Kronos; and numerous educational sessions on various technologies and business trends impacting the future of retailing.

director and senior analyst for Oppenheimer & Co. Equity Research. Levanon noted that the “wealth effect” on the consumer psyche from rising housing values and, to a lesser extent, skyrocketing stock prices will keep retail spending strong. “The reversal from negative growth in business investment in 2016 to double-digit business spending in November 2017 also was a major turning point in the economy,” added Levanon, who did warn of increasing tightness in the labor market, which will create labor shortages later this year and next year. “Right now, investors are giddy about what we’re hearing from retailers,” said Nagel, adding that the retailers he’s spoken with are anticipating a huge windfall from the recently passed tax reform legislation. “Retailers are very excited about the tax reform package that was passed,” he said. “The math is simple. Domestic retailers are one of the highest-taxed sectors in the economy. Costco, for example, will save over $450 million a year due to lower tax rates, and Home Depot says they’ll save $1.6 billion. Retailers will have to find ways to invest that money into their companies, which bodes well for spending on new technology. ... They’ll face consumer backlash if they simply use that money to buy back their own stock or increase dividends.”

There was clearly an upbeat attitude as retailers achieved a “stellar performance” this past holiday season, according to NRF Chief Economist Jack Kleinhenz. “We saw strong job growth in October and November. A 3.5-percent pickup in disposable personal income. Home values and stock prices soared, and consumer confidence is high,” Kleinhenz noted in explaining the reasons for the strong retailer performance at a special Retail Economic Outlook session. On the panel with Kleinhenz were Gad Levanon, chief economist for The Conference Board, and Brian Nagel, managing

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Of course, the main focus of NRF 2018 was on technology, with exhibitors showcasing all kinds of innovative solutions to help retailers operate more efficiently and effectively. Among the major trends Convenience Store News editors noticed were technology to enable dynamic shelf pricing, the Internet of Things (IoT), cloud enterprise solutions, click-and-collect options, digital signage, task management solutions, assortment optimization, data security, loyalty and more. For a selection of what solution providers were showing that has application for the convenience store industry, go to the Awards & Events section of www.csnews.com. CSN

NEW PRODUCTS

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1. Doritos Crunch Nuts & Crunch Mix

2. Javamelts Sweeteners

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4. Blackeye Roasting Co. Nitro Cold Brew

PepsiCo’s Frito-Lay Division introduces two new additions to the Doritos brand: Doritos Crunch Nuts and Doritos Crunch Mix. Both new products are peanut-based snacks available in Nacho Cheese and Cool Ranch varieties. Doritos Crunch Nuts include roasted peanuts wrapped in a Doritos Nacho Cheese or Cool Ranch flavored shell. Doritos Crunch Mix contains crunch nuts along with 3D triangles, puffs, pretzel bites and corn sticks seasoned with Doritos Nacho Cheese or Cool Ranch flavoring. Both products have a suggested retail price of $1.99.

Javamelts are an innovative and convenient new way to flavor and sweeten coffee. Available in four gourmet flavors — Hazelnut, French Vanilla, Mocha and Caramel — the individually wrapped, non-dairy flavored sweeteners make for a quick and simple way to take control of the taste of both coffee and tea, according to the maker. Javamelts are made with 5 grams of real sugar and are only 20 calories each. They have a shelf life of up to one year, and no refrigeration is required. Javamelts are offered in a bulk pack of 200 individually wrapped pieces of one flavor for easy delivery and storage for $36 wholesale.

Alert Caffeine Gum is a new caffeinated gum from Mars Wrigley Confectionery that is designed to gives adults an innovative, simple and portable alternative to energy drinks, coffee and soda. One piece provides 40 milligrams of caffeine, about the same amount, on average, as a half cup of coffee, one 12-ounce can of soda or half of an 8-ounce energy drink, according to the maker. The line includes Alert Caffeine Gum Mint and Alert Caffeine Gum Fruit.

Blackeye Roasting Co. Nitro Cold Brew has a new formula, new packaging and new flavors. The brand’s signature drink has been reformulated with a new taste profile and is now preservative free and available in White Chocolate and Nitro Cocoa varieties. Both new flavors are made with a proprietary blend of cold brewed coffee and nondairy based creamer, making them shelf-stable and extra creamy, according to the company. Additionally, Blackeye’s packaging has been redesigned to have a sleek, new look. The shelf-stable cans are taller and slimmer and have transitioned their branding to feature a matte black background.

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5. Hershey’s Cookie Layer Crunch Triple Chocolate Hershey’s Cookie Layer Crunch is now available in a Triple Chocolate variety. The newest flavor is made with chocolate crème, chocolate cookie bits, and milk chocolate. Hershey’s Cookie Layer Crunch bars feature layers of crunchy cookie bits and decadent filling, all surrounded by smooth and creamy Hershey’s chocolate, according to the company. Triple Chocolate joins Caramel, Vanilla Crème and Mint Crème varieties in the line. The Hershey Co. Hershey, Pa. (800) 468-1714 thehersheycompany.com

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Looking at Your Store With Fresh Eyes

SMALL OPERATOR

RE RES

How to determine whether you need a turnaround IT’S HAPPENED TO ALL OF US. A visitor who you haven’t seen for years comes by to stay at your house for a couple of days. This is the home you’ve lived in for several years and you are house-proud. You clean it regularly. You even pick up the dirty laundry when you aren’t expecting guests. The place looks great!

By Roy Strasburger, President, Convenience Management Services Inc.

After a day or so, the conversations become very comfortable and you and your guest are able to easily mention the first things that start coming to mind. The “polite visitor” filter has been lowered and your guest starts pointing out things around the house you hadn’t really noticed: a crack in a figurine on the shelf, the faded colors in a photo on the wall, a sink faucet that won’t stop dripping. Then, a magical transformation happens — you start anticipating what your guest is going to say and you start viewing your house through their eyes. Small things start to spring out at you: peeling paint on the door frame, a loose piece of carpet, dust bunnies under the bed. The horror! How did this happen? Of course, these things can be repaired and fixed — if only you had noticed them. But you have to notice them first. This is similar to the frog in the boiling water analogy. You know the one: If you put a frog into a pot of boiling water, it will jump out immediately. However, if you put the frog in a pot of tepid water and turn on the heat, the frog won’t notice the increase in temperature and will soon be sitting in the boiling water. This is what happens in our stores. Incremental changes are very difficult to observe, especially if you are involved in the day-to-day details of running the business and are spending all of your time in the store. You have no perspective as to what is really happening because you live with it every day. The problem is that your customers don’t spend as much time in your store as you do and they notice the things you

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might fail to see: the stains on the shelves, the dried milk on the floor of the cooler, the dust on top of the cans of beans. All of these small details add up to a larger picture and affect the impression customers have of your store. Would you want to buy food from a store that is covered in dust or has missing tiles in the bathroom? Would your customers? So, how do you gain the perspective you need to be able to see what your store really looks like? Perhaps the easiest thing to do is take a vacation and get out of the store for a while. A break of a week or two will allow you to take in new stimuli from being in other places, which will crowd out the familiarity you’ve developed with your store. One of

your business

ÂŠ2017 Altria Group Distribution Company | For Trade Purposes Only

SMALL OPERATOR

the things I like to do is visit other stores and observe things I think the operator has become oblivious to. Another approach: What would you change if you bought that store during your visit? When you come back to your store, you will be able to objectively look at it with fresh eyes, but this will only work if you make the conscious effort to closely inspect your store immediately upon your return. Look for the types of things you saw in the other stores, and do it before you become over-familiar with your store again. The second way to see the store from another perspective is to ask a colleague (or better yet, a competitor) to walk the store with you and point out what they see. I promise you that you will then notice at least two things for every one they point out. I admit this can be a painful way of getting the result. No one wants to hear about their deficiencies, but keep the long-term objective in mind — the more things you fix, the better your store will be, the more your customers will like it, and the better your sales will be. A third way to view your store is to create your own formal inspection process. This is much harder than it sounds because you have to overcome the internal bias I mentioned earlier. Create a checklist and carefully scrutinize every inch of your store. Look closely at the floors, the shelves, under the products on the shelves, the walls, the corners, the ceiling tiles, and the interior walls and floors of your coolers and refrigeration units.

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Don’t limit your inspection to only the areas customers see. Check the storerooms, closets, inside the cooler, under the shelving units, and behind the equipment. Write down every problem you see and take photos so that you can recreate the inspection in three months’ time and compare your previous notes. You will find that one issue will lead you to think about another. Something you see in the storage area will cause you to think about looking under the sales cabinet. Imagine that you are a detective and give yourself points for each item you find. This is a game where you want a high score because it is evidence that you are being serious about making improvements. Keep in mind that the most observant walkthrough and the most ruthless inspection routine count for nothing if you don’t fix the problems. In a perfect world, the number of issues you find would go down with each subsequent tour of the store as you find and fix problems. Unfortunately, in the real world, new defects emerge regularly and things need to be fixed again and again. In reality, it is a never-ending task. As Neil Young sang, “Rust never sleeps” and dust never goes away. Good luck with honing your new vision. You, your customers and your business will be the winners in the game of “Spot the Problems.” CSN Roy Strasburger is president of Convenience Management Services Inc. (CMSI), a privately held retail consulting, operations and management provider serving the small-format retail industry nationwide. CMSI operates retail locations for companies that don’t have the desire, expertise or infrastructure to operate them. Learn more at www.cmsistores.com. Editor’s note: The opinions expressed in this article are the author’s and do not necessarily reflect the views of Convenience Store News.

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The Food and Drug Administration is shifting its tobacco policy. What will this mean for the c-store industry? BY M EL I SSA K R ESS

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

THE FACE OF THE BACKBAR MAY BE CHANGING.

In July, the Food and Drug Administration (FDA) unveiled a new course for tobacco and nicotine regulation, shifting the focus to nicotine and the issue of addiction. According to the agency, the comprehensive plan “will serve as a multi-year roadmap to better protect kids and significantly reduce tobacco-related disease and death.” The goal, the FDA says, is to ensure that the agency has “the proper scientific and regulatory foundation” to efficiently and effectively implement the Family Smoking Prevention and Tobacco Control Act. In 2009, Congress passed this act, which gives the FDA the authority to regulate tobacco products. President Obama signed it into law in June of that year.

“The overwhelming amount of death and disease attributable to tobacco is caused by addiction to cigarettes — the only legal consumer product that, when used as intended, will kill half of all long-term users.” — FDA Commisioner Scott Gottlieb What will this change in policy mean for the tobacco industry, and for the convenience store industry where cigarettes and other tobacco products (OTP) account for more than 35 percent of all in-store sales annually? On the one hand, the change has already brought some relief to the electronic cigarette, vapor and cigar industries. As the FDA now puts nicotine — and not necessarily tobacco — at the center of its efforts, the agency has extended some timelines established in its May 2016 deeming rule, which expanded the FDA’s authority to additional tobacco products. The adjusted timelines are meant “to make certain that the FDA is striking an appropriate balance between regulation and encouraging development of innovative tobacco products that may be less dangerous than cigarettes,” the organization explained. On the other hand, zeroing in on nicotine

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Convenience Store News

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POLITICAL TEA LEAVES

could put the future of traditional combustible cigarettes in question, as the FDA reviews low-nicotine or zero-nicotine products.

How the 2016 election results could come into play in the FDA’s policy shift

The future of any change in tobacco regulation may be read in the tea leaves of the 2016 presidential election between Republican winner Donald Trump and Democratic challenger Hillary Clinton. The results revealed strong divides between voters’ tobacco consumption habits, with Trump voters materially overindexing to cigarette smoking. Vivien Azer, director and senior research analyst at Cowen & Co., points out that: • Trump won 100 percent of the top 10 smoking states, while Clinton won 80 percent of the bottom 10 smoking states; • Average smoking incidence in Trump states was 450 basis points higher, on a population-weighted basis; • In Ohio, Trump counties had a smoking incidence 380 basis points higher than Clinton counties; • In California, Trump counties had a smoking incidence 520 basis points higher than Clinton counties; and • In New York, Trump counties had a smoking incidence 220 basis points higher than Clinton counties. Presidential elections are not so much a national election, but rather a handful of battleground state elections, and one glaring constant in the Trump Electoral College states is proclivity for combustible tobacco, added Chris Krueger of the Cowen Washington Research Group. Of the 25 states with the highest smoking rates, 23 voted for Trump. With tax reform fault lines starting among regional issues, and state and local taxes at the forefront, the administration is attempting to put out regional political fires, he said. “Creating a new political inferno in states Trump needs for his legislative agenda is the kind of firestorm the administration is trying to avoid,” Krueger said. “They are looking to put out fires, not create new ones that could burn their entire house down.”

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First Steps to Change Four months after dropping the bombshell, the FDA set out on its tobacco journey by announcing the formation of a committee to help chart the new roadmap. The Nicotine Steering Committee is charged with reevaluating and modernizing the FDA’s approach to development and regulation of nicotine replacement therapy (NRT) products that help smokers quit. These products are typically sold as over-the-counter drugs in the form of gums, patches and lozenges. The primary focus of the committee will be on these therapeutic nicotine products for combustible tobacco product cessation. Key subjects will be the types of safety and efficacy studies the agency requires and the way these products are used and labeled. As the FDA explained, the aim is to ensure it has the right policies in place to enable the development of product innovations that have the potential to be more beneficial in helping smokers quit combustible cigarettes and maintain abstinence. Serving on the Nicotine Steering Committee are Commissioner Gottlieb; Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research; and Mitchell Zeller, director of the FDA’s Center for Tobacco Products. The panel also includes senior leadership from all three divisions. While one significant focus will be on NRT — the committee slated a public hearing on Jan. 26 to consider the FDA’s approach to evaluating NRTs — the group’s mandate will be to address the organization’s overall approach to nicotine. It will create a forum for developing

AVAILABLE JANUARY 2018

COVER STORY

and implementing nicotine policy and regulation to address the public health crisis of tobacco usage in the United States, according to the agency.

Agenda for Change The end of January also saw the agency’s Tobacco Products Scientific Advisory Committee (TPSAC) meet to discuss Philip Morris International’s (PMI) Modified Risk Tobacco Application (MRTP) for iQOS, a heated tobacco product. The MRTP is a pathway to allow iQOS to be sold in the U.S. At the end of the two-day meeting, the panel voted on several key questions, rejecting the tobacco company’s reduced-risk claims. However, analyst Bonnie Herzog does not view the panel’s actions as “a total disaster.” “Much of the panel’s concerns were around how PMI worded its proposed reduced-risk claims and how PMI ‘messages’ those claims to the consumer — we’re hopeful there is room for PMI and the FDA to work on this,” she explained. In addition, TPSAC’s recommendation to the FDA is non-binding. “The FDA, we think, seems more supportive of ultimately approving PMI’s MRTP application as

it is in line with the agency’s plan for a comprehensive nicotine strategy,” Herzog said. The TPSAC meeting is a prerequisite for MRTP approval, but not for Premarket Tobacco Application (PMTA) approval, according to Herzog. PMI has also filed a PMTA, which is required to commercialize the product in the U.S. with no health claim. Citing the overlap between the two applications, Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, said the FDA would most likely “make use of any information gathered at the TPSAC meeting to aid the PMTA review process.”

Slow to Change While the FDA’s journey has begun, some industry watchers don’t anticipate quick action. Vivien Azer, director and senior research analyst at Cowen & Co., pointed out that it is unlikely the FDA will move rapidly to shift the market to very low-nicotine cigarettes. “The agency tends to move at a slow pace but, more importantly, we don’t think the administration has the appetite to take on such political risk,” Azer said. “[The] 2016 election results by state and by county show that Trump supporters overindex to cigarettes.” (See “Political Tea Leaves” analysis on page 34.) Speaking at the 2017 Global Tobacco & Nicotine Forum in New York on Sept. 12, Joe Murillo, vice president of regulatory affairs for Altria Client Services, agreed that establishing a nicotine product standard for cigarettes is a “deliberative process” that will take place over years, giving interested parties an opportunity to give their perspectives. “We look forward to participating in this important regulatory process as FDA analyzes the science and evidence on which any standard must be based, and assesses unintended consequences and technical achievability,” Murillo said. “Importantly, implementation of any standard would need to occur in a marketplace where smokers have access to and information about reduced-risk products,” he continued. “Commissioner Gottlieb has acknowledged that any proposed nicotine standard needs to be part of a comprehensive package that also includes steps to foster potentially reduced-harm products.”

Uncertainty & Anxiety The FDA’s decision to extend some of the regulatory deadlines for newly deemed products still leaves a lot unknown for the affected segments’ future. “I think everyone is nervous of the unknown,” said Jack Saleh, CEO of JAK ECIG. “It has extended the

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

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deadlines, but it is still the unknown. No one has put their finger on it yet. Five years is a long time; who knows what’s going to happen down the road.” While JAK ECIG — which is the sixth-largest e-cigarette brand, according to IRI data — is doing everything it can to be FDA compliant, Saleh noted that he is not seeing new players enter the market and wonders who will be left standing. David Graham, chief impact officer at NJOY, believes pushing back the deadlines was the right thing for the agency to do, but when it comes to change in the nicotine level, the FDA may have to go big or go home, so to speak. According to Graham, studies have shown that for nicotine reduction policies to work, the change has to be significant. In all, “the policy environment is very exciting,” Graham said, adding that the regulatory environment will help people switch completely from combustible to electronic cigarettes — and not dual usage, which is common now — as e-cigarettes and vapor products become more acceptable. NJOY CEO Doug Teitelbaum is in favor of quality standards, but does point out that the FDA’s regulations lack clarity around Premarket Tobacco Applications. Still, he is “encouraged” by the switch in regulatory focus and thinks it is an important move to focus on harm reduction and the continuum of risk. “It is these and other types of insights that help us identify preferences that inform our product development efforts,” said Teitelbaum.

Embracing Change Even before the FDA’s announcement in July,

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the major tobacco companies have been moving toward a future that addresses the transitioning tobacco landscape. Reynolds American Inc., an indirect wholly owned subsidiary of British American Tobacco plc, has a long-running “Transforming Tobacco” initiative built around three pillars: sustainability approach, youth tobacco prevention, and tobacco harm reduction. Altria Group has also been an advocate for change. Calling it an exciting time, Murillo said the FDA’s announcement presents the industry with an important opportunity. “Properly implemented, this approach could bring together consumer preferences, product technologies and a regulatory framework to advance harm reduction for smokers. It all starts with a focus on the ‘continuum of risk,’ where you have traditional combustible cigarettes on one end as most harmful and smoking cessation on the other end as least harmful,” he said. “The products that fall between those two ends of the spectrum represent the opportunity for satisfying adult tobacco consumers, while making a positive impact on public health.” In the end, though, the adult tobacco consumer will heavily decide what shakes out. “For us, the consumer is at the ‘center of the plate’ in all that we do. When we develop e-vapor products, for example, we start by asking: What do we know about adult smokers and vapers? What do they like? What can we develop that will satisfy them?” Murillo explained. “Our research shows that adult smokers and vapers consider many features when trying new products, including taste, performance and value.”

COVER STORY

2018: A PIVOTAL YEAR FOR TOBACCO From heat-not-burn products to various regulatory and legislative moves, times they are a changin’ By Renée M. Covino THREE DAYS INTO THE NEW YEAR,

USA Today put forth a dramatic tobacco headline: “Philip Morris says its New Year’s resolution is to give up cigarettes.” Clever, but what does it really mean? In a nutshell, the global tobacco giant is betting its future on cigarette alternatives. The Marlboro brand maker took out full-page ads in several United Kingdom newspapers stating that its 2018 ambition is to build a smoke-free future and eventually stop selling cigarettes. The company says it wants to help people quit smoking traditional cigarettes and to one day replace them with smoke-free alternatives like electronic cigarettes and heated tobacco products. iQOS is Philip Morris International’s widely publicized heat-not-burn product (HNB). It is currently under reduced-risk review by the Food and Drug Administration (FDA) for approval to be sold in the United States. At the end of January, the FDA’s Tobacco Products Scientific Advisory Committee discussed the iQOS application, which many believe will pave the way for the rise of reduced-risk products in the nation. The committee rejected PMI’s reduced-risk claims. However, the FDA is not required to follow the committee’s recommendations, and the agency’s review will continue —

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although there is no set timeline. iQOS has already been launched in cities in Canada, Colombia, Czech Republic, Denmark, France, Germany, Greece, Guatemala, Italy, Israel, Japan, Kazakhstan, Korea, Lithuania, Monaco, the Netherlands, New Zealand, Palestine, Poland, Portugal, Romania, Russia, Serbia, Slovak Republic, Slovenia, South Africa, Spain, Switzerland, Ukraine, the United Kingdom, and in some Duty Free shops. In early January, Wells Fargo Securities LLC went on record as saying that 2018 will be a “pivotal” year for the tobacco industry with multiple potential positive catalysts. One being the commercialization of iQOS as soon as February and the possibility of the FDA granting modified-risk status to iQOS in the second half of 2018. (Wells Fargo Securities also cited the impact of tax reform as another potential positive force.) iQOS seems to be getting the most analyst and media attention, but it is not the only tobacco product filed with the FDA for modified-risk review. Reynolds American Inc. is also “on the stick” with 18 modified risk applications for six different styles of its Camel Snus.

The Rise of Alternatives Alternatives are a big part of the upcoming tobacco picture, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities. “The year 2017 was defined by several potentially game-changing new developments that should continue to play out in 2018, including increased focus on heat-not-burn

COVER STORY

LEGISLATIVE HURDLES Each year brings new legislation around tobacco in most states across the country Thomas Briant, executive director of NATO, the National Association of Tobacco Outlets, recaps how the last year has played out for tobacco in state legislatures across the United States. CIGARETTES 2017 marked a new high in state legislatures considering new excise taxes on cigarettes. In total, 28 states and Puerto Rico considered such legislation that either was enacted, failed, or still represents an ongoing threat to raise cigarette excise taxes in some form. Three states that enacted cigarette excise tax changes in 2017 were: Delaware, 50-cent-per-pack increase; Rhode Island, 50-cent-per-pack increase; and Connecticut, 45-cent-per-pack increase. Puerto Rico also increased its per-pack tax rate from $2.23 to $5.10. OTHER TOBACCO PRODUCTS The number of states that considered other tobacco products (OTP) excise tax hikes reached 23, along with Puerto Rico. However, only two and Puerto Rico formally acted on them: Delaware, 15-percent increase on OTP product and 38-cent increase on moist snuff; Connecticut, $2-per-ounce increase on snuff to $3; and Puerto Rico, cigar tax increase from $2.23 to $5.10. E-CIGARETTES & VAPOR PRODUCTS Twenty-four states considered e-vapor tax changes last year. Three passed their legislation: Delaware, new tax on vapor products at 5 cents per fluid milliliter on nicotine solution; New York, tax modification on vapor products to 40 cents per fluid milliliter; and Kansas, decreased its excise tax on vapor products from 20 cents per milliliter of e-liquid to 5 cents. BALLOT MEASURE INITIATIVES California voters approved a tobacco tax ballot question that raised the state’s cigarette tax by $2 per pack, and increased its OTP tax to 65.08 percent. These changes went into effect July 1. Two other states, Oregon and South Dakota, currently have pending tobacco tax ballot measures. TAX REDUCTION 2017 produced one state legislature that passed a law to decrease the uncompetitive taxes levied on retailers and consumers of tobacco products: Minnesota. In that state, the automatic inflator on the excise tax per pack of cigarettes was removed, freezing the rate at $3.04. Additionally, Minnesota reduced its tax cap on premium cigars from $3.50 to 50 cents per cigar. — Renée M. Covino

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and reduced-risk product (RRP) development,” she said, adding that they mark a paradigm shift that has upended conventional thinking about the durability and trajectory of the combustible cigarette business model. “Winners should inevitably be those tobacco players who can leverage the strong net price realization and profitability of their combustible cig businesses to develop new avenues of growth, with most investment likely to focus on RRPs.” Beyond tobacco industry analysts, the reducedrisk market is also backed by some in the healthcare arena. For instance, Erika Bliss, a Seattle-based family physician and CEO of Equinox Primary Care, said although there is not enough information regarding the long-term health risks of non-combustible tobacco products, “we must encourage investments in new technologies. Bringing reduced-risk products to market would not only provide millions of people in this country with another meaningful option to reduce their risk from smoking, it could also revolutionize tobacco consumption around the world.”

The Fall of Cigarettes In July, when the FDA unveiled a new course for tobacco regulation — shifting the focus to nicotine and the issue of addiction — the agency also announced plans to reduce nicotine in cigarettes to “minimally addictive” levels, as Commissioner Scott Gottlieb put it. The agency plans to come out with a product standard to set a lower level of nicotine in cigarettes, but not until it receives comments from the industry and the public. Analysts predict this would take a minimum of two years and, as of press time, no additional word on the matter had been put forth by the FDA. However, it’s not only the nicotine level that’s predicted to fall in the cigarettes category. While convenience stores make up the lion’s share of tobacco sales (70 percent, according to Wells

COVER STORY

Fargo Securities), all channels are seeing their cigarette volumes drop in the 4-percent range annually, with no signs of stopping, according to multiple industry statistics. Sales dollars remain flat, with the declining volumes offset by annual manufacturer price increases. This has brought rise to private label cigarette sales. “Two price increases per year in the industry are beginning to make cigarettes exorbitant for the average adult smoker. They’re looking for greater value,” Mark Schueller, marketing manager for private label cigarette maker Premier Manufacturing, told Convenience Store News. And for retailers reporting sales volume decreases, margin erosion and reduced profitability, Schueller sees the convenience

channel trend going toward more in-house cigarette brands as a way for retailers to offer cigarette discounts and gain consumer loyalty. “Private label brands bring new customers into stores and serve as destination brands for consumers, much like coffee and food offerings, which build greater loyalty to retailers that carry them,” he said. “The money consumers save by purchasing private label cigarettes also generates larger market basket sales. They will generally spend the money saved on beverages, snacks and candy.” Meanwhile, efforts are underway to modernize the traditional cigarette experience. Case in point: North Carolina-based cigarette and other tobacco product manufacturer Cheyenne International recently unveiled a new brand logo. CEO David Scott said, “Designing a brand mark that is eye-catching, while still preserving our heritage, was key to our overall effort.” CSN

Tobacco 21 Update: Five States & Counting Oregon began enforcing its new legal minimum age to purchase tobacco on Jan. 1 It’s only been two short years since Hawaii became the first state to make Tobacco 21 the law of the land within its borders. As the clock struck midnight on Jan. 1, 2018, that number climbed to four states, with a fifth set to join the ranks in July. In Oregon, SB 754, known as Tobacco 21, has been in effect since Gov. Kate Brown signed it into law Aug. 9; however, enforcement and fines began Jan. 1 of this year. Violations are punishable by a fine of $50 for employees, $250 for store managers, and $500 for store owners. For managers and owners, the fines double by the third offense. The Oregon Health Authority’s Public Health Division is authorized to enforce the minimum age of tobacco sales law and coordinate with the Oregon State Police to conduct state-sponsored compliance inspections. Four other states have similar Tobacco 21 measures on a statewide basis: Hawaii, California, New Jersey and Maine. Hawaii was the first state to enact a T21 law, which went into effect Jan. 1, 2016, followed by California six months later. New Jersey’s measure became law in November of last year, and Maine’s new legal age will take hold July 1. According to the Tobacco 21 movement, which is part of the Preventing Tobacco Addiction Foundation, more than 270 cities and counties in 18 states also have passed legislation raising their minimum legal age to buy tobacco products to 21. The federal age remains 18.

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Considering the wide swath of proposals that landed before local officials across the country in 2017, those numbers are likely to keep rising this year. For example, at the end of 2017, Florida State Sen. David Simmons (R-Altamonte Springs) sponsored legislation to raise the minimum legal age to buy tobacco products from 18 to 21. Retailers found in violation would face a fine up to $500 for the first offense and up to $1,000 for a second offense. Underage consumers found in violation would face 20 hours of community service for the first offense and 40 hours for the second. The Florida state legislature was scheduled to consider the legislation when it returned from winter break in early January. And in West Virginia, several state senators co-sponsored a bill to raise the tobacco-buying age from 18 to 21. The lawmakers introduced the legislation on Jan. 10. — Melissa Kress

Create a Personalized C-store for Every Customer Consumers today are demanding a more customized shopping experience, or they’ll go elsewhere By Tammy Mastroberte

IN THE ECOMMERCE WORLD, personalized offers, website recommendations and product suggestions based on previous purchases are becoming commonplace — led by the incredible example of Amazon. Ecommerce retailers are even emailing shoppers who abandon a cart without checking out and offering coupons to entice them to complete their order.

Consumers are looking for the same level of customer service at retail stores, and that includes convenience stores. According to a recent NectarOm Marketing Personalization Study, 83 percent of customers surveyed expect a “personalized” retail experience.

“Consumers are demanding it and, as they get it from other areas like Amazon, grocery stores and Walmart, the expectation morphs elsewhere,” said Derek Gaskins, chief customer officer at York, Pa.-based Rutter’s, operator of more than 60 c-stores. Whether it’s through loyalty programs, point-of-sale (POS) data, apps or geofencing, there are many technology options available to help retailers get to know their customers — what they purchase, what they don’t, and even when they are near a store. There are technology options for small budgets, as well as large. “The first step is to talk to existing vendors — your POS, digital signage and kiosk providers — and see what they support out-of-the-box,” advises Dennis Egen, founder and president of Engine Room Technologies, an information technology, cybersecurity and technology consulting firm based in Philadelphia. Gathering personal data usually requires integra-

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

tion of more than one technology system with the POS, noted Ed Collupy, executive consultant at W. Capra Consulting Group, based in Chicago. “Retailers often have to marry loyalty data with POS data and bring these two elements together into an analytic tool to slice and dice it,” he explained. “Personalization is not a singular piece of data, but a combination of it.”

The Loyalty Connection Loyalty programs have been around for years, but today’s loyalty landscape is backed by sophisticated technology, allowing retailers to more easily incorporate personalization into their brand. The goal is for a store to be able to: identify customers as individuals rather than a “household” or a segment; understand their purchase behavior; and direct coupons, promotions or rewards to them based on this data so that they will take action. This often starts with customers downloading a company’s app, joining a brand’s loyalty program, or signing up for mobile payments.

“Stores need a way to easily identify a single person, not a segment or a group of customers. They need to know who I am and that my name is Jake,” explained Jake Kiser, chief revenue officer at Hatch Loyalty, based in Chicago. “In a c-store, if you want to get me inside the store to buy more high-margin items, you need to understand what I care about. When people enroll in a loyalty program, retailers should have qualifying questions to start segmentation, and capture and store that data.” When someone signs up for a loyalty program or downloads an app connected to such a program, all c-store operators should have an enrollment process set up so that customers start sharing data about themselves right away, Kiser noted, explaining that the retailer should pick about five questions they want to ask to begin creating customer segments. Rutter’s offers a VIP Level in its loyalty program, whereby customers are asked for more information than at other levels, but are provided extra benefits.

“Consumers are happy to give up information about themselves if you are willing to give them something back,” he said, citing Starbucks as a prime example. When Starbucks first started its loyalty program, the coffeehouse chain asked for a little information and centered the program on consumers collecting stars to get something in return. Then, Starbucks slowly started asking for more information and began to integrate more services into the program, according to Kiser. “Every step they take, they give more back to the consumer in a personalized experience. One person will get a different offer from Starbucks than another based on behavior,” he said. When connected to the POS, customer behavior and purchases can be recorded and segmented, such as the frequency a customer visits for gas, the types of items they purchase, and how often they come into the c-store. This intel, and more, can be used to communicate and

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influence a customer’s future behavior, said Jeff Hoover, c-store data strategist at loyalty provider Paytronix, based in Newton, Mass. “One client we worked with segmented customers by frequency of visit — once per week, twice per week — and then identified the guests within those segments who potentially missed a visit,” Hoover explained. “Then, the company targeted them with offers to bring them back into the brand.” C-stores can also segment gas-only customers, so when a gas-only customer uses a mobile app to identify themselves, he or she can be targeted and sent an offer though the app to come into the store for a free cup of coffee, he pointed out. “You want to look at their behavior and see if the offers you send them change or influence the behavior,” Hoover said, explaining that the means of communication is up to the retailer and how sophisticated their setup is for targeting customers. Email notifications, app notifications or push notifications using geofencing can all be used to identify when a customer is at the pump or in a certain radius of the store. Mobile is a driving force in personalization, and retailers, including the top c-store chains, have created mobile apps to communicate with customers and enhance personalized offers and interactions. Customers often need to opt-in to receive app or text notifications, or share their location data. The Oracle Retail 2025 Report polled 709 consumers and found that shoppers are more likely to accept intrusive technologies from a brand they trust. Offering an incentive for their permission can entice them to opt in, said Egan of Engine Room Technologies. “Cashback offers are much more likely to get customers to give permission for a store to know their location than just discounting,” he advised. At Rutter’s, the retailer identifies customers individually by telephone number and offers a VIP Level in its loyalty program, whereby customers are asked for more information than at other levels, but are provided extra benefits. Not only are Rutter’s VIP customers able to earn more loyalty points, but they can also benefit from the company’s “Remember Me”

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Call to Action l Talk to your existing vendors — your pointof-sale, digital signage and kiosk providers — and see what they support out-of-the-box. Gathering personal data typically requires integration of multiple technology systems. l Get customers to download your app, join your loyalty program, or sign up for mobile payments. During the enrollment process, have some qualifying questions that you can use to start segmentation, and capture and store that data. l Acquire as many customers as you can into your program, identify who they are and what they purchase. Once you gather enough data, start segmenting. l Connecting an individual customer to purchases through the POS and gathering data to segment is the frontend of a personalized plan, but there needs to be technology on the backend to analyze the data and send personalized offers based on it. l When targeting customers, choose the means of communication that makes the most sense for your setup. Email notifications, app notifications or push notifications using geofencing can all be used to identify when a customer is at the pump or in a certain radius of the store.

Rutter’s VIP customers can benefit from the retailer’s “Remember Me” program, which saves their last 12 food orders through the stores’ touchscreen ordering kiosks.

program, which offers another avenue for personalization. “We worked with NCR for our POS and one of the big loyalty enhancements of the VIP program was the ability for our system to save your last 12 food orders through our kiosks. So, habitual customers don’t have to put in their combinations every time,” Gaskins said, explaining there are numerous options offered at the kiosks for customers to customize their food, so this feature saves them time. VIP customers can also go cardless by entering their 10-digit telephone number and a four-digit password at the kiosks to pull up their previous orders. This personalization continues through customized offers the chain sends via email, text, and push notifications through its app via OpenStore by Gasbuddy. Rutter’s is now rolling out NCR Optic touchscreens to all of its fuel pumps so when someone identifies themselves with their 10-digit telephone number and password, the pump can target offers to them based on their behavior.

Utilizing the Data Connecting an individual customer to purchases through the POS and gathering data to segment is the frontend of a personalized plan, but there needs to be technology on the backend to analyze the data and send personalized offers based on it. “You want to acquire as many customers as you can into your program, identify who they are and what they purchase,” said Hatch Loyalty’s Kiser.

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

“Once you gather enough data, start segmenting between four and eight segments to create mini promotional programs for each. The person who buys one cup of coffee and fills their tank once per month could get an offer to change their behavior to a coffee and a sandwich, or [an offer] to get them there more often.” A technology component to aggregate the data is a must in order to identify the opportunities to personalize offers and influence customer behavior — for example, if someone bought X, they are likely to buy Y, or if they bought X, then they are likely to want it again, according to Egan. “Start listening to what the consumer is doing using technology, and use the data you collect to give them some type of carrot,” Kiser added. “Also, combine the consumer transactional data and behavior with other things they are doing, like if they signed up for email or text message, and do they like your brand on Facebook.” The c-store industry as a whole is still working to get to the point where some drugstore and supermarket brands, like CVS and Kroger, are. These companies know a customer’s entire shopping history and present offers back based on it. These are industries to watch, according to Collupy of W. Capra Consulting. “There is often a desire to overthink personalization but, at the end of the day, the important thing is to figure out the least common denominator that will get you connected to the largest amount of your customers, and give them a reason to share some data with you so that you can start to prove your theories through the data,” Kiser concluded. CSN

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FOODSERVICE

Getting Better Equipped Advances in equipment and related technology are changing how c-stores do foodservice, but where should retailers invest in upgrades? By Angela Hanson WITHIN THE CONVENIENCE FOODSERVICE INDUSTRY AND BEYOND to the realm of full-

service, quick-service and other foodservice outlets, suppliers are thinking big as they conceive and test innovative and interesting new products and recipes. But when it comes to the equipment and technology used to order and make food, manufacturers are thinking small — literally. While much of the activity in convenience foodservice these days involves operators getting into foodservice for the first time, or beginners transitioning to more intermediate programs, equipment- and tech-related innovation is coming in the form of shrinking unit sizes that make it easier for them to do so, according to Ryan Krebs, director of foodservice for York, Pa.-based Rutter’s, which has nearly 70 convenience stores throughout central Pennsylvania. “You can get more into a smaller space,” Krebs told Convenience Store News,

pointing to changes he’s observed like a conveyor-belt toaster shrinking from 24 inches wide to approximately six inches, just wide enough for a single piece of toast as part of a made-to-order sandwich. Flat-top cooking spaces have also gotten just small enough to cook a fresh hamburger one at a time, which might be too slow for a high-volume store but just right for a small operator. Many foodservice outlets struggle with limited space, but c-stores in particular face hard limits in terms of the square footage and amount of countertop space they can devote to food preparation, particularly small operators and stores that lack a dedicated kitchen. Other foodservice equipment advancements can be seen in units that are the same size as older versions, but able to do more. Krebs said at last year’s NACS Show he was impressed by a new Turbo Chef oven similar to the model Rutter’s typically uses in its kitchens, but this one has two independent oven cavities inside instead of one. “I’ve just doubled my cooking capacity without taking up any more space,” he said. “That was a huge value to us.” The ability to save space, effort and time is the driving force behind equipment advances for convenience foodservice, industry experts agree. For the most part, this means optimizing equipment’s

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capabilities rather than adding specialized units. However, investing in equipment for specific menu items can pay off depending on the customer demand. “We use speed ovens built specifically for pizzas, which has really enhanced our pizza turnaround time and quality. It’s like watching a pizza cook in time-lapse photography,” said Rich Green, director of foodservice for Salt Lake City-based Maverik Inc., operator of roughly 300 stores across 10 western states. “We’ve also found electric steam tables to be of great value to our made-to-order taco program — very efficient.”

Remote Management Advances in technology are increasing the efficiency of foodservice equipment, too, by changing who can use it and who doesn’t have to. Instead of having to memorize the cooking processes for a store’s entire prepared food offer or relying on printed documentation, employees can trust the equipment itself. Updated ovens and other units now offer programmed recipe storage. Krebs cites the ability to push updates remotely to multiple units at the same time as a notable savings in labor, which he considers to be particularly important in foodservice. “Hard work in the kitchen, constant orders, can sometimes minimize the customer

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FOODSERVICE

service experience. So, what I always try to keep on the forefront of my mind is how can I make it more enjoyable and easier on my staff, which then gets a better experience for my customer,” he said.

The ability to save space, effort and time is the driving force behind equipment advances for convenience foodservice.

This was a factor in Rutter’s recent implementation of Restaurant Technologies’ automated Total Oil Management system at all of its stores that offer fried food. Along with seeing improvements in consistency and food quality, the system has freed employees from the time-consuming routine of manually shuttling jugs of oil to and from the hot fryer and the outdoor rendering tank. “I think there’s some ways people could potentially either minimize labor or reallocate labor to put it back into their customers, rather than the antiquated systems we use,” said Krebs. Retailers and manufacturers alike believe that investing in equipment with these qualities will enable convenience foodservice programs to get the most value out of costly upgrades. “Efficiency and safety are most important for any foodservice operation looking to increase its current productivity,” said Jay Cipra, president and CEO of Broaster Co., provider of a licensed branded chicken program and manufacturer of pressure fryers.

“Equipment will become more user-friendly and have the ability to be operated by people of all skill levels, due to innovations from equipment manufacturers,” Cipra added.

Digital & Delivery Still, some of the most important advancements in convenience foodservice are occurring not in what prepares the food, but rather in what gets it to the customer. “Touchscreens are huge because they allow people to create their own experience,” noted Krebs. Long used by gold-star convenience foodservice programs such as Wawa’s and Sheetz’s, touchscreen ordering — while not equally present in every market — has grown increasingly prevalent as the cost comes down and consumers grow more accustomed to it. By letting customers input the specifics of their order, c-store retailers can remove a step that lessens the chance of an error and makes customers feel catered to personally. “It doesn’t fit every single model, but I do think more and more customers are seeking out that made-to-order, ‘I want it the way I want it’ kind of thing. It certainly adds a whole different layer of offering to your program by doing it,” Krebs explained. Additionally, the abundance of third-party delivery services such as DoorDash and UberEATS, as well as the widespread consumer acceptance of mobile apps for

Our Foodservice Advisory Council DAVID BISHOP Managing Partner Balvor LLC JOSEPH BONA President Bona Design Lab LLC

TOM COOK Principal King-Casey JACK W. CUSHMAN Foodservice Director Circle K (retired)

ED BURCHER Vice President of Foodservice FriendShip Food Stores

CHAD DEWBERRY Category Manager McLane Co. Inc.

NANCY CALDAROLA General Manager The Food Training Group JOSEPH CHIOVERA President, Innovation & Design and Emerging Channels Buddy’s Kitchen Inc.

DEAN DIRKS CEO Dirks & Associates

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

RYAN KREBS Director of Foodservice Rutter’s

MATHEW MANDELTORT Vice President, Foodservice Insights Eby-Brown Co. LLC LARRY MILLER President Miller Management & Consulting Services Inc. TIM POWELL Vice President/Senior Analyst Q1 Consulting WESLEY PRICE Category Supervisor, Fresh Foods and Beverages Murphy USA Inc.

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digital orders they can pick up, are making it easier for c-stores to position themselves as foodservice destinations for consumers who want their food in the most convenient way possible.

Touchscreen ordering has become increasingly prevalent as the cost comes down and consumers grow more accustomed to it.

Retailers have to make sure their work processes can support digital orders, which can be a challenge, but Krebs believes most c-stores will have to implement some kind of advance pre-order program, as people’s ideas about and expectations for on-demand availability have evolved significantly in recent years and will continue to evolve. “I think, in general, any technological advancements that further facilitate the speed of ordering will be critical to the convenience channel,” Maverik’s Green agrees. “For me, the jury is out on delivery. I think in order to be successful there, your in-house operation needs to be running as well as anyone else in the business who’s doing it.

Most convenience chains aren’t there yet.” With even more advances in foodservice equipment and technology on the horizon, retailers and manufacturers expect the convenience channel to upgrade to units that make food easier to prepare and purchase, and help them distinguish themselves from the competition. “Foodservice retailers need to first determine their needs — Is their current program offering the variety of products to satisfy their customers? If not, can their current equipment properly handle a new product line?” advised Cipra of Broaster. Green points outside the c-store industry to an area of innovation he’d like to see explored. “I love the idea behind the Amazon Go [cashierless convenience store] concept. That kind of technology helps the whole store, but is possibly even more important for food purchases, as these inherently take more time anyway,” he said. CSN

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RTD Ready Six reasons why your stores need to be shelf-solid with ready-to-drink coffee and tea this year By Renée M. Covino COULD READY-TO-DRINK (RTD) COFFEE AND TEA

make up for declining soda sales in the convenience channel? These two “ready” beverage categories seem to be all set to be part of the solution. Consider these six reasons for why your stores should be shelf-solid with RTD in 2018:

They’re on the “Best” Radar Inc. named RTD coffee and tea as one of the best industries for starting a business last year. The well-regarded business magazine cited that the shifting interest away from frozen juices, beverages, drink mixes and concentrates and toward on-the-go coffee and tea has driven acquisitions and joint ventures by big beverage companies like Starbucks (which acquired Atlanta-based tea retailer Teavana in 2012), and Hain Celestial (which plans to complete multiple acquisitions of RTD beverage brands valued at $5 million to $20 million). Also, one of the newer players in the market, Austin, Texas-based coffee maker Chameleon Cold Brew, was No. 140 on Inc.’s list of the fastest-growing private companies in the United States.

The Positive Stats Are Flowing From 2011 to 2016, the RTD coffee category more than doubled, according to Euromonitor International, with estimates putting it up another 13 percent in 2017. Ready-to-drink teas, meanwhile, are steadily increasing in popularity. The market grew by 40 percent between

2011 and 2016, according to a report by beverage consultancy Zenith Global. What’s more, Zenith reports that the average annual growth rate of RTD teas is 7 percent — far exceeding that of soda for the last five years. Global consumption of RTD tea is expected to surpass 45 billion liters by 2021. By 2024, the global RTD coffee and tea industry, including refrigerated and shelf-stable products, will reach sales of $116 billion, up from $71 billion in 2015, Grand View Research projects.

Big Names in RTD Are Convenience-Friendly Starbucks, Dunkin’ Donuts and McDonald’s are all fiercely battling for convenience store shelf space with new RTD coffee products introduced in 2017. Dunkin’ Brands Group Inc. partnered with The Coca-Cola Co. to introduce Dunkin’ Donuts RTD Coffees nationwide early last year. Available in four flavors — Original, Mocha, French Vanilla and Espresso — the beverages are made with Arabica coffee blends, milk and sugar. A few months later in 2017, McDonald’s announced its own partnership with The Coca-Cola Co. to introduce ready-todrink versions of its McCafé line of coffee frappes. The new portfolio of McCafé Frappes — available in Caramel, Mocha and Vanilla varieties — are also made with 100 percent Arabica beans, milk and sugar. Starbucks, which has been in the RTD arena the longest of the three brands, maintains a partnership with PepsiCo Inc. and together they made new product news last year by bottling Starbucks’ popular Pumpkin Spice Latte for the fall season.

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Analysts Are Buzzing About RTD “Overall, we saw a lot of new innovation in RTD coffee — not surprising, it has been the fastest-growing non-alcoholic beverage segment over the past five years,” Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities, explained in a recent research note. She stated that part of the reason the overall beverage outlook is brightening is due to the strong performance of the Dunkin’ Donuts bottled iced coffees and the potential of Coke’s additional partnership with McDonald’s McCafé, which she expects will drive accelerating results as production issues are addressed. Herzog also mentioned Monster’s RTD coffee offerings as being very “on-trend.”

Millennial Consumers Are Into RTD RTD coffee and tea reportedly appeals to millennials because of the products’ organic and natural ingredients, and lack of additives and preservatives. Millennials are also known to gravitate toward more niche products. More than a third of young adults say they would pay more for coffee/tea with added health benefits. Oftentimes, these are the same consumers seeking more “personalized” coffee, according to market researcher Mintel. Therefore, more convenience stores are wanting to become synonymous with selling bottled drinks that provide functional benefits, such as energy-boosting,

anti-inflammatory, relaxing or antioxidant. Gourmet coffee/ tea perception and sales are both increasing through functional drinks in the RTD section. Matcha, herbal tea drinks and kombucha are alternative versions of gourmet coffee self-expression by the millennial set, research shows.

Tea is On-Trend for the Foodie Future Market research firm Packaged Facts identifies tea as one of the beverage ingredients that will trend in 2018 and beyond. The researcher points out that tea-flavored ice cream has recently gone mass-market, and tea as a dessert drink or drink flavoring is quickly gaining in popularity, particularly Earl Grey tea. This buzz can only add to the RTD tea momentum. Some of the latest RTD tea innovations include: • Argo Tea partnered with Whole Foods Market to launch a line of RTD cold-brew, single-estate bottled teas into the retailer’s stores nationally. The release of this RTD line follows a successful test last year of the handcrafted single-estate, cold-brew teas in the company’s own Argo Tea cafés. • Lipton, a brand of the Pepsi Lipton Tea Partnership between PepsiCo and Unilever, introduced a mango variety into its line of RTD iced teas. • Pure Leaf, another brand of the Pepsi Lipton Tea Partnership, added mint and pomegranate varieties to its RTD tea portfolio. • Gold Peak, a brand of The CocaCola Co., introduced RTD tea lattes. • Starbucks, in partnership with Anheuser-Busch, is shipping Teavana RTD Craft Iced Teas to select convenience stores and grocery retailers in New Hampshire, New York, Vermont and Missouri. In general, convenience channel shoppers are primed these days to expect the unexpected in food and beverage, and researchers predict retail experimentation will quicken in 2018 thanks to Amazon scaring all walks of food and beverage retailers into “a frenzy of innovation,” according to Packaged Facts. CSN

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EDITOR’S NOTE

Opportunity Knocks Our 2018 Guide to Consumer Insights spotlights four opportunity segments for c-stores “CONSUMERS ARE CHANGING as fast as I’ve ever seen them change. They want now, simple, easy. They’re completely redefining what ‘convenience’ is.” That is what 7-Eleven Inc. CEO Joseph DePinto, head of the nation’s largest convenience store chain, told me in October during the 2017 NACS Show, where I interviewed him on the occasion of his induction into the Convenience Store News Hall of Fame. He went on to tell me how 7-Eleven does not seek to be a “disruptor,” but rather seeks to understand the customer and where they’re going, understand consumer trends, and then change its products and infrastructure to deliver on that. Easier said than done. Every day, it seems like a new research report crosses my desk talking about another new evolution in the purchasing behavior of consumers. One day, they’re all about plant proteins. The next day, they’re back on animal proteins. One day, they’re all about buying their groceries online. The next day, they want the brick-and-mortar experience. Examples like this go on and on. Suffice it to say, understanding consumers is tricky. Enter, our exclusive Convenience Store News Realities of the Aisle consumer study, which analyzes the demographics and purchasing behavior of convenience channel shoppers. Now in its ninth year, this unique study seeks to help convenience channel retailers, wholesalers and suppliers understand who’s in the stores today, what they’re buying and why, what they’re not buying and why, and which consumer segments are on the cusp and primed for mining. This year’s results are based on an online survey conducted in December in partnership with CSNews sister company EnsembleIQ Research Solutions. The questionnaire was fielded to a representative U.S.-based sample of 1,500 participants. In order to qualify for the study, participants had to shop convenience stores at least once a month. On the following pages of our 2018 Guide to Consumer Insights, we spotlight four “opportunity” segments for c-stores: Women, Millennials, Hispanics, and Health-Conscious Consumers. While such shoppers do frequent c-stores today, there’s a lot of untapped potential here. For comments, please contact Linda Lisanti, Editor-in-Chief, at (201) 855-7608 or llisanti@ensembleiq.com.

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Convenience Store News

Step Aside, Bubba Female shoppers are gaining traction in the convenience channel By Danielle Romano EVERYONE IS FAMILIAR WITH BUBBA. Near and dear to convenience store retailers’ hearts, Bubba is the traditional c-store shopper: white, blue-collar, in his mid-30s, and looking to fill up his gas tank and grab a quick snack and coffee. Although Bubba is the foundation on which the convenience store industry was built, and is still very much a valued customer, female shoppers have forged their way to the front of retailers’ minds. Men still shop at c-stores more than women, but the 2018 CSNews Realities of the Aisle study shows that the gap between genders is shrinking. Of women who currently shop a c-store at least once a month, approximately 11 percent are doing so “almost every day,” compared to 14 percent of men who said the same. Forty-four percent of women pegged their c-store shopping frequency at two to three times a week, compared to 48 percent of male shoppers.

Do you typically shop at the same convenience store each time? Total

Yes No

64% 36%

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

64% 36%

Female

63% 37%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

Did you purchase gasoline/motor fuels at a convenience store in the past month? Total

Yes No

81% 19%

Male

Female

80% 20%

83% 17%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

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

Gasoline is the No. 1 reason both male and female shoppers frequent a c-store, although women are slightly more likely than men to do so (74 percent vs. 72 percent). And that isn’t the only c-store commodity they’re more likely to buy. Rounding out the top five reasons females frequent a

Male

Every time Almost every time Some of the time Rarely Never

3% 20% 51% 23% 3%

Male

3% 21% 50% 23% 2%

Base: 1,222 respondents who shop the c-store channel at least once a month and purchased gasoline/motor fuels at a c-store in the past month Source: Convenience Store News Market Research, 2018

Female

3% 18% 53% 23% 3%

Have any of the following elements influenced your decision to visit a convenience store? Total

Loyalty program Gas price app Coupon Word-of-mouth Mobile app offer from convenience store Promotion or message on social media Radio or TV advertisement Billboard Email Text message Mobile ordering Print circular Other None

Male

Female

24% 15% 15% 12%

25% 14% 14% 12%

6% 5% 5% 5% 4% 3% 3% 3% 47%

6% 6% 6% 5% 4% 3% 3% 3% 46%

6% 5% 4% 4% 4% 2% 2% 4% 47%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

Did you purchase prepared food at a convenience store in the past month? Total

Yes No

52% 48%

Male

55% 45%

Female

48% 52%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

c-store more than men are: to buy a packaged salty or sweet snack (61 percent vs. 56 percent), to buy a packaged beverage (47 percent vs. 38 percent), to buy candy or gum (37 percent vs. 27 percent), and to buy a fountain or frozen beverage (36 percent vs. 32 percent). Women are proving to be especially valuable c-store shoppers for their jump onto the prepared food bandwagon. In the past month, nearly half of female respondents (48 percent) said they’ve purchased prepared food, such as a hot dog, deli sandwich or salad. In addition to their prepared food buys, they’ve purchased well-known items that accompany any meal: bottled water (48 percent), candy or gum (40 percent), cold fountain/dispensed drink (39 percent), a hot beverage (36 percent), and a packaged salty snack (32 percent) or sweet snack (24 percent). They’ve also made some nontypical buys, like a newspaper or magazine (16 percent), and a grocery item (10 percent). Convenience store visits have become part of female shoppers’ regular routines. More than half of female respondents said they will make a c-store pit stop while traveling to or from work or school (52 percent), and will even pay a visit while they’re out traveling for pleasure (53 percent). Thirty-six percent of those surveyed went so far as to say they will go out of their way and make a special trip to a convenience store from home, although the majority agree that their most typical stops occur while running errands (70 percent).

The most common time of day for female shoppers to stop at a c-store is 4 p.m. to 6:59 p.m. (52 percent). However, respondents said they also stop during the 7 p.m. to 10 p.m. timeframe (34 percent), or from 6 a.m. to 8:59 a.m. (33 percent). The presence of a loyalty program is an influential factor for female consumers to shop a c-store, as cited by one-quarter of respondents. Other influences that resonate with women include: the availability of a gas price app (14 percent), a coupon (14 percent), word-of-mouth (12 percent), and a mobile app offer from a c-store (7 percent). Women are not alone in their sentiments about the influence of other offers, however. Both men and women say they can be swayed to shop a c-store by a promotion or message on social media (6 percent), and by a text message (4 percent). According to 39 percent of female shoppers, their usual convenience store has a frequent shopper or loyalty program that they’re already enrolled in. Thirty-one percent report that their usual c-store doesn’t offer any kind of loyalty program, but if it did, they would enroll in it. Only 14 percent said they wouldn’t enroll even if their usual c-store did have one.

79%

The percentage of female c-store shoppers who completely or somewhat agree that they are health conscious.

63%

The percentage of females who typically shop the same c-store each time. When rating their favorite convenience store, women give the lowest ratings for the quality of prepared food (38 percent) and it being fun to shop (37 percent).

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Millennials of the Moment Paying attention to this largest segment of the population will be key for the industry’s future By Chelsea Regan MILLENNIALS HAVE OVERTAKEN BABY BOOMERS as the largest generation, making it more important than ever for convenience store retailers to understand who they are as shoppers. According to the 2018 CSNews Realities of the Aisle study, which polled 492 millennials — 49 percent of them male and 51 percent female — from across the country, 16 percent said they visit a convenience store daily, which is five percentage points higher than any other generational group, and just one percentage point less than the number of millennials who opt to shop ecommerce retailers such as Amazon every day. Like other generations, when millennials head to c-stores, they are looking to fill up their gas tank and grab a bite to eat. Seventy-three percent purchase gasoline at a c-store once a week, compared to 71 percent of other generations, contradicting the conventional wisdom that millennials as a group are driving less. Many of these trips for gas also include in-store purchases. This year’s study shows that 61 percent of millennial respondents have purchased prepared food at a c-store in the last month, with sandwiches, pizza and hot dogs proving to be the most popular. However, millennials are more or less split when it comes to

How often do you shop at convenience stores? Total

Daily Weekly Once a month

13% 46% 41%

Age Millennials All Others

16% 49% 35%

11% 45% 44%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

How often, on average, do you shop at a convenience store for gasoline? Total

Daily Weekly Once a month Once every 6 months Yearly Less often than once a year Never

4% 68% 17% 3% 0% 1% 6%

Age Millennials All Others

8% 73% 11% 2% 0% 0% 5%

2% 66% 20% 3% 0% 1% 7%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

whether or not they prefer made-to-order food (45 percent) or prepacked/grab-and-go items (43 percent). In addition to foodservice items, millennials are ringing up a variety of other goods at the checkout counter. In the month preceding the polling conducted by CSNews, 54 percent of millennials said they had purchased hot dispensed beverages at a convenience store — 80 percent of whom prefer a self-service station over barista service. Sixty percent had purchased cold or frozen dispensed beverages, 33 percent bought beer or malt beverages, 66 percent picked up candy or gum, 75 percent purchased packaged beverages, 65 percent packaged snacks, 21 percent cigarettes and, last but certainly not least, 81 percent made a fuel purchase. In total, 83 percent of millennials consider themselves health conscious to some degree, but only 30 percent are either “extremely satisfied” or “very satisfied” with the better-for-you selection currently offered at c-stores; 41 percent are “somewhat satisfied.” Millennials are most concerned about the sugar content in the food and beverages they purchase (25 percent), followed by calories (20 percent), and whether or not the items are fresh (18 percent). These percentages reflect respondents ranking the aspect as their primary or secondary concern. Loyalty programs have been taking the retail industry by storm, and millennials are buying into them at a rate on par with other generations. Of the millennials polled, 37 percent whose regular c-store offers a loyalty program are enrolled in it. Additionally, 28 percent whose regular c-store does not currently offer a loyalty program would sign up if they developed one.

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

Do you use any of the following services at a convenience store? Total

ATM Car wash DVD rental Money orders Internet access/Wi-Fi Bill pay Check cashing Coin counting Postal services Pickup lockers (Amazon, UPS, etc.) Copy/fax Video games Mobile ordering Home delivery None of the above

Which of the following types of prepared foods did you purchase at a convenience store in the past month?

Age Millennials All Others

31% 18% 10% 7% 7% 3% 3% 3% 2% 2% 2% 2% 1% 1% 50%

41% 23% 15% 10% 12% 6% 5% 6% 3% 4% 2% 3% 2% 2% 34%

25% 15% 7% 6% 4% 1% 1% 1% 2% 1% 1% 1% 1% 0% 57%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

What might surprise c-store retailers is that among the services millennials use at c-stores — from mobile ordering (2 percent) to home delivery (2 percent) to pickup lockers for Amazon and UPS (4 percent) — the most popular service used is an onsite ATM. Forty-one percent of millennials said they use ATMs at c-stores, compared to 25 percent in other generations. At the time this study was conducted, 3 percent of millennials polled owned an electric vehicle (EV), compared to 2 percent of all other generations combined. Although 3 percent might seem insignificant, with EV vehicle ownership numbers expected to grow, it is important for those in the convenience and fuel retailing industry to know what EV drivers’ wants and needs are. The study results show that 73 percent of millennial EV owners say it’s “very” or “extremely” important that a c-store has a charging station, with 80 percent stating they charge up “almost every time” or “every time” they visit a c-store.

When purchasing prepared food at a convenience store, 45 percent of millennials prefer made-to-order options, 43 percent prefer grab-andgo, and 12 percent have no preference.

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

Total

Deli/sandwiches Hot dog Pizza Breakfast sandwich Hot snacks other than French fries (eggrolls, taquitos, mozzarella sticks, etc.)

Fresh baked goods

(doughnuts, cookies, pies, etc.)

Other breakfast foods

(muffins, biscuits, bagels, etc.)

Chicken (rotisserie, fried, wings, etc.) Hamburger Mexican (tacos, nachos, burritos, etc.) French fries Hot entrées Ice cream/frozen yogurt (soft-serve or hand-dipped)

Salad (green salad, macaroni salad, etc.) Fresh-cut fruit Fresh fruit/veggie smoothies Soup/chili Yogurt parfaits Healthier options

(low-fat, low-carb, low sodium, etc.)

Take-home meals

(heat & eat, meal kits, etc.)

Fresh-cut vegetables Organic/all-natural products Italian Chinese Indian Middle Eastern Thai Other

Age Millennials All Others

39% 36% 28% 23%

37% 32% 37% 21%

39% 38% 23% 25%

21%

26%

18%

17%

18%

16% 14% 12% 12% 11% 8%

16% 18% 14% 14% 18% 10%

15% 11% 11% 10% 8% 7%

8% 8% 7% 6% 5% 4%

10% 10% 8% 8% 5% 6%

7% 7% 6% 5% 5% 3%

4% 3% 3% 3% 3% 1% 1% 1% 2%

7% 6% 5% 5% 5% 2% 1% 1% 1%

2% 1% 2% 2% 1% 1% 1% 0% 2%

Base: 779 respondents who shop the c-store channel at least once a month and purchased prepared food at a c-store in the past month Source: Convenience Store News Market Research, 2018

80%

The percentage of millennials who prefer self-service when purchasing hot beverages at a c-store.

30%

The percentage of millennials who are either extremely satisfied or very satisfied with the current selection of healthy, better-for-you food and beverage options at c-stores.

Hail Hispanics! They are growing in number and in buying power, and they like convenience stores By Don Longo THE U.S. CENSUS BUREAU DESCRIBES HISPANIC or Latino ethnicity as “a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin regardless of race.” Hispanic people are the largest minority in the United States. Only Mexico has a larger Hispanic population than the U.S. And, by 2060, the Census Bureau predicts Hispanic people will comprise more than 28 percent of the total population, with 119 million residing in the U.S. Hispanic consumers, a multifaceted and diverse group composed of many different subcultures, are widely recognized as critical to the current and future success of U.S. retailers. Hispanic buying power surpassed $1.4 trillion last year and is expected to reach $1.8 trillion by 2021, according to market researcher Nielsen. While Hispanics’ purchasing patterns can differ significantly when it comes to shopping at grocery stores, especially in such departments as meat, produce and dairy, their spending at convenience stores is pretty similar to the general market, with the exception of a couple key categories. This year’s CSNews Realities of the Aisle study takes a deep dive into how Hispanic consumers shop convenience stores. The study examines what draws them to the store, how often they shop, and what they purchase when they are at the c-store. Our study confirms Census Bureau data that Hispanics are younger than the general population. Among all those who shopped a c-store in the past month, Hispanics represent a higher percentage of 18- to 34-year-olds by a wide margin. Hispanic c-store shoppers are also more likely to have children under the age of 18 living in their household. In household income, Hispanic c-store customers index higher than the general population for having incomes below $35,000 a year. They are also more likely than the general market to have an annual income between $50,000 and $75,000. Underling the importance of Hispanic consumers to c-stores is the finding that Hispanics are more likely to be daily shoppers

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

Which of the following ranges includes your annual household income? Hispanic/Latino

Less than $35,000 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 or more Mean

29% 20% 29% 11% 11% $56.12K

All Other

23% 19% 24% 17% 18% $62.51K

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

How much do you agree or disagree with the statement, “I am health conscious”? Hispanic/Latino

Completely agree Somewhat agree Neither agree nor disagree Somewhat disagree Completely disagree

26% 54% 11% 7% 2%

All Other

24% 55% 13% 6% 1%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

How many times in the past month did you purchase prepared food at a convenience store? Hispanic/Latino

Once Twice Three times Four times or more Mean

20% 19% 16% 34% 4.86 times

All Other

26% 15% 12% 22% 3.51 times

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

of convenience stores than shoppers of other ethnicities. They are more likely to be monthly shoppers as well. Hispanic frequent c-store shoppers are a bit more likely than the general market to shop inside the c-store for merchandise or foodservice items on a daily basis, too. Like most of the general public, the foremost reason Hispanics shop c-stores is for gasoline. This is followed closely by snacks and packaged beverages. Compared with the general market, Hispanics are more likely to shop c-stores for food, soft drinks, alcoholic beverages, and snacks. Hispanic c-store shoppers are more likely compared to the overall market to stop at a c-store while traveling to or from work. By time of day, they tend to frequent c-stores more than average for lunch (11 a.m. to 1:59 p.m.) and in the evening (7 p.m. to 10 p.m.).

c-store, their alternative destination for the majority of such occasions (60 percent) was a fast-food outlet, like McDonald’s.

Did you buy the following products at a convenience store in the past month? Hispanic/Latino

Hot dispensed beverages Cold or frozen dispensed beverages Beer or malt beverages Candy or gum Packaged beverages Packaged snacks Cigarettes

56% 63% 31% 63% 72% 66% 19%

All Other

52% 49% 22% 41% 60% 55% 21%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

Have any of the following elements influenced your decision to visit a convenience store? Hispanic/Latino

Loyalty program Gas price app Coupon Word-of-mouth Mobile app offer from store Promo on social media Radio or TV ads Billboard Email Text message Mobile ordering Print circular

17% 18% 18% 7% 9% 8% 9% 7% 3% 4% 3% 2%

A slightly higher percentage of Hispanics purchased a hot dispensed beverage at a c-store in the past month than the general market. Hispanics also were more likely to purchase cold or frozen dispensed beverages — 63 percent vs. 51 percent. A larger percentage of Hispanics purchased beer or malt beverages at a c-store than the general market, while nearly two-thirds of Hispanic c-store shoppers purchased candy or gum in the past month, compared with about half of all c-store shoppers. Hispanics also over-index on purchases of packaged beverages and snacks. Interestingly, Hispanics are no more or less likely than the general population to purchase cigarettes.

All Other

15% 14% 11% 6% 5% 5% 5% 4% 4% 2% 3% 4%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

Top Product Categories Hispanics are more likely to purchase prepared food at a c-store than the general market (55 percent vs. 52 percent). Hispanics purchased prepared foods a mean average of 4.86 times in the past month, much more often than the average for all shoppers of 3.7 times a month. Hispanics also spend more on prepared food than the average customer, a $24.52 mean average vs. $20.55. The most-purchased prepared foods by Hispanic c-store shoppers are hot dogs, deli/sandwiches, hot snacks and pizza, in that order. They are less likely than the average customer to purchase a breakfast sandwich and chicken. When purchasing prepared food, Hispanics buy bottled water, bottled/canned soda, and candy/gum to go along with their food purchase. In terms of satisfaction, Hispanics are much more satisfied with prepared food at c-stores than other customers. More than eight in 10 said they were extremely or very satisfied with their last prepared food purchase compared to just seven out of 10 overall customers. More Hispanics prefer prepackaged/grab-and-go food at a c-store than made-to-order food, while shoppers overall are about evenly split in their preferences. For Hispanics who hadn’t purchased prepared food at a

What Draws Them? Hispanics are drawn to a c-store by many of the same factors that influence general-market consumers, such as a loyalty program or coupons. However, they are a little more likely than general-market consumers to be influenced by radio, television, and billboard advertising. Hispanics are heavy users of c-store services, indexing higher on a wide range of services from the ATM to car wash, DVD rental, money orders, bill paying, and pickup lockers. When their c-store shopping is done and it’s time to check out, Hispanics are more likely to pay for their purchase with a debit card than general-market customers.

Hispanics like dollar stores almost as much as they like convenience stores. They are more than twice as likely to be daily dollar store shoppers than non-Hispanics, and they also shop dollar stores on a weekly basis at a greater rate than non-Hispanics. Hispanics are more satisfied with prepared foods at c-stores than other customers. More than eight in 10 said they were extremely or very satisfied with their last c-store prepared food purchase, compared to just seven out of 10 overall customers. Hispanics are heavy users of c-store services, indexing higher on ATMs, car washes, DVD rental, money orders, and pickup lockers.

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Health-Conscious, But Not Healthy-Reliant Consumers who care about better-for-you products are already regular c-store shoppers, but they want more options By Angela Hanson MANY CONVENIENCE STORES HAVE ENHANCED their fresh-food and better-foryou offerings in recent years, but the channel is still often associated with unhealthy and indulgent foods and beverages. Yet, findings from the 2018 CSNews Realities of the Aisle study show that consumers who view themselves as “health conscious” can and do shop at c-stores. This means c-store retailers have an opportunity to expand sales — but to be successful, they must understand who health-conscious shoppers are and what they really want. Health-conscious convenience store shoppers do differ from those who view themselves as “definitely not health conscious” or “neutral” on the topic. However, they don’t differ significantly in how often they visit c-stores. Fifty-one percent of health-conscious consumers shop for in-store merchandise and/or foodservice at a c-store once a week, compared to 50 percent of health-neutral shoppers and 48 percent of non-healthconscious shoppers. The next most common frequency is once a month, at 28 percent for health-conscious shoppers, 26 percent for health-neutral shoppers, and 26 percent for non-health-conscious shoppers. When it comes to daily in-store shoppers, there is just a 1 percentage-point difference between daily health-conscious shoppers (14 percent) and daily non-health conscious shoppers (15 percent). Retailers who want to

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

Are you satisfied with the current selection of healthier/better-for-you foods and beverages at convenience stores? Extremely satisfied Very satisfied Somewhat satisfied Not very satisfied Not at all satisfied

Total

Health Conscious

7% 18% 45% 27% 3%

8% 18% 45% 25% 3%

Not Health Neutral Conscious

4% 18% 46% 31% 2%

5% 12% 42% 38% 3%

Base: 1,500 respondents who shop the c-store channel at least once a month Source: Convenience Store News Market Research, 2018

When purchasing prepared food at a convenience store, which do you prefer? Made-to-order food Prepackaged/graband-go food No preference

Total

Health Conscious

Not Health Neutral Conscious

42%

43%

39%

38%

40% 18%

39% 18%

43% 18%

42% 21%

Base: 779 respondents who purchased prepared food at a convenience store in the past month Source: Convenience Store News Market Research, 2018

boost their sales of healthy products can therefore market to customers they already have instead of focusing on drawing in new ones. However, while more than a quarter of health-conscious c-store shoppers say they are “very” or “extremely” satisfied with the selection of healthier/better-for-you foods and beverages currently available at convenience stores (27 percent),

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a significantly larger amount (45 percent) are only somewhat satisfied with what’s available, and 28 percent say they are unsatisfied, indicating there is room for improvement in the average c-store’s heathy product offering. When they buy prepared food, healthconscious consumers show a slight preference for made-to-order food (43 percent) over prepackaged/grab-and-go food (39 percent). And a larger amount of healthconscious consumers (71 percent) say they were satisfied with their last prepared food purchase at a convenience store, compared to health-neutral customers (66 percent satisfied) and non-health-conscious customers (58 percent satisfied). C-stores should also consider what other items health-conscious consumers are likely to purchase as add-ons with prepared food. More than four in 10 (41 percent) said they purchased bottled water with prepared food in the last month, compared to just 31 percent of health-neutral shoppers and 28 percent of non-health-conscious shoppers. Healthconscious consumers were also more likely to buy coffee, tea and other hot beverages, at 37 percent, compared to 28 percent of health-neutral shoppers and 23 percent of non-health-conscious shoppers. CSN

More so than other shoppers, health-conscious consumers typically shop at c-stores while running other errands, while traveling for pleasure, or on special trips from home.

Health-conscious consumers are the group most likely to have brought their last prepared-food purchase home to consume.

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

What else did you purchase at the convenience store where you purchased prepared food? Bottled water Cold fountain/ dispensed drink Coffee/tea/other hot beverages Bottled/canned soda Candy/gum Packaged salty snack Packaged sweet snack Other bottled beverage Milk Cigarettes Ice cream Beer/malt beverage Newspaper or magazine Grocery items Fresh produce Other Nothing else, I only purchased prepared food items in the past month

Total

Health Conscious

Not Health Neutral Conscious

39%

41%

31%

28%

36%

33%

51%

36%

35% 33% 33% 28% 21% 21% 20% 16% 16% 14% 12% 11% 8% 3%

37% 31% 34% 27% 20% 20% 22% 15% 17% 14% 13% 11% 8% 3%

28% 36% 30% 38% 27% 22% 15% 18% 11% 13% 11% 10% 7% 4%

23% 51% 23% 25% 19% 25% 13% 21% 13% 19% 4% 8% 6% 9%

Base: 779 respondents who purchased prepared food at a convenience store in the past month Source: Convenience Store News Market Research, 2018

More than half of consumers who self-identify as “health conscious” typically shop at convenience stores during the dinnertime daypart.

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CAUTION: Fierce Competition Ahead Experts predict it’s going to be a rocky year on the convenience retail competitive front By Renée M. Covino FASTEN YOUR SEATBELTS. Competition

“convenience” retailing is heating up. Amazon, grocery delivery services, grocery pickup services, and convenience delivery services such as GoPuff are evolving swiftly as outside competitors to c-stores, while of course, there are threats from the usual suspects such as mass-merchandisers Walmart and Target, traditional grocery retailers, dollar stores and drug stores. And inside the channel lurks plenty of healthy rivals, too, especially for independent operators. Convenience Store News recently chatted about the 2018 competitive forecast with a panel of five retail industry experts from different walks. They all predict more competition in 2018 than 2017, but with varying perspectives on who the biggest threats are and how convenience stores can best compete. Here are their viewpoints:

“2018 promises to bring more competition in all retail verticals.” As commodity-based goods are trading more heavily in ecommerce platforms, the compe-

tition ramps up for creating in-store experiences, said David Sheldon, vice president of client engagement for Retail Design Collaborative. While many retailers are shutting stores in epic proportions, convenience stores and quick-serve retailers are actually thriving. Sheldon points to retailers like 7-Eleven Inc. and Alimentation Couche-Tard Inc. as those that are expanding and succeeding, but he also finds it interesting from a competitive perspective that stores like Aldi and Lidl are beginning to move into the mix. He believes these “small-format, no-frills grocer brands” will gradually overtake the traditional convenience store if the channel doesn’t stay on top of its business. He says convenience stores can compete against grocers or in the ecommerce marketplace by implementing a stronger emphasis on the design quality of the store, especially as consumer expectations heighten every day. Sheldon offers the grab-and-go retail operations at airports as a prime example of a successful design. “Where there is the function aspect — fast, casual and convenient — it also meets form with simple, clean design,” he said. “I believe that as convenience begins to freshen the customer experiences that are rooted in hospitality, even if they are only engaging the customer for less than two minutes, they will succeed.” If they abandon design elements, he says there’s the possibility of gas stations becoming obsolete, especially as more automatic and electric vehicles hit the market. In addition to design, health is another aspect for convenience stores to more seriously address, according to Sheldon, who says he sees this playing out in California where Retail Design Collaborative is headquartered. “We look at how the trends being set in California are having a ripple effect nationally and globally. One key trend I’m seeing, which I feel will dramatically impact convenience store

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sales and their position in the marketplace, is the mantra of ‘Health is the new wealth.’ I feel strongly that convenience store brands need to embrace more thoughtful food and drink options,” he stated.

tively to the health of the c-store industry. Consumers can use Taskrabbit or other such portals to buy groceries and other household items and get it delivered home from a c-store nearby,” he offered.

“With consumer acceptance of ecommerce at an all-time high, convenience stores are facing deeper threats.”

“The competitive watch for 2018 is on the delivery economy in the grocery channel.”

Services such as FreshDirect and Farmigo are making the lives of consumers easier by saving them a trip to the convenience store on their way back home. Online grocery delivery services and subscription-based delivery services, as well as BOPIS (buy online, pick up in store) services are also adding more fierce competition to the arena, points out Ashwin Ramesh, CEO of Synup, a consultancy for independent retailers.

Lauren Giles, a partner in Alston & Bird’s Financial Services & Products Group, observes that traditional grocery retailers are showing strong interest in reviving their delivery and curbside pickup services in order to compete with Amazon and other emerging threats.

The big names have not kept away from moving into the c-store mix, either. “December 2016 saw the launch of a grocery, pickup and gas station concept Walmart in Thornton, Colo.,” Ramesh noted. “A brand like Walmart trying to explore this space definitely poses a threat to smaller retail businesses in the area.” Amazon with its Amazon Prime Fresh, Amazon Prime Pantry and Amazon Now is a sizeable threat as well. “One of the biggest impending threats to c-stores everywhere will be the real-time introduction of the super-futuristic Amazon Go — a concept that is projected to change the way retail stores operate entirely, allowing customers to pick the product up and leave the store with no manual intervention at all,” he said. However, this does not mean that all is lost for c-stores. Besides the fact that hyperlocal startups do not always fare well, convenience stores can switch the trend around in their favor, Ramesh believes. “Tech startups might contribute posi-

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“Convenience stores, where transactions are lower-dollar and cash is more common, cannot directly offer the same services. Third-party services may be able to help convenience stores to bridge this gap and mitigate threats from the growth of grocery delivery,” she said. Two other areas that convenience stores should be considering as a way to thwart intense competition are loyalty programs and “bank substitutes,” according to Giles. The way she sees it, consumers are looking for ways to make their spending work for them and, as a result, loyalty programs — including co-branded and private-label payment cards, as well as non-card-linked reward programs — will continue to be a growth area in 2018. “However, our experience suggests that the effectiveness of loyalty programs truly is rooted in the customer relationship to the retailer. Retailer-specific programs that provide rewards tailored to your customer base will likely be more effective than multi-brand programs that do not target your customers’ needs,” she explained. Regarding the “bank substitutes” issue, Giles said tens of millions of Americans remain unbanked or underbanked, and

NOMINATIONS ARE NOW OPEN!

TOP

W MEN IN CONVENIENCE PRESENTED BY CONVENIENCE STORE NEWS

Nominations are now being accepted for Convenience Store News’ Top Women in Convenience awards program, which recognizes the integral role women play in convenience retailing. Women will be honored from the retailer, wholesaler and supplier communities in four different categories: AWARD CATEGORIES*

Women of the Year

Senior Level Leaders

Rising Stars

Mentors

To nominate a deserving woman for this special recognition, visit csnews.com/twic2018 today!

DEADLINE FOR NOMINATIONS APRIL 30, 2018

neighborhood stores often provide critical access to financial services for these individuals by handling remittances, selling or reloading prepaid cards, and operating non-bank ATMs. “We are seeing significant interest in the development of new bank substitute or bank supplement products, such as those that enable unbanked or underbanked customers to load cash into a stored-value account in order to transact online,” she said. “We expect this to continue to be a growth space in 2018.”

“Just looking at the ‘convenience’ benefit of c-stores, there are three major areas of increased competition in 2018.” Don Stuart, managing director of Cadent Consulting Group, said the three areas are: expansion of small-format deep discounters a la Aldi and Lidl, continued dollar store development, and pure ecommerce expansion and home delivery. Additional secondary factors that he believes are going to make it more stressful for convenience stores to operate at the status quo for 2018 include: • The focus on expandable consumption snacking throughout

all retail outlets, which will pressure traditional convenience store fare; • Private label expansion and competitive price pressures that will incent some consumers to opt out of the convenience channel; and • All retailers becoming more convenience-oriented, which will take the “sharp edge” off the traditional convenience store advantage. Stuart sees the competitive advantage of convenience stores right now being their product mix, with a heavy reliance on tobacco, beverages, snacks and gasoline. Convenience stores need to compete by focusing on their strengths and addressing opportunities, he said. “The strengths are clearly convenience, but it is convenience with proper merchandising and selection, with a heavy focus on tobacco products, beverages and snacks,” he explained. “Foodservice, however, has not been fully leveraged in convenience stores. The more they can create a satisfying eating experience with quality food, quick preparation, healthy options and excellent service, the more they will become

an immediate meal destination to complement existing business.” Additionally, the sheer reach of c-stores, with approximately 160,000 outlets across the country, puts them within footsteps of a large portion of America. Stuart believes this proximity advantage will continue to work in their favor with the right competitive tweaks.

“Perhaps the greatest convenience store competition in 2018 will come from within the channel.” Providing consumers with an improved retail experience isn’t cheap. Whether it’s a loyalty program that consumers actually respond to, or a meal offering worth picking up for dinner, the investment is significant. In many cases, consumers have c-store choices, and those intrepid companies that are willing to make the investment win, says Jean-Eric Penicaud, co-founder of Survey.com, which measures c-store product introductions and brands.

Penicaud recognizes that chains hold a distinct advantage over independents when it comes to investment spending — they have the ability to spread the burden across a large number of locations, and have leverage when negotiating the cost of necessary equipment and services with vendors. But the good news for independents is that there is an opportunity to build alliances with other providers facing similar challenges.

Our Panel of Retail Industry Experts LAUREN GILES Partner Alston & Bird’s Financial Services & Products Group JEAN-ERIC PENICAUD Co-founder Survey.com

ASHWIN RAMESH CEO Synup

“It is imperative independents maintain strong local connections to the community and their consumers, more than their competition. Intimate knowledge leads to more granular offerings and a greater sense of community,” he said. This mindset will increase the chance of making future investments successful, according to Penicaud. CSN

DAVID SHELDON Vice President of Client Engagement Retail Design Collaborative DON STUART Managing Director Cadent Consulting Group

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STORE SPOTLIGHT

Wawa Goes to Washington The retailer’s inaugural location in the District is also its largest yet By Melissa Kress

The store opened its doors to customers on Dec. 14.

LIKE THE GEESE IN ITS LOGO, no one can accuse Wawa Inc. of standing still.

In 2012, the convenience store retailer welcomed customers at a new store in Orlando, Fla., marking its first location not only in the Sunshine State, but also outside its Mid-Atlantic comfort zone. In 2014, the Pennsylvania-based company celebrated the 50th anniversary of its firstever store, which Grahame Wood opened in Folsom, Pa., on April 16, 1964. That same year, Wawa began pumping fuel at its 400th gas store, located in Frederick, Md.

At a Glance WAWA D.C. Location: 1111 19th Street NW Size: 9,200 square feet Unique Features: Interactive social media board, built-to-order salads, nitro cold brew coffee

Fast forward three years to the end of 2017 and Wawa added another first to its long list of milestones: its inaugural store in Washington, D.C. But it is more than just the retailer’s foray into the nation’s capital; it is also Wawa’s largest store yet at 9,200 square feet. At more than double the size of a typical Wawa, which measures anywhere between 3,500 and 4,000 square feet, this location also stands out for being a non-gas location in an industry that sells 80 percent of the gas purchased in the United States. Wawa officially cut the ribbon on the store at 1111 19th Street NW on Dec. 14, but offered guests a sneak peek with a “Taste of Wawa” preview event on Dec. 13 that included a

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store tour, and food and beverage tastings. With more than 9,000 square feet to work with, Wawa found a lot of room to boast new features — like an interactive social media board and touchscreen ordering kiosks throughout the store, not just at the foodservice station — and to offer the brand’s newest foodservice initiatives, including built-to-order salads and nitro cold brew coffee. “As you can tell, we are really excited. It’s finally here,” John Sharpless, director of store operations, said at the preview event. “We’re thrilled to bring this unique mix of quality and what we call ‘convenience’ to the residents and visitors of the District with a unique kind of restaurant-style location created specifically for the District and the D.C. customer.” Other store highlights include an open kitchen concept and free Wi-Fi. This store not only gives Wawa a large canvas to display its offerings, but also an opportunity to welcome customers in the nation’s capital into the Wawa family. “At Wawa, we take great pride in building family bonds with our customers. We remember their names and their favorite things that Wawa has to offer,” said Area Manager Mike Davis, citing several customers who have become family,

like Aaron Huertes, who started a petition to open a Wawa in D.C. “We heard you loud and clear, Aaron, and we are very happy you started that.”

Premier Location, Inside and Out Calling the site a “premier location,” Sharpless said the store in the Golden Triangle Business Improvement District is the launchpad for the retailer’s Washington, D.C. expansion. Wawa has a second District convenience store currently under construction in Georgetown. Wawa’s portfolio comprises roughly 800 convenience stores, and it’s growing every day — in fact, while team members were ringing up customers in D.C. for the first time, several other new stores across Wawa’s six-state footprint were throwing their own grand-opening festivities. Still, the Washington, D.C. store stands out for reasons other than its size. It features an indoor café, outdoor patio seating, and boasts floor-to-ceiling windows along the storefront that give the illusion of eating outside even when temperatures hover around the freezing mark. “And, for the first time in the history of Wawa, we are going to provide free air to

the bicycles passing by,” Sharpless added. The interior design of the store incorporates exposed brick and subway tile on the walls, and wood tones throughout the design. “We really hope you love this store as much as we do,” Sharpless said. “And I have to be honest with you, if you knew me at all, it’s not just about a new store. To be frank, we open stores pretty much every week. … But let me tell you about this store: I’m so excited to connect with the District. That’s what this is about. We don’t just want to open a new store here; we want to become part of the neighborhood and do as much good as we can right here in the District.”

Good Neighbor Policy With the store’s grand opening coming during the holiday season, Wawa themed the event around fighting hunger. “Fighting hunger has been one of the major areas of focus companywide,” Davis said. Wawa incorporated its commitment to fighting hunger into the 19th Street store’s grand opening with a “Lending a Helping Hoagie” campaign. Wawa donated a portion of hoagie sales from the new store — up to $5,000 — to the Capital Area Food Bank. In addition, the Wawa Foundation presented the food bank with a $10,000 grant to help it launch a sustainable “Fresh Community Market” initiative as part of its Family Market program.

This unique restaurant-style location was created specifically for the District and the D.C. customer.

The new District store also participated in the retailer’s annual Checkout Hunger in-store fundraising campaign, during which customers donate $1, $3 or $5 at the point-of-sale to benefit food banks throughout the retailer’s geography. “I know many of you have been waiting for this day and believe me, everyone at Wawa has been, too,” Sharpless said. CSN

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TWIC TALK

Barbara Poremba, The Coca-Cola Co. The 2014 TWIC Woman of the Year says all leaders have the opportunity to do things differently By Linda Lisanti vice president of national retail sales at The Coca-Cola Co. Fittingly, she was among the first-ever TWIC honorees in 2014, when the program launched. Poremba was one of five awarded the title of Woman of the Year. CSNews: How would you describe the current state of affairs for gender equality in the convenience store industry? How does this compare to 10 years ago?

NOW ENTERING ITS FIFTH YEAR, the Convenience

Store News Top Women in Convenience (TWIC) awards program has recognized 200 of the best and brightest women making a positive impact on not only the companies they work for, but also the entire convenience retail channel. TWIC is the only program that recognizes exceptional female leaders, rising stars and mentors among retailer, supplier and distributor firms in the convenience store industry, from the c-suite to the store level to the independent entrepreneur. In TWIC Talk, our new Q&A series, we interview a past TWIC winner about what it it’s like to be a female leader in the convenience store industry today — the challenges, the opportunities — and get their words of wisdom for up-and-comers seeking to blaze their own trail. Our inaugural TWIC Talk subject is Barbara Poremba,

Poremba: As in many other industries, there are opportunities for the convenience retail industry to continue to evolve to achieve gender equality. I believe retailers and suppliers across the industry are actively working to ensure wider representation of women at senior levels in their companies. We’re seeing retailers and suppliers build leadership teams that are representative of the consumers they serve, and that’s helping shape the future of our industry in a positive way. CSNews: What is the most positive change you have personally witnessed? Poremba: I’ve seen many retailers mindfully think about how to elevate top female talent and evolve their leadership and management teams to be more inclusive. They’re looking for ways to identify emerging talent, and invest in those who have potential and expose them to opportunities for volunteerism and participation across the industry. These steps are great for female and male leaders, business outcomes, and our industry. CSNews: Along your career path, did you personally experience gender bias or inequality? If so, how did you overcome it? Poremba: Throughout my more than 25-year career in the CPG industry, there have been many times when I found myself the only woman on a leadership team or at a meeting. But more importantly, I was afforded opportunities to take on stretch assignments that allowed me to grow and advance. This happened because I worked for progressive leaders and coaches who saw my potential and guided me to be suc-

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

cessful. They also encouraged me to be a champion for others, and I’m certainly able to do that at The Coca-Cola Co. We take a very mindful approach to reaching gender equality and elevating female leaders to reach their full potential. This creates an environment that allows everyone — not just female leaders — to thrive. CSNews: What barriers to advancement do you see still existing in the c-store industry? Poremba: The greatest barrier is a mindset that’s focused on the past instead of one that’s oriented to what the world looks like today and will look like in the future. The bright side is that all leaders have the opportunity to think and do things differently. Leaders in the convenience retail industry have the ability to assess their organizations and identify top talent who have innovative thoughts and perspectives. These different viewpoints allow retailers to better serve their increasingly diverse consumer base, too. CSNews: What is your advice for other industry women looking to rise to higher ranks? Poremba: Ask to take on roles or projects that will stretch your thinking and allow you to grow — taking these mindful risks will allow you to develop in your career and learn from those around you. Seek out both male and female leaders you can learn from. Get involved with organizations within our industry, which provide opportunities for networking and training. Explore opportunities to volunteer with organizations like NACS or the Network of Executive Women (NEW), which have many regional and national programs. CSN

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

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GETTING TO THE CORE

Resolutions for a Healthier 2018

C-store shoppers place importance on maintaining a healthy diet and lifestyle It seems convenience store shoppers have caught the health and wellness bug. EIQ Research Solutions, sister company of Convenience Store News, recently surveyed consumers who shop at a c-store at least once a month and found that nearly 90 percent say it is extremely or somewhat important for them to maintain a healthy diet and lifestyle. Additionally, more than one in four report they have stronger feelings about health and wellness than they did a year ago.

23%

How important is it for you to maintain a healthy diet and lifestyle? Not at all important Somewhat unimportant Neither important nor unimportant Somewhat important Extremely important

Baby boomers (41.4%), more than any other generation, say it is extremely important for them to maintain a healthy diet and lifestyle.

0.2% 3.2% 7.0% 54.2% 35.4%

Only of c-store shoppers who made 2017 resolutions to improve their health or diet report that their efforts went very well or excellent.

How does this compare to one year ago? A year ago, it was more important It was the same a year ago A year ago, it was less important

6.2% 51.0% 42.8%

Base: Consumers who visit a convenience store at least once a month Source: EIQ Research Solutions

48.2% The percentage of convenience store shoppers who say they are making resolutions for 2018 to improve their health or diet.

37.4% The percentage of c-store shoppers who say they made a resolution at the start of 2017 to improve their health or diet.

Are you making resolutions for 2018 to improve your health or diet? Yes No Unsure/Undecided

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.

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

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

48.2% 27.6% 24.2%

More than any other demographic tracked, Hispanic c-store shoppers (64.4%) are resolved to make changes this year. Base: Consumers who visit a convenience store at least once a month Source: EIQ Research Solutions

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