CSN - April 2018 by ensembleiq

W H AT ’ S N E X T I N C O N V E N I E N C E A N D F U E L R E TA I L I N G

THE FUTURE OF FUEL RETAILING

HOW TO EMBRACE THE BETTER-FOR-YOU TREND

FROM THE ENERGY SOURCE TO THE FUELING EXPERIENCE, “FILLING UP” IS IN FLUX.

APRIL 2018 CSNEWS.COM

your business LEGISLATION / REGULATIONS

SALES STRATEGIES

COMPREHENSIVE RESOURCES

CONSUMER INSIGHTS

MERCHANDISING SOLUTIONS

SALES & PROFITS

COLLABORATION

LEADERSHIP BRANDS

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VIEWPOINT

Charged Up About the Future of Fuels? Alternatives are on the way, but “when” is the question TESLA FOUNDER ELON MUSK envisions a future filled with “old-school drive-in,” carhop-style restaurant charging locations for drivers of electric vehicles (EVs). The restaurants at these locations would be technologically connected to the vehicles, sending menus to the cars’ touchscreens and electronically receiving orders from the drivers still in their vehicles.

Are EVs the next big thing? Policymakers have pinned hopes of reducing greenhouse gas emissions on the development of electric cars with wider ranges. Manufacturers are making EVs more affordable while extending their range. Leading carmakers are on track to roll out vehicles that could travel up to 200 miles on a single charge. Two hundred miles is the magic number that many believe is necessary to broaden EV appeal to the masses. Tesla’s cars already exceed that range, and their prices are now coming down to the range of gas-powered luxury models. Predicting the pace of technological change, though, can be a crapshoot — as evidenced by the recent report that a self-driving Uber vehicle hit and killed a pedestrian crossing the street, which has to be a setback for driverless technology. And the impact of surging demand for power to charge EVs has yet to

play out. Will consumers eventually weigh the environmental impact of producing the electricity needed to power these supposed eco-friendly vehicles? A single EV charge could consume as much electricity as the average refrigerator does in six weeks. Prasat Satyavolu, chief digital officer for Cognizant, an international technology consultancy, believes the digitization of the driving experience and changing consumer behaviors will usher in a very different transportation industry. Speaking late last year at Convenience Store News’ fourth-annual Alternative Fuels Summit, sponsored by Growth Energy, Satyavolu said he believes a move toward hybrid vehicles is imminent. “We’re going to see a slow but steady adoption of alternative fuel vehicles,” he said. “But there will be no one source of energy. It will be a blend of different types of fuel.” As our cover story points out (see page 38), the future of fuel retailing will likely be determined by customer choice. Customers’ needs, expectations and desires should be the filter through which all c-store retailers view their future forecourt business. For comments, please contact Don Longo, Editorial Director, at (201) 855-7606 or dlongo@ensembleiq.com.

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

EDITORIAL ADVISORY BOARD

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.

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CONTENTS APR 18

VO LU M E 54 N UMB ER 04

32 FEATURES

DEPARTMENTS

COVER STORY

VIEWPOINT

SMALL OPERATOR

38 The Future of Fuel Retailing From the energy source to the fueling experience, “filling up” is in flux.

4 Charged Up About the Future of Fuels? Alternatives are on the way, but “when” is the question. 12 CSNews Online

32 Cleaning Up Your Operation: Step 1 in Any Turnaround Deficiencies in cleanliness can doom everything else that is good in a c-store.

OUT & ABOUT

STORE SPOTLIGHT

23 Convenience Distribution Marketplace Covers All the Bases Sessions at the wholesaler event addressed tobacco, foodservice, candy, snacks and more.

TWIC TALK

48 Finding the Current Electric vehicle charging stations are making their way to convenience stores, as early adopters take advantage of installation incentives. 54 Attuned to Alternative Fuels Consumers’ growing knowledge about fueling options is a driving force. 61 The Cashierless Convenience Store: Fad or Future? Amazon, Walmart and Kroger are a few companies automating the checkout process, and experts believe c-store operators should be paying attention.

OUT & ABOUT

24 Canadian Convenience Grabs the Spotlight This year’s Convenience U CARWACS Show in Toronto delivered more innovation. 28 New Products

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

70 Redefining the Urban Bodega Boomshack Market offers “quick-hit” convenience in a playful atmosphere.

73 Kimberli Carroll, Ruiz Food Products Inc. The 2015 TWIC Woman of the Year says it’s a great time to be a woman in the business world. GETTING TO THE CORE

86 Message in a Beer Bottle Insight on beer buyers and non-buyers flows from new c-store shopper research.

If it can fuel a Mars rover, it can fuel your summer sales. Drive volume and give your customers what they need for one Interesante summer.

+10% MEXICAN IMPORTS CONTINUE TO EXPERIENCE DOUBLE DIGIT GROWTH.1

AUGMENTED REALITY EXPERIENCE WITH SHAZAM ENGAGE CONSUMERS AT RETAIL AND INCREASE IMPULSE PURCHASE.

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Sources: 1. Nielsen FDCM + 26 weeks ending 10.21.17 2. Nielsen FDCM + 26 weeks ending 11.4.17

Keep It Interesante.

CONTENTS APR 18

VO LU ME 54 N UMB ER 04 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

14 INDUSTRY ROUNDUP

Editor-in-Chief (201) 855-7608

16 RaceTrac Hitting the Road to a New Market 18 In the Public Eye 18 Fast Facts 20 Eye on Growth 22 Retailer Tidbits

CATEGORY MANAGEMENT

64 What’s Hot on C-store Menus? GetGo gets high marks on The Ultimate Meatloaf Sub. FOODSERVICE

65 The Match Game What should c-store retailers look for in the growing pool of branded foodservice prospects? TOBACCO

56 Embrace the Better-for-You Trend Put your best food forward as elevated nutrition needs arise among consumers.

Melissa Kress mkress@ensembleiq.com

Associate Editor (201) 855-7619

22 Supplier Tidbits

HOW TO

Linda Lisanti llisanti@ensembleiq.com

Senior News Editor (201) 855-7618

FOODSERVICE

14 Casey’s Unveils Value Creation Plan

Don Longo dlongo@ensembleiq.com

68 Tapping a Tobacco Mind Managing the tobacco category is risky and rewarding business, as Brookshire Brothers’ Phil Metzinger can attest.

Angela Hanson ahanson@ensembleiq.com

Associate Managing Editor (201) 855-7604

Danielle Romano dromano@ensembleiq.com

Assistant Editor (201) 855-7614

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 CUSTOM MEDIA General Manager, Custom Media (224) 632-8244

Kathy Colwell kcolwell@ensembleiq.com

AUDIENCE DEVELOPMENT Director of Audience Development Gail Reboletti (224) 632-8214 greboletti@ensembleiq.com List Rental (800) 529-9020

The Information Refinery Brian Clotworthy

Subscriber Services/Single-Copy Purchases (978) 671-0449 EnsembleIQ@e-circ.net ART/PRODUCTION Director of Production (973) 358-4875 Creative Director (973) 607-1320 Advertising/Production Manager (773) 992-4418 Art Director (224) 632-8245

Kathryn Homenick khomenick@ensembleiq.com Colette Magliaro cmagliaro@ensembleiq.com Ed Ward eward@ensembleiq.com Michael Escobedo mescobedo@ensembleiq.com

CORPORATE OFFICERS Chief Executive Officer 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

David Shanker Rich Rivera Korry Stagnito Ned Bardic Mike McMahon Joel Hughes Jennifer Turner

CONVENIENCE STORE NEWS AFFILIATIONS

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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 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

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OUR WATCH WE I.D. TOBACCO PURCHASES

HELP KEEP TOBACCO OUT OF THE HANDS OF MINORS. I.D. ANYONE UNDER 27.

It’s up to us to protect our community from underage tobacco use. To help prevent sales to minors, FDA has created the “This Is Our Watch” program. Look for your materials in the mail. Learn more about federal tobacco regulations and order free materials at www.FDA.gov/ThisIsOurWatch.

CSNEWS ONLINE

ONLINE EXCLUSIVE

TOP 5 DAILY NEWS HEADLINES

Immigration Compliance Must-Knows for C-store Retailers

On the heels of U.S. Immigration and Customs Enforcement raids on multiple 7-Eleven locations, it’s more important than ever for convenience store retailers to school themselves in immigration compliance. Under the Trump administration, there is an increased focus on enforcement and compliance.

Philip Morris USA Launches Initiatives to Boost Combustible Segment

As cigarette volumes return to historical decline levels — about 4 percent in 2017 — Altria Group Inc. is taking a three-pronged approach to maximize income from its combustible tobacco segment, which includes Philip Morris USA, John Middleton Co. and Sherman Group Holdings LLC and its subsidiaries including Nat Sherman.

Meet 2017 Foodservice Innovator to Watch: Pilot Flying J

In 2017, the retailer hired celebrity chef and restaurant owner Tim Love to create new signature food items and work on developing Pilot Flying J’s foodservice culture. Reportedly, Love will focus first on the company’s stores in its Southwest region by developing new nutritious menu items with representative flavors and items considered specialties from the U.S. Southwest.

Parker’s Adds From-Scratch Southern Comfort Food to More of Its Stores

Parker’s is expanding its Parker’s Kitchen concept, which features fresh, hot, Southern-inspired food that is made from scratch daily, to 29 convenience stores in Georgia and South Carolina. The company also extended foodservice hours for all Parker’s Kitchen locations to 7 p.m., which allows customers to enjoy breakfast, lunch and dinner at Parker’s.

Senators Urge FDA to Reject iQOS Application

Ten federal lawmakers came together to ask the Food and Drug Administration to reject Philip Morris International’s bid to market its heat-not-burn product as a modified risk tobacco product. The senators voiced concerns around the tobacco company’s Modified Risk Tobacco Product application for iQOS in a letter to FDA Commissioner Scott Gottlieb.

EXPERT VIEWPOINT: The Benefits of Biodiesel Jon Scharingson of Renewable Energy Group Inc., a producer of biodiesel and renewable diesel, shares how offering more options at its pumps has paid off for Sapp Bros. Travel Centers, which operates 17 locations stretching from Pennsylvania to Salt Lake City. Sapp Bros. has been pleased to find that the benefits of biodiesel also make their way inside its stores by helping to attract a bigger assortment of customers, such as drivers hauling goods for fleets that have their own sustainability goals or are trying to meet those of their customers.

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

Will Casey’s Be the Next Big C-store M&A Headline? 2018 did not start out on the greatest terms for Casey’s General Stores Inc. On Jan. 3, its shareholders JCP Investment Management LLC, BLR Partners LP and Joshua E. Schechter issued an open letter to fellow Casey’s shareholders pushing for a strategic review of the company. The concerned shareholders cited decreasing same-store sales and bloated operational expenses, which have led the company to miss earnings targets for seven straight quarters. Industry experts weigh in on whether the retailer will survive recent shareholder pressure, or follow in the footsteps of companies like The Pantry Inc. and CST Brands Inc. For more exclusive stories, visit the Special Features section of www.csnews.com.

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INDUSTRY ROUNDUP

Casey’s Unveils Value Creation Plan Roadmap to drive growth and value comes three months after shareholder unrest

is embarking on a journey to drive store growth and increase company value through its fiscal year 2021.

CASEY’S GENERAL STORES INC.

The goal of the company’s new value creation plan, according to President and CEO Terry Handley, is to use its track record of successful programs — such as pizza delivery, 24-hour stores and its major remodel initiative — as a foundation. “Our plan to build on this strong foundation involves enhancing store performance, while maintaining a disciplined approach to capital allocation,” Handley reported during the company’s earnings call on March 7. “We are also announcing strategic board and governance initiatives that enhance alignment between our strategy, board and shareholders.” By fiscal 2021, Casey’s expects that all the components combined will drive growth in: same-store fuel gallons of at least 4 percent, same-store sales in grocery and other merchandise of at least 6 percent, and same-store sales in prepared food and fountain of at least 10 percent. Under the store enhancement portion of the value creation plan, there are three key initiatives: digital engagement, a fleet card program and price optimization. In addition, Casey’s remains focused on implementing ongoing cost-reduction measures and managing operating expenses. To that end, the retailer has identified several cost-reduction measures focused primarily on labor — its largest category of controllable expenses. Casey’s has also optimized prior initiatives, like

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

pizza delivery and 24-hour stores, and enhanced its ability to monitor and adjust these programs across the store base, including new stores, according to the chief executive. Casey’s expects to achieve accumulative operating store savings of approximately $200 million from the fourth quarter of fiscal 2018 through fiscal 2021. The retailer intends to reinvest these savings in key initiatives to increase shareholder value. Along with revealing its value creation plan, Casey’s announced the appointment of three new independent members to its board of directors: • Donald E. Frieson, former executive vice president of operations, Sam’s Club, a division of Walmart Inc.; • David Lenhardt, former president and CEO, PetSmart Inc.; and • Allison Wing, former chief marketing lead officer and executive vice president of digital channels, Ascena Retail Group Inc. The retailer also named Lynn Horak, former regional chairman of Wells Fargo Regional Banking, as board chairman. Horak has been an independent member of Casey’s board since 2009. Ankeny-based Casey’s General Stores ended the third quarter of its fiscal year 2018 with 2,020 convenience stores in 15 states.

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INDUSTRY ROUNDUP

RaceTrac Hitting the Road to a New Market Entry into the Nashville area will be the retailer’s first big move in 15 years is making its first move into a new market in more than 15 years. The Atlanta-based convenience store retailer plans to open 30 new stores in Middle Tennessee by 2023. The expansion will create 600-plus jobs.

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“Nashville is undergoing a true transformation with an influx of new residents and businesses that provide a foundation for continued growth. We believe the city’s young, vibrant population — along with the growth in commuting and mobile workplaces — is a natural

fit for RaceTrac,” said President Billy Milam. “Our expansion into the area deepens our roots in the southeastern region, and we look forward to becoming a part of this flourishing community.” The chain’s first Middle Tennessee store is slated to open in 2020 on Medical Center Parkway in Murfreesboro. Additional sites will be based on visibility and access, among other factors. The company is currently looking at real estate in Nashville and the surrounding markets. RaceTrac will invest hundreds of millions

of dollars in opening the 30 new stores and recruiting and training employees for these locations. The company will begin hiring in 2019. RaceTrac currently operates more than 450 convenience stores across Georgia, Florida, Louisiana and Texas.

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INDUSTRY ROUNDUP

In the Public Eye Alimentation Couche-Tard Inc., Laval, Quebec Couche-Tard continued the rebranding of its network to the new global Circle K brand during its third quarter of fiscal year 2018. To date, the company has rebranded more than 2,500 sites in North America and 1,450 sites in Europe, President and CEO Brian Hannasch reported during a March 20 earnings call. It has also rolled out its Simply Great Coffee program to 3,109 sites. CrossAmerica Partners LP, Allentown, Pa. Following a busy 2017, CrossAmerica Partners expects to see additional synergies from recent alignment with Circle K on its fuel distribution carrier business, and continued success with integrating the Jet-Pep assets this year. The partnership has a new president, Gerardo Valencia, who joined the company March 1. Overall, CrossAmerica had a good 2017, increasing adjusted EBITDA by 5 percent over full-year 2016, the company reported Feb. 27. Delek US Holdings Inc., Brentwood, Tenn. During the fourth quarter of 2017, Delek US saw net sales of $212.8 million and contribution margin of $13.3 million from its retail segment, the company reported during an earnings call on Feb. 27. No comparison could be made to Q4 2016 as its Alon USA Energy transaction closed less than one year ago. Merchandise sales were $84.3 million with an average retail margin of 31.5 percent for the quarter. Approximately 53.2 million gallons of fuel were sold at the retail level at an average margin of 17 cents per gallon. Getty Realty Corp., Jericho, N.Y. Getty Realty invested $214 million to acquire 103 properties during the fourth quarter of 2017 in a combination of portfolio and individual transactions. As for redevelopment, rent began on two redevelopments during 2017, including a new-to-industry convenience and gas location that Getty delivered in the fourth quarter. The company reported net earnings of $13 million for the quarter, compared to net earnings of $8.3 million for the same period in 2016, company executives stated during a Feb. 28 earnings call.

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

Global Partners LP, Waltham, Mass. Global Partners saw strong results for full-year 2017, driven mainly by its gasoline distribution and station operations (GDSO) segment, which generated a $28.4-million increase in product margin year over year, President and CEO Eric Slifka reported during an earnings call on March 8. The GDSO segment product margin for the fourth quarter was $142.3 million, an increase of $30.6 million vs. the same period a year ago, primarily reflecting higher fuel margins. Sunoco LP, Dallas In 2017, Sunoco LP completed three key steps to set itself up for future stability and growth: completing the 7-Eleven Inc. transaction, fixing its capital structure, and becoming an overheard- and capital-light model, President and CEO Joe Kim explained during the company’s fourth-quarter earnings call on Feb. 22. It plans to move even closer to its goal of becoming a fuel distribution and logistics business with the conversion of some retail locations — the majority in West Texas — to the commissioned agent model in the first quarter.

TravelCenters of America LLC, Westlake, Ohio TravelCenters of America announced that it will roll out a Minit Mart loyalty program in the second quarter. This decision comes on the heels of disappointing fourth-quarter 2017 results for its convenience store segment, CEO Andrew Rebholz said during an earnings call on Feb. 28. Notably, TravelCenters’ nonfuel revenues for the fourth quarter decreased by $2.1 million, or 3.3 percent, primarily due to increased competition. Nonfuel gross margin increased slightly to 35.2 percent vs. 33.9 percent in the same period of 2016.

FAST FACTS Millennials (at 63.1 percent) and Generation X (at 61.3 percent), in particular, view loyalty programs as “important” or “very important” to them. — AlixPartners

With the most options of any meal, more than four in 10 consumers do not look forward to deciding what’s for dinner. — The Hartman Group’s Transformation of the American Meal 2017

The percentage of consumers who use voice-ordering technology and report ordering groceries through their smart devices. — OC&C Strategy Consultants

Fuel savings (cited by 30 percent) have surpassed cash-back (29 percent) as the rewards currency with the highest consumer engagement. — Excentus Corp.’s The Road to Rewards 2017

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INDUSTRY ROUNDUP

Eye on Growth

Stewart’s Shops Corp. plans to spend up to $50 million in 2018 to build two new stores

and rebuild or renovate 15 locations in New York and Vermont. GPM Southeast LLC purchased four South Carolina c-stores that operated under the Crenco Food Stores ban-

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ner, as well as one truck stop. The acquired stores are all high-volume, Exxon-branded sites. Andeavor will expand the ARCO brand to the Northern Great Plains region of North Dakota, South Dakota, Wisconsin Andeavor’s three refinerand Minneies and 19 product supply sota. The terminals in the Northern Great Plains will provide company the fuel supply network is planning for these site. more than 150 ARCO stations in the region over the next five years. Yesway acquired six more convenience stores, including five Rip Griffin Travel Center stores across Texas, and the State Line Convenience Store in Joplin, Mo. Tri Star Energy LLC, parent company of Twice Daily Convenience Stores, has opened five White Bison Coffee shops since November. It plans to open an additional five to seven coffee shops this year. TravelCenters of America LLC’s Quaker Steak & Lube restaurant brand is looking for franchised locations in non-traditional spaces, such as airports. Other areas of growth include stadiums, kiosks and colleges.

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The Spinx Co. opened its first express tunnel car wash at a new convenience store in Moncks Corner, S.C. The tunnel wash system is the first of many that Spinx plans to bring to South Carolina.

INDUSTRY ROUNDUP

Retailer Tidbits

Pester Marketing Co. is expanding the better-for-you trend beyond its convenience stores to its corporate office. A “Healthy Snack Bar” is now available to all staff and stocked with fresh fruit, protein bars, yogurt, fruit cups, cheeses and whole-grain cereals. The Spinx Co. established a new Regional Learning Center at Trident Technical College in Charleston, S.C. The center provides local Spinx associates with onboarding and entry-level training known as SpinUp.

Supplier Tidbits

shrimp tacos, tavern battered cod sandwiches and crab cake sliders. Speedway LLC is bringing its Speedy Café to Walt Disney World. Following the remodeling of the Magic Kingdom Car Care Center, the site’s Speedway gas station will include the foodservice-focused venue.

The first Speedy Café opened in 2016. There’s only one other in Ocoee, Fla.

Express Mart Convenience Stores rolled out a new Around the Clock Rewards program through a partnership with Paytronix Systems Inc. Program elements include loyalty, messaging, mobile and data insights.

Rutter’s has tallied up more than 25 different seafood options on its menu. Choices include fried

BP and United Airlines are teaming up to offer BP Driver Rewards and United MileagePlus members a new loyalty program. In addition to earning miles with every gallon purchased, BP Driver Rewards and MileagePlus members can use 60 award miles to save 50 cents per gallon with a linked debit or credit card.

The Hershey Co. in collaboration with goPuff developed a virtual reality shopping experience at the 2018 SXSW Conference & Festivals in Austin, Texas. The experience offered insights into how consumers interact with brands.

of ZYN products, ZYN-branded merchandise, and a listening lounge that houses vintage and new vinyl and headphone stations.

Paytronix Systems Inc. received a $65-million growth equity investment from Great Hill Partners, a Boston-based private equity firm. Paytronix will use the funding to accelerate growth of its product suite, geographic footprint, and market focus. Swedish Match’s ZYN nicotine pouches arrived in Chicago at a new pop-up store in Lincoln Park. The 1,000-squarefoot store features a full selection

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

Monster Energy Corp. and mixed martial arts organization UFC renewed their global partnership in a multiyear extension. Monster will continue to have center canvas and entrance logo placement inside the UFC Octagon at events.

The two brands will also work together on retail promotions during UFC events in select markets.

British American Tobacco plc has achieved $70 million of the $400 million in synergy savings it expects by 2020 from its purchase of Reynolds American Inc. Miller Brewing Co. became the founding partner for the new Wisconsin Entertainment and Sports Center. The sponsorship includes the company’s branding and integration throughout the arena, including its three main bar locations. CSN

OUT & ABOUT

Convenience Distribution Marketplace Covers All the Bases Sessions at the wholesaler event addressed tobacco, foodservice, candy, snacks and more By Don Longo THE CONVENIENCE DISTRIBUTION MARKETPLACE — the Convenience Distribution

Association’s (CDA) annual celebration of the nation’s convenience products wholesale distribution industry — was filled with committee meetings, educational sessions, networking and awards events, as well as a trade show floor featuring products and services from leading convenience store industry manufacturers. The CDA, formerly AWMA, is the trade organization representing convenience product distributors in the United States.

Industry veteran Paul Auger (center), formerly of Pine State Trading Co., was inducted into the CDA Hall of Fame.

Among this year’s highlights from the Feb. 26-28 event in Orlando were the induction of industry veteran Paul Auger, formerly of Pine State Trading Co., into the CDA Hall of Fame; and a panel discussion with representatives from CDA’s Warehouse Delivered Snack Committee, who presented compelling arguments on why c-stores need to capture a larger share of space and dollars at the front of the store. The panelists also explained to distributors how they can work with leading candy and snack manufacturers to develop high-profit MVEs (multi-vendor endcaps). Other high points of Convenience Distribution Marketplace 2018 included: • Don Burke, senior vice president of Management Science Associates, explored trends in nicotine product categories. He cautioned that dollar stores, while still a very small share of total category sales, are rising quickly in share, especially in cigarette sales. He also noted that moist smokeless tobacco continues to be a strong performer at c-stores, and large cigars have been especially hot in the past year. E-liquids, on the other hand, have declined precipitously across all channels,

Burke noted, but vaporizers are growing rapidly at all channels except dollar. “The vapor category is showing strong consumer interest,” he said. • Wade Hanson, principle of Technomic, said the bar has been set higher for foodservice and everyone has to meet that bar now. His presentation showed how convenience foodservice is taking share from fast-food and casual restaurants. • “It’s imperative that men are engaged in bringing the topic of women’s leadership forward,” Blake Benefiel of Altria Group Distribution Co. said as he introduced the CDA’s Women’s Leadership Program. During a “Gender Dynamics for Business Success” session, Altria’s Stephen Sanger, lead analyst, sales, and Charlotte Savage, trade marketing manager, new products, discussed the scientific and leadership differences between men and women. • Dr. William McCleave, trainer and president of W.R. McCleave & Associates, discussed how distributors of the future will focus on customers and markets where they can provide world-class performance and a unique value proposition. • CDA President and CEO Kimberly Bolin presided over the annual Awards Luncheon and in her opening statement noted that, despite the many challenges, there also have been great successes since the association was established in 1932. “While the challenges look far different today than anyone could have imagined back in the ‘30s, it is a great testament to this industry that we still stand together shoulder to shoulder forging ahead,” she said. • At the Awards Luncheon, John Mayer of McLane Co. Inc., who is retiring in June, was recognized by RAI Trade Marketing Services’ Dave Riser for an illustrious career. “John’s legacy is one of creating a strong foundation for McLane and the industry,” said Riser. “He is emphatically driven to do the right thing for customers, for McLane and for the category. The effects of John’s drive and love for this business will be felt for years to come.” CSN

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OUT & ABOUT

Canadian Convenience Grabs the Spotlight This year’s Convenience U CARWACS Show in Toronto delivered more innovation By Kelly Gray THE CONVENIENCE U CARWACS SHOW 2018,

owned and operated by Convenience Store News parent company EnsembleIQ, scored another success in Toronto as Canada’s leading showcase for the quick-service retail, gas bar and car wash sectors. Hundreds of people attended the event held March 5-6 at the Toronto Congress Centre, scores of businesses exhibited, and thousands of operators across the country now stand to gain from the discoveries made at this year’s show. Here are the top 10 takeaways from the event: 1. New Product Innovation: From beverages to confectionery to snack foods, major manufacturers highlighted new product introductions. Just a few examples: CocaCola Canada’s five new Diet Coke flavor entries, Lay’s new Poppables lowfat snacks, and Nestlé’s enhanced lineup of Kit Kat bars like Tiramisu and Green Tea flavors, as well as frozen Oreo and Chips Ahoy line extensions. For those craving novelty, The Convenience U CARWACS Show did not disappoint. 2. Big Tobacco Makes a Change: Tobacco companies showed off their drive to survive by responding to cigarette health concerns with new vapor products that take the heat and tar out of nicotine enjoyment. 3. Stronger, Faster, Higher: Car wash bay door challenges could be a thing of the past given the innovations of entry system manufacturers displayed at the show. Want strength in a new door? One manufacturer

CSNews Editorial Director Don Longo (R) discussed foodservice with session moderator Tony Chapman.

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

Crowds maneuvered through the show floor, moving from booth to booth.

showed off a new vinyl exterior barrier where the fused seams could hold the weight of four technicians. 4. The Importance of Millennials: Millennials — those born between 1980 and 2000 — will dominate Canadian society for the next three decades and exert great power and influence over almost every aspect of life, from government public policy to the ways in which they search for and buy products from their local convenience store, David Coletto, CEO of Abacus Data, told attendees of the Convenience U CARWACS Show. Millennials currently make up 25.6 percent of Canada’s population (9.3 million people). As in the U.S., they are the most ethnically and culturally diverse, tech-savvy and entrepreneurial generation, consisting of a greater number of women with degrees. Each year, millennials are forming some 270,000 households in the country. 5. Presentations That Delivered Top Business Intelligence: Business strategist, author and marketing guru Tony Chapman led a blue-chip slate of presenters through a morning of insight on the second day of the conference. He asked: “How can operators achieve the attention of customers in this ‘Age of Noise’?” Answers came from industry experts, including Convenience Store News Editorial Director Don Longo, Convenience Guru Russell Large, RBH’s Peter Luongo, Scott Negley of Dover Fueling Solutions, and occupational health and safety expert Kirsi Henry. 6. Righteous Replenishment: Who knew there were so many kinds of rolling papers and cannabis accessories? We do, because we went to The Convenience U CARWACS Show and discovered natural hemp papers with their own filters, blunt wraps and virgin unbleached joint twists. There was a wealth of suppliers at the show to help retailers prepare for “Weed Sunday,” aka July 1, when Canada’s government suggests it will legalize cannabis use.

OUT & ABOUT

7. Scents Make Cents: One car wash vacuum company (among several at the show) was showing off how its product could not only get at the dust and grime in car carpets, but also then add a refreshing scent after the clean to provide a total package to improve automobile interior environments. 8. Prime Ministerial Lampooning: Just when you thought Canada’s Prime Minister Justin Trudeau was funny enough, Justin-Canada has introduced a line of lighthearted novelty products, such as T-shirts, air fresheners, stickers, beverage containers and cheeky figures, poking fun at the popular PM’s push for cannabis. 9. Car Wash Legends in the Making: More than 100 car wash industry professionals packed onto buses for a tour of Southern Ontario’s newest vehicle cleaning sites. The tour took in Brampton’s Esso/Circle K on Mavis Road to show off MarkVII’s Choice Wash XT. The next stop was Pioneer’s redeveloped Ancaster location where Belanger’s low RPM

“Duo-scrubbers” use Spin-lite technology to increase contact time on vehicles for cleaner cars. Lastly, the group inspected the newest Valet Car Wash. Located in Brantford, Valet’s new site features eight detailing bays, as well as a 125-foot tunnel that uses equipment from Sonny’s. So far, the new location is on track to clean 130,000 vehicles in its first year. 10. Gains in Gas Dispenser Technology: Attendees were pumped to discover the evolution in fuel dispensers. Wayne, OPW and Nation Energy Equipment competed for the attention of operators with the latest in new line-dispensing technology that enhances forecourt conversation, site safety and business data. CSN Kelly Gray is the editor of Octane, a publication of Convenience Store News Canada. Octane is the only Canadian publication focused on the car wash and petroleum industry. Talbot Boggs, correspondent for Convenience Store News Canada, also contributed to this coverage.

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1. Two Hats Light Beer

2. Krusteaz FlatBottom Waffles

3. Cheyenne Sweet Mint Cigars

4. KIND Protein From Real Food Bars

Two Hats is a new line of light beer from MillerCoors that is targeted to 21- to 24-year-old drinkers. The clean-finishing light beers are brewed with a hint of natural fruit flavor and check in at a 4.2-percent alcohol by volume, according to the brewer. Two Hats is available in two varieties — lime and pineapple — and carries the tagline, “Good, cheap beer. Wait, what?” A digital marketing plan leverages partners such as College Humor, Spotify, Snapchat and YouTube in an effort to reach the younger generation.

Krusteaz Flat-Bottom Waffles are joining Conagra’s foodservice lineup. These delicious buttermilk and maple waffles can be an exciting addition to a retailer’s foodservice menu, according to the maker. The breakfast product features one grooved side and one flat side, making it easier for the waffles to hold sandwich ingredients in place. Krusteaz Flat-Bottom Waffles are available in both square and round varieties.

New from Cheyenne International, Cheyenne Sweet Mint Cigars add value to the brand lineup by creating a diverse taste profile for adult cigar consumers while adding incremental sales for retailers, according to the company. Created from a blend of high-quality cigar tobacco, Cheyenne Sweet Mint Cigars balance a fresh mint taste and a touch of sweetness. They will be available in 20-count hard packs. Shipments are slated to begin in the second quarter of 2018.

KIND Healthy Snacks enters the protein bar category with the release of KIND Protein From Real Food bars. The bars, which each deliver 12 grams of protein and are made from only real food, seek to reinvent the category. According to KIND, the company has discovered that what is missing in protein bars is a delicious taste and protein delivered from premium, whole ingredients that consumers can recognize and feel good about putting in their bodies. For each KIND Protein From Real Food bar, the first and predominant ingredient is a nutrient-dense food. None of the bars contain any genetically engineered ingredients. KIND Protein From Real Food bars have a suggested retail price of $1.99 per bar.

Conagra Brands Chicago (877) 266-2472 conagrabrands.com

MillerCoors Edison, N.J. (800) 645-5376 millercoorsonline@casupport.com

millercoors.com

Cheyenne International Grover, N.C. (866) 254-6975 contactus@cheyenneintl.com cheyennecigars.com

KIND Healthy Snacks New York (855) 884-5463 customerservice@kind-snacks.com

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5. Growing Roots Snack Bites & Clusters Unilever is expanding its U.S. urban farming efforts with the launch of Growing Roots, an organic, plant-based food brand that will support urban farming with each purchase. The Growing Roots product line includes snack bites and clusters made from organic ingredients like coconut, corn and seeds. Growing Roots snacks feature simple, plantbased ingredients with delicious, bold flavors in uniquely sweet and savory combinations, according to the company. Flavor varieties include: Cocoa Chipotle, Pineapple Coconut Rum, Maple Bourbon and Coconut Curry. The new line is USDA-certified organic, certified gluten-free and certified vegan. Growing Roots snack bites and clusters retail for $3.99 per 4-ounce package. Growing Roots Englewood Cliffs, Calif. (800) 453-3432 growingrootsfoods.com 28 Convenience Store News C S N E W S . c o m

NEW PRODUCTS

8 6 9

6. Prairie City Bakery 7. Purpose Jumbo Donuts Purple Tea

8. Rice Krispies Treats New Flavors

9. Strongbow Rosé Apple

Prairie City Bakery is launching a new gourmet foodservice line, Jumbo Donuts. The line includes four varieties: Crème Filled Long John, Custard Filled Long John, Raspberry Filled Bismarck and Bow Tie Donut. These filled donuts are more than 25 percent heavier than Prairie City’s Premium Donut line, and the Bow Tie is significantly larger than the other yeast donuts in Prairie City’s portfolio, according to the company. Prairie City suggests using its new Jumbo Donuts to complement gourmet coffee programs.

Kellogg’s Rice Krispies Treats welcomes two new varieties to the line: Birthday Cake and Cookies ‘n’ Creme. The Cookies ‘n’ Creme variety has chocolate cookie crumbles and a creme coating, while the Birthday Cake treats feature colorful rainbow sprinkles and a creme drizzle. Both new varieties will be available in Rice Krispies Treats write-on wrappers to create custom messages of encouragement or love.

Strongbow Hard Ciders introduces a new variety, Rosé Apple, a semi-dry hard cider with a touch of red-fleshed apples. With a light, refreshing, fruity taste and 5 percent ABV, the new addition is reminiscent of a rosé wine and has 50 percent less sugar than leading U.S. hard ciders, according to the brand. Strongbow Rosé Apple, like all Strongbow beverages, contains no artificial flavors or colors. It is available in six-packs of 11.2-ounce bottles, the Strongbow Variety 12-Pack and, for a limited time, 5.1ounce mini cans.

Prairie City Bakery Vernon Hill, Ill. (800) 338-5122 pcbakery.com

Purpose Tea introduces the first brand of ready-to-drink (RTD) purple tea to U.S. consumers. Purple tea is a naturally organic and non-GMO tea variety of the common tea leaf, Camellia sinensis, and is grown exclusively in Kenya. Purple tea contains 15 times more anthocyanins than blueberries, and has a greater degree of antioxidant activity than either green or black tea, according to the maker. All Purpose Teas contain only 60-80 calories per 16-ounce bottle. With the company’s “Direct Impact” model, Purpose Tea contributes 5 percent of all sales to empower female tea pickers.

The Kellogg Co. Battle Creek, Mich. (800) 962-1413 kelloggs.com

Heineken USA White Plains, N.Y. (914) 681-4100 heinekenusa.com

Purpose Tea Dallas purposetea.com

10. Chef’s Cut Mini Sticks Chef’s Cut Mini Sticks have hit the market. The small-portion meat sticks (0.5 ounces) are gluten- and nitrite-free; made with nothing but real meats and recognizable ingredients; and are the perfect-sized snack for kids and adults alike, according to the company. Chef’s Cut Mini Sticks are available in Original Smokehouse (beef and pork) and Barbecue (chicken) varieties. Sold in packs, each pantry-friendly bag contains seven individually wrapped sticks. Each stick packs 7-8 grams of protein and 60-100 calories, depending on the variety. Chef’s Cut Real Jerky New York (855) 456-2275 info@chefscutrealjerky.com chefscutrealjerky.com

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

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Cleaning Up Your Operation: Step 1 in Any Turnaround

C-

RE RES

Deficiencies in cleanliness can doom everything else that is good in a c-store THERE ARE MANY COMPONENTS that a store operator needs to do right to have a successful business. Good customer service is a must. Having the proper selection of products appropriately priced is very helpful. Freshly made food and a beverage bar can provide additional gross profit opportunities. I think we can all agree on these things.

By Roy Strasburger, President, Convenience Management Services Inc.

Unfortunately, there is one component that when not done well can doom everything else that is good: cleanliness. No matter how friendly your employees are, how tasty your food is or how cheap your products are, if your store is perceived as dirty by customers, they will not visit you. Your sales and profits will suffer. When CMSI takes over the operation of a site, the first three things we do are: 1. Review the health and safety issues at the site, 2. Onboard our new employees, and 3. Do a deep clean of the store and fuel equipment. It never ceases to amaze me how much dirt and grime can accumulate in a store over time.

The frustrating thing is that the dirt and grime build up even though you are not doing anything. The way I think of it is that uncleanliness is a constant event and keeping things clean is a never-ending battle against filth. May I suggest that you look at your store like you are walking into it for the first time? If you were buying your store from someone, what would you do when you opened the doors for the first time? Here is what we do when we take over a store, in stages:

Floors The first thing we do is mop and clean the floors. However, a mop with soap and water doesn’t usually do the job, so our team members can often be seen on their hands and knees scrubbing parts of the floor that mopping won’t clean. Once the floor has been initially cleaned, we then move the shelving gondolas six inches. It never fails that the previous owner attempted to clean the floors with a very wet mop, creating rust stains from the shelving units on the flooring. We scrub these off, if possible, and then move the gondolas six inches the opposite direction to clean the other side. If possible, we take off the shelving skirts or endcaps so that we can sweep or vacuum the floor inside the shelving unit. Talk about dust bunny central! We’ve found some very expired product and a few deceased mammals under the shelves in the past. Once the shelving has been put in its final position and the floor cleaned again, we assess whether it needs to be buffed or polished. We usually contract out the work to a local firm, which will then take care of the floor on a scheduled maintenance basis for us. A store’s floors are important in setting the initial impression the customer has of the store. Clean floors are expected and, more importantly, are safer floors (as long as you keep them dry).

Bathrooms The No. 2 thing that can kill a store’s foodservice business is a dirty bathroom (No. 1 is bad-tasting food). When a customer sees a filthy restroom, they immediately wonder

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

SMALL OPERATOR

how clean your foodservice preparation area is. A dirty bathroom equates to dirty employees and dirty food facilities in your customer’s mind. When we move into a store, the bathrooms usually have been neglected for quite a while. We’ve had some so filthy that we’ve had to bring in commercial cleaners to do the work. The basic rule of thumb is that every smooth surface (sinks, toilets, floors, tiles) needs to be scrubbed and sanitized. Every broken or chipped piece of equipment (basin, toilet, towel machine, hand dryer) needs to be replaced. And every painted surface (walls and door) needs to be repainted. Only with a complete overhaul will you get things to the level that your customer will accept as the minimum standard. If you have the time and creativity, add flowers, pictures, an air freshener and wallpaper for bonus points with your customer.

Foodservice Equipment We’ve talked about the impact a dirty bathroom can have on your foodservice program. Let’s assume this corollary is true. All of your foodservice equipment should be broken down, repaired, cleaned and sanitized. Not only is this good for extending the life of your equipment, but it can also help you avoid making people ill through contamination. Please don’t forget to clean the fountain machine heads. Unscrew the heads and soak them in hot, soapy water to get the syrup buildup (and other gunk) off them. You may be surprised how the taste of your fountain drinks changes after you clean the heads — if you haven’t done so in a while.

Shelving We’ve already talked about the space under the shelves. Now, let’s focus on the shelving itself. The shelving provides you with the setting for the products that you are selling. The more attractive the setting, the more products you will sell. All products need to be removed and the shelves scrubbed and disinfected. Broken

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

shelves or mismatched equipment should be replaced, if possible. Don’t forget to clean the backboards of all shelving units and wipe down the underside of the shelves to remove cobwebs.

Products When putting the products back on the shelves, be sure to wipe down the cans and bottles and then clean the tops of all the products. No one wants to pick up a dusty can of beans. Even if the product arrived last week, when it is dusty or the label is torn, it gives off the impression of being old and stale. It won’t sell.

Coolers Rarely does a week go by that some can, bottle or carton hasn’t leaked. All of this liquid tends to fall to the floor and collect. In some cases, it starts to smell. In other cases, it attracts insects and vermin. In all cases, it is unsightly and gives your store a bad image. Hot water and soap, along with some disinfectant, usually fixes the problem.

Windows Every piece of glass needs to be cleaned in the store — exterior windows, cooler doors, sneeze guards and bathroom mirrors. Before cleaning them with a solvent, be sure to remove any signs or posters that are attached. You should only have professionally printed signs on your windows and, even then, use them sparingly so that your store feels open and light.

Fuel Equipment Here, too, signs and stickers need to be removed (except for the ones required by law). We try to clean the card readers, pump faces and hoses. If there are any oil company decals on the equipment that have become tattered or torn, we try to have them replaced as soon as possible. Please pay extra attention to the nozzle handles and hoses. They need to be wiped down to reduce the oil and grease that accumulate.

Driveways & Sidewalks When possible, we try to scrape up leftover gum remains. We then have a commercial company powerwash the pavement and concrete. An assessment as to whether the parking lot needs to be restriped is made and arranged if necessary.

The Building While you have the power washer there, look at the sides of your building. Are they

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SMALL OPERATOR

scuffed up or covered with graffiti? Washing them might help, or you can get graffiti removal solvent to try and get most of the tags off the wall. In dire circumstances, a coat of paint can go a long way.

Your customers will notice the difference (or more importantly, not notice that it is not clean) and your employees will have more pride in their workplace, their job and their team. CSN

Check out the mansard and canopies. Do they need to be cleaned? Are there nests being built inside? Are pieces missing? Any of these things will detract from the image of your store as customers pull up to shop with you. Once the deep clean is done, I suggest the following cleaning routine: mop floors two times a day (more if it rains), dust shelves and product daily (use a Swiffer and not a feather duster), clean all glass weekly, clean food prep areas twice a day, clean fountain machines daily, pick up trash off the lot every shift, and empty the trash cans (inside the store and outside) every shift. The process of deep cleaning a store is not easy, nor is it fast. It usually takes us three or

New Year ... New Look And Continued Evolution for

four weeks to get all of the work done (and we are having it done while we are open for business in most cases). But the time it takes is well worth the results.

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.

Convenience Store News magazine has been the leader in convenience retailing information for more than 40 years. As the c-store industry has evolved, CSNews has changed to stay at the forefront of industry developments. With our January 2018 issue, we are excited to unveil the next step in that evolution with a fresh update to the look and feel of the magazine.

www.CSNews.com

Industry’s Favorite Magazine has a new look that matches the evolution of the convenience retail market.

LING L R E TA I ND FUE IENCE A CONVEN NEXT IN W H AT ’ S

Temperate Optimism

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

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

THE FUTURE OF FUEL RETAILING FROM THE ENERGY SOURCE TO THE FUELING EXPERIENCE, “FILLING UP” IS IN FLUX A Convenience Store News Staff Report

THE BASIC WAY MOTORISTS FILL UP THEIR VEHICLES TODAY IS NOT THAT MUCH DIFFERENT FROM A GENERATION OR TWO AGO. In most U.S. states,

a driver notices he or she is low on gas, pulls into a convenience store or gas station, gets out of their vehicle, lifts the nozzle off the pump and inserts it into their fuel tank. Once full, the driver pays and pulls away. It could be 1978 or it could be 2018. One major element that has changed, however, is what motorists expect from the fueling experience — and their expectations are only getting higher. “I like to think back to 50 years ago when my grandad was filling up and he would have bought fuel and maybe lubricants from a gas station. Fast forward to today and we are still discussing those fuels, which we will always be famous for, but consumers want so much more,” noted Nicola Buck, vice president of marketing, Fuels North America, at BP plc. On their wish lists? Cleaner energy. Technology. Apps. Convenience. “They want technology to improve the experience. They want convenience in its broadest form. So, what does that mean for food for now, food for tonight, food to go? And they want the experience to be transformed,” Buck explained. Today’s fueling industry must change to meet these new expectations. “Honestly, the fueling industry, if you think about it, hasn’t really changed in 20 years because of the way our sites are built. How many products and services are like that today? Very few,” said Buck. “Consumers are expecting different types of experiences. Look at Amazon. Everything is changing, and even the fueling experience needs to change.”

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Convenience Store News

COVER STORY

But what exactly does the future of fuel retailing entail? Is it about the types of fuels? The fueling experience? The way consumers get around in the first place? The answer, according to industry insiders, is: All three.

Rethinking the Market To date, the biggest change in the fuel retailing market came in the 2000s, when the market saw a downturn. To stay competitive, retailers had to find ways of increasing customer-generated profits that were not necessarily fuel-related.

“

“Retailers had to start diversifying their products,” said John Eichberger, executive director of the Fuels Institute, a nonprofit organization dedicated to evaluating issues affecting the vehicles and fuels markets. “I think we’ve seen an acceleration of that.”

attractive. Retailers could also target Uber and Lyft drivers by providing them a place to take breaks between rides.

The change in focus included a heavier emphasis on operations and quality of service, and an integrated approach to drawing customers in from the fuel pump to make in-store purchases.

The Future of the Fuels

It’s all about being ahead of the game. Not too far ahead that you lose money from your customers, but far enough ahead that you are ready. — Roy Williamson, BP plc

”

Looking to the future, regardless of how gas prices are affected by the economy and other factors, Eichberger expects the constant push for fuel-efficient vehicles to affect trip frequency and thus, retailers must be prepared to meet new and changing consumer needs.

“We have to rethink how we go to market,” Eichberger said, suggesting that companies rethink things as basic as a gas station’s layout. “It might be time to take the entire facility ... throw that into a blender and see what comes out.” He pointed to the rise of ride sharing as a way retailers can adapt and offer new solutions. They could offer car care for Uber and Lyft drivers — not necessarily maintenance, but services to help keep a car clean and

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

While individual services and initiatives will vary by retailer, the important thing is to “capitalize on the opportunity the market is bringing us,” Eichberger stressed. Advancements in the retail landscape within the past decade have included an ongoing trend of high-volume retail site fuel dispensing, according to Kevin Kinney, general manager, Light Oils Marketing, at CITGO Petroleum Corp. The configuration of sites have trended toward larger plot sizes to accommodate larger convenience store prototypes and increased fueling positions. As site footprints have grown, so too has the variety of fuel/energy options offered at retail sites. There is considerable debate in the industry over which types of alternative fuels/energy will emerge the victors and garner the most support in the near- and long-term. Fuels blended with ethanol, such as E85 and E15, have the advantage of a low cost of production, but these fuels also bring certain infrastructure hurdles that still need to be addressed — such as federal law that prohibits fuel with ethanol from being sold during the summer months in order to limit ozone, according to Eichberger. “There’s a lot of confusion associated with that,” he said, which has slowed some retailers’ adoption of E15. “The rules are clear, but the enforcement is not.” If this regulatory issue is resolved, Eichberger predicts that several thousand locations will add E15 in the next few years. While the ultimate future of biofuels hinges on federal policy, the Fuels Institute chief believes there is much to be gained from working with automakers, who are continuously looking for fuel that is more efficient. He also strongly advises the liquid fuel industry to look outside the current market and recognize coming competitive threats, particularly as the pace of electric vehicle (EV) development is only going to accelerate.

COVER STORY

“There’s an opportunity for [liquid fuel producers] to increase their roles in the future market, but in-fighting in the industry is compromising that,” Eichberger said. In the near term, Roy Williamson, vice president of Mobility at BP, sees electric as the likely winner in the alternative fuels/ energy race. In the long term, however, he thinks hydrogen fuel cells look like the best bet. Also, in certain specific use cases, gas — compressed natural gas (CNG) and liquefied natural gas (LNG) — will have their applications, he added. “If you were going to put your money on something today, I think it would be electric,” he said, acknowledging that more work needs to done to push electric to the top. Today, 85 percent of EV charging is done at home. Charging time is a factor when you talk about bringing this service to the convenience channel, according to Williamson. “Tesla superchargers can do half an hour, 20-minute charges. That begins to be acceptable from a c-store perspective,” he explained. “But you really need to get down to 10 to 12 minutes, which is where the industry is going and certainly where we are encouraging the industry to move.”

From a vehicle manufacturer perspective, the industry needs batteries that can handle a speedier rate of charge and equipment that can deliver it — including the infrastructure, which is quite expensive, said Williamson. As it becomes more common, he believes the cost will come down. As far as the convenience channel is concerned, ultra-fast EV charging is the answer, he said. “We need to make sure we encourage that in the marketplace,” he added. BP does not currently have an electric vehicle charging platform in the United States, but the company is looking to develop one in the U.S., as well as in Europe and China. “Certainly, we are looking at being a key provider of energy to low-carbon vehicles in the future,” Williamson said. “The penetration is very low. It is not a crisis of disruption at the moment because there are so few electric cars. But they will come. The question is just a matter of [when], not a question of if. It’s all about being ahead of the game. Not too far ahead that you lose money from your customers, but far enough ahead that you are ready.” To that end, the company’s BP Ventures division recently announced a $5-million investment in FreeWire Technologies Inc., a manufacturer of mobile rapid-charging systems for electric vehicles. BP will roll out FreeWire’s Mobi Charger units at select BP retail sites in the United Kingdom and Europe during 2018. Sales of electric vehicles and plug-in hybrids are already on the rise, jumping 26 percent in 2017, Eichberger cites. Still, it will take quite a while for sales to increase significantly enough to affect the number of vehicles on the road. If electric vehicle sales continue to see exceptional annual growth of 20 percent each year, eventually reaching 42 percent of vehicles sold in 2035, they would still make up only 10.5 percent of the cars on the road. “They’re coming, they’re going to grow market share, but it’s going to take some time,” Eichberger said. Retailers therefore have some time to plan for how they can capitalize on the electric vehicle market. Most charging will be done overnight at drivers’ homes. Unlike traditional vehicles, drivers of electric vehicles are likely to charge at gas stations in smaller increments to aid the battery. “They’re going to plug in when and where they can,” noted Eichberger. Drivers of electric vehicles will do more advance planning for longer trips, though, which will give retailers the opportunity to have a competitive advantage. Placing chargers along routes where consumers drive 100 to 150 miles will be strategically important. Still, despite advances in alternative vehicles such as electric cars and hybrids, the “fundamental reality” is that even in the most aggressive transition models, the internal combustion engine will dominate for the next four to five decades, according to Eichberger.

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

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COVER STORY

The Future of the Fueling Experience Having EV charging stations and alternative fuel blends may help retailers draw in consumers who are seeking those options, but it’s going to take them upping their game around the fueling experience to keep the everyday motorist coming back. Competitive prices are one piece of the puzzle. At the same time, easy and convenient payment solutions, enjoyable consumer experiences and changes in fuel preferences are moving to the forefront of the fuel retailing industry, according to Phillips 66, which markets refined petroleum products in the United States under the Phillips 66, Conoco and 76 brands. “The consumer experience is more important than ever,” said Rod Palmer, general manager of marketing services for Phillips 66. “Millennials especially have a unique power of influence over buying behaviors. They demand a delightful, modern and convenient buying experience. The solutions we develop must meet the demands of this connected consumer.” To stay competitive, innovation is a must, Palmer stressed. As part of its innovation strategy, Phillips 66 is rolling out an easy-to-use mobile payment solution. It was recently introduced to Phillips 66’s network of branded retail locations. “It’s not just about being able to pay at the pump — it’s about being able to pay with your smartphone,” Palmer told Convenience Store News. The goal is to make it easy and low-cost for the company’s branded customers to implement, according to Jim Macari, Phillips 66’s director of innovation.

“The Phillips 66 Mobile Pay Solution works at the pump and inside the store. It’s designed to benefit our customers’ entire business by attracting consumers and increasing security,” Macari explained. BP’s Buck echoes the importance of innovation and says, at the very least, fuel marketers and retailers should be looking at ways to shave time off the fueling experience. “Time is so important to [consumers]. Anything we can do to make that site experience frictionless is going to be important. That’s where things like mobile pay start to come in,” she said. With pay at the pump, a driver still has to get out of the car, still has to put a credit card in the reader, still has to type in a ZIP code — and still has to stand out in the cold in certain locales. Once retailers have things like mobile pay — which may seem like a small step — they start to save consumers a few precious moments, and every second counts when you are in the mindset of getting back on the road, Buck explained. “It makes a frictionless experience and that, for us, is the start of a journey,” she said. “It may start with an app today, which is all about payment and rewards that are loaded into one system, one step. Then, we continue down that path. How do we collect data on our consumers to push personalized offers and services? How do we get feedback through the app? How do we interact to make the experience more fun?” When looking to the future, the focus for retailers is on the needs of Generation Y and Generation Z, according to CITGO’s Kinney. As he sees it, these two technology-driven generations will place more importance on the speed of refueling, ease of transactions like NFC technology at the pump, aesthetically appealing sites, and the latest technology inside and outside the convenience store.

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

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COVER STORY

Taking the fueling experience even further into the future, Buck points to connected car technologies, where tasks are tied into the vehicle dashboard. “Once we have this platform, which is as frictionless as possible, everything is integrated into the dashboard and remotely monitored — like fuel levels,” she said. “We can remind our customers when it’s time to fill up. We can remotely monitor lubricant levels and use that to upsell related products.”

The Future of Mobility Of course, the future of fuel retailing begins even before the issue of fueling itself. Where the conversation really starts is the future of mobility. How do people get around? “People are not owning their own cars. They may be using their Uber and they never stop at a convenience store with the driver. So, how do we provide convenience on the go for people? How do we deliver to their own vehicles?” asks Williamson of BP. Retailers must prepare for the shift in who owns cars and how they are used. Increasingly, fewer millennials and younger people are getting driver’s licenses. Even in areas without a reliable public transit infrastructure, many people feel they don’t need a vehicle and see the cost of services such as Uber and Lyft as an acceptable expenditure. “Some organizations are projecting massive, fast conversion to this autonomous on-demand ride-hailing. I think it’s going to be niche; it’s going to gain traffic in certain markets, [but] it’s not going to be ubiquitous everywhere,” Eichberger forecasted. “Ultimately, I think we’re going to see a percentage of the population opt to use somebody else’s infrastructure for transportation. Those generations are extremely inclined to adopt a sharing economy.” In Williamson’s view, the world is going to change dramatically over the next two decades, with urban markets evolving at a

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more rapid pace than rural and suburban markets. “What you will see will be a very different experience in central, urban environments from deep, rural environments. You do today, to an extent. But that differentiation will be greater. You will have electric vehicles; you will have autonomous vehicles,” Williamson said. “We already cater differently to those markets today.” Although self-driving vehicles have yet to overcome various technological challenges, Eichberger expects deployment and testing of self-driving vehicles over the next couple of years. As the technology gets better, its applications will become clearer. From there, the necessary regulations will be clarified, and the effect on consumers will be more known. For now, Eichberger advises retailers to keep an eye on this developing technology and consider what opportunities it will bring to develop collaborative business relationships. “It takes being aware of what’s coming around the corner and asking yourself: ‘How can I benefit from this?’” he said. Retailers that recognize a new paradigm is coming can think now about what would happen if it materialized in their market. What would the impact be? How could they profit? “Then, you’re a step ahead of the game,” Eichberger said. Case in point: Growth in car-sharing raises questions as to how these services will impact not only demand for fuel, but also access to gas stations. To that end, BP has various pilot programs around the world analyzing how to approach car-sharing and its likely impact on the future. “One of the big issues is the fleet. The fleets will be the customer of the future, probably more than individuals,” Williamson noted. “That has a whole other layer of implications with respect to where would you want to fill up? How would you want to charge the vehicles? What locations would you use? What is the role of convenience in that context? “A long-term trend, but one that is going to be quite significant,” he said.

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FINDING THE CURRENT Electric vehicle charging stations are making their way to convenience stores, as early adopters take advantage of installation incentives By Tammy Mastroberte IT WAS A RECORD YEAR for new car sales in 2016, with 17.6 million cars and trucks sold, but electric vehicles (EVs) only made up 0.5 percent of that total. It’s possible that the market may not really feel the impact of EVs until after 2035.

In fact, many c-store retailers — Sheetz Inc., Maverik Inc., OnCue, QuickChek Corp., Spinx Inc., Alimentation CoucheTard Inc. and BP plc — are dipping their toes into the EV waters and installing charging stations now, with the help of incentives from car companies and local government agencies that either cut the costs or eliminate them entirely.

Electric vehicles, which include pure electric, plug-in hybrid and traditional hybrid vehicles, could represent 35 percent of new car sales by 2035, John Eichberger, executive director of the Fuels Institute, told Convenience Store News.

“The theory is sound: If EVs are coming, why not be the first to market and be recognized as a leader?” Eichberger said. “Every electric vehicle has a computer in it with stations that offer electric charging stations, so why not be on that list? Then, as it grows, your company will have the reputation for offering it, so it’s a competitive advantage.”

Still, that would be only 8 percent of the cars on the road, he explained. “Even if 30 percent of new cars sold last year were electric, it would be 4.5 million vehicles in a pool of 250 million total cars on the road. That’s a drop in the bucket,” he said.

He recommends c-stores install EV charging stations in new builds first, rather than doing construction on established locations, due to the costs. The most expensive part of installing charging stations is drilling into the concrete to run the power lines to the EV parking spaces, and building a power panel to handle the project.

In no way, though, does the slow growth rate mean EVs are not relevant in today’s vehicle market, or in the convenience store market.

“This conversion could cost $75,000 but when building it at a new site, it would only be around $5,000,” Eichberger explained.

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COVER STORY

Many of the early adopters in the c-store industry are working with car companies or other groups that are offering incentives to install and run the charging stations, but these incentives may not be around in the future. “If someone is offering you money to do it now, it’s a good idea because the money might not be there in five years,” Eichberger said, noting that Volkswagen’s Electrify America is investing in charging stations as a result of a settlement with the Environmental Protection Agency, and both Nissan and Tesla are offering incentives as well.

Striking While Hot While Sheetz and QuickChek are two chains partnering with Tesla Motors to install Tesla Superchargers at select locations for its Model S sedan and Model X sports utility vehicles, Stillwater, Okla.-based OnCue found a more local partner. OnCue, which operates 75 OnCue Express locations, partnered with Oklahoma Gas and Electric (OG&E) to install Level 3 electric charging stations at two OnCue

interstate locations in The Sooner State. Both charging stations were paid for by OG&E and are currently offering free EV charging to the public. Scott Minton, OnCue’s director of business development, said OG&E approached the company about three years ago asking if this was something of interest. Back then, it wasn’t. However, now, OnCue wants to see what the chargers will require and if people will be looking to c-stores to provide this service, so they accepted the offer — with the costs covered, the electricity provided for free, and shared data received regularly. “We get shared data on who is using them, how much they use and how often, so we can use the data for the future if we decide to install more,” Minton said. Monthly reports come from a software program called Greenlots. The plan is for OG&E to eventually turn ownership of the equipment over to OnCue and start charging for the electricity. Right now, it remains free for customers. The chargers offer two different nozzles and allow customers to charge all types of EVs, except for Tesla vehicles. “Tesla requires a different nozzle, but some Tesla owners have this nozzle in their cars so they can charge,” Minton pointed out. Like OnCue, Maverik is also collaborating with local partners. In August 2017, Maverik announced plans to install two fast-charging stations from ChargePoint at stores in central and southern Utah, and the chain already has plans to install three more. The installations are part of a partnership with Rocky Mountain Power, the Governor’s Office of Energy Development, Utah Clean Air and the Mighty Five Electric Vehicle Corridor. “The state wanted to electrify the 115 Corridor, and we are getting subsidies and rebates to install them as part of the deal,” said Maverik Chief Financial Officer Andre Lortz. There is a fee for the public to use the charging stations — estimated to be around $10 to $12 for a quick charge and $18 for a longer charge, according to Laura Nelson,

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

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COVER STORY

executive director of the Governor’s Office of Energy Development. “There is a connection fee, and a fee based on kilowatts pulled. We have a Level 2 and Level 3 charger at each station. One gives you 12 times as much power as the other one,” Lortz explained.

Is It Worth It? Since installing the electric chargers starting in late 2016 and the first quarter of 2017, OnCue reports that it continues to see customers using them. EV chargers are usually turned on using an app on the customer’s smartphone, vs. inserting a credit card at the gas pump. Users create an account, and data is collected on how long they charge for and the kilowatt hours consumed.

“

“I can see how many unique users per month and, in a week, I am getting about 10 users right now,” Minton shared. “Six or seven are unique [users], while the others are coming multiple times.”

If EVs are coming, why not be the first to market and be recognized as a leader? — John Eichberger, Fuels Institute

”

The average charge time is around 30 minutes, with the majority of users charging their EVs to roughly 60 percent and then leaving, Minton said. The way the chargers work is they charge quickly to 80 percent and then slow down as the charge reaches 90 and 100 percent. Many stop around 95 percent because it’s better for the battery health. “There is a high ratio of people charging who come inside the store,” noted Lortz of Maverik, which has consistent customers who come to charge up once or twice a week. Maverik is now working on a five-year plan to extend charging stations from its home state of Utah into Idaho, Nevada and Wyoming. The plan calls for 20 to 30 locations in the next five years — all in partnership with Rocky Mountain Power.

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

There are currently four options for EV chargers on the market today: • Level 1 is designed for someone’s home and uses a normal electric outlet. This takes between 12 and 18 hours for a full charge; • Level 2 is also an option for homeowners, but uses a 220volt plug, similar to what would be used for an electric dryer in the home. This will charge in four to six hours, and is designed for a workplace. • Level 3 charges up to 80 percent in 30 to 45 minutes, and is the fastest available that is not designed for Tesla; and • Tesla has its own Level 3 charger because it has a larger battery. If retailers want to take advantage of dollars available in their market to install the chargers, Minton believes it’s a good idea. “But don’t make it part of the bottom line yet because you won’t be making money from it at this point,” he advised. He foresees the real traction happening around 2025. “It’s coming,” he added. “Then, year by year, the numbers will be growing. If you look at some European nations, they will not allow traditional gasoline vehicles on the road by 2025.” Currently, Oklahoma (and 19 other states) do not allow stores to sell electricity, but OnCue is working with lawmakers to come up with a solution to justify bringing in the electric chargers and making money on them. It certainly won’t outpace gasoline sales, but it will offer stores a new stream of income in the future, Minton said. “I don’t see an industry impact where electric vehicles will cause a decrease in gallon sales until 2030 and, in some areas, it may be sooner,” Eichberger concluded.

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ATTUNED TO ALTERNATIVE FUELS Consumers’ growing knowledge about fueling options is a driving force By Chelsea Regan

IF 2017 WAS THE YEAR OF RETAILERS’ slow but sure embrace of alternative fuels, like E15, 2018 is likely to be the year that consumers fuel further expansion by choosing them at the pump.

Growth Energy Vice President of Market Development Mike O’Brien sees consumers’ growing knowledge about alternative fuels as a driving force for alternative fuel adoption. Growth Energy, based in Washington, D.C., is a trade association working to advance pro-biofuel policies and expand consumer access to higher blends of ethanol. “I think consumers in general are more attuned to the idea that their purchasing decisions can not only offer them a better deal, but have societal benefits as well,” O’Brien said. “So, I think that motivation is behind the fact that consumers are embracing E15 in particular.”

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E15, a higher octane fuel consisting of 15 percent ethanol and 85 percent gasoline, typically saves consumers up to 10 cents per gallon and is the most tested fuel in history, according to O’Brien. “It also allows [consumers] to make a better choice for the environment and oftentimes supports American jobs. Those are important attributes for today’s consumers,” he added. Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association (MSSA) — which offers its members the Minnoco brand of alternative fuels, including E15 and biodiesel, and flex-fuels like E85 and E30 — believes alternative fuels have a bright future in the fuel retailing industry today and tomorrow. “The demand is there,” he said. E15 sales at Minnoco dealers and MSSA member sites are looking very strong so far in 2018, according to Klatt, who was honored as Convenience Store News’ 2017 Fuels Leader of the Year. With more retailers offering E15, there is now a larger demand for the product from consumers, he explained.

Currently, all Minnoco sites are offering E15, which represents more than 50 percent of the overall fuel sales at certain sites. Klatt predicts that in five to 10 years, E15 will replace E10, otherwise known as 87 octane. “You’re offering a higher octane at the same price or lower price to the consumer,” he said, citing price as one of the foremost advantages of E15. “[Its] biggest selling points are: higher octane, cheaper or same price as 87 and, of course, supporting our local farming communities and economy,” said Klatt. “Most of our ethanol is produced and purchased in Minnesota or on the Iowa/Minnesota border. ‘Buy local.’”

“

E15 is taking off with consumers wherever it is available and becoming their go-to fuel. — Mike O’Brien, Growth Energy

”

While Klatt has seen the potential for E15 in Minnesota, O’Brien has had a front-row seat to watch as the alternative fuel sweeps the nation — a turn of events he attributes to two things: retailers with an eye on the future, and value-minded consumers. “E15 is taking off with consumers wherever it is available and becoming their go-to fuel. In just three months, American drivers surpassed another billion miles on E15, putting it at more than 3 billion miles today,” said O’Brien. “At the forefront of this incredible growth are forward-thinking retailers that have figured out that E15 is smart business, and consumers who have come to rely on the better value proposition E15 presents. It’s a win-win on both ends, and that means E15’s growth is only going to continue.” In 2017, the number of retail sites offering E15 doubled for the fourth year in a row, so that’s a good indication of where things are going, according to Growth Energy’s chief. Pete Davis, founder and CEO of GreenPrint Corp., which licenses its reduced fuel emissions program to convenience store chains, believes “the only reason we’re talking about alternative fuels is because of the emissions issue and climate change debate.” He says his company — which has reduced-emissions fuel programs in place with 7-Eleven, Alon, Ricker’s, Twice Daily and more — is working to address the climate change issue now, with the same vehicles, same fuel, same customers, and no capex. “It’s a hot topic and we have an easy-to-implement, win-win solution that’s not a silver bullet, but a bridge to whatever the future holds for our industry in 20 to 30 years,” Davis said. CSN

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Convenience Store News

Embrace the Better-for-You Trend Put your best food forward as elevated nutrition needs arise among consumers By Renée M. Covino IN THE COMING YEARS,

the BFF of the convenience store operator may just be BFY. The Better for You (BFY) nutrition trend is on the rise in all food channels, defined by a host of other nicknames and ingredient nomenclature, such as: all-natural, fresh, organic, simple, clean and high protein. Shoppers today clearly care more about purchasing foods and beverages that they not only perceive as “healthier,” but also that have a certain nutritional halo. Following in the grocery channel’s footsteps, convenience stores that truly break through better-for-you and call attention to these products in a concerted and direct way are setting themselves up for higher sales and incremental (often millennial) customers.

A Few Good Choices Consider the approach being taken by the Dallas-based Army & Air Force Exchange Service (AAFES), which operates 3,500 facilities consisting of department stores, convenience stores, gas stations, restaurants, theaters and specialty stores on military installations in all 50 states, five U.S. territories and 33 countries.

Its proprietary “BE FIT” program is designed to offer a holistic approach to health, covering exercise, diet and mental well-being. At its more than 320 AAFES Express c-store locations, shoppers can choose from nearly 400 BE FIT-approved items, including fresh fruit, yogurt, grass-fed and nitrate-free beef sticks and jerky, gluten-free meat snacks, seaweed crisps and more. The number of BE FIT items available at AAFES Express locations increased 17 percent between 2016 and 2017. BE FIT consumable items are reviewed to ensure they meet standards set by the company’s staff dietician. These standards include that the item has fewer than 500 calories for entrees and 200 calories or less for snacks. They also must contain less than 40 percent of calories from fat, and 10 percent or less of calories from saturated fat. “Customers vote with their wallets and as we have added more better-for-you options, we have seen a positive impact on sales,” Eric Sidman, vice president of convenience channel merchandising for AAFES, told Convenience Store News. “The BFY segment is a growth category for the industry and for the Exchange, which is working on some exciting new options to further elevate it in our stores,” he added, noting that as a military channel retailer, the Exchange tends to over-index in categories such as “healthy,” protein and water. In the past year, the Exchange has also expanded its selection of name-brand restaurants to include healthier options, opening six Subways, three Boston Markets, two Smoothie Kings, three Qdoba Mexican Grills, and new Freshens and Muscle Maker Grill locations. These, and all of the Exchange’s more than 1,700 restaurants, offer BFY menu choices — with an eye especially on millennials. “Convenience, cost and taste have been the key factors pushing customers to one QSR [quick-service restaurant] or another. Millennials are adding

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

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Open-air fresh cases are effective in calling attention to better-for-you offerings, like fruit cups, yogurts, cheeses and protein packs.

‘healthier’ to this list,” said Darrin McCready, director of food programs for the Exchange. “Consumers report ‘healthy’ as the No. 1 characteristic they want to see more of on restaurant menus, and what they mean by that is they’re looking for food that’s real. As our guests’ demands evolve, so do the Exchange’s restaurant offerings.” At both the restaurants and AAFES Express stores, BFY options are called out. In the restaurants, in coordination with its multiple restaurant brand partners, the Exchange seeks to educate guests via separate signage that highlights the BFY options. In the c-stores, all BE FIT-approved items have “branded callout shelf tags,” explained Sidman. The BE FIT item tags were recently redesigned so that customers can quickly identify the items and “be confident that what they are buying is a healthy alternative,” Sidman told CSNews. “Our approach is to merchandise each product in the categories where customers expect to purchase [it]. Healthy snacks are in the snack section and merchandised to make the customers aware that they have a healthy choice every day.” The BE FIT program continues to evolve, with the Exchange adjusting the way it merchandises and calls out BE FIT items in a more uniform and obvious way. Frontof-store endcaps are another recent addition so that the increasingly robust BFY assortment is showcased. “There is now a mandatory, monthly BE FIT endcap program that features approved snacks, beverages and quick meals,” Sidman shared. “Island coolers also contain more than 20 healthy options, including wraps, salads, hummus, yogurt, hard-boiled eggs and fresh fruits,” at more than 100 Express locations worldwide.

Suppliers on Your Side It’s not only food and beverage retailers that are embracing the BFY movement. Manufacturers, large and small, are on the scene as well, offering both new BFY products and the latest intelligence on shopper preferences.

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Sargento Foods Inc. has observed a crossover trend from beverages to BFY, according to Joe Miller, sales team leader, small format stores, for the supplier, which offers c-stores portable BFY protein options through its cheese sticks, cheese planks and Balanced Breaks cheese and nuts/dried fruit/yogurt drops combo cups. “In beverages, consumers are gravitating toward more functional beverages, and we’re seeing a similar trend in the snacking arena. They want natural ingredients they can not only pronounce, but also that offer functional nutrition,” stated Miller. “Our items fit into that sweet spot now with consumers — they’re a good source of protein and calcium packaged up into on-the-go nutrition.” Convenience store chains like Pennsylvania-based Wawa Inc. are incorporating open-air “fresh” cases “that you almost trip on when you walk in,” Miller pointed out, advising that BFY endcaps and signage are crucial to success, particularly when special strips of color are used to accentuate something new and different in the store. Another good marketing practice is to have gas pump signage that calls out the everyday low price or sale price of healthier items, including fresh fruit, added Steve Strubbe, Sargento’s marketing manager, strategic channels. This drives awareness, he believes, as does two-item BFY deals that pair together well and create a “halo around healthier.” Tom Michalewski, customer marketing manager, convenience, for Rich Products Corp.,

also encourages c-store retailers to advertise their BFY offerings at the fuel pumps and then integrate the same messaging into store advertising and marketing plans, including billboards, signage, radio, mobile messaging and social media. Establishing a segregated BFY section, or even a portable display that can sit by the coffee bar in the morning and beside the register in the afternoon, is another strategy supported by Michalewski. Last year, Rich Products introduced Betterfor-You Protein Energy Bars and Cookies that are fresh-baked onsite. These items represent “a healthy indulgence” in that they offer full flavor with no artificial additives, sweeteners or flavors, and they have only 200 calories per 2-ounce bar or under 100 calories per cookie, he said. “They answer consumers’ desire for fresh baked goods that are healthier options made with real, simple ingredients, like vanilla, nuts, quinoa, flax seed and blueberries,” he added. While BFY products offer c-store operators the opportunity to unlock increased sales, they also give retailers the chance to attract a younger demographic to their stores. “Our demographic has always been millennials. We are in thousands of colleges and have a huge following, so what we can offer a c-store chain is a younger, affluent clientele, and we are marketing to them like crazy to get them through the door,” said Jim Simon, president of JIMMYBAR, an up-and-coming protein bar company. The supplier recently did a Super Bowl promotion with Holiday stores, giving away 30,000 mini JIMMYBARS in Minneapolis, which helped drive traffic and sales to those stores. “The internet has changed the way people look at food, including c-store customers,” Simon said. “BFY will continue to grow, and emerging brands like ours are resonating with younger consumers over the Big Food conglomerates.”

Putting BFY Forward The prevalence of protein already in most convenience stores is an indication that the channel, as a whole, is headed wisely in the BFY direction. “Protein is a critical better-for-you component of nutrition and is prevalent in c-stores in bars, drinks and

dairy products,” said Don Stuart, managing director of Cadent Consulting Group. C-store operators, however, must recognize who their BFY customer is and is not. A typical c-store shopper will have a different interpretation of BFY than a natural foods shopper, for example. “There is a spectrum of BFY,” as Stuart sees it. “The evaluation process of what is better-for-you can often be subjective, but overall c-store shoppers are a bit more circumspect,” he acknowledged. “They are more mainstream, and the selection of items should follow these two rules: build off what sells best, and don’t overreach in terms of newness and unproven innovation.” It’s critical to be very selective in variety and stay on the BFY spectrum that is more c-store and less natural foods retailer. Stuart believes c-stores should ensure that their BFY alternatives offer clear benefits and great taste, without an excessive price upcharge. To him, this means less than a 20-percent price differential. Other c-store BFY best practices, according to Stuart, are: • A strong presence of fresh products, especially produce; • A strong healthy snack presence in the center of the store that complements traditional snack items; • A clean, well-organized dairy section with a strong presence of organic options; and • A healthier foodservice operation that moves beyond hot dogs to customized foodservice options. New item proliferation is excessive in BFY now, Stuart cautions, with much of the excitement happening around natural, organic and specialty items. “C-stores can assess what sells best in other outlets using grocery as a guideline, but they will ultimately need to decide if the product is a good fit for their shoppers,” he advised. There is no one “right” answer for all c-stores, or even all the stores within the same chain. Results will vary based on location, shopper population and seasonality.

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Call to Action l Highlight an open-air Better for You (BFY) snack area and/or endof-aisle endcap that has strong but simple callouts in signage and color. Rotate this offering on a regular basis, perhaps even monthly. l Incorporate a few BFY items in-aisle, where it makes the most sense and where space will allow, to encourage customer trial. l Use local grocery stores as a guideline in terms of new-item proliferation, but do not overreach with unproven innovation. BFY alternatives in c-stores should offer clear benefits and great taste with less than a 20-percent price upcharge. l Remember there is no right BFY approach across all stores. Results will vary based on location, shopper population and even seasonality. Consider innovative technologies, such as mixed reality and virtual simulations, to figure out how to merchandise this quickly emerging growth category. l Establish a healthy corporate culture from the top down. Offer your employees BFY alternatives to the more indulgent samples sent to the home office. The healthy halo will undoubtedly trickle down.

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This is where innovative technologies, such as mixed reality and virtual simulations, can be powerful tools for figuring out how to merchandise emerging categories like BFY. “Using VR [virtual reality], retail and brand teams can quickly test display layouts, identify winning configurations, and then iterate based on what works,” Mark Hardy, CEO of InContext Solutions, told CSNews. “The beauty of mixed reality is that these tests can yield conclusive data within as little as two weeks, instead of the traditional turnaround — upwards of 26 weeks — that it typically takes to get such insights.” Conducting market research and testing BFY product placements and shopper marketing initiatives with virtual simulations “can help c-store teams uncover valuable insights before putting the time and money into real-life versions,” according to Hardy. Retailers can use mixed reality software, like the ShopperMX platform from InContext Solutions, to figure out what in-store signage gets noticed by shoppers, what aisle configurations yield the best store flow, what displays best catch the customer’s eye, and so on. Digital products can be dropped into a virtual store layout to get a visualization of how they will look in the physical store, and then be tested using real shoppers. “From there, it’s easy to get a sense of how an item

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or category will sell in-store,” Hardy said.

The Future of Better-for-You Looking ahead, it’s expected BFY will only continue to grow in the convenience channel. The way Stuart sees it, there is nothing more mainstream than the convenience store. “C-stores command about half of the retail doors for CPG in the U.S. There is a mainstream shopper, but a mainstream shopper who is on a quick trip,” he said. “If quick trips can be adjusted to incorporate better-for-you options, then this can create an improved health and wellness diet lifestyle for mainstream America.” Consumers are going to be increasingly invested in what they’re putting in their bodies as the Internet of Things makes it easier and easier to track fitness and health metrics, according to Hardy, who expects BFY to keep growing and diversify. “Imagine a smart watch app that lets you scan barcodes to get nutrition info about a product and how it would fit into your day’s health goals. That doesn’t exist yet, as far as I know, but it would make it important to have BFY items at, say, wrist level,” he noted.

OUR RETAIL NEEDS

The BFY movement may also move from the store level to the corporate level. Denver-based Pester Marketing, which operates 117 c-stores in rural Colorado under its Alta Convenience banner, recently realized it wasn’t walking the talk. “As our industry has continued to move toward more healthy choice offerings in our stores, we noticed our own office was not exactly following the trend,” said Rich Spresser, president of Pester Marketing. “Like most convenience store industry offices, we receive a lot of samples, which are not always the best items to leave out for everyone to try. So, we created what we refer to as a ‘Healthy Snack Bar’ in the office.” All items in this snack bar are free to the office staff and include fresh fruit, protein bars, yogurt, fruit cups, cheeses and whole-grain cereals. “The response has been great, and we hope to expand the offerings as we move forward,” said Spresser. CSN

The Cashierless Convenience Store:

Fad or Future?

Amazon, Walmart and Kroger are a few companies automating the checkout process, and experts believe c-store operators should be paying attention By Tammy Mastroberte with the opening of its Amazon Go store, featuring a grab-and-go concept with no checkout or cashiers. The entire store is run on proprietary technology, which the company calls “Just Walk Out Technology,” as it automatically detects products taken off and returned to the shelves, and adds them into a virtual cart for automatic checkout using the Amazon Go app on the customer’s phone. The system is also using cameras and facial recognition technology.

AMAZON MADE HEADLINES RECENTLY

“The whole concept of the cashierless convenience store is about convenience to the customer, and what is our most precious asset as an individual — our time,” said Ken Gold, CEO of Skilken Gold, a real estate development company based in Columbus, Ohio. “Companies are trying to figure out what the next gimmick or differentiator is to bring attention to their brand and provide the most convenience to consumers.” While Amazon has not revealed the exact technology being used in the Amazon Go store (the company did confirm it’s not RFID), experts believe its system utilizes artificial intelligence with cameras and facial recognition, in conjunction with sensors

on the shelves and the mobile app. Customers are also required to have an Amazon account. VideoMining Corp., a company based in State College, Pa., that offers in-store behavior analytics for consumer packaged goods manufacturers and retailers, uses a similar technology platform with cameras and sensors to track where people move throughout a store, according to Jeff Hershey, VideoMining’s executive vice president of strategy and development. “It looks like the use of computer vision similar to what we do and using multiple sensors — either weight-sensing or pressure-sensing shelves,” he noted. “The camera takes inputs from the top down and sideways to determine what was purchased or what you put back. When you come in, you check in with your phone and build a virtual basket as you go through the store, and it probably knows a person has left based on location-based technology.” Some experts are referring to the technology as a “disruptor” that will cause others to provide a similar service. Both Walmart and Kroger announced cashierless self-checkout concepts to be rolled out this year. Walmart plans to bring its Mobile Express Scan & Go, which uses a mobile app, to more than 100 stores, while Kroger is rolling out its Scan & Bag technology, which uses an app or handheld scanner, to 400 stores in 2018. These concepts, however, would not be easily incorporated

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into the convenience store environment, according to Rob Gallo, chief marketing officer at Impact 21, a petroleum and convenience consulting company based in Lexington, Ky. “Given the small basket size and short duration of a c-store shopping trip, I don’t think handheld scanners are the answer,” said Gallo, noting also that with c-stores, there’s the issue of tobacco and made-to-order foodservice where people will need to interact with someone. “Nothing I have read would indicate [Amazon Go] will carry cigarettes, and that is a destination driver of the c-store industry and a significant gross margin contributor,” added Steven Montgomery, president of b2b Solutions, a c-store consulting company based in Lake Forest, Ill. Montgomery also clarified that Amazon Go is not without employees; it is just without registers. “The alcoholic beverage section does have associates checking IDs,” he noted.

Accuracy & Loss Leading up to the opening of the first Amazon Go store in Seattle, Amazon did acknowledge some delays in the launch because of technology and accuracy issues. The Amazon Go app currently works with the latest versions of Apple and Android phones, and the company initially had issues with the app’s ability to handle larger volumes of traffic, according to Montgomery. “As far as accuracy, Amazon has acknowledged it isn’t perfect,” echoed Gallo. “That said, I would imagine the shrink at Amazon Go would be less than a typical convenience store.” Amazon had the Seattle store in testing with employees for a year, and now that it’s open to the public, there are reports the system is missing items in a customer’s cart — only capturing seven out of eight, said VideoMining’s Hershey. While he doesn’t think the technology will work 100 percent of the time, he also doesn’t believe Amazon is worried about it. “I think Amazon is willing to accept some breakage or inaccuracy. Small losses will be outweighed by the fact they don’t need so many people running the store,” he explained.

What C-stores Need to Know Now that Amazon Go has launched, and other retailers are offering their own versions of cashierless checkout, should c-store operators be concerned and looking for their own version? One of the benefits could be reduced labor costs if cashiers are not needed, but employees are still needed in the stores — even at Amazon Go.

The entire Amazon Go store is run on proprietary “Just Walk Out Technology,” which automatically detects products taken off and returned to the shelves, and adds them into a virtual cart for automatic checkout using the Amazon Go app on the customer’s phone.

“I do believe the concept has legs, but note: Even though Amazon Go does not have cashiers, it still has plenty of employees,” said Gallo of Skilken Gold. “Companies should be deploying technology that frees up people to perform more value-added tasks.” Even in a self-checkout environment, someone must be available for age-restricted items and to assist with any issues, Montgomery agreed. Additionally, it has long been a focus of convenience stores to get

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consumers from the fuel pump into the store, and they often use the checkout area to advertise impulse buys, Impact 21’s Gold noted. “In a way, it goes against the checkout concept with impulse purchases such as gum, candy bars and more, which are highly profitable items,” Gold said. It also changes the way c-stores provide customer service. “As consumers, we need customer service. We become loyal to a location and brand because of customer service,” he added. “Publix continues to be No. 1 in customer service, but if they start eliminating employees, they will no longer be No. 1.” The setup used by Amazon Go also won’t necessarily translate to the c-store and larger format environment because it would become expensive and accuracy would be more of an issue.

This is why Walmart and Kroger are creating their own versions. “Scalability is a concern if this technology was going to be employed in larger stores,” said Gallo. “The number of sensors and cameras necessary to make the process seamless in a store the size of Whole Foods — cost and accuracy are likely to become a big challenge.” Still, experts believe adoption of the cashierless checkout will increase over time, especially as labor costs continue to rise and companies look to replace certain labor functions with technology, including self-checkout, Gallo explained. “Lowering overhead costs can keep retailers more competitive on price. Managed properly in the right locations, self-checkout can get customers out of the store faster,” he said, advising that c-store operators should consider this for the future as they look to innovate and progress. “Convenience stores should be doing more than watching,” Gallo concluded. “They should be thinking about the evolution of the channel and how they can continue to ‘own’ convenience. If they are not willing to rethink the business, others will.” CSN

Amazon Go executives recently shared at the ShopTalk retail industry event that the most popular grab-and-go item is the store’s chicken sandwich.

“Convenience stores should be doing more than watching. They should be thinking about the evolution of the channel and how they can continue to ‘own’ convenience. If they are not willing to rethink the business, others will.” — Rob Gallo, Impact 21

Amazon is expected to announce plans soon for additional Amazon Go stores.

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FOODSERVICE

What’s Hot on C-store Menus? GetGo gets high marks on The Ultimate Meatloaf Sub GETGO’S THE ULTIMATE MEATLOAF SUB hits the bullseye. The sub —

OPERATOR: GetGo ITEM TYPE: Limited-Time Offer DATE: December 2017 PRICE: $3.99 It’s the ultimate comfort food with a culinary kick. Chef Tom starts with potato bread baked fresh in-store and loads it with nearly a half-pound of mouthwatering meatloaf, tops it with cheddar cheese, applewood-smoked bacon, French’s crispy fried onions and his incredible smoky bacon aioli.

with fresh-baked bread, a halfpound of meatloaf, cheddar and applewood-smoked bacon — has received high marks across six measurements from consumers on Datassential’s SCORES platform. The Ultimate Meatloaf Sub scored especially high for Uniqueness (97th percentile), Branded Purchase Intent and Unbranded Purchase Intent (in the 87th percentile for both scores), and Value (94th percentile). The sandwich has been surveyed twice in the SCORES platform since its introduction in December 2017 and performed well both times.

It’s Craveable & Unique This limited-time offer takes

convenience store sandwiches to the next level with unique, premium flavors offered in a format that is still familiar to consumers. The Ultimate Meatloaf Sub is unique in that it transforms a traditional comfort food dish into something people can eat on the go, along with trendy flavors like smoky bacon aioli (aioli is up 45 percent on restaurant menus over the past four years) and crispy fried onions. The carrier — the fresh-baked potato bread — is an interesting addition as meatloaf is normally served with a side of mashed potatoes.

Consumers See Value At just $3.99, consumers surveyed see The Ultimate Meatloaf Sub as an affordable option for a filling meal when they are on the go, especially with its premium ingredients (fresh-baked bread, a half-pound of meat). It’s also a sandwich that consumers ranked as something they would keep returning for, scoring in the 85th percentile for Frequency. In terms of demographics, men are much more interested in trying The Ultimate Meatloaf Sub than women. In addition, millennials rated the sandwich very highly over other generations surveyed. The concept was also most appealing to Asians and Hispanics.

CONCEPT SUMMARY: UNIQUENESS

Datassential, a Chicago-based food and beverage industry research and consulting firm, brings clients real-world insights on flavor trends,foodservice and consumer packaged goods, globally.

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FOODSERVICE

The Match Game What should c-store retailers look for in the growing pool of branded foodservice prospects? By Angela Hanson ALTHOUGH CONVENIENCE STORES are increasingly upping their foodservice game, with some experienced chains like Wawa, Sheetz and QuikTrip cultivating restaurant-quality programs, industry experts still see the most foodservice growth coming from retailers who are just getting into the category, rather than expanding upon what they already have. Branded foodservice programs recognize this and are pursuing convenience channel growth and expansion accordingly — something that presents both opportunities and challenges for c-store operators.

Many of the experts on the Convenience Store News Foodservice Advisory Council agree that proprietary foodservice programs yield greater profit and long-term benefits. However, a branded foodservice partnership can offer knowledge, support and a recognizable name — all qualities that could be invaluable to retailers without significant food experience, particularly the industry’s small operators and single-store owners. In the right situation, a branded foodservice partnership is a win-win for the retailer and partner alike. This has attracted companies into the c-store industry that didn’t previously have a significant interest or presence in the channel. A&W Restaurants, for example, is making an aggressive push into the convenience space for the first time and has opened franchises inside Casey’s General Stores and TravelCenters of America locations. Cinnabon, meanwhile, has partnered with RaceTrac Petroleum to add the “Crafted by Cinnabon” line to the chain’s everyday menu, in addition to its partnership with Salt Lake City-based Maverik Inc. Retailers can also choose from brand-new branded programs like BirdShack, a fresh fried chicken concept that debuted at the 2017 NACS Show. BirdShack has formed a relationship with convenience distributor Core-Mark to capture chain and independent c-stores looking to offer their customers an easy-to-prepare fresh food experience. With the plethora of options, it might seem like there’s no wrong way to go with a branded partnership, but by taking into account various strategic factors and understanding what branded concepts are looking for, c-store operators can increase the likelihood of success. For Nestlé Toll House Café by Chip, which opened its first café inside a convenience store in Des Plaines, Ill., in August 2017, it’s all about real estate. “We’re constantly looking for real estate. When that option became available to us, it just made sense,” said Joey Zapoli, vice

president of operations, citing the quality and location of its first c-store partner, River & Oakton Shell Auto Care. C-store operators interested in partnering with a brand may want to consider how they can stand out from the competition. One way is by teaming up with a brand that isn’t ubiquitous in the convenience space. Zapoli noted that the operator of River & Oakton Shell Auto Care reached out to Nestlé Toll House Café by Chip. The company hadn’t previously looked at the channel. While the c-store location isn’t as lucrative as its standalone and mall kiosk locations, the company is pleased to have a franchise store with a different traffic pattern, in the form of customers who initially come to the location for fuel. “It’s a nice thing for us that we have a captured audience,” Zapoli said. In turn, the store stands out from other c-stores in its area by having the Nestlé Toll House Café by Chip, which offers freshbaked treats, as well as freshly prepared savory items like crepes and flatbreads. From Zapoli’s perspective, the most successful c-store foodservice programs are those that seek to answer the question: What can that gas station do that’s something different than the person across the street?

Finding That Perfect Partner On the retailer side, the location of existing stores can’t be changed, but multiple other factors should be evaluated before selecting a branded foodservice program. “We evaluate interstate traffic volume,

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FOODSERVICE

surrounding businesses, franchise strength in the area, and the local population’s size and demographics,” said Gemma Howley, senior manager, national brand relations and development at Knoxville, Tenn.-based Pilot Flying J, which operates more than 750 retail locations in 43 states. To establish a successful partnership with a branded foodservice offering, it is important to leverage the operations systems and processes that are provided by the partner in order to ensure consistency and alignment between brands, according to Howley. “A strong background-check process helps to ensure the brand partner is financially secure, has experience in non-traditional retail partnerships, maintains a strong and reliable reputation, and has the resources to manage and assist in the operational preparations,” Howley added. Footprint flexibility — the ability to operate in a small space or expand into a larger one, rather than requiring strict uniformity — is a point in a branded partner’s favor. Opinions vary on whether a branded program should be fully integrated into a store or occupy its own distinct space, possibly with a separate entrance, but regardless the style of food must appeal to local tastes, even if the goal is to stand out. Leo Vercollone, president of Duxbury, Mass.-based VERC Enterprises, believes in choosing a type of food that is strong in the region, such as fried chicken in the South.

Knowledge of convenience stores, which must cope with the challenges of both the retail industry and the food industry, can be a crucial differentiator as well. Dan Shapiro, executive vice president of Louisiana-based Krispy Krunchy Chicken, cites his and founder/President Neal Onebane’s backgrounds as a major reason why the brand has done so well. Krispy Krunchy Chicken opened 509 new locations in 2017. “Both of us have been in the convenience business our whole working lives, so we really understand what the operators are dealing with,” Shapiro said. “The fact that a huge percentage of the business comes from people who walk in the store with no intention of eating — who came in for cigarettes, beer, soft drinks, whatever — you’ve got to figure out how to merchandise it, display it, get people hungry when they walk in.” Hand-in-hand with c-store channel knowledge is post-opening support. Experts say branded partners should be involved from permitting and construction to assistance with equipment to employee training. Nestlé holds 12-day training classes for owners and managers, and then sends trainers to the site ahead of opening to train some more. Retailers can use the knowledge they gain to better prepare employees during onboarding. “Operators can take steps to maximize the effectiveness of branded partnerships by preparing detailed training materials, such as operation guides and food preparation charts, as well as developing marketing materials that build on each brand’s strengths and unique offerings,” advised Howley of Pilot Flying J, which works with multiple branded partners. Third-party partners can also help retailers assess what level of business the program should bring in based on criteria such as regular customer traffic, the busiest days and dayparts, and more — and create an action plan if the business is falling short of expectations. Such a plan might include sampling, coupons and other moves to reach the projected volume, said Shapiro. Above all else, retailers should view a branded foodservice partnership as an ongoing initiative that can constantly be improved upon. Continual investment in getting the most out of it will ultimately build success for the c-store and the branded partner alike. CSN

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

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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.

TOBACCO

Tapping a Tobacco Mind Managing the tobacco category is risky and rewarding business, as Brookshire Brothers’ Phil Metzinger can attest By Renée M. Covino to successfully manage tobacco in the convenience channel these days?

WHAT DOES IT TAKE

An open mind certainly helps, for starters. Such an asset belongs to industry veteran Phil Metzinger, vice president of specialty beverage and tobacco operations at Brookshire Brothers, based in Lufkin, Texas. Brookshire is predominantly known as a grocer, but the company also operates tobacco outlets under its Tobacco Barn banner and convenience stores under its Brookshire Brothers Express banner. According to Metzinger, Brookshire Brothers had as many as 32 convenience stores in 2000, but the company later converted many of them to tobacco outlets — even at a time when many other tobacco chains were closing stores and shuttering their operations. Today, Brookshire still has four company-owned convenience stores, located close to its headquarters, with the advantage of honing tobacco trends and merchandising experience gleaned from the Tobacco Barn stores. As a tobacco industry veteran who can look at the category from both a total tobacco and convenience-channel perspective, Metzinger recently chatted with Convenience Store News, covering such topics as his best tobacco practices, his favorite subcategories, and his biggest

hopes and fears for the future. Here are some of the candid conversation highlights: CSNews: What is the best news you’ve heard recently regarding the tobacco category? Metzinger: Back in August of 2017, the FDA [Food and Drug Administration] publicly said it was open to the idea of a continuum of risk for tobacco products. So, in terms of combustibles, snus, moist snuff, etc., the risk factor for all of those need to be determined so that people who enjoy tobacco products can weigh the options. It was also identified that nicotine is something that, when properly consumed, is not the archenemy we think combustibles to be. While it has yet to be determined, I’m hopeful and excited that tobacco items may soon come to market where we could put some type of label identifying that one might not be as bad for you as another. CSNews: What would this mean for your stores and the industry? Metzinger: I really think this is the way we want to go. Let’s offer people less risky options and let the FDA inform them by way of warning labels. It gives us, as retailers, the opportunity to say, “This is a less risky form of tobacco usage.” The public has a right to it. There are still those who want tobacco completely outlawed, but I don’t think that will ever work. It will just take us back to the bootlegging days of prohibition. It will just be the Wild West all over again. No, this is what we need — a continuum of risk. CSNews: What is your foremost challenge regarding management of the tobacco category? How do you hope to resolve or manage it? Metzinger: Cigarette consumption drops by 3 percent to 4 percent every year, so the biggest challenge is to grow sales in a declining category, and to do it in a legal, professional, upbeat way. Electronics have a place; there are good and not-so-good options. So, just being a responsible retailer and growing your tobacco business is a challenge today. Different techniques in merchandising really help. We live in a world where variety trumps everything. People want better choices in fast food, wine and, yes, tobacco. We are a people that like variety and flavor profiles, so we have expanded variety in tobacco. Obviously, we want to do it in a responsible manner with legal products, so lately I’ve

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Brookshire Brothers Express stores are designed to blend the best of a traditional supermarket with a convenience store.

offered a wider variety in premium cigars and moist snuff. As far as glassware paraphernalia, we’re not going to go there. I personally don’t think that’s responsible, and we have no plans to carry it. I draw the line there.

business, based on our demographics.

CSNews: How has Brookshire Brothers’ tobacco category evolved since a year or two ago?

Metzinger: The most important best practice is to be sure we’re following FDA guidelines about checking IDs and selling only to adults. The c-store industry, as a whole, has done really well with this lately. It’s an important practice, and good operators of integrity want to be known for the fact that they carefully train people to only sell tobacco to adults in the communities we do business. Of course, part of the problem is that the definition and legal age of what constitutes an adult is changing in so many locales.

Metzinger: Merchandising this category is more challenging, more interesting and more fun than it ever has been, and we are continuously making tweaks that are proprietary in nature. Everybody should have their own unique way of presenting the category. One thing I will mention looking forward is iQOS [Philip Morris International’s widely publicized heat-not-burn product, which is currently under reduced-risk review by the FDA]. If it comes to market in the U.S., I plan on carrying it because it offers a lower health profile to the general public. It’s not a perfect solution, but if it flies through the FDA and meets the hurdles, I’m behind it. CSNews: Which tobacco subcategories are the strongest in your stores? Which show the most potential? Metzinger: Cigarettes are still a very strong category, and if moist snuff has warning labels changed by the FDA this year or next, that will be a great opportunity. Snus is another huge opportunity, no matter the manufacturer. If it becomes a modified risk product, the way it has in other parts of the world like Sweden, I believe the public will embrace that. We’ve sold premium cigars in our stores, but now we’ve expanded that area. It’s becoming more of a staple and a big category for us. We find our customers started on the typical c-store domestic cigars, but once they’ve enjoyed premiums, most never go back. It is a product much like wine — once you get a taste of the good stuff, it’s very hard to go backwards. There is good potential in premiums for us. Now, our sweet spot is in the neighborhood of $5 to $7. We have some higher than that, but that is the price range our customer base is most comfortable with. Also, the bundle business is big by us. You can get a bundle of cigars for less than $20, so that’s a popular part of our

CSNews: Please tell us your “must” for managing tobacco today.

CSNews: How do you see tobacco changing in c-stores moving forward? What is your greatest fear? What is your greatest hope? Metzinger: The vast majority of convenience stores have served the communities they do business in for years, and they are responsible retailers who care for their clientele. But in tobacco, we also have a movement going on in this country — it’s a prohibitionist movement — spurred by the fact that the federal government hasn’t moved fast enough. We have to be patient and hopefully it will make good, honorable decisions regarding the category. My biggest fear is that the movement will continue to be in a big hurry, thinking of Big Tobacco as evil, so municipalities will continue to make decisions that will negatively affect our businesses. San Antonio is one Texas municipality that has changed the legal age to purchase tobacco from 18 to 21, but the rest of the state so far is 18. So, all of those businesses there, all of those c-stores in San Antonio, are basically now being penalized. I don’t have stores there, but I could. We penalize people that support tax rates. In our moralistic view, tobacco is immoral. But it is a legal product. I fear things will go back to the days of prohibition. My hope is that we will be patient and let the industry get to a place of minimizing risk and letting our customers and the population make their own intelligent decisions. CSN

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STORE SPOTLIGHT

Redefining the Urban Bodega Boomshack Market offers “quick-hit” convenience in a playful atmosphere By Danielle Romano

Boomshack Market, which will celebrate its one-year anniversary next month, offers a fresh, madeon-site food program.

BODEGAS ARE A UNIQUE MICROCOSM of

the convenience channel. Originating from the Spanish word “la bodega,” the MerriamWebster Dictionary defines bodega as “a usually small grocery store in an urban area.” In an industry inundated with consolidation — mostly from larger chains gobbling up small and midsize players — Trisha McGovern set out to redefine convenience with her take on a bodega in the form of Boomshack Market. “The way I look at it is, if you’re at Gate 57 going through LaGuardia Airport, what are they selling there? We’re about the mile. We are redefining the urban c-store. That is our goal,” she told Convenience Store News.

At a Glance

Boomshack Market Owner and operator: Trisha McGovern Location: 237 7th St. West, St. Paul, Minn. Size: 1,500 square feet Tagline: “Meet me at my bodega.”

A St. Paul, Minn., native, McGovern spent 20 years in marketing and information technology, traveling frequently to New York and other large cities. She drew inspiration for Boomshack Market from the neighborhood bodegas she shopped at and ate in while on the go. Boomshack Market, which opened May 1, 2017, is aptly named for its “quick-hit” convenience. “The name came to me by thinking of someone saying, ‘Boom! I just got that at that little shack! Can you believe it?’” McGovern explained.

Uniquely Its Own Prior to opening Boomshack Market,

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McGovern spent a year and a half researching and studying bodegas. She even went so far as to sit in the window across the street from her store’s to-be home at 237 7th St. West in St. Paul for two weeks before signing the lease, so she could observe the foot traffic and “make sure the data was correct.” Nestled in the heart of the city, Boomshack Market is surrounded by hospitals, administrative buildings, hotels, bars and restaurants. The Xcel Energy Center arena is also within walking distance. The bodega’s footprint is similar to that of an airport store, in that it operates in a small space, has seating, and sells on-the-go items that are ideal for traveling. Despite its limited footprint, Boomshack Market is unbounded by an eclectic, playful atmosphere. The store features a Boom Room café, a selfie station, and a “Tell us what YOU want!” communal bulletin board, where guests can add post-it notes providing feedback on menu ideas or more personal, comical responses like, “Sleep” and “A husband who golfs rather than hunts.” The store’s walls are adorned with iconic American movie posters handpicked by McGovern that highlight film and culture themes of the 1970s, ’80s and ’90s. “The brand Boomshack is just fun. It’s an uplifting place to come and it has worked its way into [customers’] lifestyles,” McGovern expressed.

Making Fast Casual Fresher Housed within the small, yet enticingly unique bodega is Boomshack Market’s fresh, made-on-site food program. The menu was inspired by benchmarked data and trends tracked by McGovern’s sister, who lives in England. Hot-ticket menu items include Boomshack Brisket, The Boom Dog, and Deluxe Nachos. All of the offerings can be complemented with toppings from the Boom Up Bar, a condiment station that changes seasonally, but typically features relishes, sauces, pickles and side items like coleslaw. “The Boom Up Bar is not huge, but it’s enough to be three steps above a traditional gas station and convenience store offering,” McGovern noted, adding that Boomshack Market prides itself on providing the freshest produce possible. The bodega receives fresh produce deliveries every other day when store traffic is bustling, and once a week when it’s slower. “I always say we make fast casual fresher,” the singlestore owner expressed. Other components of Boomshack Market’s foodservice and beverage offer include:

chef’s salad), Accent on Asian (a noodle salad) and the Southern Delight (a chicken salad). The retailer plans to introduce soft-serve ice cream this summer. The closing of a Dairy Queen down the block, coupled with the fast-service window at Boomshack Market, presents the opportunity to roll out the offering, according to McGovern. Last summer, she tried hand-scooped ice cream, but “it caused too much brain damage” and wasn’t profitable for the business. “I grew up in the Dairy Queen business because my mom owned one growing up, so it was natural for me to figure out how to do that hoodless, small-space kitchen concept,” she explained. Other new offers are also in the pipeline for Boomshack Market. McGovern and her sister are currently working on a line of bottled water called “Boomshack Water for the Northerner,” a vitamin-D enriched beverage. Additionally, they’re developing a line of fresh-to-go food called Luxe Café Américain. The line is intended to be more upscale, so it will have a higher price point and feature a different label than Boomshack. Other amenities customers find at Boomshack Market are: • Indoor and outdoor seating featuring steel café tables and chairs; • A miniature newsstand; • Delivery via Bite Squad ($20 minimum purchase); • Farmer’s market flowers on Thursdays; and

• The basics, like fresh-brewed coffee; • Nearly 300 varieties of packaged beverages; • Protein snack boxes that are assembled in-store and combine jerky, mixed nuts and a hardboiled egg; • Proprietary private-label Boomshack bottled water that uses triple-filtration; and • Grab-and-go options like the American Gigolo (a

• Small pharmacy items. McGovern said the bodega will stay away from carrying everyday grocery items, except for typical products people might bring back to a hotel or office, like microwavable popcorn or hair gel. Instead, she hopes to incorporate more local items, such as hot sauces, peanut butters and snacks. This avenue has proved to be tricky, however, seeing as many of these items have immediate expiration dates to contend with, she pointed out.

A communal bulletin board and iconic American movie posters contribute to the store’s eclectic and playful atmosphere.

A Booming Future When thinking about the future of

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STORE SPOTLIGHT

Boomshack Market, McGovern is open to different possibilities for expansion. She has already received interest from companies in Philadelphia and Ohio, as well as an offer to open a second space in Minneapolis. Other c-store operators have even thrown their hats into the ring, providing McGovern with insights and advice on understanding backend operations and compiling information needed to expand Boomshack Market from a single store into a chain.

“Our customers are as loyal as can be because they like the experience. While products may be similar to traditional convenience stores, the experience is tremendously different with our visuals, our signage, our social media and our customer experience.” — Trisha McGovern, Boomshack Market

For now, though, McGovern is focused on getting through the first year of business, focusing her attention on boosting the brand’s private-label products, as well as tightening up granular aspects of inventory, operations and employee manuals. “Boomshack is not going to be a one-hit wonder. I can feel it and my customers feel it,” she said. CSN

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TWIC TALK

Kimberli Carroll, Ruiz Food Products Inc. The 2015 TWIC Woman of the Year says it’s a great time to be a woman in the business world By Linda Lisanti for up-and-comers seeking to blaze their own trail. This month’s TWIC Talk subject is Kimberli Carroll, senior vice president of sales for the Foodservice Business Unit at Ruiz Food Products Inc. In 2015, Carroll was one of the five women celebrated by TWIC as Women of the Year. CSNews: How would you describe the current state of affairs for gender equality in the convenience industry? How does this compare to 10 years ago?

NOW IN 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’s like to be a female leader in the convenience store industry today — the challenges, the opportunities — and get their words of wisdom

Carroll: My observation is that it is really good and I am extremely bullish on the future. I started working in the c-store industry, on the manufacturing side, nearly 17 years ago and even then, there were many women involved in varying levels of responsibility within the industry. What I have observed in the last 10 years is even more women stepping into senior leadership roles. CSNews: What is the most positive change you have personally witnessed? Carroll: It seems like more women today are willing to challenge themselves to take on more responsibility at work and push themselves to take on what were formerly unconventional roles for women. It helps that family dynamics have also evolved. Men are also taking on unconventional roles, either being the primary parent or even a stay-at-home parent. The ability to better balance work life and home life makes it possible for men and women to pursue their passions without societal judgement. CSNews: Along your career path, did you personally experience gender bias or inequality? If so, how did you overcome? Carroll: If I have, I was not aware of it. Honestly, I can say that I am very fortunate to have had a lot of support throughout

my career, both from men and women who sought to give all team members the opportunity to succeed. I have certainly had my share of obstacles and failures, but have always felt supported to get back up and try again. Ruiz Foods, where I have spent the last 17 years of my career, has made integrity and respect for all a cornerstone of the company culture. We are very inclusive. I don’t remember ever thinking or feeling like my gender was in any way inhibiting my potential for success. I can certainly remember, especially early in my career, wondering if I had enough education and/or enough experience to get to that next rung, but gender has not been a factor. CSNews: What barriers to advancement do you see still existing in the c-store industry? Carroll: It is truly a great time to be a woman in the business world, c-store industry or otherwise. In the last 25 years, women have achieved many firsts. The good news for those of us who are coming after is that for the most part, the doors are already open. Now, we just have to prove that we are the best person for the job. CSNews: What is your advice for other industry women looking to rise to higher ranks? Carroll: My advice to other industry women is don’t get in your own way. Surround yourself with positive people who you respect, both professionally and personally. Keep educating yourself and when the opportunity is presented, raise your hand and say, “Yes, I can.” CSN

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HOT PRODUCTS SPECIAL ADVERTISING SECTION

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Pet Treats

HOT PRODUCTS SPECIAL ADVERTISING SECTION

E Vape Products

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Lighter Leash

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General Merchandise

Age Verifier

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Gourmet Pet Treats

Car Wash

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ATMs

Air Vacs

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Services

Prepaid Kiosks

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Plastics

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. 201-855-7615 for more details AP R

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ADINDEX Advance Pierre Foods/Tyson, Inc. ...................................................... 87 Altria Group Distribution ........................................................................ 2-3 Cash Depot, LTD........................................................................................ 16 Cookies United ........................................................................................... 21 Crown Imports, LLC ................................................................................. 13 Del Monte Fresh Produce NA, Inc....................................................... 5 E-Alternative Solutions ........................................................................... 33 E-Alternative Solutions ........................................................................... Outsert Forte Products ........................................................................................... 55 Gatorade ....................................................................................................... 9 Growth Energy ........................................................................................... 47 Heineken USA, Inc..................................................................................... 7 Hughes Network Systems ...................................................................... 88 ImageWorks Display & Mktg. Group .................................................. 25 John Middleton Company...................................................................... 35 Krispy Krunchy Chicken.......................................................................... 67 Liggett Vector Brands ............................................................................. 29 Living Essentials, LLC .............................................................................. 51 LSI Industries, Inc ...................................................................................... 20 McLane Company ..................................................................................... 49 Omega flex, Inc. ......................................................................................... 26 Perfetti Van Melle USA, Inc.................................................................... 19 Phillips 66 ..................................................................................................... 45 Renewable Energy Group ...................................................................... 41 RJ Reynolds Tobacco .............................................................................. 15 Sargento Foods, Inc. ................................................................................ 57 Stryve Protein Snacks.............................................................................. 53 Subway.......................................................................................................... 37 Swedish Match North America, LLC .................................................. 31 Swisher International ............................................................................... 27, 43 The Wonderful Company ....................................................................... 17 U.S. Food and Drug Administration ................................................... 10-11 Uline ............................................................................................................... 60 Universal Merchant Services ................................................................. Outsert

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

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

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GETTING TO THE CORE

Message in a Beer Bottle

Insight on beer buyers and non-buyers flows from new c-store shopper research With so many alcoholic beverage options in the marketplace today, are convenience store shoppers still saying cheers to beer? EIQ Research Solutions, sister company of Convenience Store News, recently surveyed consumers who shop a c-store at least once a month about their beer-buying habits. While roughly a quarter say they never drink beer, four in 10 c-store shoppers say they drink beer weekly, and one in four imbibe multiple times a week. That adds up to a whole lot of opportunity for c-store retailers to froth up their beer sales.

How often do you drink beer? Every day Multiple times a week Once a week 2-3 times a month Once a month Every couple of months Less often than every couple of months Never

Total Respondents The largest percentage of c-store shoppers who say they drink beer every day are those aged 18-24 (7% vs. 2.9% for all respondents).

2.9% 24.0% 14.3% 11.0% 6.8% 6.4% 10.1% 24.4%

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

24.4%

The percentage of c-store shoppers who say they never drink beer.

Why don’t people drink beer? • They don’t drink alcohol (48.3%) • They don’t like the taste (45.8%) • They prefer other alcoholic beverages (7.6%)

74.1% vs. 59.1% The percentage of female vs. male c-store shoppers who say they are drinking fewer alcoholic beverages now compared to a year ago. Which types of beer do you prefer? Hispanic c-store shoppers, in particular, have a stronger preference for beers from major brewers.

Beers from major brewers

• They think beer has too many calories (4.2%)

(e.g., Anheuser-Busch, MillerCoors)

Beers from smaller brewers No preference

42.2% 29.3% 28.5%

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

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

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

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