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VIEWPOINT By Don Longo, Editorial Director

Many Called, Few Are Chosen CSNews honors top women who are propelling the c-store industry forward

e are proud and delighted this month to put a spotlight on the winners of our third-annual Top Women in Convenience (TWIC) awards. From a total of more than 150 nominations, Convenience Store News, along with our TWIC Advisory Board, made the tough decisions necessary to recognize more than 60 female managers, directors and executives who work in the convenience store industry. Believe me, it wasn’t easy. There were so many deserving nominees. But when you read the profiles of our five Women of the Year, as well as the thumbnail bios of all our 2016 TWIC honorees (see pages 22 to 45), you’ll understand why these incredibly talented and accomplished women epitomize the traits we look for in our TWIC winners. Honorees were chosen based on nominations from their peers that illustrated each candidate’s innovative corporate initiatives, extraordinary financial and For comments, please contact Don Longo, Editorial Director, strategic accomplishments, astuteat (201) 855-7606 or problem solving acumen, excepdlongo@stagnitomail.com. tional performance and selfless charitable participation, among other attributes that go above and beyond the call of duty. On a personal note, it is an honor for me to be associated with this program that celebrates and promotes greater diversity in the convenience store

industry. We know this has not always been an industry that’s been super friendly to female managers and executives. The number and quality of all the nominees this year illustrates that women have earned our “R-E-S-P-E-C-T” in the convenience store industry. CSNews’ 2016 TWIC winners include chief executives, presidents, vice presidents and senior vice presidents, supervisors, directors and executive directors, category managers and senior category managers, account executives, store managers, and more. They represent retailers, distributors and suppliers. Indeed, they represent the future of the c-store industry. Special congratulations to our five Women of the Year who were recognized for their exceptional impact on the success and direction of their companies: • Laura Asbell of Mondelez International Inc.; • Niki DePhillips of Kum & Go LC; • Sharon Kuncl of Eby-Brown Co. LLC; • Danielle Mattiussi of Maverik Inc.; and • Nancy Smith of 7-Eleven Inc. We are looking forward to honoring them and all of our 2016 winners at our TWIC Awards Reception, taking place Wednesday, Oct. 19 at 5:30 p.m. at the Omni Atlanta Hotel at CNN Center, right after the NACS Show expo floor closes for the day. Like last year’s event, this year’s TWIC Awards Reception promises to be a fun and upbeat affair. Mark the date on your calendar. You’ll be inspired by these terrific women leaders who are propelling the convenience store industry forward to greater and greater success.

CSNews has been recognized with more editorial awards, including the prestigious Jesse H. Neal Award for business journalism, in the past six years than any other industry publication. 2013 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2012 2013 Jesse H. Neal National Business Journalism Award Finalist, Best Profile, August 2012 2008 Jesse H. Neal National Business Journalism Award Best Single Issue, October 2007 2016 Trade Association Business Publications Intl. Tabbie Awards Silver, Front Cover Illustration, June 2015 2010 Trade Association Business Publications Intl. Tabbie Awards Honorable Mention, Front Cover Illustration, October 2009 2009 Trade Association Business Publications Intl. Tabbie Awards Gold, Front Cover Illustration, February 2008 Honorable Mention, Best Single Issue, October 2008

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

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

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 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 2010 American Society of Business Press Editors, Northeast Regional Azbee Awards Silver, Feature Article Design, November 2010

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CONTENTS AUGUST 2016

VOLUME 52/NUMBER 8

22 | COVER STORY Leading Ladies

HOW TO DO WORLD-CLASS FOODSERVICE 48 | How to Track Your Foodservice Financials 48 | Call to Action: Foodservice 101 50 | Call to Action: Foodservice 201 54 | Call to Action: Foodservice 301

INDUSTRY ROUNDUP 14 | Appeals Court Tosses $7.25B Swipe Fee Settlement 16 | New Player Prepares to Take C-store Industry by Storm 16 | Eye on Growth 18 | Retailer Tidbits Convenience Store News (ISSN 0194-8733; USPS 515-950) is published 12 times per year, monthly, by Stagnito Business Information, 570 Lake Cook Rd. Deerfield, IL 60015. Copyright © 2016 by Stagnito Business Information. All rights reserved. Subscriptions: One year, $93; two years, $152. One year, Canada, $110; two years, Canada, $175. One year, foreign, $150. Payable in advance with a bank draft drawn on a U.S. bank in U.S. funds. Single copies, $10, except foreign, where postage will be added. Printed in U.S.A. Periodicals postage paid at Deerfield, IL, and at additional mailing offices. POSTMASTER: Send address changes to Convenience Store News, P.O. Box 1842, Lowell, MA 01853.

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

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CONTENTS 570 Lake Cook Road, Ste. 310, Deerfield, IL. 60015 (224) 632-8200 Fax: (224) 632-8266 www.csnews.com Direct Mailing Address for Convenience Store News: 111 Town Square Place, Suite 400, Jersey City, N.J. 07310

CATEGORY MANAGEMENT

BRAND MANAGEMENT

FOODSERVICE

Group Brand Director (330) 840-9557

58 | All Signs Steady The 2016 CSNews Foodservice Study reveals widespread growth across the category. CANDY & SNACKS

62 | The Meat of the Matter Flavor, format and other innovation give meat snacks some serious momentum. IN-STORE MERCHANDISING

66 | Destination: HBC Forward-thinking c-stores can convert their emergency sections to destination departments.

DEPARTMENTS VIEWPOINT

4 | Many Called, Few Are Chosen CSNews honors top women who are propelling the c-store industry forward. 12 | CSNews Online 20 | New Products STORE SPOTLIGHT

68 | Fueled by Opportunity QuikTrip debuts a c-store sans fuel as part of the chain’s long-term strategy. OUT & ABOUT

72 | Blurring the Foodservice Lines Retail channels get much attention at the 2016 National Restaurant Association Show.

Ron Lowy rlowy@stagnitomail.com

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

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

EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION Vice President/Custom Media Division Pierce Hollingsworth (224) 632-8229 phollingsworth@stagnitomail.com Production Manager Anngail Norris Strategic Marketing Director Bruce Hendrickson (224) 632-8214 bhendrickson@stagnitomail.com Director of Events Pat Benkar (973) 607-1330 pbenkar@edgellmail.com Director of Market Research Debra Chanil (201) 855-7605 dchanil@stagnitomail.com Audience Development Manager Shelly Patton (646) 217-1045 spatton@stagnitomail.com List Rental The Information Refinery (800) 529-9020 Brian Clotworthy Reprints and Licensing Wright’s Media (877) 652-5295 sales@wrightsmedia.com Subscriber Services/Single-Copy Purchases (978) 671-0449 Stagnito@e-circ.net

CORPORATE OFFICERS Executive Chairman

Alan Glass aglass@stagnitomail.com Peter Hoyt phoyt@p2pi.org Chris Stark cstark@stagnitomail.com Ned Bardic nbardic@stagnitomail.com Korry Stagnito korrystagnito@stagnitomail.com Joel Hughes jhughes@stagnitomail.com

President & CEO Chief Financial Officer Chief Customer Officer Chief Operations Officer

OUT & ABOUT

Chief Digital Officer

76 | Sweets & Snacks Expo King-Sized Spanning two expo halls, this year’s event was bigger and more educational than ever.

CONVENIENCE STORE NEWS AFFILIATIONS

90 | Getting to the Core A peek into some of the preferences of java purchasers.

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

Jack Lewis Village Pantry LLC

Jonathan Polonsky Plaid Pantries Inc.

Kyle McKeen Alon Brands Inc.

Roy Strasburger Convenience Management Services Inc.

Richard Mione GPM Southeast Matt Paduano Nice N Easy Grocery Shoppes

Jon Urbanik CST Brands Inc.

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CSNEWS.COM ONLINE EXCLUSIVE

TOP 5 Daily News Headlines The most viewed articles online. 1 | Wawa’s Secret Weapon in Florida Expansion When a convenience store retailer decides to grow organically — especially in a new state — plenty of research must be done to determine if the sites it selects will produce the best return on investment. Pennsylvania-based Wawa Inc., which is aggressively moving into Florida, knows how important this process is and enlists the help of a secret weapon: Esri software. 2 | Couche-Tard Ready to Make More Acquisitions Despite making several, large recent acquisitions, Alimentation Couche-Tard Inc. has the financial wherewithal to make additional purchases, President and CEO Brian Hannasch stated during the company’s fiscal fourth-quarter earnings call. “We continue to grow, and do not intend to slow down any time soon,” he said. “We don’t just look at strategic opportunities, but we also look at potential acquisitions to see if there is anything we can learn from them.” 3 | Why Amazon’s Private Label Program Can Hurt C-stores Amazon Inc.’s planned private label grocery program could affect convenience store retailers more than any other retail channel, according to the findings of a new study fielded by Carbonview Research, sister company of Convenience Store News. Amazon is rolling out an array of shelf-stable private label products, including nuts, spices, baby food, coffee, tea, vitamins, diapers and laundry detergent. 4 | Pilot Flying J & Speedway Form Joint Venture Pilot Flying J and Speedway LLC entered into a joint venture that consists of 120 travel plazas located primarily in the southeastern United States. The new entity, PFJ Southeast LLC, will initially consist of 41 locations contributed by Speedway and 79 locations contributed by Pilot Flying J. All of these locations will be operated by Pilot Flying J and carry either the Pilot or Flying J brands.

Q&A

5 | Tackling Tobacco: June 2016 Legislative & Regulatory Roundup Tobacco legislation and regulation is constantly under review at the local, state and federal levels. Convenience Store News highlights the latest proposals and approved changes happening across the United States. The average American eats 50 hot dogs per year, and many of them are purchased from their local convenience store’s roller grill. Rob Ramsey, senior marketing manager at Tyson Convenience, provided some tasty insights into the c-store hot dog business:

NYACS Celebrates 30 Years of Advocacy

NYACS — a private, not-for-profit organization that celebrated its 30th anniversary this spring — still embodies one core purpose: to lead, safeguard and forge a favorable environment for New York State’s diverse community of neighborhood c-stores. Founded in 1986, NYACS’ retail membership consists of more than 100 companies that range in operations from one store to more than 300. While most c-store chains in New York State are NYACS members, single-store operators account for many of its member retail companies. For more exclusive stories, visit the Special Features section of www.csnews.com.

PRODUCT HIGHLIGHT The most viewed New Product online.

Anthony Infinity 060 Cooler Door

Anthony’s Infinity 060 Cooler Door for walk-in or reachin cases features a slim 0.60-inch painted border that provides an all-glass appearance to deliver optimal product visibility, as well as energy efficiency. The Infinity 060 is available in silver, gray or black finishes and comes in plastic or aluminum frame options. The aluminum-frame option is ideal for cooler reach-in and walk-in applications, providing a front-loading raceway and U-shaped mullion for easy service. The plastic-frame option is ideal for cooler reach-in cases and features a French door swing, according to the company. Anthony International Sylmar, Calif. (800) 772-0900 www.anthonyintl.com

CSNews: How has the hot dog business in convenience stores evolved? Ramsey: There is now more variety beyond hot dogs such as smoked sausages, taquitos and other premium items. This offers the consumer endless ways to customize their hot dogs.

Ramsey: Execute against the fundamental food operation rules like rotating the stock, conducting limited-time offers, keeping the roller grill clean, and offering promotions and combo meals.

CSNews: What are the must-dos for a successful c-store hot dog offering?

Visit the Special Features section of www.csnews.com to read the full Q&A.

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

INDUSTRYROUNDUP FAST FACT

Appeals Court Tosses $7.25B Swipe Fee Settlement Purchasers at convenience stores, more than any other outlet (fast-food restaurants, doughnut shops, coffee shops, etc.), like to make their own coffee as opposed to having it prepared for them by a barista. Source: Carbonview Research (page 90)

QUOTABLES

“Opportunities will present themselves and there could be a million reasons running through your head on why you can’t do it or are too busy. Quiet those voices and have the courage to say ‘yes.’” — Niki DePhillips, Kum & Go LC (page 22)

Judges rule legal representation presented a fundamental conflict

he Second U.S. Circuit Court Cou of Appeals in New York threw thre out the $7.25-billion antitrust settlement among Visa Inc., MasterCard MasterCa Inc. and millions of retailers over cred credit card interchange fees. In the June 30 move, the federal appeals court said some of the retailers were inadequately represented in the litigation. It also decertified the case as a class action. The litigation dates back to 2005, 20 and the court’s decision overturns a July Ju 2012 agreement that settled claims that tha the credit card companies overcharged merchants mer on swipe fees — also known as inter interchange fees. U.S. District Judge John Gleeson Gle in Brooklyn, who has since left the bench, approved the settlement in 2013. The settlement had been the largest all-cash antitrust accord in U.S. history. One class of merchants that accepted Visa or MasterCard from January 2004 to November 2012 was to share up to $7.25 billion, while a second class accepting the cards from then on was to get injunctive relief in the form of rule changes. Many retailers objected to the settlement, saying among other things that it forced members of the second class to give up their right to sue over various policies and practices. Writing for the appeals court, Circuit Judge Dennis Jacobs said the two classes should not have been represented by the same lawyers, who were awarded $544.8 million in fees. He said the lawyers suffered

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from a “fundamental conflict,” having been in a position to negotiate terms that could simultaneously benefit one class and harm the other. “We have reason to think that that occurred here,” and in the end “sapped class counsel of the incentive to zealously represent” the class obtaining injunctive relief, Jacobs said. NACS, the Association for Convenience & Fuel Retailing, was one of the leaders opposing the settlement. “We are pleased the Second Circuit Court of Appeals has thoughtfully addressed the problems we have long identified with this proposed settlement. We will work to help ensure that this moves forward in a way that recognizes the best interests of merchants and the consumers they serve,” said NACS President and CEO Henry Armour.

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INDUSTRYROUNDUP

New Player Prepares to Take C-store Industry by Storm

he Guess Corp., through a subsidiary, is seeking to acquire at least 1,000 convenience store/gas station units over the next 12 months. Its plans call for the acquisition of an average of 100 units per month, which may include branded and unbranded units. After completing the acquisitions, the company intends to rebrand and renovate the properties, and provide enhanced customer relationship management technology. Based in Durham, N.C., The Guess Corp. is a privately held conglomerate that began as a luxury goods holding company in 2012, with a focus on diamonds. It has since expanded into other business areas, including wine, lumber and automotive. While this is The Guess Corp.’s first foray into the convenience channel, a company spokesperson told Convenience Store News that it is a diversified organization that looks to identify opportunities in which it is able “to bring commitment to excellence

and upscale opportunities to an industry.” “We believe that going to a gas station or c-store does not have to be a mediocre experience. Part of our rebranding strategy will be increasing the size of existing operations, complete renovations and getting rid of the gas smell through scent technologies so that the stores are actually refreshing. We will bring boutique style to the c-store/gas station industry,” the spokesperson explained. The Guess Corp. wants to acquire small and large chains; it is not interested in single-store operations. The company intends to spend more than $1 billion for the acquisitions over the course of 12 months, and an additional roughly $250 million for extensive rebranding, renovations and technology upgrades. The convenience stores will be operated by the company’s petroleum subsidiary. — Melissa Kress

eye on growth n Shareholders of Northern Tier

Energy LP approved the company’s merger with Western Refining Inc. The deal combines approximately 395 convenience stores, comprising the SuperAmerica, Giant, Mustang, Sundial and Howdy’s banners. n 7-Eleven Inc. and its wholly owned sub-

sidiary, SEI Fuel Services Inc., closed on the purchase of 79 convenience stores in California and Wyoming from CST Brands Inc. The final acquisition cost was $408 million.

n Sunoco LP, through wholly owned sub-

sidiaries, closed on a $76.4-million deal for 18 Valentine Stores locations in New York. Sunoco LP also completed its previously announced purchase of 14 Texas c-stores under the Rattlers banner. n CrossAmerica Partners LP is buy-

ing certain assets in the Chicago area from State Oil Co. The $45-million deal consists of 59 fee sites, 55 lessee dealer accounts, 25 independent dealer accounts, and three companyoperated locations.

n Alimentation Couche-Tard Inc., through its Circle

K Eesti AS subsidiary, reached a pact to purchase a majority of the assets operated under the Premium 7 brand from Sevenoil Est OÜ and its affiliates. The assets include 23 sites in Estonia.

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

n Midwest Petroleum Co. picked

up five Station Break convenience stores and Delano gas stations from Delano Oil Co., which is exiting the business after 88 years.

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INDUSTRYROUNDUP

retailer tidbits n Global Partners LP com-

pleted the sale-leaseback of 30 convenience stores and gas stations in New England to an institutional investor for $63.5 million. Global Partners entered into a master unitary lease pact for the sites.

on freshness. Opened July 31, the store includes a gas station and a Freshies deli, while offering quality foodservice options such as smoothies made with kale, goji berries and flax seeds; grab-and-go and made-to-order sandwiches and salads; Whoopie pies; and pizza with such toppings as fig, prosciutto, brie and spinach, as well as standard toppings.

n Rutter’s Farm Stores launched a new

fresh-baked pizza program. The 8-inch and 16-inch pies can be customized with nearly 50 different toppings. n RaceTrac Petroleum Inc. will add

E15 to its fuel offer at more than 100 stores later this year. The retailer currently offers other renewable fuels, including E85. n R.H. Foster Energy debuted a new Foster’s On The

Run prototype store in Ellsworth, Maine, that focuses

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n Family Express

debuted a Free Fruit For Kids program for children aged 12 and under. The program joins the chain’s storewide Better For You initiative. n The Spinx Co. added Level 3 electric

charging stations to seven of its South Carolina convenience stores. These new charging stations are part of Nissan’s “No Charge to Charge” program.

NEWPRODUCTS Cheez-It Bold & Extreme Flavors The Cheez-It brand of crackers launches two new ontrend flavor profiles into the convenience channel with Cheez-It Snack Mix Sriracha and Cheez-It Grooves Hot & Spicy. According to maker Kellogg Convenience, bold and extreme flavors represent the fastest-growing salty snacks in convenience stores, followed by cheese flavor. The two new varieties join existing convenience channel products: Cheez-It Original, Cheez-It Duoz Cheddar Jack/Baby Swiss, Cheez-It Snack Mix Original, and Cheez-It Grooves Zesty Cheddar Ranch. Kellogg Convenience Elmhurst, Ill. (877) 511-5777 kelloggsconvenience.com

QuicFix Cold Brewed Coffees QuicFix Cold Brewed Coffees use bag-on-value packaging technology to keep the beverage tasting fresh without refrigeration or preservatives for three years. During the cold-brewed process, time replaces heat which can release undesirable flavor elements. Cold water brewing extracts flavor compounds and caffeine from the coffee beans without bitter oils or fatty acids, according to maker B.O.V. Solutions. QuicFix Cold Brewed Coffees are portable and allow consumers to make a cold or hot beverage without the use of special equipment. The product is available in 6-ounce cans, with 24 servings per can. B.O.V. Solutions Statesville, N.C. (352) 746-6731 bestofbov.com

MasonWays Newspaper Basket Stand MasonWays’ newspaper basket stand is a multipurpose merchandiser that can be used to increase impulse sales, along with serving as a home base for shopping baskets, newspapers, eco-smart totes and special sales flyers. The stand can also be used to merchandise bottled water, as well as wine and energy drinks, which can be placed on the side of the unit and positioned in high-traffic areas to increase profits and product turn, according to the company. Custom colors and logos are available for this sanitary, easy-to-move and clean merchandiser. MasonWays Indestructible Plastics LLC West Palm Beach, Fla. (800) 837-2881 masonways.com

Snapple TEAcision 2016 Flavors To tap into consumer interest around the 2016 presidential election, Snapple will launch two seasonal varieties in September: Red Fruit Tea and Blue Fruit Tea. Red Fruit Tea incorporates pomegranate, cherry and raspberry flavors, while Blue Fruit Tea incorporates blueberry and blackberry flavors. The limited-edition beverages are being backed by an integrated marketing campaign dubbed “TEAcision 2016,” which includes prelaunch visits to cities hosting political events, like Philadelphia and St. Louis. Dr Pepper Snapple Group Plano, Texas (972) 673-7000 drpeppersnapplegroup.com

ChampStix Chicken Skewer ChampStix from Champs Chicken is a proprietary, 100-percent breast meat chicken skewer. The product, skewered on a 10-inch stick, is battered, breaded, fried to a golden crisp and then dipped into a pan of a rich, warm, glazing sauce. Champs Chicken retailers are equipped with a commercial, three-well, saucewarming station for this very purpose, according to Pro Food Systems. ChampStix are initially available in three flavor profiles: Orange Zing, a spicy mandarin sauce; Southern Heat BBQ sauce; and Champs Chicken’s award-winning Teriyaki sauce. More flavor options are to come. The retail price point per skewer is under $3. Pro Food Systems Inc. Holts Summit, Mo. (888) 581-9188 pfsbrands.com

20 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

COVER STORY

Leading Ladies More than 60 recognized in our third-annual Top Women in Convenience awards

A Convenience Store News Staff Report

ar Mar Oil Co. President and CEO Sandra Morgenstern, upon receiving her Woman of the Year award during last year’s Convenience Store News Top Women in Convenience reception, recalled how far the convenience store industry has come in growing its female ranks. “I remind myself of years past when I sat in rooms with very few women other than myself representing our industry,” she told last year’s crop of fellow honorees.

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This year, CSNews is once again recognizing and celebrating the increasing presence and achievement of females in the c-store industry — from the c-suite to the store level to the independent entrepreneur — with our third-annual Top Women in Convenience awards program. The 2016 class includes 62 of the best and brightest ladies making a positive impact in the convenience retail channel. It is a diverse group, with the winners hailing from c-store retailer, supplier and wholesaler

companies, and serving in a variety of job roles. Categories include: senior-level leaders (positions of vice president and above), rising stars (job titles above store manager, but below vice president), mentors (women who have made an extraordinary impact on the careers of their colleagues), store managers and single-store owners. As in years past, the honorees were chosen based on nominations received from their peers. Drawing from achievements during the previous 12 months, nominators were asked to illustrate the candidate’s innovative corporate initiatives, extraordinary financial and strategic accomplishments, astute-problem solving acumen, exceptional performance and selfless charitable participation, along with other attributes that go above and beyond the call of duty. This year’s judging was conducted by the Convenience Store News editorial staff in conjunction with the Network of Executive Women (NEW) and the 2016 Top Women in Convenience Advisory Board, which includes all five 2015 Women of the Year honorees. The judging panel selected 24 senior-level leaders, five mentors, 21 rising stars, five store managers and two single-store owners to receive the esteemed title of Top Women in Convenience for 2016. In addition, the panel chose five nominees as the best of the best from among all the nominations and awarded them the title of Women of the Year. Recognized for their exceptional impact on the success or direction of their company, as well as their positive impact on the convenience store industry, the 2016 Women of the Year are: • Laura Asbell, Regional Vice President, Convenience, Mondelez International Inc. • Niki DePhillips, Senior Vice President, Store Development, Kum & Go LC • Sharon Kuncl, Vice President, Merchandising, Foodservice, Eby-Brown Co. LLC • Danielle Mattiussi, Vice President, Retail Adventures, Maverik Inc. • Nancy Smith, Senior Vice President, Merchandising, Fresh Food & Proprietary Beverages, 7-Eleven Inc. All of the honorees will be celebrated at an awards reception taking place during the 2016 NACS Show, the largest annual gathering of the convenience store industry. The event will begin at 5:30 p.m. Wednesday, Oct. 19 at the Omni Atlanta Hotel at CNN Center. Read on for spotlights of this year’s Top Women in Convenience.

ThE 2016 CONVENIENCE STORE NEWS TOP WOMEN IN CONVENIENCE PROgRAM IS SPONSORED BY:

Presenting Sponsor

Platinum Sponsor

Gold Sponsor

2016 TOP WOMEN IN CONVENIENCE ADVISORY BOARD Blake Benefiel

Trade & State Relations, Training & Compliance, Altria Group Distribution Co. Jenny Bullard Director of Technology Innovation, CST Brands Inc. Kimberli Carroll Senior Vice President, Foodservice Division, Ruiz Foods Stacy Loretz-Congdon Senior Vice President/Chief Financial Officer, Core-Mark International Inc. Pat Cordle Vice President, Field Sales, BIC Consumer Products Tammy Floyd Vice President/Controller, CST Brands Inc. Sandra Morgenstern President/CEO, Par Mar Oil Co. David Riser Vice President, External Relations Trade Marketing, R.J. Reynolds Tobacco Co. Joan Toth CEO, Network of Executive Women

WWW.CSNEWS.COM | AUGUST 2016 | Convenience Store News 23

COVER STORY

Woman n of the Year:

Laura Asbell

Regional Vice President, Convenience, Mondelez International Inc.

fter 27 years in the industry, Laura Asbell has the relatively unique experience of being a longtime veteran of the same organization, yet having worked for a variety of companies. “I have been with the same brand for 27 years, but it has been five different companies,” Asbell said. “I’ve managed to go through the processes of being bought, being sold, being merged, being split, and then finally to a company that was created as a startup.” Since getting her start as a territory sales representative, Asbell has held roles ranging from district manager to key account manager to national account manager to her current role. She’s also led the Walmart and McLane teams for Mondelez International’s predecessors. Today, Asbell is the convenience channel subject matter expert for Mondelez and leads the distributor and wholesaler teams. Her influence includes budget oversight, customer revenue, geographic sales territory, and leadership through organizational transformation. This means everything from plan development through execution of Mondelez’s strategy for its products in the channel. On a day-to-day basis, this translates to a large number of planning meetings. “Either managing for future plans or aligning on current plans — a lot of that is done every day in terms of making sure I give the channel’s perspective and my customers’ perspective to our headquarters,” explained Asbell. To reach her current position, she worked to balance her goal of managing larger customers with

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being able to raise a family in the Dallas region. As a result, she was able to find both professional and personal satisfaction. “My goals … are all about continuous improvement and making sure that I’m challenged, adding value and, above all, happy,” Asbell said. “I don’t need to climb the ladder — I would rather take on positions and responsibilities that continue to keep me growing.” As a result of her efforts, Asbell’s accolades include the President’s Award for Cadbury; Vendor of the Year Award, Consumer Insights & Technology, McLane Convenience; Vendor of the Year, Walmart; Living Values Award, Kraft Foods; and Manager’s Award, Mondelez. Her experience has taught her the importance of both making connections and standing independently. She is active in and has held leadership roles with the Network of Executive Women, Women Unlimited, and the Women’s Sales Council for Mondelez, among others. “It’s important to make sure you develop a network so you have champions in your court,” Asbell said. “You have to drive that. You have to be responsible for it. It’s about the choices you want to make that are best for you.” While Asbell “puts a lot of energy” into mentoring both male and female colleagues at Mondelez, she urges her mentees to take ownership of the mentor relationship and decide the best way it can drive their professional goals. As a result, she says, they get much more out of the mentorship, while still making use of the support and time she offers them. “Take responsibility for your own career and drive it in the direction that best suits you,” Asbell advised. “Appreciate the value of networking and having your champion. So much of any industry is about who you know vs. what you know — the who is just as critical.” — Angela Hanson

COVER STORY

Woman n of the Year:

Niki DePhillips

Senior Vice President, Store Development, Kum & Go LC

resh out of college, Niki DePhillips joined convenience store chain Kum & Go LC based in West Des Moines, Iowa, as an administrative assistant in the real estate department. She brought with her a degree in marketing, but no real estate experience. Yet that didn’t stop her from climbing the ranks to her current role of senior vice president of store development. “I had a great boss who unleashed my passion for real estate and the convenience store industry,” DePhillips told CSNews. “Growing up, I worked for several years in a local grocery store, so I was already in love with working in retail at 14 years old.” From administrative assistant, she quickly moved up the ladder to real estate manager, then director of real estate, then director of recruitment and retention, before earning the title of vice president of real estate. Her current role is a newly created position on the leadership team, combining real estate and construction development. “My role today includes overall leadership for the company as a member of the senior management team, and leadership for my department including site selection, design, construction and asset management,” she explained. “I oversee our non-c-store real estate development arm, and am also leading the design and build of our new Store Support Center, which is being designed by Pritzker Prize awardwinning architect, Renzo Piano of the Renzo Piano Building Workshop.” She believes one of her greatest career accomplishments thus far is having built more than 200 stores during her time at Kum & Go. She’s also proud the

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“I love the fast-paced environment; the ability to delight our customers; and how open our industry is in sharing with each other to help improve the industry as a whole.” retailer has upgraded its quality of assets over the years to better meet customer needs. DePhillips recently completed her MBA and is active in the Iowa CCIM Chapter, a real estate trade organization. She also volunteers on panels, boards and various groups to help guide others in their personal and professional development. Since starting in the convenience store industry, she continues to see an increase in the number of women in leadership positions throughout the industry, and there are a number of things she loves about being involved in it all. “I love the fast-paced environment; the ability to delight our customers; and how open our industry is in sharing with each other to help improve the industry as a whole,” she noted. “I also love the people I work with — hard-working, team players who treat each other like family. Kum & Go has always been a family-owned and -run business, and I think that has helped build a culture of caring among associates.” Her advice to other women: “Opportunities will present themselves and there could be a million reasons running through your head on why you can’t do it or are too busy,” she said. “Quiet those voices and have the courage to say ‘yes.’” — Tammy Mastroberte

KUM & GO CONGRATULATES NIKI DEPHILLIPS ON HER GREAT ACHIEVEMENT. AS A “TOP WOMEN IN CONVENIENCE” AWARD WINNER, SHE HAS SHOWN US THE POWER OF DELIVERING MORE.

COVER STORY

Woman n of the Year:

Sharon Kuncl

Vice President of Merchandising, Foodservice, Eby-Brown Co. LLC

haron Kuncl set a goal for herself early in her career, soon after joining Naperville, Ill.-based Eby-Brown after college: to become a vice president. In 2002, she fulfilled that goal and is currently vice president of merchandising, foodservice for the company. “Early on in my career, I set that as a personal goal for myself,” she told CSNews, noting that it is one of the things she is most proud of so far in her career. Kuncl started out as a sales trainee, which meant occupying different positions to learn all about the company, from the warehouse and retail stores to the accounts payable department. She also held the role of national account manager, where she was in charge of one retail customer and worked within that customer’s location. “This gave me an appreciation for what our c-store customers go through on a daily basis, and what as a distributor we were doing or not doing to help them,” she explained. Around 2000, she left the sales side and moved over to the purchasing side of the business, eventually becoming vice president in charge of foodservice and other categories (foodservice then was not as big of a category as it is now). Today, she is in charge of anything related to foodservice and maximizing the profit within those segments. Kuncl works with manufacturers to select the items stocked in Eby-Brown’s distribution facilities, as well as on promotional funding, product selection, and cre-

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ating and implementing programs for retailers. She’s implemented a number of private-label foodservice programs, including Aroma Bay Café, a comprehensive hot beverage program; Savory Corner Café, a category management approach to the roller grill, heat-and-eat and hot-to-go products; and Crisp Acres, which encompasses whole fruit, cut fruit, salads, snack trays and deli salads. “My favorite thing about my job is change. Although I have [remained] in the vice president of merchandising role with Eby-Brown, foodservice continues to evolve and change, so my job description continues to evolve and change with that,” she noted. “I find it is fun and challenging to continue to produce solutions for the customers.” In addition to her work at Eby-Brown, Kuncl is active in trade organizations, such as UNICO Foodservice, a co-op where she works with an initiative called Pro C that is focused on convenience stores. She also works with United Fresh on behalf of NACS, the Association for Convenience & Fuel Retailing, to help identify what the c-store needs are as an industry and how manufacturers can help with their products and expertise. Through the years, Kuncl said she’s seen a “significant” change in the role women play in the industry — both in the number of women involved and the number in leadership positions. Each year, these numbers have grown, she noted. “Early on, I would go to industry events and I was pretty much the only woman in the room. It has been refreshing to walk into events and see the number of roles for women increase,” she said. “My advice to other women is be passionate, be engaged, be ambitious and don’t mind being the person who leads the way.” — Tammy Mastroberte

CONGRATULATIONS

SHARON KUNCL

ON BEING NAMED ONE OF 2016’s TOP WOMEN IN CONVENIENCE Sharon Kuncl is Eby-Brown’s Vice President of Merchandising, Foodservices. Sharon’s unwavering commitment and dedication to building the business, coupled with her strong focus on customer relationships, has been a critical part of our success in the foodservice market. Throughout her 20 year career, she has done an outstanding job for Eby-Brown and we take great pride her recieving this honor. The entire Eby-Brown family applauds her well-deserved achievement and recognition!

COVER STORY

Woman n of the Year:

Danielle Mattiussi Vice President, Retail Adventures, Maverik Inc.

or 20 years, Danielle Mattiussi worked for Eastman Kodak and Canon USA in enterprise software sales and product development, but she wanted to move into something new that would inspire her. She found that inspiration at Maverik Inc., the Salt Lake City-based operator of 285 convenience stores. “The move to Maverik was to run the group in charge of beer, wine, cigarettes, tobacco, lottery and gaming, and my title was executive director of customer value creation,” she recounted, explaining that she was in this role for eight months before she moved into the position of executive director of retail operations. It was then 10 months later that she transitioned into her current role as vice president of retail adventures. Today, she is responsible for retail operations, operational efficiencies, and facilities and maintenance for Maverik, also known as “Adventure’s First Stop.” She is in charge of the operations across all the company’s stores, which includes approximately 4,000 employees throughout 10 states and represents $550 million in store sales. Mattiussi innovates and spearheads unique customer service and employee incentive initiatives. One example is the “Live Legendary, Never Ordinary” customer service campaign to engage and align retail operations around the common goal of thrilling customers. “We used the tagline to describe to employees what we were trying to achieve, and it’s been extremely effective,” she said. “The end goal is to earn a legendary reputation for thrilling customers, and to go over and above for customers in every situation.” The retailer even created a logo around the campaign and it’s on the inside of every employee uniform, as well as on vests, wristbands and other gear. Thus far in her career at Maverik, this campaign is what she is most proud of.

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“I’m proud of how we have been able to get everyone to understand what the slogan means and to rally around it,” she said. “I’m also proud of how the stores look, the cleanliness, customer experience, employee friendliness and the quality of our food.” Mattiussi also overhauled the store incentive program, increasing bonus dollars paid to store employees by 35 percent — from $2.4 million to $3.1 million — and creating new associations between store objectives and Maverik’s strategic goals. “Previously, the top role of store director had a bonus program. We tripled the number of people eligible, including the operations and foodservice managers. And, for the first time in Maverik history, every employee in the store is eligible for a bonus of some sort,” she explained. “It has really aligned people because everybody has the same objectives.” Currently, she is utilizing her past experience with technology to implement new systems, increase store efficiency and make employees’ lives easier, including better labor management and task management. In fact, the sophistication of the technology available to c-stores is one of Mattiussi’s favorite things about the industry. “It amazes me every day the technology available and analytics at your fingertips,” she said. “Also, the quality of the people and their propensity to share is another favorite. The trust and ability to share information across companies is amazing and something I had never seen before, working in a different industry.” When offering advice to fellow women, she relays the importance of trusting your instincts and using data to back up those instincts. “I think women are very instinctual and they have to trust that,” she said. “And there is a lot of data to back them up. Also, I would tell them they don’t have to know everything before they start. Just start. A blank palette can produce amazing results that someone deeply embedded could never have conceived.” — Tammy Mastroberte

Oh Thank Heaven for You! Congratulations to 7-Eleven’s Nancy Smith and Ena Williams for being recognized as two of the Top Women in Convenience by Convenience Store News. Thank you for your hard work and dedication in making 7-Eleven one of the world’s top convenience retailers for our Franchisees and guests.

WOMEN OF THE YEAR

SENIOR-LEVEL LEADERS

NANCY SMITH

ENA WILLIAMS

SVP, Merchandising Fresh Food & Beverages

SVP, International 7-Eleven

The Top Women in Convenience “Women of the Year” award recipients are recognized for their exceptional impact on the success or direction of their company, as well as their positive impact on the convenience store industry.

The Top Women in Convenience, “Senior-Level Leaders” award recipients are recognized as retailer, supplier and wholesaler executives who have executed strategy and transformed their business in a positive manner.

COVER STORY

Woman of the Year:

Nancy Smith

Senior Vice President of Merchandising, Fresh Food & Proprietary Beverages, 7-Eleven Inc.

hen Nancy Smith went to work for an oil company right out of college, she never realized she was actually entering the convenience store industry. She graduated from Oklahoma State University and started in the management trainee program of Cities Service Oil and Gas, which eventually became CITGO Petroleum Corp. Four years in, Southland Corp., now 7-Eleven, purchased the retail and refinery business. “When you went to school in Oklahoma, you either went to work for a bank, phone company or oil company,” she explained. “After joining the management trainee program, I went to work running a sub-group of 10 Quik Mart stores in Dallas.” Following the 7-Eleven acquisition, Smith moved around in the company — including physically moving to Chicago in order to run gasoline pricing and construction for a division of Quik Marts that 7-Eleven purchased. From there, she transitioned into merchandising and became a buyer. “Almost every two years, I did something different and I’ve physically moved seven times with the company,” she said, noting she is now back in Dallas for her current role as senior vice president of merchandising, fresh food and proprietary beverages. She leads the teams responsible for all the new fresh-food innovation work at 7-Eleven, including partnerships with 14 commissaries and 14 bakeries across the United States. She’s also in charge of the budget and results of merchandising in these categories for more than 8,500 7-Eleven stores throughout the U.S. and Canada. Her team employs chefs, food scientists, food engineers and Ph.D. cuisine specialists. “Since last year, we have been setting up a new mer-

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“Our industry is really an early predictor of trends and what is going on with the economy, and that is one of my favorite things about it.” chandising team in each zone and they will be tasked with sourcing and developing more regional products because we want the right product assortment at the local level; not just one big national assortment throughout the U.S.,” Smith explained, citing examples such as the kolache at participating stores in Texas, and the Faygo Rock & Rye Slurpee in Michigan and Ohio. “My team is coaching them on how to find products and develop them.” In fact, coaching and training other people is one of her favorite things about her job, and she is grateful to have talented people on her team. While she is not a chef or a foodie, Smith says she’s learned so much in her role, which is another perk of the job. “Our industry is really an early predictor of trends and what is going on with the economy, and that is one of my favorite things about it,” she added. “We see it quicker and can respond quicker because we see so many people, and so many of the same people every day. The industry is pretty quick to respond and it’s a very nimble and fast-paced business. I’ve always enjoyed being part of the changes. You never know what will happen the next day, and I have always found that very interesting.” One of the things she is most proud of is leading the team that acquired White Hen Pantry in Chicago and getting all those stores remodeled and converted. Within 16 months, the division doubled its size. Smith is also proud of the last couple of years in terms of the evolution of the fresh-food space in 7-Eleven. “We have customers crediting us for having food that tastes really good, made with great quality ingredients, and that has been really rewarding,” she shared. — Tammy Mastroberte

HIGH-FIVES ALL AROUND.

Congratulations to our own

Victoria and Jeanne

on being named two of the Top Women in Convenience.

Victoria Person-Goral RJRT Area VP Southern Sales Area

Jeanne Swisher RJRT Account Executive

Building relationships. Building growth.

COVER STORY

Senior-Level Leaders Julie CAndow Supervisor of Retail Operations, Energy North

• Candow has 32 years of experience in the convenience channel. • She can often be seen stocking store coolers one minute and then helping a new shift leader learn how to use the handheld to place an order the next minute. • She’s implemented many lessons learned from the NACS Leadership Challenge.

stepHAnie doliveriA Vice President of Human Resources, Sheetz Inc.

• Her responsibilities include creating, communicating and implementing Sheetz’s vision, mission and overall direction. • Doliveria and her team worked on an audit of the current organizational capabilities, looking at existing talent, future talent needs, and present-day gaps in competencies. • She was appointed by the governor to the Pennsylvania Commission on Early Learning Investment.

MAriA Fidelibus Vice President, Information Technology, QuickChek Corp. • Fidelibus played a key role in sourcing and developing QuickChek’s mobile app, and creating the chain’s mobile ordering platform. • She was the first to execute self-checkout in the c-store industry, partnering with NCR. She also partnered with Xpedient to install self-serve order kiosks in all stores across the chain almost 10 years ago. • She sits on the board of Alternatives, a community-based, nonprofit organization dedicated to helping individuals with special needs reach their highest level of independence.

MiCHelle Flegel Vice President, North America Sales & Marketing, Arctic Glacier • Flagel was responsible for the topline growth of 16 national accounts in her former position as senior director of national accounts at PepsiCo Inc. She led her team

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and customers through the Joint Business Planning process and co-development of strategic multi-year planning. • In 2015, she was awarded PepsiCo’s highest honor, the PepsiCo Chairman’s Award, for her cross-functional and cross-divisional work leading the commercial marketing team in the Northeast to bring Super Bowl XLVIII to life at retail. • She is known for her mentoring skills and has successfully prepared three individuals for promotion over the past year.

Anne Flint Senior Category Manager, Tobacco, Cumberland Farms Inc.

• Flint has been with Cumberland Farms for 21 years and handles tobacco buying for the chain’s 550-plus stores. • She joined the board of the National Association of Tobacco Outlets (NATO) in 2014 and currently serves as vice president. • She is a recipient of NATO’s Pinnacle Award for her government affairs work.

Kelly FulFord Senior Category Manager, Convenience, General Mills Convenience & Foodservice • Fulford is responsible for leading all category management-related activities for key distributors and retailers. • She has been instrumental in elevating the category management tools and capabilities of General Mills with her ability to break down data and deliver actionable insights. • The Concordia University graduate recently added an MBA to her bachelor’s and master’s degrees.

MelissA HAdley Director, Product Management, The Pinnacle Corp.

• Hadley joined The Pinnacle Corp. as an entry-level employee and has climbed the ranks to the leadership team over her 20-year tenure. • She was named Pinnacle Manager of the Year four times: 2004, 2006, 2011 and 2013. • She is a member/contributor of Conexxus (formerly PCATS) since 2003.

Congratulations on taking leadership to the

AGDC would like to congratulate the 2016 CSNews Women of the Year on their positive impact on the convenience store industry. Laura Asbell Regional VP, Convenience, Mondelez International Inc. Niki DePhillips SVP, Store Development, Kum & Go LC Sharon Kuncl VP, Merchandising-Foodservice, Eby-Brown Co. LLC Danielle Mattiussi VP, Retail Adventures, Maverik Inc. Nancy Smith SVP, Merchandising, Fresh Food & Beverages, 7-Eleven Inc. Our People | Our Brands | Our CustomersĂ&#x2022; Success

ÂŠ2016 Altria Group Distribution Company | For Trade Purposes Only

COVER STORY

Helen HAyes Vice President of Tax, Core-Mark Holding Co.

debbie MArKoviCH Fuel Manager, Quik Stop, The Kroger Co.

MelAnie isbill Executive Director of Marketing, RaceTrac Petroleum Inc.

Colleen MCglinn CEO, Tri-State Petroleum Corp.

• She manages more than 7,000 filings a year with a staff of just 15. • Hayes heads the Convenience Distribution Association task force on uniformity issues related to electronic cigarette and tobacco excise tax returns. • She is the incoming president of the Tax Executive Institute Vancouver, B.C. chapter.

• Isbill has been the driver for much of the change in how RaceTrac approaches initiatives needed to grow its presence in the marketplace. • She is an active member of the LEAD steering committee, a grassroots women’s initiative at RaceTrac. • She earned an MBA in marketing and finance from The Wharton School at the University of Pennsylvania.

Julie JACKson Senior Vice President, General Manager, G&M Oil Co.

• Jackson oversees 150 convenience and fuel retail locations throughout Southern California. • Her corporate initiatives include the back-office migration of a new accounting system; the creation of a G&M mobile app for Android, Blackberry and iPhone devices; and the launch of a new website. • She is a member of the Chevron ExtraMile Franchise Advisory Council, NACS Membership Services Committee, and CIOMA Retail Committee.

roxAnne lowder National Sales & Execution, The Coca-Cola Co., North America

• Lowder is Coca-Cola’s vice president of U.S. sales for the 7-Eleven Global Customer Team. • She joined the company in 1992 as a Foodservice & On-Premise Account Executive and has progressed through a series of sales leadership roles. • She is an active member of the Women’s Foodservice Forum, Network of Executive Women, and Women’s Linc at The Coca-Cola Co.

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• Markovich is the only female fuel manager in the Kroger Convenience Store Division. • She won the award for highest average weekly gas gallons sold in the Kroger Convenience Store banners in 2012, 2013 and 2014. • She’s worked for Quik Stop for more than 37 years, starting as a processing clerk.

• She joined Tri-State Petroleum in 1997 and served as vice president, general counsel and executive vice president before being elected CEO in 2005. • McGlinn’s responsibilities include developing strategic plans for the corporation, management of day-to-day operations, and guiding and developing members of the management team. • She also serves as chairman of Tri-State Petroleum and president of EJC Legacy Inc., the holding company of TriState Petroleum.

KAren MitCHener Director of Human Resources, Ricker Oil Co.

• Mitchener has served as leader of the human resources department at Ricker Oil for more than 18 years. • Training programs that have been developed under her watch include the WOW Experience orientation and the Ricker’s Business Academy. • She is a member of the Society for Human Resource Management, East Central Indiana Chapter; and past chair of the Madison County Community Action Program.

leslie owens Director, Retail Operations, Tri-State Petroleum Corp.

• Owens joined Tri-State Petroleum in 2014 as a district manager and was promoted to her current position in 2015. • She is responsible for managing, directing and providing support for all the retail and merchandise managers, and for achieving and maintaining retail business objectives for all c-store operations. • She began her career in the convenience channel in 1998.

Congratulations 2016 WINNERS!

Sophie Provencher Karen Yeakel Judy Grover-Allen Senior-level Leader Senior-level Leader Mentor

Heather Davis Rising Star

CST Brands now has

12 Convenience

Top Women in

Jeannie Amerson 2014 Rising Star

Cindy Henderson 2015 Senior Level Leader

Leti Andrade 2015 Rising Star

Tonjalia Green 2015 Mentor

Soo Sang 2015 Store Mngr.

CST is an international Fortune 500 company that employs more than 14,000 team members.

Woman of the Year

Kim Lubel - 2014

Woman of the Year

Jenny Bullard - 2015

Woman of the Year

Tammy Floyd - 2015

www.cstbrands.com

COVER STORY

viCtoriA person-gorAl Area Vice President of Trade Marketing, R.J. Reynolds Tobacco Co.

• She is one of the eight executive members of the trade marketing leadership team and is accountable for the southern sales area. • Person-Goral joined R.J. Reynolds in 2004 when the company merged with Brown & Williamson Tobacco Corp. • She is a board member of the Southern Association of Wholesale Distributors and the Northwest North Carolina Chapter of the American Red Cross.

sopHie provenCHer Marketing & Merchandising Director, CST Brands Inc. • She heads up the new marketing campaign for the introduction of CST Canada’s fresh foodservice concepts. • Provencher developed a new website for Corner Store and was very involved in the “Store of the Future” project. • She began her tenure at CST in 2012 as zone manager.

lori rodMAn Vice President of Sales, Century Distributors • She trains and develops a sales team of more than 40 employees. • Rodman created the infrastructure to maximize manufacturer programs. • She cultivates strong category alignment through training and development of her sales organization.

Coleen snyder East Region Category Manager, H.T. Hackney Co.

• Snyder was the first category manager hired for H.T. Hackney. • She maintains planograms for the East Region, covering chain accounts for multiple warehouses. • She is the lead trainer on category management programs used to create customer planograms for retailers.

sAndrA surrAtt Director, Contract/Convenience Sales, Kellogg Co.

• Surratt manages Kellogg’s agency, alternative retail team and SDA (Seven Day Adventist) channel. • She increased sales 15.3 percent in the alternative retail

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channel in 2015 and plans to increase sales an additional 18 percent this year. • She is a member of WOK: Women of Kellogg.

JeAnne swisHer Account Executive, R.J. Reynolds Tobacco Co.

• Swisher is responsible for all elements of the marketing mix and commercial business results for R.J. Reynolds Tobacco Co. • She has called on convenience retail for her entire 34-year career at the company. • She won the 7-Eleven Tobacco Vendor of the Year award in 2014 and the 7-Eleven Best Field Execution Award in 2014 and 2015.

Julie vAn AlyeA President, Redwood Oil Co.

• Alyea joined Redwood Oil Co. (ROC) in 2004 as the merchandise manager and became president in 2013. • From 2004 to 2016, she helped ROC add eight quick-service restaurants and three ground-up gas stations/c-stores. • She established an employee appreciation and recognition program, and implemented a third-party training platform for management and store-level employees.

enA williAMs Senior Vice President, International, 7-Eleven Inc.

• She oversees international operations, licensing and global expansion. • Williams helped spearhead 7-Eleven’s expansion into Vietnam. • She has received a leadership coin from 7-Eleven President and CEO Joe DePinto, and is the retailer’s executive sponsor and ambassador for the Network of Executive Women.

KAren yeAKel Executive Director of Investor Relations & Support, CrossAmerica Partners LP

• She partners with senior management, the finance department, communications and public relations to promote and support CrossAmerica Partners. • Yeakel has been with CrossAmerica Partners and its predecessors for 21 years. • She is currently vice president on the board of the Lehigh Valley Arts Council.

Rising Stars KrisTina appen Special Projects Senior Manager, RaceTrac Petroleum Inc. • Appen began her career at RaceTrac Petroleum in 2011 in the Operations Reporting Department as an analyst. She was quickly promoted to a new role within operations as a project manager, facilitating the opening of more than 30 new stores. • After two years in operations, she was again promoted to the Special Projects Department, where she began working on various cross-functional initiatives. • Now as special projects senior manager, the Alpharetta, Ga., resident is actively working to expand innovation at RaceTrac.

angie Bell District Manager, Texas, Murphy USA Inc.

• Bell leads 10 store managers and multiple individual stores in a geography including greater San Antonio, Eagle Pass, Floresville, and Pleasanton, Texas, which has enjoyed significant growth in recent years. • She has influence over a $113.7-million annual operations budget. • Bell was honored with Murphy USA’s Division Leadership Award in 2015.

Carla BoyingTon Director, Center Store, Core-Mark International Inc.

• Boyington leads the team responsible for developing the center-of-store categories for the convenience distributor. • Her influence is felt not only at the division level, but also as the face of CoreMark to many of the company’s customers, offering support and knowledge on how to grow their sales faster and more profitably. • Boyington has served Core-Mark for nearly 17 years, previously working for McLane Co. Inc.

leanne Budolfson Employee Communications Manager, Human Resources, Cumberland Farms Inc.

• Budolfson, who began at Cumberland Farms in 2014, is responsible for establishing and executing the communications strategy for the

organization’s approximately 7,000 employees. • In just two years, she has relaunched the company intranet, increased executive leadership visibility and connection to employees, revitalized meetings and events, and set the content strategy for a mobile application. • Budolfson has served in the communications field for more than 10 years, including stints in public affairs for the U.S. Air Force in Germany, as well as roles with Dunkin’ Brands and Pepperidge Farm.

Brandi Cushman Category Manager, Tobacco, C.N. Brown Co.

• As one of two category managers at C.N. Brown, Cushman manages a variety of categories including tobacco. • The 20-year company veteran’s territory comprises 87 convenience stores in Maine, New Hampshire and Vermont. • Cushman is recognized each year for her work with the Muscular Dystrophy Association as she and her team coordinate an annual event, The C.N. Brown Miracle Ball.

Trish dauBerT District Manager, Turkey Hill Minit Markets, The Kroger Co.

• Daubert has been a district manager at Turkey Hill Minit Markets for the past five years, where she is responsible for the successful operation of 11 convenience stores. • Her primary responsibilities include supporting the company vision, implementing strategies to achieve goals, and building store sales and gross profits. • Daubert recently won Turkey Hill’s 2015 District Manager of the Year award.

heaTher davis Executive Director, Finance Integration, CrossAmerica Partners LP

• Davis, a certified public accountant, is responsible for CrossAmerica’s consolidation, retail operations and integration of newly acquired retail operations. • She has quickly learned the intricate and complicated financial makeup of CrossAmerica as a master limited partnership and has a “natural aptitude for solving complex financial and business problems,” according to her co-workers. • Davis previously worked with Valero Energy Corp., Ernst & Young LLP, and Arthur Andersen LLP.

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COVER STORY

STEPHANIE DORSEY Account Manager, Mid-Atlantic, Altria Group Distribution Co.

• Dorsey’s chief responsibilities include calling on wholesale and large retail chains in the Mid-Atlantic territory, providing knowledge on Altria’s retail programs. • She is instrumental in the education process within Altria’s sales team regarding new products and helping coworkers understand programs and changes in the tobacco industry. • Dorsey was awarded Altria’s Women Sales Network Region 1 Woman of the Year award in 2015.

CAROLINE FILCHAK Director, Human Resources, Clipper Petroleum

• Filchak is responsible for the human resource needs of Clipper Petroleum’s 350 team members across Georgia and South Carolina. • She completed her undergraduate degree at the University of North Georgia in 2011. She also earned her master’s in Business Administration from Mercer University in 2013. • Filchak currently serves on the Business Advisory Committee for Project SEARCH, the Business Advisory Committee at North Hall High School, is a student in Leadership Hall County, and serves as a director for the Clipper Petroleum Foundation.

LAURA WHITE Category Manager, Tobacco, RaceTrac Petroleum Inc.

• White manages the multimillion-dollar tobacco category for RaceTrac’s 400-plus convenience stores. • She is responsible for product assortment, budgets, merchandising to consumer, optimizing category profitability, and negotiating contracts with manufacturers. • White has 10 years of previous experience in the soft drinks category with Cadbury Schweppes, Dr Pepper Snapple Group and Big Red, where she called upon convenience, grocery, mass and club stores.

JAMIE KIEFER District Manager, Tom Thumb Food Stores, The Kroger Co.

• Kiefer leads a store management team comprising 11 locations with a combined total of 100-plus associates across Florida and Alabama.

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

• She and her team are responsible for delivering financial results, as well as increasing both customer and associate engagement. • Kiefer, who began with Tom Thumb in 1990 as an hourly store associate, was selected as the retailer’s 2015 District Manager of the Year.

ABBEY MITCHELL Senior Trade Manager, Trade & Pricing, General Mills Inc. • At General Mills since 2007, Mitchell leads the Trade and Pricing Team for General Mills Convenience, where she is responsible for the planning and development of trade strategies and activation tools for the channel. • She is the company ambassador for the Women in Foodservice Forum and an active member in the General Mills Women’s Mentor Circles. • Mitchell won the 2014 Champion’s Award for her trusted leadership, and a 2013 Special Achievement Award.

MARY MORKETTER Vice President, Short Stop Food Marts

• Morketter became part owner of Fayetteville, N.C.-based Short Stop Food Marts in 2013, operator of 48 convenience stores in eastern North Carolina • She oversees five supervisors who report to her weekly, and is also a buyer for the chain. • Morketter began at Short Stop in 1995 as a clerk.

SUZANNE MUSIC Merchandising Coordinator, Loaf ‘N Jug C-stores, The Kroger Co.

• Music provides merchandising/marketing direction and support to a group of 15 stores. • In her prior role as Loaf ‘N Jug category manager, she introduced several new and innovative programs, with the most impactful still part of the retailer’s portfolio today. • Music has worked with numerous nonprofit 501(c)3 animal welfare groups to raise funds to support spay/neuter programs. She’s also been involved in raising money to provide medical services to companion animals of low-income individuals and families.

Congratulations to

C-Stores Divisionâ&#x20AC;&#x2122;s six Top Women in Convenience winners:

Debbie Markovich Fuel Manager Quik Stop

Heather Nicholas District Manager Kwik Shop

Jamie Kiefer District Manager Tom Thumb

Maureena Fletcher Store Manager Quik Stop

Suzanne Music Category Manager Loaf â&#x20AC;&#x2122;N Jug

Trisha Daubert District Manager Turkey Hill Minit Markets

COVER STORY

heaTher niCholas District Manager, Kwik Shop, The Kroger Co.

• Nicholas has direct oversight of 13 stores within Kwik Shop’s Hutchinson, Kan., market. • Her responsibilities include supporting the company vision and mission statements; ensuring all stores are providing customer service that meets or exceeds company standards; and ensuring all assigned stores operate within established budgets. • In 2015, Nicholas was named the Kroger Convenience Store Group’s Community Service Award winner for her work with Camp Hope, a local camp for children with cancer, and the Make-A-Wish Foundation where she is a wish giver.

sheril reTson Category Manager, Center Store, Chevron Corp.

• Retson is responsible for the center of store (COS) consumer value proposition for the ExtraMile branded, Chevron company-owned, company-operated and franchise classes of trade. • She develops and deploys product assortment/selection, space allocation, visual presentation, pricing, promotions and merchandise performance review to differentiate Chevron’s ExtraMile offering. • Retson also oversees category sales, margin percentage and gross margin dollars, including responsibility for the COS portion of overall store financial metrics, along with handling contract negotiations.

mary ridouT Manager, Non-Foods Merchandise, United Refining Corp. (Kwik Fill)

• In her 18th year at United Refining, Ridout oversees the company’s annual trade show, where it brings together more than 120 vendors and 350 managers as a team building/buying event. • She also coordinates United Refining’s Annual Incentive Trip for winning managers every year. • Ridout sits on the board of her local church and is active in many community events.

JaCKie smiTh District Manager, Texas, Murphy USA Inc. • Smith leads 11 store managers in a geography including northwest Houston, Cleveland, and Huntsville, Texas, and has influence over an $88-million-per-year operations budget.

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

• She is responsible for delivering best-in-class customer service, achieving measurable positive and consistent results, development of the store management team, and ensuring consistent operational excellence. • Smith was awarded Murphy USA’s Division Leadership Award in 2015. Her goal is to become division director of the convenience store retailer in an effort to lead an even larger market.

Julia sTafford Senior Category Manager, Sunoco LP

• Stafford manages several diverse categories for Sunoco’s Stripes division, including cigarettes, other tobacco products, general merchandise, bakery, dairy, ice cream and ice at more than 750 locations. • She is responsible for merchandising, financial planning, logistics, strategy, marketing and product development across multiple categories. • Stafford is an advocate of Stripes’ involvement in the community via the Children’s Miracle Network, March of Dimes, United Way and 4-H programs.

laura l. Wayne Director, National Retail Sales, The Coca-Cola Co.

• Wayne manages the business relationship between Coca-Cola and one of the largest convenience retail chains in the United States. • She also manages and ensures alignment with cross-functional account teams at Coca-Cola Refreshments, including marketing, field execution and independent bottlers. • Wayne was successful in adding Coca-Cola Freestyle to 179 Texas convenience stores, marking the first convenience retail chain in the Texas market with Coca-Cola Freestyle.

CourTney Williams Senior Category Manager, Family Express Corp.

• Williams recently joined Family Express after seven years at Sheetz Inc., where she managed the Pennsylvania-based retailer’s ready-to-eat food program, Hot Cart application, bakery, produce and ice cream. • She was an integral member of Sheetz’s Innovation Team and managed its traveling coffee event trucks to help build the brand within local communities. • Williams obtained a master’s degree in Innovation & Creativity from Drexel University in 2015, following up her previous bachelor’s degree in Hospitality Management from Penn State University.

COVER STORY

Mentors MirAndA AnderSon Director of Human Resources, West Florida, RaceTrac Petroleum

• Anderson began her career at RaceTrac as a store manager in 2011. • In 2015, she drove the lowest total turnover in the company. In fact, she has reduced turnover in every market where she has worked. • The University of North Florida graduate drives the company’s LEAD Women’s Initiative in Florida.

heidi BArnhArt Marketing Manager, North America Circle K Team, GSP

• Barnhart manages a team of seven, including five account managers and two account specialists. • In 2015, she helped increase GSP sales revenue by more than 60 percent on her accounts. • Her philanthropic efforts include the Krewe of Cavaliers, an organization that raises money and awareness for the Multiple Sclerosis Society, and the Children’s Home of Tampa.

Beth coldSMith Senior Director, Acosta Sales & Marketing

• Coldsmith started in 2002 as director of national accounts.

• She’s served as both McLane Team Lead and 7-Eleven Team Lead for her first 12 years. • She is a member of the Network of Executive Women and an active affiliate member of the National Coalition Association of 7-Eleven Franchisees.

Judy Grover-Allen Executive Director, Information Services, CST Brands Inc.

• Her responsibilities include business intelligence, data management and warehousing, and human resources information systems. • Grover-Allen has been at CST for 30 years. • Among those she has mentored are a zone manager, two above-store senior managers, and two recently promoted supervisors.

rAndi Sheeler Personnel & Operations Supervisor, Rutter’s Farm Stores

• Sheeler joined Rutter’s in September 2004 as a roving store manager and was given her own store two months later. • She won the inaugural Rutter’s No Guts No Glory Award in 2008 for her success at a struggling high-volume store. • In her current role, she oversees 13 stores, as well as the performance of the employees and managers working in those stores.

Store Managers AMBer BridGeS Store Manager, Alon Brands Retail

• Bridges began with Alon as a sales associate in 2008 and quickly rose through the ranks to become store manager of the retailer’s Wichita Falls, Texas, location. • She currently manages Alon’s highest-volume convenience store in the district. • Under Bridges’ tutelage, the store she manages achieved 13.5 percent year-over-year sales growth and 22 percent year-over-year EBITDA growth, all while trimming labor expenses by 5 percent vs. the prior year.

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

MAureenA Fletcher Store Manager, Quik Stop, The Kroger Co.

• A 14-year Quik Stop veteran, Fletcher manages the convenience store retailer’s Carson City, Nev., store. She was also instrumental in opening the chain’s Sparks, Nev., store in 2004. • She increased sales at her store by more than 6 percent year over year in 2015, along with achieving a 96-percent approval rate in mystery shopping trips. • At Kroger’s 2015 Annual Managers Meeting, Fletcher won the award for second place in expense control.

MAxi PeterMAn Store Manager, Wawa Inc.

• Peterman oversees the strategic and day-to-day operations of the Wawa flagship store in Center City, Philadelphia, where she is responsible for the development and management of 85 employees. • A six-year Wawa veteran, she has successfully managed five stores with increasing responsibility as a general manager. She has a consistent record of exceeding forecasts and catapulting her stores into profitability. • Peterman graduated from Penn State University in 2010 with a degree in Hotel, Restaurant and Institutional Management.

Mindy torney Store Manager, Rutter’s Farm Stores

• Torney manages 33 employees at Rutter’s York, Pa., store, where she plays an integral part in the successful management and implementation of operational procedures, marketing initiatives, human resource policies and executive directives.

• In November 2004, she became a restaurant manager and in 2006, Torney was awarded Restaurant Manager of the Year for her sales and commitment to excellence. She also served as a foodservice supervisor before taking on her current role earlier this year. • Torney has served on Rutter’s Advisory Board and works closely with the operations and marketing teams to make an impact at the store level.

chriStAl PAyne Store Leader, GetGo, Giant Eagle Inc.

• As store leader of GetGo’s Delmont, Pa., location, Payne supervises all her team members, including senior team leaders, crew, kitchen and WetGo (car wash) leads. • She is responsible for growing the business by allocating resources appropriately; driving sales and merchandise; controlling costs; developing talent; and coaching senior team leaders and team members on how to meet or exceed business goals. • In addition to her daily duties, Payne has trained three GetGo store leaders this year as a master trainer in the Giant Eagle Retail Leadership Development Program.

Single-Store Owners MArylou Mendez Owner & Chief Financial Officer, Mendez Auto Services

• Since 1979, Mendez has served as general manager of her family’s Chevronbranded stations, where she helped open Chevron’s first c-store in Orange County, Calif. • In 1992, she purchased Plaza Chevron from her father. Her husband and two sons work alongside her in the business. • Mendez is an active member of Chevron’s Extra Mile Franchise Advisory Council and is involved in implementing a formal mentor program within the Chevron franchise group.

GrAce PAPouliAS Owner, Westmoor Chevron

• Papoulias is responsible for everything involved with running the business, from top-level management decisions to day-to-day operations. She has two direct reports and 11 employees. • She began working in her father’s gasoline station business as a child and joined full-time in 1991. In 2014, she helped drive the Westmoor, Calif. station’s rebuild construction project to replace the three-bay auto care business with a convenience store. • In 2015, Papoulias established her own limited liability company, took over the business and, following a seven monthlong renovation project, opened the convenience store.

WWW.CSNEWS.COM | AUGUST 2016 | Convenience Store News 45

Against us, the other cookies crumble.

The top-selling cookies â&#x20AC;&#x201C; another reason Little Debbie is #1. When it comes to cookies, it only makes sense to stock Little Debbie cookies in your C-store. Our classic Oatmeal Creme Pies have been a winner for generations. And now Fudge Rounds, Peanut Butter Creme Pies and Chocolate Chip Creme Pies make our cookie offerings even stronger. Give your customers what they want. To learn more about all of our leading snacks, call (866) 483-4664 or visit LittleDebbieCStore.com. Nielsen ScanTrack, Convenience Stores channel of trade, 52 weeks ending May 9, 2015.

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

HOW TO

How to Track Your Foodservice Financials By Bob Phillips

smooth-running, profitable foodservice operation is like a lava lamp — smooth, freely flowing and often changing in shape, form and color. Like a lava lamp, certain colors (or, in a foodservice context, certain items and flavors) will dominate before smoothly and swiftly changing, perpetually melding into another form. Foodservice 101 With so many • Understand and accept that waste is moveable parts, part of providing high-quality food proper management and beverages. of the financial sub• Make sure your goals are realistic. structure of your • Always be agile in your business foodservice operaapproach. Take whatever steps are nection — including essary if you are not hitting the mark. food costs, shrinkage, spoilage and,

Call tO aCtIOn:

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

of course, labor — can mean the difference between profit and loss; success and failure. For starters, convenience store retailers must understand that when you are in the business of serving food, there will be waste. It simply comes with the turf, according to our Convenience Store News How To Crew panel of foodservice experts. “Food and beverage items have exceedingly short shelf lives relative to retail items, and throwing them out is seen as a waste of money,” said How To Crew member Mathew Mandeltort, vice president of foodservice strategy for convenience distributor Eby-Brown Co. “On the other hand, leaving food and beverages out past their prime will result in lost sales. You need to determine what levels are acceptable, and these levels will vary depending on the product and category.” Tracking why you throw out an item is as important as tracking what you throw out, Mandeltort

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

added. Some factors to keep your eye on are: • Did someone over-order? • Was the product damaged? • Was it improperly prepared? • Was the product improperly stored? • Was it stolen or pilfered? • Did someone not follow par level recommendations? Another important consideration is all is not lost just because a product has gone past its “best if used by” date. Reengineering or repurposing food can minimize waste and help recapture what would otherwise be lost revenue. Over-ripe bananas can be converted to banana muffins/bread. Rotisserie chicken meat can be pulled from the bone and repackaged as ready-touse boneless chicken. Cookies can be used to make ice cream sandwiches. Keeping an ongoing inventory of all items is an integral component in the process. How To Crew expert Larry Miller, president and founder of Sanford, Fla.-based Miller Management & Consulting Services, poses several important questions. How does your store track and account for all the items that go into a prepared food item? How often are you, as an operator, taking inventory of all the foodservice items you stock in order to make certain your margins are the same as what Foodservice 201 was projected? • Use industry benchmarks to deter“For someone mine where your performance stands with my background in relationship to those marks. If nec— heavy traditional essary, look outside the industry. c-store operations, • Make a relentless commitment to and almost as much monitoring and metrics. An item could time in foodservice be hot for a short period, but then go — I am well aware into rapid decline due to fading interof the challenges est or oversaturation. of accounting for • The rule of thumb is food waste should prepared food sales be between 4 percent and 10 percent. and profit margin,” Miller remarked. Some operators mistakenly “pull a number out of the air for a budget number,” acknowledged fellow How To Crew panelist Dean Dirks, CEO of Gig Harbor, Wash.-based Dirks & Associates, a foodservice consultancy serving the greater Seattle area. Instead, he offers a hybrid of a Taco Bell/ Subway spreadsheet the company created to show actual food cost vs. what the food cost should be based on item sales. (See worksheet example on page 52.)

Call tO aCtIOn:

50 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

“Ours changes week to week based on the items purchased. For instance, a store that sells more cold cut trios, our best food cost item, will have a lower expected food cost than a store that sells more chicken sandwiches, our highest food cost item,” Dirks said. SEttIng thE BaR

So, how does a c-store operator know if a program is hitting its goal, and how should the retailer go about setting that mark in the first place, and modifying it if necessary? The first step is to establish metrics for each area: sales, shrink, margin, labor, etc., advised How To Crew retailer Chad Prast, senior category manager of fresh foods and dispensed beverages for El Dorado, Ark.-based Murphy USA Inc. Once these metrics are in place, Prast suggests comparing each store against them to gauge how that location is performing. “To establish the metrics, try and use industry standards and then tweak them for your business model,” continued Prast. “For example, industry standards for coffee cups per day may be 100. But depending on what part of the nation you are in, that metric can vary greatly.” At York, Pa.-based Rutter’s Farm Stores, Director of Foodservice and How To Crew member Ryan Krebs employs several criteria to establish and confirm foodservice goals. These include margin, overall sales, spoilage and labor costs.

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

PRICe CHANge ANAlySIS/IDeAl FooD CoST ANAlySIS Price neW

Price noW

$5.59 $3.59 $3.59 $5.59 $3.59 $5.59 $3.59 $5.59 $3.89 $5.89 $3.79 $5.79 $3.79 $5.79 $3.59 $5.69 $3.69 $5.69 $3.69 $5.69 $5.69 $3.69 $5.69 $3.69 $5.69 $3.69 $5.69 $3.79 $5.79 $3.69 $3.59 $5.59 $3.59 $5.59 $3.59 $5.69 $3.79 $5.69 $5.79

$5.59 $3.59 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $3.49 $5.49 $5.49

iTeM

12” Turkey 6” Turkey 6” Ham 12” Ham 6” Roast Beef 12” Roast Beef 6” Turkey & Ham 12” Turkey & Ham 6” Tuna 12” Tuna SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH SANDWICH

UniT cosT

$1.20 $0.65 $1.23 $0.67 $0.74 $0.93 $1.48 $1.30 $0.00 $0.00 $1.20 $0.65 $1.23 $0.67 $0.74 $0.93 $1.48 $1.30 $0.00 $0.00 $1.20 $0.65 $1.23 $0.67 $0.74 $0.93 $1.48 $1.30 $0.00 $0.00 $1.20 $0.65 $1.23 $0.67 $0.74 $0.93 $1.48 $1.30 $0.00 ToTal

WeeKlY UniTs

ideal cosT of UniTs

100 234 46 120 78 156 60 120 56 167 78 189 14 22 11 25 13 35 11 23 17 31 57 14 31 43 87 5 12 7 22 23 46 3 8 23 55 12 22 2076

120 152 57 80 58 145 89 155 0 0 94 123 17 15 8 23 19 45 0 0 20 20 70 9 23 40 129 6 0 0 26 15 57 2 6 21 81 16 0 1744

iTeM iTeM f.cosT noW f.cosT neW UniT PercenT PercenT sales noW

21.5% 18.1 35.3 12.1 21.2 17.0 42.3 23.6 0.0 0.0 34.5 11.9 35.3 12.1 21.2 17.0 42.3 23.6 0.0 0.0 21.9 18.7 22.5 19.1 13.5 26.7 26.9 37.1 0.0 0.0 34.5 11.9 35.3 12.1 21.2 17.0 42.3 23.6 0.0

UniT sales neW

21.5% $559.00 $559.00 18.1 $840.06 $840.06 34.3 $160.54 $165.14 11.9 $658.80 $670.80 20.6 $272.22 $280.02 16.7 $856.44 $872.04 41.2 $209.40 $215.40 23.2 $658.80 $670.80 0.0 $195.44 $217.84 0.0 $916.83 $983.63 31.7 $272.22 $295.62 11.3 $1,037.61 $1,094.31 32.5 $48.86 $53.06 11.5 $120.78 $127.38 20.6 $38.39 $39.49 16.4 $137.25 $142.25 40.1 $45.37 $47.97 22.8 $192.15 $199.15 0.0 $38.39 $40.59 0.0 $126.27 $130.87 21.1 $93.33 $96.73 17.7 $108.19 $114.39 21.7 $312.93 $324.33 18.1 $48.86 $51.66 13.0 $170.19 $176.39 25.2 $150.07 $158.67 26.0 $477.63 $495.03 34.2 $17.45 $18.95 0.0 $65.88 $69.48 0.0 $24.43 $25.83 33.5 $76.78 $78.98 11.7 $126.27 $128.57 34.3 $160.54 $165.14 11.9 $16.47 $16.77 20.6 $27.92 $28.72 16.4 $126.27 $130.87 39.0 $191.95 $208.45 22.8 $65.88 $68.28 0.0 $120.78 $127.38 $9,766.64 $10,130.04

sales Mix noW

sales Mix neW

increase in sales WeeKlY

0.06 0.06 $0.00 0.09 0.08 $0.00 0.02 0.02 $4.60 0.07 0.07 $12.00 0.03 0.03 $7.80 0.09 0.09 $15.60 0.02 0.02 $6.00 0.07 0.07 $12.00 0.02 0.02 $22.40 0.09 0.10 $66.80 0.03 0.03 $23.40 0.11 0.11 $56.70 0.01 0.01 $4.20 0.01 0.01 $6.60 0.00 0.00 $1.10 0.01 0.01 $5.00 0.00 0.00 $2.60 0.02 0.02 $7.00 0.00 0.00 $2.20 0.01 0.01 $4.60 0.01 0.01 $3.40 0.01 0.01 $6.20 0.03 0.03 $11.40 0.01 0.01 $2.80 0.02 0.02 $6.20 0.02 0.02 $8.60 0.05 0.05 $17.40 0.00 0.00 $1.50 0.01 0.01 $3.60 0.00 0.00 $1.40 0.01 0.01 $2.20 0.01 0.01 $2.30 0.02 0.02 $4.60 0.00 0.00 $0.30 0.00 0.00 $0.80 0.01 0.01 $4.60 0.02 0.02 $16.50 0.01 0.01 $2.40 0.01 0.01 $6.60 100.00% 100.00% $363.40

Source: Worksheet example provided by Dean Dirks of Dirks & Associates

“These areas are constantly reviewed to assess budget vs. actual,” said Krebs. “The obvious goal is to exceed expectations in all categories, with the exception of margin, which is controllable.” When introducing new items, one might want to test different retails to see what hits the best profit-tosales ratio, according to Prast. It is also important to keep a careful eye on any cannibalization a new product may have on your current offerings. “If you introduce an item that sells 20 units per

52 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

day, but other items drop by 10 a day, then it may not be as profitable as first thought,” he explained. Beyond the numbers, it’s also helpful to gather customer feedback. “There are lots of items that customers say they want, but when you bring them in, they don’t sell,” Prast said. “Usually, sales and profits dictate the success of an item.” The tendency for many c-store operators is to rely on anecdotal evidence from their frequent foodservice customers. These customers, of course, will usually provide

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positive feedback and that will provide unreliable results. “If they have the resources, they should consider engaging a customer research partner to help them gain a complete understanding of all their customers; not just foodservice program enthusiasts,” EbyBrown’s Mandeltort said, pointing out it’s more dif-

Call tO aCtIOn: Foodservice 301

• If customers are purchasing items consistently in high volumes, then the margins, spoilage and labor should align accordingly. • Devise a system where each item disposed of must be logged. This will encourage store-level employees to keep on top of things, and give you a better picture about what is being thrown away and why. • Measure product waste by shift and by menu item and report the results electronically each day. This will help operations identify trouble areas, such as a product that may be problematic or an employee that may need more training.

ficult to capture insights from infrequent customers without third-party assistance. “For every positive review, there may be five negative ones, but you’re never going to hear that [with anecdotal evidence].” IDEntIFyIng KEy MEtRICS

To ensure the maximum financial efficiency of a foodservice operation, it is imperative to identify the most important financial metrics to track the overall program. Here, there is some divergence in opinion among our How To Crew panelists. “Sales, margin and spoilage are the main three,” said Prast, succinctly. For Krebs, though, it’s all about sales. “It’s really that simple,” he said. “Are customers purchasing what you are providing? If product is spoiling or excess inventory accumulates due to slow-moving items, decisions must be made to find what the customer is actually looking for. Case purchases vs. actual sales is a tell-all of success. As long as products are aligned within margin profits and labor models, successful items will

drive consistent and ongoing profits to the bottom line. Essentially, meeting sales/budgetary goals will be the catalyst for growth, added labor, remodels or whatever direction an organization plans to move in.” Another How To Crew member David Bishop, managing partner of Barrington, Ill.-based sales and marketing firm Balvor LLC, says at the most basic level, unit sales and gross profit dollars indicate how a program is performing. A program that’s growing unit sales is either resonating with a larger customer base or becoming a greater draw for specific customers. “Either way, the consumer value proposition is working,” he stated. From an internal perspective, a program that generates more gross profit dollars — taking into account product waste and shrink — depends on either fewer price discounts or more effective management of operational costs to drive volume. “Retailers who focus on one measure [internal or external], but not the other, may be getting a false sense of whether their programs are truly success-

ful,” Bishop cautioned. “Units sold is the No. 1 metric to monitor. This variable drives the others and represents where customer demand is high or low for a program.” Next in importance, Bishop believes, is cost per unit, which typically excludes waste. “Monitoring this metric impacts how you price, promote and produce an item,” he said. In some areas such as hot

dispensed beverages, the result should reflect a weighted average based on usage or purchases. “This is because you have different items, coffee blends, that go into selling a single item — a cup of coffee,” said Bishop, who noted retailers can manage waste by adjusting

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FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

Our How To Crew

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Your Source for Ventless Kitchen Solutions for the past 25 Years

David Bishop — Balvor LLC Joseph Bona — MoseleyBona Retail Ed Burcher — Coen Markets Nancy Caldarola — Food Training Group Joseph Chiovera — XS Foodservice & Marketing Tom Cook — King-Casey Jack W. Cushman — CST Brands Inc. Dean Dirks — Dirks & Associates Ryan Krebs — Rutter’s Farm Stores Mathew Mandeltort — Eby-Brown Co. LLC Larry Miller — Miller Management & Consulting Services Tim Powell — Q1 Productions Chad Prast — Murphy USA Inc. Holly Veale — McLane Co. Inc.

production schedules or par levels based on sales patterns by time of day, day of week, etc. The process of managing waste often produces a classic retail conundrum: How do you lower the rate of spoilage without limiting variety and choice for the consumers? This is particularly important in the foodservice arena. “It just comes down to tracking and analyzing sales patterns and being disciplined about par levels, etc.,” said Mandeltort. “Being willing to adapt offerings by region is also beneficial. What sells well in one market may not sell well in another.” Of course, being creative with potential waste is always helpful. “I used to say that if I had pizza, quiche and/or soup on the menu, I ran zero-percent food waste,” said Mandeltort. “Yesterday’s leftovers became tomorrow’s special of the day. Of course, it helps to have a kitchen.” The advice of Murphy USA’s Prast: Allocate more space to higher volume items and don’t cut back on variety. Cut back on the space allocated for lower-volume items. Savvy retailers understand how and where they can expand variety with minimal risk to increasing product waste. “For instance, if you have a made-to-order program, you can add menu items by finding ways to cross-utilize existing ingredients,” explained Bishop. “Or, if you’re expanding your hot coffee lineup, you can adjust brew size for new blends initially to reduce the potential waste.” And yet, as important as sales are to the bottom line, there may be even one more undervalued and underappreciated metric: customer satisfaction — the single most important factor in building customer loyalty for your convenience store. “Many retailers simply don’t take the time to gauge customer satisfaction levels with their foodservice programs,” Mandeltort said. CSn

FOODSERVICE

FOODSERVICE STUDY

Prepared Food + Hot, Cold, Frozen Dispensed Beverages

All Signs Steady The 2016 CSNews Foodservice Study reveals widespread growth across the category By Angela Hanson

onvenience stores are no longer a place to pick up packaged snacks and beverages, with foodservice programs tacked on as an afterthought. Cstores are now a foodservice destination. Industry retailers have been saying this for years, but the last 12 months proved it beyond a doubt, according to the 2016 Convenience Store News Foodservice Study. Of the chain c-store operators who took part in the study, a whopping 92.9 percent reported an increase in their foodservice category sales for 2015. This number is considerably higher than the 83 percent who in last year’s study predicted their 2015 foodservice sales would rise. It’s also higher than the actual percentage of retailers whose foodservice sales increased in 2014 (also 83 percent). The number of chain retailers who saw no change in 2015 was a minority at 7.1 percent and, most notably, zero study participants saw a decrease in foodservice sales last year. Profits generated by foodservice sales are similarly on the rise. In this year’s study, three-quarters of chain retailers (75 percent) reported their foodservice profits rose in 2015, ahead of the total industry figure of 66.1 percent. Chain retailers whose foodservice profits fell were again in the minority at 7.1 percent, while 17.9 percent said

Foodservice Sales Increased

decreased

Stayed the same

TOTAL

15.8%

3.5%

SINGLE STORES

CHAINS

7.1%

24.1%

2015

84.2%

75.9%

92.9%

16.1% 2016

(expected)

10.7%

21.4% 7.1%

80.4%

2016

(expected)

89.3%

71.5%

Source: Convenience Store News Market Research, 2016

Category Analysis: total Foodservice AverAge SAleS per Store % 2015 CHAnge

Prepared food (prepared on-site or off-site) Hot dispensed beverages Cold dispensed beverages Frozen dispensed beverages TOTAL

$149,900 45,867 17,293 8,019 $221,079

InduStry totAl (in millions) % SHAre CHAnge oF totAl

2015

6.5% $22,694 4.7 6,944 7.9 2,618 0.0 1,214 6.0% $33,470

7.7% 5.8 9.1 1.1 3.9%

67.8% 20.8 7.8 3.6 100.0%

Source: Convenience Store News Market Research, 2016

profits held steady. Retailers remain incredibly optimistic about the future of foodservice. Looking ahead to the final results of 2016, the number

58 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

of chain retailers who expect to see their foodservice sales increase this year falls slightly to 89.3 percent, but zero chain retailers anticipate their 2016 sales for the category will

decrease. An almost equally large figure (82.8 percent) expect their foodservice profits to rise in 2016, while only 3.4 percent of chain retailers expect profits to fall. What’s driving this even betterthan-expected growth? Study participants cited a variety of primary sales drivers. One factor repeated by numerous c-store operators is simply the increased quality of foodservice that convenience stores are offering these days, along with new menu items, expanded fresh food offerings and overall value. “Customer service and presentation drive our sales,” one retailer commented. “Profit changes depend entirely on the fluctuating market.” Additionally, while customers are more willing to try c-store foodservice when they know the purchase is worth it, U.S. consumers’ increased amount of discretionary income as of late allows them to put their money where their mouth is. “The economy seemed to have had a big impact in 2014 and early 2015, then picked up in 2016 as the customers seemed to have a more upbeat attitude,” said one retailer. SOlID SEgmEnt gROwth

Within the overarching foodservice category, most segments saw individual growth in 2015, proving it’s not just one or two boom segments propping up the category. Cold dispensed beverages generated the largest increase in average sales per store at 7.9 percent, followed by prepared food at 6.5 percent. Frozen dispensed beverages had the least impressive performance with no change in average sales per store year over year. Longtime c-store staples of sandwiches, hot dogs and pizza generate the most sales within prepared food.

Foodservice profits Increased

decreased

Stayed the same

TOTAL

26.8% 7.1%

CHAINS

35.7%

2015

2016

33.3%

(expected)

71.4%

57.1%

17.9% 7.1% 2015

7.2%

66.1

23.2% 5.4%

SINGLE STORES

75.0% 3.4% 13.8%

2016

(expected)

59.3%

2016

(expected)

7.4%

82.8%

Source: Convenience Store News Market Research, 2016

Segment Analysis: prepared Food AverAge SAleS per Store % 2015 CHAnge

Sandwiches $39,030 Hot dogs 25,035 Pizza 25,003 Chicken 18,562 Bakery 10,322 Salads 5,909 Hamburgers 5,251 Soup 3,626 Frozen treats (i.e. frozen yogurt) 2,782 All other prepared food 14,380 TOTAL $149,900

InduStry totAl (in millions) % SHAre 2015 CHAnge oF totAl

7.8% $5,909 4.7 3,790 7.2 3,785 7.3 2,810 6.5 1,563 4.6 895 7.3 795 4.4 549 7.9 421 4.6 2,177 6.5% $22,694

9.0% 5.9 8.4 8.5 7.7 5.8 8.5 5.6 9.1 5.7 7.7%

26.0% 16.7 16.7 12.4 6.9 3.9 3.5 2.4 1.9 9.6 100.0%

Source: Convenience Store News Market Research, 2016

Segment Analysis: Hot dispensed Beverages AverAge SAleS per Store % 2015 CHAnge

Coffee (including flavored) $34,229 Cappuccino/specialty 7,887 Hot chocolate 1,896 Hot tea 1,156 All other hot dispensed beverages 700 TOTAL $45,867

4.9% 5.3 1.5 2.4 -2.8 4.7%

InduStry totAl (in millions) % SHAre 2015 CHAnge oF totAl

$5,182 1,194 287 175 106 $6,944

6.1% 6.5 2.6 3.6 -1.8 5.8%

74.6% 17.2 4.1 2.5 1.5 100.0%

Source: Convenience Store News Market Research, 2016

WWW.CSNEWS.COM | AUGUST 2016 | Convenience Store News 59

FOODSERVICE Prepared Food + Hot, Cold, Frozen Dispensed Beverages

However, the biggest increases in average sales per store for 2015 were seen in sandwiches (up 7.8 percent), chicken and hamburgers (both up 7.3 percent). Per-store sales of frozen treats grew an impressive 7.9 percent last year, though this segment accounts for less than 2 percent of overall prepared food sales. Among c-store chains, 84.6 percent offer no-touch, graband-go/prepackaged items; 73.1 percent offer some-touch products that are assembled on-site or thawed and served; and 46.2 percent offer full-touch, made-toorder foodservice programs. In hot dispensed beverages, coffee remains king, accounting for nearly three-quarters of the sales within the segment. Average sales per store of coffee increased by a solid 4.9 percent last year. Average sales of No. 2 cappuccino/specialty hot beverages grew even more, by 5.3 percent. Only all other hot beverages (excluding hot chocolate and hot tea), an extreme minority of total sales, saw a decline of 2.8 percent in 2015 average sales per store. Cold dispensed beverages are undoubtedly dominated by fountain carbonated beverages, which make up 86.5 percent of sales in the segment, and increased 8.4 percent in average sales per store last year. In a distant second place, fountain noncarbonated grew 6.6 percent in average per-store sales, which could point to further growth of tea. Only fountain sports drinks, which account for just 1.5 percent of segment sales, saw a decline in average sales per store of 3.6 percent. DaypaRt by DaypaRt

While consumers are increasingly recognizing the quality and variety of foodservice items that c-stores offer, it’s clear they are taking advantage of

Segment Analysis: Cold dispensed Beverages AverAge SAleS per Store % 2015 CHAnge

Fountain carbonated $14,961 Fountain noncarbonated 1,281 Fountain sports drinks 258 All other cold dispensed beverages 793 TOTAL $17,293

8.4% 6.6 -3.6 5.0 7.9%

InduStry totAl (in millions) % SHAre CHAnge oF totAl

2015

$2,265 194 39 120 $2,618

9.6% 7.8 -2.5 6.2 9.1%

86.5% 7.4 1.5 4.6 100.0%

Source: Convenience Store News Market Research, 2016

Foodservice Sales by daypart totAl

Breakfast (6 a.m.-8:59 a.m.) Morning snack (9 a.m.-10:59 a.m.) Lunch (11 a.m.-1:59 p.m.) Afternoon snack (2 p.m.-3:59 p.m.) Dinner (4 p.m.-6:59 p.m.) Evening snack (7 p.m.-9:59 p.m.) Late night (10 p.m. or later)

25.5% 9.9 31.8 9.8 13.1 6.7 3.2

SIngle StoreS

CHAInS

23.3% 9.7 35.2 10.5 12.0 6.6 2.7

27.2% 10.1 28.3 9.2 14.2 6.7 3.7

Source: Convenience Store News Market Research, 2016

the convenience aspect. Looking at chain c-store foodservice sales by daypart, more than half of total sales are made during lunch (11 a.m.-1:59 p.m.) or breakfast (6 a.m.-8:59 a.m.), at 28.3 percent and 27.9 percent respectively, when people are most likely to be in a rush before work or on a meal break. With a share of 14.2 percent, the dinner daypart presents opportunity for growth. Breakfast and lunch were also the dayparts that experienced the biggest sales growth in 2015, with 55.4 percent and 30.7 percent of chains indicating increases, respectively. Notably, the growth of breakfast foodservice sales at chains was far ahead of the industry total. To promote their foodservice program improvements, chain c-store operators are most frequently using loyalty programs (51.7 percent), social media (48.3 percent) and paper coupons (41.4 percent). Inside the store, chain operators report that price discounts and bundling are the most

60 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

effective promotions for their foodservice programs. More than ever, promotions are important because c-stores aren’t just competing within their own retail channel. Nearly three-quarters of c-store chain operators do cite other convenience stores as their biggest competitor in foodservice, but other top competitors include: McDonald’s (named by 57.7 percent of chain retailers), other national/ regional quick-service restaurants (53.8 percent) and chain sandwich shops such as Subway and Quiznos (38.5 percent). When asked about the category’s challenges, many retailers list the big two C’s as their biggest obstacles: competition and consistency. Consumers have to be able to trust they’ll find something worth buying at a c-store; otherwise there are plenty of other places to go. Still, other retailers reported difficulty finding employees with the right aptitude and skills for foodservice. “Labor certainly has been challenging,” said one retailer. CSn

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CANDY & SNACKS Chocolate + Non-Chocolate + Gum + Salty Snacks

The Meat of the Matter Flavor, format and other innovation give meat snacks some serious momentum By Danielle Romano

uch has been written lately about the rise of snacking, as more and more time-pressed consumers opt to replace regular, full meals with on-the-go snacking. Much has also been written lately about the rise of better-for you, with snackers increasingly seeking out more healthful products, particularly those that boast protein and all-natural ingredients. Fitting perfectly into all this conversation is the meat snacks segment, which is enjoying a “nationwide surge” thanks to factors like nutrition, innovation, changing tastes and increasing product variety, noted Tim Powell, vice president of consulting at Q1 Consulting Services. The meat snacks market was worth $2.5 billion in 2015 and it’s important to note that 80 percent or $2 billion of those sales were accounted for in convenience stores, Powell said. That’s because consumers turn to meat snacks to satisfy the need for fast fuel, and c-stores are the go-to destination to fill in the gaps between meals. For two

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consecutive years, the meat snacks segment has led the alternative snacks category in year-over-year growth, according to the latest annual Convenience Store News Industry dustry Reports. In 2014, average sales per store of meat eat snacks saw a 10.3-percent rise to $8,528. Strong gains ins were made again in 2015 when average per-store sales les ticked up another 6.5 percent to $9,082. Overall, thee total industry saw a 7.7-percent increase in meat snack ack sales last year. In addition, a recent study conducted by Datassential and d Tyson Convenience found that: more consumers indicated dicated they purchased bagged jerky in the past three months onths than any other type of off-the-shelf snack food from om convenience stores, except for chips or pretzels; and d nearly 90 percent of c-store operators said bagged jerky rky is at least “somewhat important” to the success ss of their business. This study was fielded between September ptember and November of 2015. “The [meat snacks] category continues to grow since nce it is ideally located at the intersection of snackingg trends and consumer demand for protein,” Rob ob Ramsey, senior marketing manager for Tyson Convenience, onvenience, told CSNews. “New brands, flavors and formats rmats have the potential to bring new consumers to thee category, which will drive growth.” Me MeAt e SNACK DYNAMiCS

Meat eat snacks are an example of how all snacks are not created eated equal in terms of meeting specific consumer needs. eds. “More of a mini entrée, the overall appeal of jerky rky is that it is a more satisfying snack … It fills you up,” p,” explained David Lakey, senior vice president of marketing arketing at Oberto Brands, adding that meat snacks have ve historically been different from other snack foods. Meat snacks were once perceived as unhealthy, redneck dneck and only appropriate as a snack for long drives, ives, Lakey acknowledged. But this dynamic has changed anged as the c-store market has begun to brim with more ore variety for consumers as they seek out flavorful,

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CANDY & SNACKS Chocolate + Non-Chocolate + Gum + Salty Snacks

better-for-you options. “Jerky has been a category that’s been around since the beginning of time,” echoed Bart Silvestro, CEO of Chef’s Cut Real Jerky. “The more you talk to consumers, you hear they’re looking for sustainable snacks between meals, as well as looking for lean and betterfor-you products. Low in carbs, low in fat and high in protein, jerky meets that in many aspects.” Consumer mindfulness Consumer i df l around d protein i iis “on “ fi fire,” ” added Silvestro, and this has been ongoing for the past

few years. Protein as a selling point got its start with protein bars, then moved over to Greek yogurt, and now the high-protein halo has moved to jerky products. Another selling point of meat snacks is product innovation. It’s no coincidence that as sales are surging, innovation in the segment is also rapidly on the rise. Beef jerky still accounts for a hefty majority of the segment (79 percent), per IBISWorld data. However, poultry jerky, like chicken and turkey, has become the fastest-growing flavor profile. Game jerky is also seeing a rise in popularity, represented by double-digit growth in 2015. New flavor profiles provide further proof that jerky innovation is not slowing down. For instance, Perky Jerky’s Jammin’ Jamaican Turkey Jerky, Brewmaster’s Pale Ale Turkey Jerky, and BBQ with Seoul Beef Jerky appeal to millennial consumers. Meanwhile, Jack Link’s Squatch Snack Sticks with Bacon and Cheddar are also suited for a younger demographic, while its Small Batch Maple Bacon Jerky capitalizes on the bacon mania craze. “Turkey jerky is continuing to grow in popularity as consumers seek a healthier alternative to the more traditional beef jerky,” observed Brian Levin, CEO of Perky Jerky. With demand for more transparency and cleaner ingredients, Levin also predicts there will be a shift in

64 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

sourcing antibiotic-free, grass-fed beef among the next generation of jerky brands. As for future flavor innovation, Oberto’s Lakey believes flavor-forward innovation is less about spicy and more about interesting flavors that are not polarizing. He foresees sea salt and other cuisine-inspired flavors that are becoming mainstream making their way over to the meat snack aisle i l soon. “Some “S products ducts may be appealing to 5 percent of consumers, but not to the other 95 percent,” he cautioned. oned. Format innovation novation is also gaining steam. Suppliers in the segment point to bars and trail mixes as the next up-and-coming meat snack ck formats. “We’ll We’ll be seeing creative, new ways that get consumers to engage with h the jerky category by reframing g it into mainstream categoriess like energy bars and trail mixes,” xes,” noted Ramsey at Tyson Convenience. “Trail mix, bars and other alternative formats fuse the savory, protein-rich meat snacks with other ingredients, like nuts and fruit, and then package them into new and exciting consumer snacking platforms.” How C-StoreS CAN CApitAlize

Meat snack suppliers are optimistic about jerky’s prospects for the foreseeable future and they’re equally bullish on the role convenience stores will play in the category’s continued growth. Silvestro of Chef’s Cut advises c-store operators to be proactive. “What you hear from c-store meat snack buyers is the paradigm is shifting,” he explained. “C-stores are changing their layouts and putting better-for-you products up close, and separating it from hot dogs and candy bars. This will only grow the jerky category.” Lakey of Oberto’s advice for c-store operators is to monitor shopper research because it will show which key flavors, brands, formats, etc., consumers want to find when they shop. However, he cautions retailers to make sure they don’t overdo it. “With limited space, [retailers] have to decide how to not over-SKU. Shoppers want to come to a section they see is for them — offer variety not strictly based on velocity, like offering 15 items from a traditional brand,” he advised. “Don’t miss out on new users and new occasions.” CSN

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IN-STORE MERCHANDISING Grocery + General Merchandise + HBC + Periodicals

Destination: HBC Forward-thinking c-stores can convert their emergency sections to destination departments By Renée M. Covino

or convenience stores that are on the ball, aspirin and lip balm are not merchandising afterthoughts. Advanced seasonal plans work well for candy, snacks and beverages. So, why not the health and beauty care (HBC) category, too? Generally speaking, HBC has “taken a back ba seat in the convenience channel and often is rolled in with general merchandise, which is typically typical the most cluttered and least enjoyable category to t shop,” according to Brian DeLong, senior vice president presi of agency Catapult Marketing. The forward-thinking trend is to turn around aro the notion that HBC is just for convenience store customer “emergencies” and instead present it as a front-seat, year-round section, DeLong told Convenience Convenienc Store News, realizing “the nature of the category means m shoppers need to trust that the products sold are safe and effective.” He advises c-store operators to “focus on small sizes presented in a clean and easy-to-shop organization that convinces shoppers [the retailer] doesn’t just have HBC items on hand, but they are actually selling them” and are committed to the category. OuTSIDE THE SEASONAl BOx

Part of this commitment means managing a HBC section that goes outside the seasonal box. Paying attention to year-round sales numbers can help in this respect. Nielsen data, for instance, shows that while cough and cold remedy sales peak during the winter months, consumers still buy about half as much during the summer months. So, it doesn’t make sense to discontinue cough/cold items after the winter season. Recent Nielsen data also shows double-digit growth of cosmetics in c-stores, mostly at the expense of declining baby care items. This is giving way to expanded “beauty” items. Borrowing from a successful add-on sale at drugstores, some savvy

66 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

c-stores are latching on to a HBC trend that millennial shoppers, in particular, are gravitating toward — new lip balms being offered in trendy flavors and shapes, and sold singly in fish bowls and other countertop displays. Experts agree new and trendy items sold like this on the counter give c-store customers the idea there is a dedicated section. Later, the most successful SKUs can be incorporated into the set. Again, this requires a wide-angle approach, beyond what most in the convenience channel are doing today. Category Management Knowledge Group President Sue Nicholls makes a correlation between the typical HBC section and the typical grocery section in the convenience channel. Both are in need of a “bigger picture” strategy, Nicholls asserts. “C-stores really need to rely on vendors who are willing to come in with that broader look across the category,” she emphasized. She further explained it’s not just about the one or two items a HBC supplier may offer; “it’s about being able to rely on suppliers

that make recommendations beyond the item level. They need to help the c-store meet the most important needs of the shopper coming in for the HBC assortment.” Essentially, this means going with vendors or distributors who don’t subscribe to an assortment that solely meets their own agenda. A FINE BAlANCING ACT

Lil’ Drug Store Products Inc. is one supplier that focuses on taking an overarching HBC category approach. The company identifies 30 subcategories in HBC including analgesics, gastrointestinal, oral care, eye care, cough/cold, feminine hygiene, first aid and antacids. According to the supplier, the top 15 SKUs in dollar sales very often do upwards of 25 percent to 30 percent of the category’s business, while the top 40 SKUs often account for upwards of 50 percent to 60 percent of the category’s business.

“Health & beauty care has taken a back seat in the convenience channel and often is rolled in with general merchandise, which is typically the most cluttered and least enjoyable category to shop.” — Brian DeLong, Catapult Marketing

Getting the HBC mix right doesn’t stop with that simple formula, however. Proper management manag of the category requires a “fine balancing act, act,” said Beth Noteman, senior director of category m management for Lil’ Drug Store Products. A c-store sshould ideally determine its right mix by weighing wh what is bestselling currently, what sold within the past p year, and what can be sold moving forward, she eexplained. “If you always manage to the past numbers, nu you aren’t giving yourself an opportunity to venture into new subcategories,” Noteman reasoned. She identified antacids as “one of the interesting, evolving evolv subcategories currently,” because it is trending toward t “ultra” and “advanced” SKUs. These “premium” “premium products are also priced accordingly, with $1.49, $1.79 $1.7 and $1.99 price points instead of the typical $1.19 and $1.29 retails. “You can think about it as being simisimi lar to the king-size candy proposition or the 20-ounce soda movement — it’s a way w

for the category categ to see continuing profitability,” she said. profitability, Full-SIzE CONSIDERATION

Lil’ Drug Store Sto Products works with c-stores to identify customer-speciftomer-specif ic data and geographicspecific data as well, to maximize m HBC within the walls w of a particular store or with a particular consumer group. The company recognizes there are varied types of stores within the convenience channel, from interstate truck stops to inner-city stores. Truck stops generally carry a more robust mix of full-size HBC products because truckers “like to take the full-size items on the road with them,” Noteman told CSNews. Also, contrary to the traditional view of convenience-channel shoppers, there is a growing group who view c-stores as a stock-up destination and are looking to them for more of the HBC items they need. The full-size trend has even opened up another HBC trend in c-stores: a growing opportunity for private label brands. In late 2014, 7-Eleven Inc. launched a private label line of over-the-counter (OTC) medications under its 7-Select brand in full sizes. The products fall into five major segments: pain relief, cold/flu/ allergy, gastrointestinal, cough/throat, and sleep aids. Sixty percent of Americans regularly purchase private label products when shopping for OTC medications, according to a recent Harris Poll comparing name brands vs. store brands. CSN

WWW.CSNEWS.COM | AUGUST 2016 | Convenience Store News 67

STORESPOTLIGHT QuikTrip

Fueled by Opportunity QuikTrip debuts a c-store sans fuel as part of the chain’s long-term strategy By Danielle Romano

s a leading seller of motor fuels in all the markets in which it operates, QuikTrip customers in metro Atlanta may be surprised to find the convenience store chain’s newest site is missing one offering traditionally associated with the c-store operator: fuel.

QuikTrip plans to counteract the absence of fuel with good food and great customer service.

QuikTrip Corp., winner of the 2015 Convenience Store News Retailer Innovator of the Year award, is testing a non-fuel concept as part of the company’s long-term strategy to grow and serve non-traditional market segments, according to Chuck Barton, vice president of marketing. Located at the intersection of Peachtree and 6th streets in Atlanta, the new c-store sans gas is the first of its kind for QuikTrip since the late 1970s, when the company tested a similar concept in its hometown of Tulsa, Okla. The demand for convenience in metro areas has grown since that first experiment, leading QuikTrip to believe the time was right to try the concept once again. “We saw an opportunity to expand the QuikTrip brand into other areas of the Atlanta market we have not historically been able to reach,” Barton told CSNews. “These sites would not allow fuel, which in the past we were unwilling to compromise. But with our increased focus on foodservice, we felt now was the time to test this concept.” With its QT Kitchens made-toorder food and beverage program, the retailer is doing its part to make convenience stores a fresh-food destination for consumers. No Fuel, No Problem

With a densely populated downtown footprint, Atlanta is QuikTrip’s largest market. The 700-plus-unit chain operates a total

68 Convenience Store News | AUGUST 2016 | WWW.CSNEWS.COM

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STORESPOTLIGHT QuikTrip

The QT Kitchens program in this store is double the size of the standard footprint.

of 127 stores here. The Peachtree and 6th property fit the bill in terms of criteria needed to run a non-fuel convenience store, according to Barton. Boasting 3,500 square feet and open 24 hours a day, seven days a week, the site is a little more than half the size of QuikTrip’s typical Gen 3 store model. Like other Gen 3 stores, it puts QT Kitchens — QuikTrip’s propriety foodservice offering — at the forefront. In fact, despite the store’s smaller size, this QT Kitchens is twice as large as the traditional footprint.

“QuikTrip already attracts customers from all walks of life, [but] we felt like this was a great opportunity to get our products and services into an area of the market that was underserved by our brand.” — Chuck Barton, QuikTrip Corp.

An expanded menu includes: a coffee bar, fountain drink dispensers, flatbreads, smoothies, frozen drinks, breakfast burritos, pizzas and toasted sandwiches. This location is the first to feature made-to-order toasted subs, Barton shared. “QuikTrip already attracts customers from all walks of life, [but] we felt like this was a great opportunity to get our products and services into an area of the market that was underserved by our brand,” the marketing chief explained.

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The only product category at this location that is much smaller than a standard QuikTrip store is beer; the mix here focuses on smaller packages and craft beer. But otherwise, the store carries the same merchandise as a standard QuikTrip store, noted Barton. Aesthetically, however, this QuikTrip is “completely different” from the brand’s standard store in terms of merchandise layout and design. For example, the sales floor layout incorporates smaller gondolas and additional open-air coolers arranged to fit the smaller footprint. Additionally, the ceilings are two stories high with an open warehouse/industrial look. QuikTrip’s in-house design team and sales department collaborated to arrive at the design for this nonfuel location. With all the decisions made internally, Barton said it was a quick process. Is ThIs JusT The begINNINg?

There is no doubt fuel is a significant traffic driver for a convenience store site and while Barton acknowledges this fact, he enthusiastically explained that QuikTrip plans to counteract this “with good food and great customer service!” Thus far, the new store has gotten a very positive initial response from the neighborhood. QuikTrip does not currently have another city or market in mind for further testing the non-fuel store concept. Still, the retailer continues to look for such opportunities. In the meantime, those who live and work in metro Atlanta can reap the benefits of QuikTrip’s “convenience, value and good food,” Barton exclaimed. CSN

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Spotlighting major industry events

Blurring the Foodservice Lines Retail channels get much attention at the 2016 National Restaurant Association Show By Angela Hanson

very year, the National Restaurant Association (NRA) Show highlights the trends, advances and key operating tactics of importance to all foodservice retailers. The 2016 show, held May 21-24 at Chicago’s McCormick Place, highlighted the fact that boundaries between foodservice channels and the National Restaurant products and experiences Association Show they offer are exhibitors showcased ways they are responding to the evolving foodservice landscape. May 21-24, 2016 blurring more Chicago about how to practically implement technology soluthan ever before as both foodtions. This includes preparing in-house systems and service operators and consumer giving consumers the option to order takeout through tastes evolve. their mobile devices — something that will essentially The quick-service segment in particular is changing become mandatory in today’s on-demand society, the rapidly as consumers seek higher-quality, better-tasting, panelists advised. better-for-you food — at the same price and level of “If you’re not thinking about mobile ordering, convenience — and as certain foodservice operators you’re behind already,” said Carl Howard, CEO of prove they are capable of delivering that, according to Italian-American fast-casual restaurant chain Fazoli’s. panelists of the “Emerging Trends: How Fast Food Is Disrupting the Way America Eats” education session. “Disruption” is a term more often used in the techBuildiNg A BetteR tomoRRow nology industry, but successful quick-service restaurant Many exhibitors on this year’s NRA Show expo floor (QSR) chains are disrupting the status quo for the were showcasing ways they, too, are responding to the better. Dan Kish, Panera Bread’s head chef and senior evolving foodservice landscape. vice president of food, told the audience that valuing The Broaster Co.’s new lineup of dipping sauces a long-term vision over short-term profit is disrupfor its chicken program made its official debut at tive. His company took steps toward this when it the event. Consumers’ changing flavor profiles were announced the removal of all artificial ingredients and a direct driver of the overhauled sauce line after the sweeteners from its products by the end of this year. company performed “deep-dive” research, according Along with upping the quality of their products, to Chad Vendette, director of marketing. Although foodservice operators should be thinking seriously the company has more than 60 years of experience,

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OUTABOUT &

Spotlighting major industry events

“classic” flavors had to be reviewed in order to meet Sheetz, director of brand strategy, Sheetz Inc.; Steven new consumer wants and expectations. Petusevsky, co-chair of CIA Appetites & Innovation Complex flavor profiles and adventurous conInitiative, Culinary Institute of America; and Nicolas sumer tastes likewise inspired four new meats from Granucci, vice president and general manager of global Hormel, whose Fast ‘N Easy Bold Sausage Patties were food retail, Ecolab. designed to help distinguish a foodservice program. According to the panelists, despite the advanceSweet & Smoky BBQ Pork, Citrus Chipotle Chicken, ments made in convenience foodservice, the indusChorizo Pork and Spicy Asian Chicken can be used in try’s biggest challenge is still consumer perception. sandwiches, wraps and more. On the foodservice equipment side, Hatco Corp. introduced the Rapid Cuisine Induction Range, a durable unit constructed of black ceramic glass that is intended to be suitable for both convenience store and restaurant foodservice programs. The silent-running range is small enough to fit in a prep area with limited counter space and includes a USB port that lets multiunit retailers transfer programmable preset modes. For c-stores and other foodservice operators that are serious about investing in a quality foodservice program, Hamilton Beach displayed wawa and Sheetz executives (far left) participated in the inaugural foodservice at Retail conference. its Expeditor family of culinary blenders. These durable units are specifically meant for outlets “with a focus on fresh” Retailers must convince consumers they can get qualas they allow for efficient, easy creation of everything ity, fresh prepared food at a convenience store. from smoothies to sauces to dips. The presence of gasoline on-site contributes to the stigmatized perception, as some consumers envision c-store food as having a “petroleum residue over it,” the RiSe of RetAil foodSeRvice said Sheetz. However, he also acknowledged the posiRetail foodservice outlets, which include convenience tive role that gasoline plays in bringing people to the stores and supermarkets with prepared food prostore, dubbing it both a blessing and a curse. grams, are competing against traditional restaurants The good news is that millennials and members of more than ever these days. In recognition of this, the Generation X see no difference between c-stores and 2016 NRA Show held the first-ever Foodservice at other foodservice destinations. “I love millennials,” Retail Conference. said Sheetz, explaining that these consumers don’t With profits in traditional c-store categories such have the same hangups about buying food from a site as cigarettes and gasoline declining and the quality of with a gas station. c-store foodservice rising, the channel is in a state of The changing opinion of younger consumers proflux. During a panel entitled “Culture Club: Bringing vides a real growth opportunity for c-stores, especially the Gap Between Foodservice and Retail at Work,” those willing to invest the time and money to become Phil Lempert, Supermarket Guru and Foodservice at a premium source of prepared food. Retail program consultant, moderated a discussion “The power of really good food allows you to become between four retail foodservice experts. a destination,” said Sheetz. In an extremely competitive Participants included Mike Sherlock, vice presienvironment, “[it] can be a differentiator.” CSN dent of fresh food and beverage, Wawa Inc.; Ryan

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

OUTABOUT &

Spotlighting major industry events

Sweets & Snacks Expo

King-SizEd

Spanning two expo halls, this year’s event was bigger and more educational than ever By Angela Hanson & Danielle Romano

he candy and snacks categories are continually growing in innovation, sales and product offerings, and the National Confectioners Association’s (NCA) 2016 Sweets & Snacks Expo reflected this with more suppliers, retailers and industry experts than ever before attending the annual event May 23-25 at Chicago’s McCormick Place West. More than 720 exhibitors alone displayed their wares at the show, which spanned two expo halls: the main show floor, and Skyline Hall’s Innovation Avenue that showcased companies just beginning their candy and snack businesses. More than 720 candy and snack exhibitors could be found on the expo floor. This year, the NCA also added a second theater for its lineup of educational sessions, which spanned nearly the full operating The 2016 Most Innovative New Product Awards hours of the show — something that was a direct winners were: result of the wide variety of • Chocolate: Grand Ferrero Rocher, Ferrero U.S.A. Inc. experts who were interested in Sweets & Snacks • Non-Chocolate: Starburst Gummies, Wm. sharing insights and guidelines, Expo Wrigley Jr. Co. according to Larry Wilson, May 23-25, 2016 • Sweet Snacks: Half Dips Dark Chocolate vice president of industry Chicago Mango, Alli & Rose LLC affairs for NCA. • Salty Snacks: Hardbite “18 Carrot Gold” Carrot The first day of the expo Chips, Naturally Homegrown Foods Ltd. featured the presentation of the Most Innovative New • Savory Snacks: Hungry Buddha Smokin’ Sriracha Product Awards. Unlike in previous years, both the Coconut Chips, Temple Lifestyle category finalists and the winners this time were deter• Novelty/Licensed: Dippin’ Dots Redberry Sherbet mined by a judging panel that tested and evaluated with Sour Patch Kids, Dippin’ Dots Ice Cream more than 320 submissions. Points were awarded for • Seasonal: Turtles Eggs, DeMet’s Candy Co. taste, innovation, packaging and go-to-market ability. • Gourmet/Premium: Organic Jelly Beans, Jelly “With more competition than ever before, each of Belly Candy Co. the Most Innovative New Product Awards finalists • Gum & Mints: Bazooka Sugar-Free To Go Cup, and winners represent the upper echelon of candy and Bazooka Candy Brands snack innovation,” said Barry Rosenbaum, Sweets & • Best in Show: Reese’s Pieces Peanut Butter Cups, Snacks Expo chairman and president of Nassau Candy The Hershey Co. Distributors Inc.

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“With the use of unique ingredients and flavor combinations, the tastes of 2016 are bigger, bolder and more groundbreaking than ever before,” said NCA President and CEO John Downs. “The Expo is a showcase of the ways in which our industry is working hard to provide consumers with choices, information and the support they need to make decisions that are right for them.” Top TrEndS SpoTTEd

The 2016 Sweets & Snacks Expo also unwrapped the latest trends in both candy and snacks. These were the top themes spotted by Convenience Store News editors on the expo floor: Simple Ingredients There was a noticeable rise in products boasting “pure” or “all-natural” ingredients. One example is the introduction of Old Wisconsin’s Natural Cut hardwood-smoked snack sticks, a gluten-free alternative snack that is also free of nitrates, artificial ingredients, preservatives, binders, fillers and MSG. Another example is Buddha Bowl Foods’ Himalayan Pink Organic Popcorn, which vows it’s made from “ingredients as pure as the Himalayas.” The product is gluten-free and its ingredients list includes only three items: non-GMO popcorn, organic extra virgin coconut oil, and Himalayan salt. “Healthier” Products Some new products are targeting consumers who still want to indulge, but are looking to do so a little “healthier.” For instance, Jelly Belly showcased its organic jelly beans and fruit snacks, while The Hershey Co. highlighted its Simply 5 Syrup that health-conscious consumers can pour atop their favorite ice cream flavors. Bites, Barks & Thins Also along the lines of better-for-you, bites, barks and thins were more prominent at this year’s show. Described as a “revolutionary, edible coffee treat,” Krispy Kreme Coffee Thins infuse the doughnut chain’s signature coffee into chocolate thins. Varieties include Caramel Macchiato, Original Glazed, and Cappuccino. Kitchen-Inspired Flavors Kitchen-inspired flavors like pumpkin, fiery spices and international tastes are making their way into candy and snack items. Cinnamon, sriracha and chimichurri packed a punch on the expo floor, while coffee, espresso and cappuccino flavors made their presence known, too. Seasonal & Occasion-Based Marketing In addition to events-related tie-ins with

2. 3. 4. 5.

This year’s event spanned two halls in Chicago’s McCormick place.

Super Bowl and summer blockbuster movies, Mars Chocolate North America representatives discussed the “fifth season” (alongside Valentine’s Day, Easter, Halloween and Christmas), which takes place between Memorial Day and the Fourth of July. Company representatives said this “fifth season” is wide open for promotional opportunities. Mars also shared further research into its “Transaction Zone Vision,” the result of a researchdriven approach to driving incremental purchases across all products that are typically found at the checkout. Mars and Wrigley found that shoppers have three primary mindsets: refresh, reward and remind. By merchandising to properly fulfill these mindsets, retailers can boost their incremental sales. Along with its seasonal efforts, The Hershey Co. spotlighted its promotion of occasion-based treating. Its “Hello Happy. Hello Hershey’s” campaign is founded on the idea that happiness is a choice and Hershey’s products can facilitate sweet, intimate and personal moments of happiness. Jerky, Jerky, Everywhere It seemed like you couldn’t walk down one aisle of this year’s Sweets & Snacks Expo without running into a jerky supplier’s booth. Format and flavor innovation were on display, such as with Hershey’s Krave bars, which combine dried fruit and quinoa with turkey, beef or pork to create a sweet and savory profile. Jack Link’s not only showcased a variety of new flavors (Korean BBQ, Sweet BBQ and Whiskey Glaze, to name a few), but the company also debuted its Lorissa’s Kitchen jerky brand, which launched in March. The “farm-totable” brand is more of a “lifestyle brand,” a company representative told CSNews. While the traditional Jack Link’s brand targets males and the classic jerky lover, Lorissa’s Kitchen focuses more on female consumers and those looking for a refined jerky experience. CSN

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“ON THE GO” C-STORE SOLUTIONS Mobile POS provides a competitive edge in today’s consumer centric, quick serve environments. As many of their names imply, convenience stores are about being “on the go”—food is for immediate consumption, fuel customers pay at the pump and mobile payment solutions are growing. Nobody wants to wait long for anything. This fast-paced, consumer centric environment is making traditional stationary POS systems only a XT Series partial solution. There will always be a need for durable and reliable touch screen terminals for C-Store POS. But for today’s consumer POS must be additionally flexible and functionally advanced. This requires a hybrid solution that can be stationary, mobile and/or self-serve to varying degrees. The 2017 EMV compliance deadline is looming, meaning many retailers must upgrade their systems. Retailers whose POS platforms are currently “standing still” can benefit from incorporating a mobile POS hardware solution that also meets heightened security standards.

MOBILE FLEXIBILITY FOR SMALL SPACES Since 1984, Posiflex has been developing small formfactor POS hardware. Products operate in c-stores, truck stops and fueling stations. Hybrid mobile and fixed terminals marry low-cost point-of-entry with performance: • About the size of a cable TV box, the TX Series is a mini-PC. It can replace a standard PC and a keyboard and monitor can be added. The TX can be wall- or undercounter mounted for digital display or POS. • The HS Series is a fully integrated, small form factor terminal. Its 10-inch monitor, MSR and modular printer ADVERTORIAL

for easy replacement make it convenient where counter space is limited. • The Posiflex MT4008 bridges the mobile/tablet gap. Retailers can line-bust, check information on the store floor, scan inventory and establish a POS terminal with one hardware platform. The MT4008 transforms from a tablet to a retail-ready barcode scanner. It also connects to a docking station with a fully integrated printer to function as a traditional POS terminal. • XT Series touch screen terminals have a long legacy of reliability needed for 24/7 C-store operations, running virtually any Window’s software. Many models are spill / dust resistant for an extra level of durability to assure maximum uptime.

A POPULAR & GROWING CHANNEL Solutions let c-stores improve performance in a segment that shows no signs of slowing down. According to NACS, convenience stores generated record in-store 2015 sales of nearly $225.8 billion. Overall industry sales for 2015 reached $574.8 billion, attesting to shoppers’ channel affinity. As of December 31, 2015, there were 154,195 U.S. c-stores. These account for slightly more than 33.9% of all retail outlets, said Nielsen. C-stores far outnumber other format locations, including drug (41,799 stores), supermarket/supercenter (41,529) and dollar (26,572). C-stores need inventive ways to serve consumers. This can be done through omnichannel HS Series experiences that process transactions through different POS terminals. Hence, c-stores of all sizes can leverage the smaller form factor Posiflex POS hardware terminals to increase sales. Contact Posiflex for more Info: 1.888.968.1668 30689 Huntwood Ave. Hayward, CA 94544 Ph: 1.888.968.1668

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HOTPRODUCTS Special Advertising Section

Foodservice Technology

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HOTPRODUCTS Special Advertising Section

Gourmet Pet Treats

General Merchandise

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CLASSIFIED Credit Card Processing / Merchant Services

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CLASSIFIED Credit Card Processing / Merchant Service

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CLASSIFIED C-Store Recruiters

ATMs

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CLASSIFIED Air Vacs

Pre-Paid/Cellular Products

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CLASSIFIED Petroleum/Equiment

ATMs

Plastics

Sunglasses

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CLASSIFIED Age Verifier / POS

General Merchandise

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

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

ADINDEX 7-Eleven.....................................................31 Advance Pierre ..........................................49....................................BIGAZadvancepierre.com Altria Group Distribution Co ....................2,3,35 .............................www.insightsc3m.com

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

Anchor Packaging.....................................92....................................www.anchorpac.com Autofry........................................................56....................................800.AUTO-FRY BakeNJoy....................................................57 ....................................www.bakenjoy.com BIC ..............................................................5 ......................................www.biclighter.com Campbell’s .................................................91 Cash Depot.................................................18 ....................................www.cdlatm.com Chef’s Cut Real Jerky................................65 Cheyenne Intl............................................21 ....................................www.cheyenneintl.com Chobani ......................................................53....................................www.chobani.com CST Brands ................................................37 ....................................www.cstbrands.com Del Monte Fresh Produce NA Inc. ...........61 ....................................www.freshdelmonte.com Eby-Brown.................................................29 Imageworks ...............................................13 ....................................www.imageworksdisplay.com Iowa Rotocast ............................................19 ....................................www.irpinc.com Kroger.........................................................41 KT&G...........................................................73 & 75...........................877.580.5506

Peter Hoyt President & CEO 773-992-4456 phoyt@p2pi.org Ned Bardic Chief Customer Officer 224-632-8244 nbardic@stagnitomail.com Korry Stagnito Chief Brand Officer 224-632-8171 kstagnito@stagnitomail.com Ron Lowy Group Brand Director 330-840-9557 rlowy@stagnitomail.com Michael Hatherill Business Development Manager 201-855-7610 mhatherhill@stagnitomail.com

Kum & Go...................................................27 ....................................877.580.5506 Logic Technologies ...................................10-11 ..............................www.logicecig.com McKee/Little Debbie .................................46-47..............................www.littledebbiecstore.com

Terry Kanganis Account Executive & Classified Advertising 201-855-7615 tkanganis@stagnitomail.com

McLane Company......................................15 ....................................www.mclaneco.com Mondelez International............................25 Paytronix ....................................................69....................................www.paytronix.com Path to Purchase .......................................71 ....................................www.path2purchaseexpo.com Phillip’s.......................................................7 ......................................www.Beyond.76.com Posiflex .......................................................78 ....................................www.PosiflexUSA.com Profoods/PFS Brands/Champs Chicken .54,55 ..............................PFSbrands.com/partner RJ Reynolds Tobacco Company ..............9,33.................................www.engagetradepartners.com Rutter’s .......................................................43

Rachel McGaffigan Northeast Regional Sales Manager 508-385-2524 rmcgaffigan@stagnitomail.com Dian Melius Western Regional Sales Manager 949-387-1451 dmelius@stagnitomail.com Roz Gilman Ad Manager 314-403-4753 rgilman@stagnitomail.com

Swedish Match..........................................15 ....................................customerservice@smna.com Swisher ......................................................17.....................................www.swishersweets.com Tillamook Country Smoker, Inc...............63....................................www.tcsjerky.com Tyson Foods...............................................51 ....................................www.tysonconvenience.com Universal Merchant Services...................Outsert ............................www.nyab.com

Stagnito Business Information U.S. brands:

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

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GETTINGTOTHECORE

Coffee Inclinations A peek into some of the preferences of java purchasers

offee drinkers tend to be a particular bunch when it comes to the type of coffee they like and how it is prepared. To learn more about such preferences, Carbonview Research, sister company of Convenience Store News, recently surveyed 502 U.S. consumers who purchase ready-to-drink coffee at least once a month from any retail outlet. Among the interesting findings: Purchasers at c-stores, more than any other outlet (fastfood restaurants, doughnut shops, coffee shops, etc.), like to make their own coffee as opposed to having it prepared for them by a barista.

How often do you purchase something to eat along with your ready-to-drink coffee beverage?*

(Very often/often) TOTAL

(Base) Morning Mid-dayy Afternoon Evening Late night

By puRChASE VENuE: CONVENIENCE FAST-FOOD STORES RESTAuRANTS

(502) 54.4% 31.7% 34.1% 27.4% 37.6%

(253) 54.2% 33.3% 39.3% 27.8% 38.0%

BAKERy CAFES

(246) 64.6% 39.0% 38.3% 36.2% 42.4%

*Includes regular brewed coffee, a specialty drink like a latte or cappuccino, a bottled or canned coffee drink Multiple responses accepted

(120) 66.7% 40.7% 42.3% 32.0% 41.3%

DONuT ShOpS

COFFEE ShOpS

(244) 64.8% 37.7% 36.9% 30.2% 40.5%

(367) 55.3% 33.3% 35.3% 25.8% 38.8%

Morning time is when convenience store shoppers are most likely to buy food along with their coffee beverage.

What type of roast do you prefer for brewed coffee? TOTAL

(Base) Medium Dark Light

(444) 60.1% 30.9 9.0

By GENDER: MALE

(229) 60.7% 34.5 4.8

FEMALE

By AGE: 18-24

25-34

35-44

45-54

55-64

65+

(215) 59.5% 27.0 13.5

(70) 58.6% 28.6 12.8

(80) 72.5% 20.0 7.5

(88) 63.7% 29.5 6.8

(80) 62.5% 28.8 8.7

(78) 47.4% 41.1 11.5

(48) 52.0% 41.7 6.3

When purchasing coffee beverages, which of the following do you prefer? (Base)

TOTAL

CONVENIENCE STORE puRChASER

(502) (269) Barista-made 61.4% 51.7% 48.3 Make-your-own 38.6

Coffee buyers as a whole prefer baristamade beverages vs. make-your-own. However, convenience store coffee buyers are more evenly split in their preferences.

What other items do you typically buy when you purchase coffee beverages? (Base) Bakeryy Prepared food (sandwiches, hot

or cold entrees, etc.)

Packaged sweet snacks Bottled water Saltyy snacks Candy/gum y Canned/bottled drinks

(soda, juice, tea, energy drinks, etc.)

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.

Lotteryy tickets Newspaper Cigarettes Other tobacco products

Bakery, prepared foods like a sandwich, and packaged sweet snacks are the three most popular items purchased by c-store shoppers along with their coffee beverage.

(cigars, smokeless, etc.)

Beer Other I typically y y onlyy purchase myy coffee beverage Multiple responses accepted

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

While both men and women prefer a medium roast, males are more open to a dark roast and females to a light roast. A medium roast is also preferred across all age groups.

TOTAL

CONVENIENCE STORE puRChASER

(502) 52.6%

(269) 52.4%

38.2% 23.7% 18.9% 18.3% 13.9%

45.4% 29.4% 23.0% 24.2% 19.0%

13.7% 12.5% 11.2% 7.0%

17.5% 17.1% 15.2% 10.8%

3.0% 2.4% 2.8% 15.7%

3.7% 3.3% 3.3% 10.4%

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Editor’s Note

Grandfather May Not Know Best Deeming rule’s Feb. 15, 2007 predicate date could put the brakes on transforming tobacco

n April 2011, the Food and Drug Administration (FDA) announced it would regulate electronic cigarettes as tobacco products under the Family Smoking Prevention and Tobacco Control Act. Five years later, in early May, the agency made good on its promise. While the tobacco industry had hoped for the best and braced for the worst, the FDA’s final deeming rule — and its host of initial regulations — was as bad as some feared, especially when it comes to innovation. As the tobacco industry explores its future and the role harm reduction will play in it, innovation has been key for the tobacco companies. Leading the way has been electronic cigarettes and vapor products; however, the deeming rule could bring this segment to its knees. The final rule, which becomes effective Aug. 8, expands the FDA’s authority to regulate all tobacco products, including electronic cigarettes, cigars, hookah tobacco and pipe tobacco. The rule includes several provisions that make sense — prohibiting the sale of products to anyone under 18 years old, age verification by photo ID, and a ban on the distribution of free samples. These provisions are not surprising given the FDA’s existing regulations on cigarettes and smokeless tobacco. But then comes a major sticking point: the Feb. 15, 2007 grandfather date. This is the same date

used for cigarettes and smokeless tobacco, but many argue this date does not make sense for e-cigarette and vapor products, which were virtually nonexistent nine years ago. As a result of this predicate date, most new products will require a pre-market tobacco application to the FDA. According to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, “the applications could By Melissa Kress, Senior Editor take an average of 1,500 hours to complete, which is clearly a burden to the industry and could realistically slow down or stifle innovation.” Another major point of contention in the final deeming rule is the inclusion of premium cigars. Even though the cigar industry has argued that premium cigars are different than other cigars and should not be treated the same, Mitch Zeller, director of the FDA’s Center for Tobacco Products (CTP), said the CTP could not find any public health justifications to exempt them. Predictably, the deeming rule has sparked several lawsuits from all segments. What this means is after five years of waiting, the wait is still not actually over — far from it.

WWW.CSNEWS.COM | Guide to Tobacco 3

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Contents

PSHOTS

3 | Editofr’asthNoeter May

Grand Best Not Know . 15, 2007

’s Feb Deeming rulete could put the brakes a d te a predic ing tobacco. on transform

8 | CoverteSrtotryhe

Life Af ule: Act 1wsuits, R g in m e e D -up la more. introduces lit e nd New storylination, overseas gains a v o n in stalled

6 Guide to Tobacco | WWW.CSNEWS.COM

SNA SEGMENT

RESULTS OF THE COLLABORATION BETWEEN TWO GREAT COMPANIES

Cover Story

Staff Report Store News ce en ni ve A Con

8 Guide to Tobacco | WWW.CSNEWS.COM

he second half of this year can now go down in the tobacco history books as 2016 A.D. — After Deeming, that is, referring to the Food and Drug Administration’s (FDA) final deeming rule announced on May 5 and going into effect Aug. 8. Yes, there is life after deeming, but it is a changed one — and certain to change even more in the months and years ahead as this first act unfolds. Exactly how it will unfold is up for debate. Act I starts up in May, more than two years after the FDA first announced its deeming rule proposal. The opening scene is the agency finalizing the deeming rule, which extends its authority to electronic cigarettes/e-vapor, premium and domestic cigars, pipe tobacco, hookah tobacco, dissolvable tobacco products and nicotine gels. The final plan is met with industry relief that the wait is finally over, but then angst that the uncertainty is far from over. At this time, what is certain for retailers who sell e-vapor and the other “deemed” tobacco products mentioned above is as of Aug. 8, a minimum age of sale (18 years old) is required, vending machine sales are prohibited, and sampling with consumers is prohibited. The regulations for manufacturers, however, are a lot more complex, and certain to affect retailers and the entire industry moving forward. Basically, as it stands now, manufacturers of deemed products must submit ingredient lists for each product (deadline is Feb. 8, 2017) and report harmful or potentially harmful constituents, known as HPHCs, for each product (deadline is Aug. 8, 2019). A registration of tobacco product manufacturing facilities and a list of all tobacco products manufactured is required before Dec. 31 of each year. Manufacturers must also remove modified-risk descriptors (e.g., “light,” “low” and “mild”) from products. And most taxing of all, manufacturers of deemed products must file substantial equivalency (SE) applications — deadline is Feb. 8, 2019 — or pre-market tobacco applications (PMTA) — deadline is Aug. 8, 2019 — for products introduced into the marketplace after Feb. 15, 2007, which is known as the predicate or grandfather date under the final deeming rule. On the plus side for retailers, the FDA did not prohibit retail self-service displays of the deemed products. On the plus side for manufacturers, the agency did not ban flavored deemed products. Still, these pluses could turn into minuses because the final deeming rule is an enabling regulation, mean-

ing the FDA can issue further regulations down the road to meet the agency’s standard of protecting the public health; terminology that many in the industry find ambiguous. Nevertheless, the FDA indicated it may consider banning retail self-service displays in the future if the agency believes it would be appropriate to further limit youth access to tobacco. What’s more, the FDA stated it intends to issue a proposed product standard that, if finalized and adopted, would eliminate characterizing flavors in all cigars, including cigarillos and little cigars, according to Thomas Briant, executive director and legal counsel for NATO, the National Association of Tobacco Outlets. So, with this new regulation in mind, here are some of the developing scenes within the first act of this changing industry, as insiders see it:

Scene 1: Lit-Up Litigation Almost immediately after the FDA’s announcement of its final deeming rule, lawsuits against the agency sprang up. Tobacco industry analyst Nik Modi from RBC Capital Markets called litigation an “inevitable” part of the picture now. By the end of June, five manufacturer lawsuits were filed against the new regulations, seeking to overturn either the entire set of deeming regulations, or to prevent the enforcement of a specific regulation with respect to particular products, Briant relayed. Boston University School of Public Health Professor Michael Siegel maintains that the lawsuits present “strong and solid” arguments against the deeming regulations, including that the FDA, by applying the Tobacco Control Act of 2009 to e-vapor products, exceeds the “very limited and specific scope of authority” that it was granted by Congress under the Act. Siegel also said the agency failed to conduct a proper cost-benefit analysis; that its regulatory scheme lacks a rational basis; and that the regulations infringe upon the free speech rights of companies by prohibiting them from making “truthful, non-misleading” claims about their products without any legitimate government interest in doing so. Even so, Bryan Haynes, a partner with law firm Troutman Sanders, recently cautioned the industry against relying on the courts to save the day, or the industry for that matter. “It is too early to tell how these cases will play out, but I can tell you from experience that cases against the government are hard to win,” Haynes noted, speaking to a crowd of vapor manufacturers and retailers at the Vapor Expo International show, taking

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place this June in Rosemont, Ill. “The rules are heavily skewed toward government.” More recently in July, litigation sprang up from the retailer sector. Three vape shops in Alabama filed a lawsuit against the FDA, claiming the new rules for e-vapor products will “annihilate” the vaping industry rather than regulate it. Unlike the other pending suits against the deeming rule, this one is the only one so far demanding a jury trial, according to media reports. According to their complaint, the regulatory expenses would cost these businesses between $390,000 and $790,000 upfront and at least $450,000 annually. One vape shop owner said her business brings in just about $186,000 a year. Another said he doesn’t see vape shops making it, and that he is not opposed to regulation but wants it to be fair.

clerks wear] white jackets,” he stated. “It’s something we should begin doing as an industry to go pro-health.”

Scene 3: First Freeze, Then Prohibition

The way Greg Conley, president of the American Vaping Association, sees it, the freeze of the market on Aug. 8 of this year will lead to prohibition two to three years from now when there will be “various ways products in your store become illegal.” He calls the PMTA process the “Millionaires’ Lottery” and believes only a minute percentage of manufacturers will win. Once the majority of products are out, “for the first time ever in this industry, people will have to turn to the black market,” Conley predicts, adding the industry is already in trouble, largely due to the panic the deeming rule and its regulations have created. “Companies are lying to vape shops about their products, saying they’ve already received FDA Scene 2: Vape Shop Clinics? approval. The market is full of companies trying to Where these litigating vape shops (and the vape shop make a buck before the deadlines; others are trying to channel overall) is most affectrush product to market,” ed by the deeming rule s ie n a he said. “Then, of course, is in the e-liquids of comp l l u f is there are 20 percent to 40 category. rket ore f e b k c “The ma percent that are actually ake a bu g m in y o r t t g doing things the right way, tryin ers are h t o ; s e but [the FDA’s] Mitch dlin ket.” r a the dea m o n o t Zeller and the various roduct rican Vaping Associati prohibitionists are p h s u r doing to Ame Conley, g re G everything in their power to stop the industry — from surviving.” After meeting with Congress, Conley said he does have faith “that we will get that predicate date moved. Then, it becomes a new category that’s sustainable in the long run.” Vape shops that mix their own liquids qualify as small manufacturers and are thereby subject to the same pre-market costs — ranging between approximately Scene 4: The ‘Big’ Advantage $800,000 and $1.2 million in the first two years, by Essentially, as some analysts see it, the Big Tobacco some estimations. companies are the only ones with the resources needed The aforementioned vape shop lawsuit aside, vape to survive the FDA’s new regulations. shops that currently mix their own e-liquids will not Initially, vapor caught the traditional cigarette busibe doing so much longer, according to Vivien Azer, ness and Big Tobacco off-guard a bit, according to managing director and senior tobacco research anaMichael Lavery, director and senior tobacco analyst at lyst for Cowen and Co. Instead, she said they will be CLSA, a brokerage and investment group. He points out sourcing liquid only from FDA-approved manufacturthat just before Lorillard Inc. bought the blu brand, 99 ers over time. percent of the business was coming from combustible Thinking outside the box, Tobacco Merchants cigarette users, who helped blu achieve year-over-year Association President Farrell Delman sees vape shops growth of more than 40 percent at one point. This was cementing their future viability through a pro-health when blu and other e-cig players were becoming a giant industry movement. “I would suggest that…vape shops threat to the Big Tobacco companies. ought to be set up as smoking cessation clinics. [They] “It’s a little bit ironic now that deeming regs favor bigshould look like [they’re] in the health business [where ger players who are savvy with regulation and have more

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resources,” Lavery said. “It’s funny how we got here. Unwittingly now, they are the ones best-positioned to succeed. And competitive dynamics could change now that the bigger companies have more of a vested interest. If there is further consolidation among com“Tobacco is a scale business, and petitors, it might get a little bit easier to make money e-cigs are no different. We need to in the category.” get more devices in people’s hands Sharing this sentiment is Bill Marshall, vice president and senior tobacco analyst with banking and to drive profitability. What gets us to financial services company Barclays. “If you asked category growth is innovation, which me two years ago, I thought large tobacco companies is now stifled a bit.” would have waved a magic wand if they could to — Vivian Azer, Cowen & Co. make vapor go away, knowing they weren’t going to get their fair share,” he said. “A couple of years later, Reynolds wants to see progress and is moving down the risk continuum in the category. It bodes well for the big players. It will get more challenging for smaller companies, such as R.J. Reynolds, “had a target to get the players; not impossible, but it is no longer a situation where next-gen product profitable, but will now have to back off,” the larger ones want it to disappear.” noted Azer. “Tobacco is a scale business, and e-cigs are no different. We need to get more devices in people’s hands to Scene 5: Stalled Innovation A particular scene in Act I that’s drawing a lot of attention is drive profitability. What gets us to category growth is innovation, which is now stifled a bit.” the impact of the deeming rule on innovation. Analysts say Realizing that consumers in the category are thanks to the terms of the finalized rule, innovation is now “always looking for more and what’s next,” Barclays’ stalled. In fact, they have opined that the promising heatMarshall says there is speculation on larger companies not-burn technology will lay in wait for at least another acquiring innovative e-vapor companies (as opposed to three years before making it to the U.S. market. e-cig companies), as the situation progresses. “We won’t see it here before 2019 — we think that’s the most likely date,” stated Cowen and Co.’s Azer. She is basing this somewhat on the “process Scene 6: Overseas Gains Ground we’ve seen Swedish Match go through” with its so-far- Meanwhile, outside the United States, there is undoubtunapproved Modified Risk Tobacco Product (MRTP) edly life after the deeming rule. The new FDA regulations application for its General brand of snus. (Swedish have no bearing on overseas vapor markets. Match did, however, receive FDA approval to now American Enterprise Institute resident scholar market improved snus products long on the market in Sally Satel recently wrote in Forbes that in the United Sweden on U.S. shelves, through a PMTA.) Kingdom, where the Royal College of Physicians in Heat-not-burn is “a truly novel innovation, and April released a report that considers e-vapor a harm because there’s no predicate, we don’t know what framereduction strategy, policymakers are “years ahead of work [the FDA] will base it on,” according to Azer. [the U.S.] in pursuing a revolution in nicotine delivery, Lavery of CLSA, too, thinks sometime around 2019 while the FDA is protecting the cigarette market and is the best-case scenario for heat-not-burn. Substantial crushing the e-vapor industry with its final deeming equivalency applications “are moving more quickly rule on products that were not previously regulated.” now, but Swedish Match had a couple of MRTPs In the U.K., even with regulation from the EU that are even more difficult to get through — it’s like Tobacco Products Directive, most products will remain brand-new activity,” he explained. “Anyone who is on the market, innovation will continue, more smokfollowing the government and the FDA knows that ers will switch to vaping, and smoking will continue to nothing is quick to go through. Usually, no matter decline, strategic consultancy Clarityse reported. what they say, it takes significantly longer.” Analysts say just because innovation stops in the Beyond heat-not-burn, the industry consensus is that the U.S. as of Aug. 8, that doesn’t mean it stops elsewhere. bigger picture of e-vapor being a truly profitable category is As one noted, “China will still continue with countries largely stalled now given the new regulations. Even the big that are not frozen.” CSN

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Cigarettes

Cigarette Sales & Units

Oh, what a difference a year makes. The combustible cigarettes market left its flat ways behind in 2015, seeing relatively robust growth in dollar sales and something on the plus side in unit u volume. The categoryâ&#x20AC;&#x2122;s performance continued to be up for the first half of 2016, but only in dollar sales and a at a reduced growth rate vs. the year-ago period. Unit sales were back to being down. 2015 DOLLAR SALES % cHAngE (in millions) VS. YEAR Ag gO

Premium Branded discount Subgeneric/private label Fourth tier Imports TOTAL

$42,144.7 7,511.72 2,534.35 242.75 1.66 $52,435.2

4.1% 3.1 1.4 11.0 6.7 3.8%

2015 UnIT VOLUME % cHAngE (in millions) VS. YEAR Ag gO

6,395.6 1,352.7 450.8 44.0 0.2 8,243.2

FIRST HALF 2016 FIRST HALF 2016 DOLLAR SALES % cHAngE UnIT VOLUME % cHAngEE (in millions) VS. YEAR Ag gO (in millions) VS. YEAR Ag gO

1.6% 0.8 -2.2 12.8 3.8 1.3%

$19,182.9 2.1% 3,387.8 1.3 1,194.5 5.7 94.7 -13.0 0.7 -2.7 $23,860.6 2.1%

2,868.1 591.7 205.6 16.2 0.1 3,681.8

-0.6% -2.7 1.2 -19.8 -1.7 -1.0%

Source: Nielsen; Convenience Store News Market Research, 2016

Cigarette Segment Share Consumers traded up to premium brands last year, perhaps thanks to more discretionary income from lower gas prices. Premium made up 80.4 percent of the dollar-share pie (up from 80.2 percent in 2014) and 77.6 percent of the unit-share pie (up from 77.4 percent). So far this year, premium maintained its dollar share while inching up a bit more in unit share (to 77.9 percent). Premium

Branded discount

DOLLAR SALES

Subgeneric/private label

Fourth tier

UNIT VOLUME

0.5% 4.8% 14.3%

DOLLAR SALES

UNIT VOLUME

FIRST HALF 2016

0.4% 5.0%

0.5% 5.5%

2015

Imports

14.2%

16.4% 80.4%

0.4% 5.6%

16.1%

77.6%

80.4%

77.9%

Source: Nielsen Scantrak Convenience

Cigarette Sales & Units by Month

Since the beginning of 2014, cigarette gains and losses have been simultaneous in regards to dollar sales and unit volume. For instance, the biggest dip of the 30-month period, which occurred in January 2015, consisted of a 4.4-percent decrease in dollar sales alongside a 4.8-percent decrease in unit volume.

Source: Nielsen; Convenience Store News Market Research, 2016

14 Guide to Tobacco | WWW.CSNEWS.COM

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Percent change in dollar sales Percent change in unit sales

02/15/14

6 5 4 3 2 1 0 -1 -2 -3 -4 -5

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Cigarettes

Cigarette Share by Package Size (First Half 2016) Cigarette Share by Region (First Half 2016) Itâ&#x20AC;&#x2122;s clear that packs (containing 20 cigarettes) are the primo packaging choice across the cigarettes category, comprising 98.3 percent of units for the first half of this year. The segment with the largest unit share of cartons (comprising 200 cigarettes) is subgeneric/private label.

Regionally speaking, cigarettes are losing share in the hightaxing Northeast, where share was down slightly in both dollar sales and unit volume for the first half of this year. Conversely, the West enjoyed slight gains, now exceeding 13-percent share in both metrics.

PERc cEnT OF DOLLAR SALES PAck (20) cARTOn (200) ALL OTHER

Imports Premium Branded discount Fourth tier Subgeneric/private label TOTAL

96.5% 89.8% 84.5% 79.4% 78.8% 88.4%

3.5% 10.1% 15.4% 20.6% 21.2% 11.4%

Northeast

0.0% 0.1% 0.1% 0.0% 0.0% 0.1%

South

Midwest

DOLLAR SALES

13.1%

West

UNIT VOLUME

13.1%

18.2%

14.9%

PERc cEnT OF UnIT VOLUME PAck (20) cARTOn (200) ALL OTHER

Imports Premium Branded discount Fourth tier Subgeneric/private label TOTAL

99.5% 98.6% 97.9% 97.2% 96.6% 98.3%

0.5% 1.3% 2.0% 2.8% 3.4% 1.5%

26.4%

0.0% 0.1% 0.1% 0.0% 0.0% 0.1%

25.5% 42.4%

46.5%

Source: Nielsen; Convenience Store News Market Research, 2016

Cigarette Competitive Channel Market Share Slow and steady wins the race, as the convenience channel can attest. C-stores not only remain the supreme destination for cigarettes, but the channel keeps steadily picking up share in dollar sales (reaching almost 89 percent) and in unit volume (hitting just shy of 90 percent). Convenience

Food

Drug

88.68%

88.23%

89.92%

89.53%

6.71%

6.83%

5.85%

5.88%

4.61% FIRST HALF 2016 DOLLAR SALES Source: Nielsen; Convenience Store News Market Research, 2016

16 Guide to Tobacco | WWW.CSNEWS.COM

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4.23% FIRST HALF 2016 UnIT VOLUME

4.58% FIRST HALF 2015 UnIT VOLUME

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Smokeless

Moist Smokeless Sales & Units

As more young adults switch to non-cigarette tobacco alternatives, moist smokeless smokeles is a good-news segment that just keeps getting better. Both full-year 2015 and the first half of 2016 witnessed wit gains of 6.5 percent in dollar sales, while unit volume was up 2.1 percent in 2015 and 1.6 percent in i the first half of 2016.

Dollar sales (in millions) Unit volume (in millions)

2015

2014

$4,974.9 1,112.2

$4,673.0 1,089.0

% change

FIRst halFF 2016

6.5% 2.1%

$2,383.0 514.0

FIRst halFF 2015 % change

$2,238.5 505.9

6.5% 1.6%

Source: Nielsen; Convenience Store News Market Research, 2016

Moist Smokeless Smokel Share are by Region (First Half 2016) Every region experienced slight gains in share of dollar sales and unit volume in the first half of 2016 except the South, which still remains — by far — the top region for moist smokeless tobacco, holding about half the share.

Moist Smokeless Share by Package Size

Northeast

Canisters rule among the various moist smokeless package options and saw decent share gains in dollar sales and unit volume for the first half of this year. Canisters’ share of both metrics is in the 91-percent range. DollaR R sales FIRst halFF 2016 FIRst halFF 2015

Canister Bag Box All other

91.0% 3.3 2.6 3.1

91.5% 2.4 2.6 3.5

Midwest

West

DOLLAR SALES

15.5%

UnIIt VolU Ume FIRst halFF 2016 FIRst halFF 2015

88.8% 3.5 2.8 5.0

South

89.9% 2.7 2.9 4.6

UNIT VOLUME

11.2%

13.9%

25.9%

10.7%

26.0% 47.4%

49.4%

*All other consists of wraps, tubs, envelopes, sleeves, etc. Source: Nielsen; Convenience Store News Market Research, 2016 Source: Nielsen; Convenience Store News Market Research, 2016

Moist Smokeless Sales & Units by Month

Dips in dollar sales and unit volume don’t last long on a month-to-month basis for moist smokeless. The segment is more used to steady and consistent growth, as indicated by the past 30 months, during which only four months saw a more than 1-percent drop.

Percent change in dollar sales Percent change in unit sales

3 2 1 0 -1 -2 -3

Source: Nielsen; Convenience Store News Market Research, 2016

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Cigars

Cigar Sales & Units

Double-digit growth in unit volume coupled with solid gains in dollar sales indicate pricing prici is getting sturdier these days in the cigars segment and moving away from the intense buy-one-get-one deals, much to the delight of convenience store retailers. A continued shift toward higher-retail single SKUs is als also a positive factor.

Dollar sales (in millions) Unit volume (in millions)

2015

2014

% change

FIRst halFF 2016

$2,252.0 1,508.0

$2,167.0 1,371.4

3.9% 10.0%

$1,076.9 746.9

FIRst halFF 2015 % change

$1,013.3 667.6

6.3% 11.9%

Source: Nielsen; Convenience Store News Market Research, 2016

Cigar Share by Region g on (First Half 2016)

The warmer weather of the South is ideal for growing tobacco, and it shows in the regionâ&#x20AC;&#x2122;s cigar sales. The South not only commands well over half the segment share in dollars and units (actually, nearing 60 percent in unit volume), but its share continues to grow.

Cigar Share by Package Size

Envelopes/pouches are shrinking as the premiere package choice of c-store cigar customers. On the other hand, wraps (the typical packaging for single sticks) are growing nicely, even jumping past the unit share of envelopes/ pouches (34.7 percent vs. 27 percent). DollaR R sales FIRst halFF 2016 FIRst halFF 2015

Envelope Wrap Bag Box in wrap Box All other

25.6% 23.6 17.2 16.9 10.7 6.0

Northeast

27.0% 34.7 9.5 22.0 3.8 3.0

Midwest

West

DOLLAR SALES

UnIIt VolU Ume FIRst halFF 2016 FIRst halFF 2015

29.5% 21.0 15.2 18.9 10.2 5.2

South

12.8%

31.4% 29.5 8.7 23.9 3.7 2.8

UNIT VOLUME

13.8%

12.1%

18.8%

10.7%

17.7% 54.6%

Source: Nielsen; Convenience Store News Market Research, 2016

59.4%

Source: Nielsen; Convenience Store News Market Research, 2016

Cigar Sales & Units by Month

Cigars have long been a steady tobacco earner for the convenience channel and its sales numbers since 2014 show that. Over a 30-month period, the segment only showed major dollar sales and unit volume dips in the dead-of-winter month of February.

10 8

Percent change in dollar sales Percent change in unit sales

6 4 2 0 -2

Source: Nielsen; Convenience Store News Market Research, 2016

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E-Cigarettes

E-Cigarette Sales & Units

It appears negative consumer perception, the Food & Drug Administration’s deeming rule r and other tobacco product alternatives (including vapor) are all taking a toll on traditional e-cigarettes. So far this year, dollar sales are down 6.5 percent and unit volume is flat — a far cry from two years ago. 2015

Dollar sales (in millions) Unit volume (in millions)

$670.5 78.2

2014

% change

$648.3 62.7

3.4% 24.8%

FIRst halFF 2016

FIRst halFF 2015 % change

$316.0 38.4

$337.8 38.2

-6.5% 0.5%

Source: Nielsen; Convenience Store News Market Research, 2016

E-Cigarette Share S by Region

(First Half 2016) Share by region for e-cigarettes is much more evenly divided than the other tobacco segments. Still, the South leads, with nearly 35 percent dollar-sales share and 36 percent unit-volume share. The West’s share, however, is climbing at a bigger clip than any other region.

E-Cigarette Competitive Channel Market Share

Northeast

Convenience Drug Supermarket

88.93% 9.14% 1.94%

17.4%

UnIIt VolU Ume FIRst halFF 2016 FIRst halFF 2015

90.18% 7.81% 2.01%

90.64% 7.38% 1.99%

Midwest

DOLLAR SALES

Convenience stores have the “e-vantage” e vantage when it comes to channel share, capturing nearly 89 percent of dollar sales and nearly 91 percent of unit volume for the first six months of this year. These numbers do, however, reflect some share loss to drugstores, which have pulled away from traditional tobacco but are wisely latching on to tobacco’s electronic options. DollaR R sales FIRst halFF 2016 FIRst halFF 2015

South

West UNIT VOLUME

18.6%

26.7%

21.5%

22.5%

23.0%

91.97% 5.98% 2.05%

36.0%

34.5%

Source: Nielsen; Convenience Store News Market Research, 2016

E-Cigarette Sales & Units by Month

We’re not in 2014 anymore. The high gains (peaking in September of that year) and overall segment volatility of 2014 were replaced with much more modest but steady business in 2015. So far, e-cigarettes seem to be continuing the stability trend in 2016.

30 25

Percent change in dollar sales Percent change in unit sales

20 15 10 5 0 -5

Source: Nielsen; Convenience Store News Market Research, 2016

22 Guide to Tobacco | WWW.CSNEWS.COM

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06/06/15

05/09/15

04/11/15

03/14/15

02/14/15

01/17/15

12/20/14

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

-15

01/18/14

-10

Vaping pi

Vaping/E-Liquid Product Sales & Units The vaping/e-liquid products segment, which includes electronic cigarette cigare liquids, e-cigarette liquid capsules, electronic hookah liquid, vaporizer pen e-juice and more, mor last year experienced the hyper-gains that e-cigarettes did two years ago. However, the first half of this year paints a much different picture, as dollars are down 15.6 percent and units dow down 22.4 percent. Dollar sales (in millions) Unit volume (in millions)

2015

2014

% change

first half 2016

$60.7 6.7

$42.2 4.4

43.9% 53.9%

$24.9 2.5

first half 2015 % change

$29.5 3.3

-15.6% -22.4%

Source: Nielsen; Convenience Store News Market Research, 2016

Vaping/E-Liquid Product Vaping/E-Liq uct Share by Region (First Half 2016) The regional share pie for the first half of this year looks a lot different than it did this time last year. The South dropped out of the top spot and was replaced by the Northeast, which has a nearly 39-percent share of dollar sales and nearly 31-percent share of unit volume.

Vaping/E-Liquid Product Competitive Channel Market Share

Northeast

Convenience Drug Supermarket

90.05% 9.19 0.76

88.26% 9.92 1.81

West UNIT VOLUME

14.8%

17.3% 38.8%

30.5%

13.8%

Unit VolU Ume first half 2016 first half 2015

93.21% 6.40 0.39

Midwest

DOLLAR SALES

The convenience channel commands the lionâ&#x20AC;&#x2122;s share of vaping/e-liquid sales, though the numbers did drop a bit during the first half of this year as drugstores picked up some share. Still, convenience stores have 90-percent share of dollar sales and 88-percent share of unit volume. Dollar sales first half 2016 first half 2015

South

93.02% 6.46 0.53

15.6%

32.6%

Source: Nielsen; Convenience Store News Market Research, 2016

36.6%

Source: Nielsen; Convenience Store News Market Research, 2016

Vapid/E-Liquid Product Sales & Units by Month

Vaping/e-liquid products seem to be following in the footsteps of electronic cigarettes. As with e-cigs, 2014 was a phenomenal year of double-digit increases. But by 2015, the segment was experiencing single-digit drops. This year, that continues on a flatter scale.

25 20

Percent change in dollar sales Percent change in unit sales

15 10 5 0

06/04/16

05/07/16

04/09/16

03/12/16

02/13/16

01/16/16

12/19/15

11/21/15

10/24/15

09/26/15

08/29/15

08/01/15

07/04/15

06/06/15

05/09/15

04/11/15

03/14/15

02/14/15

01/17/15

12/20/14

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

-10

04/12/14

-5

Source: Nielsen; Convenience Store News Market Research, 2016

WWW.CSNEWS.COM | Guide to Tobacco 23

Pipe & Loose Tobacco

Pipe/Loose Tobacco Sales & Units

It seems convenience stores have finally caught on to the opportunity in pipe and loose tobacco. The high single-digit downturns of 2015 were replaced by solid upturns during the first half of this year. Dollar growth, though, is lagging unit growth.

Dollar sales (in millions) Unit volume (in millions)

2015

2014

% change

FIRST halFF 2016

$86.6 15.8

$91.3 17.3

-5.2% -8.4%

$43.2 7.5

FIRST halFF 2015 % change

$40.7 6.7

6.1% 11.9%

Source: Nielsen; Convenience Store News Market Research, 2016

Pipe/Loose Tobacco To Share by Region (First Half 2016)

It is not surprising that the highest-tax regions are realizing the biggest share gains in pipe and loose tobacco sales. The Northeast jumped four points in dollar share for the first half of this year, while the Midwest took a leap of more than three points.

Pipe/Loose Tobacco Competitive Channel Market Share

Northeast

Convenience Supermarket Drug

69.88% 24.24 5.88

68.33% 25.15 6.52

20.4%

UnIT VolU Ume FIRST halFF 2016 FIRST halFF 2015

74.19% 21.44 4.37

Midwest

DOLLAR SALES

Convenience stores capture nearly three-quarters of the unit volume share in this segment and about 70 percent of the dollar sales share. Both metrics climbed in the first half of this year at the expense of supermarkets and drugstores. DollaR R SaleS FIRST halFF 2016 FIRST halFF 2015

South

West UNIT VOLUME

28.1%

27.8%

22.1%

16.1%

34.0%

18.0%

70.67% 24.63 4.70

33.5%

Source: Nielsen; Convenience Store News Market Research, 2016

Pipe/Loose Tobacco Sales & Units by Month

This may be pipe and loose tobaccoâ&#x20AC;&#x2122;s year. April through the summer months typically shows increases in the segment, and this trend appears to be magnified this year.

15 12

Percent change in dollar sales Percent change in unit sales

9 6 3 0 -3

Source: Nielsen; Convenience Store News Market Research, 2016

24 Guide to Tobacco | WWW.CSNEWS.COM

06/04/16

05/07/16

04/09/16

03/12/16

02/13/16

01/16/16

12/19/15

11/21/15

10/24/15

09/26/15

08/29/15

08/01/15

07/04/15

06/06/15

05/09/15

04/11/15

03/14/15

02/14/15

01/17/15

12/20/14

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

-9

01/18/14

-6

s u n i o J ! r o s n o p s a as

Presenting Sponsor

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• Mentors • Store Managers • Single Store Owners

We will present the Top Women in Convenience awards at an elegant cocktail reception on Wednesday, October 19th immediately following the close of the NACS Show® Expo Floor.

Platinum Sponsor

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Contact your sales representative today to join us in celebrating these outstanding women and all they accomplished! Group Brand Director/SOUTHEAST, Ron Lowy, 330-840-9557, rlowy@stagnitomail.com WEST, Dian Melius, 949-387-1451, dmelius@stagnitomail.com NORTHEAST, Rachel McGaffigan, 508-385-2524, rmcgaffigan@stagnitomail.com MIDWEST, Michael Hatherill, 201-855-7610, mhatherill@stagnitomail.com CLASSIFIED, Terry Kanganis, 201-855-7615, tkanganis@stagnitomail.com

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Tobacco Accessories

Tobacco Accessories Sales & Units

Single-digit dollar sales growth (up 5.1 percent) was realized by tobacco accessories in 2015, but that waned a bit in the first half of this year (up 3.3 percent). Unit growth is also waning and even more mo so, with relatively flat volume so far this year vs. a rise of 3.4 percent in 2015.

Dollar sales (in millions) Unit volume (in millions)

2015

2014

% change

first half 2016

$555.7 347.1

$528.7 335.8

5.1% 3.4%

$254.2 155.9

first half 2015 % change

$246.2 155.2

3.3% 0.4%

Source: Nielsen; Convenience Store News Market Research, 2016

Tobacco Accessories Acces Share by Region (First Half 2016)

The share of tobacco accessories regionally was virtually unchanged the first half of this year compared to the first half of last year. The South sells the most traditional tobacco products so, naturally, it sells the most tobacco accessories â&#x20AC;&#x201D; not suprising given its leading c-store count. Northeast

Tobacco Accessories Competitive Channel Market Share

Convenience Drug Supermarket

99.27% 0.52 0.21

99.21% 0.58 0.21

Midwest

DOLLAR SALES

Convenience store customers purchase a lot of lighters. Itâ&#x20AC;&#x2122;s virtually no contest in the accessories segment when comparing c-store share to that of the drug and supermarket channels. Dollar sales first half 2016 first half 2015

South

20.8%

UNIT VOLUME

11.9%

20.1%

Unit VolU Ume first half 2016 first half 2015

99.69% 0.17 0.14

11.3%

21.3%

21.7%

99.67% 0.19 0.14

West

45.6%

Source: Nielsen; Convenience Store News Market Research, 2016

47.3%

Source: Nielsen; Convenience Store News Market Research, 2016

Tobacco Accessories Sales & Units by Month

Big spikes in the sale of tobacco accessories are back on the grid in 2016, after a mostly consistent year in 2015. During the first half of this year, the largest spike was seen in March, when dollar sales increased by 7.6 percent.

Source: Nielsen; Convenience Store News Market Research, 2016

26 Guide to Tobacco | WWW.CSNEWS.COM

06/04/16

05/07/16

04/09/16

03/12/16

02/13/16

01/16/16

12/19/15

11/21/15

10/24/15

09/26/15

08/29/15

08/01/15

07/04/15

06/06/15

05/09/15

04/11/15

03/14/15

02/14/15

01/17/15

12/20/14

11/22/14

10/25/14

09/27/14

08/30/14

08/02/14

07/05/14

06/07/14

05/10/14

04/12/14

03/15/14

02/15/14

Percent change in dollar sales Percent change in unit sales

01/18/14

12 10 8 6 4 2 0 -2 -4 -6 -8

BIC® Full-Size Lighter Only

Select Lighter Series

Eye-catching designs, quality, and reliability make BIC® America’s #1 Lighter*. Visit BICLighter.com.

*Source: IRI C-MULO for the 52 weeks ending September 27, 2015

BUILD ING WITH BEER ™

2 016 –17 INDUSTRY INSIGHTS A CO M P R E H E N S I V E L O O K AT U. S . B E E R I N D U S T R Y I N S I G H T S

3 4 6 12 PAG E

PAG E

Executive Letter

MillerCoors Advantage

Industry Overview

Off-premise 12

C -S TO R E S

E - CO M M E R C E

L I QU O R S TO R E S

D R U G & D O L L A R S TO R E S

24 G R O C E RY

38 PAG E

On-premise 38

O N - PR E M I S E OV E R V I E W

C A SUA L D I N I N G

N E I G H B O R H O O D BA R S

CO N C E SS I O N & C A S I N OS

S P O R T S BA R S

T R AV E L & L E I SU R E

We’re in a new and exciting era of American beer. You see it every day. More and more adult consumers are interested in beer, in trying different brands and styles, and in learning the stories behind their favorite beers. They’re cooking and pairing food with beer. Retailers who understand the real trends and business drivers of beer in their store – and not just the hype – have a huge opportunity to leverage this growing interest in beer. That’s where this Building with Beer™ Industry Insights Report comes in. This report will give you a look at how beer contributes to the overall success of your business and the satisfaction of your customers. It informs on opportunities and highlights key trends for each specific class of trade. At MillerCoors we are committed to leveraging the MillerCoors Advantage to grow the size and the value of your total beer category. A growing category benefits everyone – including your consumers. This report reflects this commitment. We hope you enjoy Building with Beer™ Industry Insights. To learn more about trends in your business and how MillerCoors can bring you tools and solutions to capitalize on them, we encourage you to reach out to your MillerCoors sales team. Thank you,

Kevin Doyle President, Sales and Distributor Operations MillerCoors

MillerCoors Advantage

Brands

Distributor Services

Innovation Profitable Category Growth

People

Business Building Solutions

M I L L E R C O O R S A D VA N TA G E

The MillerCoors Advantage is the bundle of goods and services we provide to grow the size and value of a retailerâ&#x20AC;&#x2122;s beer category. Brands We have a robust brand portfolio that includes industry-leading Premium American Lagers and Premium American Light Lagers, Crafts, Prestige Imports, Ciders, Flavored Malt Beverages and more.

Innovation We drive scalable and differentiated innovation that excites consumers, shapes the category and drives incremental value for your business.

Business Building Solutions We bring a suite of space and assortment, retail marketing, revenue management and other tools to help retailers drive shopper conversion.

People We have the most collaborative, passionate and value-add talent in beer with the skills to meet the needs of our dynamic industry and increasingly sophisticated retailers.

Distributor Services We have a network of entrepreneurial distributors who are constantly looking for new ways to help retailers build their beer business.

I INDUS TRY

OVERVIEW OV VERVIE EW BEER IS STRONG Consumers like i to celebrate and make beer

BEVER AGE ALCOHOL CONSUMPTION BY T YPE

part of their daily lives, as well as part of

Beer remains the alcoholic beverage

family and friend celebrations. Recession-

of choice with 83% of Total Alcohol

inspired trends of home entertainment

Beverage gallons sold, and 51% of TAB

have lasted, though people continue to

servings. 1

dine out and visit bars so the market is filled with beer-drinking occasions. Channels must evolve and stay ahead

BEVERAGE ALCOHOL CHOICE SHARE OF SERVINGS

of trends to meet consumer needs in

BEER

WINE

SPIRITS

different ways, most notably through

2006

56%

15%

29%

packaging and product innovation.

2015

51%

17%

32%

Evolving consumer preferences have changed the types of products and

Serving = 12oz beer, 5oz wine, 1.5oz spirits Internal MillerCoors Analysis, December 2015

packages that beer buyers are purchasing.

GALLON SALES (MIL) BY ALCOHOL TYPE

As a result, distributors, retailers and shoppers are faced with more choice than ever before within the beer category.

BEER

WINE

SPIRITS

This Building with Beerâ&#x201E;˘ Industry Insights

2013

6,400

773

496

Report provides a channel-by-channel

2014

6,400

781

503

breakdown of the shoppers and product

% CHANGE

0.0%

1.0%

1.5%

83.3%

10.2%

6.6%

trends affecting sales and changing the shape of the industry. 1. Internal MillerCoors Analysis, December 2015

% OF TAB

MillerCoors Industry Sales Projections, December 2015

INDUSTRY OVERVIEW

BREWERIES IN THE U.S.

NUMBER OF U.S. BREWERIES

The explosion in craft breweries and brewpubs has resulted in a historically high number of breweries in the U.S.,

6,0 0 0 5,0 0 0 4,0 0 0

nearly tripling in just the past six years.

3,0 0 0 2,0 0 0

• 5,525 breweries in 2015 1

1,0 0 0

• Nearly 75% of legal drinking age

T TB AC TIVE BREWER PERMITS BY STATE, 2015 COUNT

S TATE

COUNT

S TATE

COUNT

A L A BA M A

K EN T U CK Y

N O R T H DA KOTA

AL ASK A

LO U I S I A N A

OHIO

167

A R IZO N A

MAINE

OKL AHOMA

A RK A N SA S

M A RY L A N D

O REGO N

265

C A L I FO RN I A

714

M A SSACH US E T T S

107

PEN N S Y LVA N I A

256

CO LO R A D O

330

M I CH I GA N

291

RH O D E I S L A N D

M I N N E SOTA

127

SO U T H C A RO L I N A

CO N N EC TI CU T

2015

2011

20 08

20 05

20 02

Alcohol and Tobacco Tax and Trade Bureau, December 2015

• Nearly 3,000 beer distributors

S TATE

1999

1996

1993

1990

1984

brewery 1

1987

adults live within 10 miles of a

D EL AWA RE

M I SS I SS I PPI

SO U T H DA KOTA

D I S T R I C T O F CO LU M B I A

M I SSO U R I

T EN N E SS EE

FLO R I DA

186

M O N TA N A

TE X A S

193

GEO RGI A

N EB R A S K A

U TA H

H AWA I I

N E VA DA

V ERM O N T

I DA H O

N E W H A M PS H I RE

V I RGI N I A

141

ILLINOIS

180

N E W J ERS E Y

WA S H I N GTO N

352

INDIANA

135

N E W M E X I CO

W E S T V I RGI N I A

I OWA

N E W YO RK

294

W I SCO N S I N

177

K A N SA S

N O R T H C A RO L I N A

183

W YO M I N G

1. Alcohol and Tobacco Tax and Trade Bureau, December 2015 2. National Beer Wholesalers Association, December 2015

TOTAL

5,525

2015 Total U.S. Beer Sales SALES BY RETAIL CL ASS OF TR ADE Convenience stores are the leading retail outlet for beer. They fit the beer drinker demographic and are a destination for a broad range of beer occasions and are growing in sales as a result.

• Large format: Opportunity lies

• On-premise: Opportunity to

• Small format: Opportunity

in helping consumers navigate

arises in capturing conversion

manage core items versus

and understand the explosion

of shoppers in-store,

“the long tail” to capture the

of items within the set while

particularly for small-pack

power of velocity.

retaining space for profitable,

occasions, especially singles.

high-velocity brands. 8%

PERCENT OF TOTAL INDUSTRY 2015 (BBL VOLUME) CO N V E N I E N C E

DRUG

G RO C E RY

R E S TAU R A N T

LIQUOR

B A R / TAV E R N

MASS MERCH

OT H E R O N - PR E M I S E

OT H E R O F F - PR E M I S E

29%

2% 3% 3% 20%

23%

MillerCoors Estimates, December 2015

BEER STOCK KEEPING UNITS

A L L OT H E R S K U S

80% OF DOLL ARS

With the explosion in craft brands and flavored malt beverage variety, SKU count has increased more than 70% in the past five years. 1 Despite adding more than 6,900 SKUs since 2010, less than 3% of all SKUs contribute 80% of category dollars. 1

2 012

2 013

2 014

2 015

A LL OTH E R SKUS

11, 673

13 , 5 6 4

15 ,101

16 , 0 3 8

80% OF DOLL ARS

346

3 87

4 07

4 42

1. Nielsen Total U.S. xAOC 4 Years Ending Dec. 26, 2015

• Premium American Light Lager remains the largest segment across all channels with 47% of all beer volume sold. • Craft continues strong growth, but represents less than 10% of beer industry sales. • Flavored malt beverages are a new growth opportunity as legal drinking age millennial consumers seek increased variety in flavor profile.

% OF TOTAL

% CHANGE

PREMIUM AMERICAN LIGHT

47%

-3.1%

SUPER PREMIUM & PREMIUM

14%

-1.0%

TOTAL IMPORTED

14%

5.3%

CR AFT

15.2%

ECONOMY

-3.9%

FMB

6.3%

ICE

-4.2%

MALT LIQUOR

-3.3%

100%

-0.1%

SALES IN CASES (000)

TOTAL BEER

INDUSTRY OVERVIEW

BEER SALES BY SEGMENT

MillerCoors Industry Sales Projections, December 2015

SEGMENT OPPORTUNITIES TO SUPPORT OVER ALL BUSINESS All segments are important and have different opportunities to support overall business.

ABOVE PREMIUM

• Segment with double-digit growth

PREMIUM AMERICAN LIGHT

• Largest volume and revenue driver

ECONOMY

• Economy shoppers exhibit high brand loyalty and will shop elsewhere if their brand

• Innovation is key with millennials and new

• #1 beer choice in all consumer occasions

• Produces more revenue per

consumers, especially in flavored malt beverages

or pack is not available

• Turns quickly and the profit per case it

total distribution point than craft segment

provides gives the • Opportunity to recruit female consumers with

operator substantial cash flow

• Frequent trips and fast turns create high sales dollar volume

relevant products and marketing • High margin/profit

• Increases total basket

• Shoppers buy a 24-pack of

size for the retailer

economy beer on average every eight days

Seasonality Beer sales are seasonal. Summer leads in sales volume (May â&#x20AC;&#x201C; August, 37%).

SEASONALITY 269,000

259,000

262,000 255,000

250,0 0 0 242,000 237,000 AVER AGE

238,000

236,000

228,000 223,000

212,000

209,000

20 0,0 0 0 JANUARY

FEBRUARY

MARCH

APRIL

MAY

JUNE

JULY

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

MillerCoors Industry Sales Projections, December 2015

Summer selling season is imperative. More beer is sold in each summer week than the week leading up to the Professional Football Championship!

KEY HOLIDAY OCCASIONS

150

135 118

120

119

112 104

97 90

PROFESSIONAL FOOTBALL CHAMPIONSHIP 2 W/E 02/07/15

EASTER 2 W/E 04/11/15

0 Nielsen xAOC, December 2015 MillerCoors Industry Sales Projections, December 2015

MEMORIAL DAY 2 W/E 05/30/15

JULY 4TH 2 W/E 07/11/15

LABOR DAY 2 W/E 09/12/15

THANKSGIVING 1 W/E 11/28/15

XMAS/NY 3 W/E 01/02/16

B E E R I S A B E V E R AG E T H AT I S POPUL AR AMONG ALL SEGMENTS O F T H E P O P U L AT I O N .

INDUSTRY OVERVIEW

Beer Consumer Profile

Core beer consumer: MALE

AGES 28-54

WHITE

MODERATE INCOME

Beer consumer opportunity: FEMALE

AGES 28-54

WOMEN CONSUME 17 BILLION SERVINGS OF BEER ANNUALLY.

Conventional wisdom told us

One out of every four

The number of female

that beer must focus tightly

beers in America is

beer drinkers in this

on heavy users. A broader

consumed by a woman.

country is similar in size

perspective is imperative now,

Thatâ&#x20AC;&#x2122;s 17 billion bottles

to all millennial beer

and that includes reimagining

of beer every year.

drinkers and larger than

the role that women play in

the number of Latino

category growth.

beer drinkers.

Multicultural opportunity: LATINOS ARE:

21% OF LEGAL DRINKING AGE MILLENNIALS

90% OF POPULATION GROWTH

40% OF LATINO DRINKING OCCASIONS ARE PREMIUM AMERICAN LIGHT LAGER, NEARLY EQUAL TO IMPORTS, WHICH CONSTITUTE 46% OF OCCASIONS. U.S. diversity has reached a tipping point, resulting in a

Above Premium (mainly Mexican

shift in consumer attitudes, expectations and behaviors.

imports) represent approximately

90% of the U.S. population growth for the next few years

46% of beer volume, however,

will come from the Latino market. By 2023 Latinos will

Latinos also consume Premium

represent 19.2% of total legal drinking age consumers and

American Light Lagers at a

approximately 19.5% of beer volume vs. the current 16.5%.

considerable 40% volume.

Source: US Census Bureau, December 2015, MillerCoors Behavioral Tracking, December 2015

CONVENIENCE STORES

CO N V E N I E N C E S T O R E S CO N T I N U E TO GROW IN IMPORT TA ANCE As the primary stop for gas, beverages, cigarettes, snacks and dining on the run, c-stores fit todayâ&#x20AC;&#x2122;s fast-paced lifestyle and deliver an ever-increasing quality experience changing the way people shop in c-stores. Beer is critical to the c-store operator. With more than $16 billion in annual sales, it is a

13.1%

Beer sales as a percentage of total in-store sales (for those selling beer) CSX-NACS 2016 State of the Industry report

BEER AND C-STORES ARE INTERDEPENDENT Beer is the third-largest category in the store. C-stores are the #1 shopper outlet for beer capturing almost one-third of beer industry volume. 2

29%

Convenience stores are the largest retail outlet for beer with 29% of all beer barrel volume, and continuing to grow. 2. MillerCoors Industry Estimates, December 2015

primary destination category for the store. 1 Beer dollar sales are up 2.9% in c-stores in 2015 and have increased more than $1 billion in the past two years. 1 C-stores remain popular with consumers seeking Premium American Light and Economy products, with the primary demographic males between 21-27 years old. 1 1. MillerCoors Behavioral Tracking, December 2015

M O N T H LY S A L E S P E R S T O R E B Y Q UA R T I L E Top-quartile operators captured $16,000 more in beer sales annually compared to bottom-quartile retailers. Top-quartile c-stores drive higher beer sales and traffic with more aggressive margins.

$16,183 $14,834

TO PQU ART ILE MO NT H LY SAL ES

BO TTO MQU ART ILE MO NT H LY SAL ES

CSX-NACS 2016 State of the Industry report

$17.3 BILLION

ANNUAL SALES 2015 Nielsen Total U.S. Convenience Year Ending Dec. 26, 2015

3.2%

OV ER 2 014

G ROW TH I N 2 015 WA S D R I VE N BY CO NTI N UE D E X PA N S I O N O F S I N G LE S, M I X SH I F T S A N D PR I CE I N CR E A SE S . G ROW TH I N 2 016 FO R EC A S TE D AT 3. 5% .

3.3

BILLION

CONVENIENCE STORES

Year-Over-Year Growth

3.5% in 2016

MillerCoorsEstimates, December 2015

64%

BEER UNITS SOLD IN 2015

IN DEPEN DEN T CO N V EN IEN CE R E TA IL ER S A R E CR IT I C A L TO T H E

+2.9%

Nielsen Total U.S. Convenience Year Ending Dec. 26, 2015

B EER C ATEGO RY, ACCO U N TI N G FO R 6 4% O F C -S TO R E B EER VO LU M E IN 2 015. MillerCoors Internal Data, December 2015

C-Store Sales CONVENIENCE STORE SHOPPING FREQUENCY AND BEER BASKET RING MAKE BEER SHOPPERS SOME OF THE MOST VALUABLE CONSUMERS. Beer shoppers are 2 ½ times as valuable as an average c-store shopper.

Percentage of beer that will be consumed within two hours:

Beer basket $9.44 is almost 60% larger than c-store average of $5.93.

80%

• Single basket $4.76

60% LARGER

• Multi-pack basket $14.24 MillerCoors Profitable Beer Marketing Database, December 2015

C-STORE SHOPPERS ARE “ON THEIR WAY.” Three primary occasions motivate shoppers to purchase beer in c-stores, and cold beer is a necessity! 60% of beer sales occur between

3-8pm

CHILLIN' AT HOME Re-connecting with small group of family/friends

TNS Landis Shopper/Trip Segmentation 2015

BRING THE BEER Beer for small party/fun social gathering

SHED THE DAY Transition from "work time" to "my time"

VAST MAJORITY OF SALES AT C-STORES ARE SMALL PACKAGES. Singles 59%

4-12 packs 33%

Nielsen 52 Weeks Ending Dec. 26, 2015

18-packs 5%

24-packs and larger 3%

Beer Sales by Segment • Convenience is the “Premium American Light Lager” channel, with almost 60% of Premium American Light dollar sales and more than 70% of Premium American Light units across all off-premise retail beer outlets. • Above-premium priced beers lead growth. Imports, craft styles, flavored malt beverages and ciders are all showing double-digit growth.

SIMPLIF Y PRICING

• While craft beer styles have grown rapidly, they still account for only 5% share of c-store beer dollars.

+8.3%

SINGLES DRIVE GROW TH IN C-STORES

92%

Five distinct segments motivate shoppers to purchase singles, and all five are unique and necessary for growth. Merchandising these segments together helps shoppers quickly manage the section. Improving the speed at which a shopper can find their brand increases purchase rate and basket size.

Average singles dollar growth since 2010

of stores growing beer revenue are growing singles

Nielsen, Total U.S. Convenience Year Ending Dec. 26, 2015

SALES BY SEGMENT $441.9

$141.8 $129.1

FLAVORS

$20.6

FASTEST-GROWING SEGMENT; PEAKS ON WEEKENDS • Flavored Malt Beverages • Teas • Hard Sodas • Cocktails 2/$5

$833.8

INDULGENCE

$1,063.3

TRADE UP AND TREAT YOURSELF • Imports • Crafts • Super Premium

$6,323.5 2/$5

$1,111.8

REFRESHMENT

LARGEST SEGMENT; RELAXATION AND REFRESHMENT • Premium American Light

$2,344

$1,361.7 $1,615.9

CONVENIENCE STORES

• The singles shopper buys an average of 1.5 singles. • Leverage ‘2-for’ bundled pricing.

2/$4

VALUE

TRIP DRIVER FOR VALUE-ORIENTED SHOPPERS • Economy

$1,920.3 2/$3

PREMIUM AMERICAN LIGHT

SUPER PREMIUM

IMPORT

CRAFT

NEAR PREMIUM

MALT LIQUOR

PREMIUM AMERICAN REGULAR

ALTERNATIVE

BUDGET

CIDER

FMB

COOLERS

Nielsen, Total U.S. Convenience Year Ending Dec. 26, 2015

THIRST QUENCHER HIGH-VELOCITY SEGMENT; GET MORE FOR LESS • Large-Pack Items, 32 oz. or Larger

2/$6

Maintaining the same ‘2-for’ price on all items on each shelf makes it easier for consumers to identify their desired product.

Beer Sales by Package C-store shoppers want cold and quick! Small packs and cold space for beer are critical. Beer is often consumed within two hours of purchase. MillerCoors Research, December 2015

• Beer is under-spaced in most outlets relative to the revenue it creates versus the other categories in the cooler. • More than 85% of all c-store beer units sold are 12-packs, 6-packs or singles. • 12-packs are the highest-selling package in dollar sales. • There were an average of 106 beer items stocked per store in 2015, up 13% since 2012.

• 40 of those items are singles, up 22% since 2012. • Singles drive c-store unit sales and growth! • 92% of c-stores that are growing are growing with singles. • Singles SKUs have increased 31%. (+10 SKUs per store) • Singles segment mix is evolving to include more crafts, imports and FMBs. Nielsen, Total U.S. Convenience Year Ending Dec. 26, 2015

EXPAND SPACE FOR SINGLES • Stores in the top quartile of beer-selling outlets dedicate at least 25% of beer cooler space to singles. MillerCoors Cooler Space Audit, Nielsen, December 2015

• Price shelves at ‘2-for’ pricing for each segment with a single price point for each shelf. • Create a singles destination for shoppers organized by segment. 10 SHELVES

AVERAGE C-STORE SINGLES SHELVES: 5

6 SHELVES

$598/ WK

$809/ WK +$211/ WK

7 SHELVES

SINGLES IN ONE DOOR HAVE A 13% HIGHER VELOCITY PER STORE THAN STORES WITH SINGLES SPREAD THROUGHOUT THE COOLER $907/ WK +$329/ WK

$1,158/ WK +$560/ WK

GENDER

Index

by Purchase Volume

ETHNICITY

MALE

FEMALE

WHITE

BL ACK

L AT I N O

A SI A N /OTH E R

72%

28%

62%

15%

19%

103

129

110

AGE

Index

21–27

28 –34

35 – 44

45 –54

55+

17%

20%

26%

17%

125

127

102

<$30K

$30 –50K

$50 –70 K

$ 7 0 –10 0 K

$10 0 K+

35%

24%

17%

15%

150

114

O F F - P R E M I S E B E H AV I O R

CONVENIENCE STORE BEER CONSUMER DEMOGRAPHICS

INCOME

MillerCoors Behavioral Tracking, December 2015

FREQUENT SHOPPER:

C-Store Beer Shopper • 12-packs are shopper preferred for versatility, as consumers feel “enough for me and enough to share.”

CONVENIENCE STORES

Index

TRIPS PER MONTH

• 6-packs satisfy shoppers’ “personal supply” needs.

DESTINATION: BEER IS THE THIRD-LARGEST GROSS PROFIT GENERATOR AT $2,892 PER STORE PER MONTH, UP 3% FROM 2014.

OF TRIPS ARE BEER ONLY

CONVENIENCE STORE BEER PROFITABILITY 2015 AVERAGE PER STORE PER MONTH

Due to the decision process and quick

SALES

MARGIN %

GROSS PROFIT

nature of the c-store beer trip, it’s difficult to influence the beer shopper in the store.

Change vs. 2014

$16,317

17.7%

$2,892

3.4%

-0.1%

3.0% CSX, LLC, December 2015

Looking for COLD, QUICK, CONVENIENT! MillerCoors Profitable Beer Marketing Dataset, December 2015

LIQUOR STORES

Liquor is a big and important class of

for alcohol, providing a convenient, quick

trade, while also being unique. Liquor

location for cold beer. Regardless of

stores are not all alike. Some are liquor

the format, liquor stores are a primary

destinations — built to explore and

destination for beer. However, there are

experiment across a broad assortment

big opportunities to improve the shopping

of beverage alcohol choices — while

experience and space efficiency to recruit

others act more as convenience stores

beer shoppers back to liquor stores.

8 0 % OF LI QUOR S TORES ARE 3,0 0 0 SQUARE FEET OR LESS. MillerCoors Year Ending 2014 Liquor Space and Display Audits

• #1 In total alcohol experience • 37K+ Total liquor outlets

3.1B

• 164M Total shopping trips

CALENDAR YEAR 2015

• 20% Share of total beer sales

Sales at liquor stores grew 3.9% in 2015.

• +3.9% Growth in dollar sales

Nielsen Liquor, 52 Weeks Ending Dec. 26, 2015

7.2

TOTAL U.S. HH PE NE TR ATI ON

Nielsen Household Panel Data Through Dec. 12, 2015

20%

Liquor stores are the third-largest class of trade for beer sales at 20% of volume. MillerCoors Industry Estimates December 2015

CONSUMPTION INTENT VARIES BY STORE T YPE: •

destination Preparing for large gathering

•

neighborhood On the way to a party

6% O F VO L U M E

•

corner Personal immediate consumption

Large, warehouse, megastores that have a large selection and specialized staff to help customers with questions

Liquor store eye-tracked shoppers in Minneapolis, Boston and Tampa, July 2013

DE S T I N ATI ON 3% OF OUTLETS

N E I GH BOR H OOD 63% OF OUTLETS

LIQUOR STORES

NOT ALL LIQUOR STORES ARE CREATED EQUAL

NEIGHBORHOOD LIQUOR SEGMENT HAS THE MOST OUTLETS AND DRIVES THE MAJORIT Y OF VOLUME.

71% O F VO L U M E

Medium-sized stores that vary in selection, size and staff to help customers with questions

23%

34%

CO R N E R 3 4% O F O U T L E T S 2 3 % O F VO L U M E Smaller stores with spaceconstrained selection and minimal expectations for staff engagement from customer

MillerCoors STR Data, December 2015

63%

PERCENTAGE OF OUTLETS BU Y ING

NEIGHBORHOOD

71%

PERCENTAGE OF VOLUME

CORNER

D E S T I N AT I O N

MillerCoors STR Data, December 2015

G ROW T H R AT E FO R FM BS, FA S T E S T- G ROW I N G SEG M E N T

PE RC E N TAG E O F CR AFT & IMPORT SA LE S I N L I QU O R S TO R E S

Nielsen Liquor, 52 weeks ending Dec. 26, 2015

BEER SALES BY SEGMENT With the large number

Craft and Import beers

FMBs are the fastest-growing

of brands and packages

dominate the liquor

segment, while Premium

offered, beer shoppers

store experience with

American Light, Premium

in liquor stores place an

more than 56% of

American Regular and Economy

emphasis on variety

dollar and unit sales,

segments have the highest

and experimentation.

and continuing to grow.

velocity per SKU (efficiency).

CR AFT & IMPORT ACCOUNT FOR MAJORIT Y OF SALES

FMBS ARE FASTEST GROWING FMB +34.1

PREMIUM SEGMENTS HAVE HIGHEST $ PER SKU VELOCIT Y

$18,083,944

5% 5% 4% 3% CR AFT +5.5

8% 29%

VELOCIT Y PER SKU DOLL ARS

IMPORT +3.6

19%

SUPER PREMIUM +1.7

27%

$10,197,304

PREMIUM AMERICAN LIGHT +1.2

CR AFT

$7,358,846

IMPORT

$5,893,695

NE AR PREMIUM - 0.1

PREMIUM AMERICAN LIGHT L AGER

$3,239,646 $3,239,646 $3,106,116

PREMIUM AMERICAN REGUL AR PREMIUM AMERICAN REGUL AR -1.0

NE AR PREMIUM

$2,593,865

FMB BUDGET -3.2

SUPER PREMIUM BUDGET Nielsen Liquor, 52 Weeks Ending Dec. 26, 2015

-5%

10%

15%

Nielsen Liquor, 52 Weeks Ending Dec. 26, 2015

20%

25%

30%

35%

PREM. PREM. BELOW SUPER IMPORT CRAFT FMB PREM. AMER. AMER. PREM. LIGHT Nielsen Liquor, 52 Weeks Ending Dec. 26, 2015

CIDER

Beer Sales by Package

• Package mix in liquor stores reflects both variety and value. • Focus on package availability should be on the cold vault, as 93% of beer is purchased cold. • Just two package sizes, 12-packs and 6-packs, make up 53% of dollar volume. • Three package sizes, 12-packs, 6-packs and singles, are more than 80% of unit sales.

SMALL PACKAGES ARE LEADING GROWTH.

28%

13%

23%

TOTAL COMBINED LIQUOR MARKETS 2015 PACKAGE SIZE

$ SHARE 12%

Liquor store eye-tracked shoppers in Minneapolis, Boston and Tampa, through December 2013

25%

12-pack

Singles

6 -pack

Remaining

24/30 -pack Nielsen Liquor, 52 Weeks Ending Dec. 26, 2015

$ VOL % CHANGE VS. YEAR AGO

UNIT SHARE

UNIT % SHARE VS. YEAR AGO

12-pack

2.1

16%

-0.2

6-pack

9.7

23%

4.8

24/30-pack

2.3

0.3

Singles

3.3

44%

2.6

Remaining

3.0

2.0

Nielsen Liquor, 52 Weeks Ending Dec. 26, 2015

LIQUOR STORES

LIQUOR STORES 2015

• Singles and 6-packs provide variety and serve quick-trip occasions.

PREMIUM AMERICAN LIGHT

PREMIUM AMERICAN LIGHT AND PREMIUM AMERICAN REGULAR PROVIDE THE GREATEST SALES POWER PER SKU STOCKED

SKUS ARE 6 TIMES MORE PRODUCTIVE THAN CRAFT ITEMS.

LIQUOR STORES 2015 SEG MENT

PREMIUM A MERIC A N L IGHT

$ SHAR E

SHAR E OF SKUS

18.7%

$ PER SKU

5.2%

$18,083,944

PREMIUM AMERICAN REGUL AR

7.5%

3.7%

$10,197,304

BELOW PREMIUM

8.7%

6.0%

$7,358,846

SUPER PREMIUM

3.6%

3.0%

$5,893,695

IMPOR T

25.9%

25.8%

$3,239,646

CR A F T

27.9%

43.2%

$3,239,646

FMB

5.1%

8.3%

$3,106,116

CIDER

2.5%

4.9%

$2,593,865

TOTA L

100%

$5,013,528

Nielsen AOD – Total Combined Liquor Plus & Total U.S. Food, Calendar Year 2015, Ending Dec. 26, 2015

Liquor Space Management Space and Assortment LIQUOR SHOPPERS SPEND MOST OF THEIR TIME AND MONEY IN THE COOLER. Prominent brand/package placement in the cooler will drive conversion.

PE RCE NTAG E O F T I M E COLD

80%

AMBIENT

20% PE RCE NTAG E O F PU RCH A SE

COLD

93%

AMBIENT

7% Liquor store eye-tracked shoppers in Minneapolis, Boston and Tampa, through December 2013

TAKE ADVANTAGE OF THE OPPORTUNITIES FOR EXPERIENCE AND EFFICIENCY IN LIQUOR STORES BY: • Cooler needs to be visible to attract shoppers, 93% purchase cold • Create differentiated points of interest early in the shopping flow • Ambient selection needs to be well-organized and shoppable • Craft SKUs tend not to be consumed until more than 24 hours after purchase which makes them ideal for ambient placement

MillerCoors Behavioral Tracking, December 2015

LIQUOR STORE BEER CONSUMER DEMOGR APHICS GENDER

Index

by Purchase Volume

ETHNICITY

MALE

FEMALE

WHITE

BL ACK

L AT I N O

A SI A N /OTH E R

69%

31%

67%

11%

16%

103

105

AGE

Index

21–27

28 –34

35 – 44

45 –54

55+

13%

16%

25%

26%

21%

101

107

101

<$30K

$30 –50K

$50 –70 K

$ 7 0 –10 0 K

$10 0 K+

18%

16%

19%

28%

105

161

INCOME

Index

MillerCoors Behavioral Tracking 2015

Different formats capture slightly different audiences, thus shopping behavior varies.

O F F - P R E M I S E B E H AV I O R

Shopper Behavior

COLD BEER IS IMPORTANT BECAUSE CONSUMPTION IS NOT FAR BEHIND THE PURCHASE.

Consumption intent varies by store type:

• NEIGHBORHOOD – On the way to a party; consume in less than 12 hours • CORNER – Personal, immediate consumption; consume in less than 4 hours Liquor store eye-tracked shoppers in Minneapolis, Boston and Tampa, through December 2013

of total volume

71% of total volume

23% of total volume

Destination Store Shopper

Neighborhood Store Shopper

Corner Store Shopper

“Megastores,” large warehouse-type outlets

Medium-sized stores with a range of variety, usually in strip malls

Smaller stores with space constrained selection and less shopper expected staff engagement

• Basket ring $51–$100 or more

• Basket ring $11–$50

• Basket ring less than $11

• Shopper is looking for great selection and staff expertise as they take their time exploring the store • Selects multiple brands and packs • Looking for value

MillerCoors Behavioral Tracking Study, December 2015

LIQUOR STORES

• DESTINATION – Preparing for large gathering; consume in less than 24 hours

• Shopper is looking for good selection and staff knowledge, but also needs store to be organized and convenient

• These are routine/ high frequency trips for immediate consumption

• Buys a variety of packages, small and large

• Primarily singles and small packs

• Often price-sensitive, so subject to brand and pack age switching

• Cold is critical

GROCERY STORES

Grocery stores are the second-largest

49% of their beer dollars there, while the

class of trade for beer sales, trailing

remaining 51% is lost to other classes of trade. 1

only convenience stores. Beer space in grocery stores has remained the same

The perimeter continues to increase its role,

while SKU choices have exploded. This

and beer is an important contributor to the

has led to cluttered shelves, fewer points

perimeter and the total store. At 3.9% and

of interruption, more out-of-stocks and

growing, beer is the fourth-largest product

a more difficult shopping experience for

category in the grocery store. There are

consumers. As a result this class of trade is

opportunities to simplify the shopping

losing share of total beer dollars.

experience, build baskets through food pairings, and improve conversion to maximize the beer potential in grocery stores.

Beer drinkers who shop grocery still spend

15B

GROCERY STORE TOP 10 CATEGORIES 2015,

$ SALES BILLION

$12.6 $11.8

12B

$11.2

$10.7

$10.1

$10.0

9B $7.9 $7.0 $6.1

VEGETABLES AND HERBS

CHEESE

SALT Y SNACKS

BEER AND MALT BASED BEVERAGES

SOFT DRINKS

BAKED BRE AD

Meat and Deli segment unavailable within data sort. Nielsen Total U.S. Food Calendar Year 2015 for Weeks Ending Dec. 26, 2015 1. Willard Bishop Grocery Super Study, Profitable Beer Marketing, August 2015; 2. Nielsen, December 2015

MILK

WINE

FRUIT

FROZEN ENTREES

GROCERY STORES

Y E A R - OV E R -Y E A R G R O W T H

$10.7

B I L L I O N YE AR- END SALES 2015

4.1% OVER

2 014

1.5%

34.5

TOTAL U.S. HH

UNIT SALES 1.3 BILLION

PENETR ATION Nielsen xAOC Homescan July 2015

1. Nielsen Total U.S. Food Calendar Year 2015 for Weeks Ending Dec. 26, 2015

Beer Sales BEER SALES BY SEGMENT Premium American Light still takes the #1 beer sales spot in

Craft, Import and FMB are close

25%

behind and

grocery with more

leading growth

than 25% of dollar

in the category.

sales, with only 11% of SKUs.

BEER SALES BY SEGMENT SEGMENT

$ SHARE

SHARE OF SKUS

PREMIUM AMERICAN LIGHT L AGERS

25.2%

10.9%

$91,527,233

7.4%

5.8%

$49,939,211

ECONOMY

13.6%

11.2%

$47,794,319

IMPORT

19.4%

18.6%

$41,307,426

SUPER PREMIUM

5.7%

$39,247,557

20.9%

33.0%

$25,021,957

FMB

5.6%

10.0%

$21,897,864

CIDER

2.3%

4.8%

$18,714,035

TOTAL

100%

$39,474,071

PREMIUM AMERICAN REGUL AR

CRAFT

Nielsen, Total U.S. Food Year Ending Dec. 26, 2015

$/ SKU

SINGLES AND 6 -PACKS ARE GROWING IN IMPORTANCE AS CR AF TS AND FMBS GROW.

While having a reputation for large packs on sale, grocery stores sell more than 50% of their beer dollar volume and nearly 50% of units in smaller 12-packs and 6-packs. This demands a more balanced approach across packages and segments to meet the needs of a wide array of occasions.

GROCERY STORES

BEER SALES BY PACK AGE

TOTAL U.S. FOOD BEER PACKAGE SALES 2015 $ SHARE

$ VOL. % CHANGE VS. YEAR AGO

UNIT SHARE

UNIT % CHANGE VS. YEAR AGO

12-PACK

29.8%

1.7

21.3%

-0.5

6 -PACK

24.8%

10.2

27.1%

5.9

24-PACK

12.4%

3.1

6.2%

1.3

30 -PACK

9.6%

-1.8

5.7%

-2.9

SINGLES

8.2%

4.5

3.9%

-1.1

REMAINING

15.2%

7.4

35.9%

5.0

PACK AGE SIZE

Total U.S. Food Year Ending Dec. 26, 2015

CHALLENGE:

DISPL AY:

As grocery expands beer variety and cold box space

Leveraging displays to support

remains the same, there is less space for each SKU.

feature activity is critical to

This increases the risk of out-of-stocks!

driving conversion and lift on

• 2010: 192 SKUs

2015: 249 SKUs

• +23% Average SKU count

promoted packs. Display space should be used to support the right brands and packs that

DISPLAY is shrinking, too!

yield the greatest return on the

• Featured items +40%, while

display space used.

display support of feature is flat

Willard Bishop August 2014 Syndicated SuperStudy™

Grocery Store Beer Shopper Total trips and beer trips are declining at

However, the beer trip in grocery is very valuable.

grocery, and dollars per buyer are down creating a tough market.

Rebuilding these declining baskets can be accomplished through food pairings and

Beer consumers are coming less often and

encouraging shoppers to purchase in multiple

spending less money when they do!

categories within the store.

THE BASKET VALUE IS

$ SPENT PER SHOPPING TRIP:

54% HIGHER

$67.24 WITH BEER

ON BEER TRIPS VS. NON-BEER TRIPS.

â&#x20AC;¢

$43.68 WITHOUT BEER

This basket drives significant sales and gross profit dollars per week for the average store. Willard Bishop Superstudy, August 2015 and 2014

T YPE OF TRIP:

67%

33%

GENERAL SHOPPING TRIPS WHERE BEER IS ONE OF A NUMBER OF ITEMS BEING PURCHASED

AN ALCOHOLSPECIFIC TRIP

Demographics Grocery shopping for beer occurs across broad demographics: gender, age, income and ethnicity.

GROCERY STORE BEER CONSUMER DEMOGR APHICS GENDER

by Purchase Volume

ETHNICITY FEMALE

WHITE

BL ACK

L AT I N O

A SI A N /OTH E R

Percent

72%

28%

64%

17%

10%

Index

104

101

100

131

AGE 21–27

28 –34

35 – 44

45 –54

55+

Percent

11%

14%

22%

28%

25%

Index

110

111

<$30K

$30 –50K

$50 –70 K

$ 7 0 –10 0 K

$10 0 K+

Percent

21%

23%

19%

21%

16%

Index

109

108

106

GROCERY STORES

MALE

INCOME

MillerCoors Behavioral Tracking, December 2015

Shopper Trip Mission & Consumption Occasion Beer shoppers are looking to grocery stores

2. One-Stop Bargain: Shoppers expect

for a variety of trip missions. These top three

a wide variety at low prices. These

trip types illustrate the diverse reasons beer

trips are highly preplanned.

shoppers choose grocery, and how retailers

3. Unique Gourmet: Shoppers seek a

have to meet consumers’ needs in often

welcoming, enjoyable experience

radically different ways.

where they can browse and reward

1. Grab & Go: The need is for a store that

themselves.

offers value, multi-purpose shopping and also access to favorite cold beers.

4. eCommerce: This new trip is emerging via the web. TNS Landis Shopper/Trip Segmentation, 2015

eCOMMERCE

eCOMMERCE GROCERY FULFILLMENT HAS EVOLVED.

BEER CATEGORY IN eCOMMERCE STORES

eCommerce in consumer packaged goods

While beer is relatively new in eCommerce,

encompasses all internet sales, whether

it is a significant sales and profit contributor,

delivered to the home or picked up in the store.

and growing rapidly. • Beer is the 15th-largest category in

$24

BILLION I N 2014

+10%

eCOMMERCE SALES WITHIN CPG

A N N U A L LY

INCLUDES FOOD, BEVER AGE, H E A LT H A N D PERSONAL CARE PRODUCTS

60 % BY 2018 TO

BY 2018

$38

BILLION IN 2018

eCommerce grocery sales. 2 • Online beer shoppers purchase 10X per year. 3 • The average eCommerce beer basket is of significant size, totaling nearly $200, with more than $25 in beer alone. 2 • Average spend on beer increases +23% when shopping online vs. in-store. 2

BASKET RING PER BEER TRIP

Willard Bishop The eCommerce eVolution, November 2014

Based on other consumer sectors, such as travel, music, books and media, the tipping point is likely to be 5% share of market. After that,

$172.34

Other Non-Beer Purchases When Beer Is in the B a s ke t

growth will be exponential, and the laggards will be left behind. 1

Beer

Current trends indicate the tipping point for CPG will occur in three years. Current eCommerce penetration in CPG hovers around 2%. 1

1. Willard Bishop The eCommerce eVolution, November 2014 2. Willard Bishop eCommerce SuperStudy™ April 2015 (Liquor-selling store subset only) 3. SABMiller – Sponsored Consumer Research Study in U.S., July 2015

U. S . O N L I N E B E E R S H O P P E R GENDER

42%

FEMALE

AGE

% WITH CHILDREN

eCOMMERCE

MALE

58%

37%

41 AVER AGE INCOME

H O USEH O L D

PER SO N A L

$122,789 % OF ALL GRO CERY D O NE O N L IN E AV ER AGE SPEN D O N B EER IN S TO R E

23% $43.01

$140,567 AVG . SPEN D ON L AST GRO CERY T R IP

$96.09

AV ER AGE SPEN D O N B EER O NL IN E

$52.91

AV ER AGE N U M B ER O F O NL INE S TO R E S USE D FO R GRO CER IE S SABMiller â&#x20AC;&#x201C; Sponsored Consumer Research Study in U.S., July 2015

2.9

DRUG STORES & DOLLAR STORES

Drug stores and dollar stores fulfill a critical

beer trips are to meet shopper needs for beer

role for the beer shopper providing a

consumption occasions that support emotional

convenient and pleasant beer shopping

health, such as relaxing alone at the end of the

experience for quick fill-in trips. The majority of

day or connecting with friends and family.

BEER IN DRUG STORES

$1.1

BILLION

DRUG, 2015

OPPORTUNITY Building awareness is critical to beer category growth. Most Drug (88%) 1 and Dollar (96%) 1 beer

STORE C AT E G O RY Beer/Malt based beverages is the thirdlargest selling food & beverage category in drug stores.

shoppers do not buy any of their beer in these channels primarily because the majority of them are unsure or unaware that drug and dollar stores sell beer. 2 Increasing beer category conversion by one point can grow total beer sales by 8% or more. SOLUTION The top in-store influences for drug shoppers purchasing beer are displays (29%) 1 and beer signage (27%). 1 Executing authorized beer displays and signage is critical to building category awareness and driving conversion. 1. Nielsen Homescan, Annual 2015

Nielsen Total U.S. Drug, Latest 52 Weeks Ended Jan. 23, 2016

2. MillerCoors Shopper Research Study, April 2016

• While craft beer styles have grown,

• Premium American Lights and Imports lead segment sales in drug stores with

they are still just 9% share of drug

57% of dollar sales.

store beer dollars.

DRUG STORES

DRUG STORE BEER SALES BY SEGMENT

TOTAL U.S. DRUG STORE BEER SALES BY SEGMENT 2015 SEGMENT

$ SHARE

SHARE OF SKUS

$/SKU (000)

PREMIUM AMERICAN LIGHT

31.5%

2.6%

$3,462

IMPORT

26.1%

13.4%

$551

PREMIUM AMERICAN REGUL AR

9.0%

2.0%

$1,288

CRAFT

8.9%

60.7%

$42

NEAR PREMIUM

7.6%

3.1%

$696

ECONOMY

7.2%

2.3%

$888

SUPER PREMIUM

4.3%

1.9%

$649

FMB

3.3%

6.3%

$146

CIDER

1.0%

4.4%

$64

MALT LIQUOR

0.7%

1.7%

$119

COOLERS

0.3%

1.2%

$70

ALTERNATIVE

0.0%

0.5%

Nielsen Total U.S. Drug Census Calendar Year 2015, week ending Jan. 2, 2016

Beer Sales by Package BEER IN DRUG STORES Drug store shoppers purchase different pack sizes to meet the needs of different trip types and consumption occasions.

38%

Value-driven trips

36.6% Conveniencedriven trips

38% of drug store beer dollars are from 18-packs or larger, driven by price promotions and larger packconsumption occasions.

12-packs lead with 36.6% of beer dollars, driven by conveniencerelated trips and smaller consumption occasion gatherings.

30% Conveniencedriven trips

Singles are an important package for traffic with nearly 30% of unit sales.

TOTAL U.S. DRUG STORE BEER SALES BY PACKAGE 2015 PACK AGE

$ SHARE

$% CHANGE VS. YEAR AGO

UNITS SHARE

UNITS % CHANGE VS. YEAR AGO

12-PACK

36.6%

-6.2%

27.4%

-8.2%

18-PACK

17.6%

-5.8%

11.3%

-5.9%

30 -PACK

14.3%

-8.6%

7.1%

-9.4%

6 -PACK

13.4%

5.1%

15.9%

0.8%

24 -PACK

6.4%

-4.5%

3.3%

-7.3%

SINGLE

5.9%

-3.8%

28.6%

-6.0%

REMAINING

5.8%

1.0%

6.3%

-0.3%

Nielsen Total U.S. Drug Census Calendar Year 2015, Week Ending Jan. 2, 2016

DRUG STORES

BEER ECONOMICS IN DRUG STORES Beer shoppers in drug stores spend

$8.65 more per shopping trip when beer is in their basket.

$ SPENT PER SHOPPING TRIP:

TOTAL BEER MARGIN DOLLARS REMAIN STRONG IN DRUG STORES.

• $37.95 with beer

• 20% gross margin

• $29.30 without beer

• Gross profit $ per week per store = $300 National Drug Retailer Store Space Audit and Shopper Card Data, December 2015

BEER LEADS DRUG STORE CATEGORIES IN REVENUE PRODUCTIVITY CATEGORY

TOTAL SPACE IN FEET (WARM & COLD)

GROSS REVENUE PER LINEAR FOOT

BEER

486

$565

LIQUOR

364

$506

$289

DSD SNACKS

208

$97

BEVER AGES

936

$93

1,160

$89

DAIRY

CANDY

National Drug Retailer Store Space Audit and Shopper Card Data, December 2015

Dollar Store Channel BEER IN DRUG STORES BEER IN DOLL AR STORES

$173.4

MILLION

CALENDAR YEAR 2015 Nielsen Total U.S. Dollar Channel

Total sales for calendar year 2015 in

0.5% TOTA L

dollar outlets were up a whopping 288% since 2012, thanks to a skyrocketing number of dollar stores selling beer over the past three years. The number of dollar stores selling beer increased 81% since 2012, approaching 7,400. And

U.S. HH

sales per store are up more than 100%.

PE N E T R AT I O N

As volume and sales continue to grow, projections indicate more than 10,000 stores will sell beer. Nielsen Total U.S. Dollar Channel, Annual 2015

Nielsen Homescan, 12 Months Ending June 2015

STORES SELLING TOTAL $ SALES (MM) $ PER STORE

2012

2015

% CHANGE 2015 VS. 2012

$4,066

$7,351

81%

$44.7

$173.4

288%

$11,003

$23,585

114%

DOLLAR STORES

TOTAL U.S. DOLLAR CHANNEL BEER STORES AND SALES

Nielsen Total U.S. Dollar Channel, December 2015

TOTAL ALCOHOL BEVER AGE SHARE • Beer accounts for more than 80% of TAB sales in dollar stores.

• All alcohol categories are growing rapidly in dollar stores.

TOTAL ALCOHOL BEVERAGE SHARE

BEER/CIDER LIQUOR WINE TOTAL ALCOHOL BEVER AGE Nielsen Total U.S. Dollar Channel December 2015

$ SALES (000)

% CHANGE VS. YEAR AGO

$173,343.0

81%

28%

$591.0

14%

$39,421.0

19%

21%

$213,355.0

100%

25%

ON O N - PREMISE E

OVERVIEW OV VERVIE EW THE STATE STAT TE OF TOTAL ALCOHOL BEVERAGE EVERAGE IN ON-PREMISE: • Alcohol units have declined, while sales are up slightly due to increased pricing. • Beer is the beverage of choice on-premise – about half of all alcoholic drinks served and nearly $50 billion in annual sales. • Consumers spend a majority of alcohol beverage retail dollars on-premise on

2015 ON-PREMISE ALCOHOL BEVERAGE SALES BEER

WINE

SPIRITS

DOLLARS

$48,596

$19,511

$35,771

PERCENT

47%

19%

34%

CHANGE VS. 2014

Technomic, December 2015

beer (47%) and spirits (34%), with wine a distant third at 19%. • Beer is losing share on-premise, with dollars shifting to spirits. Guest Metrics, December 2015

THERE ARE 290,000 BEER-SELLING ON-PREMISE OUTLETS NATIONALLY, CONCENTRATED WITHIN FIVE PRIMARY CLASSES OF TRADE: • Neighborhood Bars • Casual Dining

TAB servings distribution among consumers ages 21-34

15% 13%

30% 48%

72% 23%

• Sports Bars • Concessions • Hotels

1.75 million people are directly employed in the on-premise channel. Beer Servers America Report 2015

SINCE 2008 BEER HAS LOST A POINT OF SHARE PER YEAR TO WINE & SPIRITS

GENERATION X-1999 BEER

WINE

MILLENNIALS-2012 SPIRITS

MillerCoors Research, December 2015

PERCENT OF ALL CONSUMERS THAT HAVE HAD A DRINK ON-PREMISE IN PREVIOUS T WO -WEEK PERIOD —3Q 2015 37%

47% 40%

31% 33%

35% 25% 19%

Technomic Co Pilot September 2015 MEN

WOMEN

TOTA L

21- 2 9

30 -39

4 0 - 49

5 0 - 59

6 0 - 69

BEER IN THE ON-PREMISE CHANNEL

In total, 63% of consumers visited an

• On-premise sales of beer are nearly $50

on-premise establishment in the third

billion annually, generating more overall

quarter of 2015 — the lowest level of

beer profit than off-premise, with far

consumers visiting seen in the last six

greater margins. 1

quarters.

ON-PREMISE

CONSUMER SNAPSHOT

• Premium American Lagers (Light and Regular) continue to be the largest on-premise segment,

While overall on-premise visits have slowed, the share of visits that include

accounting for two of every five units sold. 2 • On-premise remains critical for exploration

at least one drink increased by three

and trial, as Craft brands now account for one of

percentage points in third quarter 2015

every three units sold. 3

and now resides at 38%.

• Today, on-premise drinkers identify the right beer for the right occasion. 80% of

On-premise remains a young adults’

Craft drinkers still consume domestic lagers

destination with consumption incidence

when the occasion fits. 4

declining as consumers age.

1. Technomic Co-Pilot, September 2015 2. GuestMetrics 2015

3. GM 2015 4. Nielsen Survey 2015

Consumer Preferences • Top three draft brands are Premium American

• Newer brands may provide increased revenue per keg, however, core brand

Light Lagers — Bud Light, Coors Light, Miller Lite. Their drinkers are two times more

velocity will drive larger volume and

loyal to their segment than craft drinkers.

increased total revenue and profit. 2

• New brands on-premise provide on average only 1/10 of the velocity of average

1. Nielsen Homescan, December 2015 2. GuestMetrics

Premium American Light Lager brands. 2

2015 BEER SALES ($MILLION)

ON-PREMISE BRAND CONCENTRATION 2015 $2,908

$1,922

$3,317

TOTAL DINING DRINKING ESTABLISHMENTS

$21,381

HOTELS CONCESSION/CASINO/REC

$19,068

ALL OTHER ON-PREMISE Technomic Co Pilot, September 2015

% OF BEER UNITS SOLD

# OF BRANDS

AVG. UNIT VELOCIT Y PER OUTLET(ANNUAL)

CHANGE IN DIST. VS. YEAR AGO

BASE 70%

447

-0.8%

NEXT 10%

139

168

-1.9%

NEXT 10%

673

151

0.8%

NEXT 10%

14,132

5.8%

Guest Metrics, July 2015

BEER SEGMENT PREFERENCE While craft styles continue to grow on-premise,

Be aware of putting too much focus against

beer drinkers overwhelmingly prefer Premium

niche styles. Consider aligning assortment

American Light Lagers.

with style ranks.

Guest Metrics, July 2015

$ SHARE OF TOTAL BEER BY S T YLE PREMIUM AMERICAN LIGHT LAGERS INT’L PALE LAGERS IPA/PALE ALE WITBIER AM REGULAR LAGER STOUT CIDER PALE LAGER DARK LAGER AMBER LAGER GOLDEN ALE AMBER ALE SEASONAL FRUIT BEER PORTER BROWN ALE BELGIAN DARK STRONG STRONG ALE SAISON INT’L PALE LAGERS AM REGULAR LAGER

Guest Metrics, July 2015

SOUR 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

OUTLOOK FOR 2016 return to growth for on-premise food

ALCOHOL BEVER AGE GROW TH EXPEC TATIONS BY CL ASS OF TR ADE:

and beverage:

Project On-premise Consumption Growth Rates

The outlook for 2016 is good, with a

• Growth in restaurant outlets +1.3% BEER

SPIRITS

WINE

4.1%

5.2%

NEIGHBORHOOD/ SPORTS BAR

2.1%

1.7%

4.1%

HOTEL

4.6%

4.2%

7.0%

CASINO

2.2%

3.0%

3.2%

• Overall on-premise food & beverage revenue +6%

CASUAL DINING

• Overall on-premise alcohol revenue +3.5% • 35% of chain restaurant operators expect to raise prices in 2016, vs. 39% in 2015 Technomic Adult Beverage Insights Group, September 2015

Technomic Adult Beverage Insights Group, September 2015

GENDER

ETHNICITY

MALE

FEMALE

WHITE

BL ACK

L AT I N O

A SI A N /OTH E R

62%

38%

70%

16%

ON-PREMISE

BEER CONSUMERS IN ON-PREMISE CHANNELS

AGE 21–29

30 -39

40 - 49

50 - 59

60+

25%

26%

25%

16%

<$25K

$25 – 50K

$ 5 0 –75K

$ 7 5 –10 0 K

$10 0 K+

25%

27%

19%

12%

16%

INCOME

Technomic, September 2015

NEIGHBORHOOD BAR BUSINESS

Neighborhood bars are familiar places where

TAB SHARE BY SEGMENT:

guests go to “be themselves.” Their visits are primarily social occasions. For many, they are a home away from home. Alcohol beverages

BEER 48%

41%

S PI R I T S

are the primary product category with food secondary. However, many outlets have

WINE 11%

increased their focus on food offerings, with

Technomic, September 2015

“quality bar food” increasingly available.

• There are approximately 75,000 neighborhood bars in the U.S. 1

NEIGHBORHOOD BAR BEER SALES DOMINATED BY EVENINGS AND WEEKENDS

• 99% of neighborhood bars are independently owned. 1

BAR* BEER $ BY DAY

• Neighborhood bars skew toward the Northeast and upper Midwest with 65% of volume in 12 states.

60% of beer dollars are generated Thursday - Saturday

Fri.

Mon. 7.7%

13.5%

Tues.

Sun.

Wed. 10.1%

11.7%

11%

• Total Beverage Alcohol is 89% of total Bar/ Tavern sales. 2 • Beer sales are up in drinking establishments, + 1.9% in 2015.

24.5%

Thurs.

• Total food and beverage sales in neighborhood bars are up 4% in 2015.

Sat.

21.6%

• Beer sales units are down, but offset by higher

BAR* BEER $ BY DAY PART 70% of beer dollars are generated after 6pm

10pm-2am 26.5%

42.8% 2-6pm 19.1%

prices. 3 1. MillerCoors Internal Data, December 2015 2. Technomic, September 2015 3. GuestMetrics, July 2015

6-10pm

10am - 2 pm 11.6%

*Day/day part data is for all bar types and NOT specific to Neighborhood Bars as defined by MillerCoors GuestMetrics Promotional Study, December 2015

Neighborhood Bar Consumer NEIGHBORHOOD BAR CONSUMER

FORM PREFERENCE

The neighborhood bar guest is older, less

provide both draught and bottle beer across all

affluent than at other on-premise outlets.

beer styles.

To meet consumer preferences, it is important to

45+

More than half are 45+ years of age.

48%

Almost half of patrons have annual income less than $50,000.

52%

Slightly more than half of patrons are blue-collar workers or unemployed.

PREMIUM AMERICAN LIGHT SEGMENT Premium American Light

NO PREFERENCE 8%

BOTTLE 50%

DRAUGHT 39%

drinkers have a strong preference for both draught and bottle, CAN/ALUM. PINT 3%

meaning both forms should be carried.

AGE 21–27

28 –34

35 – 44

45+

15%

16%

18%

51%

CRAFT SEGMENT

DRAUGHT 74% NO PREFERENCE 8%

Craft drinkers prefer draught.

ON-PREMISE

NEIGHBORHOOD BAR GUEST DEMOGR APHICS:

BOTTLE 17% CAN 1%

INCOME <$50K

$ 5 0 –10 0 K

$10 0 K+

48%

37%

15%

E M P L O Y M E N T S TAT U S WHITE COLLAR

BLUE COLLAR

NOT EMPL. FT

48%

37%

15%

MillerCoors BTS Survey, TNS Landis, July 2011

IMPORT SEGMENT Import drinkers prefer

NO PREFERENCE 10% DRAUGHT 48%

BOTTLE 40%

both, with a slight skew toward draught.

MillerCoors BTS Survey, TNS Landis, July 2011

CAN/ALUM. PINT 2%

SPORTS BARS

Sports bars are similar to traditional

Sports bar beer revenue is driven by

neighborhood bars, but emphasize the sports-

evenings and weekends, but key game-day

viewing experience. This is typically evident in

viewing windows come first. Major sports

large televisions throughout the establishment,

events are especially critical, including:

and a more open floor and seating plan. Given

• Professional Sunday (Monday & Thursday

that the sports-viewing occasion is longer than

nights secondary)

other on-premise visits, sports bars typically

• College Football Saturday

have significant food offerings.

• March College Basketball tournament • Other key sports-viewing events

• There are approximately 9,000 sports bars in the U.S. 1 • 96% of sports bars are independently owned and operated.

• Sports bars skew toward the upper Midwest, with 66% of beer volume in just 12 states. 1 • Total food and beverage sales in sports

BEER FORM PREFERENCE To meet consumer preferences and meal occasions, it is important to provide both draught and bottle beer across all beer styles.

bars are up 4% in 2015. 2 • Beer sales are up 1.9% in 2015. 2

44% 9%

Sports bars are a small, but high-value piece of the on-premise channel. While fewer in

47%

number, sports bars have significantly higher

PAC K AG E

beer sales per outlet, making beer a key

DRAFT

driver of traffic and total sales.

NO PR E F E R E N C E

1. MillerCoors Internal Data, December 2015 2. Technomic, September 2015

MillerCoors Survey, July 2015

Sports Bar Consumer

TOP CRITERIA FOR CONSUMER

Patrons are primarily visiting sports bars

CHOICE OF THEIR SPORTS BAR:

to socialize with a group or “reconnect,”

• Convenience/proximity

representing 60% of sports bar occasions.

• Atmosphere/ambience

MillerCoors Category Strategy National Survey, July 2015

Technomic Co Pilot, September 2015

Often the sporting event takes center stage and the group becomes secondary.

SPORTS BAR CONSUMER

DEMOGR APHICS:

Sports bars attract a more affluent guest.

E M P L O Y M E N T S TAT U S WHITE COLLAR

BLUE COLLAR

NOT EMPL. FT

65%

13%

22%

66%

of patrons have annual income more than $50,000

65%

of patrons are white-collar

ON-PREMISE

SPORTS BAR GUEST

MillerCoors BTS Survey, TNS Landis, July 2011

AGE 21–27

28 –34

35 – 44

45+

17%

16%

25%

42%

SPORTS BAR OPPORTUNITIES • Increase conversion to alcohol purchase in alcohol-appropriate occasions. • Carry the brands with the largest

INCOME <$50K

$ 5 0 –10 0 K

$10 0 K+

34%

46%

20%

MillerCoors BTS Survey, TNS Landis, July 2011

consumer base in order to satisfy your guests’ top beer selection criteria. • Business is booming during major sporting events. Work to build traffic between these high-demand occasions.

CASUAL DINING

A casual dining restaurant is a restaurant that serves moderately priced food in a casual atmosphere. Casual dining restaurants typically provide table service. • There are approximately 205,000 casual restaurants in the U.S. 1 • Casual restaurants are about 10% chain, and 90% independently owned and operated. • Total food and beverage sales in casual restaurants are up 5.6% in 2015. 2

ALCOHOL BEVER AGE PRESENCE IN MEAL OCCASIONS

Alcohol Consumed 27.7%

51.6% 20.7%

Alcohol Appropriate

SEGMENT PREFERENCE Premium American Above Premium

TAB SHARE BY SEGMENT

GuestMetrics, July 2015

But Not Consumed

• Total Beverage Alcohol is 22% of total casual dining sales. 2

Alcohol Not Appropriate

Light Lagers

43%

& Regular Lagers

55%

Multiple Segments 2%

47%

32%

BEER SPIRITS WINE

20%

GuestMetrics, July 2015

• Casual dining is about the meal occasion, with Above Premium and American Light Lagers both highly relevant depending on the meal and guest preference.

Technomic, December 2015

Total beer is declining slightly in casual dining outlets, down 1.2% in 2015 3, but there is a huge opportunity to convert guests to beer purchase in appropriate occasions.

• Guests prefer Above Premium (including craft and import) in 55% of Casual Meal occasions. 4 There is very little segment shifting within occasion. 1. MillerCoors Internal Data, December 2015 2. Technomic, December 2015 3. GuestMetrics, July 2015 4. MillerCoors Category Strategy National Survey, December 2014

Casual Dining Consumer

FORM PREFERENCE

Casual dining guests are 45+,

To meet consumer preferences and meal occasions, it is important to provide both draught and bottle beer across all beer styles.

PREMIUM AMERICAN LIGHT LAGERS SEGMENT Premium American Light Lager drinkers

BOTTLE 43%

CAN/ALUM. PINT 3%

35 – 44

45+

11%

14%

24%

51%

<$50K

$ 5 0 –10 0 K

$10 0 K+

27%

47%

26%

E M P L O Y M E N T S TAT U S

NO PREFERENCE 7% BOTTLE 19%

CAN/ ALUM. PINT 1%

Craft drinkers prefer draught.

28 –34

DRAUGHT 72%

WHITE COLLAR

BLUE COLLAR

NON EMPL. FT

61%

13%

22%

CASUAL DINING

draught equally creating

CRAFT SEGMENT

21–27

INCOME

prefer bottle and a need to carry both.

CASUAL DINING GUEST DEMOGRAPHICS: AGE

NO PREFERENCE

DRAUGHT 45%

more affluent and in white-collar jobs.

MillerCoors BTS Survey, TNS Landis, July 2011

CASUAL DINING OPPORTUNITIES IMPORT SEGMENT

• Increase conversion to alcohol purchase

NO PREFERENCE 14%

Import drinkers prefer both, with a slight skew

BOTTLE 39% DRAUGHT 45%

• Enable guests to satisfy their appetite for something different.

toward draught.

MillerCoors BTS Survey, TNS Landis, July 2011

in alcohol-appropriate occasions.

CAN/ ALUM. PINT 2%

• Drive traffic and make the most efficient use of limited space to maximize beer category revenue.

CONCESSION & CASINOS

CONCESSION Concession venues are primarily found

CONSUMPTION AT CONCESSIONS

in stadiums and amphitheaters. They

• Beer sales are up 2.9% in 2015. 3

service a limited number of occasions

• The average fan consumes 3.8 beers

with a limited duration (sporting events, concerts, etc.), making operational

at an event. 2 • Brand is the most important selection

efficiency essential to their success.

criteria when choosing a beer.

The remainder of concession venues

• 2/3 of concessions beer sales are

are mostly in airports and other public

Premium American Light Lagers. 2 • 60% of consumers stay with a

transportation hubs.

single brand throughout the • There are more than 800 concession venues selling alcohol beverages, an increase of 2.5% in 2015. 1 • Total food and beverage sales in concessions are up 3% in 2015. 2 • Total alcohol beverage sales are 21%

event. 2 • 87% of fans will, or will consider, leaving their section to purchase their preferred brand. 2 1. MillerCoors Internal Data, December 2015 2. MillerCoors Custom Research, July 2015 3. Technomic, September 2015

of concession’s total sales. 2

ALCOHOL BEVER AGE SHARE BY SEGMENT

PACK AGE PREFERENCE Fans choosing cans/bottles often do so because they believe their beer will stay cold longer.

21% 63%

16%

SPIRITS

35% DRAFT

BEER WINE

Technomic, September 2015

65%

C A N S /A L U M I N U M B OT T L E S MillerCoors Custom Research, July 2015

Casinos

CASINOS

GUEST AC TIVITIES

Casinos have 41 million annual visitors,

Assortment varies based on activities — ensuring

with that figure set to grow. Revenue centers include the casino floor, restaurants/ bars, banquets/convention center and pools.

the right brands and form are available is critical.

77.7%

Gaming makes up 37% of revenue, but that is declining. 1

47.1%

40.8%

37.7%

36.4%

Played table games

Watched a stage show or concert

Went to a bar/ nightclub

• Casinos target 21-to 29-year-old patrons as key beer drinkers, who represent 44% of visitors, up 8.7% in 2015. 1 • Total Alcohol Beverage sales are 36% of

BEER CONSUMPTION IN CASINOS • Casino guests generally consume their favorite beer, primarily Premium American Light Lagers, or Premium American Regular

Went to an upscale restaurant

Las Vegas Scarborough 21+ (age) FY 2015, December 2015 Those who visited a casino in last 12 months

% DR ANK IN PAST MONTH 62.5%

Lagers and not Crafts or Imports. 3

55.7%

ON-PREMISE

casinos’ total food and beverage sales. 2

Played slot machines

58.7%

• 2/3 of beer drinkers consumed Premium American Light, the largest beer segment.

17.9%

24%

TAB SHARE BY SEGMENT WINE

33%

Premium American Light Lagers

Premium American Regular

Imports

Craft Beer

Las Vegas Scarborough 21+ (age) FY 2015 Those who visited a casino in last 12 months

BEER 43%

SPIRITS Technomic, September 2015

1. Las Vegas Convention and Visitors Authority, December 2015 2. Technomic, September 2015 3. Scarborough Multi-Market, December 2015

T R AV E L & L E I S U R E

The travel and lodging industry includes primarily hotels, motels and resort properties. The travel and leisure industry generated $43.5 billion in food and beverage revenue in 2014 with $8.4 billion in alcohol beverage sales. • There are approximately 53,000 hotels in the U.S., which is an increase of 8.5% since 2011. • Hotels are dominated by Economy and Midscale units, but total revenue derives

2 015 B E E R SA LE S

+4.5% $3.3

BILLION

Technomic Lodging Study, July 2015

from midscale and upscale properties.

LODGING BY SEGMENT 2015 60%

50%

55%

52%

SHARE OF LOCATIONS SHARE OF REVENUE

40%

32% 30%

20% 11%

10% 0%

8% 3%

1% LUXURY Technomic Lodging Study, July 2015

UPSCALE

MIDSCALE

ECONOMY

TAB SHARE BY SEGMENT

GUEST OCCASIONS In alcohol-appropriate occasions, guests are primarily visiting to socialize with a group or

33%

“reconnect” with an intimate

40% BEER 27%

friend or their partner. Although less frequent, large events or

WINE

special occasions (e.g., banquets)

S PI R I T S

drive the most alcohol sales. Technomic Lodging Study, July 2015 MillerCoors Category Survey, December 2015

Technomic Co Pilot, September 2015

• There are multiple service areas in hotels, with restaurants, bars/lounges, banquet space, and pool bars driving nearly all alcohol beverage sales. • Total Alcohol Beverage is 19% of total food and beverage sales in hotels.

Top outlet selection criteria: • convenience/proximity • atmosphere/ambience Technomic Co Pilot, September 2015

TRAVEL & LEISURE OPPORTUNITIES • Increase conversion to alcohol

• Beer sales are $3.3 billion, up 4.5% in 2015.

purchase in alcohol-appropriate

• Beer sales: 73% is in Luxury and

occasions.

Upscale hotels, which are less than

• Grow beer sales in new

10% of lodging properties.

opportunity service areas,

Technomic Lodging Study, July 2015

such as lobby carts/kiosks.

Technomic Co Pilot, September 2015 MillerCoors Category Survey, December 2015

ON-PREMISE

Technomic Lodging Study, July 2015

• Ensure the right package mix in each service area. 51

At MillerCoors, we are committed to growing the size and value of the beer category in your business. Our approach is simple: understand your business and your objectives, and then work with you on opportunities to achieve those goals. Our network is ready to share with you the Building with Beer™ suite of channel solutions designed to deliver total category results.

Building with Beer™ On-Premise

Building with Beer™ Grocery

• Leverage the power of Premium American Light Lagers to increase 1) revenue and profits, 2) the time your customers spend in your establishment, and 3) the total size of the check • Optimize brand assortment, ensuring productive mix of national and local crafts • Offer brands in both draught and package to meet your consumers’ needs

• Improve feature, space and assortment mix to drive revenue and trips • Increase basket ring by pairing meal solutions with beer • Optimize display velocity and turns to deliver profitable revenue

Building with Beer™ C-Store

Building with Beer™ Liquor Store (Spring, 2017)

• Optimize cold space across all items to grow overall cooler revenue and profit • Merchandise singles by shopper segments to improve revenue and profit • Simplify singles pricing to drive incremental purchases, revenue and profit

• Recruit routine beer shopper visits by elevating the in-store experience • Grow profitable revenue through a disciplined variety in the cooler • Maximize total alcohol occasions with basket building solutions

PLEASE CONTACT YOUR MILLERCOORS SALES TEAM FOR MORE INFORMATION.

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