Convenience Store Decisions March 2018 by WTWH Media LLC

Volume 29 • Number 3 • MARCH 2018 Business Solutions for Retail Decision Makers

® A

H A R B O R COMMUNICATIONS

P U B L I C AT I O N

2018

Category

Management

Covering 38 categories, CSD assesses what’s hot in store, what works in the forecourt, proﬁtable products and growing consumer trends.

Review

EDITOR'S MEMO

BEVERAGES

8 Engaged Customers are Loyal

42 Carbonated Beverages

44 Cold/Frozen Dispensed

TECHNOLOGY

FRONT END

45 Juices & Teas

81 Prepaid Cards

10 CSD’s Quick Bites

46 Bottled Water & Sports Drinks 48 Beer & Adult Beverages

82 Loyalty

84 Security & Cash Management

Customers

12 Technology’s Food Interface 18 Industry News

20 Cumberland Farms to Host 5th

Annual YEO Conference 21 Chevron, Jacksons Food Stores Launch EMCS 22 CM Leadership Awards: Fasel Focused on Family Express 24 CM Leadership Awards: Hanke Brings Experience to Maverik

FOODSERVICE

50 Energy Drinks

SNACKS

OPERATIONS

52 Salty Snacks

90 Car Wash

56 Healthy Foods

94 ATMs

55 Sweet Snacks & Bars

CONFECTIONS 58 Chocolate

38 Bakery

40 Coffee

88 Fuels

54 Meat Snacks

32 Sandwiches 36 Hispanic Foods

86 POS

87 Electronic Payment

28 Chicken

34 Roller Grill

HEALTH & BEAUTY AIDES

51 Energy Shots

60 Gum & Mints

30 Pizza

DAIRY & ICE CREAM

TOBACCO

93 Lighting

BACK END 96 Product Showcase

100 Quick Stop 101 Ad Index

102 Industry Perspectives: Honing the

Category Management Process

62 Cigarettes

64 Roll Your Own 66 Smokeless 68 Cigars

74 Vaping Products 76 E-Cigarettes

78 Tobacco Accessories 4 Convenience Store Decisions March 2018

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THE CSD GROUP Convenience Store Decisions • Leading Through Innovation A H A R B O R C O M M U N I C AT I O N S L L C C O . Convenience Store Decisions

EDITORIAL

Vice President, Editor-in-Chief John Lofstock jlofstock@csdecisions.com Senior Editor David Bennett dbennett@csdecisions.com Senior Editor/News & Online Erin Del Conte edelconte@csdecisions.com Associate Editor Howard Riell hriell@csdecisions.com Associate Editor Marilyn Odesser-Torpey mot@csdecisions.com

Contributing Editors Anne Baye Ericksen Pat Pape Brad Perkins Jeffrey Steele Lisa White Columnists Jim Callahan John Matthews Production Manager Barbra Martin bmartin@csdecisions.com Webmaster Dave Miyares dmiyares@csdecisions.com

VIRTUALMART ADVERTISING

Group Publisher Tom McIntyre tmcintyre@csdecisions.com 440-250-1583 Publisher John Petersen jpetersen@csdecisions.com 440-250-1583 Vice President, Sales Tony Bolla tbolla@csdecisions.com 773-267-1897

Creative Director Erin Canetta ecanetta@csdecisions.com EDITORIAL ADVISORY BOARD

Robert Buhler, President and CEO Open Pantry Food Marts Pleasant Prairie, Wis. Jim Callahan, Director of Marketing (Retired) Geo. H. Green Oil Inc. • Fairburn, Ga. Brad Call, President Colour Du Jour • Salt Lake City Bill Kent, President and CEO The Kent Cos. Inc. • Midland, Texas Greg Lorance, Dispensed Category Manager Cumberland Farms • Framingham, Mass. Billy Milam, President RaceTrac Petroleum Inc. • Atlanta Patrick J. Lewis, Managing Partner Oasis Stop 'N Go • Twin Falls, Idaho Scott Zaremba, President and CEO Zarco 66 • Lawrence, Kan.

OFFICE LOCATIONS

Headquarters 19111 Detroit Rd., Ste 201 Rocky River, OH 44116 P: 440-250-1583 • F: 440-333-1892 Editorial and NAG 1420 Queen Anne Rd., Suite 4 Teaneck, NJ 07666 (201) 837-2177 http://twitter.com/CStoreDecisions www.facebook.com/CStoreDecisions www.linkedin.com/CStoreDecisions 6 Convenience Store Decisions March 2018

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NATIONAL ADVISORY GROUP BOARD

Peter Tamburro, Board Chairman Clifford Fuel Co. • Utica, N.Y. Mary Banmiller, Director of Retail Operations Warrenton Oil Inc. • Truesdale, Mo. Greg Ehrlich, Chief Operating Officer Beck Suppliers Inc. • Freemont, Ohio Doug Galli, Vice President, General Manager Reid Stores Inc./Crosby’s • Brockport, N.Y. Joe Hamza, Chief Operating Officer Nouria Energy Corp • Worcester, Mass. Brent Mouton, President and CEO Hit-n-Run Food Stores • Lafayette, La. Robert O’Connor, President and CEO O’Connor Petroleum Co. • Hales Corners, Wis. Vernon Young, President and CEO Young Oil Co. • Piedmont, Ala.

SUBSCRIPTION INQUIRIES

To enter, change or cancel a subscription: Web (fastest service): www.ezsub.com/csd Phone: (844) 862-9286 (U.S. only, toll-free) Fax: (440) 333-1892 Mail: Convenience Store Decisions P.O. Box 986, Levittown, PA 19058 Copyright 2018, Harbor Communications, LLC

YEO BOARD OF DIRECTORS Jared Sturtevant, Board Chairman CST Brands, Director of Marketing

Alex Olympidis, Board Vice Chairman Family Express Corp., Director of Operations Alli Bixler, Director of Special Projects The Kent Cos. Sharif Jamal, Corporate Training Manager Chestnut Petroleum Distributors Lindsay Lyden, Vice President, Development Truenorth Energy Dana Moloney, Strategic Workforce Partner Warrenton Oil Co. Jeremie Myhren, Vice President, IT Road Ranger Bart Stransky, Executive Director, Merchandising RaceTrac Petroleum Inc.

Convenience Store Decisions is a three-time winner of the Neal Award, the American Business Press’s highest recognition of editorial excellence.

Convenience Store Decisions (ISSN 1054-7797) is published monthly by Harbor Communications, LLC., 19111 Detroit Rd., Suite 201, Rocky River, OH 44116, for petroleum company and convenience store operators, owners, managers. Qualified U.S. subscribers receive Convenience Store Decisions at no charge. For others, the cost is $80 a year in the U.S. and Possessions, $95 in Canada, and $150 in all other countries. Single copies are available at $9 each in the U.S. and Possessions, $10 each in Canada and $13 in all other countries. The annual Sales Trend Handbook can be purchased for $75. Periodicals postage paid at Cleveland, OH, and additional mailing offices. POSTMASTER: Send address changes to Convenience Store Decisions, P.O. Box 986, Levittown, PA 19058. GST #R126431964, Canadian Publication Sales Agreement No: #40026880. Materials in this publication must not be reproduced in any form without written permission of the publisher. Direct requests to: Editorial Department, 1420 Queen Ann Rd., Teaneck, Suite 4, NJ 07666. Phone: (917) 601-9623. Copyright 2016, Harbor Communications LLC. All rights reserved. Circulation audited by Business Publications Audit of Circulation, Inc.

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EDITOR’S

Memo

Engaged Customers Are Loyal Customers

HE CONVENIENCE STORE INDUSTRY CONTINUES to evolve and where it ends up as robotics and personalized delivery gain traction is anyone’s guess. But one thing for sure is that how customers feel about your brand and your services will likely determine where they make their purchases. Robbie Kellman Baxter, a business consultant focused on how to engage customers, said retail companies must get very intentional about keeping customers engaged with their brand. Capturing customers is hard enough, but keeping that customer is even tougher. For one thing, so many competitors crowd the marketplace that consumers can quickly and easily find another option. For another, customers simply expect more. They demand quick service, great experiences, and plenty of personalization and perks. Plus, it doesn’t take much to lose a customer. They don’t have to have a bad experience; many customers leave because of indifference they perceive on the part of a sales associate. “It used to be that if you offered a good product or service and just did a good job, that was enough to keep customers happy,” said Baxter, author of “The Membership Economy: Find Your Superusers, Master the Forever Transaction, and Build Recurring Revenue.” “But now, constant engagement is crucial for creating those forever transactions with customers.” Whether they realize it or not, customers crave more value from their relationship with brands, and brands must find innovative ways to provide it. Once you get customers emotionally invested they will stick with your brand, buy more and spread the word about you to other potential customers. This provides a much greater ROI than your efforts to acquire new customers. “You have to work at making existing customers feel special,” said Baxter. “You absolutely cannot ever take them for granted.” Exceptional Times The push for exceptional customer experiences is part of a shift toward what Baxter calls the Membership Economy, a model based on customer-centric strategy using topics like price, inclusiveness and digital platforms that draw people in and win their loyalty. People today expect to be engaged, and if they don’t experience engagement with your brand, they will find it somewhere else.

8 Convenience Store Decisions March 2018

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If you have any questions or have suggestions for future issues, please don’t hesitate to contact me at jlofstock@csdecisions.com.

This is where the Customer Success function comes in. Not to be confused with Customer Service— which mostly handles complaints when the customer has a problem—Customer Success Managers (CSMs) foster engagement by being the consumer’s insider to the brand. With social media being such a preferred mode of communication for today’s consumers, CSMs can help put out fires and control the dialogue. If you want to engage with your customers and build a deeper level of loyalty, Customer Success may be a smart solution. According to Baxter, Customer Success will accomplish three things: Customer Success focuses on the customer’s experience, not just retention. Trying to win a customer back after they’ve moved on to another brand is very hard, Baxter said. “It’s much easier to make sure they stay engaged in your brand, which is where things like loyalty programs come into play. Customer Success treats the consumer like a friend. A CSM is ultimately judged on customer engagement, which is a leading indicator of retention, which leads to revenue and profitability. Customer Success generates profits while building relationships. From the moment of the initial transaction, CSMs are reaching out to customers to ensure they are getting value from the relationship. At convenience store chains this could mean engaging customers on social media, through couponing with text messages or customer intercepts. Connecting with customers at all points where they interact with your brand is crucial for strengthening their attachment to your brand. “Many chains now recognize that long-term engagement is the way to build deeper customer loyalty,” Baxter said. “Keeping in touch with your customers and helping them get the most from your brand shows them that you really do care and makes them feel good about sticking with you.”

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QuickBites Foodservice Customers Look for Deals NON-DEAL OFFERS • 75% of all restaurant traffic • Down 1% in 2016 and 2017

DEAL OFFERS • 25% of all restaurant traffic • Up 2% over last year (up for 3rd consecutive year)

Source: NPD Group’s foodservice market research.

Valentine’s Day Spend

2017 2018 $135.57

(spent by customers)

U.S. drivers logged 1 billion miles on E15 fuel between November of last year and this January.

54%

(celebrated)

$18.2 billion

Driving on E15

(in Valentine’s Day sales )

$143.56

(predicted customer spend)

55%

(expected to celebrate)

$19.6 billion (in Valentine’s Day sales projections)

Source: National Retail Federation (NRF) and Prosper Insights & Analytics. The survey, which asked 7,277 consumers about their Valentine’s Day plans, was conducted Jan. 3-10 and has a margin of error of plus or minus 1.1 percentage points.

About 1,000+ U.S. stations offer E15—three-times as many as in Oct. 2016.

CUSTOMER BREAKFAST HABITS The most functional and routine meal of the day, breakfast is typically focused on quick, often portable options that provide nutritious, lasting energy

Almost 16 million adults have access to E15.

WHO WITH

WHERE EATEN Source: Growth Energy

84% HOME

(8% work, 5% restaurant 3% Other)

SECURITY EVOLVES

The retail environment requires security beyond retailers’ current focus on payments and networks. 91% of retailers will have end-to-end encryption (E2EE) by the end of 2020 61% will offer a single token solution across the enterprise within three years 0

WHEN DECIDED WHAT TO HAVE

62% < HOUR BEFORE

(16% 1 Hour Before, 6% Several Hours Before, 17% Day or More Before) 80

100

53% ALONE

(24% Couple, 19% Family, 4% Friends)

23% of consumers skip

breakfast at least once a week

Source: The Hartman Group, “Transformation of the American Meal 2017” report.

Source: Boston Retail Partners, 2018 POS/Customer Engagement Benchmarking Survey

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FRONTEND

Column

Technology’s Food Interface As needs of the U.S. consumer change, modern tools are offering convenience retailers new solutions to craft better foodservice programs.

Erin Del Conte

By Erin Del Conte, Senior Editor

S CONVENIENCE STORES CONTINUE TO up their foodservice game, technology is offering ways to better meet crucial goals, from labor management to speed of service to food safety to tracking orders. Boston Retail Partners (BRP) notes “the pervasiveness and ease-of-use of mobile devices offers tremendous opportunities for retailers.” Soon, Gen Z will proliferate the workforce, a generation that has never experienced life without a mobile phone. Customers expect to use a mobile device to order ahead for their meal and beverage and pay for it in advance all via their phone. They also want loyalty points and personalized discounts linked to their phone that can be used at the pump without having to rummage through a wallet or

purse to find a card, Perry Kramer, senior vice president and practice lead at BRP, advised me recently. Many c-stores are already either strategizing or introducing mobile ordering and in some cases even delivery, and linking loyalty programs with payment via an app. However, the mobile realm is only one area where technology is aiding foodservice initiatives. Food Safety & Transparency Blockchain is a technology that came about with the concept of Bitcoin, and today it is getting a lot of buzz. Blockchain is a continuously growing list of online records, called blocks, which are linked and secured using cryptography, that can be accessed via the internet.

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OUR #1 SELLING SNACK ITEM 7-Eleven Convenience Stores teamed with Flirtey, an independent drone delivery service, in 2016 to begin testing drones. Will drones be the delivery vehicle of the future?

Blockchain eliminates the need for paper records and one place it could become especially useful to c-stores is in the area of food safety and the overall logistics chain of food, Eric Richard, education coordinator, International Dairy Deli Bakery Association, told me recently. “In essence a consumer, a store or a distributor can count at any moment where a specific product is, so they’re able to track the whole logistics food chain in real time. It really gives the consumers a peace of mind knowing that the cstore, has the capability to know where their product is at any given time.” If a foodborne illness were to break out, it could be tracked—using blockchain—within hours rather than the days or weeks it takes currently. It also allows a retailer to look at a shipment of lettuce, for example, and know exactly where it is at any time. This builds complete transparency around ingredients and products. And we all know transparency is a huge demand of customers today. Blockchain is still in its conceptual phase, but the need for transparency with food and ingredients and clean labels is not going to go away—if anything it’s expected to grow, and technology can help pave the way for giving customers the information they desire. FOOD ORDERING Today, more c-stores are looking to technology to seamlessly integrate foodservice within their operating systems. One example is Verifone’s Commander Site Controller software platform that now incorporates food configuration. Sayre, Pa.-based Dandy Mini Marts, which operates 64 locations, is one of the many c-store chains using the technology. When a customer orders food via an employee or an ordering kiosk the transaction interfaces with the kitchen production system, which then shows the item so the kitchen staff can prepare it. This helps with labor management and order accuracy. The technology now can also interface via the drivethrough, and the order appears on a confirmation board so the customer has a chance to confirm what they ordered. The result is accurate, faster orders, which in turn can result in increased sales.

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FRONTEND

Column

EMPLOYEE SCHEDULING Technology can also help retailers with labor management. As the gig economy continues, many c-store employees are working many different jobs at once, and balancing shifts between those jobs can become problematic.

At the National Association of Convenience Stores (NACS) Show this past October, Danielle Mattiussi, vice president of operations for Maverik Inc., noted that the Salt Lake City-based chain started making changes after exit interviews turned up a surprising

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trend. Some 47% of employees were being let go after a no-call-no-show because it was easier for them to leave than to conform to the schedule. Meanwhile, employees with multiple gigs struggled to get enough hours. Maverik tackled these challenges by adding a new management software, that is also available via an app. Now, schedules can be planned two weeks in advance. Store directors can post available shifts and employees can opt in, allowing for more ﬂexibility. Maverik then began working on an employee-pooling feature where employees can opt in to pick up shifts at multiple stores. Maverik expects to see reduced turnover and also see a beneﬁt when it comes to correct sizing for the seasonal workforce.

“

Today, more c-stores are looking to technology to seamlessly integrate foodservice within their operating systems. One example is Verifone’s Commander Site Controller software platform that now incorporates food configuration.

”

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Are Drones Done? Robotics and drones are another area of continued innovation. While the likes of Amazon and 7-Eleven might be testing drone delivery, Daniel Burrus, an American technology futurist, told me he does not expect drones to take off as the food/ product delivery vehicle of the future. “Drones is a way of signaling, ‘we’re doing really cool stuff,’” Burrus said, but added if Amazon gets going with drones in a major way, so will all other retailers. “You’ll have more drones than birds,” Burrus said, the Federal Aviation Administration would never allow it.”

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INDUSTRY

News

fresh-made items such as fruit, pizza, burgers and f’real milkshakes. “Being a locally Arkansas-owned company, central Arkansas is home to us,” said Big Red Stores president David Hendrix said. “We are excited about further serving our friends and neighbors.”

Andeavor Expands U.S. Footprint

Casey’s Acquires Five Frawley Sites

Andeavor recently reported on its fourth quarter growth, noting its network has expanded by 763 stores, or 31% year-over-year, to 3,255 locations. The retail giant operates Giant convenience stores in the Southwest, SuperAmerica c-stores in the Minneapolis-St. Paul area and ampm cstores in southern California. The latest growth was driven by its Western Refining acquisition, the acquisition of retail stores in northern California and the continued execution of the company’s organic growth plan, including rebranding and expansion into Mexico. Andeavor also opened 28 ARCO stores in Mexico as of Jan. 31, 2018.

Ankeny, Iowa-based Casey’s General Stores has acquired five convenience stores from Frawley Oil Co. located in Whitewater, Wis. Casey’s expects these c-stores to be rebranded and that they will undergo improvements in the coming months following the final closing of the transaction. Frawley Oil continues to distribute fuels and lubricants throughout southeastern Wisconsin, as a third-generation company.

Big Red Stores Now Larger Big Red Stores convenience chain has begun construction on its 37th location in central Arkansas, located in North Little Rock on Counts Massie Road, and set to open in April 2018. This store will serve the Maumelle and North Little Rock communities. It will incorporate the company’s new contemporary design, developed to meet changing customer needs. This location will include touchless bathrooms, 18 Convenience Store Decisions March 2018

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QuickChek Hires VP of Food Service Whitehouse Station, N.J.based QuickChek Corp. has hired Scott Zoeller to the newly-created position of vice president of f o o d s e r v i c e . Scott Zoeller Zoeller joins the c-store chain from Kings Supermarkets and Balducci’s, where he was most recently vice president of deli, prepared foods, meat and seafood. QuickChek operates 154 fresh convenience market locations throughout New Jersey and New York.

Amazon Testing Grocery Delivery Amazon on Feb. 8, announced the introduction of free two-hour delivery of natural and organic products from its recently acquired Whole Foods Market through Prime Now, with plans to expand across the U.S. in 2018. Starting immediately, Prime customers in neighborhoods of Austin, Cincinnati, Dallas and Virginia Beach can shop through Prime Now for bestselling items including fresh produce, high quality meat and seafood, everyday staples and other locally-sourced items from Whole Foods Market.

Sheetz One of 100 Best Companies Altoona, Pa.-based Sheetz—Convenience Store Decisions’ 2017 Chain of the Year—has been named one of the 2018 Fortune 100 Best Companies to Work For, according to global research and consulting firm Great Place to Work and Fortune Magazine. This list, now in its 21st year, recognizes companies that have exceptional workplace cultures. Sheetz was ranked 66th, improving upon its 2017 standing by 21 positions. Companies opt to participate in a selection process, which includes an employee survey and an in-depth questionnaire regarding programs and employee practices.

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FRONTEND

News

Cumberland Farms to Host the 5th Annual YEO Conference Attendees are scheduled to tour Cumberland Farms’ facilities and learn how the chain tackles foodservice and nurtures its outstanding retail culture. By CSD Staff

View the full agenda and register for the 2018 YEO he Young Executives Organization (YEO) is headed to Massachusetts May 16-17 with an all-star agenda Conference by visiting www.nagconvenience.com/2018of speakers, store tours and interactive demonstra- yeo-conference. In addition, attendees will hear from several guest tions at Cumberland Farms’ commissary and distribution center. The group will also partner with Habitat for Human- speakers, including congressional candidate Peter Tedeschi, the former president and CEO of Tedeschi Food Shops. ity for the second straight year. The fifth annual YEO Conference will be held at Cum- Tedeschi, a 2018 Republican candidate seeking election to the U.S. House to represent the 9th Congressional District berland Farms’ new headquarters in Westborough, Mass. In addition to networking and a firsthand tour of Cum- of Massachusetts, will discuss the importance of family berland Farms’ facilities, YEO members will hear how this businesses in the convenience store industry. Jill Johnson, an award-winning management consultant leading convenience store chain nurtures its outstanding retail culture, tackles foodservice, staffing and developing who has impacted more than $4 billion worth of business decisions, will also lead sessions on its convenience store operations. enhancing strategic thinking and Last August, the New England reconfidence. tail chain unveiled its “next generation” store. The 5,000-square-footLEADERSHIP GROWTH location, built in Titusville, Fla., offers “YEO is extremely proud to be several new food and beverage oppartnering with Cumberland Farms tions. Smoothies, frozen espresso, to learn more about a great conand milkshakes are available, as well venience store chain,” said John as specialty coffee drinks including Lofstock, executive director of the espresso, cappuccino, and lattes are National Advisory Group (NAG) also part of Cumberland Farm’s next and YEO. “Cumberland Farms has generation menu. earned a reputation for having outAs an added bonus—for the sec- In 2017, YEO members participated in a Habitat standing leadership, a great foodserond straight year—the 2018 YEO for Humanity project in Provo, Utah. This year, YEO members will have a chance to participate in Conference will feature a team-build- Habitat’s Operation Playhouse in Massachusetts. vice program and being among the most innovative chains in the industry ing exercise by partnering with Habiwith its distribution and commissary tat for Humanity on a construction model. Combined with speakers like project on May 15. YEO members will work with Habitat for Humanity’s Op- Peter Tedeschi and Jill Johnson, this is shaping up to be a eration Playhouse, which builds playhouses for children of very special two days.” Following up on the successful conferences YEO has military veterans in Massachusetts. Once they complete construction, YEO members will reveal the surprise play- had at Family Express, RaceTrac and Maverik, YEO members are sure to have a wonderful experience that will help house to the children in a special presentation. them grow personally and professionally. CONFERENCE AGENDA Attendance for the 2018 YEO Conference is free for Speakers for the 2018 YEO Conference will include a NAG members thanks to sponsors Altria, Apter Industries, host of Cumberland Farms’ key executives including CEO McLane, PDI, R.J. Reynolds and SKUPOS. To learn more Ari Haseotes; Gwen Forman, senior vice president of mar- about NAG and YEO, visit www.nagconvenience.com. Register today to participate in the 2018 YEO Conference keting; Keith Boston, vice president of foodservice; and Sean Linnane, vice president of human resources. Plus, and the Habitat for Humanity project. If you have any quesYEO members will be treated to guided tours of the chains tions about NAG, YEO or membership, contact NAG Executive Director John Lofstock at jlofstock@csdecisions.com. stores, commissary and distribution center. 20 Convenience Store Decisions March 2018

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News FRONTEND

Chevron, Jacksons Food Stores

Launch EMCS

Companies aim to double the number of ExtraMile c-store locations by 2027. By CSD Staff

hevron U.S.A. Inc. and Jacksons Food Stores have launched a joint venture: ExtraMile Convenience Stores LLC (EMCS), which officially began operations on Feb. 1. EMCS will expand the ExtraMile brand across more of the western U.S. “Our objective is to double the number of sites in the West by 2027, but does not rule out additional growth opportunities into other regions like U.S. East and Mexico,” Lorne Chambers, Chevron’s general manager for retail west told CSD. Chevron opened its first ExtraMile store more than 10 years ago. Its 250+ company-owned, company-operated ExtraMile locations will now become franchisees of EMCS. Jacksons Food Stores, based in Meridian, Idaho, has more than 230 company-operated convenience stores in six western states— Idaho, Nevada, Utah, Arizona, Oregon and Washington. This year Jacksons Food Stores plans to convert its 60+ existing company-owned and operated Jackson Food Stores at Chevron and Texaco locations to the ExtraMile brand. This will extend the ExtraMile brand further into areas of its existing footprint as well as into four new states. All of those locations will then fall under the EMCS franchisee umbrella. “This is an exciting time for Chevron, Jacksons and the new company as we kick off the next chapter in our ExtraMile growth story,” said Paul Casadont, president of EMCS. “By partnering with Jacksons, we are well positioned for dramatic growth over the next decade—we intend to double the number of ExtraMile sites in that time. Customers can count on the same world-class c-store experience they’ve come to expect from ExtraMile with even more opportunities to enjoy the benefits and product offerings.” The ExtraMile network currently includes nearly 800 cstores located in California, Oregon and Washington. New Enhancements to Come “There will continue to be a Franchise Council providing input on key ExtraMile initiatives as they do today,” Chamcstoredecisions.com

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Dale Walsh, president of Chevron Americas Products, and John Jackson, CEO of Jacksons Food Stores, sign an agreement, launching ExtraMile Convenience Stores (EMCS) as a joint venture.

bers said, adding new enhancements to the ExtraMile offering are in the works—including in foodservice—and announcements are planned for later in the year. Chevron first announced the formation of EMCS, which is co-owned by Chevron and Jacksons, to grow the ExtraMile brand back in September 2017. The new company will be located in San Ramon, Calif. “We are honored to be part of this great opportunity to grow ExtraMile,” John Jackson, CEO and president of Jacksons Food Stores, said in a statement when the venture was first announced in September. “We are committed to the long-term success of ExtraMile and will be rebranding all of our Jacksons/Chevron company-owned locations to ExtraMile. We are looking forward to combining the entrepreneurial spirit of the franchisees with the ExtraMile brand and the capabilities of Jacksons to become the leading convenience retailer in the West.” Chevron U.S.A. Inc will retain strategic oversight and control over the ExtraMile brand, which will continue to enhance and complement the Chevron and Texaco fuel brands. EMCS is entirely focused on the convenience store business, allowing ExtraMile to expand and operate with more of an entrepreneurial spirit, becoming nimbler and better able to compete with fast-growing competitors, Chambers explained. While EMCS owns the franchise, including operational expertise, buying power and advertising, the assets remain with the partners.

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CATEGORY MANAGEMENT LEADER

Fasel Focused on Family Express Because of his imperative role at Family Express and the positive impact he makes on the company’s customers every day, CSD this year is recognizing Ryan Fasel as a category management leader. By David Bennett, Senior Editor

Ryan Fasel

hen Ryan Fasel came to Family Express Inc. State. “I am successful when our customers are happy.” Measuring success and all its components comes in nine years ago, his role as a category manager many shapes and forms. At Family Express, Fasel weighs was challenging and complex. However, as the convenience store landscape has many analytical tools to ensure the company is staying on evolved, marked by more sophisticated consumers, top of the trends. “Using quality data is imperative. Every year is less and headier vendor relationships and more aggressive competitors—both c-stores and in other channels—the job less reactionary or focusing on the immediate,” said Fasel. “It’s becoming increasingly important to prepare for sevgets a little more challenging and complex every year. Today, as the director of store merchandising/category eral months, or even years, into the future. New innovation manager for Family Express, a Valparaiso, Ind.-based across all categories is coming in at faster rates than ever. chain of more than 70 stores, Fasel oversees several cat- It’s important to allow flexibility to be among the first to egories including tobacco and dispensed beverages. His market to capitalize on new innovation and trends.” The changing role of the modern c-store has also been multiple responsibilities and broad knowledge base have shaped his understanding that future retail will demand formed through technological advances. Again, staying more from category managers. It’s a future that he can’t in front of the curve is the enviable place to be, as Fasel can attest. wait to tackle head on. “We have diverse networks to pull information from,” Because of his imperative role at Family Express and the positive impact he makes on the company’s custom- Fasel said. “That includes building a network of suppliers every day, CSD this year is recognizing Fasel as one of ers and manufacturers that see you as innovative and have you at the top of their lists when it comes to prethe industry’s category management leaders. senting new innovation and sharing industry data, staying on top of information in industry publications, and Our customers are becoming more adventurhaving a network of counterparts from chains in all areas of the country.” ous, looking for new items, and have specific

“

preferences for items such as better for you, responsibly sourced, environmentally friendly, or just really unique flavors.

”

CUSTOMER FOCUS So what’s the biggest challenge in 2018? “I think keeping up with changing consumer demands is the biggest challenge. Consumer preferences are constantly changing across all categories,” said Fasel. “Our customers are becoming more adventurous, looking for new items, and have specific preferences for items such as better for you, responsibly sourced, environmentally friendly, or just really unique flavors.” Meeting customer expectations is a big part of his role. It’s a responsiblity that he takes seriously. “At Family Express we measure success by meeting our customers’ needs,” said Fasel, a native of the Hoosier 22 Convenience Store Decisions March 2018

22_Category Leader-Fasel.indd 22

PART OF THE FAMILY Before arriving at Family Express, the product of Purdue University spent five years working in the service and insurance industry. However, his career took a good turn when he joined the family-owned and operated company. In an age of increasing industry consolidation, Fasel feels being family-owned and operated is Family Express’ biggest strength. “There’s no red tape when it comes to making important decisions,” said Fasel. “Decision makers, including our CEO (founder Gus Olympidis), can be brought together to make decisions quickly, many times in a matter of minutes. That, combined with our distribution center and daily delivery model, allows us to react to changing trends and implement new items and programs, such as our Cravin’s To Order proprietary foodservice, to improve the business quicker than anyone in the industry.”

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2/24/18 1:47 PM

CATEGORY MANAGEMENT LEADER

Hanke Brings Experience to Maverik Utilizing modern means and methods are a necessary part of being a category manager in today’s convenience store industry. Travis Hanke counts his well-rounded industry knowledge as perhaps his sharpest tool. By David Bennett, Senior Editor

Travis Hanke

ravis Hanke wouldn’t say he’s cutting edge, but in terms of the latest and greatest in category management, you might say he works near the edge. The edge of adventure, that is. “I’m very fortunate to be part of the Maverik Inc. team. Maverik’s ‘Adventure’s First Stop’ brand, new-build store growth, innovation and the team members are all amongst the best in the industry,” said Hanke, category manager for the Salt Lake City, Utah-based chain of 311 stores. Specifically, he oversees the cigarette, tobacco and general merchandise categories. In a short period time— a little less than a year—he has brought his industry knowledge to Maverik, which has also brought a liveliness to a tobacco category that is often bogged down by government regulations.

“

We’re making better decisions and moving in directions quicker based on actual measurable results and not perception, speculation or emotion. This evolution has also bought clearer visibility to cannibalization, duplication and space-to-sales opportunities.

”

Not only does he stay on top of the latest tobacco regulations, but he is using state-of-the-art methods to evaluate and respond to the latest industry trends. Hanke also recognizes that consumers expect to be recognized and treated as individuals, and those expectations are spurring significant changes to all aspects of today’s c-store operation. Counting the tangibles and intangibles he brings to the table, CSD is recognizing Hanke for his leadership in category management. IN THE BEGINNING Hanke started in the industry in June 1998 as a cashier at Flying J. During his time at Flying J, Hanke served in operations and category management roles for 12 years. Afterward, Hanke’s career stops included experiences in both operations and category management. Prior to Maverik, he was a district manager/category manager at the convenience store chain Pump & Pantry, part of Bosselman Enterprises. His resume also includes a tenure with Buchanan Energy, which does business as Bucky’s 24 Convenience Store Decisions March 2018

24_Category Leader-Hanke.indd 24

and operates c-stores in four markets; Omaha Metro, Chicagoland, greater St. Louis and Houston. So what does a category manager acquire after 20 years—aside from a lot of kudos and coffee cups? Hanke brings much managing experience. At Maverik, he put that experience to work. HARNESSING DATA Changes in category management that have affected the scope of Hanke’s job include tools that capture consumer data. Accuracy is clearly a significant hurdle to many retailers’ abilities to harness analytics to drive decision-making and improve the customer experience. More and more c-stores are letting technology do the work, and Maverik is no exception. “The retail sales data solutions available have significantly changed the game over the years. Knowledge is power,” said Hanke. “We’re making better decisions and moving in directions quicker based on actual measurable results and not perception, speculation or emotion. This evolution has also brought clearer visibility to cannibalization, duplication and space-to-sales opportunities. A winwin with our vendor partners can’t be achieved without it.” In a short time, Hanke and his team have made improvements in the tobacco category, including the implementation of zone pricing within each state on cigarettes and moist smokeless tobacco. Maverik’s geographic footprint includes 11 Western states. “This direction allows us to optimize sales and profits within each market based on competition,” Hanke said. MEETING CHANGE Of course, overseeing such a fluid category isn’t without its challenges. “Earlier this year, the cigarette industry’s leading manufacturer announced its plan for a ‘smoke-free’ future,” said Hanke. “The category is evolving fast and we must be prepared to respond quickly to give customers the products they want.” “The legislative tobacco issues are also a challenge,” Hanke continued. “The state tax increases have always been there, however the menthol restrictions and minimum purchase age changes have become more prevalent recently.”

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2/27/18 2:10 PM

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Introduction

2018 Category Management Review

2018 Category

Management

Review

Covering 38 categories, CSD assesses what’s hot in store, what works in the forecourt, profitable products and growing consumer trends. A CSD Staff Report

n today’s industry, it’s a category manager’s job to differentiate customer experiences, build solid category strategies, design compelling assortments, plan productive planograms and efficiently price and promote today’s hottest offerings. That’s enough work for anyone. However, analyzing, assessing and then acting upon the change of course that many c-store categories have taken in the last few years is a separate job, which often requires some overtime. Not surprisingly, 2018 is shaping up to be no exception.

GIVE THEM CAKE The face of category management is changing rapidly. That’s because the categories are fluctuating with the shifting tide of consumer demand. Today’s c-store customers want to have their cake and eat it too—in every daypart. America’s growing penchant for healthier snacks, more nutritious food offerings, cleaner labeling and less additives co-exist with its demand for more exotic beverages, bigger portions, slicker vape pens and more indulgent chocolate candy. It begs the question: Do you want gravy on that? By taking a customer-centric approach, more retailers were able to identify categories in which the needs of the customer were going unmet and exploit that gap. However, 26 Convenience Store Decisions March 2018

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BEVERAGE SALES CHANNELS Beverage Daily.com last year queried some 1,000 suppliers and other professionals to gauge the channel that offers the best growth prospects for their products in 2017. Aside from supermarkets, the rise in ecommerce is seen with 28% of respondents, while 27% identified eating out and 26% identified c-stores as their favorite options. Supermarkets 49% E-commerce 28% Foodservice and eating out 27% Convenience stores 26% Premium retail 19% Others 14% Independent stores 14% Club stores/wholesalers 12% Discount stores 7%

Drug stores/non-food shops/ 5% gas station Source: Beverage Daily.com State of Beverage Industry 2017

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THE MORE ITEMS THE BETTER Those who purchase many foodservice items from c-stores tend to have positive associations with c-store foods, while those who only purchase a few items have more negative views. These are the findings of Mintel’s March 2017 Foodservice report. In a survey of 1,193 internet users aged 18plus who have purchased a made-to-order/prepared food/ drink from a c-store in the past three months, respondents were asked to asked to rate their foodservice experience. For example, 56% of consumers who have purchased five or more foodservice items from a c-store in the past three months agree that c-store food is high quality. 60

FOOD INTAKE For the last few years, as cigarette sales have declined, foodservice sales have risen as companies such as Casey’s, Sheetz and Stripes, which are pushing their own envelopes and own menu offerings to great a destination experience for their customers. U.S. convenience stores experienced record in-store sales of $233 billion in 2016—and the third straight year of $10 billion-plus in pretax profits—according to National Association of Convenience Store’s (NACS) State of the Industry data. While tobacco products, including cigarettes, were 36% of in-store sales dollars, they accounted for only 18.2% of gross profit dollars. Also, OTP experienced double-digit growth in both sales and gross profit dollars. cstoredecisions.com

26-27_Cover Intro.indd 27

53%

56% 51% 46%

45%

40 30

C-Store food often looks unappealing

2 types

21%

1 type

5 or more types

3-4 types

2 types

31%

5 or more types of food

55%

3-4 types

1 type of food

filling the gap is vital to today’s convenience operation as the industry grows in size and complexity. Consider the ebb and flow of the vaping and e-cigarette categories. Some perceptive category managers probably predicted the market success of JUUL, which surpassed VUSE during the 12-week measuring period ending Nov. 4, 2017. Wells Fargo Securities analyst Bonnie Herzog said then VUSE, made by R.J. Reynolds Vapor Co., dropped to 27.4% from 28.9% during the measuring period. Meanwhile, JUUL, made by Pax Labs Inc., surged from 27.2% to 32.9% based on a 31.5% jump in sales. With those kinds of figures, its not surprising that Big Tobacco is further embracing the future of a world where cigarettes—still a dominant category for c-stores in 2017—will eventually take a back seat to other tobacco products (OTP). Still, the announcement from tobacco giant Philip Morris International this past January, in which the manufacturer said it will focus on “smoke-free products,” surprised some. The company, which makes classic cigarette brands such as Marlboro, L&M and Parliament, presented its new vision, promising a “much better choice than cigarette smoking.” They also claimed products such as vapor and e-cigarettes would eventually replace cigarettes completely in the UK.

C-Store food is high quality

Source: Lightspeed/Mintel, March 2017

It was foodservice holding to second place that was encouraging, according to NACS data. Foodservice contributed 21.7% of in-store sales in 2016 and accounted for 35.2% of gross profit dollars, with prepared food and cold dispensed beverages driving the category’s growth. Other strong c-store categories in 2016 included packaged beverages and snacks. To understand how a straightforward category is being shaped by advances in technology, look no further than the car wash. Americans pride themselves in the vehicles they drive and vehicle upkeep has become a booming business. However, meeting consumer demand for such upkeep has spurred various changes in the car wash equipment industry. And, because car wash equipment is a significant investment, the need for retailers to do their homework—as in all the categories they include in their service sector—is as important as ever. On the following pages, CSD breaks down 38 categories that remain critical cogs in today’s convenience channel. We look at what’s hot in store, what works in the forecourt, profitable products and growing consumer trends. Again, 2017 was a stellar year for the industry. Convenience operators are positioning themselves to ensure that 2018 is even better.

March 2018 Convenience Store Decisions 27

2/27/18 1:33 PM

Foodservice

Chicken

Poultry Sales Set to Soar

ast year, the U.S. Department of Agriculture estimated that per capita consumption of chicken in the U.S. would be a little more than 91 pounds. The forecast for this year is 92.5 pounds. That’s a lot of poultry even though, according to a report published by Mintel research company last November, the category has experienced only “minimal growth” for the past five years. But, the researchers predicted, the outlook for increased sales over the next five years appears to be brighter, in part due to product innovation, especially by suppliers and retailers who are incorporating chicken into non-traditional dayparts such as breakfast or snack. At Clark’s Pump-N-Shop stores, » Chicken’s versatility for example, chicken tenders virtumakes it a hot seller. ally fly out the door from morning through night, subbing for sau» There’s a potential sage or bacon in breakfast biscuit to add sales by addsandwiches and accompanied ing online ordering. by a variety of six or seven dipping sauces for lunch, dinner and

Fast Facts:

• 67% of American consumers said they have eaten a chicken meal/snack from a foodservice establishment in the past two weeks. That’s down from 72% in 2016. • The average number of times consumers said they have eaten a chicken meal/snack from a foodservice establishment in the past two weeks is 2.2 times. • 47% are light users who have eaten 1-2 chicken meals/snacks from a foodservice establishment over the past two weeks. • 27% are heavy users who have eaten 3+ chicken meals/snacks from a foodservice establishment over the past two weeks. • The highest number of foodservice establishment heavy chicken users by generation is Millennials (43%), with Generation X and boomers tied at 29% each.

Source: “Foodservice Establishment Chicken Consumption Behavior Study” by the National Chicken Council and Watt Global Media, which is hosting the Chicken Marketing Summit 2018

28 Convenience Store Decisions March 2018

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CHICKEN FLIES HIGH Chicken production rose in 2017, including wings and things. The following chart shows poultry production in pounds per million. Chicken

Jan-Dec Jan-Dec 2016 2017

Broilers

40,696

41,658

Other Chicken

548.6

535.1

Aug. 2017

Sept. 2017

Oct. 2017

Nov. 2017

Dec. 2017

3,763 3,430

3,709

3,437

3,322

48.3

45.4

50.7

43.7

Source: USDA, National Agricultural Statistics Service, “”Livestock Slaughter”” and “”Poultry Slaughter.”” Date run: 1/29/2018

in-between snacking. The availability of high-quality dipping sauces is important because they make it possible for the same basic chicken tenders to provide numerous ﬂavor experiences, said Brian Unrue, the company’s director of operations. Seven of Pump-N-Shop’s 67 stores feature Krispy Krunchy Chicken, a Louisiana Cajun marinade-injected fresh product that suits the spice-loving tastes in those market areas. Other locations, where the preference is for milder seasonings, offer either Chester’s Fried Chicken, Chappy’s Chicken or PumpN-Shop’s own proprietary program. In all the stores where chicken is available, the product comes in fresh and is battered, breaded and fried on-site in front of the customers. NPD Group market research reported in January that bone-in and boneless wings are also big sellers in restaurants and foodservice outlets. The research showed that 45% of Americans order chicken wings, over 60% of which are bone-in.

WORKING SMARTER Chicken is also the star of the catering menu that Unrue introduced a little more than four months ago. In response to customer requests, he is testing a partnership with ChowNow, an online ordering system and marketing platform, in his Ashland, Ky. store. “When we were opening the new store we had a lot of requests for online food ordering,” said Urue. ChowNow developed the web page, set up the menu and put in place a system, in which orders go to an iPad with a wireless printer in the store. The system also accepts prepayment so that the order is totally ready for grab and go when the customer comes to the store for pick-up. “We pay a monthly fee to ChowNow and we have a system that allows us to stay current and on top of things in the marketplace,” Unrue said. cstoredecisions.com

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Foodservice

Pizza

C-Stores Push

Pizza Innovation Fast Facts: » Bold ingredients, combinations are driving pizza purchases in the channel. » Breakfast pizza can ﬁt a healthy lifestyle, experts say.

n its “Global Pizza Market 2016-2020” report, Technavio research forecasted a compound annual growth rate ((CAGR) CAGR) of around 3% for that period. Researchers attributed much of that growth to the inﬂux of new and often bold topping ingredients and combinations, a trend that is being greeted with open minds and palates, particularly by Millennials. “Limited edition” varieties ﬁll the

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bill for ﬂavor experimentation at the more than 300 Pilot Flying J retail locations that offer pizza as part of their PJ Fresh brand, said Shannon Johnson, the Knoxville, Tenn.based chain’s vice president of food innovation. Offered multiple times per year, the limited editions are available for four to six weeks at a time. Pilot Flying J’s combined network of more than 750 retail locations across North America serves more than 1.3 million customers daily. Two varieties that were particularly well received by guests were the Buffalo chicken and mega meat pizzas. “We always want to surprise and delight our guests, especially during different seasons,” Johnson said. “These specialty variations allow our guests to discover new ﬂavors.” Johnson pointed out that pizza is one of the stores’ most popular food offerings, making it a consistent growth category. He credited a combination of fresh, hand-craftedon-site product and top-quality ingredients such as 100% mozzarella cheese and other premium toppings. And there’s another interesting twist in the way Pilot Flying J prepares its PJ Fresh Pizzas. To make its pies visually distinctive and memorable, the crust is braided by hand into a signature “rope” design. “We call PJ Fresh Pizza ‘unexpectedly awesome’ because travelers don’t really think about getting a high-quality

TOP PIZZA TOPPINGS Datassential’s MenuTrends Keynote on Pizza released in 2017 is a comprehensive overview of this consumer favorite, covering how operators are currently menuing pizza and the breakdown of daypart consumption. Within the report are the most popular pizza toppings and the fastest growing toppings:

28-40_Foodservice.indd 30

2017 PENETRATION

Sausage

74%

Pepperoni

73%

Chicken

69%

Bacon

59%

Ham

43%

Source: Datassential 2017 Menu Trends

30 Convenience Store Decisions March 2018 Portion Padl.indd 1

MOST POPULAR

cstoredecisions.com 12/19/17 3:33 PM

2/26/18 8:51 AM

pizza when stopping for fuel and other travel center items,” said Johnson. PJ Fresh Pizza is available whole or by the slice. At any given time, no fewer than three varieties are available by the slice and guests can customize their whole pizzas to take to work or home.

THE TOP 5 FASTEST GROWING PIZZA TOPPINGS (+++% indicates >200% growth) 2017 PENETRATION

4 YEAR GROWTH

Kale

2.5%

+++%

Cranberry

1.1%

+++%

Brussels Sprouts

1.6%

+160%

Heirloom Tomato

1.0%

+137%

Roasted Corn

1.1%

+132%

FASTEST GROWING

Source: Datassential 2017 Menu Trends

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HEALTH HALO Aside from the traditional lunch and dinner pizza purchases, customers have also taken to ordering the pies during the morning daypart. This has made the stores’ breakfast pizza an increasingly popular item, said Johnson. The Technavio report showed that some major national chains are bundling customization with “better-for-you” benefits by providing nutrition calculators that help customers keep track of the calorie count in their build-your-own creations. Pilot Flying J lists the calorie counts of some of its pies on its company website. According to Technavio, gluten free is also well on its way from being a niche market buzz-phrase to mainstream concept, even though only about 1% of Americans have celiac disease—an immune reaction to eating gluten, necessitating avoidance of that protein. However, a much higher number of Americans are adopting the gluten-free lifestyle for health reasons.

March 2018 Convenience Store Decisions 31

2/26/18 8:53 AM

Foodservice

Sandwiches

Adding Zest to Sandwiches combinations. Among the top-trend- rotates in limited time offer (LTO) ing globally-inspired specialties called made-to-order and grab-and-go hot out by Datassential are the Vietnamese and cold varieties every other month. » Americans are looking to banh mi, Mexican torta, French croque In January, for example, the LTO was other cultures for new sandwich madame, Indian shawarma and all- a chicken-bacon, Caesar-salad, garingredients and combinations. lic-herb wrap that was a big hit with American lobster roll. While the traditional ham and customers. Sometimes an LTO sand» Sandwiches can pull doublecheese still reigns supreme, Kent wich, such as the recently featured duty as both made-to-order opKwik customers have shown that they Philly Cheesesteak, is so popular it can are willing to try something new and earn a permanent place on the regutions and grab-and-go selections. interesting. One major example is the lar menu. Some LTOs do double duty as house-made chicken salad with cranberries and pecans on wheatberry both made-to-order and grab-and-go a d e - t o - o r d e r s a n d - bread that has become a best seller, selections. Williams pointed to a ham wiches have their share Williams noted. In fact, the wheatberry and cheese sub that was a favorite of loyal fans. But, accord- bread has been so heartily embraced choice in both formats. Kent Kwik offers an always-available ing to Chicago-based Q1 by customers that the company Consulting, grab and go still rules the switched to it from the usual white sub-chips-drink combo, but Williams said it’s more for customer convenience roost in the sandwich category. In its bread for all its wedge sandwiches. “The wheatberry bread tastes bet- than it is a necessity to drive sales. Grocerant Consumer Survey for 2018, “We sell many more subs by themQ1 reported that 71% of consumers ter and stays fresher than white bread, of prepared take-out food who pur- and it appeals to customers who are selves than we do combos,” she said. When it comes to breakfast sandchased a cold deli sandwich went the looking for a ‘better-for-you’ option,” wiches, the 97-cent sausage biscuits said Williams. grab-and-go route. In addition to the usual selection have long been a draw. The stores sell The grab-and-go cases at the 44 Kent Kwik Convenience Stores in of Kwik Eats sandwiches, Kent Kwik an average of 250 per day. Texas, Oklahoma and New Mexico are a popular stop-off for the construction and oil ﬁeld workers who come in for LAST OCCASION FOOD PURCHASEDbreakfast and pick up sandwiches to HOT BREAKFAST SANDWICHES take with them for lunch, said Stormy Eight percent of consumers purchased a hot breakfast sandwich on their Williams, the company’s director of last occasion. These include breakfast burritos and breakfast wraps. operations-foodservice division. The service areas used for the last purchase varied across grab and go, Kent Kwik produces five different in-store restaurants and made-to-order. sub sandwiches and two wedge variBASE % GRAB IN-STORE MADE-TOeties for its Kwik Eats deli in its 1,000 TYPE SIZE PURCHASING AND GO RESTAURANT ORDER square-foot proprietary commissary. Another three or four kinds of sandHot Breakfast 48 5% 63% 31% 25% wiches come from an outside supplier. Sandwich

Fast Facts:

LTOS PROVIDE SPICE In its MenuTrends Sandwich Keynote 2017, Datassential research ﬁrm found that a growing number of Americans are looking to other cultures for new sandwich ingredients and 32 Convenience Store Decisions March 2018

28-40_Foodservice.indd 32

Breakfast Burrito

38%

41%

Breakfast Wrap

55%

20%

Source: Q1 Consulting Services, 2017

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Foodservice

Roller Grill

Roller Grill Set To Grow Fast Facts:

foodservice sales, said Jon Fleck, the HOT DOG & SAUSAGE company’s merchandising manager. PRODUCTION Last year, roller grill sales were up » Mexican-style items, such more than 15% over 2016 and Fleck Industry specialties like hot dogs, bratas tornados, are in-demand expects them to continue to grow. wursts, Italian sausages, pepperoni offerings. “Our customers like our roller grill and breakfast sausages are popular products because they’re hot, they inclusions in consumers’ meals and » Condiments are a key have a great smell and they can be regular popular offerings in convecomponent to a successful customized with our great selection of nience stores. Within the $15 billion roller grill program. condiments,” said Fleck. industry, the product mix accommoAlmost all 35 Zip Trip stores in dates all dayparts. Montana, Wyoming, North Dakota, 7.8% he hot dog and sausage indus- South Dakota and Minnesota have 8% Poultry sausage try is a $15 billion business, with roller grills, except for the few stores Breakfast sausage (including hot dogs) products revenue increasing by 2% in that are too small to accommodate (except from poultry) 2017. In its “September 2017 one. Depending on the size of the Hot Dog & Sausage Production in the stores and their volume of sales in the U.S.” report, IBISWorld estimated that category, the grills range from three to revenue will grow at an annualized rate five hot dogs wide. % Fleck explained that during midof 2.1% to $16.6 billion over the next morning through the dinner rush, the five years to 2022. Dinner sausage IBISWorld noted recently that sales stores feature up to seven different products % of dinner sausage, including Italian roller grill products. In the morning, (except from Hot dogs poultry) sausage and bratwurst, also peak dur- the assortment is mostly breakfast sau(except from poultry) ing summer months, with dollar sales sages and breakfast tornados. After 10 accounting for nearly one-third of a.m., that changes to hot dogs, dinannual sales. Nielsen Co. data showed ner sausages, hamburger and chicken that breakfast sausage sales peak dur- roller bites and other tornados. Mexican-style items, such as tornaing holiday months from November Billion dos are taking the roller grill category Source: IBISWorld 2017 through January. by storm, said Bonnie Riggs, restaurant industry analyst for NPD Group grill items by far are the Hillshire Farm MENU OFFERINGS At Cenex Zip Trip convenience research firm. Over a five-year trend to Cheddarwurst and Angus Beef Ball stores hot dogs, sausages and other 2017, these products took a big leap— Park Hot Dogs, Fleck said. Research roller grill products are year-round up 59%—in traditional convenience from a Harris Poll conducted last May showed that beef was the ingredient big sellers, making this category an stores. At Zip Trip, the best-selling roller Americans wanted most in their hot integral part of the stores’ overall dogs. It was the top choice of 61% of consumers, while 12% preferred pork and 7% turkey. In that same survey, 38% of respondents said they prefer hot dogs with natural casing. Twenty-five percent chose skinless. In addition to the regular line-up, the stores rotate a limited time offer (LTO) item every two months “to bring some new things to the grill,” said Fleck.

51.3

32.9

Total $15

34 Convenience Store Decisions March 2018

28-40_Foodservice.indd 34

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Foodservice

Hispanic

Extending

Hispanic Offerings

As a percentage of the total ork, Pa.-based Rutter’s, which has 69 c-stores in Pennsylvania, with nine more planned, including sites U.S. population, Hispanic and Fast Facts: in West Virginia and Maryland, has been in the burrito Latino demographics have risen » What has been beneficial business since its made-to-order foodservice offer- from 6% in the 1980 to about to the burrito/Hispanic food 17% today. Domestic adaptaings were instituted about a decade ago. category are new products geared specifically for conRutter’s plans to expand on the stores’ current Hispanic tions of Mexican cuisine, such as venience stores. food menu to take advantage of the growing demand for Tex-Mex, have grown in popularity, supported by major chains Hispanic foods. » The Mexican cuisine “The category continues to grow, although there are pock- such as Taco Bell that have a industry was estimated to ets where these products are more popular,” said Ryan Krebs, significant national presence. grow 3% per year on averRutter’s director of food service. “There was a time when Overall, the industry was estiage, reaching $38.4 billion there wasn’t a strong demand for these items in our market, mated to grow 3% per year on in 2016. average, reaching $38.4 billion but Hispanic foods have become a relevant category.” in 2016, according to IBISWorld. “Hispanics have traditionally been a very important cusWEIGHING OPPORTUNITY tomer segment for c-stores,” said Mark Halliwell, regional IN HISPANIC COMMUNITIES advisory market sector leaders, consumer products and In the Mexican restaurant Industry, the concentration of estabretail at London-based EY Consulting. “Studies show many lishments is higher than the average in the West due to numerHispanics shop for daily needs, including snack and hot preous establishments in California, largely due to the significant pared food options in this format over others.” proportion of Hispanics living in the state. After California (13.3%), the states with the largest amount of industry operators are Texas (7.7%), New York (6.8%), Florida (4.9%) and Illinois (4.0%). Those regions where Hispanic populations outshine the volume of establishments offer potential opportunity for c-store foodservice programs.

n Establishment n Population

20 15 10

Southwest

Southeast

Rocky Moutains

Plains

New England

Mid-Atlantic

Great Lakes

West

Source: WWW.IBISWORLD.COM

BROADENING THE APPEAL What has been beneficial to the burrito/Hispanic food category are new products geared specifically for convenience stores. This gives the c-stores a chance to add such offerings. “Empanadas are pretty successful nationally, and I’m still working on finding the best one for our stores,” said Krebs. “These are portable, go on hot-holds and can be either fried or baked in the oven.” Rutter’s stores are expanding Hispanic food offerings to include, not just American versions of Mexican food like tacos and nachos, but also authentic fresh salsa and rice and beans. “This will help support other components we already have in the burrito category,” said Krebs. “We are moving into the rice and beans category, which is high volume and relevant, as well as fresh salsa, which will be a value add.” He predicts the future will see the availability of more c-store friendly products, such as tamales, pre-made fajita fillings and chipotle flavors. “As c-stores seek to broaden their appeal to their customer base, offering convenient and convenience products and services, and with the Hispanic population continuing to grow rapidly in the U.S., I would expect the Hispanic segment to continue to be a strong performer and sales of Hispanic food items to also remain strong,” said Halliwell.

2017

2016

2015

2014

2013

2012

2011

2010

cstoredecisions.com

2008

2007

2006

2005

2004

2003

2002

28-40_Foodservice.indd 36

2001

2000

1999

36 Convenience Store Decisions March 2018

2/26/18 8:58 AM

S:7.25”

For freezer door

For grab and go

S:10”

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2/26/18 5:53 AM

Foodservice

Bakery

Indulging On-the-Go Bakery

resh bakery is a hot category at The Hub convenience stores in western North Dakota, especially the bulk packs of mufﬁns, cookies and doughnuts that are baked on site, said Jared Scheeler, the company’s managing director. Last year, bakery sales at two of The Hub’s three stores (the third is a new acquisition that’s being upgraded to include fresh bakery) increased almost 20%—due mainly to an increased focus on bulk products and catering, Scheeler explained. Sweet goods and three types of buns for the grab-and-go » Consumers want sandwich proindividual-size bakgram are baked ery items. in The Hub stores every day » Encourage impulse in six-rack consales by putting vection ovens. displays near the That number checkout. is particularly impressive as, in general, in-store bakery sales rose 1.3%, according to Nielsen Answers on Demand, Total U.S., for the 52 weeks ending July 1, 2017. Eric Richardson, education coordinator for the International Dairy Deli Bakery Association (IDDBA), pointed out that baking the breads for their sandwiches can go a long way in promoting convenience stores’ in-store bakery category. The Hub is also a Cinnabon franchisee and prepares the highly aromatic buns in the stores. “That aroma of those baking cinnamon rolls is very hard to ignore,” Scheeler said. Each store has trained bakery specialists who handle mainly large catering orders. All morning and lunch

Fast Facts:

38 Convenience Store Decisions March 2018

28-40_Foodservice.indd 38

daypart staffers are also trained in the bakery program.

VARIETY WORKS Doughnuts, muffins and pastries are prepared in the morning. Breads and cookies are baked in the afternoon—the same cookies are displayed by the register. Scheeler pointed out that there are about a dozen kinds of doughnuts in the company’s portfolio, but different ﬂavored icings, glazes and toppings make it easy to offer a constantly changing assortment of 24 varieties each day. Among the “must-haves” is the signature maple bacon long john. The bakery also produces seven different muffins, four pastries, four cookies (including a much-loved peanut butter cookie with a full-size peanut butter cup candy baked inside) and a regional favorite fresh caramel roll. A new doughnut limited time offer (LTO) is introduced every month. Mufﬁn and cookie LTOs are rotated in each quarter.

SINGLE SIZE One trend that characterized last year’s bakery sales that is a plus for convenience stores and which IDDBA’s Richardson predicted will continue is the consumer preference for individual-size items rather than full-size cakes and pies. An increasing number of American households are now composed of two or less. As a result on-the-go eating has become prevalent and consumers have a growing appetite for trying new ﬂavors. For on-the-go snackers, The Hub stores offer cups filled with strudel bites and mini doughnuts and cookies on a bulk display table, located in an area separate from the bakery to give more exposure to the products.

BAKERY HAS MORE THAN BAGELS Bagels, mufﬁns and doughnuts have become stalwarts of the U.S. fresh bakery products—including the convenience channel. Desserts boast the lion’s share of retail bakery offerings.

1.5% Other Misc. Bakery ä 7.8%

23.2%

Breakfast Bakery ã 1.9%

50.3%

27.1%

ã 2.4%

Breads & Rolls ä 2.4%

Desserts

SHARE OF $

% CHANGE vs. YEAR AGO

Cakes

0.9%

Breads

-0.5%

Rolls

13.4

2.3%

11.2

2.8%

Donuts

7.5

0.9%

Sweet Goods

6.5

-0.7%

Pies

6.2

2.7%

Mufﬁns

5.1

7.7%

Bagels

2.1

0.5%

Specialty Desserts

2.0

27.3%

Brownies & Dessert Bars

1.9

0.0%

Other Misc.

1.5

1.3%

Source: Nielsen FreshFacts, the International Dairy Deli and Bakery Association, for the 52 Weeks Ending July 1, 2017, Total U.S. Fresh Coverage Area

cstoredecisions.com

2/26/18 2:25 PM

Snack sales go great with beverage sales. And when it comes to baked sweet goods, Little Debbie products are the sales leader*. In fact, 4.7 million Little Debbie products are sold every day â&#x20AC;&#x201C; thatâ&#x20AC;&#x2122;s 55 every second. In a world where snacks and drinks go hand in hand, imagine what that can do for your business. To learn more, call (800) 315-6208 or visit LittleDebbieCStore.com. Little Debbie products are sold DSD by wholesale distributors. *Nielsen ScanTrack, Convenience Stores channel of trade, 52 weeks ending July 29, 2017.

CSD_Ad_Template.indd 21

2/24/18 1:52 PM

Foodservice

Hot Dispensed

Streamlining Hot Dispensed

ometimes you really can line its coffee selection over the past have two much of a good few months. Flavors are being rotated thing. Until recently, the 15 out as limited time offers (LTOs) of Pump-N-Pantry stores located the week. All indications are that this in six northeastern Pennsylvania coun- abbreviated line-up will be rolled out ties offered between 10-12 varieties of to the rest of the stores. hot coffee. Along with its proprietary dark HOT SHOTS Endless Mountain Beanery Coffee, an According to the National Coffee even darker Midnight Blend and decaf, Association (NCA), 24% of coffee drinka variety of different flavored brews ers chose espresso-based beverages rounded out the mix. The problem in 2017, a “leap” of 6% from 2016. was a lot of that cof- That represents the largest recorded fee was being thrown one-year jump for the category in the away, said Wade history of NCA’s annual National Coffee Robinson, Pump-N- Drinking Trends tracking report. Pantry’s food service One new offering that is set for supervisor/digital testing to target the many truck drivmarketing manager. ers who frequent the stores is Extreme To remedy that sit- Caffeine, made from an extract that uation, the company delivers twice the caffeine of regular has begun to stream- coffee. Customers can also boost their

SPECIALTY COFFEE CONSUMPTION Specialty coffee consumption in the U.S. is growing and 2017 marked a rebound in daily specialty coffee drinkers. Over the last 18 years, the average number of cups specialty coffee drinkers consume daily has consistently increased, from about 2.2 cups in 1999 to three cups in 2017.

3.5

2.5 2.0 1.5

40 Convenience Store Decisions March 2018

28-40_Foodservice.indd 40

2017

2016

2015

2013

Source: National Coffee Association Annual Drinking Trends Report, Speciality Coffee Association, 2018

2014

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1.0

» Abbreviated coffee regular coffee’s line-ups can boost your bottom line. caffeine by adding a shot of » More customers Stok, which is seek espresso-based available on the beverages. coffee bars. Although the flavored brews are being trimmed, Pump-N-Pantry still offers many alternatives to coffee drinkers who enjoy different ﬂavors. Last summer through Christmas, the Montrose store tested the Bunn Infusion brewing and holding system. With this system, the stands the servers sit on are connected to a tablet that tells how long before the window of maximum freshness expires and blinks red when the system requires attention. The system is set to be rolled out to all the stores by summer. After testing a barista-served cappuccino drink service in one of the stores, Pump-N-Pantry switched over to the self-service Bunn IMIX machine that uses powdered mixes to dispense ﬁve different hot drinks including regular and mint hot chocolate and French vanilla, hazelnut and seasonal flavor cappuccinos.

TEA PLEASE

3.0

0.5

Fast Facts:

Over the past couple of years, hot tea sales have also picked up in the stores. Instead of ordering a box about every month, they are now ordering one every week or every other week. Aside from regular orange pekoe, the stores offer six Bigelow tea ﬂavors. Among the trends that are driving the growing popularity of hot dispensed tea are the beverage’s healthfulness, variety, availability and sustainability, said Peter Goggi, president of the Tea Association of the U.S.A. Goggi also predicted that the increase “will hold steady if not grow throughout 2018.” cstoredecisions.com

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Beverages

Carbonated Soft Drinks

Soft Drinks Target of Changing Market

n the fourth quarter of 2017, Coca Cola eked out a 1% gain in sales of its carbonated soft drinks (CSDs) such as Coke, Sprite and Fanta in North America, while global volume sales dipped 1%. Still, those kinds of numbers won’t grow the CSD segment and beverage companies such as Coke are committing to noncarbonated beverage products to bolster proﬁts. “We’ve noticed ﬂavored sparkling water is taking over in cooler doors and alkaline Ph-balanced water is being noticed at the c-store level,” said Nicolette Jaeger, loyalty and foodservice manager of Warrenville, Ill.-based PRIDE Stores, which has 12 locations in the Chicago area. “We do see a move away from carbonated soft drinks, but people still crave the classics like Coke and Pepsi.” Last year, the convenience channel accounted for about 19% of industry revenue, which totaled $44.6 billion in 2017. Still, annual growth of CSDs declined 0.4% in 2012 and 2017 and is projected to decrease 0.9% between 2017 and 2022.

STILL TOPS

Fast Facts:

CSDs in 2016 still topped the packaged beverage » New York City-based market category with an research firm IBISWorld reports average-monthlythat the carbonated beverage sales-per-store total segment generates about 19% of $7,639, according of industry revenue, which to preliminary figures totaled $44.6 billion in 2017. released in the NACS » Instead of regular and diet State of the Industry sodas, today’s more health-conSummit Report from scious consumers are turning April 2017. to bottled water and fortified W i t h t o p c a rbeverages with natural ingredibonated soft drink manufacturers furents to satisfy their thirst. ther diversifying their lines and moving into other beverage arenas, the segment will continue evolving to suit consumer tastes. “Whether the category stops hemorrhaging and whether Coke and Pepsi take from other beverages remains to be seen,” said Tom Pirko, managing director, BevMark Consulting, Santa Barbara, Calif. “We haven’t had these competitive dynamics before, with the two biggest players in the world looking to find a way to bring consumCSD SHARE SHRINKING ers back in.” Both Coca-Cola and PepsiCo have launched In 2017, carbonated new mid-calorie soda products, reported soft drinks (CSDs) were IBISWorld. In addition, craft sodas like Pepsi’s 4.8% Mixers estimated to account for Stubborn line are more popular. In 2017, Coca51.4% of industry revenue, Cola debuted Blue Sky Zero Sugar, a craft soda, according to IBISWorld and Coca-Cola Zero Sugar, for consumers who data. Demand for regular prefer the taste of traditional sodas, but are weary and diet CSDs is anticipat19.8% of the added sugars and calories. Diet Carbonated ed to decline further over With the focus on obesity and rise in diabetes, Drinks/Sparkling the next five years, due to % the focus has turned to healthier versions of carWater growing health concerns. Regular bonated beverages that have less calories and Per capita soft drink conCarbonated healthier ingredient profiles. 24% sumption is expected to Soft Drink “There will always be cola, lemon-lime beverEnergy/ decline at an annualized Sports ages and orange soda in this category,” said Pirko. rate of 2.5% over the five Drinks “The real issues are with things like the safety of years to 2022. artificial sweeteners and the big producers questioning their identities. These manufacturers will Source: www.IBISWorld.com turn to other categories to right their ships.”

51.4

42 Convenience Store Decisions March 2018

42-51_Beverges.indd 42

cstoredecisions.com

2/26/18 9:02 AM

CSD_Ad_Template.indd 35

2/26/18 6:39 AM

Beverages

Cold & Frozen

Dispensing Cold Profits

ccording to the National Association of Convenience Stores’ (NACS) most recent State of the Industry report, average sales per store in 2016 of cold dispensed beverages were $52,457 and frozen dispensed beverages were $23,414, almost 98% of c-stores sell cold dispensed beverages and 96% offer the frozen type. Cold dispensed remains popular with retailers because it offers more than a 50% gross margin and frozen dispensed offers almost 65% margin, among the highest for c-store categories. “Cold and frozen dispensed beverages continue to be high areas of focus,” said Kathy Holt, foodservice/c-store lead at JPG Resources, a food consultancy based in Battle Creek, Mich. “I’m seeing increased interest in slush-type drinks that may have health or other beneﬁt components with fruit or vitamins.” Warrenville, Ill.-based PRIDE Stores, which operates 12 stores, has experienced a move away from carbonated soft drinks in the fountain segment. “We’re moving into the direction where what’s popular in our cooler doors is popular in our carbonated dispensed beverages,” said Nicolette Jaeger, loyalty and foodservice manager. Holt sees c-stores doing a great job with store loyalty programs, but aside from these and bundling offerings with food, there is nothing too innovative in fountain promotions. This is where retailers can step up their game. “In terms of promotions, definitely our club cards for

Fast Facts: » According to the Alexandria, Va.-based National Association of Convenience Stores’ (NACS) most recent 2016 report, cold dispensed beverages encompass just 2.48% of in-store sales, while the frozen type garnered 1.06% in 2016. » Along with fruit ﬂavors, more coffee-type drinks like frappucino have helped propel the cold and frozen dispensed category.

44 Convenience Store Decisions March 2018

42-51_Beverges.indd 44

COLD DISPENSED IS A MARGIN PLAYER Cold dispensed beverages proved to be a solid proﬁt performer, ranking up with foodservice and hot dispensed beverages in terms of gross margin, according to data from the National Association of Convenience Stores (NACS).

2016 GROSS MARGIN PERCENT

TOP QUARTILE

BOTTOM QUARTILE

DIFF.

12.6%

2.4 pts

Cigarettes

14.9%

Packaged Beverages

41.5%

36.7%

4.7 pts

Beer

18.7%

21%

-2.3 pts

31%

26.6%

4.4 pts

Salty Snacks

38.3%

37.6%

0.8 pts

Candy

49.9%

48.5%

1.4 pts

53%

53.7%

-0.7 pts

Hot Dsp Beverages

67.6%

42.8%

24.7 pts

Cold Dsp Beverages

52%

43.4%

8.6 pts

OTP (Other Tobacco)

Prepared Food

Source: NACS State of the Industry Summit Report, CSX LLC, April 2017

fountain drinks have been our go-to, with a Buy 5, get the 6th free offering,” said Jaeger at PRIDE Stores.

COMPETITION STRATEGIES Des Moines, Iowa-based Git ‘N Go stores, which has four locations, hasn’t discounted its dispensed beverages beyond 99 cents for some time. “It looks like RaceTrac stores are not doing the Sodapalooza [free refill fountain promotion] this year, and that may mark an industry reflection point in discounting fountain to drive inside sales,” said William Baine, CEO of Git ‘N Go. “I see 59-, 79- and 99-cent promotions on billboards from some large chains, however, so the race for large discounts is not over. With our drive-throughs, we compete more with the fast food chains for this business, and 99 cents gets the lines going.” The challenge remains in getting more fountain heads, with big soda players owning leases and not willing to step aside, said Holt. In terms of trends, along with fruit flavors, more coffeetype drinks like frappucino have helped propel the cold and frozen dispensed category. cstoredecisions.com

2/26/18 2:25 PM

Beverages

Juices & Teas

Juices, Teas Stir Margins

Tropical flavors like mango and n the juice and tea segments, it’s the products with healthier pineapple have been on the rise, as ingredient profiles, low sugar and consumers look for exotic and creative on-trend flavors that are at the healthy alternatives, reports IBISWorld. » Total juice revenue last For example, POM Wonderful is forefront in convenience stores. year totaled $12 billion and Total juice revenue last year totaled expanding into POM Blends that although annual growth $12 billion and although annual growth mix tropical flavors with its staple declined 2% between 2012 declined 2% between 2012 and 2017, pomegranate juice. Additionally, and 2017. it’s expected to grow slightly at .2% Ocean Spray Mocktails, nonalcoholic between 2017 and 2022, according to juice blends launched last year, are » Ready-to-drink tea revNew York-based market research firm also being marketed to Millennials. enue totaled $6 billion in IBISWorld. Orange juice comprises the PepsiCo’s Tropicana brand rolled out 2017, experienced annual bulk of the juice segment at more than Tropicana Essentials Probiotics in 2017. growth of 3.3 % between Coca-Cola promotes the level of 52%, followed by non-citrus fruit juice 2012 and 2017. and smoothies at antioxidants in its Honest Tea beverages on its product labels. In 2017, nearly 34%. By comparison, Lipton added mango as a new flavor in re a d y - t o - d r i n k its iced tea line while Nestlé revamped including Dr Pepper, Green Mountain t e a r e v e n u e its Nestea line using only natural ingre- Coffee, 7UP, Snapple and Sunkist, under one umbrella. totaled $6 billion dients and simplifying packaging. “This deal is all about distribuThrough recent mergers, the bevin 2017, experienced annual erage segment is experiencing tion,” said Daniel Levine, director of growth of 3.3 % consolidation. Keurig Green Mountain the Avant-Guide Institute in New York. between 2012 recently struck a deal worth more “The future of retail is multi-channel and 2017 and than $21 billion to combine with Dr and this deal is greater than the sum of i s e s t i m a t e d Pepper Snapple Group Inc. This will its parts because it gives all the comto grow annu- put well-known coffee, soft drink, pany’s brands access to each other’s a l l y a b o u t 2 % ready-to-drink tea and juice brands, markets.” between 2017 and 2022, according to IBISWorld. Almost 60% of the category is black tea, while 25% is green TEA MARKET GROWS MORE or white tea. According to the Tea Association of the USA, ready-to-drink (RTD) tea is the

NEW BREWS “There are many new items coming out this year in teas and juices,” said Steve Magestro, president of Saukville, Wis.-based Mad Max Convenience Stores, which has 10 Wisconsin locations. “We are seeing more space be given to the alternative beverages in our store set again this year, and space that was once for sodas is shrinking.” Magestro is seeing a bigger push for teas and new items, with its biggest sellers including Minute Maid and Ocean Spray for juices and Arizona, Peace Tea and Lipton teas. cstoredecisions.com

42-51_Beverges.indd 45

Fast Facts:

most popular tea beverage. U.S. convenience store sales of tea in 2017 increased nearly 4% with Pepsi Lipton Tea contributing $705 million during the calendar year. $ SALES

Canned and Bottled Tea

$ SALES % CHG YAGO

$ SHARE UNIT SALES OF TYPE

$1.5 B

3.9%

100

1.1 B

Pepsi Lipton Tea Partnership

$705 M

7.8%

465.4 M

Arizona Beverages USA LLC

$288 M

-10.3%

19.2

278.3 M

Coca Cola Co.

$192 M

10.8%

12.8

107.6 M

Dr Pepper/Snapple Group

$122 M

-9.1%

8.1

71.5 M

$65 M

28.6%

4.4

54 M

Peace Tea Beverage Co.

Source: Information Resources Inc. (IRI) Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017.

March 2018 Convenience Store Decisions 45

2/26/18 9:03 AM

Beverages

Bottled Water & Sports Drinks

Bottled Water

Making Waves

oth the bottled water and sports drinks categories have continued benefitting from the robust economy and consumers’ penchant for consuming healthier beverages. Sales of bottled water in convenience stores totaled nearly $4.3 billion in the 52 weeks ending Dec. 31, 2017, while sports drinks totaled $2.8 billion, according to scan data from Chicago-based market research ﬁrm IRI. Sales of convenience/PET still waters accounted for more than $3.7 billion, a 3.5% increase during the same period. Comparably seltzer/sparkling/mineral types only comprised more than $240 million of the total, according to IRI. Some bottled water companies see much potential in sparkling water. The rise of sparkling water has been a hot trend in the beverage industry as consumers continue to move away from sugary beverages toward healthier offerings. According to Euromonitor, the sparkling water category grew 70% from 2011-2016 and is expected to reach $3.1 billion by 2022. It will be propelled by manufacturers like Nestlé—the biggest globally in terms of sales, followed by CocaCola, Danone and PepsiCo, according to Euromonitor International. Nestlé recently announced rebranding for its

Fast Facts: » The demand for sparkling water has warmed up in the beverage industry. » Sales of bottled water in convenience stores totaled nearly $4.3 billion in the 52 weeks ending Dec. 31, 2017. 46 Convenience Store Decisions March 2018

42-51_Beverges.indd 46

Nestlé Waters’ Regional Spring Water Sparkling portfolio. This includes 10 new flavors, bold bottle design changes, a new can format, and new packaging for the Poland Spring, Deer Park, Zephyrhills, Ozarka, Ice Mountain and Arrowhead Sparkling brands. The segment could also be marked by the recent Dr Pepper-Keurig merger.

more seasonal in convenience stores. “Sports drinks had a rough year due to our [cooler] summer,” said Heidi Rembecki, director of merchandising for Tonawanda, N.Y.-based NOCO Energy Corp., which operates approximately 30 NOCO Express c stores. The c-store chain decided to bring in the Body Armor line about a year

BOTTLED WATER INVIGORATES RETAIL There’s no mistake the packaged beverages category is proﬁtable for the convenience channel, spurred on by the continuing momentum of bottled water sales, led in 2017 by Nestlé Waters with more than $3.7 billion. $ SALES

$ SALES % CHG YAGO

$ SHARE OF TYPE

$ SHARE % CHG YAGO

Segment - Bottled Water

$4.2 B

3.6%

Convenience/Pet Still Water

$3.7 B

3.3%

100

Nestlé Waters North America Inc.

$904 M

24.4

1.1%

Glaceau Water Co.

$858 M

-6.8%

23.1

-2.5%

Pepsico Inc.

$433 M

-4.2%

11.7

-0.9%

Coca Cola Co.

$395 M

-1.1%

10.6

-0.5%

Private Label

$301 M

10.5%

8.1

0.5%

Source: Information Resources Inc. (IRI) Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

“The beverage category’s recent and a half ago, and due to strong big news is the coming together of sales, is expanding to offering the the Dr Pepper Snapple Group (DPS) electrolyte-enhanced brand in a and Keurig Green Mountain,” said larger container. Ed Collupy, executive consultant at “We attribute the strong sales to Chicago-based W. Capra Consulting this being a new product for us, and Group. “Although DPS isn’t leading we encouraged trial with a two for $3 the water or energy drink subcatego- promotion in the smaller size twice in ries, watch for what disruptions are to 2017,” said Rembecki. Gatorade and Powerade brands follow. Keurig is dependent on water, so there could be cross promotional also are strong sellers, with customers opportunities with DPS water brands.” seeking different sizes. NOCO Express convenience stores also recently expanded its sparkling, GOOD SPORTS Unlike bottled water, some retailers electrolyte and spring water offerings contend that sports drinks tend to be in response to consumer demand. cstoredecisions.com

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Beverages

Beer & Adult Beverages

Domestic Beer Sales Fall Flat

eer buyers are unswervingly loyal to conve- according to retail data pronience stores that carry their favorite brands, and vider IRI Worldwide. The reward them with additional sales through larger C h i c a g o - b a s e d m a r k e t » U.S. beer dollar sales research firm reported total basket rings. increased 3% through The category is undergoing a sea change. For exam- U.S. dollar sales of about $2.2 the first four weeks of ple Budweiser, which according to Beer Marketer’s Insights billion through Jan. 28 in the 2018. had ranked as America’s most popular beer until 2001 and multi-outlet and convenience one of its top three since the 1970s, has fallen in popularity channels (MULC). » Consumers are IRI data revealed dollar among domestic beer consumers. embracing authenticity Vivien Azer, managing director and senior research sales for several notable craft with a good brand story analyst with Cowen and Co. in New York City, used the brands also grew, includand local and increased word “malaise” to describe the category in 2017, where ing Lagunitas IPA (2.1%), flavor selection. volumes fell by nearly 1%. “Shifts to distilled spirits and Sweetwater 420 Pale Ale wine continue to be a category headwind, as younger, (6.3%), Founders All Day IPA cross-category consumers continue to replace older beer (15.3 %), Firestone Walker 805 Blonde Ale (15.5%), Bell’s Two Hearted Ale (20.5%), New Belgium Rampant Imperial category loyalists.” Consumers aged 21-34, she added, were eight IPA (71.7%) and Kona Big Wave Golden Ale (49.7%). Collins concurred with those who see the growth of craft percentage points less likely to prefer beer than their 35-tobeer as a national trend, and one on which consumers are 44-year-old counterparts. Eric Schmidt, director of alcohol research for Beverage insisting. “There are more and more beer drinkers changing Marketing Corp., said craft brews are doing well because and younger drinkers are going toward the crafts.” consumers are embracing authenticity with a good brand story and local and increased flavor selection. David Collins, president of Birmingham, Ala.-based DC BIG BEER SALES DIP Oil Inc., which operates a dozen Quick Shop c-stores in Scan data gathered in 2017 by IRI indicates the waning central Alabama, said his beer category was up sales of the top domestic brands of Bud Light, Coors slightly in 2017. “I guess you would almost call Light, Budweiser and Miller Light. However, smaller it flat, but up a little bit. Wine, on the other brands including Corona Extra, Modelo Especial and hand, has done outstanding.” Michelob Ultra-Light enabled c-store beer sales to rise Interestingly, the biggest impact on beer 1.2% last year. sales at a couple of Quick Shop stores came TOP TRENDS $ SALES % CHG YAGO as the result of local legislation that legalized Sunday sales. “Those counties actually went Total: $18.9 B 1.2% wet on Sundays; prior to that, we could not Bud Light $3.7 B -4.9% sell beer on Sundays. That is happening a lot in the state of Alabama and throughCoors Light $1.3 B -1.9% out the South.” Budweiser $1.3 B -4.7% As for the top brands, said Collins, they don’t change. “I don’t see that, but there Miller Lite $1.1 B -1.7% is a constant changing and mixing in the Corona Extra $975 M 9.5% microbrews and crafts. There were a lot of new products that came in in 2017.”

Fast Facts:

2018 BEGINS WELL U.S. beer dollar sales increased 3% through the first four weeks of 2018, 48 Convenience Store Decisions March 2018

42-51_Beverges.indd 48

Modelo Especial

$922 M

20.8%

Michelob Ultra-Light

$892 M

23.9%

Source: IRI’s InfoScan Review of C-Store sales for the 52 weeks ending Dec. 31, 2017

cstoredecisions.com

2/26/18 2:26 PM

Register today to attend the 5th Annual YEO Conference, which will be held at Cumberland Farms May 16-17 in Westborough, Mass. To register visit: www.nagconvenience.com/2018-yeo-conference

This premier industry event is open to nextgeneration leaders 40 and under and is free for members of the National Advisory Group (NAG). YEO is the convenience store industry’s exclusive organization for next-generation leaders and up-and-coming decision makers.

Registration for the 5th Annual YEO Conference is open!

Visit www.nagconvenience.com/2018-yeo-conference for details.

“NAG’s YEO is extremely focused on bringing great young talent together from across the country and giving them a platform to discuss the successes and struggles facing next-generation leaders throughout the convenience store and petroleum industry,” said Jared Sturtevant, YEO board chairman and supervisor of digital marketing for Couche-Tard Inc.

For information on NAG membership or NAG’s Young Executives Organization (YEO) contact NAG Executive Director John Lofstock 201.837.2177 • jlofstock@csdecisions.com

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2/27/18 1:31 PM

Beverages

Energy Drinks

Energy Drinks Wake Up Category

Fast Facts: » Euromonitor International reports that retail sales of energy drinks in the U.S. have spiked 25% since 2012 to $11.7 billion last year.

ine extensions and Americans’ unremitting thirst BRAND LOYALTY for energy and variety continue to power the energy “I would say we do fairly well drink category. with energy drinks,” said David » Mordor Intelligence Convenience store sales of energy drinks totaled Kraning, president of the fourfound c-store sales of $8.4 billion in 2017 and the segment is expected to regis- unit K&B Kwik Stop in Pocatello, energy drinks totaled ter a compound annual growth rate (CAGR) of 3.6% during Idaho. Interestingly, he compared $8.4 billion in 2017. the period 2018-2023, according to market research firm the category’s consumer dynamics Mordor Intelligence. The market for these beverages has to those of pipe tobacco. experienced robust growth in recent years as consumers “We have our customers who have sought alternatives to carbonated soft drinks. are brand loyal, and then you’ve got your customers who While soda sales have steadily declined as more are price loyal,” Kraning observed. “You’ve got the ones Americans shun sugary drinks, they continue to turn to who are diehard Monster fans and nothing else, and then energy drinks as a pick-me-up. you’ve got others for Rockstar, which is very competitively Retail sales of energy drinks in the U.S. have spiked priced. Almost every other week, it seems they are running 25% since 2012 to $11.7 billion last year, according to on special, and you can get Rockstar around $1.39.” Euromonitor International data. Monster Beverage Inc. has been enjoying stellar market “Energy drinks continue to have healthy growth, while momentum. energy shots have flattened out a bit,” said Gary Hemphill, “We believe that Monster is increasingly benefiting from managing director of research for Beverage Marketing trade-down,” agreed Vivien Azer, managing director and Corp. (BMC) in New York City. “Overall refreshment bever- senior research analyst for Cowen and Co. “Our cautious ages have seen slower growth in 2017 than in 2016.” BMC view on the lower-income consumer keeps us constructive expects continued solid growth in energy drinks, and likely on share gains in core energy.” continued softness in shots. K&B Kwik Stop is able to maintain that favorable pricing because its area Monster distributor offers pallet purchasing. Energy is Monster’s biggest sales driver—Java, Rehab, ENERGY DRINKS CLIMB Ultra, Hydro and Mutant are several of the top-selling Monster The top non-aseptic energy brands accounted for more brands—but the company also offers tea, juice, water, coffee than $8 billion in convenience store sales in 2017. and zero-calorie energy drinks. It’s planning to expand coffee and juice flavors in 2018. $ SHARE TOP ENERGY DRINK $ SHARE % K&B stores dedicates six of its 12-14 $ SALES BRANDS CHG Y AGO OF TYPE cooler doors to energy drinks, soda, waters and non-alcoholic non-dairy SS Energy Drinks $8.4 B 2.6% 100 beverages. Non-Aseptic “I would say probably about 20% of Red Bull North $3.4 B 2.6% 41.1 it’s dedicated to energy,” said Kraning. America Inc. “I think that as they introduce new flaMonster Beverage $3.4 B 3.3% 40.6 vors and new things it might go up a Corp. little bit. We might try and fit in a few more facings, and maybe cut down Rockstar Inc. $749 M 0.4% 8.9 on facings of other things.” High Performance $377 M 6.8% 4.5 Kraning credited beverage comBeverage panies with keeping the momentum Pepsico Inc. $123 M -27% 1.5 going through continual line extensions. “They are always introducing Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017 new flavors and tweaking things.” 50 Convenience Store Decisions March 2018

42-51_Beverges.indd 50

cstoredecisions.com

2/26/18 9:05 AM

Beverages

Energy Shots

Energy Shots Slip Back

ver the past few years, energy shots have emerged as a separate product category from energy drinks and other functional beverages. While energy drinks are increasingly associated with healthfulness and positive lifestyle choices, energy shots remain oriented toward direct functionality. Americans crave added energy as much as ever, yet overall category sales of energy shots are trending downward, due in part to the growth of enhanced beverages, and price is becoming more of a factor, as evidenced by the gains by private-label brands. According to IRI scan data, the biggest player, 5-hour Energy, had sales of $662 million during the same period. There remains a sharp discrepancy between sales of energy shots and drinks, which can be attributed partly

ENERGY SHOTS STILL VITAL As the energy shot market begins to mature, growth has slowed. However, private label offerings as well as newer brands such as Tweaker and Rhino Rush are keeping the segment vital.

$ SALES

% CHG YAGO

Energy Shots Total

$719 M

-6.7%

5-hour Energy

662.9 M

-7.4%

18.2 M

11.9%

Private Label

9.4 M

84.3%

Rhino Rush

8.0 M

8.6%

Stacker 2

3.3 M

6.1%

Tweaker

Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

cstoredecisions.com

42-51_Beverges.indd 51

Fast Facts: » Sales of energy shots in convenience stores reached $719 million in the 52 weeks ending Dec. 31, 2017.

to energy drinks regularly releasing new products, increasing distribution and increasing pricings, which all combined has helped that segment grow robust over the last few years. To attract new consumers, 5-hour Energy and other producers are introducing new ﬂavors to entice a younger demographic.

» There remains a sharp discrepancy between sales of energy shots and drinks, which can be attributed partly to energy drinks regularly releasing new products.

would buy them to keep them awake and keep them going while they were studying. They used to buy them by the six pack. That made the store my biggest seller as far as six packs of energy shots.” YOUNGER CROWD Energy shots that contain protein Ed Kashouty, the owner of two Exxon-branded c-stores in New Jersey, could be a convenient and less expensaid his sales of energy shots are buck- sive alternative, and formulators can ensure that they remain low in sugar ing the trend, up about 20% last year. “We sell them mostly to young- and calories are also drawing consters; by that I mean people between sumer interest. Retail consultant Bob Phibbs conthe ages of 18-35, to 40 years old,” ceded that the front counter is a said Kashouty. Sales trends continued as expected necessary location. “Sales training just through January, he added, augur- isn’t practical in c-stores, so it would ing little change in his projections. have to be under their noses.” But Phibbs also regularly advises “People are always looking for something with a bit more kick.” 5-hour convenience store operators to crossEnergy remains his top-selling brand, merchandise with any of several product categories, and energy shots followed by Monster. Younger consumers seem to buy are one of them. “Put the energy shots and the sleeping products together shots more regularly, Kashouty said. “In one of the stores that I used to and cross merchandise. Many people have by Rutgers University, the kids can’t sleep, but also can’t wake up.” March 2018 Convenience Store Decisions 51

2/26/18 9:05 AM

Foodservice

Salty Snacks

Salty Snacks Hold Strong

hen it comes to chips and salty snacks at the nation’s convenience stores, any time is crunch time. That’s because America’s c-store customers enjoy few things more than crunching into yet another package of sodium-laced chips, pretzels, nuts and/ or similar items. Category sales bear this out. According to scan data from the IRI for the 52 weeks ending Dec. 31, 2017, sales of salty snacks totaled at least $5.3 billion, a 7.24% increase over the previous year. Wells Fargo Securities LLC reported all channel dollar sales for salty snacks increased 4.7% during the four-week period ending Jan. 27, 2018, according to Nielsen data. From a sales-ranking perspective, top favorites are Doritos Tortilla Chips, Cheetos Cheese Snacks, Lay’s Potato Chips, Ruffles Potato Chips and Funyuns Onion Snacks, said Sally Lyons Wyatt, executive vice president and practice leader with Chicago-based IRI. Those leading the pack in sales growth are Late July Tortilla Chips, Paqui Tortilla Chips, Dot’s Homestyle » Wells Fargo reported Pretzels, Churrumais Corn all channel dollar sales Snacks and Sunshine for salty snacks inCheez-It Snack Mix. Paqui creased 4.7% during Chips, certified as Kosher, the four weeks ending are gaining as shoppers look Jan. 27, 2018. to meet dietary needs. “Top flavors based on » The best placement unit sales growth are hot strategies are situation and spicy, Mexican, vinegar, based. sweet and beer,” Wyatt said. “Those declining based on dollar and unit sales are meat, chocolate, Asian, butter and peanut butter.” Best placement and promotional strategies are primarily situation based, Wyatt said. “However, one key strategy that all companies should drive is to strategically leverage pricing to enhance volume growth, while avoiding using it as a tactic for driving dollar value growth.”

Fast Facts:

STEADY PERFORMANCE At Team Oil Travel Center in Spring Valley, Wis., grocery manager Jesse Streater reported chips are a “pretty steady” item. Popular items include Fritos, Doritos and Old Dutch chips, in a number of flavors. Kettle cooked chips are 52 Convenience Store Decisions March 2018

52-56_Snacks.indd 52

among customer favorites, as are plain, sour cream and onion, barbecue and newer flavors. Sales are guaranteed on both the Lay’s chips and on Old Dutch. The companies, Streater said, will set up the shelves themselves, and do their own ordering. When it comes to popcorn, a brisk mover is the Smartfood brand in plain and cheese. “They offer new flavors sometimes but they never seem to stick very long,” Streater said. Team Oil, like c-store operations from coast to coast, makes it easy for patrons to find the salt they crave, positioning its chips and salty snacks on two sides of one aisle, and on end caps. Customers don’t have to search for them. “We have got them where [customers] will see them the second they come through the store, and at the register,” said Streater.

SALTY SNACKS SHINE According to IRI scan data, every segment in the salty snacks category experienced higher sales in 2017. Cheese Snacks showed the greatest dollar sales percentage change from a year ago with 11.73%. $ SALES

$ SALES % CHG YAGO

Category — Salty Snacks

$5.3 B

7.2%

Potato Chips

$1.7 B

7.5%

Tortilla/Tostada Chips

$996 M

6.4%

Other Salted Snacks (No Nuts)

$862 M

6.2%

Cheese Snacks

$689 M

11.7%

Corn Snacks (No Tortilla Chips)

$394 M

7.5%

Pretzels

$239 M

3.2%

Ready-To-Eat Popcorn/ Caramel Corn

$230 M

5.4%

Pork Rinds

$203 M

5.0%

Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

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2/26/18 9:07 AM

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2/26/18 5:54 AM

Foodservice

Meat Snacks

Mightier Meat Snacks Market

eat snacks continue to take a healthy slice of snack sales at convenience stores, reported Mintel.That outperformance vis-a-vis other snacks has much to do with category innovation and meat snacks’ functional beneﬁts, Mintel reported. Mintel also forecasts a compound annual growth rate (CAGR) of 5.2% for meat snacks from 2016-2021. As of July 1, 2017, meat snacks generated $1.4 billion in c-stores, a hike of 3.2% over the previous year, reported Nielsen Co. in its Total U.S. Convenience Channel View. For the 52 weeks ending Sept. 9, 2017, meat snacks enjoyed a 9% share of the on-the-go snacking category within the convenience channel, growing at a rate of 5% or $547 million over the past year. Jerky is the segment leader in convenience and dollar growth has continued to rise in the past four years. Yearto-date, the jerky segment is up 8.7% according to Nielsen Convenience Data ending July 15, 2017. Jack Link’s continued to top meat stick snack sales in 2017 with well over 30% of market share. The meat snack category lends itself to new product innovation. One area is premium meat snacks made with prime cuts, from grass-fed animals, offering humanelyraised ingredients as well as hormone-free.

SNACK TRACK

MEAT SNACK PREFERENCES In a Febrary 2017 Mintel survey, 566 internet users aged 18 and older who had purchased any meat snack in the past three months were asked: “Which of the following types of meat snack products would you be interested in purchasing?” The results indicated a signiﬁcant share of younger consumers is interested in socially-conscious meat snacks, grass-fed meat snacks and humanely-raised meat snacks. Spice-Flavored 45% Meat Snacks Made from Prim Cuts 41% Meat Snack Variety Pack 38%

Asian Flavors (eg teriyaki jerky) 37% Grass-fed 28% Meat Snack Bars 27% Preservative-free 26%

Humanely-raised The 2018 National Association of Convenience Stores Meat Snack Trail Mixes 24% (NACS) Consumer Fuels Reports may be insightful on meat snack sales. It found 45% of gas purchasers go inside the Artisanal (eg small batch) 18% store. Of that total, more men than women (37% to 30%) Uncured 12% bought a snack, and younger buyers were most likely to buy None of the Above 10% snacks, with 45% of 18-to-34-year-olds doing so, said Jeff Source: Lightspeed/Mintel Group’s Meat Snacks Deep Dive-Product Interest, April 2017 Lenard, NACS’ vice president, strategic industry initiatives. At Zarco USA stores 0 10 20 30 40 in Lawrence, Kan., national brands Slim reﬂected in its capturing the Grand Champion Beef Jerky Jim and Jack Link’s sell prize in 2015 and 2016 from the Kansas Meat Processors » For the 52 weeks ending briskly. But bigger sell- Association. The eagerness with which Zarco USA customSept. 9, 2017, meat snacks ers recently have been ers have purchased Hombre in larger packages selling in the enjoyed a 9% share of the Hombre Authentic $13 range has given Zaremba an idea. on-the-go snacking category “We’re actually moving into the category ourselves,” Beef Jerky Sticks from within the convenience chansaid Zaremba. “We’re opening a barbecue restaurant that Eudora, Kan.-based nel, growing at a rate of 5% or will start functioning in the next 30 days, inside one of our Pyle Meat Products, $547 million over the past year. said Zarco USA CEO stores, and we’ll be producing our own meat snacks in that » The meat snacks restaurant. As long as you’re doing it the right way, you can Scott Zaremba. category lends itself to new Not only is the make a quality product. The most difﬁcult part of this [initiaproduct innovation. Hombre brand locally tive] will be getting [consumers] to sample. Once they do, made, but its quality is meat snack buyers are very loyal.” 24%

Fast Facts:

54 Convenience Store Decisions March 2018

52-56_Snacks.indd 54

cstoredecisions.com

2/26/18 7:19 PM

Foodservice

Snack Bars

Create Opportunity

ith an increasing awareness among consumers on healthy eating, snack bars have become immensely popular, replacing chocolates, cakes and biscuits as the go-to snacks. Snack bar manufacturers are introducing the health aspect into their products via protein and fiber content. The category fared well despite the economic recession as they are considered an affordable comfort food, according to an exclusive report by research firm Mordor Intelligence. The report, “Global Snack Bar Market: Growth, Trends and Forecasts (2018 2023),” explains snack bars brands have been responsive to consumer trends such as demand for nutritious snacks containing fiber, functional snacks, lowcarb snacks, protein-fortified snacks offering satiety. Snack bars with fortified functional ingredients are about to see notable demand. Snack bars have also responded to diet trends such as gluten-free and

Paleo diets, and as such launches of grain-free and even meat-based snack bars have increased. The sugar content of bars is likely to be increasingly scrutinized by healthconscious consumers and is a constraint for the category. Snack bars are an inexpensive source of nutrition, which has resulted in the replacement of other traditional foods. The rising demand for ready-to-eat (RTE) food is expected to be a major factor in inﬂuencing snack bar market growth in the near future.

GRANOLA GRABS SHARE The snack bar market is segmented based on type and ingredients. There are various products available as snack bars such as breakfast bars, energy bars, fruit bars, granola, nutritional bars and others. However, among all the available options, granola bars accounted for the highest sales followed by breakfast/cereal bars. Fruit-based snack bars are playing a big role in this category. This format

Total breakfast/cereal/snack bars saw dollar sales of $180.7 million for the 52 weeks ending Dec. 31, 2017, down 1% over last year.

$ SALES

$ SALES % CHG YAGO

UNIT SALES

UNIT SALES % CHANGE

Total Breakfast/ Cereal/Snack Bars

$180.7 M

-1.0%

141.7 M

-3.4%

Kellogg Co.

$110.4 M

-2.2%

94.7 M

-3.4%

General Mills

$44.1 M

-6.4%

33.3 M

-8.5%

Best Maid Cookie Co.

$4.1 M

9.6%

2.6 M

10.8%

That's It Nutrition

$4 .0 M

47.2%

2.0 M

48.0%

Private Label

$3.8 M

28.2%

2.2 M

29.5%

Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

52-56_Snacks.indd 55

» Snack bars are keeping pace with consumer trends, such as the demand for protein and ﬁber. » The sugar content of bars is likely to be increasingly scrutinized by health-conscious consumers.

utilizes fruit as binder and sweetener agent, enabling the snack bars to make “no added sugar” claims which resonate with an increasingly sugarwary consumer. Nutrition bar market grew 34% reaching $2.2 billion and had a market share of 39.6, the Mordor report found. The U.S. remains the largest market for snack bars with the highest sales accounting for 42% of the global sales, the Mordor report found.

COMPETITIVE LANDSCAPE

TOP FIVE BREAKFAST/CEREAL SNACK BAR PROVIDERS

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Fast Facts:

The global snack bar market is fragmented and consists of many small and large players worldwide. The companies such as Kellogg, Nature Valley, Alpen and Jordan are the major players. Quest brand has performed very well in the nutritional bars segment, and it has grown 450% by distribution gains and strong sales in the existing channels. The sales of Nature Valley protein bars grew by 10% in both value and volume. In terms of breakfast bars, IRI reported that the U.S. market was down slightly. Sales slipped 1% to $180.68 million for the 52 weeks ending Dec. 31, 2017. That’s It Nutrition and Best Maid Cookie Co. and saw the biggest dollar sales gains increasing 9.62% and 47.22% respectively. March 2018 Convenience Store Decisions 55

2/26/18 9:09 AM

Foodservice

Healthy Foods

Nut & Seed Sales Decline

onvenience store sales of seeds, snack nuts and corn nuts generated more than $965 million in the 52 weeks ending Dec. 31, 2017, a 2.8% decline from the previous year, according to IRI scan data. Comparably, c-stores sold nearly $6 billion of salty snacks last year, a jump of 7% over 2016. “Nuts and seeds have continued to face challenges within the convenience channel,” said Jordan Rost, vice president of consumer insights at Nielsen. “Although con» Convenience store sidered a better-for-you sales of seeds, snack snacking option, nuts and nuts and corn nuts genseeds have been outpaced erated more than $965 by snacking staples, such million in the 52 weeks as pretzels, crackers and ending packaged, ready-to-eat Dec. 31, 2017. popcorn. In fact, nuts and seeds contracted by 2.7% » Nuts alone may have in dollars and 4.2% in units lost some appeal for over this past year, seeing those shoppers seeking a declines for a second year more indulgent snack. in a row.” There are several possible reasons why seeds and nuts have slipped in popularity. For one, a national survey of more than 2,000 dietitians sponsored by Today’s Dietitian, a nutrition trade magazine, found that fermented foods, such as keﬁr, yogurt, kombucha, sauerkraut, tempeh, kimchi, miso and some types of pickles, have become the top super foods for the coming year. While nuts are still important, survey participants predict that consumers will choose clean, natural, fermented foods as they attempt to improve overall health and well-being. Another reason is that there continues to be blurring throughout sweet, salty and better-for-you snacks, according to Stephanie Poitry, category manager at Kum & Go, the West Des Moines, Iowa-based chain of about 420 locations in 11 Midwest states.

Fast Facts:

OH NUTS “Nuts and seeds are a big part of that blurring as they are included in more mixes that may be classiﬁed as ‘other’ snack categories,” she said. “Nuts alone may have lost some appeal for those shoppers seeking a more indul56 Convenience Store Decisions March 2018

52-56_Snacks.indd 56

gent snack, but they remain very popular in bars, mixes and confection.” Despite claims that younger consumers are the primary consumers of healthy snacks, they don’t always apply to this category. “Overall, nuts and seeds continue to have mass appeal among multiple generations,” said Poitry. “There does seem to be a trend towards nuts that are perceived to be healthier, such as almonds and cashews. Peanuts have struggled recently in maintaining their high turns, even though they are one of the best values in the section.” U.S. consumers have favorite brands and flavors of seeds based on the region of the country in which they live. “It’s very important to have the right brands that appeal to market-specific demands,” Poitry said. “Nuts seem less regional from a brand or flavor perspective. New flavors have struggled to maintain share, but they do provide short-term category lifts.”

TOP NUT BRANDS Despite dipping sales, the most popular nut brands contribute healthy proﬁts to c-stores. Led by Kraft and Frito Lay, nuts are a growing draw for health-conscious consumers. $ SALES

$ SALES % CHG YAGO

$ SHARE OF TYPE

Snack Nuts

$618 M

-0.64%

100

Kraft Heinz Co. Snack Nuts

$159 M

-7.0%

25.8

Frito Lay Snack Nuts

$156 M

1.6%

25.2

Wonderful Pistachios & Almonds Snack Nuts

$62 M

16.8%

10.0

Private Label Snack Nuts

$47 M

-6.0%

7.7

Blue Diamond Growers Snack Nuts

$46 M

1.7%

7.4

Source: Information Resources Inc. (IRI) U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

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2/26/18 9:09 AM

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2/24/18 1:46 PM

Confections

Chocolate

Tracking New Candy Trends

MIXING IT UP The Hershey Co. and Mars Wrigley Confectionery are contributing to both trends. Hershey’s Gold bars include caramelized crème and salty peanut and pretzel bits, while Mars’ Snickers Hunger bars offers three introductions: the salty sweet Indecisive?; the fiery Wimpy?; and the » Sweet & Heat espresso-infused Irritable? “The ‘sweet heat’ flavor marks a growing is on fire this winter,” said chocolate ﬂavor George Puro, president of movement. Puro Research Group. “Mars » Packaging introalso introduced spicy Skittles Sweet Heat and Starburst ductions are helping Sweet Heat. Hershey, which to drive sales. does about 13% of its business in convenience stores,

Fast Facts:

58 Convenience Store Decisions March 2018

58-60_Confections.indd 58

U.S. CHOCOLATE CONFECTION SEGMENTS VARY Chocolate candy boxes/bags/bars weighing more than 3.5 ounces and less than 3.5 ounces have generated increasing market sales since 2010, especially candy weighing more than 3.5 ounces, projected to reach $8 billion in total dollar sales by 2020, according to a 2016 Mintel report. 8000 7000 /b Box

/bar

bag Box/

5000

3.5

ba ag/

6000 $ Millions

ne thing is apparent in the chocolate category: people still like to snack. Mintel, in its 2016 Chocolate Confectionery study, showed $17 million in sales that year and a projected 19% growth in sales through 2020. “Chocolate sales were up in 2017. Most of the growth has come from king-size, resealable pouch bags and innovation,” said Mike Clifford, category manager at Clifford Fuel. Packaging continues to be important to sales, both in terms of labeling and size. Mintel’s “Chocolate, Sugar and Gum Confectionery 2018” study indicated that labeling is key to acceptance, which drives product introductions. Last year, introductions of products called “bites” grew 50%, while product offerings called “light” declined 22%. The study also projected box/bag/bars greater than 3.5 ounces to continue to increase above other segments within chocolate, to nearly $8 million in sales by 2020. Of coursed, the key drivers of growth are flavor combinations, texture and spice. Sweet and salty continues to be a trend, and in 2018, spiciness and similar combination profiles are expected from major candy makers. “While demand is consistent, but not rising, innovation in the category is evolving to match changing tastes,” said Dan Donovan, a GetGo spokesman. “We’ve noted the increased presence of dark chocolate options as well as hot and spicy flavor profiles.”

<3.5

onal

Seas

4000 3000 2000

Snack Size

1000 0

Gift Box

2010

Sugar-Free 2015 (est) 2020 (fore)

Source: Mintel’s Chocolate Confectionery US -March 2016 report based on Information Resources Inc. (IRI) Multi-Outlet All Scan data

has also been busy bolstering its snack mix line. It recently introduced another sweet: Hershey’s and Reese’s Popped Snack Mixes, which includes pretzels, Reese’s Pieces peanuts, popcorn and Reese’s Minis.” Other areas of innovation, according to both Puro and Mintel, include “clean snacking,” with no artiﬁcial ﬂavors or colors; non-dairy milk chocolate; and texture. With so many options, the chocolate category seems poised to continue its success, leading to many choices for consumers and convenience retailers, including competition for traditional favorite candies. “I think chocolate will continue to perform well in 2018 due to what looks like strong innovation from Hershey, Mars and, now, Mondelez with the Oreo chocolate bars,” Clifford said. “Dark chocolate, white chocolate and mint chocolate make up a large part of the innovation. Mars seems to be vying for the customer base of Reese’s with chocolate peanut butter offerings from Snickers and Twix.” cstoredecisions.com

2/26/18 9:11 AM

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2/26/18 5:56 AM

Confections

Gum & Mints

New Approach for Gum, Mints

nce a confectionery stalwart, is gum now out of favor? While Mintel’s September 2015 “Gum, Mints and Breath Fresheners Executive Study” noted that breath-freshening gum sales increased 3% globally in 2016, its more recent “Chocolate, Sugar and Gum Confectionery 2018” study, released in January, showed that per-capita sales declined in the U.S. by 1% from 2016 to 2017. And store experience backs up the research. “Gum sales continue to decline slightly while mints are still trending up,” said John Lutz, category manager at Pilot Flying J.

FLAVORS, FUNCTION ENTICE As people move away from gum, companies are trying to lure them back with new ﬂavors, combined ﬂavors and even functional gum that could whiten teeth, improve bone health, provide vitamins, help with weight loss or even provide medicine. But even with new tastes and reasons to chew, sales have been lagging. Mintel’s research explains why:

TOP 10 CHOCOLATE, SUGAR AND GUM FLAVORS FOR 2017 When it comes to the confectionery palete of U.S. consumers, legacy ﬂavors last year remained at the top of the charts, whether it was chocolate, sugar confections or gum, according to Mintel’s recent review. CONFECTIONERY

SUGAR CONFECTIONERY

GUM

Unﬂavored/ plain

Fruit

Mint

Hazelnut

Strawberry

Spearmint

Almond

Orange

Peppermint

Caramel/ carmalised

Lemon

Strawberry

Milk

Unﬂavored/ plain

Watermelon

Peanut/ groundnut

Cherry

Tutti Fruitti

Strawberry

Grape

Fruit

Orange

Mint

Grape

Coconut

Cola

Lemon

Mint

Apple

Peach

Source: Mintel Chocolate, Sugar and Gum Confectionery 2018 Annual Review, January 2018

60 Convenience Store Decisions March 2018

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Fast Facts:

“The top two reasons people purchase gum, mints and breath fresheners is to freshen » Gum makers are their breath and to remove a working to woo bad taste from their mouth,” customers with new the 2015 study said, citing flavors and functionality. its poll that found 62% of respondents purchase gum or » Dessert-flavored gum mints to freshen breath. launches are taking off. The 2018 study added, “In sugar and gum confectionery, the standard flavors are still the most popular, but innovation includes a broader array of dessert inspirations and savory/spicy launches.” Is the demand for innovative gum flavors there? Companies are banking on it, with introductions of dessertflavored gum with flavors like churros, cookies, sorbet and s’mores, flavor mixes and greater choice. Though international companies are gaining attention, the main players are still on top. “Mars Wrigley Confectionery has the lion’s share of gum and mint sales, and introduced some mashups in recent months, including last December’s Juicy Fruit Mixies and Juicy Fruit Collisions, which is expected in May,” said George Puro, president of Puro Research Group. Another way companies are trying to grab the consumer is with larger packages of gum and mints. “I think an overall trend of trading up will occur in 2018,” said Joseph Borner, category supervisor at Rutter’s. “I believe consumers will continue to sway from standard to king. Gum packs shifting to larger pack sizes and bottles. When consumers decide to trade up there’s an overall sense of getting more bang for the buck.” Innovation in the functional gum area has flatlined as the ability to add such things as vitamins hasn’t grabbed a foothold in American markets. So, while the world waits for vitamins or healthier ingredients to come in gum form, one area stands out as ripe for innovation—energy gum. “In 2018, the big new gum launches are Mars Wrigley’s caffeinated Alert gum, a new gum by Tic Tac and Mondelez will come out with Trident Vibe later this year which looks very promising,” Lutz said. cstoredecisions.com

2/27/18 9:52 AM

Dairy

Milk & Ice Cream

Dairy Not All

Peaches and Cream

airy products such as milk of those categories now that peoand ice cream remain indis- ple think carefully about unless they pensable in the convenience have little kids, in which case they just space, especially when it buy milk in bulk,” said Steve Barnett, the founder and president of Bardo comes to single-serve products. » Global ice cream market Global ice cream market value is Consulting in New York. value is expected to reach Des Moines, Iowa-based BW Gas & expected to reach $89.5 billion by $89.5 billion by 2023. 2023, recording an anticipated com- Convenience, which does business as pound annual growth rate (CAGR) Yesway, is seeing consumers migrate » Growth will come from of 4.9% during the period of 2018- to healthier snacking alternatives. functional and premium “We expect sales and gross proﬁt 2023, according to the latest report products. from market research firm Mordor growth to come from functional and Intelligence. Unilever dominates the premium products, like Halo Top,” global market occupying eight of the said Tony Sparks, vice president of 15 top selling brands and a 22% share merchandising. “We also see an Last year, Yesway switched suppliers increasing number of private-brand in the market. Nestlé is the closest to items in this category, especially in in order to increase product selection Unilever, occupying four the premium and functional segments, and lower costs, said Sparks. “We also and an expanded focus on novelties.” upgraded all of our equipment and brands in the top 15. American consumers’ growing reallocated product assortment to be Mordor notes the sales of low- healthier habits are also spurring more heavily focused on immediately quality ice cream demand for frozen yogurt and other consumable items versus take home items.” Sales of novelty ice cream have been declin- frozen dairy offerings. “Immediately consumable, health- products grew the most, he added. ing, due to the For the balance of 2018, ultraincreased preference ier ice cream novelties that tend to be for premium ice cream low-calorie, gluten-free or low-sugar premium ice cream and treats will alternatives will continue to drive continue to show growth, Kum & Go’s and frozen novelties. Overmohle is convinced. “When indulging, con- change in this category,” Sparks said. sumers want full ﬂavor ice cream,” said Samantha ICE CREAM SALES CHILL Overmohle, assistant cateConvenience store sales of ice cream dipped to $510 million in 2017, a gory manager for Kum & Go LC. “We’re also seeing a shift decrease of 2.6% compared to the previous year. Ben & Jerry’s led the subcategory with more than $174 million, followed by Nestlé Dreyers Ice Cream. towards low-calorie, high-protein ice cream snacks. Interestingly enough, $ Sales % $ Share $ Share % $ Sales we see these ice creams purchased Chg YAgo of Type Change Yago more often as multiples because conIce Cream $510 M 2.60% 100 0 sumers feel they can eat these treats more often and still feel good about Ben & Jerrys Hmde Inc. $174 M -3.80% 34.18 -0.42% what they are eating.” Kum & Go operates more than 450 Nestlé Dreyer’s Ice Cream Co. $79 M -6.20% 15.43 -0.59% stores in 11 states. Blue Bell Creameries LP $52 M 4.00% 10.24 0.64%

DAIRY MINDED The proliferation of perishable milk, for example, delights consumers but may over-burden stores. “Milk is one cstoredecisions.com

61_Ice Cream Dairy.indd 61

Fast Facts:

Good Humor Breyers

$33 M

-5.50%

6.42

0.2%

Private Label

$30 M

-1.40%

5.87

0.07%

Source: Information Resources Inc. (IRI) Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

March 2018 Convenience Store Decisions 61

2/26/18 9:13 AM

Tobacco

Cigarettes

Battle for Sales

igarette sales last year behaved exactly as ana- resources and production capacity toward a new populalysts predicted: volumes dropped month after tion of smokers.” That said, Philip Morris tried to ignite interest in tradimonth and manufacturers boosted prices each month to compensate. This strategy helped min- tional cigarettes by introducing Marlboro Ice as well as B&H Menthol. The retail response has been lackluster. In fact, imize losses for the category. However, indications suggest the approach may be data indicates the brand as a whole incurred substantial showing signs of weakening in 2018. According to IRI, cig- losses. Nielsen research, reported by Wells Fargo Securities, arette sales in convenience stores fell by 0.5% for the 52 shows volume sales for Marlboro fell by 7.4% during the weeks ending Dec. 31, 2017, despite a pricing offset of at ﬁrst four weeks of this year. Still, not all the news about the category is negative. It least 4% last year. appears the strong economy and aggressive marketing efforts aimed at Millennials have uplifted a few BAT brands. SHRINKING BASE The decline might be According to Nielsen, sales of Newport for the ﬁrst four attributed to smokers vowing weeks of 2018 jumped 2.8%, including volume growth of » Losses in volume to quit as a new year’s resolu- 0.9%. Sales for the 12 weeks registered at 4.1% growth. sales outpaced price tion, but more likely, most of Natural American Spirit reported volume increases of 2.5%. Premium brands outsell low-priced labels when the econthat loss is a result of an everhikes in 2017. omy is strong, said Lyons—a possibility for 2018. shrinking customer base. “Cigarette sales are trend» Newport posted ing downward nationwide gains while Marlboro and Stinker is seeing customer CIGARETTE PRICE INCREASES continued to slide. behavior that is consistent Ongoing cigarette price increases in 2017 helped comwith the trend,” said Dan pensate for falling unit volume sales in the c-store channel. Lyons, general manager at a division of Stinker Stores Inc., EACH MONTH AVERAGE LOSS IN AVERAGE PRICE which operates more than 60 fuel retailers and c-stores. OF 2017 UNIT VOLUME SALES INCREASES “The decline is partially driven by traditional tobacco users seeking alternatives, such as vapor, electronic cigarettes, January approx. -4% 2% moist tobacco and other smoke-free alternatives.” February approx. -1% 2% By all accounts, manufacturers have embraced this trend, too. While regular and menthol cigarettes currently com- March approx. -2% 2% bine for more than 78% of all tobacco products produced in approx. -2% approx. 4% the U.S. last year, per IBISWorld, Philip Morris USA and par- April ent Altria Group, and British American Tobacco (BAT) have May approx. -3.5% 5% invested increasingly in electronic nicotine delivery systems. June approx. -4% 5% “Growth in the industry has primarily been in response to increased demand for the electronic cigarette and other July -3.5% approx. 4% electronic nicotine delivery devices,” said John Madigan, August -3.5% 4% analyst for IBISWorld. Madigan also suggested traditional cigarettes could September -3.5% 4% face another competitor as more states legalize recreOctober approx. -2.5% 4% ational marijuana. “Once a federal decision is reached on marijuana use, November approx. -4% approx. 5.5% if approved and legalized, major tobacco companies approx. -4.5% 5% could look to move into this emerging market in force,” December he explained. “They are already positioning financial Source: Nielsen C-Store and Wells Fargo Securities LLC, Jan. 9, 2018

Fast Facts:

62 Convenience Store Decisions March 2018

62-74_Tobacco.indd 62

cstoredecisions.com

2/27/18 9:46 AM

Advertorial

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2/24/18 1:43 PM

Tobacco

RYO

Holds Its Own

Throughout the rest of 2018, he fortunes of the roll-yourown (RYO) tobacco market are Greene predicted, consumers who tied to a disarming number of stay in this category can be expected factors, ranging from the over- to continue to purchase large sizes. all health of the economy to cigarette “You will always have consumers on a taxes, age restrictions, competition budget purchasing pouches; however from tobacco outlets and dollar stores, I believe we are seeing a percentage available shelf space and consumer of the six-ounce to eight-ounce consumers moving to 16-ounce offerings.” migration to other tobacco products. Tim Greene, general manager and category director-tobacco for Smoker SOLID 2017 Friendly International in Boulder, Colo., According to Don Burke, senior vice reported that total RYO units at his president of information management stores were down 4%, but total ounces solutions for Management Science had dipped by only 0.5% at Smoker Associates Inc. in Pittsburgh, last year Friendly locations. Retail dollars and wasn’t a bad one for RYO tobacco. margins were up slightly. “We actually saw an increase of 2.7% “Consumers are purchasing big- during 2017, so it was actually a pretty ger units,” Greene noted. “I suspect good year.” the category will continue to be staIncreases in state excise taxes (SET) ble, with little anticipation of growth. I on cigarettes helped fuel RYO growth believe we’ve also seen fewer consum- in different regions. “In a lot of cases, ers enter the category, and a migration as states increase SET on cigarettes, to other categories such as vapor and a lot of consumers move to roll-yoursmoking alternatives.” own,” Burke said. “That beneﬁts the category.” Burke and his colleagues expect that trend to continue in 2018. “In fact, we expect even a little bit better growth than that 2.7% we saw.” » Increases in state excise taxes The strongest growth for roll-youron cigarettes helped fuel rollown was in the dollar stores, he noted, your-own (RYO) growth. which have added quite a few SKUs. “Therefore, their business is up almost » Consumers are gravitating to a third, 32.4%.” larger RYO units. The consumer psycho-dynamics in this category are telling, Burke acknowledged. “What we ﬁnd is that

Fast Facts:

64 Convenience Store Decisions March 2018

62-74_Tobacco.indd 64

when a state increases its excise tax, some consumers say, ‘My God, if I am going to be paying this much I’m just going to buy premium.’ You ﬁnd that those consumers who are smoking the discount brands either move up or they will move down to roll your own. Those that continue to be very priceconscious will move down to RYO, of course, and with SETs likely to increase, RYO could actually be a very strong category in the next few years.” Burke said c-stores should stock a good selection of RYO-related products, accessories such as papers, tubes and wraps that consumers need.

RYO CHALLENGES PIPE TOBACCO Though pipe tobacco continued on a solid trek in convenience store sales in 2017, the segment incurred a yearover-year decline of more than 6%. Comparably, roll your own tobacco enjoyed a year-over-year increase of more than 1,100% during the same period.

Other Tobacco

$ Sales

% Change/ Yr. Ago

122.4 M

49.44%

Pipe Tobacco

73.2 M

-6.28%

RYO

49.3 M

1179.23%

Total OTP Sales

Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

cstoredecisions.com

2/27/18 9:48 AM

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2/24/18 1:50 PM

Tobacco

Smokeless

Recovers from Recall

When it comes to individual brands, hen the U.S. Smokeless To b a c c o C o . , a d i v i - Copenhagen leads with nearly 52% of s i o n o f P h i l i p M o r r i s the unit share. Skoal edges out BAT’s I n t e r n a t i o n a l ’s A l t r i a Grizzly by slightly more than 3%. » Dollar sales rose 5.2% for the In years past, the smokeless Group, issued a nationwide recall of 12-week period ending Jan. 27. several Copenhagen, Skoal, Cope tobacco category, including moist and Husky products last year, retail- chew and snus, received boosts by » R.J. Reynolds Tobacco ers weren’t sure how consumers introducing new types of products, Co. announced it will seek a would react, and how long the cate- packaging or flavors. Since the U.S. reduced-risk classiﬁcation for Food & Drug Administration (FDA) gory would suffer the effects. Camel snus. As one might suspect, sales did ruled these products must be regfall. Wells Fargo Securities reported ulated and taxed at the same level volume growth tanked during the of traditional cigarettes, innovation 2017 second quarter, recording only has slowed. That said, buzz is building around “Like all other categories, prod0.5% growth. Third quarter results weren’t much u c t i n t r o d u c t i o n s h a v e b e e n R.J. Reynolds Tobacco Co.’s (owned significantly impacted by premar- by BAT), announcement that it will better with 0.6%. “My smokeless [tobacco sales ket authorization, and we anticipate seek a reduced-risk classification last year] were basically flat with that there’s likely no relief from this for six Camel snus. This is the first 2016,” said David Collins, presi- freeze in the coming years absent attempt for a smokeless item. In dent of DC Oil Co., which owns and very significant changes to how new 2015, the FDA denied a Swedish operates more than a dozen Quick products gain FDA authorization to Match North America Inc. request Shop convenience stores through- get into the market,” said Darryl for a modified risk tobacco prodJayson, TMA chief operating officer. uct (MRTP) qualification for some out Alabama. of its products under the General By autumn, however, the tobacco brand. But the agency did grant subcategory was back on an upward the company a premarket tobacco swing with volume gains of 1.5%, and REBOUNDING FROM application (PMTA). it appears the recovery will be ongo- THE RECALL “Swedish Match’s PMTA authoing. For the four weeks ending Jan. rization for General snus was a 27, dollar sales of smokeless tobacco By late last year, smokeless tobacco notable achievement,” said Chris in convenience stores cashed in sales began bouncing back from a manufacturer’s recall of several popuGreer, TMA president and CEO. at 3.8% growth. For the 12-week lar category brands in February 2017. “We think that Swedish Match and period, dollar sales rose 5.2%. Still, volume growth recorded last the earlier attempts were early in year didn’t mirror that of years past. the FDA’s process of setting up what Volume % it wants to do as far as the MRTP 2015 2016 2017 Growth process goes. The industry was disappointed that earlier attempts to Quarter 1 1.0% 2.5% 1.5% gain this did not result in the MRTP authorization.” Quarter 2 3.25% 4.25% 0.5% “TMA believes the biggest issue Quarter 3 2.5% 3.0% 0.6% for smokeless will be the Camel snus MRTP application, which could Quarter 4 2.5% 2.5% 1.5% start heating up late in the year,” he Source: Wells Fargo Securities LLC, “Tobacco Talk” – Q4 U.S. Retailer Survey, Jan. 28, 2018 concluded.

66 Convenience Store Decisions March 2018

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Fast Facts:

cstoredecisions.com

2/27/18 9:49 AM

NEW

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LESS TAR BETTER TASTE

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2/26/18 6:05 AM

Tobacco

Cigars

Cigars Stay on Course

Fast Facts:

nexpensive two- and three-cigar packs made up less Dutch Master, Optimo and than 1% of cigar sales in 2008, but by 2015 this pack- Garcia Vega. » According to IRI, c-store Gregory Moore, senior aging style held 40% of the retail market share. Black dollar sales of cigars rose & Mild and Swisher Sweets dominate the convenience tobacco buyer, Army & Air more than 13% during the store channel and together are responsible for nearly 60% Force Exchange Service 52 weeks ending Dec. 13, (AAFES), said Black and of total mass-merchandise cigar sales. 2017, totaling nearly $3.2 In 2017, cigars continued to bolster other tobacco prod- Mild’s, Swisher and White billion, with units up 14%. ucts (OTPs) category sales. According to IRI, c-store dollar Owls also resonate with his sales of cigars rose more than 13% during the 52 weeks customers. AAFES recently » Cigars will rake in more ending Dec. 31, 2017, totaling nearly $3.2 billion. In addi- removed pre-priced cigars than $563 million dollars from its assortment but tion, units were up 14%. in user fees. “I expect cigars to be the highest gross profit OTP cat- is still looking at a 0.4% egory in 2018,” said Mike Gancedo, tobacco category increase in cigar sales over manager for Savanah, Ga.-based Parker’s chain of 50-plus last year. There are AAFES 700 stores on U.S. military bases convenience stores. Parker’s operates locations in Georgia and South Carolina. throughout the U.S. and abroad, which include Exchange Gancedo predicts that pre-priced cigars will provide Express c-stores. Moore buys for 565 military locations. profits this year.“I am expecting increased sales for 2018 vs 2017 in both sales and gross profits based on the programs FDA MANDATE we have signed for 2018,” said Gancedo. The U.S. Food and Drug Administration (FDA) issued a Some of the most popular cigar brands at Parker’s final guidance related to health warning statements that includes Black & Milds, Swisher, White Owl, Game, are required on cigar packaging following the 2016 final

CIGARS SALES HEAT UP Across multiple retail channels, cigar dollar sales remain solid, led By Altria’s Middleton and followed by No.2 Swisher. EQ Unit Sales y/y

Avg.EG Price y/y

$ Sales y/y

Retail $ Sales Last 52 wks ($MM)

4-Wk

12-Wk

52-Wk

4-Wk

12-Wk

52-Wk

4-Wk

12-Wk

52-Wk

Cigar Category

$3,085

5.1%

5.9%

7.9%

5.6%

4.8%

11.1%

12.3%

13.2%

Altria Group Inc

$973

3.8%

4.2%

9.1%

8.6%

9.7%

6.1%

12.8%

14.4%

15.8%

Middleton’s

$952

3.2%

3.7%

8.1%

10%

6.5%

12.5%

14.2%

15.2%

Nat Sherman

9.3%

12.8%

14%

-54.6%

-47.3%

-25.6%

Period Ended 01/27/18

-58.5% -53.3% -34.5%

Period Ended 01/27/18

Swisher International Inc.

$886

9.3%

10.3%

9.9%

1.6%

1.5%

0.9%

10.9%

11.9%

10.9%

Swisher

$832

7.6%

8.6%

8.8%

0.8%

0.1%

8.5%

9.5%

8.9%

Swedish Match AB

$523

10.9%

13.1%

16.9%

-1.4%

-2.3%

-2.4%

9.2%

10.6%

14.1%

Garcia Vega

$279

20%

22.1%

23.6%

-1.8%

-2.7%

-2.9%

18%

18.9%

20.1%

White Owl

$216

1.2%

4.2%

12.2%

-1.8%

-2.3%

-2.5%

-0.7%

1.8%

9.4%

Source: Nielsen Total US xAOC Including Convenience Database and Wells Fargo Securities, LLC, Jan. 27, 2018

68 Convenience Store Decisions March 2018

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cstoredecisions.com

2/27/18 9:49 AM

A LEGACY OF

FLAVOR IMPORTED FROM THE DOMINICAN REPUBLIC

Available in both 3 for $1.99 & Save on 5 pouches

Contact your Swedish Match Representative • 800-367-3677 • customerservice@smna.com GAMECIGARS.com

CSD_Ad_Template.indd 29

2/26/18 5:49 AM

Tobacco

Cigars

rule that extended the FDA’s regulatory authority to cigars, among other tobacco products. Beginning on Aug. 10, 2018, it will be unlawful for anyone to manufacture, package, sell, import or distribute any cigar within the U.S. The FDA has issued Draft Guidance: Compliance Policy unless the product packaging bears one of the following for Required Warning Statements on Small-Packaged warning statements: Cigars. This draft guidance is intended to assist any For cigars that are sold individually, and not in a prodperson who manufacturers, packages, sells, offers to sell, distributes or imports small-packaged cigars in complying uct package, the retailer must display all six of the required with warning statement requirements. The draft guidance warning statements on a sign posted at the point of sale. also describes the agency’s compliance policy for cigars • WARNING: Cigar smoking can cause cancers of the in packaging that is too small or otherwise unable to mouth and throat, even if you do not inhale. accommodate a label with sufficient space to display the • WARNING: Cigar smoking can cause lung cancer and required warning statements. heart disease. • WARNING: Cigars are not a safe alternative to cigarettes. • WARNING: Tobacco smoke increases the risk of lung Thomas Briant, executive director of the National cancer and heart disease, even in nonsmokers. Association of Tobacco Outlets, said the new warning man• WARNING: Cigar use while pregnant can harm you and your baby. or SURGEON GENERAL WARNING: date might cause consumers to pause, but it likely won’t Tobacco Use Increases the Risk of Infertility, Stillbirth dissuade them from picking up their favorite brand. “Many cigar products have had warning labels since and Low Birth Weight. a federal court settlement between the Federal Trade • WARNING: This product contains nicotine. Nicotine is Commission and seven cigar manufacturers was reached in an addictive chemical. 2000,” said Briant. “These rotating warnings on cigar packages and advertising over the past 17 years have sensitized the adult population to health impacts of cigars. The new FDA warning statements will be a continuation of the same kind of warnings required by the court settlement.” The court settlement in 2000 mandated that new labels say cigars can cause cancer ‘’even if you do not inhale’’ and warn users that tobacco smoke increases the risk of lung cancer and heart disease ‘’even in nonsmokers.’’ ‘Cigars’ largely refers to the inexpensive, machinemade cigars, cigarillos and little/filtered cigars widely available at convenience stores, unless speciﬁcally designated premium cigars. The FDA announced an increase in the user fees for the 2018 ﬁscal year, which began on Oct. 1, 2017. The FDA uses user fees to help pay for the Center for Tobacco Products (CTP)’s regulation of tobacco products. Cigarette JUNE 11-13, 2018 / DALLAS, TEXAS products have been paying this fee, but with the deeming regulations introduced in 2016, premium cigars, pipe FEATURED SPEAKER THERESA PAYTON, tobacco, snuff, chewing tobacco and roll-your-own products will also pay user fees. FoRMer white house cIO In 2018, the CTP plans to collect $672 in user fees. This is At NRF PROTECT 2018,, you’ll get up from the $635 goal from 2017. It already has announced insights on maintaining Internet that the goal for 2019 will be $712 million. Each category security, averting data breaches and mitigating fraud from one of America’s of regulated tobacco product has a target amount of user most respected authorities. fees where these totals will come from. For example, cigars will rake in more than $563 million dollars in user fees and Retailers, save up to $425 on the cigarettes an impressive $5 billion. Full Conference through April 6 Altria in October 2016 announced plans to close the or get your FREE EXPO Pass. Middleton plant in Limerick, Pa. and move its operations to NRFPROTECT.COM/CSD Richmond, Va. during 2018. The Limerick plant makes Black & Mild cigars, Middleton’s Cherry Blend pipe tobacco, etc.

Cigars in Small Packages

70 Convenience Store Decisions March 2018

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2/27/18 9:49 AM

AVAILABLE JANUARY 2018

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2/26/18 5:49 AM

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2/26/18 6:06 AM

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2/26/18 6:07 AM

Tobacco

Vape

Vaping Not Out of Flavor

“We carried e-liquids for a while, few years ago, it seemed as if new flavors, from fruity but ultimately decided to discontinue to dessert to tropical, were due to slow sales,” said Daniel Moran, being introduced every week. category manager for Robinson Oil » Experts predict a CAGR of Nowadays, the preferred vaping prod- Corp., which does business as Rotten 23.6% for closed vaping systems Robbie. The fourth-generation familyuct is the more diminutive pod mod. by 2021. Pod mods can be either open sys- owned business is headquartered in tems in which users add their own Santa Clara, Calif., operating 35 con» JUUL reported more than 652% e-liquid or closed systems that use venience stores. growth in year-to-year unit sales. “As consumers explored their tastes prefilled cartridges of liquid nicotine and preferences over the years, their or nicotine salts. A c c o r d i n g t o E u r o m o n i t o r inclination towards certain flavors, such International, closed vaping systems as tobacco, menthol and fruity flavors, VUSE, for retail dollar sales—$389.3 miledged out the competition in 2016, has become clear,” added Khan. “As a lion for BAT and $387.3 million for JUUL, $2.120 billion versus $2.108 billion. result, the introduction of new flavors per Nielsen and Wells Fargo Securities. As a whole, the vaping category, However, analysts anticipate that dif- is no longer an effective strategy to in combination with e-cigarettes, has ference to multiply exponentially over expand the consumer base.” However, it appears pod mods experienced a steady improvement the next few years—a forecast of 23.6% compound annual growth rate (CAGR) have been able to attract a broader over the past half year. “Overall, our electronic business by 2021 for closed electronic nicotine demographic. While there are sevdelivery systems (ENDS) and a negative eral brands available, including Cue almost doubled in 2017 compared to CAGR of 30.6% for open vaping devices. Vapor System, Kimsun Smart 4R, and 2016,” said Moran. And industry watchers fully antic“The market share of rechargeable LAAN Pod Mod, few have enjoyed cigalikes has plummeted due to ris- the level of success JUUL has accu- ipate this momentum to carry on ing popularity of closed pod systems, mulated this year. The closed system throughout 2018. Wells Fargo which eliminate the drawbacks of device even surpassed Big Tobacco Securities issued an annual growth outlook of 16.8%. rechargeables, and have thus become ENDS products. Still, retailers remain concerned In a year-to-year comparison for the fastest growing product type in the past year,” said Shazlie Khan, a the 52 weeks ending Jan. 27, JUUL about local and state regulations, noted more than 652% growth in unit ranging from public vaping restrictions research analyst with BIS Research. Consequently, the fervor surround- sales, and it runs nearly equal to British to raising the minimum age requireAmerican Tobacco (BAT), maker of ment to imposing flavor bans. ing e-liquids has quieted.

Fast Facts:

VAPING SYSTEM BREAKDOWN It was only a few years ago that open vaping systems were the preferred device of choice among users. However, since 2016 closed systems have closed the gap and are expected to grab more market share in the coming years.

2016 Sales (in millions)

Projected Sales (in millions) for 2021

Forecasted CAGR%, 2016-2021

Closed vaping systems

$2,120.80

$6,125.30

23.60%

Open vaping systems

$2,108.90

$339.00

-30.6%

Source: Euromonitor International Ltd. 2018; Jan. 23, 2018

74 Convenience Store Decisions March 2018

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2/27/18 9:50 AM

2018

SAVE THE DATE

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8/15/17 4:17 PM

Tobacco

E-Cigarettes

Recharging

the E-Cigarette Market

pproximately one year ago, Philip Morris International (PM), parent company of Altria Group Inc., submitted a modified risk tobacco product (MRTP) application to the U.S. Food & Drug Administration (FDA) for its heat-not-burn iQOS brand, in hopes it would be classified as a reducedrisk tobacco product. Industry watchers predicted approval would be granted early this year. Then came the hearing before the FDA Tobacco Products Scientific Advisory Committee in January. Officials voted in the negative on three out of four of the questions regarding health risks and label/advertising issues. “We wouldn’t be surprised if more data/research is requested to more effectively demonstrate the science to support the claim that switching to iQOS from combustible cigs definitely reduces risk of disease and exposure to harmful toxins, i.e., it’s a process,” declared Bonnie Herzog, senior analyst for Wells Fargo Securities. “Ultimately, we think the chances for the FDA to approve PM’s MRTP are still good, but timing is tough to predict.” The news may have disappointed retailers looking forward to adding iQOS to their smoke-free alterna-

Fast Facts: » Rechargeable refills commanded nearly three-fourths of e-cigarette sales. » JUUL boasted more than one-third of the unit share for e-cig refills over the first four weeks of 2018. 76 Convenience Store Decisions March 2018

62-74_Tobacco.indd 76

E-CIGARETTE SHARE DISTRIBUTION While British American Tobacco, parent company of VUSE maker Reynolds American Inc., still owns top unit and dollar share on a 52-week year/year comparison, JUUL Labs Inc. closed the gap last year. UNIT SHARE 52-WEEK COMPARISON ENDING 12/30/17

DOLLAR SHARE 52-WEEK COMPARISON ENDING 12/30/17

1.8%

1.5%

1.1% CB Distributors Ballantyne 3.2% Brands Others 3.3% NJoy Inc.

8.7% Logic

12.7%

Imperial Tobacco

21.9%

Altria Group

35.3%

British American Tobacco

12.1%

JUUL Labs

1.4% CB Distributors Ballantyne 2.3% Brands Others 2.2% NJoy Inc.

31%

9.7% Logic

British American Tobacco

12.9%

Imperial Tobacco

15.2%

Altria Group

23.8% JUUL Labs

Source: Nielsen Total US xAOC Including Convenience Database and Wells Fargo Securities, LLC, Jan. 9, 2018

Throughout 2016, the disposable tive tobacco inventory, but it hasn’t affected the public’s current endorse- share held steady between 33% and 39% for each quarter. The rechargement of the e-cigarette category. “There’s a lot of talk within the indus- able share started that year at 17% try so we’re aware, but I’m not sure the and ended with 22%. “The disposable was the king of consumer is,” said Tim Greene, category director of tobacco and general the hill, but the cartridge version is manager for Smoker Friendly. The now firmly in the lead,” said Ray Story, Boulder, Colo.-based business oper- CEO of the Tobacco Vapor Electronic ates more than 100 stores in five Cigarette Association. The greater acceptance of rechargestates, including Gasamat c-stores. A c c o rd i n g t o N i e l s e n d a t a , able e-cigs could be tied to the reported by Wells Fargo Securities, popularity of British American Tobacco’s rechargeable refills commanded VUSE, which began taking command of nearly three-fourths of e-cigarette market share in late 2014. By mid-2017, sales in all retail channels for the four however, the brand began losing share, weeks ending Jan. 27, whereas dis- and JUUL began gaining.Most recently, posables represented only 7% of sales. JUUL led the industry with 34.1% of the This is a much different picture than at unit share for e-cig refills over the first four weeks of 2018. the beginning of 2017. cstoredecisions.com

2/27/18 9:50 AM

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2/24/18 1:41 PM

Tobacco

Tobacco Accessories

Lighters Remain Tops

in Accessories

ate last year, Scripto announced a new line of lighters. The Scripto Ultima is being promoted as a premium pocket lighter with a designer touch. Individuals can dress up the device with different wraps. Functionally, it offers many of the standard features found with other pocket lighters. The new offering is another example of producers trying to trigger purchase decisions by appealing to consumers’ reactions to visual stimuli, and it’s common practice for items considered tobacco accessories. However, because items such as lighters and ashtrays compose such a small portion of c-stores’ total inventory, the category sometimes is an afterthought for owners and operators, or is difficult to capitalize on in order to boost profitability. “After a couple of different attempts over the past years [to add more variety], sales in this area have proven to be soft, so we are reluctant to give up valuable and needed space to try this again,” said Mallorie Hardesty, category manager for Certified Oil Co., based in Columbus, Ohio, the business owns and operates convenience stores and fuel retailers in Ohio, Kentucky and West Virginia. However, the category’s potential shouldn’t be discounted even though cigarette sales have dropped an industry average of approximately 3% every year for the last few years.

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Fast Facts: » Last year, BIC USA Inc., earned approximately $21 million more in lighter sales compared to 2015. » As of mid-February, eight states have legalized cannabis sales, and another 12 states are contemplating similar bills.

cstoredecisions.com

2/27/18 9:50 AM

The rise of electronic nicotine delivery systems has offered new opportunity in accessories like batteries. Also, an expanding cannabis industry, is generating a demand for accessories.

FUTURE MARKET

LIGHTING THE WAY In the tobacco accessories segment, lighters are one of the popular and profitable offerings. In 2017, BIC held strong as the most sold lighter among top selling brands in U.S. convenience channel. $ SALES ending 12/31/17

$ SHARE ending 12/31/17

UNIT SALES ending 12/31/17

BIC USA Inc. Lighters

$559 M

89.12%

327.8 M

Halpern Import Company Lighters

$21 M

3.30%

19.0 M

BRAND

Calico Brands Inc.

$5.6 M 0.89% 6.2 M “Tobacco use has been steadily declining while Lighters marijuana consumption has been increasing,” said MK Lighters $4.4 M 0.70% 4.6 M John Madigan, an analyst with IBISWorld. Wing Sale Lighters $4.2 M 0.66% 2.1 M As of mid-February, eight states have legalized recSource: IRI, total U.S. convenience stores, latest 52 weeks ending Dec. 31, 2017; Feb. 2, 2018 reational marijuana, and another 12 are contemplating similar bills. Nineteen states have enacted legislation to permit marijuana use for medical purposes. Within the tobacco accessories category, standard dis- lowing: Halpern Import Company, 3.30%; Calico Brands posable lighters remain a top seller, and BIC USA Inc., Inc., 0.89%; MK Lighters, 0.70%; and Wing Sale, 0.66%. In terms of dollar figures, BIC USA recorded more than maintains a stronghold. According to scan data by IRI, a Chicago-based market research firm, the company com- $555 million for the same period, which is up from the manded nearly 90% of the dollar share among U.S. $534 million earned in 2015. Halpern Import’s 2017 earnconvenience stores for the 52 weeks ending Dec. 31, 2017. ings reached more than $20 million, and competing lighter The remaining listing is was divided up among the fol- brands posted less than $6 million each.

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March 2018 Convenience Store Decisions 79

2/27/18 9:50 AM

Health & Beauty Aides

Make-Up & Medicine

Finding a Way For HBA

rom top-selling lines like cold remedies, toothpaste and cosmetics to a wide variety of lower-volume SKUs, health and beauty aids (HBA) as a c-store category will remain strong—and sensitive to package size, type of store location and local demographics. Some segments within the HBA category continue to do well in c-stores. For example, convenience store sales of internal analgesic tablets—medicines used to relieve pain—increased 2.76% to $382 million during the 52 weeks ending Dec. 31, 2017, according to IRI scan data. Comparably, cold/allergy/sinus tablets/packets accounted for nearly $150 million in the c-store channel during the same period, an 8.63% hike over the previous year. “With HBC, smaller pack sizes are definitely a plus, with some emphasis on organic grooming items and the hand-sanitizer area,” said Mary Sonatore, retail buyer and merchandiser for Northwest Petroleum in Houston, Texas, a branded fuel retailer and an ofﬁcial fuel partner of Shell and Phillips 66 with 35 locations, including 18 Q Mart convenience stores. “Trends that I have seen are in travel-size grooming items and single-dose OTC (over-the-counter) items. I expect to see the same trends in 2018.”

SHOPPING PATTERNS

EYING HBA OPPORTUNITY The health and beauty aids category continues to offer potential to convenience retailers that can best ﬁgure out how to promote it. While health offerings such as medicines can generate strong sales, cosmetics—especially eye makeup—offers opportunity.

$ SALES

$ SALES % CHG YAGO

$256 M

135.5%

Eyebrow Makeup

$28 M

93.6%

Eye Liner

$75 M

95.1%

Eye Shadow

$87 M

152.6%

Mascara

$65 M

279.9%

Total

Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending Dec. 31, 2017

“The first thing we need to know is: How is the customer shopping the store?” said Steve Montgomery, president of b2b Solutions LLC, in Lake Forest, Ill. “That means, is Sometimes, raising your HBA profile is just attitude. their store a highway location? “How you think about a category defines the limits of A neighborhood location? A combination thereof? Because how far you can grow it,” said Ryan Mathews, the founder that will drive what the con- and principal of Black Monk Consulting in Eastpointe, Mich. » Internal analgesic sumer may be looking for to “Most convenience stores limit their ability to grow the tablets—medicines make that quick purchase in health & beauty aids category by thinking about it as a secused to relieve pain— tion consumers only use on a ‘fill-in’ or ‘emergency’ basis. In HBA.” increased 2.76% to Category management will other words, most c-store operators assume that consumers $382 million during continue to be another key would prefer to make HBA purchases somewhere— maybe the 52 weeks ending anywhere else—besides their stores.” HBA profit measure. Dec. 31, 2017, acRetailers can stock things parents need, from individual “Most retailers are very good cording to IRI. at adding products, but not packs of Kleenex and smaller, portable hand sanitizers to very good at eliminating them. limited cosmetic lines popular with students. A store near » Determine what is And so my advice would be to a construction zone might beacon a display of first-aid and selling and what isn’t go through your sales history skin-care items. to better grow your “But that is precisely why you have to practice smart merand determine what is selling category. and what isn’t selling,” said chandising and make the space you have effectively work for you,” said Mathews. Montgomery.

Fast Facts:

80 Convenience Store Decisions March 2018

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cstoredecisions.com

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Technology

Prepaid

Prepaid Pays Dividends

he U.S. Consumer Financial Protection Bureau has again delayed implementation of a rule that puts restrictions on prepaid cards, including greater disclosures and overdraft limits. The rule was delayed from April 2018 to April 2019, citing the industry needs more time to comply. One proposed change would require customers to register » Prepaid financial accounts in order to receive fraud services are growing in and error protection benefits. importance. C. Sue Brown, director, prepaid advisory service for Mercator » Payment via mobile Advisory Group Inc., said that apps to increase. hopefully the delay will bring closure. “The industry has been in limbo on these (rules) for several years. The first challenge will be getting all of the disclosures ready, followed by repackaging for cards sold in retail locations. The new regulations now also cover mobile payments and person-person payments (like Venmo and Zelle), and this will be new for them.” In 2018, Brown expects growth will slow in many categories of prepaid debit cards, such general purpose reloadable (GPR), as this segment is maturing.

Fast Facts:

IN-STORE CARDS Mercator Advisory Group recorded growth of 6% in the closed-loop in-store gift cards segment in 2016, to $91.1 billion, and forecasts a 2% compound annual growth rate through 2020, when loads will reach $99.6 billion. Brown advised retailers to consider adding open-loop cards (Visa, Mastercard, etc.) as well. If stores are already offering limited ﬁnancial services, such as check cashing, money orders and bill pay, they should consider adding GPR with a processor in order to add loads to cards or join a load network. Recently Casey’s General Stores partnered with Blackhawk Network Holdings Inc., to offer Amazon Cash to customers. Amazon Cash allows consumers to load between $15 and $500 in cash to their Amazon Balance without fees. They just show the Casey’s cashier a personalized Amazon barcode, along with the money they wish to load. The amount is then applied to the customer’s existing Amazon account and available to use for online shopping on Amazon.com. cstoredecisions.com

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“We are constantly looking for ways to leverage different platforms that provide for our customers. In some cases we are the only opportunity in our communities to provide these types of services,” said Michael Richardson, vice president, marketing for Casey’s, which operates more than 2,000 stores in 15 Midwestern states. “We feel that it is another reason for customers to stop at our stores and to get what they need. That is a benefit to both our customers and to us.” In addition to offering the standard prepaid options, Casey’s also offers bill pay solutions through PayNearMe. Its prepaid card options span open loop ( Visa MasterCard), closed loop (iTunes, Google, eBay), prepaid wireless (Verizon, Boost, Tracfone) and financial service cards ( Net Spend and Green Dot reloadable Debit cards). “We also offer real time reloads at the register for no contract phones. Each store has a dedicated prepaid fixture,” Richardson said.

GROWING THE LOOP Loads in the In-Store Gift Cards Segment of U.S. Closed-Loop Prepaid Cards Market shot up to $91.1 billion in 2016, up from $85.7 billion in 2015 and slightly down from $93.5 billion in 2014. Going forward, the segment is expected to increase in the following years, beginning in 2017. $100 $93

$80

$96 $86

$94

CACR

$86

$91

2%, 20

$94

16-202

$97

$97 $100

$60 $40 $20 $0

2011 2012 2013 2014 2015 2016 2017(f) 2018(f) 2019(f) 2020(f)

Source: 14th Annual U.S. Closed-Loop Prepaid Cards Market Forecasts, Mercator Advisory Group

March 2018 Convenience Store Decisions 81

2/26/18 9:20 AM

Technology

Loyalty

Customers Bank on Loyalty

ome 81% of U.S. consumers say loyalty programs make them more likely to do business with brands and 66% modify their spend to maximize loyalty benefits, according to “The Battle for Love and Loyalty Report 2017” executive summary by Bond Brand Loyalty in collaboration with Visa. “In the c-store world, loyalty is so important. We operate in an increasingly competitive space and customers have so many choices…” said Darrin Samaha, vice president and brand manager for Des Moines, Iowa-based Yesway, which operates 80 c-stores. Yesway in June 2017 partnered with Paytronix, and launched its Yesway Rewards program, with good results. “In an increasingly competitive market, we wanted to move away from a purchase-to-points model and offer something that was unique and attached to our brand, and so we created the Yesway ‘Smile,’ our fun and friendly currency,” Samaha said. Customers earn “Smiles” for each $1 spent on fuel or in-store. “Smiles” can be redeemed for new fuel » Bond Brand Loyalty found incentives or merchan66% of U.S. customers modify dise, from free roller grill their spend to maximize loyalty items to travel mugs. It also beneﬁts. includes a Beverage Club, » A loyalty program can help Day ‘N Night Bite Club improve customer retention, and a Nutrition Bar Club. customer service and better Customers can access the engage customers. program using a card or the Yesway-branded app. “Our engagement on the app is strong overall and we see a tremendous opportunity to do more online with gamiﬁcation rewards,” Samaha said. Yesway is currently exploring digital coupon integration and geo-fencing, and plans to soon offer card-based automated clearing house (ACH) payment options and mobile pay. “We can surprise and delight our customers with free ‘Smiles,’ new sweepstake offers, bonus points, fuel incentives and visit challenges to make the Yesway loyalty experience truly fun and convenient,” said Samaha.

Fast Facts:

CUSTOMER RETENTION Including a loyalty program can help improve customer retention, customer service and engage with customers 82 Convenience Store Decisions March 2018

81-87_Technology.indd 82

RETAIL CHANNELS EARN HIGH SCORE Exploring the changing attitudes and behaviors of 28,000 North American consumers, the “Battle for Love & Loyalty Report 2017” indicated that satisfaction among non-payment programs was highest in the gas/convenience stores, grocery and drug channels, with a 48% satisfaction level. Credit Cards 52% Gas/Convenience/Grocery/Drug Store 48% Dining QSR 47% Retail Specialty 42% Dining Casual 40% Retail Department 40% Health + Beauty (Retail CPG) 40% Airline 39% Hotel 38% CPG Food + Beverage 36% Services 35% Apparel 31% The Battle for Love & Loyalty Report 2017 by Bond Brand Loyalty in collaboration with Visa.

who frequent the stores, said Stephanie Daniel, loyalty marketing manager for Richmond, Va.-based GPM Investments. GPM Investments offers the fas REWARDS loyalty program in all of company’s 960-plus convenience stores. Customers earn two points per every $1 spent in-store and two points for every gallon purchased at the pump. They can redeem points for fuel, snacks and more. “We have a variety of clubs available to customers—from our THIRSTY? fountain club to bagged ice, coffee and even breakfast sandwiches,” said Daniel. And sweepstakes offers: loyalty customers that participate in its current ‘Fa$ Million’ scratch card game through May 1, also gain entry into a $1 million drawing. Customers can use the free fas REWARDS App to check points, view special offers, see their status in various clubs and access their virtual card. “We use a variety of reports and metrics to segment our marketing efforts and provide the best possible loyalty program and offers to meet our customers’ needs,” Daniel said. cstoredecisions.com

2/26/18 9:20 AM

5 4

per month

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2/19/18 2:47 PM 2/24/18 1:23 PM

Technology

Loss Prevention

Modern Tools for Loss Prevention

Fast Facts:

“Internally-developed, ne of the exciting parts of being in retail loss » Despite growing prevention, for Britt Davidson, manager of loss exception-based reportinvestment in electronic prevention at West Des Moines, Iowa-based Kum ing helps us ﬁnd our ‘leaks.’ surveillance and other & Go L.C., is crime trends are constantly changing. ThinkLP, a case manageloss-prevention ap“Criminals are always looking for new opportunities to ment software, assists with proaches, inventory loss cause leaks and it is up to us to identify and eliminate those the entire investigative process, including audits opportunities,” said Davidson. in the U.S. remains an Davidson noted that statistically and nationally speaking, and restitution efforts,” important issue. external theft has again surpassed internal theft—a trend Davidson said “March, Axis » Ensure organizational he expects to continue. “Changes in EMV (chip and pin), and Samsung is an extencommitment from mancredit card fraud and speciﬁcally card-not-present fraud, is sive, all IP CCTV system. We hope to implement bringing a number of challenges to all retail landscapes.” agers throughout the Kum & Go, in numerous states, is helping to introduce camera analytics in 2018 company. new laws and advocate for increased penalties for skim- to support the needs of our business partners, includming and credit card fraud. Kum & Go uses a variety of technologies to address ing customer count, dwell times and conversion rates.” Training, communication and awareness are the founshrink and theft at its 450-plus c-stores in 11 states. dation for a successful prevention program, Davidson said. Kum & Go is currently revamping its entire loss training curSHOPLIFTING TRENDS riculum, which will include training for hourly associates up The 29th Annual Retail Theft Survey conducted by Jack L. to senior level positions. Hayes International, published in June 2017, surveyed 23 large retail companies with 16,038 stores and over $370 billion in retail sales (2016) about shoplifting and employee theft. The survey found:

Recovery Dollars: More than $120 million was recovered from apprehended shoplifters and employees in 2016, an increase of 2.5% from 2015. Shoplifter Apprehensions: 384,296 shoplifters were apprehended in 2016, down 0.2% from 2015. Employee Apprehensions: 53,786 employees were apprehended in 2016, up 9.9% from 2015.

Source:29th Annual Retail Theft Survey conducted by Jack L. Hayes International, published in June 2017.

Shrink: 56.5% of survey participants reported an increase in shrink in 2016, with 21.7% reporting a decrease in shrink. Another 21.7% reported shrink stayed about the same.

84 Convenience Store Decisions March 2018

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FUTURE OUTLOOK Lisa LaBruno, senior vice president of retail operations for Retail Industry Leaders Association (RILA), noted a trend toward increased violence by shoplifting subjects, organized retail crime and gangs. “RILA is doing its part to expose retailers to cutting-edge, game-changing technology designed to address some of these evolving challenges.” Artiﬁcial intelligence, augmented reality, prescriptive analytics and crowd sourcing are just a few of the emerging technologies retailers are leveraging. For example, instead of placing an expensive highshrink item on the shelf, retailers can use virtual reality to allow customers to interface with an image of the product. “I can pick it up. I can open it…and I feel as though the product is in my hand, but it’s not,” LaBruno said. Meanwhile, crowd sourcing is being used to identify shoplifters. People can watch live feeds into stores and if they spot a suspicious character they can tag that person’s image. If an image receives enough tags, the store would receive an alert. While LaBruno doesn’t endorse any particular technology she said such examples show how retailers are becoming more innovative in their strategies. “We’re exploring all angles and what’s most important is informing future development of technologies,” said LaBruno. cstoredecisions.com

2/26/18 9:20 AM

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2/20/18 1:51 5:47PM PM 2/24/18

Technology

Point-of-Sale

Positive Results Through POS

n 2017, VERC Enterprises, owner and operator of 28 c-stores GLOBAL POS TERMINAL MARKET REVENUE and car washes in Massachusetts By region 2017 (US $ billions) and southern New Hampshire, The global POS machine market is projected to grow at a value compound updated its point-of-sale (POS) soft- annual growth rate (CAGR) of 11.5% during 2017-2025 to reach a market ware to Envoy Retail, which allows evaluation of about $144 billion in 2025 from $60 billion in 2017. In 2017, management to control all retail oper- North America led the way with approximately $17 billion. ations from a central location. After the chain’s price book was created in March, Courtney Buckley, manager of training and development for VERC, helped roll out the new system store-by-store. “We’ve added more stores, and we had to upgrade to a system that can handle more stores,” said Buckley. “This system is working out well. Now it’s easier to set up promotions, and all prices change automatically. Little upgrades make everything more conSource: Transparency Market Research, 2017 venient, faster and save time.” VERC is not alone. POS keeps evolving, and operators are taking POS/Customer Engagement Survey.” ing to compete more effectively. “There are tools that help forecast advantage of updated software and It found that more than half of survey all-new systems, or run the risk of los- respondents believe it’s important to sales based on like conditions and add more capabilities to their current dayparts, year over year,” said John ing ground to competitors. Boston Retail Partners (BRP), an POS, and half said they are prioritizing Kirk, president and CEO of the Retail Solutions Providers Association based independent consulting firm serving a POS upgrade or replacement. Most modern POS systems provide in Charlotte, N.C. “Understanding trafthe retail and restaurant industries, recently reported results of its “2018 the foundation for loyalty, inventory and fic patterns and the impact of tailored accounting functions, PCI compliance merchandising to those patterns are and lower-cost payment processing key. Due to the quantities of categooptions, said Perry Kramer, senior vice ries and assortments being managed, there will be broader impact of data president and practice lead at BRP. “In many cases, retailers can also science as a tool in establishing pricing » Managing essential POS data lower training costs, help reduce shrink that is viewed as fair by the customer. will be vital to running a retail and shortage issues, increase inventory For many retailers, data science will be operation, especially for c-stores accuracy and enable a better replenish- the only way to manage the business.” looking to compete more efWhile BRP survey respondents ment model resulting in increased sales fectively. through better in-stocks,” Kramer said. didn’t put as much emphasis on “For retailers that offer fresh food, the mobile payments as they did on POS » POS keeps evolving, and order-ahead and inventory manage- upgrades, “mobile payments are operators are taking advantage going to grow significantly in the next ment functions are almost a must.” of updated software and all-new Very soon, managing essential POS one to three years and then probably systems, or run the risk of losing data will be vital to running a retail level off after adoption becomes more ground to competitors. operation, especially for c-stores look- pervasive,” said Kramer.

Fast Facts:

86 Convenience Store Decisions March 2018

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2/26/18 9:21 AM

Technology

Electronic Payment

Accepting

Electronic Payments

Fast Facts:

Because the process is ore than 1.7 million merchants accept chip cards today, 388 million Visa chip cards have being driven by major fuel » Fuel dispenser EMV been issued in the U.S. and across chip-enabled brands Magestro expects upgrade spend in the merchants there’s been a 43% reduction of coun- all stores to be converted U.S. is estimated at more to EMV by the end of 2018. terfeit fraud, according to Visa. than $7 billion. The date when liability for fraudulent transactions at gas “It’s going fine. I wish we pumps—for those not equipped with (Europay, Mastercard, could have done all the » Mobile apps allow Visa) EMV chip technology—shifts to retailers has moved stores at once, but again, c-stores to combine paythe majors are driving the from Oct. 2, 2017 to Oct. 1, 2020. ment and loyalty without The total fuel dispenser EMV upgrade spend is esti- bus on this and we have to the cost of a physical card. mated at more than $7 billion in the U.S., noted Perry do it when they say.” Kramer, senior vice president and practice lead at consulting firm Boston Retail Partners (BRP). C-stores can use this THE NEXT FRONTIER upgrade to leverage beacon technology or mobile phones BRP’s “2018 POS/Customer Engagement Benchmarking linked to payments and loyalty. Survey” noted 62% of retailers plan to increase their use of Steve Magestro, president of Mad Max Convenience Stores, mobile devices at the POS at the end of 2019. based in Saukville Wis., noted many of his 10 locations have “The use of self-service, pre-ordering, and closed loop/priswitched to EMV. “You have to go with the times and make vate-label payment systems will continue to expand at a very things easier for your customers in service and protection.” aggressive rate,” said Kramer. Kramer forecasts a near-term shift from physical cards to a proliferation of mobile programs that link a consumer’s credit card account to a closed-loop token/barcode 32% 36% on their phone, which “enables greater customer relaof retailers have impleplan to implement mented a loyalty program tionship management and product segmentation data this type of loyalty with a mobile component for retailers to use to increase customer loyalty and program in the next that can be used for identhree years. retention.” tifying the customer. He advised c-stores should build apps where the customer’s credit card and the brand’s loyalty card are RETAILERS linked to a single bar code in the app. “This helps cement loyalty, speeds up checkout, ADOPT MODERN reduces the cost of plastic loyalty cards MEANS 42% 21% and adds convenience to the customer’s Increasingly, retail channels are incorpowill use customerof retailers are experience.” rating payment innovations that tie into owned mobile deincreasing spending modern customer devices, resulting in Westborough, Mass.-based vices as a point of sale on kiosks. more seamless service from the beginCumberland Farms, which combines loywithin three years. ning of a transaction to the end. alty and payment in its SmartPay Check-Link app, first launched the app five years ago and Source: Boston Retail Partners, 2018 POS/ recently redesigned it. Customer Engagement Survey “SmartPay Check-Link facilitates ACH (automated clearing house) transactions with the customer’s 37% 62% checking account or Netspend account,” said Charles of retailers accept both plan to increase their Apple Pay and PayPal. An Jarrett, chief information officer at Cumberland use of mobile devices additional 26% are planFarms, which operates more than 600 stores in eight as the POS by the end ning to add Apple Pay states. SmartPay uses location services/geotracking. of 2019. acceptance this year. Customers enter a PIN in the SmartPay app before a fuel transaction or via the PIN pad in-store. cstoredecisions.com

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March 2018 Convenience Store Decisions 87

2/26/18 7:20 PM

Technology

Fuel & Alternative Fuel

Alternative Fuels Expand Footprint

um & Go has been a leader choices across a broad geography is in alternative and renewable important to making that happen.” Made primarily from vegetable oils fuels blending for a number of years. Growing its fuel portfo- or fats, such as soybean oil, biodiesel lio over the last several years, Kum & continues to serve as an essential eleGo today offers E15 at 129 locations ment of our nation’s fuel supply and across nine states. The chain also offers has slowly gained popularity among U.S. retailers. E85 at 216 locations across 10 states. Troy Shoen, senior manager of marSome might ﬁnd it surprising that the West Des Moines, Iowa-based keting for the Iowa-based Renewable chain offers biodiesel at 248 of nearly Energy Group, said more than 1,000 420 store locations. About a decade retailers nationwide are marketing bioago, the company introduced biodiesel blends above B5 (5% biodiesel). diesel and now blends biodiesel into The number continues to rise, includnearly all of its diesel fuel. That varies ing in the c-store channel, Shoen said. “Yes, we hear from c-stores daily from 5-20% (known as B5 and B20), who are interested in learning more and it offers biodiesel year-round. “At Kum & Go, we are all about about how they can incorporate the making days better and one way that advantages of biodiesel into their fuel we achieve that is by giving our guests program,” said Shoen. Shoen said biodiesel adoption is primore fueling choices,” said Sam Herro, fuels pricing manager at Kum & Go. marily driven by reduced greenhouse “Providing both biodiesel and ethanol gas emissions, improved engine per-

U.S. BIODIESEL & RENEWABLE DIESEL MARKET Figures from the U.S. Energy Information Agency on U.S. biodiesel consumption reﬂect the fuel alternative is growing in popularity. From 2011 to 2016, consumption increased 135%, hitting 2.1 billion gallons in 2016—approximately $17 billion in sales. (Millions of gallons)

Source: U.S. Energy Information Agency, October 2017; Renewable Energy Group Inc.

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Fast Facts: » 1,000 retailers nationwide are marketing biodiesel blends above B5. » The U.S. electric vehicle market posted a solid first half of 2017, growing almost 40% year-over-year to 90,302 vehicles. formance in U.S. vehicles and financial or compliance benefits to the retailer. “The fact that biodiesel is produced from primarily waste products, which a few years ago were disposed of, is a significant benefit. It helps biodiesel to be the lowest carbon intensity liquid fuel available,” said Shoen. “This has monetary value in states like California or Oregon, which offer Low Carbon Fuel Standard (LCFS) credits for using biodiesel, but it also has efficacy benefits to other retailers in other states who want to do what is right for our environment.”

OTHER ENERGY The U.S. Energy Infor mation Administration has published the February edition of its Short-Term Energy Outlook report, maintaining its January forecast that ethanol production will average 1.03 million barrels per day in both 2018 and 2019, mirroring biodiesel production in 2017. The U.S. electric vehicle market had a solid ﬁrst half in 2017, growing almost 40% year-over-year to 90,302 vehicles, according to FleetCarma, a connected car technology provider. If treated as one model, plug-in electric vehicles would have been the 24th best-selling vehicle in the U.S. cstoredecisions.com

2/27/18 10:59 AM

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2/24/18 1:42 PM

Technology

Car Wash

Profitable Appeal

of Car Washes

ccording to U.S. Census Bureau data released in 2017, consumers nationwide spend an estimated $5.8 billion at car wash businesses every year. That total represents eight million vehicles being washed on a daily basis. The International Carwash Association analyzes the market further, stating 90% of car washes in the U.S. are owned and operated by small business owners instead of corporate conglomerates and about 37% of car wash owners have owned their business for less than five years. Profits can average around from $41,000 a year for a self-service car wash to over out the competitive landscape—the $680,000 for a full-service business. According to a 2017 report from the return on investment can be stellar. Michael Meyer, facility operations research firm IBISWorld, annual industry growth within the car wash market officer at Teutopolis, Ill.-based Meyer will continue through 2021 at an esti- Oil Co., has overseen the installation of 10 automatic car wash bays at the mated 1.7% spike. So what’s the driver behind these company’s Mach 1 convenience chain. sparkling figures? Perhaps a better All 10 wash systems from D&S Car question is: Why do numerous retail- Wash Equipment Co. are located in ers continue to invest big money in central and southern Illinois. such large capital projects? Well, when the planning is done CLEAN SWEEP right, good environmental site assessCustomers are always looking for ments are made—including scoping something new and exciting, Meyer said, whether it is a tire shine or hot wax or finding different ways to save money or feel appreciated for their purchase. “We have started adding Hot Foaming Wax at all new locations » U.S. Census Bureau data indiand went back and included it in cates that about 37% of car wash higher volume locations,” said Meyer. owners started their operations “This gives us another opportunity to less than five years ago. increase the ticket price to the customer. Customers are always willing to » Wash clubs or loyalty programs pay a top shelf price if they know they can prove to be a big time saver are getting top shelf product in return.” because the customer spends less In addition to in-bay automatic car time at the pay station. wash systems, Mach 1 works to entice customers outside the interior bay.

Fast Facts:

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“Investments have been made at our last several sites to offer free vacuums to our customers,” Meyer said. “This has been an amazing draw for our customers to pull onto our lots and we have decided the more times they are on our lot the better. That is when they decide to make a purchase inside our convenience store and go through our car wash.” There are a variety of car wash options on the market today, and you can see all of them in the c-store channel. Often the two classiﬁcations that are considered when retailers tackle an installation are touchless and friction. For some time, touchless car washes were considered an enviable option over conveyor types because they are considered by many to be more delicate on a vehicle’s surface. The last year or so the development of new materials such as soft-touch foam brushes have tilted the market back to the middle, in terms of professional opinion, said Chuck Space, executive director of the Southwest Car Wash Association, based in Austin, Texas. cstoredecisions.com

2/27/18 10:59 AM

#GoCarWashShow

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CSD_Ad_Template.indd 11

2/27/18 11:26 AM

Technology

Car Wash

“For a time, the touchless was the trending operation. However there seems to be a trend now back to the friction,” said Space. “Now with the expanding market of the express exterior and the development of better equipment and products most of the fear of the friction car wash has been removed. And the operator and consumer are experiencing a better product with friction.”

CONVENIENCE FACTOR Aside from the obvious considerations of what goes into car wash planning, including environmental strategies, financing and site assessments, another weighty topic of whether a car wash complements a retail operation is the factor of convenience. Getting customers in and out of both the c-store and from the confines of the car wash in a timely manner is key.

CONVEYOR CAR WASHES In 2017, conveyer car wash sales were expected to account for 49.7% of total industry revenue. In a conveyer wash, a vehicle is driven onto a conveyor belt and taken through a tunnel that uses mechanized brushes and cloths in conjunction with high-pressure water application and a drying system.

10.4% 10.8%

Hand washing

Self-service bays

11.4%

In-bay automatic car washes

59.7%

Conveyor Car Washes

17.7%

Detailing

Total $10.5 Billion Source: www.IBISWorld.com

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One technological upgrade that is becoming more popular in car wash operations is RFID (radio-frequency identification) technology. When a customer is enrolled into the retailer’s subscription program, patrons are issued an RFID tag. This tag will be loaded with all of the customer’s information and then adhered to the inside of the windshield. When the customer pulls into the wash, the RFID tag and the RFID antenna communicate, allowing the driver to proceed without having to stop and pay. However, some customers might take advantage of the program, said Meyer. “We have two locations that offer an RFID program and while they are great tools to attract customer loyalty, there is some abuse with customers and that results in thinner than optimal margin. New and future sites do not offer RFID.” There are other car wash programs that can speed up service and better engage customers. Some industry experts explain retailers can expand their monthly strategies to include membership packages other than unlimited. Commercial fleet accounts also can enjoy the benefits of a recurring charge or discounted group rate for such services as car washing. However,

while the systems and technologies are similar, successful carwashes take a different approach with these accounts. Innovations that can get the motorist in and out quickly can pay dividends, Space said. “Wash clubs or loyalty programs have been a big time saver because the customer spends less time at the pay station,” Space said. “Express exterior has produced a faster wash process by leaving the customer in the car. Better chemistry and equipment have helped save time and labor.”

FUTURISIC FORMATS Another car wash offering that gained attention in 2017 is the express-exterior wash model, which has been around for a few years, but is now becoming a more significant part of the car wash footprint. “Express exteriors are being built at a very rapid pace, which will create a more competitive market for the other models,” Space said. “Car wash services will get more competitive and we will see more club passes/loyalty programs as more investors enter the market. Larger companies are entering or expanding in the market and could make it very difficult for the smaller operations and stores to compete.”

cstoredecisions.com

2/27/18 10:59 AM

Technology

Lighting

Lighting Up

Store Savings

convenience store annually spends approximately $4 per square foot on energy costs, according to some industry reports. Counting outdoor canopy lighting, wall-to-wall coolers and other energy-sucking costs, corralling those expenses is a full-time job. Of course, there are a bevy of strategies to cut those costs. For example, c-stores can invest in ENERGY STARcertified fixtures that typically use one-quarter the energy of traditional lighting and distribute light more efficiently and evenly than standard ﬁxtures. ENERGY STAR is a voluntary U.S. Environmental Protection Agency program that delivers environmental benefits and financial value through better energy efﬁciency. Giselle Diaz Eastlack is the general manager of Diaz Markets, an 18-store chain based in Louisiana. Diaz Markets started converting sites to LED in 2012. Since then, the c-store has enjoyed lower electric costs annually. “I estimate a 5% savings on our energy bills, but where we see the most savings is in our maintenance numbers,” said Eastlack. “We no longer need to dedicate so much time in replacing the lighting on the canopy or inside the store.” The LED lighting has generated positive feedback from patrons.

Fast Facts: » If the temperature is set lower than necessary, you are probably wasting energy. » The most common recommended settings are between -14 degrees and -8 degrees Fahrenheit for freezers. cstoredecisions.com

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BEGINNING WITH LIGHT BULBS While c-stores expend more energy than a home, it’s still noteworthy that both compact ﬂuorescent lamps (CFLs) and LEDs use much less electricity than traditional bulbs. Here’s how much each type of bulb would cost to purchase and operate over a 25,000-hour lifespan (about 23 years at three hours per day): INCANDESCENT

CFL

LED

$8 or less

1,200 hours

8,000 hours

25,000 hours

60W

14W

10W

No. of bulbs needed for 25,000 hours of use:

Total purchase price of bulbs over 23 years:

$21

Total cost of electricity used (25,000 hours at $0.12 per kWh):

$180

$42

$30

Total operational cost over 23 years:

$201

$48

$38

Approximate cost per bulb: Average light bulb lifespan: Watts used per each light bulb:

Source: The Simple Dollar, Dec. 12, 2017

“It has changed the dynamic for the customer by creating a more inviting environment,” said Eastlack. “The customer is greeted with bright and ‘sparking’ lights outside during dark hours of the day and the products inside the store are more prominent and merchandised, especially in the cooler.”

possible as repeated fluctuations in temperature will damage food quality and cost money. • Check the temperature settings of your units. If the temperature is set lower than necessary, you are probably wasting energy. The most common recommended settings are between -14 degrees and -8 degrees Fahrenheit for freezers and between 35 degrees and COOLING COSTS Lighting is one means of lower- 38 degrees Fahrenheit for refrigerators. • Clean the cooling coils on the ing operational costs. Installing better controls and addressing refrigeration backs of all units. Over time, dirt accuneeds can help also. ENERGY STAR mulation impairs proper heat transfer and lowers the efficiency and capacity recommends the following: • Purchase ENERGY STAR-certified of refrigerators. As you clean dirt and refrigerators and freezers, which can dust, watch for ice accumulation on save you energy and money over time. coils and remove that as well. • Ensure that the door seals on your You may be able to find rebates for your purchase from ENERGY STAR partners. units close tightly. Having tight seals • Keep the doors of all refrigera- and properly closing doors prevents tion and freezer units shut as much as warm air from entering the unit. March 2018 Convenience Store Decisions 93

2/27/18 1:16 PM

/ Monetizing ATM Innovation

Technology

ATM

he locations of independent ATMs tend to PREFERRED ATM SERVICES have less population, “ATM Future Trends 2017” surveyed 1,000 ATM end-users in lower population density, the UK and the U.S. about the top three services they would lower labor force participation like to see at the ATM. Fifty-two percent answered the ability rate, less college-educated to withdraw cash in multiple denominations. For the next population, higher unemploy- preferred service offering, 34% picked bill payment. ment rate, lower median and Cash withdrawal in multiple denominations (i.e. not just $20 bills) 70% average income (household Real-time transactions (e.g. deposited funds 39% and disposable),according to instantly credited to account) the Locational Study of ATMs in the U.S. by Ownership 2018. Biometric (e.g. ﬁngerprint) replacing PIN Entry 34% Currently, there are approximately 470,135 ATMs in the Check cashing at the ATM 32% U.S., with 191,741 bank-owned and 278,394 independent. More than two-thirds of ATMs in the U.S. are deployed in Email receipt 28% various retail locations. This is primarily due to the high proBill payment at the ATM 19% portion of terminals in the market that have been deployed Personal preference setup (e.g. withdrawal by non-banks, according to the Locational Study of ATMs in amounts transaction types, etc.) 17% the U.S. by Ownership 2018. Convenience stores and drugCardless cash withdrawal using mobile app 14% stores are the most popular locations for deployers. The study also cites branch closures in the U.S. banking Currency exchange 13% industry in recent years. The study states between July 2016 Cash withdrawal using a contactless card 9% and June 2017 more than 1,700 bank branches were closed in the U.S. as banks leave less proﬁtable U.S. regions. Event ticket sales 9%

FUTURE USE Though the current need for ATMs is clear, how they ﬁt in the future is under discussion. “We see cardless, in many forms, as the wave of the future,” said David Tente, executive director of the ATM Industry Association. There are already tens of thousands (of ATMS) from bank and independents that are capable of cardless withdrawals. We hear from the global card brands that the internal “plumbFast Facts: ing” will be implemented to enable interoperability of debit cards inside » More than twoof mobile wallets sometime this year. thirds of ATMs in Since virtually no independents have the U.S. are dedeployed NFC (near field commuployed in various nication) technology, that may not retail locations. mean anything. However, if you have » Currently, there a chain store franchise with a bank are approxibranded ATM; it may get upgraded mately 470,135 to NFC.” ATMs in the U.S., For now, functionality is a key with 191,741 industry concern. bank-owned and “The big push now is for increased 278,394 indefunctionality—additional transaction pendent. types that can generate revenue for 94 Convenience Store Decisions March 2018

88-94_Operations.indd 94

More complex transactions (e.g. loan application,

Charitable donation capability

Prepaid card sales

account opening, replacement card request, etc.)

Source: ATM Marketplace, “ATM Future Trends 2017”

the ATM owner,” said Tente. “Money transfer application, 20 30 at40 a 50reason60 70 80 gift and rebate redemptions can 0be 10added able cost.” More and more ATM toppers are becoming more common in the c-store channel. One example of ATM toppers belongs to Fort Loramie, Ohio-based Schafer Oil, which does business as Northtowne Sunoco Inc. and owns 14 convenience stores in Ohio. Less than two years ago, the company installed ICS Smart ATM Toppers, which are monitors that display product advertising and other operational functions. Stacy Kauffman, district manager for Northtowne, said the company has ATM’s at 13 of its locations, with toppers on half of the terminals. As a result, the Schafer locations have not only experienced a boost in ATM transactions, but increased store sales as well. “I believe people do pay attention to the toppers,” said Kauffman. cstoredecisions.com

2/27/18 1:16 PM

CStoreDecisions ecisions .com

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2017 Web Ad.indd 1

2/26/18 3:00 PM

PRODUCTShowcase Novel Nestlé Prepare Fresher Waters Fried Chicken Nestlé Waters is heating up the sparkling water competition with major rebranding for its Regional Spring Water Sparkling portfolio. The company is applying its sparkling expertise from premium brands Perrier and S.Pellegrino and harnessing the brand loyalty to its Regional Spring Water Brands to offer Americans a new and updated line of sparkling spring waters with more flavors and packaging choices than ever before. This February, the company is introducing an entirely new sparkling portfolio for its six Regional Spring Water brands - Poland Spring, Deer Park, Zephyrhills, Ozarka, Ice Mountain and Arrowhead- with new flavors, a brand new bottle design and packaging and the introduction of 12-ounce cans to meet all consumption occasions and consumer preferences. A lineup of 10 new Regional Spring Water Sparkling flavors includes Lively Lemon, Lemon Lime, Zesty Lime, Orange, Summer Strawberry, Raspberry Lime, Black Cherry, Simply Bubbles, Triple Berry and Pomegranate Lemonade. All flavors are made with natural ingredients, free of calories, sugar, sweeteners and colors to complement the 100% natural spring water.

Company: Nestlé Waters North America www.nestle-watersna.com

BirdShack is a new freshfried chicken concept that helps owner-operators seeking ﬂexible ways to deliver an irresistible fried chicken experience. BirdShack recently formed a relationship with Core-Mark to capture chains and independents seeking entrepreneurial ways to deliver an easy-to-prepare fried chicken experience. In just one month of partnership, BirdShack is now in more than 50 stores nationwide. For retailers who may be already frying chicken in their stores, the costs to open a BirdShack would be limited to purchasing store marketing materials. For retailers needing equipment, equipment can be purchased from BirdShack or from a dealer. There are also no franchise fees or royalties. BirdShack products are high quality, specially formulated for a successful foodservice program. Custom branded counters, menu boards, signage, uniforms, packaging, and product are available to each operator. Convenience store operators are trained to make double breaded fresh fried chicken, potato wedges, biscuits and Southern sides.

Company: BirdShack www.birdshackchicken.com

LTO Sherbet Shake f’real Foods is breaking down the barriers of the traditional milkshake ﬂavors as it prepares to launch a new limited-time-only (LTO) ﬂavor, SOUR PATCH KIDS REDBERRY Sherbet Shake. The frozen beverage company, which designs and sells self-service milkshakes, smoothies and frappes, teamed up with Mondelēz International Inc., a confectionary company that owns and sells various candy and snacking products that many would be familiar with. Among their various high-performing brands is SOUR PATCH KIDS candy, a delicious, soft gummy candy that is coated in sour sugar, resulting in an amazing taste that delivers the perfect balance of sour and sweet. Straying from a classic milkshake, the two foodservice companies developed a ‘sherbet shake’ formulation with the consistency reminiscent of decadent sorbet, which tastes refreshingly punchy.

Company: f’real Foods www.freal.com

Banana Smash Cigarillos The popular bold, yet sweet blend of banana and strawberry is back, but this time it is here to stay. The perfect fruit blend of Swisher Sweets Banana Smash cigarillos has been so popular that it is no longer a limited edition product, but available for purchase year-round. Swisher Sweets Banana Smash is available for order in a resealable two-count pouch with the “Sealed Fresh” guarantee and is ready for shipment to stores nationwide. It is offered in “Save on 2”, “2 for 99 cents” and “2 for $1.49” options. The sweet, smooth blend of banana and strawberry continues to be a customer favorite, and this year they won’t be able to resist their favorite blend available in your everyday selection.

Company: Swisher Sweets

(800) 874-9720 http://trade.swishersweets.com/bananasmash-encore 96 Convenience Store Decisions March 2018

96-99_ProductShowcase.indd 96

cstoredecisions.com

2/26/18 9:23 AM

PRODUCTShowcase Latest COMBOS Flavor

Premium Pocket Lighters Scripto Ultima is the newest premium pocket lighter line on the market offering a lighter for every style. Built to be the “Ultimate” lighter, the Scripto Ultima features up to 3,000 lights*, visible fuel supply, adjustable ﬂame and unique designs. A variety of designer wraps are available with an option for customization. No need for the same lighter design day in and day out. Mix it up with lighter designs that appeal to your consumer demographics. Introducing new lighter designs to your pocket lighter mix can stimulate sales in the category and add a powerful punch of fun to your front-end. Scripto is one of the most trusted and popular brands of lighters and has been a household name for over 80 years.

Company: Calico Brands Inc.

(800) 544-4837, ext. 1216

marketing@calicobrands.com

www.calicobrands.com

* full-size lighter only

Mini Meat Sticks

Bolder, Colorful Coke Flavors Diet Coke—the same crisp, iconic taste launched in 1982—isn’t changing. (You don’t mess with a good thing.) But the Diet Coke you think you know is history. Coca-Cola is re-launching with a bold new look, a fresh attitude and four delicious new ﬂavors, which join the iconic original. Diet Coke is rolling out a modern design and adding new sleek cans—still 12 ounces. Coca-Cola spoke to more than 10,000 people and spent years exploring all kinds of combinations like tropical, citrus and even botanical notes. Now it is introducing Diet Coke Ginger Lime, Diet Coke Feisty Cherry, Diet Coke Zesty Blood Orange and Diet Coke Twisted Mango into the Diet Coke family.

Company: Coca-Cola Co. www.coca-colacompany.com/dietcokerelaunch cstoredecisions.com

96-99_ProductShowcase.indd 97

Chef’s Cut Real Jerky Co. has introduced Mini Sticks. This small-portion (0.5-ounce) meat stick is the perfect snack for kids and adults alike. Like all Chef’s Cut products, they are gluten and nitrite free and made with nothing but real meats and recognizable ingredients. Sold in packs, each pantry-friendly bag contains seven individually-wrapped meat sticks—a great way to bring pint-sized protein to gym bags, lunchboxes, desk drawers or the minivan. Chef’s Cut Mini Sticks are available in their two most popular Snack Stick ﬂavors: Original Smokehouse (beef & pork) and Barbecue (Chicken). The sticks pack 7-8 grams of protein and 60-100 calories, depending on ﬂavor.

Company: Chef’s Cut www.chefscutrealjerky.com

New in 2018, Mars Wrigley Confectionery’s COMBOS brand introduces Honey Sriracha, a flavor combination that delivers a well-balanced, sweet honey with garlic and chili pepper Sriracha flavor that taste buds will love. In fall 2017, COMBOS introduced new packaging for COMBOS Snacks. The simplified design will stand out on-shelf and engage shoppers. The graphics focus on food imagery to drive appetite appeal and purchase, and the use of a white background with color bands will improve findability. COMBOS Stuffed Snacks are bite-size crackers, pretzels or tortillas jampacked with deliciousness. COMBOS Brand is a trendsetter, delivering bold and delicious flavors. In addition to upcoming Honey Sriracha, consumers can choose from eight varieties, including: Cheddar Cheese Pretzel, Pizzeria Pretzel, Buffalo Blue Cheese Pretzel, Cheddar Cheese Cracker, Pepperoni Pizza Cracker, 7 Layer Dip Tortilla, Sweet & Salty Caramel Pretzel and Sweet & Salty Chocolate Fudge Pretzel.

Company: Mars Wrigley Confectionery www.combos.com March 2018 Convenience Store Decisions 97

2/26/18 9:23 AM

PRODUCTShowcase ProteinRich Snacks Red Truck Beef Jerky is launching two new McCormick Grill Mates Beef Jerky and a Steak Bite. Each protein-rich product is seasoned with the bold, robust flavor of McCormick Grill Mates Seasonings and is ready to enjoy right out the bag. Red Truck Beef Jerky products are available in the following flavor varieties at select grocery, convenience and variety stores across the U.S.: McCormick Grill Mates Brown Sugar Bourbon Beef Jerky—an enticing blend of sweet brown sugar, bourbon, red bell pepper and spices; McCormick Grill Mates Smokehouse Maple Beef Jerky—a sweet, smoky blend of coarsely ground spices with a hint of maple; and McCormick Grill Mates Montreal Steak Bite - a robust blend of pepper, garlic and spices for a bold, unique flavor. All flavors boast a full three-ounce, seven-inch, nine-inch pegready bag, with eye-catching graphics.

Company: Red Truck Beef Jerky LLC Richard Cresswell

richardc@redtruckbeefjerky.com or admin@redtruckbeefjerky.com

RTD Cold Brew Coffees KonaRed, maker of premium Hawaiian coffee products, has introduced new labels and multi-serve 32-ounce bottles for its line of ready-to-drink (RTD) KonaRed Cold Brew Coffees. Inspired by the tropical island vibes of Hawaii, each design communicates KonaRed’s commitment to its rich Kona coffee heritage, all-natural ingredients and Nature’s Best Kept Secret —nutrient-dense Hawaiian coffee fruit valued for health properties. Available in the same delicious Original and Hawaiian Vanilla recipes found in the brand’s 12-ounce sizes, the 32-ounce varieties give consumers a larger, value-oriented bottle conveniently located next to KonaRed’s singleserve options in store. The new labels and multi-serve bottles began surﬁng through the refrigerated beverage sections of natural, conventional and convenience stores in January. SRP: $3.99/12-ounce bottle and $9.99/32-ounce bottle.

Company: KonaRed

sales@konared.com • (949) 682-4700

www.konared.com

Hispanic Beef Jerky The Hispanic-focused beef jerky brand, El Norteño, continues to innovate as the company launches a new look in 2018. Headquartered in Austin, Texas, El Norteño collaborated with a design group from Monterrey, Mexico, gaining inspiration for its re-brand from the street musicians who play Norteño music in Northern Mexico and throughout Texas. El Norteño’s re-brand, combined with authentic Mexican recipes and ﬂavors, gives the jerky brand the ability to speak directly to a bicultural audience—a shopper who was not previously courted in the meat snacks category. The brand continues to gain momentum in Texas and beyond, particularly amongst Millennials and Generation Z shoppers who are looking for new ﬂavors and culturally relevant connections when shopping for snacks. El Norteño gained an added boost after graduating from SKU, an Austin-based food and beverage accelerator (www.sku.is) in June 2017. El Norteño is America’s only nationally-distributed, Hispanic-focused, music-inspired meat snack brand.

Company: El Norteño

info@elnortenofoods.com

www.elnortenofoods.com

Macaroons & Shortbreads Rich’s Foodservice expands its bakery offerings for c-stores with the introduction of Jacqueline’s Premium Filled Shortbreads and Jacqueline’s Authentic Macaroons. Both gourmet lines are made with authentic, premium and clean ingredients with no artificial ingredients or high fructose corn syrup. Jacqueline’s Premium Filled Shortbreads feature an all-butter shortbread dough. These 1.5-ounce sweet treats are available with three different decadent fillings: apricot, dark chocolate and raspberry. The dough pucks can go directly from freezer to oven. Operators can add a premium look by finishing the shortbread with powdered sugar, cocoa powder or a drizzle. Each 90-piece case includes merchandising flavor stickers. The filled shortbread has a frozen shelf life of 365 days and a 14day baked shelf life, and the SRP range is 99 cents -$1.29 per cookie. Jacqueline’s Authentic Macaroons are ready-to-bake and filled with rich, moist coconut flakes, naturally sweet cranberries, vanilla and premium cocoa. Available in three flavors: chocolate, coconut and cranberry. The 1.4-ounce dough pucks come 144 per case, and they can go directly from freezer to oven. Finish with a chocolate drizzle, or dip them in chocolate. They have a frozen shelf life of 365 days and a 14-day baked shelf life, and the SRP range is 99 cents - $1.29 per macaroon.

Company: Rich’s Foodservice www.richsfoodservice.com 98 Convenience Store Decisions March 2018

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PRODUCTShowcase Ice Storage Bins Manitowoc has launched a new generation of ice storage bins. Beginning January 2018, Manitowoc began shipping the new D-Series ice storage bins to replace the current BSeries bins. The new D-Series bins have side grips molded into the bin door allowing easy access to the ice – no matter whether one stands in the front, right or left side of the bin. The bin door can be opened with one hand. The door is self-latching so the door stays in the open position when accessing the ice. Each D-Bin has an artic blue polyurethane liner with foam insulation. The door is foamed to reduce sweating on the door and to make the ice last longer in the bin. The ergodynamic door is angled 53 degrees to allow for easier access to the ice in the bin, especially when scooping from the bottom. The new D-Series bins are wrapped with DuraTech metal finish. DuraTech is a unique aluminum alloy combining the aesthetic appeal of stainless steel with a higher corrosion resistance. DuraTech has a hard, clear coat layer, which reduces fingerprints and makes it easier to wipe clean and maintain. Manitowoc ice storage bins are certified by the Air-Conditioning, Heating & Refrigeration Institute (AHRI), a non-partisan independent trade group. Each D-Bin is shipped with a new ergonomic NSF-approved sanitary ice scoop.

Company: Manitowoc www.manitowocice.com

Cash Recycling Systems Tidel has introduced a new lineup of cash recycling systems to its product family—the Tidel TR Series. The Tidel TR Series of cash recyclers represents the broadest portfolio of integrated note and coin recycling systems in the industry. Covering a wide spectrum of cash processing speed and capacities, The TR Series is suitable for organizations from small footprint stores to those facing high cash volumes. Unique to the TR Series is the interoperability between multiple note recyclers and coin recyclers, all of which are controlled by one common, comprehensive software platform. This approach enables Tidel customers to select the system they need based on their speciﬁc currency processing and capacity requirements—with one common platform to run it.

Diverse Soup Line Well Yes! is a line of great-tasting, ready-to-serve soups from Campbell Soup Co. The soups are made with nutritious and carefully-chosen ingredients customers know and love such as kale, quinoa and barley. And now Well Yes! is available in ﬁve new varieties: Cajun Red Bean & Vegetable, Chickpea & Roasted Red Pepper, Mediterraneanstyle Wedding, Butternut Squash Apple Bisque, and Braised Beef & Black Barley. The full line of soups includes 14 varieties that do not contain artiﬁcial ingredients. The colorful packaging is BPA-free and select varieties contain chicken with no antibiotics. SRP: $2.69.

Company: Campbell’s www.campbells.com/well-yes

Low-Cal Blond Ale Kona Brewing Co. is introducing its first blonde ale, Kanaha Blonde Ale, nationwide. Kanaha (pronounced ka-NA-ha) Blonde Ale is a bright, sessionable beer made with real mango fruit, adding a juicy, tropical flavor that is easy like the island. Previously available in only California and Hawaii, Kanaha Blonde Ale, named after the Kanaha Beach winds where colorful domed kites can be seen flying over the blue waters, offers a refreshing, clean taste with a lightly-toasted malt character. Only 99 calories, Kanaha Blonde Ale tasting notes include pale and caramel malts; alchemy, mosaic and amarillo hops with the special ingredient of mango fruit. In addition to the national release of Kanaha Blonde Ale, Kona Brewing Company is rereleasing Koko Brown Ale nationwide. A part of the Aloha Series, Koko Brown Ale has a nutty, toffee flavor made with real toasted coconuts—perfect for BBQ meats and carne asada.

Company: Kona

Brewing Co.

www.konabrewingco.com

Company: Tidel

(800) 678-7577 www.tidel.com cstoredecisions.com

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March 2018 Convenience Store Decisions 99

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Classifieds /Ad Index Brakebush

cover story

800.933.2121 / www.brakebush.com/conversation 16-17

Calico Brands

800.544.4837 / www.calicobrands.com

Car Wash Show

www.TheCarWashShow.com

800.438.6087 / www.hoshizakiamerica.com

Inline Plastics

800.826.5567 / www.inlineplastics.com

Krispy Krunchy

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KT&G

7, 9, 11

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The new storeBrands looks to invite guests to Boosting Cash Depot Retail Liggett Vector 12, 78is 65 stay a while and visit—like old country While quite a bit of attention 800.776.8834 / www.cdlatm.com 877.415.4100 paid to team members, a keen focus stores from yesteryear. To help encourCB Distributors Little Debbie 77 39 age guests /to hang around, RaceTrac remains on/ www.cbprices.com offering an unsurpassed 888.824.3256 800.315.6208 www.LittleDebbieCStore.com convenience store offering. RaceTrac's added more seating, digital screens, free Cenex Loomis Wi-Fi service and in-store music. Other 6,800 team members continually aim 89 85 www.cenex.com/businessopportunities www.loomis.us/SafePoint to deliver a "wow" retail shopping features include a coffee bar, 12 freshCheyenne International LSI Industries brewed teas, 24 frozen beverage flavors, experience. Emphasizing employees 63 14 704.937.7200 / www.cheyeneintl.com www.lsi-industries.com/vertex and ramping up foodservice opera- 10-flavors of frozen yogurt with some 40 Crown Imports Mars Wrigley toppings and aConfectionary walk-in beer cooler. 59 tions has seen revenue grow 80% per 19 www.crownimportsllc.com www.mars.com “We have been looking to make our store in five years. Del Fresh demand for faster stores McLane Company more friendly to our guests,” AsMonte consumer 57 35 800.950.3683 / www.freshdelmonte.com www.mclaneco.com/cci transactions and convenient retail said Lenker, a close Bolch family confiE-Alternative Nestle Waters N.A. Dec. 31 after more who will retire solutions has Solutions reached an all-time72-73 high, dant, 47 312.483.9452 / www.cuevapor.com 844-841-1847 40 years with RaceTrac. “We have RaceTrac responded by introducing than Gulfcoast Software Solutions, Inc. The worked NicoGenhard Pharma Solutions on the interior. We have its largest retail prototype to date. 3 15 727.449.2296in/ www.gulfcoastsoftware.com 516.693.7367 had/ awww.RogueNicotine.com great gas design. But we company late 2012 debuted its new always Hershey Northimproved American Bancard have our food offers and retail format in Acworth, Ga. 23 100 www.thehersheycompany.com 866.481.4604 www.nynab.com quality /of everything in the store. The new store design stands at about the have a reason other than gaso6,000 RaceTrac President Guests Homesquare Marketfeet. Foods NRF Protect 33 70 800.367.8325 www.nrfprotect.com/CSD to come and see us.” Max Lenker/ www.rollerbites.com said RaceTrac worked on line All of the company's stores going forthe projectAmerica for “six to eight years.” Hoshizaki Paytronix

cstoredecisions.com

617.649.3300 / www.paytronix.com

Tomlinson_half.indd 1

38 Convenience Store Decisions

l November 2014

Philip Morris USA Portion Padl

330.608.5928 / www.portionpadl.com

Prairie City Bakery

800.338.5122 / www.pcbakery.com

30 13

ward will be this format, Lenker added. R.J. Reynolds “We are looking at our old stores to103 see www.EngageTradePartners.com how we can remodel them to be similar. Smoker Friendly 25 Lots of times we are constrained by real www.smokerfriendly.com/become-a-dealer estate or parking,” Lenker said. Smokey Mountain Snuff Part of the redesign was recogniz67 www.smokeymountainsales.com ing that guests crave convenience and Swedish Match that c-stores have the capacity to offer 800.367.3677 so much more. www.GAMECIGARS.com 69 "We are well beyond the days of www.whiteowlcigar.com 71 narrowing our offering to gasoline, Swisher International cigarettes and beer," Moran said. 104 "As 800.874.9720 / www.swishersweets.com we saw demand soar for a wider variTomlinson Industries we realized our ety of consumables, 101 216.587.3400 / www.tomlisonind.com retail offering could be redefined not Tyson by our history, but by the needs of 5 www.tysonconvenience.com our guests. Naturally, things like beer and cigarettes are retail mainstays, Whitecastle 37 614.559.2473 / www.whitecastle.com but new guests now think of us when they are headed for lunch or looking Wonderful Company 53 (6887)home to their families. to800.528.NUTS bring dinner Providing a great, upscale offering has

March 2018 Convenience Store Decisions 101 1/28/16 9:03 AM

INDUSTRY

Perspective

Honing the

Category Management Process So many products, so little time.

John Matthews is the founder and president of Gray Cat Enterprises Inc., a strategic planning, operations and marketing services firm. With more than 25 years of senior-level experience, Matthews has recently written “Game-Changing Strategies For Retailers,” which is available on Amazon. In addition, he has two step-by-step manuals, “Local Store Marketing Manual for Retailers” and “Grand Opening Manual for Retailers,” which can be obtained at www. graycatenterprises.com.

By John Matthews

category manager will massage their planograms in search of the “unicorn” of displays, spending hour upon hour trying to get it just right. While the customer clearly appreciates the latest products, sometimes they just appreciate their product in stock and on the shelf. It can be as simple as that. Category management is one part product selection and one part execution. Assuming that the category manager has the product selection process well in line, let’s focus on the execution within each category. With the start of each year, planning for your annual merchandising and promotional schedule should be in place. For the multiunit operator, identifying the key initiatives for each merchandising category is critical to remaining on plan and on budget throughout the year. Each category should have targeted initiatives, all represented with sales and margin goals—including rebates—with assigned owners and key deadlines identified. All too often, multiunit operators leave too much to chance with their merchandising or simply promote items from month to month without a cohesive annualized plan. A well-thought-out category management plan enables the operator to know in advance where incremental sales and margin will come from. Failure to create these initiatives with benchmark financial metrics will leave retailers wallowing in missed opportunities throughout the year. Dovetailing these category targets with a monthly key performance initiatives (KPI) review will assist in keeping the plan on time and on budget. PRODUCTIVITY INITIATIVES Each of these initiatives should be a productivity task— in other words, achieving results through non-capital investments. Retailers should identify a series of initiatives for each category and the amount of sales, margin and rebates they expect. Retailers should also produce initiatives in each category that will add to the previous year’s baseline. Initiatives should include both growth initiatives as well as offsets (price increases, etc.). CORE STORE PLANS Initiatives developed by category roll up to new yearly sales, margin and rebate projections. This exercise holds

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the category manager accountable for financial expectations as well as on-time delivery. The key is to be able to identify all the growth tasks for the category and to implement them in a timely fashion. If he or she prefers, the operator can bifurcate the initiatives into baseline stores (core) and new stores (growth or acquisitions). This enables the owner to determine if growth at the core or base-store level is because of productivity or simply adding more stores. Initiatives are assigned an owner and a deadline for implementation. Ongoing operations meetings should include discussion of past implementation and nextquarter initiatives, including post analyses. This keeps the category team from missing deadlines, projections and implementation steps. The post-analysis process puts in place a discipline that can be used to vet future ideas with concrete benchmarks. MANAGING A TIMETABLE Lastly, all initiatives should have specific launch and completion dates. Remember, the financial targets and expectations of each task are predicated on this. In other words, missing the dates that financial expectations are due to begin puts the achievement of those metrics in peril. At the end of the day, the category manager needs to own the entire category—from selection to execution. Creating the planograms is not enough. Treating the entire category holistically through execution and focuses on every aspect of the customer are key aspects. Also, each category should have a number of key initiatives identified and projects planned for implementation throughout the year. The monthly KPI review process generates financial updates on the status of each. Make adjustments to ensure that financial goals are met. By establishing these plans in advance, the multiunit operator can prosper throughout the year with a cohesive category strategy.

cstoredecisions.com

2/26/18 7:20 PM

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

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*MSAi Database - 52 wks ending 1/27/18.

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2/26/18 5:51 AM